<PAGE>
As filed with the Securities and Exchange Commission on March 24, 1999
Registration No. 333-63287
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
TREX COMPANY, INC.
(exact name of registrant as specified in its charter)
Delaware 3089 54-1910453
(State or other (Primary Standard (I.R.S. Employer
jurisdictionof Industrial Identification Number)
incorporation or Classification Code
organization) Number)
20 South Cameron Street
Winchester, VA 22601
(540) 678-4070
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
Anthony J. Cavanna
Executive Vice President and
Chief Financial Officer
Trex Company, Inc.
20 South Cameron Street
Winchester, VA 22601
(540) 678-4070
(Name, address, including zip code and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C> <C>
Richard J. Parrino, Esq. Brian Hoffmann, Esq. Dov Schwell, Esq.
Hogan & Hartson L.L.P. Cadwalader, Wickersham & Taft McDermott, Will & Emery
555 13th Street, N.W. 100 Maiden Lane 50 Rockefeller Plaza, 11th floor
Washington, DC 20004-1190 New York, NY 10038 New York, NY 10020-1605
(202) 637-5600 (212) 504-6000 (212) 547-5400
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
This Amendment No. 4 is being filed solely for the purpose of filing the
exhibits indicated in Part II.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses expected to be
incurred in connection with the sale and distribution of the securities being
registered hereby. All amounts except the SEC Registration Fee, the NASD
Filing Fee and the NYSE Listing Fee are estimated.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $16,959.06
NASD Filing Fee................................................. 6,284.00
NYSE Listing Fee................................................ *
Blue Sky Fees and Expenses...................................... *
Accounting Fees and Expenses.................................... *
Legal Fees and Expenses......................................... *
TriCapital Corporation Fee...................................... *
Printing and Engraving Expenses................................. *
Transfer Agent Fees and Expenses................................ *
Miscellaneous................................................... *
----------
Total......................................................... $ *
----------
</TABLE>
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* To be filed by amendment.
Item 14. 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
which the person
II-1
<PAGE>
shall have been adjudged to be liable to the corporation unless and only 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, 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 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 XII 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.
II-2
<PAGE>
Bylaws. The Bylaws 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 the Bylaws 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.
Underwriting Agreement. The Underwriting Agreement will provide for the
indemnification against certain liabilities of the directors and officers of
the Company and certain controlling persons under certain circumstances,
including certain liabilities under the Securities Act.
Registration Rights Agreement. In the registration rights agreement with the
Company pursuant to which the shares offered by the Selling Stockholders are
being registered, the Selling Stockholders have agreed to indemnify the
Company, its directors, officers and agents and each person, if any, who
controls the Company against certain liabilities, including certain
liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
On September 10, 1998, in connection with the incorporation and organization
of Trex Company, Inc., Trex Company, Inc. issued 100 shares of Common Stock to
TREX Company, LLC for cash consideration of $1,000. Such issuance was exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
***1.1 Form of Underwriting Agreement.
***3.1 Restated Certificate of Incorporation of the Company.
***3.2 Amended and Restated By-Laws of the Company.
***4.1 Specimen certificate representing the Common Stock.
**5.1 Opinion by Hogan & Hartson L.L.P. regarding the validity of the
Common Stock.
*10.1 Credit Agreement, dated as of December 10, 1996, between the Company
and First Union National Bank of Virginia, as amended.
*10.2 Form of 1999 Stock Option and Incentive Plan.
*10.3 Form of 1999 Incentive Plan for Outside Directors.
*10.4 Members' Agreement, dated as of August 29, 1996, among TREX Company,
LLC and each of the persons named on the schedules thereto, as
amended.
***10.5 Contribution and Exchange Agreement, dated as of March 19, 1999,
among Trex Company, Inc., TREX Company, LLC, certain members of TREX
Company, LLC and the other persons named on the signature pages
thereof.
*10.6 Form of Distributor Agreement of the Company.
*10.7 $3,780,000 Promissory Note, dated June 15, 1998, made by TREX
Company, LLC payable to First Union National Bank of Virginia.
II-3
<PAGE>
*10.8 $1,035,000 Promissory Note, dated November 20, 1998, made by TREX
Company, LLC payable to First Union National Bank of Virginia.
*10.9 Business Loan Agreement, dated December 2, 1998, between TREX
Company, LLC and Pioneer Citizens Bank of Nevada.
*10.10 Construction Loan Agreement, dated February 5, 1999, between TREX
Company, LLC and Pioneer Citizens Bank of Nevada.
***10.11 Preferred Units Exchange Agreement, dated as of March 19, 1999,
among Trex Company, Inc., TREX Company, LLC and Mobil Oil
Corporation.
***10.12 Form of Registration Rights Agreement among Trex Company, Inc. and
each of the persons named on the schedules thereto, to be effective
upon consummation of the Offering.
***10.13 Consent and Amendment to Members' Agreement, dated as of March 19,
1999, among TREX Company, LLC and each of the persons named on the
signature pages thereof.
***10.14 Amended and Restated Credit Agreement, dated as of March 23, 1999,
between the Company and First Union National Bank of Virginia.
**21 Subsidiary of the Company.
***23.1 Consent of Ernst & Young LLP, independent accountants.
**23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
*23.3 Consent of William H. Martin, III.
*23.4 Consent of William F. Andrews.
*24.1 Power of Attorney (included in signature page).
*27.1 Financial Data Schedule.
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* Previously filed.
**To be filed by amendment.
***Filed herewith.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus 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.
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 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 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 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Winchester, Commonwealth of Virginia, on this 23rd day of March 1999.
Trex Company, Inc.
/s/ Robert G. Matheny
By: _________________________
Robert G. Matheny
President
(Duly Authorized Representative)
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.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert G. Matheny President and Director March 23, 1999
______________________________________ (Principal Executive
Robert G. Matheny Officer)
/s/ Anthony J. Cavanna Executive Vice President and March 23, 1999
______________________________________ Chief Financial Officer and
Anthony J. Cavanna Director (Principal
Financial and Accounting
Officer)
/s/ Andrew U. Ferrari Director March 23, 1999
______________________________________
Andrew U. Ferrari
/s/ Roger A. Wittenberg Director March 23, 1999
______________________________________
Roger A. Wittenberg
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
***1.1 Form of Underwriting Agreement.
***3.1 Restated Certificate of Incorporation of the Company.
***3.2 Amended and Restated By-Laws of the Company.
***4.1 Specimen certificate representing the Common Stock.
**5.1 Opinion by Hogan & Hartson L.L.P. regarding the validity of the Common
Stock.
*10.1 Credit Agreement, dated as of December 10, 1996, between the Company
and First Union National Bank of Virginia, as amended.
*10.2 Form of 1999 Stock Option and Incentive Plan.
*10.3 Form of 1999 Incentive Plan for Outside Directors.
*10.4 Members' Agreement, dated as of August 29, 1996, among TREX Company,
LLC and each of the persons named on the schedules thereto, as
amended.
***10.5 Contribution and Exchange Agreement, dated as of March 19, 1999,
among Trex Company, Inc., TREX Company, LLC, certain members of TREX
Company, LLC and the other persons named on the signature pages
thereof.
*10.6 Form of Distributor Agreement of the Company.
*10.7 $3,780,000 Promissory Note, dated June 15, 1998, made by TREX Company,
LLC payable to First Union National Bank of Virginia.
*10.8 $1,035,000 Promissory Note, dated November 20, 1998, made by TREX
Company, LLC payable to First Union National Bank of Virginia.
*10.9 Business Loan Agreement, dated December 2, 1998, between TREX
Company, LLC and Pioneer Citizens Bank of Nevada.
*10.10 Construction Loan Agreement, dated February 5, 1999, between TREX
Company, LLC and Pioneer Citizens Bank of Nevada.
***10.11 Preferred Units Exchange Agreement, dated as of March 19, 1999,
among Trex Company, Inc., TREX Company, LLC and Mobil Oil
Corporation.
***10.12 Form of Registration Rights Agreement among Trex Company, Inc. and
each of the persons named on the schedules thereto, to be effective
upon consummation of the Offering.
***10.13 Consent and Amendment to Members' Agreement, dated as of March 19,
1999, among TREX Company, LLC and each of the persons named on the
signature pages thereof.
***10.14 Amended and Restated Credit Agreement, dated as of March 23, 1999,
between the Company and First Union National Bank of Virginia.
**21 Subsidiary of the Company.
***23.1 Consent of Ernst & Young LLP, independent accountants.
**23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
*23.3 Consent of William H. Martin, III.
*23.4 Consent of William F. Andrews.
*24.1 Power of Attorney (included in signature page).
*27.1 Financial Data Schedule.
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*Previously filed.
**To be filed by amendment.
***Filed herewith.
<PAGE>
EXHIBIT 1.1
TREX COMPANY, INC.
Common Stock
____________________
UNDERWRITING AGREEMENT
New York, New York
March __, 1999
SCHRODER & CO. INC.
As Representative of the
Underwriters
named in Schedule I hereto
c/o Schroder & Co. Inc.
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Ladies and Gentlemen:
Trex Company, Inc., a Delaware corporation (the "Company"), proposes,
-------
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters"), an aggregate of
---------- ------------
3,250,000 shares (the "Company Firm Securities") of Common Stock, par value $.01
-----------------------
per share ("Common Stock"), and the persons listed on Schedule II (the "Selling
------------ ----------- -------
Stockholders") (who, as set forth on Schedule II comprise all of the record and
- ------------ -----------
beneficial owners of the Selling Stockholder Securities (as defined below))
propose, subject to the terms and conditions stated herein, to sell to the
Underwriters, an aggregate of 103,000 shares of Common Stock (the "Selling
-------
Stockholder Securities" and collectively with the Company Firm Securities, the
- ----------------------
"Firm Securities"). In addition, the Company proposes to grant to the
- ------------------
Underwriters an option to purchase up to an additional 502,950 shares of Common
Stock (the "Option Securities"), on the terms and for the purposes set forth in
-----------------
Section 3 hereof. The Firm Securities and the Option Securities are herein
collectively referred to as the "Securities." Except as may be expressly set
----------
forth
<PAGE>
below, any reference to you in this Agreement shall be solely in your capacity
as the representative of the Underwriters (in such capacity, the
"Representative").
--------------
It is understood that the Securities will be offered and sold in the United
States and, subject to applicable law, may be offered and sold outside the
United States.
1. The Company represents and warrants to, and agrees with each of the
Underwriters and the Selling Stockholders that:
(a) A registration statement on Form S-1 (File No. 333-63287) as
amended by Amendment Nos. 1 through 4 thereto (the "Initial Registration
--------------------
Statement"), and as a part thereof a preliminary prospectus, in respect of
---------
the Securities, has been filed with the U.S. Securities and Exchange
Commission (the "Commission") in the form heretofore delivered to the
----------
Representative for each of the other Underwriters; if the Initial
Registration Statement has not become effective, an amendment to the
Initial Registration Statement, including a form of final prospectus,
necessary to permit the Initial Registration Statement to become effective,
will promptly be filed by the Company with the Commission; if the Initial
Registration Statement has become effective and any post-effective
amendment to the Initial Registration Statement has been filed with the
Commission prior to the execution and delivery of this Agreement, which
amendment or amendments shall be in form acceptable to the Representative,
the most recent such amendment has been declared effective by the
Commission; if the Initial Registration Statement has become effective, a
final prospectus relating to the Securities containing information
permitted to be omitted at the time of effectiveness by Rule 430A of the
rules and regulations of the Commission under the Securities Act of 1933,
as amended (the "Act"), will timely be filed by the Company pursuant to
---
Rule 424(b) of the rules and regulations of the Commission under the Act
and, if applicable, a new registration statement increasing the size of the
offering pursuant to Rule 462(b) of the rules and regulations of the
Commission under the Act (the "Rule 462(b) Registration Statement") will
----------------------------------
timely be filed by the Company pursuant to Rule 462(b) of the rules and
regulations of the Commission under the Act (any preliminary prospectus
filed as part of the Initial Registration Statement being herein called a
"Preliminary Prospectus," the Initial Registration Statement as amended at
----------------------
the time that it becomes or became effective, or, if applicable, as amended
at the time the most recent post-effective amendment to such registration
statement filed with the Commission prior to the execution and delivery of
this Agreement became effective (the "Effective Date"), including all
--------------
exhibits thereto and all information deemed to be a part thereof at such
time pursuant to Rule 430A of the rules and regulations of the Commission
under the Act, together with all parts of the Rule 462(b) Registration
Statement and all exhibits thereto, being herein called the "Registration
------------
Statement," and the final prospectus relating to the Securities in the form
---------
first filed pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act or, if no such filing is required, the form of
final prospectus included in the Registration Statement, being herein
called the "Prospectus");
----------
2
<PAGE>
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and any Preliminary Prospectus distributed to potential
investors did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation and
-------- -------
warranty to the Underwriters shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by the Representative or another Underwriter through
the Representative expressly for use therein, and this representation and
warranty to any Selling Stockholder shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished to the Underwriters or the Company by such Selling Stockholder
expressly for use therein;
(c) On the Effective Date and the date the Prospectus was or is filed
with the Commission, and when any further amendments to the Registration
Statement become effective or any further amendments or supplements to the
Prospectus are filed with the Commission, as the case may be, (i) the
Registration Statement, the Prospectus and such amendments or supplements
did and will conform in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, (ii) the
Registration Statement and such amendments did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and (iii) the Prospectus and such amendments or supplements
did not and will not contain an untrue statement of a material fact or fail
to state a material fact required to be stated therein, or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation
-------- -------
and warranty to the Underwriters shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by the Representative or another
Underwriter through the Representative expressly for use therein, and this
representation and warranty to any Selling Stockholder shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished to the Underwriters or the Company by such Selling
Stockholder expressly for use therein;
(d) Upon consummation of the Reorganization (as defined below), TREX
Company, LLC (the "Subsidiary") will become a wholly-owned subsidiary of
the Company;
(e) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with all requisite power and corporate or similar authority to own its
properties and to conduct its business as described in the Prospectus, and,
where applicable, has been
3
<PAGE>
duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which it
owns or leases property, or conducts any business, so as to require such
qualification (except where the failure to so qualify would not have a
material adverse effect on the condition, financial or otherwise, or the
business affairs or prospects of the Company and the Subsidiary taken as a
whole (a "Material Adverse Effect"));
-----------------------
(f) The Subsidiary has been duly organized and is validly existing as
a limited liability company in good standing under the laws of the State of
Delaware, with all requisite power and authority as a limited liability
company to own its properties and to conduct its business as described in
the Prospectus, and has been duly qualified for the transaction of business
and is in good standing as a limited liability company under the laws of
each other jurisdiction in which it owns or leases property, or conducts
any business, so as to require such qualification (except where the failure
to so qualify would not have a Material Adverse Effect);
(g) All the issued equity interests in the Subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable and,
upon consummation of the Reorganization, will be owned by the Company free
and clear of all liens, encumbrances, equities, security interests or
claims; and there are no outstanding options, warrants or other rights
calling for the issuance or redemption of, and there are no commitments,
plans or arrangements to issue or redeem, any equity interests in the
Subsidiary or any security convertible or exchangeable or exercisable for
equity interests in the Subsidiary; except for the equity interests in the
Subsidiary owned by the Company, neither the Company nor the Subsidiary
owns, directly or indirectly, any shares of capital stock of any
corporation or has any equity interest in any limited liability company,
partnership, joint venture, association or other entity; and except as
disclosed in the Prospectus, neither the Company nor the Subsidiary has any
agreement or understanding with respect to the acquisition or purchase of
the securities of, or securities owned by, any person or entity or with
respect to the acquisition of the business, assets or liabilities of any
person or entity, and neither the Company nor the Subsidiary has any
agreement or understanding with respect to the disposition or sale of its
business, assets or properties;
(h) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement; the execution and
delivery of this Agreement and performance by the Company of its
obligations under this Agreement have been duly and validly authorized by
all requisite corporate action of the Company; and this Agreement
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally, now or hereafter
in effect, and subject to the availability of equitable remedies;
(i) Neither the Company nor the Subsidiary has, since the date of the
latest audited financial statements included in the Prospectus, sustained
any loss or interference with its business from fire, explosion, flood or
other calamity, whether
4
<PAGE>
or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, which loss or interference is
material to the Company and the Subsidiary taken as a whole; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, and, except as set forth or contemplated in
the Registration Statement and the Prospectus, there has not been, and
prior to the Time of Delivery (as defined below) there will not be, any
change in the shares of capital stock of the Company or equity interests in
the Subsidiary or change in the debt of the Company or the Subsidiary, any
dividend or distribution of any kind declared, paid or made on the shares
of capital stock of the Company or equity interests in the Subsidiary, or
any material adverse change, or any development involving a prospective
material adverse change, in or affecting the stockholders' equity of the
Company or the management, financial condition, or results of operations of
the Company and the Subsidiary taken as a whole, and neither Company nor
the Subsidiary has entered into any material transactions not in the
ordinary course of business other than as set forth or contemplated in the
Registration Statement and the Prospectus;
(j) The Company and the Subsidiary have good and marketable title in
fee simple to all real property and good and marketable title to all
personal property owned by each of them, in each case free and clear of all
liens, prior claims, encumbrances and defects except such as are described
in or contemplated by the Prospectus, or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or the Subsidiary, as
the case may be, or do not have a Material Adverse Effect, and any real
property and buildings held under lease by the Company or the Subsidiary
are held by them under valid, subsisting and enforceable leases of record
with such exceptions as are not material and do not interfere with the use
made and proposed to be made of such real property and buildings by the
Company or the Subsidiary, as the case may be, or do not have a Material
Adverse Effect;
(k) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the
Prospectus, and all the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-
assessable, are free of any preemptive rights, rights of first refusal or
similar rights, were issued and sold in compliance with the applicable U.S.
federal and state securities laws, were issued without violation of any
preemptive rights, rights of first refusal or similar rights, and conform
in all material respects to the description thereof in the Prospectus;
except as described in the Prospectus, there are no outstanding options,
warrants or other rights calling for the issuance or redemption of, and
there are no commitments, plans or arrangements to issue or redeem, any
shares of capital stock of the Company or any security convertible or
exchangeable or exercisable for shares of capital stock of the Company;
there are no holders of securities of the Company who, by reason of the
filing of the Registration Statement or the Prospectus or the offering or
sale of the Securities have the right (and have not waived such right) to
request the Company to include in the Registration Statement or the
Prospectus securities owned by them;
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<PAGE>
(l) The Securities have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and non-assessable, and will conform in
all material respects to the description thereof in the Prospectus; and the
Securities have been duly authorized for listing on the New York Stock
Exchange, Inc. (the "NYSE") upon official notice of issuance, and a
----
registration statement has been timely filed on Form 8-A pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which registration statement complies in all material
respects with the Exchange Act and the rules and regulations promulgated
thereunder;
(m) The execution and delivery of this Agreement, the performance of
the obligations of the Company under this Agreement, the consummation of
the transactions herein contemplated, the issuance and sale of the
Securities, the compliance by the Company with all the provisions of this
Agreement and the application of the net proceeds from the offering and
sale of the Securities in the manner set forth in Prospectus under the
heading "Use of Proceeds" do not and will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, prior claim or encumbrance upon, any of the property or assets of
the Company or the Subsidiary, pursuant to any indenture, mortgage, deed of
trust, loan agreement or other contract, agreement, license or instrument
to which the Company or the Subsidiary is a party or by which the Company
or the Subsidiary is bound or to which any of the property or assets of the
Company or the Subsidiary is subject (any of the foregoing constituting a
"Conflict"), nor do or will any such actions result in any violation of the
provisions of the Certificate of Incorporation or Bylaws of the Company or
the Certificate of Formation or Limited Liability Company Agreement of the
Subsidiary, in each case as amended through the date hereof and each
Closing Date, or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or the
Subsidiary or any of their respective properties (any of the foregoing
constituting a "Violation"); and no consent, approval, authorization,
filing, order, registration or qualification of or with any court or
governmental agency or body is required (all of the foregoing constituting
a "Consent") for the issue and sale of the Securities or the consummation
of the other transactions contemplated by this Agreement, except the
registration under the Act of the Securities, and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws or by the by-laws and rules of the
National Association of Securities Dealers, Inc. (the "NASD") in connection
with the purchase and distribution of the Securities by the Underwriters,
except for any such Conflict or Violation which would not, or any such
Consent, which the failure to obtain would not, individually or in the
aggregate, result in a Material Adverse Effect or that would not,
individually or in the aggregate, impair the Company's ability to
consummate the transactions herein contemplated;
(n) Except as disclosed in the Registration Statement and the
Prospectus, there are no legal or governmental proceedings pending to which
the Company, the
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<PAGE>
Subsidiary or any of their respective officers or directors is a party or
of which any property of the Company or the Subsidiary is subject that
could prevent consummation of the transactions contemplated by this
Agreement or that is required to be disclosed in the Registration Statement
or the Prospectus or any other such proceedings, other than litigation or
proceedings incident to the business conducted by the Company and the
Subsidiary that will not individually or in the aggregate have a Material
Adverse Effect; to the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened or
contemplated by others; and neither the Company nor the Subsidiary is
involved in any employee or labor dispute, nor, to the best of the
Company's knowledge, is any employee or labor dispute threatened, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of the suppliers, distributors or contractors of the
Company or the Subsidiary, that would have a Material Adverse Effect;
(o) The Company is not aware of any threatened or pending litigation
or any dispute between it or the Subsidiary, on the one hand, and any of
their executive officers or key employees, on the other hand, which, if
adversely determined, could reasonably be expected to have a Material
Adverse Effect, and has no reason to believe that any executive officers or
key employees will not remain in the employment of the Company or the
Subsidiary, as the case may be, for the foreseeable future;
(p) The Company and the Subsidiary have all material licenses, permits
and other approvals or authorizations of and from governmental or
regulatory authorities ("Permits") as are necessary under applicable law to
-------
own or lease their properties, and to otherwise conduct their businesses in
the manner now being conducted and as described in the Prospectus; and the
Company and the Subsidiary have fulfilled and performed all of their
respective obligations with respect to such Permits, and no event has
occurred which allows, or after notice or lapse of time or both would
allow, revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Permits; except, in any
of the above cases, where any failure to have such Permits, failure to
fulfill and perform such obligations or an occurrence of any such event
would not reasonably be expected to have a Material Adverse Effect;
(q) Ernst & Young, LLP, who have certified certain financial
statements and delivered their reports with respect to audited consolidated
financial statements and schedules included in the Registration Statement
and the Prospectus, are independent public accountants as required by the
Act;
(r) The financial statements included in the Registration Statement
and the Prospectus present fairly (i) the financial position of the Company
as at December 31, 1998, (ii) the financial position of the Subsidiary as
at December 31, 1997 and 1998 and the results of operations, the
undistributed income, the cash flows and changes in members' equity of the
Subsidiary for the period from July 1, 1996 through December 31, 1996 and
for the years ended December 31, 1997 and
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<PAGE>
1998, and (iii) the results of operations, divisional operating equity
deficit and cash flows of the Composite Products Division of Mobil Oil
Corporation (the "Predecessor") for the year ended December 31, 1995 and
for the period from January 1, 1996 through August 28, 1996, in each case
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as otherwise stated
therein, and include all adjustments necessary for a fair presentation of
the results for such periods; the other financial data set forth in the
Registration Statement and the Prospectus are accurately presented and, to
the extent such data are derived from the financial statements and books
and records of the Company, the Subsidiary and the Predecessor, are
prepared on a basis consistent with such financial statements and the books
and records of the Company, the Subsidiary and the Predecessor; the pro
forma financial information included in the Registration Statement and the
Prospectus has been properly compiled and complies in all material respects
with the applicable accounting requirements of Rule 11-01 and Rule 11-02 of
Regulation S-X of the Commission, and includes all adjustments necessary
for a fair presentation of the results for such periods; the assumptions
described in the notes to the pro forma statement of operations data and
pro forma balance sheet data contained in the Prospectus provide or will
provide, as the case may be, a reasonable basis for presenting the
significant direct effects of the transactions contemplated therein, and
the pro forma adjustments made therein give appropriate effect to those
assumptions; and no other financial statements or schedules are required to
be included in the Registration Statement and the Prospectus;
(s) There are no statutes or governmental regulations, or any
contracts or other documents that are required to be described in the
Prospectus or filed as exhibits to the Registration Statement which are not
described therein accurately in all material respects or filed as exhibits
thereto; and all such contracts to which the Company or the Subsidiary is a
party have been duly authorized, executed and delivered by the Company or
the Subsidiary, constitute valid and binding agreements of the Company and
are enforceable against the Company or such Subsidiary in accordance with
the terms thereof;
(t) The Company and the Subsidiary own or possess adequate patent
rights or licenses or other rights to use patent rights, inventions,
trademarks, service marks, trade names, copyrights, technology and know-how
necessary to conduct the business now or proposed to be operated by them as
described in the Prospectus; except as set forth in the Prospectus, neither
the Company nor the Subsidiary has received any notice of infringement of
or conflict with asserted rights of others with respect to any patent,
patent rights, inventions, trademarks, service marks, trade names,
copyrights, technology or know-how which, individually or in the aggregate,
could have a Material Adverse Effect; and, the discoveries, inventions,
products or processes of the Company and the Subsidiary referred to in the
Prospectus do not, to the Company's knowledge, infringe or conflict with
any patent or right of any third party, or any discovery, invention,
product or process which is the subject of a patent application filed by
any third party known to the Company;
8
<PAGE>
(u) Neither the Company nor the Subsidiary is in violation of any term
or provision of its Certificate of Incorporation or Bylaws (in the case of
the Company) or Certificate of Formation or Limited Liability Company
Agreement (in the case of the Subsidiary), in each case as amended through
the date hereof and each Closing Date, or any law, ordinance,
administrative or governmental rule or regulation applicable to the Company
or the Subsidiary, or of any decree of any court or governmental agency or
body having jurisdiction over the Company or the Subsidiary where the
consequences of such violation could reasonably be expected to have a
Material Adverse Effect;
(v) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a default in the due performance
and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, bank loan or credit agreement, lease or other
contract, agreement, license or instrument to which the Company or the
Subsidiary is a party or by which the Company or the Subsidiary or the
Company's or the Subsidiary's properties is bound or may be affected, where
such default could reasonably be expected to have a Material Adverse
Effect;
(w) The Company and the Subsidiary have timely filed all necessary tax
returns and notices (except where the failure to file such returns or
notices could not reasonably be expected to have a Material Adverse Effect)
and have paid or made provision for all federal, state, county, local and
foreign taxes of any nature whatsoever for all tax years through December
31, 1998, and have paid or made provision for all federal, state, county,
local and foreign taxes for any later periods to the extent such taxes have
become due; except as may be set forth or adequately reserved for in the
financial statements included in the Registration Statement and the
Prospectus, the Company has no knowledge, or any reasonable grounds to
know, of any tax deficiencies (including interest or penalties accrued or
accruing) which would have a Material Adverse Effect; the Company and the
Subsidiary have paid all taxes which have become due, whether pursuant to
any assessment or reassessment or otherwise, and there is no further
liability (whether or not disclosed on such returns) or assessment or
reassessment for any such taxes, and no interest or penalties accrued or
accruing with respect thereto; neither the Company nor the Subsidiary has
granted or agreed to any extensions of the periods provided for under
applicable law for the issuance of tax assessments or reassessments; the
amounts currently set up as provisions for taxes or otherwise by the
Company and the Subsidiary on their books and records are sufficient for
the payment of all its unpaid federal, state, county, local and foreign
taxes accrued through the dates as of which they speak, and for which the
Company or the Subsidiary may be liable in its own right, or as a
transferee of the assets of, or as successor to any other corporation,
association, partnership, joint venture or other entity;
(x) The Company and the Subsidiary maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial
9
<PAGE>
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets; (iii) access to material assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences;
(y) Neither the Company nor the Subsidiary is in violation of, nor has
either of them received any outstanding notice of a violation of, any
applicable federal, state, county, local or foreign law or regulation
relating to equal opportunity or discrimination in the hiring, promotion or
compensation or civil rights generally of employees, or any applicable
federal, provincial or state wages and hours laws, or any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
and regulations promulgated thereunder, or any legislation relating to
labor standards or antitrust or trade regulation matters, where such
violation could reasonably be expected to have a Material Adverse Effect.
The Company and the Subsidiary (i) are in compliance with any and all
applicable federal, state and local laws and regulations relating to the
protection of human health and safety, the environment, hazardous or toxic
substances or waste, pollutants or contaminants or the collection of water
for human consumption ("Environmental Laws"), (ii) have received all
Permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and are in
compliance with all terms and conditions of any such Permit, license or
approval; there has been no storage, disposal, generation, transportation,
handling or treatment of hazardous substances or solid wastes by the
Company or the Subsidiary (or to the knowledge of the Company, any of their
predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or the Subsidiary or in violation
of any applicable law, ordinance, rule, regulation, order, judgment, decree
or Permit or which would require remedial action by the Company or the
Subsidiary under any applicable law, ordinance, rule, regulation, order,
judgment, decree or Permit; there has been no spill, discharge, leak,
emission, injection, escape, dumping or release of any kind onto such
property or into the environment surrounding such property of any solid
wastes or hazardous substances due to or caused by the Company or any
Subsidiary; and the terms "hazardous substances" and "solid wastes" shall
-------------------- ------------
have the meanings specified in any applicable local, state and federal
Environmental Laws or regulations; except for such failures to comply,
failure to receive Permits, licenses or approvals, violations or other
action, inaction or occurrence that could not reasonably be expected to
have a Material Adverse Effect;
(z) Neither the Company nor the Subsidiary, nor any of their
respective officers, directors, employees or agents, has used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, or made any unlawful payment of
funds of the Company or the Subsidiary or received or retained any funds in
violation of any law, rule or regulation; none of the Company, the
Subsidiary, nor, to the Company's best knowledge, any of their respective
directors, officers, employees, consultants or agents (in the course of
such person's actions for, or on behalf of, the Company or
10
<PAGE>
the Subsidiary) has violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended, or has made any
bribe, rebate, payoff, influence, payment, kickback or other unlawful
payment;
(aa) Neither the Company nor the Subsidiary, nor any of their
respective officers, directors, employees or agents, have taken or will
take, directly or indirectly, any action designed to or which has
constituted or that might be reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
or that operates or would operate as a fraud or deceipt or any conspiracy
with respect thereto, in which the Company or the Subsidiary shall
participate, in connection with the issuance or sale of any security of the
Company;
(bb) Other than with respect to the Underwriters or TriCapital
Corporation as described in the Prospectus, the Company has not incurred
any liability for finder's or broker's fees or agent's commissions in
connection with the execution, delivery or performance of this Agreement,
the offer and sale of the Securities or the transactions contemplated
hereby;
(cc) The Company has furnished to the Representative true, accurate
and complete copies of letters from each of the executive officers,
directors, employees and current stockholders of the Company listed on
Appendix A (collectively, the "Lock-Up Agreements") pursuant to which such
------------------
persons have agreed that for a period of 180 days after the Time of
Delivery (the "Lock-Up Period"), except pursuant to this Agreement or as
--------------
specified in the Lock-Up Agreements, such persons will not offer, sell,
contract to sell, issue or grant an option or other right for the purchase
or sale of, assign, transfer, make a distribution of, pledge hypothecate or
otherwise encumber or dispose of, or grant any rights with respect to
(collectively, a "Disposition"), any shares of the Company or any
-----------
securities, instruments or other rights convertible into or exercisable or
exchangeable for, or evidencing any right to purchase or subscribe for, any
shares of capital stock of the Company (collectively, the "Company
-------
Securities"), directly or indirectly, without the prior written consent of
----------
Schroder & Co. Inc.;
The foregoing restrictions have been expressly agreed to preclude
a holder of Company Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Company Securities during the Lock-Up Period,
even if such Company Securities would be disposed of by someone other than
such holder. Such prohibited hedging or other transactions would include,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any
put or call option) with respect to any Company Securities or with respect
to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Company Securities. Furthermore, each such person has also agreed and
consented to the entry of stop transfer instructions with the Company's
transfer agent against the
11
<PAGE>
transfer of the Company Securities held by such person except in compliance
with this restriction.
(dd) The Company is not an "investment company," an entity
"controlled" by an "investment company," or an "affiliated person" of, or
"promoter", or "principal underwriter", for, an "investment company," nor,
immediately after giving effect to the offering and sale of the Securities
and the application of the net proceeds therefrom as set forth in the
Prospectus, will the Company be an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended;
(ee) Except as disclosed in the Prospectus, no holder of any security
of the Company has any right to require registration of Common Stock or any
other security of the Company;
(ff) The Company and the Subsidiary maintain insurance for themselves
of the types and in the amounts which they believe are reasonably adequate
for their respective businesses, all of which insurance is in full force
and effect;
(gg) There are no affiliations with the NASD among the Company's
officers, directors or, to the Company's best knowledge, any five percent
or greater security holder of the Company, except as disclosed in writing
to the Representative;
(hh) The Company has not distributed and, prior to the last to occur
of (i) the Time of Delivery, (ii) the Option Securities Delivery Date (as
defined below) or (iii) completion of the distribution of the Securities,
will not distribute any securities without the Representative's prior
written consent in connection with the offering and sale of the Securities.
(ii) The statements set forth in the Prospectus under the caption
"Description of Capital Stock," insofar as they purport to constitute a
summary of the terms of the Common Stock, and under the captions "Risk
Factors - Impact of Government Regulation," "Business - Governmental
Regulation," "Risk Factors - Shares Eligible for Future Sale; Registration
Rights" and "Underwriting," as well as under the caption "Indemnification
of Directors and Officers" in Item 14 of Part II of the Registration
Statement, to the extent they constitute summaries of U.S. federal
statutes, rules and regulations, or portions thereof, or insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair.
2. Each Selling Stockholder, severally and not jointly, represents and
warrants to, and agrees with, each of the Underwriters that:
(a) Such Selling Stockholder has been duly organized and is validly
existing in good standing under the laws of its jurisdiction of
organization;
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<PAGE>
(b) Such Selling Stockholder has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution and delivery of this Agreement and the performance by such
Selling Stockholder of its obligations under this Agreement have been duly
and validly authorized by all requisite action on the part of such Selling
Stockholder, and this Agreement constitutes the legal, valid and binding
obligation of such Selling Stockholder, enforceable against such Selling
Stockholder in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally, now or hereafter in effect, and
subject to the availability of equitable remedies;
(c) Such Selling Stockholder has, and at the Time of Delivery will
have, good and valid title to the Securities to be sold by such Selling
Stockholder hereunder, free and clear of any liens, encumbrances, equities,
security interests, prior claims, claims and other restrictions of any
nature whatsoever, and such Selling Stockholder has the full legal right,
power and authority, and any approval required by law, to enter into this
Agreement and to sell, assign, transfer and deliver the Securities being
sold by it hereunder and to make the representations, warranties, covenants
and agreements made by such Selling Stockholder in this Agreement; and upon
the delivery of and payment for such Securities as herein provided, the
several Underwriters will acquire good and valid title thereto (assuming
the Underwriters are without notice of any "adverse claim" (as such term is
defined in the New York Uniform Commercial Code) and are otherwise bona
fide purchasers for purposes of the New York Uniform Commercial Code), free
and clear of all liens, encumbrances, equities, security interests, prior
claims, claims and other restrictions of any nature whatsoever. The
foregoing representation shall apply to CIG & Co., as the record holder,
and each of Connecticut General Life Insurance Company ("CIGNA") and Life
Insurance Company of North America ("LICNA"), as the beneficial owners,
respectively, of the Selling Stockholder Securities to be sold by CIGNA and
LICNA, as set forth on Schedule II, in each case as to their respective
-----------
interests in such Selling Stockholder Securities;
(d) Such Selling Stockholder has duly executed and delivered an
agreement and power of attorney with respect to such Selling Stockholder
(the "Agreement and Power-of-Attorney") in the form heretofore delivered to
-------------------------------
the Representative, appointing [___________________] such Selling
Stockholder's attorney-in-fact (the "Attorney-in-Fact") with authority to
----------------
execute, deliver and perform this Agreement on behalf of such Selling
Stockholder and appointing ChaseMellon Shareholder Services, L.L.C., as
custodian thereunder (the "Custodian"). Certificates in negotiable form,
---------
endorsed in blank or accompanied by blank stock powers duly executed, with
signatures appropriately guaranteed, representing the Securities to be sold
by such Selling Stockholder hereunder have been deposited with the
Custodian pursuant to the Agreement and Power-of-Attorney for the purpose
of delivery pursuant to this Agreement. Such Selling Stockholder has full
power and authority to enter into the Agreement and Power-of-Attorney and
to perform its obligations thereunder. The execution and delivery of the
Agreement and Power-of-Attorney
13
<PAGE>
have been duly authorized by all necessary corporate action of such Selling
Stockholder; the Agreement and Power-of-Attorney has been duly executed and
delivered by such Selling Stockholder and, assuming due authorization,
execution and delivery by the Custodian, is the legal, valid, binding
instrument of such Selling Stockholder, enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization
or other laws affecting the enforcement of creditors' rights generally, now
or hereafter in effect, and subject to the availability of equitable
remedies. Such Selling Stockholder agrees that each of the Securities
represented by the certificates on deposit with the Custodian is subject to
the interests of the Underwriters, the Company and the other Selling
Stockholders hereunder, that the arrangements made for such custody, the
appointment of the Attorney-in-Fact and the right, power and authority of
the Attorney-in-Fact to execute and deliver this Agreement and to carry out
the terms of this Agreement are to that extent irrevocable and that the
obligations of such Selling Stockholder hereunder shall not be terminated,
except as provided in this Agreement or the Agreement and Power-of-
Attorney, by any act of such Selling Stockholder, by operation of law, or
otherwise, whether by its liquidation or dissolution. If any Selling
Stockholder shall liquidate or dissolve or if any other event should occur,
before the delivery of such Securities hereunder, the certificates for such
Securities deposited with the Custodian shall be delivered by the Custodian
in accordance with the respective terms and conditions of this Agreement as
if such liquidation or dissolution or other event had not occurred,
regardless of whether or not the Custodian or the Attorney-in-Fact shall
have received notice thereof;
(e) Neither the execution and delivery or performance of this
Agreement or the Agreement and Power-of-Attorney or the consummation of the
transactions herein or therein contemplated nor the compliance with the
terms hereof or thereof by such Selling Stockholder will conflict with, or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge, claim or encumbrance on any property of such Selling
Stockholder under any indenture, mortgage, deed of trust, lease or other
contract, agreement, license or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder's property is
bound, or the certificate of incorporation, bylaws or other organizational
or governing instruments of such Selling Stockholder, or any statute,
ruling, judgment, decree, order, or regulation of any court or other
governmental authority or any arbitrator applicable to such Selling
Stockholder; and no consent, approval, authorization, order, registration
or qualification of or with any governmental authority is required, except
such as have been obtained, such as may be required under federal, state or
foreign securities or Blue Sky laws or by the by-laws and rules of the NASD
and, if the registration statement filed with respect to the Securities is
not effective under the Act as of the time of execution hereof, such as may
be required (and shall be obtained as provided in this Agreement) under the
Act;
(f) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to cause or result in, or that
has constituted or which
14
<PAGE>
might reasonably be expected to constitute, the stabilization (within the
meaning of Regulation M promulgated under the Act) or manipulation of the
price of any security of the Company;
(g) The sale by such Selling Stockholder of Securities pursuant hereto
is not prompted by any adverse information concerning the Company that, to
the knowledge of such Selling Stockholder (without any independent
investigation), is not set forth in the Registration Statement or the
Prospectus;
(h) The information regarding such Selling Stockholder set forth
therein under the caption "Principal and Selling Stockholders" is complete
and accurate;
(i) At the Time of Delivery, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the
sale and transfer of the Securities to be sold by such Selling Stockholder
to the several Underwriters hereunder will have been fully paid or provided
for by such Selling Stockholder and all laws imposing such taxes will have
been fully complied with;
(j) The Selling Stockholder has not distributed and, prior to the last
to occur of (i) the Time of Delivery, (ii) the Option Securities Delivery
Date or (iii) completion of the distribution of the Securities, will not
distribute without the prior written consent of the Representative any
offering material directly or indirectly in connection with the offering
and sale of the Securities; and
(k) None of the Company, counsel to the Company, the Underwriters, or
counsel to the Underwriters has made any representations or warranties or
provided any information to such Selling Stockholder with respect to the
tax consequences of the sale of the Securities.
3. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the several Underwriters an aggregate of 3,250,000
Company Firm Securities, each Selling Stockholder agrees to sell to the several
Underwriters the number of Selling Stockholder Securities set forth on Schedule
--------
II opposite the name of such Selling Stockholder, and each of the Underwriters
- --
agrees to purchase from the Company and the Selling Stockholders, at a purchase
price of $_____________ per share (the "per share purchase price"), the
respective aggregate number of Firm Securities determined in the manner set
forth below. The obligation of each Underwriter to the Company shall be to
purchase that portion of the number of shares of Common Stock to be sold by the
Company or such Selling Stockholders pursuant to this Agreement as the number of
Firm Securities set forth opposite the name of such Underwriter on Schedule I
----------
bears to the total number of Firm Securities to be purchased by the Underwriters
pursuant to this Agreement, in each case adjusted by the Representative such
that no Underwriter shall be obligated to purchase Firm Securities other than in
100 share blocks. In making this Agreement, each Underwriter is contracting
severally and not jointly.
15
<PAGE>
In addition, subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the several Underwriters, as required (for
the sole purpose of covering over-allotments in the sale of the Firm
Securities), up to 502,950 Option Securities at the per share purchase price as
stated in the preceding paragraph. The right to purchase the Option Securities
may be exercised by the Representative giving 48 hours' prior written or
telephonic notice (subsequently confirmed in writing) to the Company of the
Underwriters' determination to purchase all or a portion of the Option
Securities. Such notice may be given at any time within a period of 30 days
following the Time of Delivery. Option Securities shall be purchased severally
for the account of each Underwriter in proportion to the number of Firm
Securities set forth opposite the name of such Underwriter in Schedule I hereto.
----------
No Option Securities shall be delivered to or for the accounts of the
Underwriters unless the Firm Securities shall be simultaneously delivered or
shall theretofore have been delivered as herein provided. The respective
purchase obligations of each Underwriter shall be adjusted by the Representative
so that no Underwriter shall be obligated to purchase Option Securities other
than in 100 share blocks.
It is agreed that 162,500 shares of Common Stock (the "Reserved
Shares") initially will be reserved by the Underwriters for offer and sale to
certain individuals, including directors and employees of the Company, members
of their families or friends, and other persons having business relationships
with the Company, at the per share purchase price. Any allocation of such
Reserved Shares among such persons will be made in accordance with directions
received by the Representative from the Company not less than ____ days prior to
the Time of Delivery, provided that under no circumstances will the
Representative or any Underwriter be liable to the Company or any such person
for any action taken or omitted in good faith in connection with such allocation
of Reserved Shares to such persons. As a condition to the purchase of Reserved
Shares, any purchaser thereof will be required to execute and deliver to the
Representative a Lock-Up Agreement. It is further understood that any such
Reserved Shares which are not purchased by such persons will be offered by the
Underwriters for sale to the public upon the terms and conditions set forth in
the Prospectus.
4. The Underwriters propose to offer the Securities for sale upon the
terms and conditions set forth in the Prospectus.
5. Certificates in definitive form for the Firm Securities to be
purchased by each Underwriter hereunder shall be delivered by or on behalf of
the Company and the Selling Stockholders to the Representative for the account
of such Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by wire transfer of immediately available funds to the
account of the Company in the amount of the purchase price of the Company Firm
Securities as specified on Schedule III hereto, and by wire transfer of
------------
immediately available funds to the account of each Selling Stockholder, as
specified on Schedule III hereto, in the amount specified thereon for the
------------
purchase price of the Selling Stockholder Securities being sold by such Selling
Stockholder as specified on Schedule III hereto, at the offices of the
------------
Representative at Equitable Center, 787 Seventh Avenue, New York, New York, at
9:30 A.M., New York City time, on __________, 1999,
16
<PAGE>
or at such other time, date and place as the Representative and the Company may
agree upon in writing, such time and date being herein called the "Time of
-------
Delivery."
- --------
Certificates in definitive form for the Option Securities to be purchased
by each Underwriter hereunder shall be delivered by or on behalf of the Company
to the Representative for the account of such Underwriter, against payment by
such Underwriter or on its behalf of the purchase price thereof by wire transfer
of immediately available funds to the account of the Company as specified on
Schedule III hereto, in New York, New York, at such time and on such date (not
- ------------
earlier than the Time of Delivery nor later than ten business days after giving
of the notice delivered by the Representative to the Company) and in such
denominations and registered in such names as shall be specified in the notice
delivered by the Representative to the Company with respect to the purchase of
such Option Securities. The date and time of such delivery and payment are
herein sometimes referred to as the "Option Securities Delivery Date."
-------------------------------
Certificates for the Firm Securities and the Option Securities so to be
delivered will be in good delivery form, and in such denominations and
registered in such names as the Representative may request not less than 48
hours prior to the Time of Delivery and the Option Securities Delivery Date,
respectively. Such certificates will be made available for checking and
packaging in New York, New York, at least 24 hours prior to the Time of Delivery
or Option Securities Delivery Date, as applicable.
In lieu of delivering certificates in definitive form for the Securities to
be delivered by the Company and the Selling Stockholders hereunder, the Company
and the Selling Stockholders may make electronic delivery of such Securities
through the facilities of The Depository Trust Company under arrangements
satisfactory to the Company, the Selling Stockholders, the transfer agent for
the Securities and the Representative.
6. The Company covenants and agrees with each of the Underwriters:
(a) If the Registration Statement has not become effective, to file
promptly any required amendment to the Registration Statement with the
Commission and use its best efforts to cause the Registration Statement to
become effective; if the Registration Statement has become effective, to
timely file the Prospectus with the Commission as required under Rule
424(b) under the Act; to make no further amendment to the Registration
Statement or any amendment or supplement to the Prospectus which shall be
disapproved by the Representative after reasonable notice thereof; to
advise the Representative, promptly after it receives notice thereof of the
time when the Registration Statement or any amended Registration Statement
has become effective or any amendment or supplement to the Prospectus has
been filed, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending of the Registration Statement or the amending or
supplementing of the Prospectus or for additional information; and in the
event of the issuance of any stop order or of any order
17
<PAGE>
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or suspending any such qualification, promptly to use its best
efforts to obtain withdrawal of any such order;
(b) Promptly from time to time to take such action as the
Representative may reasonably request to qualify the Securities for
offering and sale under the securities laws of such jurisdictions (within
or without the United States) as the Representative may reasonably request
and to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Securities, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction or to take any other action which would subject it to
taxation, other than as to matters and transactions relating to the offer
and sale of the Securities in each jurisdiction in which the Securities
have been qualified as provided above;
(c) To furnish each of the Representative and counsel for the
Underwriters, without charge, three signed copies of the Initial
Registration Statement filed with respect to the Securities and each
amendment thereto (including all exhibits thereto) and to each other
Underwriter, without charge, a conformed copy of such Registration
Statement and each amendment thereto (without exhibits thereto) and, so
long as a prospectus relating to the Securities is required to be delivered
under the Act, as many printed copies of each Preliminary Prospectus, the
Prospectus, and all amendments or supplements thereto as the Representative
may from time to time reasonably request. If at any time when the delivery
of a prospectus is required under the Act an event shall have occurred as a
result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make statements therein, in the light
of the circumstances under which they were made when such Prospectuses are
delivered, not misleading, or would contain any misrepresentation or
omission likely to affect the market price of the Securities, or if for any
other reason it shall be necessary to amend or supplement the Prospectus in
order to comply with the Act, the Company will forthwith prepare and,
subject to the provisions of Section 6(a) hereof, file with the Commission,
an appropriate supplement or amendment thereto, and will furnish to each
Underwriter and to any dealer in securities, without charge, signed and
conformed copies and as many printed copies as the Representative may from
time to time reasonably request of amendments or supplements to the
Prospectus;
(d) To make generally available to the Company's stockholders, as soon
as practicable, but not later than 60 days after the end of the twelve-
month period beginning on the first day of the Company's first fiscal
quarter immediately succeeding the Company's fiscal quarter during which
the Effective Date occurs, an earnings statement of the Company covering
such twelve-month period that satisfies the provisions of Section 11(a) of
the Act and the rules and regulations of the Commission thereunder;
18
<PAGE>
(e) To file promptly all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act
subsequent to the Effective Date and during any period when the Prospectus
is required to be delivered;
(f) For a period of five years from the Effective Date, to furnish to
its stockholders, within the time periods prescribed by the rules and
regulations promulgated pursuant to the Exchange Act or such shorter time
periods prescribed by the rules of the NYSE, after the end of each fiscal
year an annual report (including consolidated balance sheets and statements
of operations, retained earnings and cash flows of the Company certified by
independent certified public accountants) and, as soon as reasonably
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the Effective
Date), consolidated summary financial information of the Company for such
quarter in reasonable detail;
(g) During a period of five years from the Effective Date, to furnish
to the Representative copies of all reports or other communications
(financial or other) generally furnished to its stockholders, and deliver
to the Representative (A) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the Commission,
the NYSE and any other national securities exchange on which any class of
securities of the Company is listed; and (B) such additional information as
the Representative may from time to time reasonably request concerning the
business and financial condition of the Company and its consolidated
subsidiaries;
(h) To apply the net proceeds from the sale of the Securities in the
manner set forth in the Prospectus under the caption "Use of Proceeds";
(i) That it will not, and will cause the Subsidiary and their
respective officers, directors, employees, agents and affiliates not to,
take, directly or indirectly, any action designed to cause or result in, or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities;
(j) That prior to the Time of Delivery there will not be any change
in the shares of capital stock of the Company or equity interests in the
Subsidiary or material change in the debt of the Company or the Subsidiary,
otherwise than as set forth or contemplated in the Registration Statement
and the Prospectus;
(k) That it will not, during the period of 180 days after the Time of
Delivery (other than pursuant to or as provided in this Agreement), offer,
sell, pledge, contract to sell, sell any option to purchase, purchase any
option to sell, grant any option right or warrant or otherwise dispose of
(or register for sale under the Act) any shares of capital stock of the
Company (or securities convertible into, or exchangeable for, shares of the
Company), directly or indirectly, without the prior written consent of
Schroder & Co. Inc., or enter into any swap or any other
19
<PAGE>
agreement, or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of shares of capital
stock of the Company to be settled by delivery, in cash or otherwise;
provided, however, that, notwithstanding the foregoing, the Company may, as
-------- -------
described in the Prospectus, (i) consummate the Reorganization, (ii) issue
options or other awards under its 1999 Stock Option and Incentive Plan in
the form of such plan filed as an exhibit to the Registration Statement,
(iii) issue options under its 1999 Incentive Plan for Outside Directors in
the form of such plan furnished to the Representative prior to the date
hereof, (iv) issue shares of Common Stock under its 1999 Employee Stock
Purchase Plan in the form of such plan filed as an exhibit to the
Registration Statement, (v) issue up to 135,000 shares of Common Stock upon
exercise of options granted by the Company effective as of the Time of
Delivery pursuant to the plans referred to in clauses (ii) and (iii) above
and as described in the Prospectus and (vi) file one or more Registration
Statements on Form S-8 registering the offer and sale of Common Stock under
the plans referred to in clauses (ii), (iii) and (iv) above;
(l) To use its best efforts to cause the Securities to be listed on
the NYSE, at all times from the Effective Date until such time as the
Representative notifies the Company that the distribution of the Securities
has been completed and to complete the listing conditions of the NYSE; and
(m) To consummate the Reorganization (as defined in the Prospectus)
as described in the Prospectus as soon as practicable following execution
hereof (other than payments with respect to the LLC Distribution (as
defined in the Prospectus) which may be made after the Time of Delivery).
7. Each Selling Stockholder, severally and not jointly, covenants and
agrees with each of the Underwriters that:
(a) Such Selling Stockholder will not, during the period of 180 days
after the Time of Delivery, except pursuant to this Agreement, offer, sell,
contract to sell, or otherwise dispose of any shares of capital stock of
the Company (or securities convertible into, or exchangeable for, shares in
the shares of the Company), directly or indirectly, , other than transfers
to affiliates of such Selling Stockholder who are wholly-owned direct or
indirect subsidiaries of the corporate parent of such Selling Stockholder
and who agree to be bound by the terms of this Section 7(a), without the
prior written consent of Schroder & Co. Inc. or enter into any swap or any
other agreement, or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of shares in
the Company to be settled by delivery, in cash or otherwise;
(b) Such Selling Stockholder will not, directly or indirectly, take
any action designed to cause or result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization (within the
meaning of Regulation M promulgated under the Act) or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities;
20
<PAGE>
(c) Each Selling Stockholder will advise the Representative and
confirm such advice in writing promptly after (i) such Selling Stockholder
or any representative or agent of such Selling Stockholder receives any
written communication from the Commission relating to the Registration
Statement, the Prospectus or any Preliminary Prospectus, or any notice or
order of the Commission relating to the Company or any of the Selling
Stockholders in connection with the transactions contemplated by this
Agreement or (ii) such Selling Stockholder is advised in writing that (A)
any statement made in the Registration Statement, the Prospectus or any
Preliminary Prospectus is or becomes untrue in any material respect or (B)
any change is required in the Registration Statement, the Prospectus or any
Preliminary Prospectus, as the case may be, in order to make such statement
(with regard to the Prospectus or Preliminary Prospectus, in the light of
the circumstances in which it was made) not misleading; and
(d) Such Selling Stockholder will deliver to the Representative prior
to the Time of Delivery a properly completed and executed U.S. Treasury
Department Form W-9 or Substitute Form W-9.
8. The Company covenants and agrees with the several Underwriters and,
without affecting any other agreement between the Company or the Subsidiary and
any Selling Stockholder, the Selling Stockholders that the Company will pay or
cause to be paid, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated: (i) the fees, disbursements and
expenses of counsel and accountants for the Company, and all other expenses of
the Company, incurred in connection with the preparation, printing and filing of
the Registration Statement and the Prospectus and amendments and supplements
thereto and the furnishing of copies thereof, including charges for mailing, air
freight and delivery and counting and packaging thereof and of any Preliminary
Prospectus and related offering documents to the Underwriters and dealers; (ii)
the cost of printing or duplicating this Agreement, any Blue Sky Memorandum and
any other documents in connection with the offering, purchase, sale and delivery
of the Securities; (iii) all expenses incurred in connection with the
qualification of the Securities for offering and sale under securities laws as
provided in Sections 6(a) and 6(b) hereof, including filing and registration
fees and the fees, disbursements and expenses for counsel for the Underwriters
in connection with such qualification and in connection with Blue Sky surveys or
similar advice with respect to sales; (iv) the filing fees incident to, and the
fees and disbursements of counsel for the Underwriters in connection with,
securing any required review by the NASD of the terms of the sale of the
Securities; (v) all fees and expenses incurred in connection with the listing of
the Securities on the NYSE; and (vi) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section 8, including the fees of the Company's
transfer agent and registrar, the cost of any share issue or transfer taxes on
sale of the Securities to the Underwriters, the cost of the Company's personnel
and other internal costs, the cost of printing and engraving the certificates
representing the Securities and all expenses and transfer taxes incident to the
sale and delivery of the Securities to be sold by the Company to the
Underwriters hereunder.
21
<PAGE>
It is understood, however, that, except as provided in this Section 8,
Section 10 hereof and Section 13 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel, share transfer
taxes on resale of any of the Securities by them, and any advertising expenses
connected with any offers they may make.
9. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that (i) all representations and warranties
and other statements of the Company and the Selling Stockholder herein are true
and correct at and as of the Time of Delivery and all representations and
warranties and other statements of the Company herein are true and correct at
and as of the Option Securities Closing Date, and (ii) the Company and the
Selling Stockholders shall have performed all their respective obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Registration Statement shall have become effective, and the
Representative shall have received notice thereof not later than [10:00]
a.m., New York City time, on the date immediately following the date of
execution of this Agreement, or at such other time as the Representative
and the Company may agree; if required, the Prospectus shall have been
filed with the Commission in the manner and within the time period required
by Rule 424(b); if the Representative and the Company have elected to rely
upon Rule 430A, the price of the Securities and any price related to or
other information previously omitted from the Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) within the prescribed time period, and
on or prior to the Time of Delivery the Company shall have provided
evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements
of Rule 430A; no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall
have been complied with to the Representative's reasonable satisfaction;
(b) No action shall have been taken and no statute, rule or
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Time of Delivery, prevent the
issuance of the Securities; no injunction, restraining order or order of
any nature by a federal, state or provincial court of competent
jurisdiction shall have been issued as of the Time of Delivery which would
prevent the issuance of the Securities; at the Time of Delivery, no action,
suit or proceeding shall be pending against, or, to the knowledge of the
Company, threatened against, the Company or the Subsidiary or before any
court or arbitrator or any governmental body, agency or official which, if
adversely determined, would interfere with or adversely affect the issuance
of the Securities or could reasonably be expected to have a Material
Adverse Effect, or in any manner invalidate this Agreement or the issuance
of the Securities.
22
<PAGE>
(c) All corporate proceedings and related legal and other matters in
connection with the organization of the Company and the Subsidiary and the
registration, authorization, issue, sale and delivery of the Securities
shall have been reasonably satisfactory to McDermott, Will & Emery, counsel
to the Underwriters, and McDermott, Will & Emery shall have been timely
furnished with such documents and information as they may reasonably have
requested to enable them to pass upon the matters referred to in this
Section 9(c);
(d) The Representative shall not have advised the Company or any
Selling Stockholder that the Registration Statement or the Prospectus, or
any amendment or supplement thereto, contains an untrue statement of fact
or omits to state a fact which in the Representative's judgment is in
either case material and in the case of an omission is required to be
stated therein or is necessary to make the statements therein (with regard
to the Prospectus, in the light of the circumstances under which they were
made) not misleading;
(e) Hogan & Hartson L.L.P., as special counsel to the Company, shall
have furnished to the Representative their written opinion (in the form
attached as Appendix C hereto), dated the Time of Delivery or the Option
Securities Closing Date, as applicable, in form and substance satisfactory
to the Representative and to McDermott, Will & Emery;
(f) With respect to each of CIGNA, LICNA and CIG & Co., Choate, Hall
& Stewart, as counsel to such Selling Stockholders, shall have furnished to
the Representative their written opinion (in the form attached as Appendix
D hereto), dated the Time of Delivery, in form and substance satisfactory
to the Representative and to McDermott, Will & Emery;
(g) With respect to The Lincoln National Life Insurance Company,
Choate, Hall & Stewart, as counsel to such Selling Stockholder, shall have
furnished to the Representative their written opinion (in the form attached
as Appendix E hereto), dated the Time of Delivery, in form and substance
satisfactory to the Representative and to McDermott, Will & Emery;
(h) With respect to The Lincoln National Life Insurance Company,
inside counsel to such Selling Stockholder shall have furnished to the
Representative their written opinion (in the form attached as Appendix F
hereto), dated the Time of Delivery, in form and substance satisfactory to
the Representative and to McDermott, Will & Emery;
(i) Woodcock Washburn Kurtz Mackiewicz & Norris LLP, as patent
counsel to the Company, shall have furnished to the Representative their
written opinion (in the form attached as Appendix G hereto), dated the Time
of Delivery, in form and substance satisfactory to the Representative and
McDermott, Will & Emery;
23
<PAGE>
(j) McDermott, Will & Emery, counsel to the Underwriters, shall have
furnished to the Representative its written opinion or opinions, dated the
Time of Delivery or the Option Securities Closing Date, as applicable, in
form and substance satisfactory to the Representative, with respect to the
incorporation of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related matters as the
Representative may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them
to pass upon such matters;
(k) At the effective time of this Agreement and also at the Time of
Delivery or the Option Securities Closing Date, as applicable, Ernst &
Young, LLP shall have furnished to the Representative a letter or letters,
dated as of the effective time of this Agreement, and the Time of Delivery,
as applicable, or the Option Securities Closing Date, as applicable, in
form and substance satisfactory to the Representative in its sole
discretion, which letters shall include, but not be limited to,
determinations based on those specified procedures set forth or described
in Ernst & Young, LLP's comfort letter dated ___________, 1999, which
specified procedures shall be performed to and including a date within
three days of the date of the applicable letter;
(l) Neither the Company nor the Subsidiary shall have, since the date
of the latest audited financial statements included in the Prospectus,
sustained any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree; and since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, and, except as set forth or contemplated in
the Registration Statement and the Prospectus, there has not been, and
prior to the Time of Delivery there will not be, any change in the shares
of capital stock of the Company or equity interests in the Subsidiary or
change in the debt of the Company or the Subsidiary, any dividend or
distribution of any kind declared, paid or made on the shares of capital
stock of the Company or equity interest in the Subsidiary, nor any change
or any development involving a prospective change, in or affecting the
general affairs, management, financial condition, stockholders' or members'
equity or results of operations of the Company or the Subsidiary, otherwise
than as set forth or contemplated in the Prospectus, the effect of which,
in any such case is in the Representative's judgment so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and in the
manner contemplated in the Prospectus;
(m) The Company shall have consummated the Reorganization on the
terms described in the Prospectus, other than payments with respect to the
LLC Distribution, which may be made after the Time of Delivery;
(n) Between the date hereof and the Time of Delivery or the Option
Securities Closing Date, as applicable, there shall have been no
declaration of war by the Government of the United States; at the Time of
Delivery or the Option
24
<PAGE>
Securities Closing Date, as applicable, there shall not have occurred any
material adverse change in the financial or securities markets in the
United States or in political, financial or economic conditions in the
United States or any outbreak or material escalation of hostilities or
other calamity or crisis, the effect of which is such as to make it, in the
judgment of the Representative, impracticable or inadvisable to market the
Securities or to enforce contracts for the resale of Securities and no
event shall have occurred resulting in (i) trading in securities generally
on the NYSE, or in the Common Stock on the NYSE, being suspended or limited
or minimum or maximum prices being generally established on such exchange,
or (ii) additional material restrictions, not in force on the date of this
Agreement, being imposed upon trading in securities generally (or the
Common Stock specifically) by the NYSE, or by order of the Commission or
any court or other governmental authority or (iii) a general banking
moratorium being declared by federal or New York authorities; between the
date hereof and the Time of Delivery or the Option Securities Closing Date,
as applicable, (a) there shall not have been any inquiry, action, suit,
investigation or other proceeding (whether formal or informal) instituted
or threatened or any order made by any federal, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality in the United States, including without limitation, the
NYSE or any securities commission or other regulatory authority which, in
the opinion of the Underwriters or any of them, acting reasonably, operates
to or would prevent or restrict the distribution of the Securities in the
United States or prevents or materially restricts trading in the Securities
and (b) there shall not have developed, occurred or come into effect (i)
any occurrence of national or international consequence, (ii) any action,
governmental law or regulation or inquiry or (iii) any other occurrence of
any other nature whatsoever which, in the opinion of the Underwriters or
any of them, acting reasonably, seriously affects or may seriously affect
the financial markets or the business of the Company or the Subsidiary, on
a consolidated basis, or would be likely to prejudice materially the
success of the proposed issue, sale and distribution of the Securities, and
(c) the state of the financial markets shall not be or have become such
that the Securities cannot, in the reasonable opinion of the Underwriters,
or any of them, be profitably marketed.
(o) The Company and the Selling Stockholders shall have furnished to
the Representative at the Time of Delivery or the Option Securities Closing
Date, as applicable, certificates signed by the chief operating officer and
the chief financial officer of the Company and by each Selling Stockholder,
as applicable, satisfactory to the Representative as to such matters as the
Representative may reasonably request and as to (i) the accuracy of its and
their respective representations and warranties herein at and as of the
Time of Delivery or the Option Securities Closing Date, as applicable, and
(ii) the performance by the Company and each Selling Stockholder of all
their respective obligations hereunder to be performed at or prior to the
Time of Delivery or the Option Securities Closing Date, as applicable; the
Company and the Selling Stockholders shall have furnished or caused to be
furnished to the Representative at the Time of Delivery or the Option
Securities Closing Date, as applicable, certificates signed by the chief
operating officer and the chief financial officer of the Company and each
Selling Stockholder, as
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applicable, as to (i) the fact that each has carefully examined the
Registration Statement and Prospectus (in the case of each Selling
Stockholder, only the information regarding such Selling Stockholder) and,
(a) as of the Effective Date, the statements contained in the Registration
Statement and the Prospectus were true and correct and neither the
Registration Statement nor the Prospectus omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus or any amendment or
supplement thereto, in the light of the circumstances under which they were
made), except that each Selling Stockholder shall be responsible only for
information relating to it or required to be disclosed by it, and (b) in
the case of certificates delivered by officers of the Company, since the
Effective Date, no event has occurred that is required by the Act or the
rules and regulations of the Commission thereunder to be set forth in an
amendment of, or a supplement to, the Prospectus that has not been set
forth in such an amendment or supplement and (ii) in the case of
certificates delivered by officers of the Company, the matters set forth in
Sections 9(a) and 9(b) hereof;
(p) Each person or entity listed on Appendix A shall have delivered
to the Representative a Lock-Up Agreement as provided in Section 2(cc)
hereof;
(q) The Company shall have delivered to the Representative evidence
that the Securities have been duly authorized for listing on the NYSE upon
official notice of issuance as of the Effective Date; and
(r) The Company shall have delivered to the Representative written
evidence that the documents or matters set forth on Appendix B hereto have
been delivered, satisfied or fulfilled, as the case may be, in each case in
a manner satisfactory to the Representative and McDermott, Will & Emery.
10. (a) The Company will indemnify, defend and hold harmless each
Underwriter and (without limiting any obligation of the Company under any
other agreement with any Selling Shareholder) each Selling Stockholder
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter or such Selling Stockholder (and their respective
officers, directors, agents and affiliates and each person, if any, who
controls such Underwriter or such Selling Stockholder within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) (each, an
"Indemnitee") may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements made
therein not misleading (in the case of the Prospectus or any amendment or
supplement thereto, in the light of the circumstances under which they were
made), or (ii) any breach by the Company of any representation or warranty
made by the Company in Section 1 hereof, and will reimburse each Indemnitee
for legal or other expenses reasonably incurred by
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<PAGE>
such Indemnitee in connection with investigating, preparing to defend,
defending or appearing as a third-party witness in connection with any such
action or claim; provided, however, that the Company shall not be liable
-------- -------
(i) to any Underwriter to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Prospectus, the Registration Statement, the Prospectus or such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representative
expressly for use therein or (ii) to any Selling Stockholder to the extent
that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Preliminary Prospectus, the Registration Statement,
the Prospectus or such amendment or supplement in reliance upon and in
conformity with written information furnished to the Underwriters or the
Company by such Selling Stockholder in writing expressly for use therein;
provided, further, that the indemnity agreement contained in this Section
-------- -------
10(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or any persons controlling such Underwriter) on
account of any losses, claims, damages, liabilities or litigation arising
from the sale of Securities to any person, if such Underwriter fails to
send or give a copy of the Prospectus as the same may be then supplemented
or amended, to such person, within the time required by the Act and the
untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Preliminary Prospectus was
corrected in the Prospectus, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
The indemnity agreement in this Section 10(a) shall be in addition to
any liability which the company may otherwise have.
(b) Each Selling Stockholder, severally and not jointly, will
indemnify, defend and hold harmless each Underwriter and (without limiting
any obligation of any Selling Stockholder under any other agreement between
such Selling Stockholder and the Company) the Company against any losses,
claims, damages or liabilities to which such Underwriter or the Company
(and their respective officers, directors, agents and affiliates and each
person who controls such Underwriter or the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements made therein not misleading (in
the case of the Prospectus or any amendment or supplement thereto, in the
light of the circumstances under which they were made), in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Preliminary
Prospectus, the Registration Statement, the Prospectus or such
27
<PAGE>
amendment or supplement in reliance upon and in conformity with information
furnished to the Underwriters or the Company by such Selling Stockholder in
writing expressly for use therein, or (ii) any untrue statement or alleged
untrue statement made by such Selling Stockholder in Section 2 hereof, and
will reimburse such Underwriter or the Company for any legal or other
expenses incurred by such Underwriter or the Company (and their respective
officers, directors, agents and affiliates and each person who controls
such Underwriter or the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) in connection with investigating,
preparing to defend, defending or appearing as a third-party witness in
connection with any such action or claim; provided, however, that the
-------- -------
indemnity agreement contained in this Section 10(b) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter
(or its officers, directors, agents, affiliates or person who controls such
Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) on account of any losses, claims, damages, liabilities or
litigation arising from the sale of Securities to any person, if such
Underwriter fails to send or give a copy of the Prospectus, as the same may
be then supplemented or amended, to such person within the time required by
the Act and the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus, unless such failure is the
result of noncompliance by the Company with Section 6(a) hereof; provided,
--------
further, that no Selling Stockholder against whom a claim for indemnity is
-------
made on the basis of the provisions of this Section 10(b) shall be required
to indemnify, hold harmless or reimburse the Company or any Underwriter
(and their respective officers, directors, agents and affiliates and each
person who controls such Underwriter or the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) in an aggregate
amount in excess of the proceeds received by such Selling Stockholder from
the sale of Selling Stockholder Security hereunder in connection herewith.
(c) In addition to any obligations of the Company under Section 10(a)
hereof, the Company agrees that it shall perform its indemnification
obligations under Section 10(a) hereof with respect to counsel fees and
expenses and other expenses reasonably incurred by any Underwriter by
making payments within 30 days to such Underwriter in the amount of the
statements of such Underwriter's counsel or other statements which shall be
forwarded by such Underwriter, and that they shall make such payments
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of the obligation to reimburse the Underwriters for such
expenses and the possibility that such payments might later be held to have
been improper by a court until such time as a court orders return of such
payments.
(d) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities
to which the Company or such Selling Stockholder may become subject under
the Act, or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue
28
<PAGE>
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the
Prospectus or any amendment or supplement thereto, in the light of the
circumstances under which they were made), in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement, the Prospectus or such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter relating to such Underwriter through the
Representative expressly for use therein, and will reimburse the Company
and each such Selling Stockholder for any legal or other expenses
reasonably incurred by the Company or such Selling Stockholder in
connection with investigating, preparing to defend, defending or appearing
as a third-party witness in connection with any such action or claim.
The indemnity agreement in this Section 10(d) shall be in addition to
any liability which the respective Underwriters may otherwise have and
shall extend, upon the same terms and conditions, to each officer and
director of the Company and each Selling Stockholder and to each person, if
any, who controls the Company or any Selling Stockholder within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act.
(e) Promptly after receipt by an indemnified party under Section
10(a), 10(b) or 10(d) hereof of notice of the commencement of any action
(including any governmental investigation), such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party
under any such section, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any
indemnified party under Section 10(a), 10(b) or 10(d) hereof except to the
extent it was unaware of such action and has been prejudiced in any
material respect by such failure or from any liability which it may have to
any indemnified party otherwise than under such Section 10(a), 10(b) or
10(d) hereof. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If, however,
(i) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party or (ii) an
indemnified party shall have reasonably concluded that representation of
such indemnified party and the indemnifying party by the
29
<PAGE>
same counsel would be inappropriate under applicable standards of
professional conduct due to actual or potential differing interests between
them and the indemnified party so notifies the indemnifying party, then the
indemnified party shall be entitled to employ counsel different from
counsel for the indemnifying party at the expense of the indemnifying party
and the indemnifying party shall not have the right to assume the defense
of such indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to local
counsel) for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising
out of the same set of allegations or circumstances. The counsel, if any,
with respect to which fees and expenses shall be reimbursed pursuant to the
two immediately preceding sentences shall (i) be designated in writing by
Schroder & Co. Inc. in the case of parties indemnified pursuant to Sections
10(a) and 10(b) hereof, (ii) in the case of parties indemnified pursuant to
Section 10(d), and (iii) be designated (A) by the Company if it is the only
indemnified party named in any such action, (B) by the Selling Stockholders
if they are the only indemnified parties named in any such action, and (C)
jointly by the Company and the Selling Stockholder if the Company and one
or more Selling Stockholders shall be named in any such action. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by Section 10(c) hereof, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened
action, claim or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, claim or proceeding and does not include a
statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of any indemnified party. If an indemnifying party has
agreed to assume the defense of any claim against an indemnified party, the
indemnified party shall provide the indemnifying party with prior written
notice of any proposed settlement and shall not complete any settlement
without the prior written consent of the indemnifying party.
(f) In order to provide for just and equitable contribution under the
Act in any case in which (i) any Underwriter (or any person who controls
any Underwriter within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) makes claim for indemnification pursuant to Section
10(a) or 10(b) hereof, but is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding
the fact that Section 10(a) or 10(b) hereof provides for
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<PAGE>
indemnification in such case or (ii) contribution under the Act may be
required on the part of any Underwriter or any such controlling person in
circumstances for which indemnification is provided under Section 10(d)
hereof, then, and in each such case, each indemnifying party shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject as an indemnifying party hereunder (after contribution
from others) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one
hand and the Underwriters on the other from the offering of the Securities.
If, however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law or if the indemnified party failed to
give the notice required under Section 10(e) hereof, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified
party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the
Selling Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as
any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities purchased under
this Agreement (before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Securities
purchased under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company and the
Selling Stockholders on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company,
the Selling Stockholders and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section 10(f) were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to above in
this Section 10(f). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 10(f) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating, preparing to defend, defending or
appearing as a third-party witness in connection with any such action or
claim. Notwithstanding the provisions of this Section 10(f), no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Selling Stockholder has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 10(f), no Selling
Stockholder shall
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<PAGE>
be required to contribute any amount in excess of the amount by which the
total proceeds received by such Selling Stockholder from the sale of
Selling Stockholder Securities hereunder exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 10(f) to contribute are several in proportion
to their respective underwriting obligations and not joint. The Selling
Stockholders' obligations in this Agreement, including, without limitation,
obligations under this Section 10 to indemnify and/or contribute, are
several and not joint, and no Selling Stockholder shall be liable for any
act or omission of any other Selling Stockholder.
(g) In order to provide for just and equitable contribution under the
Act in any case in which (i) any Selling Stockholder or the Company makes a
claim for indemnification pursuant to Section 10(a) or 10(b) hereof, but is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that Section 10(a) or 10(b)
hereof provides for indemnification in such case or (ii) the Company and
any Selling Stockholder are required to contribute any amounts to any
Underwriter (or any person who controls such Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) pursuant to
Section 10(f) hereof, then, and in each such case, each indemnifying party
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject as an indemnifying or contributing party
hereunder (after contribution from others) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Selling Stockholders on the other from the offering of the
Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 10(e) hereof, then
each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on
the one hand and the Selling Stockholders on the other in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Selling Stockholders on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by the Company bear to the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by the Selling Stockholders, in each case as set forth
in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to
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<PAGE>
information supplied by the Company on the one hand or the Selling
Stockholders on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company and the Selling Stockholders agree that it would
not be just and equitable if contributions pursuant to this Section 10(g)
were determined by pro rata allocation (even if the Selling Stockholders
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section 10(g). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above in this Section 10(g)
shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating, preparing to
defend, defending or appearing as a third-party witness in connection with
any such action or claim. Notwithstanding the provisions of this Section
10(g), no Selling Stockholder shall be required to contribute any amount in
excess of the amount by which the total proceeds received by such Selling
Stockholder from the sale of Selling Stockholder Securities hereunder
exceeds the amount of any damages which such Selling Stockholder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Selling Stockholders' obligations in this
Agreement, including, without limitation, obligations under this Section 10
to indemnify and/or contribute, are several and not joint, and no Selling
Stockholder shall be liable for any act or omission of any other Selling
Stockholder.
(h) Promptly after receipt by any party to this Agreement of notice
of the commencement of any action, suit or proceeding, such party will, if
a claim for contribution in respect thereof is to be made against another
party (the "contributing party"), notify the contributing party of the
commencement thereof, but the omission so to notify the contributing party
will not relieve it from any liability which it may have to any other party
for contribution under the Act except to the extent it was unaware of such
action and has been prejudiced in any material respect by such failure or
from any liability which it may have to any other party other than for
contribution under the Act. Notice given pursuant to Section 10(e) hereof
shall constitute notice under this Section 10(h). In case any such action,
suit or proceeding is brought against any party, and such party notifies a
contributing party of the commencement thereof, the contributing party will
be entitled to participate therein with the notifying party and any other
contributing party similarly notified on the same terms and subject to the
same conditions contained in Section 10(e) hereof.
11. (a) If any Underwriter shall default on its obligation to purchase
the Firm Securities which it has agreed to purchase hereunder, the
Representative may in its discretion arrange for it or another party or
other parties to purchase such Firm Securities on the terms contained
herein. If the aggregate number of Firm Securities as to which Underwriters
default is more than one-eleventh of the
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<PAGE>
aggregate number of all the Firm Securities and within 36 hours after such
default by any Underwriter the Representative does not arrange for the
purchase of such Firm Securities, then the Company and the Selling
Stockholders shall be entitled to a further period of 36 hours within which
to procure another party or other parties satisfactory to the
Representative to purchase such Firm Securities on such terms. In the event
that, within the respective prescribed periods, the Representative notifies
the Company and the Selling Stockholders that it has so arranged for the
purchase of such Firm Securities, or the Company notifies the
Representative and the Selling Stockholders that it has so arranged for the
purchase of such Firm Securities, the Representative or the Company shall
have the right to postpone the Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in the
Representative's opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Firm
Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Firm Securities of such defaulting Underwriter or Underwriters by the
Representative or the Company and the Selling Stockholders as provided in
Section 11(a) hereof, the aggregate number of such Firm Securities which
remain unpurchased does not exceed one-eleventh of the aggregate number of
all the Firm Securities, then the Company and the Selling Stockholders
shall have the right to require each non-defaulting Underwriter to purchase
the number of the Firm Securities which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Firm Securities which
such Underwriter agreed to purchase hereunder) of the Firm Securities of
such defaulting Underwriter or Underwriters for which such arrangements
have not been made; but nothing shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Firm Securities of a defaulting Underwriter or Underwriters by the
Representative or the Company or any Selling Stockholders as provided in
Section 11(a) hereof, the aggregate number of such Firm Securities which
remain unpurchased exceeds one-eleventh of the aggregate number of all the
Firm Securities, or if the Company or any Selling Stockholders shall not
exercise the right described in Section 11(b) hereof to require non-
defaulting Underwriters to purchase Firm Securities of a defaulting
Underwriter or Underwriters, then this Agreement shall thereupon terminate
without liability on the part of any non-defaulting Underwriter, the
Company or any Selling Stockholder, except for the expenses to be borne by
the Company, the Selling Stockholders and the Underwriters as provided in
Section 8 hereof and the indemnity agreements in Section 10 hereof, but
nothing herein shall relieve a defaulting Underwriter from liability for
its default.
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12. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any Selling Stockholder, or an officer or
director or controlling person of the Company or any Selling Stockholder and
shall survive delivery of and payment for the Securities.
13. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon, New
York City time, on the first full business day after the Registration Statement
becomes effective, or at such time after the Registration Statement becomes
effective as the Representative may authorize the sale of the Securities to the
public by Underwriters or other securities dealers or (b) if the Registration
Statement has heretofore become effective, at the earlier of 24 hours after the
filing of the Prospectus with the Commission or at such time as the
Representative may authorize the sale of the Securities to the public by
Underwriters or securities dealers, unless, prior to any such time the
Representative shall have received notice from the Company that it elects that
this Agreement shall not become effective, or the Representative, or through the
Representative such of the Underwriters as have agreed to purchase in the
aggregate fifty percent or more of the Firm Securities hereunder, shall have
given notice to the Company that the Representative or such Underwriters elect
that this Agreement shall not become effective; provided, however, that the
provisions of this Section and Sections 8 and 10 hereof shall at all times be
effective.
If this Agreement shall be terminated pursuant to Section 11 hereof, or if
this Agreement, by election of the Representative or the Underwriters, shall
become effective pursuant to the provisions of this Section, neither the Company
nor any Selling Stockholder shall then be under any liability to any Underwriter
except as provided in Sections 8 and 10 hereof, but if this Agreement becomes
effective and is not so terminated but the Securities are not delivered by or on
behalf of the Company as provided herein because the Company has been unable for
any reason beyond its control and not due to any default by it to comply with
the terms and conditions hereof, the Company will reimburse the Underwriters
through the Representative for all out-of-pocket expenses approved in writing,
by the Representative, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Securities, but neither the Company nor any Selling Stockholder
shall then be under any further liability to any Underwriter except as provided
in Sections 8 and 10 hereof.
14. (a) The statements set forth under the caption "Underwriting" in the
Prospectus constitute the only information furnished by any Underwriter
through the Representative to the Company for purposes of Sections 1(b),
1(c), and 10 hereof.
(b) The statements relating to each Selling Stockholder set forth
under the captions "Certain Transactions" and "Principal and Selling
Stockholders" in the
35
<PAGE>
Prospectus constitute the only information furnished by such Selling
Stockholder to the Company for purposes of Sections 1(b), 1(c), and 10
hereof.
15. In all dealings hereunder, the Representative shall act on behalf of
each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by the Representative jointly with any such
Underwriter or by the Representative.
All statements, requests, notices and agreements hereunder, unless
otherwise specified in this Agreement, shall be in writing and, if to the
Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail) to
the Representative in care of Schroder & Co. Inc., Equitable Center, 787 Seventh
Avenue, New York, New York 10019, Attention: Syndicate Department, with a copy
(which shall not constitute notice) to McDermott, Will & Emery, 50 Rockefeller
Plaza, New York, New York 10020, Attention: Dov Schwell, Esq.; if to the
Company, shall be delivered or sent by letter sent by mail or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail) to
the address of the Company set forth in the Registration Statement, Attention:
Anthony J. Cavanna with a copy (which shall not constitute notice) to Hogan &
Hartson, L.L.P., 555 Thirteenth Street, NW, Washington, D.C. 20004, Attention:
Richard J. Parrino, Esq.; and if to the Selling Stockholders, to CIGNA, 900
Cottage Grove Road, S-215, Hartford, Connecticut 06152-2215, Attention: Linda M.
Terry, Esq., Senior Counsel, Investment Law, with a copy (which shall not
constitute notice) to Choate, Hall & Stewart, Exchange Place, 53 State Street,
Boston, Massachusetts 02109, Attention: W. Brewster Lee, Esq.; provided,
--------
however, that any notice to any Underwriter pursuant to Section 10(e) hereof
- -------
shall be delivered or sent by mail or facsimile transmission (subsequently
confirmed by delivery or by letter sent by mail) to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by the
Representative upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
16. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Selling Stockholders and the Company and, to the
extent provided in Sections 10 and 12 hereof, the officers, directors, agents,
affiliates of the Company and each Underwriter and each Selling Stockholder and
each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
17. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
18. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
36
<PAGE>
19. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us two counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
the Selling Stockholders. It is understood that your acceptance of this letter
on behalf of each of the Underwriters is pursuant to the authority set forth in
a form of Agreement Among Underwriters, manually or facsimile executed
counterparts of which, to the extent practicable and upon request, shall be
submitted to the Company and the Selling Stockholders for examination, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
TREX COMPANY, INC.
By: ________________________________
Name:
Title:
CIG & CO.
By: CIGNA Investments, Inc., authorized
agent
By:__________________________________
Name:
Title:
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA Investments, Inc., authorized
agent
By:__________________________________
Name:
Title:
37
<PAGE>
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA Investments, Inc., authorized
agent
By:___________________________________
Name:
Title:
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management
Company,
attorney-in-fact
By:___________________________________
Name:
Title:
Accepted as of the date hereof:
SCHRODER & CO. INC., as Representative
of the several Underwriters
By: SCHRODER & CO. INC.
By:_______________________________
Managing Director
38
<PAGE>
SCHEDULE I
NUMBER OF FIRM
UNDERWRITER SECURITIES
- ----------- ----------
Schroder & Co., Inc. _______________
J.C. Bradford & Co. _______________
Total 3,353,000
=========
39
<PAGE>
SCHEDULE II
Number of Selling
STOCKHOLDER SECURITIES Selling Stockholder
---------------------- -------------------
Connecticut General Life Insurance Company 57,062/1/
Life Insurance Company of North America 11,639/1/
The Lincoln National Life Insurance Company 34,299
__________________
/1/ Such shares are held of record by CIG & Co.
<PAGE>
SCHEDULE III
Wire Transfer Expected
Selling Party Address Information Proceeds
- --------------- ----------- ------------- --------
<PAGE>
APPENDIX A
Persons and Entities Who Are To Execute Lock-Up Agreements
----------------------------------------------------------
Anthony Cavanna
Robert Matheny
Andrew Ferrari
Roger Wittenberg
CIG & Co.
Connecticut General Life Insurance Company
Life Insurance Company of North America
The Lincoln National Life Insurance Company
Purchasers of Reserved Shares
<PAGE>
APPENDIX B
Following is a listing of additional required deliveries:
1. Contribution and Exchange Agreement dated as of March 19, 1999
2. Preferred Units Exchange Agreement dated as of March 19, 1999
3. Agreement to Terminate Class A Members' Agreement
4. Agreements to Terminate Employment Agreements of Robert G. Matheny, Anthony
J. Cavanna, Andrew U. Ferrari, and Roger A. Wittenberg, each dated as of
March 19, 1999
<PAGE>
APPENDIX C
SUBSTANCE OF OPINION
IN CONNECTION WITH PUBLIC OFFERING OF
TREX COMPANY, INC.
The following is the substance of an opinion only. Hogan & Hartson, L.L.P.
should incorporate the substance of this Appendix C in their opinion.
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own, lease and operate its properties and
conduct its business as described in the Prospectus.
2. The Company has an authorized capitalization as of June 30, 1998 as set
forth in the Prospectus, and all of the issued shares of Common Shares of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable; and the Common Shares conform to the description of the Common
Shares contained in the Prospectus.
3. The Company has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification, or is subject to no material liability or
disability by reason of failure to be so qualified in any such jurisdiction
(such counsel being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such counsel shall state
that they believe that both you and they are justified in relying upon such
opinions and certificates).
4. The Company has the corporate power and authority to execute, deliver and
perform all of its obligations under the Underwriting Agreement and to issue,
sell and deliver the Common Shares; the Underwriting Agreement has been duly and
validly authorized by all necessary corporate action by the Company, and has
been duly executed and delivered by the Company.
5. The Common Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to the Underwriting Agreement and, when issued and
delivered by the Company pursuant to the Underwriting Agreement against payment
of the consideration set forth therein, will be validly issued and fully paid
and nonassessable, and to the best of such counsel's knowledge, the issuance of
such Common Shares is not subject to any preemptive or similar rights.
6. The Underwriting Agreement has been duly authorized, executed and delivered
by the Company.
7. The issuance and sale of the Common Shares by the Company and the compliance
by the Company with all of the provisions of the Underwriting Agreement and the
consummation of the transactions therein contemplated will not conflict with or
result in a breach or violation of any of
<PAGE>
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the Company is bound or to which any of
the property or assets of the Company subject, nor will such action result in
any violation of the provisions of the Certificate of Incorporation or By-laws
of the Company or any statute or any order, rule or regulation, judgment, order
or decree of any court, arbitrator, or governmental agency or body having
jurisdiction over the Company or any of its properties.
8. The Company is not in violation of its Certificate of Incorporation or By-
laws or in default in the performance or observance or any material obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound.
9. To such counsel's knowledge and except as described in the Prospectus, there
are no legal or governmental proceedings pending or threatened against the
Company to which any of its property is subject which, if determined adversely
to the Company, is of a character required to be disclosed in the Prospectus
which has not been properly disclosed by the Company.
10. No consent, approval, authorization or order of, or filing, registration or
qualification with any Governmental Authorities (the "Governmental Approvals"),
which has not been obtained, taken or made (other than pursuant to any state
securities or Blue Sky laws or foreign securities laws, as to which such counsel
need not express an opinion), is required for the issuance or sale of the Common
Shares or the performance by the Company of its obligations under the
Underwriting Agreement. For purposes of this opinion, the term "Governmental
Authorities" means any executive, legislative, judicial, administrative or
regulatory body of the United States of America, the States of Delaware and New
York, or the Commonwealth of Virginia.
11. The statements in the Prospectus under the caption "Description of Capital
Stock," insofar as they purport to constitute a summary of the Common Shares,
and under the captions "Risk Factors Impact of Government Regulation,"
"Business Governmental Regulation," "Risk Factors Shares Eligible for Future
Sale; Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting," as well as under the caption "Indemnification of Directors and
Officers" in Item 14 of Part II of the Registration Statement, to the extent
that they constitute summaries of United States federal statutes, rules and
regulations, or portions thereof, or insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate in all
material respects.
12. Any required filing of the Prospectus, and any supplements thereto pursuant
to Rule 424(b), has been made in the manner and within the time period required
by Rule 424(b).
13. Except as disclosed in the Prospectus, to the best of such counsel's
knowledge, no holder of any security of the Company has any right to require
registration of any shares of Common Shares or any other security of the
Company.
<PAGE>
14. The Company is not required to be registered as an investment company under
the Investment Company Act of 1940, as amended, and the rules and regulations of
the Commission promulgated thereunder.
15. The Reorganization has been consummated, and Trex Company, Inc. is the
successor to all of the obligations of Trex Company, LLC.
16. We do not know of any contract or other document which is required to be
filed as an exhibit to the Registration Statement by the Securities Act or the
rules and regulations of the Commission under the Act, and the rules promulgated
thereunder, which have not been so filed.
17. Each of the Registration Statement and the Prospectus, as of their
respective effective or issue dates, appears on its face to be appropriately
responsive in all material respects to the requirements of the Securities Act
and the rules and regulations of the Commission under the Securities Act, except
for the financial statements and notes thereto, financial statement schedules
and other financial, data or ratios included in or omitted from either of them,
as to which such counsel need not express an opinion. For the purposes of the
opinion in this paragraph 17, such counsel may assume that the statements made
in the Registration Statement and Prospectus are complete and correct.
* * *
Such counsel has been advised orally by the staff of the Commission that no
stop order suspending the effectiveness of the Registration has been issued and,
to our knowledge, no proceedings for that purpose have been initiated or are
pending or are threatened by the Commission.
Such counsel has participated in conferences with certain officers,
employees and other representatives of the Company, at which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although such counsel has not undertaken to investigate or verify
independently, and does not assume responsibility for, the accuracy or
completeness of the statements contained in either of them (other than as
explicitly stated in paragraphs 9 and 13 above), based upon such participation
(and relying, as to materiality, to the extent we deemed reasonable, on
officers, employees and other representatives of the Company), no facts have
come to such counsel's attention to lead it to believe that (a) the Registration
Statement or any amendment (except for the financial statements or notes
thereto, financial statement schedules and other financial data or ratios
included in or omitted from those documents, as to which such counsel need not
express any such belief), at the time it became effective or on the date of this
letter, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (b) the Prospectus or any amendment or supplement
(except for the financial statements and notes thereto, financial statement
schedules and other financial data or ratios included in or omitted from those
documents, as to which such counsel need not express any such belief), at the
time the Prospectus was issued or on the date of this letter, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
<PAGE>
APPENDIX D
OPINION OF CHOATE, HALL & STEWART
(AS TO CIGNA PARTIES)
1. Each Selling Stockholder [CIGNA, LICNA AND CIG & CO.] has been duly
organized and is validly and existing in good standing under the laws of the
state of its organization.
2. Each Selling Stockholder has the power (corporate or otherwise) and
authority to execute, deliver and perform all of its obligations under the
Underwriting Agreement and the Agreement and Power of Attorney and to sell and
deliver the Securities being sold by such Selling Stockholder; the Underwriting
Agreement and the Agreement and Power of Attorney have been duly and validly
authorized by all necessary action (corporate and other) by each Selling
Stockholder, and have been duly executed and delivered by each Selling
Stockholder.
3. The Underwriting Agreement and the Agreement and Power of Attorney are
legal, valid and binding agreements of each Selling Stockholder, enforceable in
accordance with their terms, except as enforcement of the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
4. The sale of the Securities being sold by each Selling Stockholder and the
compliance by each Selling Stockholder with all of the provisions of the
Underwriting Agreement and the Agreement and Power of Attorney and the
consummation of the transactions therein contemplated will not (i) conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel to which any
Selling Stockholder is a party or by which any Selling Stockholder is bound or
to which any of the property or assets of any Selling Stockholder is subject, or
(ii) result in any violation of the provisions of the certificate of
incorporation or by-laws of any Selling Stockholder or any statute or any order,
rule or regulation, judgment, order or decree of any court, arbitrator, or
governmental agency or body having jurisdiction over any Selling Stockholder or
any of their respective properties or assets.
5. No consent, approval, authorization or order of, or filing, registration or
qualification with any governmental authority, which has not been obtained,
taken or made (other than pursuant to the Securities Act of 1933, as amended,
any state securities or Blue Sky laws or foreign securities laws or from the
National Association of Securities Dealers or the New York Stock Exchange, as to
all of which we express no opinion), is required for the sale of the Securities
or the performance by the Selling Stockholders of their obligations under the
Underwriting Agreement or the Agreement and Power of Attorney.
<PAGE>
6. Upon delivery of and payment for the Securities being sold by each Selling
Shareholder pursuant to the Underwriting Agreement and registration of
Securities in the names of the Underwriters in the stock records of the Company,
the several Underwriters will receive good and marketable title to such
Securities, free and clear of any adverse claim (within the meaning of the
Uniform Commercial Code), assuming at such time that the Underwriters acquire
the Securities in good faith without notice of any adverse claim and are
otherwise bona fide purchasers (within the meaning of the Uniform Commercial
Code).
<PAGE>
APPENDIX E
OPINION OF CHOATE, HALL & STEWART
(AS TO LINCOLN NATIONAL)
1. Each Selling Stockholder is validly existing in good standing under the
laws of the state of its organization.
2. The Underwriting Agreement and the Agreement and Power of Attorney are
legal, valid and binding agreements of each Selling Stockholder, enforceable in
accordance with their terms, except as enforcement of the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
3. No consent, approval, authorization or order of, or filing, registration or
qualification with any governmental authority, which has not been obtained,
taken or made (other than pursuant to the Securities Act of 1933, as amended,
any state securities or Blue Sky laws or foreign securities laws or from the
National Association of Securities Dealers or the New York Stock Exchange, as to
all of which we express no opinion), is required for the sale of the Securities
or the performance by the Selling Stockholders of their obligations under the
Underwriting Agreement or the Agreement and Power of Attorney.
4. Upon delivery of and payment for the Securities being sold by each Selling
Shareholder pursuant to the Underwriting Agreement and registration of
Securities in the names of the Underwriters in the stock records of the Company,
the several Underwriters will receive good and marketable title to such
Securities, free and clear of any adverse claim (within the meaning of the
Uniform Commercial Code), assuming at such time that the Underwriters acquire
the Securities in good faith without notice of any adverse claim and are
otherwise bona fide purchasers (within the meaning of the Uniform Commercial
Code).
<PAGE>
APPENDIX F
OPINION OF INSIDE COUNSEL
TO LINCOLN NATIONAL
1. Each Selling Stockholder has been duly organized and is validly existing in
good standing under the laws of the state of its organization.
2. Each Selling Stockholder has the power (corporate or otherwise) and
authority to execute, deliver and perform all of its obligations under the
Underwriting Agreement and the Agreement and Power of Attorney and to sell and
deliver the Securities being sold by such Selling Stockholder; the Underwriting
Agreement and the Agreement and Power of Attorney have been duly and validly
authorized by all necessary action (corporate and other) by each Selling
Stockholder, and have been duly executed and delivered by each Selling
Stockholder.
3. The sale of the Securities being sold by each Selling Stockholder and the
compliance by each Selling Stockholder with all of the provisions of the
Underwriting Agreement and the Agreement and Power of Attorney and the
consummation of the transactions therein contemplated will not (i) conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel to which any
Selling Stockholder is a party or by which any Selling Stockholder is bound or
to which any of the property or assets of any Selling Stockholder is subject, or
(ii) result in any violation of the provisions of the certificate of
incorporation or by-laws of any Selling Stockholder or any statute or any order,
rule or regulation, judgment, order or decree of any court, arbitrator, or
governmental agency or body having jurisdiction over any Selling Stockholder or
any of their respective properties or assets.
<PAGE>
Exhibit 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
TREX COMPANY, INC.
Trex Company, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name under which the corporation was originally incorporated is
Trex Company, Inc., and the original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware on
September 4, 1998.
2. This Restated Certificate of Incorporation restates and integrates and
further amends the provisions of the Certificate of Incorporation of the
corporation.
3. This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 242, 245 and 228 of the General
Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation of the corporation is
hereby restated and integrated to read in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is Trex Company, Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name
of the Corporation's registered agent at such address is Corporation Service
Company.
<PAGE>
ARTICLE III
PURPOSE
The purpose or purposes for which the Corporation is organized are to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware as from time to time
amended (the "General Corporation Law").
ARTICLE IV
CAPITAL STOCK
The Corporation shall have the authority to issue a total of forty-three
million (43,000,000) shares of capital stock, each with a par value of $0.01,
consisting of forty million (40,000,000) shares of Common Stock and three
million (3,000,000) shares of Preferred Stock.
ARTICLE V
COMMON STOCK
Except as required by law, all shares of Common Stock shall be identical in
all respects and shall entitle the holders thereof to the same rights and
privileges, subject to the same qualifications, limitations and restrictions.
Except as otherwise provided by or pursuant to this Restated Certificate of
Incorporation or as otherwise required by law, the holders of shares of Common
Stock shall be entitled to one vote per share of Common Stock on all matters on
which stockholders of the Corporation have the right to vote.
ARTICLE VI
PREFERRED STOCK
Section A. Preferred Stock. The Corporation is authorized to issue shares
---------------
of Preferred Stock from time to time in one or more series as may from time to
time be determined by the Board of Directors of the Corporation (the "Board"),
each of such series to be distinctly designated. The voting powers, preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, if any, of each such series
may differ from those of any and all other series of Preferred Stock at any time
outstanding, and the Board is hereby expressly granted authority to fix or
alter, by resolution or resolutions, the designation, number, voting powers,
preferences and relative, participating, optional, and other special rights, and
the qualifications, limitations and restrictions, of each such series,
including, but without limiting the generality of the foregoing, the following:
2
<PAGE>
1. The distinctive designation of, and the number of shares of Preferred
Stock that shall constitute, such series, which number (except where otherwise
provided by the Board in the resolution establishing such series) may be
increased (but not above the total number of shares of Preferred Stock) or
decreased (but not below the number of shares of such series then outstanding)
from time to time by like action of the Board.
2. The rights in respect of dividends, if any, of such series of Preferred
Stock, the extent of the preference or relation, if any, of such dividends to
the dividends payable on any other class or classes or any other series of the
same or other class or classes of capital stock of the Corporation, and whether
such dividends shall be cumulative or noncummualtive, and the dates at which any
such dividends shall be payable.
3. The right, if any, of the holders of such series of Preferred Stock to
convert the same into, or exchange the same for, shares of any other class or
classes or of any other series of the same or any other class or classes of
capital stock of the Corporation or any other corporation, and the terms and
conditions of such conversion or exchange.
4. Whether or not shares of such series of Preferred Stock shall be
subject to redemption, and the redemption price or prices and the times at
which, and the terms and conditions on which, shares of such series of Preferred
Stock may be redeemed.
5. The rights, if any, of the holders of such series of Preferred Stock
upon the voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation or in the event of any merger or consolidation of or sale of assets
by the Corporation.
6. The terms and amount of any sinking fund or redemption or purchase
account, if any, to be provided for shares of such series of the Preferred
Stock.
7. The voting powers, if any, of the holders of any series of Preferred
Stock generally or with respect to any particular matter, which may be less
than, equal to or greater than one vote per share, and which may, without
limiting the generality of the foregoing, include the right, voting as a series
by itself or together with the holders of any other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or more directors of the
Corporation generally or under such specific circumstances and on such
conditions as shall be provided in the resolution or resolutions of the Board
adopted pursuant hereto, including, without limitation, in the event there shall
have been a default in the payment of dividends on or redemption of any one or
more series of Preferred Stock.
3
<PAGE>
Section B. Rights of Preferred Stock.
-------------------------
1. After the provisions with respect to preferential dividends on any
series of Preferred Stock (fixed in accordance with the provisions of Section
(A) of this Article VI), if any, shall have been satisfied and after the
Corporation shall have complied with all the requirements, if any, with respect
to redemption of, or the setting aside of sums as sinking funds or redemption or
purchase accounts with respect to, any series of Preferred Stock (fixed in
accordance with the provisions of Section (A) of this Article VI), and subject
further to any other conditions that may be fixed in accordance with the
provisions of Section (A) of this Article VI, then and not otherwise the holders
of Common Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board.
2. In the event of the voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, after distribution in full of the preferential
amounts, if any (fixed in accordance with the provisions of Section (A) of this
Article VI), to be distributed to the holders of Preferred Stock by reason
thereof, the holders of Common Stock shall, subject to the additional rights, if
any (fixed in accordance with the provisions of Section (A) of this Article VI),
of the holders of any outstanding shares of Preferred Stock, be entitled to
receive all of the remaining assets of the Corporation, tangible or intangible,
of whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them respectively.
3. Except as may otherwise be required by law, and subject to the
provisions of such resolution or resolutions as may be adopted by the Board
pursuant to Section (A) of this Article VI granting the holders of one or more
series of Preferred Stock exclusive voting powers with respect to any matter,
each holder of Common Stock may have one vote in respect to each share of Common
Stock held on all matters voted upon by the stockholders.
4. The number of authorized shares of Preferred Stock and each class of
Common Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of shares having a majority
of the total number of votes which may be cast in the election of directors of
the Corporation by all stockholders entitled to vote in such an election, voting
together as a single class.
ARTICLE VII
BY-LAWS
The Board is expressly authorized to adopt, amend or repeal the By-laws
of the Corporation.
4
<PAGE>
ARTICLE VIII
ELECTION OF DIRECTORS
The directors of the Corporation shall not be required to be elected by
written ballots unless the By-laws of the Corporation so provide.
ARTICLE IX
BOARD OF DIRECTORS
Section A. Classified Board. The Board, other than those directors elected
----------------
by the holders of any series of Preferred Stock as provided for or fixed
pursuant to the provisions of Article VI hereof, shall be divided into three
classes, as nearly equal in number as the then-authorized number of directors
constituting the Board permits, with the term of office of one class expiring
each year and with each director serving for a term ending at the third annual
meeting of stockholders of the Corporation following the annual meeting at which
such director was elected. One class of directors shall be initially elected for
a term expiring at the annual meeting of stockholders to be held in the year
2000, another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in the year 2001, and another class shall be
initially elected for a term expiring at the annual meeting of stockholders to
be held in the year 2002. Members of each class shall hold office until their
successors are elected and qualified. At each succeeding annual meeting of the
stockholders of the Corporation, the successors of the class of directors whose
term expires at that meeting shall be elected by a plurality vote of all votes
cast at such meeting to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
Section B. Vacancies. Except as otherwise provided for or fixed pursuant to
---------
the provisions of Article VI hereof relating to the rights of the holders of any
series of Preferred Stock to elect additional directors, newly created
directorships resulting from any increase in the authorized number of directors
and any vacancies on the Board resulting from death, resignation,
disqualification, removal or other cause shall be filled only by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or in which the
vacancy occurred and until such director's successor shall have been duly
elected and qualified. No decrease in the number of directors constituting the
Board shall shorten the term of any incumbent director.
Section C. Directors Elected by Holders of Preferred Stock. During any
-----------------------------------------------
period when the holders of any series of Preferred Stock have the right to elect
additional directors as provided for or fixed pursuant to the provisions of
Article VI hereof, then upon commencement and for the duration of the period
during which
5
<PAGE>
such right continues (i) the then otherwise total authorized number of directors
of the Corporation shall automatically be increased by such specified number of
directors, and the holders of such Preferred Stock shall be entitled to elect
the additional directors so provided for or fixed pursuant to such provisions,
and (ii) each such additional director shall serve until such director's
successor shall have been duly elected and qualified, or until such director's
right to hold such office terminates pursuant to such provisions, whichever
occurs earlier. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Preferred Stock having such right to elect additional directors are divested of
such right pursuant to the provisions of such stock, the terms of office of all
such additional directors elected by the holders of such stock, or elected to
fill any vacancies resulting from death, resignation, disqualification or
removal of such additional directors, shall forthwith terminate and the total
and authorized number of directors of the Corporation shall be reduced
accordingly. Notwithstanding the foregoing, whenever, pursuant to the provisions
of Article VI hereof, the holders of any one or more series of Preferred Stock
shall have the right, voting separately as a series or together with holders of
other such series, to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of this Restated
Certificate of Incorporation and the Certificate of Designation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article IX unless expressly provided by such terms.
Section D. Number of Directors Constituting the Board. Except as otherwise
------------------------------------------
provided for or fixed pursuant to Article VI hereof relating to the rights of
the holders of any series of Preferred Stock to elect additional directors, the
total number of directors constituting the entire Board shall be not less than
four(4) nor more than twenty (20), with the then-authorized number of directors
being fixed from time to time by the Board.
ARTICLE X
NO ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
Except as otherwise provided for or fixed pursuant to the provisions of
Article VI hereof relating to the rights of the holders of any series of
Preferred Stock, no action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of stockholders
may be effected by written consent of stockholders in lieu of a meeting of
stockholders, unless the action to be effected by written consent of
stockholders and the taking of such action by such written consent have
expressly been approved in advance by the Board.
6
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ARTICLE XI
DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law or (iv)
for any transaction from which the director derived any improper personal
benefit. If the General Corporation Law is amended after the filing of this
Restated Certificate of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law, as so amended. No modification
or repeal of the provisions of this Article XI shall adversely affect any right
or protection of any director of the Corporation existing at the date of such
modification or repeal or create any liability or adversely affect any such
right or protection for any acts or omissions of such director occurring prior
to such modification or repeal.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation as heretofore amended or supplemented and which
has been duly adopted in accordance with Sections 242 and 245 of the General
Corporation Law, as the Corporation has received payment for its capital stock,
has been executed by its President this March 20, 1999.
TREX COMPANY, INC.
By:/s/ Robert G. Matheny
----------------------------------
Name: Robert G. Matheny
Title: President
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
TREX COMPANY, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
------------------
Corporation in the State of Delaware is 1013 Centre Road, in the City of
Wilmington, Delaware 19805, in the County of New Castle. The name of its
registered agent at such address is Corporation Service Company.
Section 2. Other Offices. The Corporation may also have offices at
--------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 1. Places of Meetings. All meetings of stockholders shall be
-------------------
held at such place or places in or outside of the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of meeting or waiver of notice thereof, subject to any provisions of the laws of
the State of Delaware.
Section 2. Annual Meetings. Unless otherwise determined from time to
----------------
time by the Board of Directors, the annual meeting of stockholders shall be held
each year for the election of directors and the transaction of such other
business as may properly come before the meeting at such date and time as may be
designated by the Board of Directors. Written notice of the time and place of
the annual meeting shall be given by mail to each stockholder entitled to vote
at such meeting, at the stockholder's address as it appears on the records of
the Corporation, not less than ten (10) nor more than sixty (60) days prior to
the scheduled date thereof.
Section 3. Special Meetings. A special meeting of the stockholders
-----------------
of the Corporation may be called at any time by the Chairman of the Board or by
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of directors which the Corporation would have if there were no
vacancies, but such special meeting may not be called by any other person or
persons. Written notice of the date, time, place and specific purpose or
purposes for which such meeting is called shall be given by mail to each
stockholder entitled to vote thereat at such stockholder's address as it appears
on the records of the Corporation not less
<PAGE>
than ten (10) nor more than sixty (60) days prior to the scheduled date thereof.
Business transacted at any special meeting of stockholders shall be limited to
the purposes stated in the notice.
Section 4. Voting. At all meetings of stockholders, each stockholder
-------
entitled to vote on the record date as determined under these By-Laws or, if not
so determined, as prescribed under the laws of the State of Delaware, shall be
entitled to one vote for each share of stock standing on record in such
stockholder's name, subject to any voting powers, restrictions or qualifications
set forth in the Restated Certificate of Incorporation of the Corporation or any
amendment thereto (the "Restated Certificate of Incorporation").
Section 5. Quorum; Voting. At any stockholders meeting, a majority
---------------
of the voting power of the shares of stock outstanding and entitled to vote
thereat, present in person or by proxy, shall constitute a quorum, but a smaller
interest may adjourn any meeting from time to time, and the meeting may be held
as adjourned without further notice, subject to such limitations as may be
imposed under the laws of the State of Delaware. When a quorum is present at any
meeting, the affirmative vote of the holders of a majority of the voting power
of the shares of stock entitled to vote thereon, present in person or by proxy,
shall decide any question brought before such meeting unless such question is
one upon which a different vote is required by express provision of the Restated
Certificate of Incorporation, these By-Laws, the rules or regulations of the New
York Stock Exchange, Inc. or any law or other rule or regulation applicable to
the Corporation, in which case such express provision shall govern.
Section 6. Inspectors of Election; Opening and Closing the Polls.
------------------------------------------------------
The Board of Directors may, by resolution, appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives of the Corporation, to act at a meeting of stockholders and
make a written report thereof. One or more persons may be designated as
alternative inspectors to replace any inspector who fails to act. If no
inspector or alternate has been appointed to act, or if all inspectors or
alternates who have been appointed are unable to act at a meeting of
stockholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by the General Corporation Law of
the State of Delaware.
The chairman of the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at the meeting.
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<PAGE>
Section 7. List of Stockholders. At least ten (10) days before every
---------------------
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address and the
number of shares registered in the name of each stockholder, shall be prepared
by the secretary or the transfer agent in charge of the stock ledger of the
Corporation. Such list shall be open for examination by any stockholder as
required by the laws of the State of Delaware. The stock ledger shall be the
only evidence as to who are the stockholders entitled to examine such list or
the books of the Corporation or to vote in person or by proxy at such meeting.
Section 8. Written Consent in Lieu of Meeting. Except as otherwise
-----------------------------------
provided for or fixed pursuant to the provisions of the Restated Certificate of
Incorporation relating to the rights of the holders of any series of preferred
stock, no action that is required or permitted to be taken by the stockholders
of the Corporation at any annual or special meeting of stockholders may be
effected by written consent of stockholders in lieu of a meeting of
stockholders, unless the action to be effected by written consent of the
stockholders and the taking of such action by written consent have been
expressly approved in advance by the Board of Directors.
Section 9. Conduct of Meetings. The date and time of the opening and
--------------------
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors may, to the extent not prohibited by law, adopt
by resolution such rules and regulations for the conduct of the meeting of
stockholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations as adopted by the Board of Directors, the
chairman of any meeting of stockholders shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the Board of
Directors or prescribed by the chairman of the meeting, may to the extent not
prohibited by law include, without limitation, the following: (i) the
establishment of an agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety of those present;
(iii) limitations on attendance at or participation in the meeting to
stockholders of record of the Corporation, their duly authorized and constituted
proxies or such other persons as the chairman of the meeting shall determine;
(iv) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (v) limitations on the time allotted to questions or
comments by participants. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
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<PAGE>
Section 10. Notice of Stockholder Business and Nominations.
-----------------------------------------------
(a) Nominations of persons for election to the Board of Directors and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders only (i) pursuant to the Corporation's notice of
meeting (or any supplement thereto), (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who was a stockholder
of record of the Corporation at the time the notice provided for in this Section
10 is delivered to the Secretary of the Corporation, who is entitled to vote at
the meeting and who complies with the notice procedures set forth in this
Section 10.
(b) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of
this Section 10, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation, and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
ninetieth (90th) day nor earlier than the close of business on the one hundred
twentieth (120th) day prior to the first anniversary of the preceding year's
annual meeting (provided, however, that in the event that the date of the annual
meeting is more than thirty (30) days before or more than seventy (70) days
after such anniversary date, notice by the stockholder must be so delivered not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such annual meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such annual meeting or the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the Corporation). In no event shall the public
announcement of an adjournment or postponement of an annual meeting commence a
new time period (or extend any time period) for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth: (i) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14a-11 thereunder (and such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (ii) as to any
other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
text of the proposal or business (including the text of any resolutions proposed
for consideration and in the event that such business includes a proposal to
amend the By-Laws, the language of the proposed amendment), the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (a)
the
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<PAGE>
name and address of such stockholder, as they appear on the Corporation's books,
and of such beneficial owner, (b) the class and number of shares of capital
stock of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, (c) a representation that the stockholder
is a holder of record of stock of the Corporation entitled to vote at such
meeting and intends to appear, in person or by proxy, at the meeting to propose
such business or nomination and (d) a representation whether the stockholder or
the beneficial owner, if any, intends or is part of a group which intends to (A)
deliver a proxy statement and/or form of proxy to holders of at least the
percentage of the Corporation's outstanding capital stock required to approve or
adopt the proposal or elect the nominee and/or (B) otherwise solicit proxies
from stockholders in support of such proposal or nomination. The Corporation may
require any proposed nominee to furnish such other information as it may
reasonably require to determine the eligibility of such proposed nominee to
serve as a director of the Corporation.
(c) Notwithstanding anything in the second sentence of paragraph (b) of
this Section 10 to the contrary, in the event that the number of directors to be
elected to the Board of Directors at an annual meeting is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 10 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary of the
Corporation at the principal executive offices of the Corporation no later than
the close of business on the tenth (10th) day following the day on which such
public announcement is first made by the Corporation.
(d) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the Board of Directors or (ii) provided that the Board
of Directors has determined that directors shall be elected at such meeting, by
any stockholder of the Corporation who is a stockholder of record at the time
the notice provided for in this Section 10 is delivered to the Secretary of the
Corporation, who shall be entitled to vote at the meeting and upon such
election, and who complies with the notice procedures set forth in this Section
10. In the event the Corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the Board of Directors, any such
stockholder entitled to vote in such election of directors may nominate a person
or persons (as the case may be) for election to such position or positions as
specified in the Corporation's notice of meeting, if the stockholder's notice
required by paragraph (b) of this Section 10 shall be delivered to the Secretary
at the principal executive offices of the Corporation not earlier than the
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<PAGE>
close of business on the one hundred twentieth (120th) day prior to such special
meeting and not later than the close of business on the later of the ninetieth
(90th) day prior to such special meeting, or the tenth (10th) day following the
day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting. In no event shall the public announcement of an adjournment or
postponement of a special meeting commence a new time period (or extend any time
period) for the giving of a stockholder's notice as described above.
(e) Only such persons who are nominated in accordance with the procedures
set forth in this Section 10 shall be eligible to be elected at an annual or
special meeting of stockholders of the Corporation to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section 10. Except as otherwise provided by law or the Restated Certificate
of Incorporation, the chairman of the meeting shall have the power and duty to
(i) determine whether a nomination or any business proposed to be brought before
the meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 10 and (ii) if any proposed nomination or
business is not in compliance with this Section 10 (including whether the
stockholder or beneficial owner, if any, on whose behalf the nomination or
proposal is made solicits (or is part of a group which solicits), or fails to so
solicit (as the case may be), proxies in support of such stockholder's proposal
in compliance with such stockholder's representation as required by clause
(iii)(d) of paragraph (b) of this Section 10, to declare that such defective
nomination shall be disregarded or that such proposed business shall not be
transacted.
(f) For purposes of this Section 10, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(g) Notwithstanding the foregoing provisions of this Section 10, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rule and regulations thereunder with respect to the matters set
forth in this Section 10. Nothing in this Section 10 shall be deemed to affect
any rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
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<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number and Qualification. The authorized number of
-------------------------
directors that shall constitute the full Board of Directors of the Corporation
shall be fixed from time to time as provided in the Restated Certificate of
Incorporation. Directors need not be stockholders of the Corporation.
Section 2. Powers. The business and affairs of the Corporation shall
-------
be carried on by or under the direction of the Board of Directors, which shall
have all the powers authorized by the laws of the State of Delaware, subject to
such limitations as may be provided by the Restated Certificate of Incorporation
or these By-Laws. Except as otherwise expressly provided herein or in the
Restated Certificate of Incorporation, the vote of the majority of directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
The Chairman of the Board, when present, shall preside at all meetings
of the stockholders and of the Board of Directors.
Section 3. Compensation. The Board of Directors may from time to
-------------
time by resolution authorize the payment of fees or other compensation to the
directors for services as such to the Corporation, including, but not limited
to, fees for attendance at all meetings of the Board or of the executive or
other committees, and determine the amount of such fees and compensation.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor in amounts authorized or otherwise approved from time to time by the
Board.
Section 4. Meetings and Quorum. Meetings of the Board of Directors
--------------------
may be held either in or outside of the State of Delaware. At all meetings of
the Board, a majority of the then authorized number of directors shall
constitute a quorum. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
The first meeting of the Board of Directors after the election of a
new class of directors shall be held immediately after the annual meeting of
stockholders and at the same place, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event such meeting is not
held at such time and place, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all the directors.
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Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board. Notice of special meetings shall be given to each director on 24 hours
notice to each director, either personally, by mail, telegram, facsimile,
personal delivery or similar means. Special meetings may be called by the
president or the Chairman of the Board of Directors and shall be called by the
president or secretary in the manner and on the notice set forth above upon the
written request of a majority of the total number of directors which the
Corporation would have if there were no vacancies.
Notice of any meeting shall state the time and place of such meeting,
but need not state the purposes thereof unless otherwise required by the laws of
the State of Delaware, the Restated Certificate of Incorporation, these By-Laws
or the Board of Directors.
Section 5. Executive Committee. The Board of Directors may designate
--------------------
an Executive Committee to exercise, subject to applicable provisions of law, all
the powers of the Board in the management of the business and affairs of the
Corporation when the Board is not in session, including without limitation the
power to declare dividends and to authorize the issuance of the Corporation's
capital stock, and may, by resolution similarly adopted, designate one or more
other committees, including such committees specified in Section 6 of this
Article III. The Executive Committee shall consist of two or more directors of
the Corporation. The Board may designate one or more directors as alternate
members of the Executive Committee, who may replace any absent member at any
meeting of the Executive Committee. The members of the Executive Committee
present at any meeting, whether or not constituting a quorum, may unanimously
appoint another member of the Board to act at the meeting in the place of any
such absent member. The Executive Committee shall keep written minutes of its
proceedings and shall report such proceedings to the Board when required.
A majority of the Executive Committee may determine its action and fix
the time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the Executive Committee
in the manner provided for in Section 4 of this Article III. The Board shall
have power at any time to fill vacancies in, to change the membership of, or to
dissolve the Executive Committee.
Section 6. Other Committees.
-----------------
(a) The Board may appoint the following standing committees, the
members of which shall serve at the pleasure of the Board: a Nominating
Committee, a Compensation Committee and an Audit Committee. The Board may
appoint such other committees among the directors of the Corporation as it deems
necessary and appropriate for the proper conduct of the Corporation's business
and
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<PAGE>
may appoint such officers, agents or employees of the Corporation to assist the
committees of the Board as it deems necessary and appropriate. Meetings of
committees may be called by the chairman of the committee on 24 hours notice to
each committee member, either personally, by mail, telegram, facsimile or
similar means and shall be called by the chairman of the committee in like
manner and on like notice on the written request of a committee member. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.
(b) One or more directors of the Corporation shall be appointed to act
as a Nominating Committee. The Nominating Committee shall be responsible for
proposing to the Board nominees for election as directors and shall possess and
may exercise such additional powers and authority as may be delegated to it by
the Board from time to time. The Nominating Committee shall report its actions
to the Board at the next meeting of the Board following such actions. Vacancies
in the membership of the Nominating Committee shall be filled by the Board of
Directors.
(c) One or more directors of the Corporation shall be appointed to act
as a Compensation Committee, each of whom shall be directors who are not also
officers or employees of the Corporation or its subsidiaries or any other
individual having a relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director (each such director, an "Unaffiliated
Director"). The Compensation Committee shall be responsible for establishing
salaries, bonuses and other compensation for the executive officers of the
Corporation and for administering the Corporation's benefit plans, and shall
possess and may exercise such additional powers and authority as may be
delegated to it by the Board from time to time. The Compensation Committee
shall report its actions to the Board at the next meeting of the Board following
such actions. Vacancies in the membership of the Compensation Committee shall
be filled by the Board of Directors.
(d) One or more Unaffiliated Directors of the Corporation shall be
appointed to act as an Audit Committee. The Audit Committee shall have general
oversight responsibility with respect to the Corporation's financial reporting.
In performing its oversight responsibility, the Audit Committee shall make
recommendations to the Board of Directors as to the selection, retention, or
change in the independent accountants of the Corporation, review with the
independent accountants the scope of their examination and other matters
(relating to both audit and non-audit activities), and review generally the
internal auditing procedures of the Corporation. In undertaking the foregoing
responsibilities, the Audit Committee shall have unrestricted access, if
necessary, to personnel of the Corporation and documents and shall be provided
with the resources and assistance necessary to discharge its responsibilities,
including periodic reports from management assessing the impact of regulation,
accounting, and reporting of other significant matters that may affect the
Corporation. The Audit Committee shall
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<PAGE>
review the financial reporting and adequacy of internal controls of the
Corporation, consult with the internal auditors and certified public
accountants, and from time to time, but not less than annually, report to the
Board. Vacancies in the membership of the Audit Committee shall be filled by the
Board of Directors.
Section 7. Conference Telephone Meetings. Any one or more members of
------------------------------
the Board of Directors or any committee thereof may participate in meetings by
means of a conference telephone or similar communications equipment and such
participation in a meeting shall constitute presence in person at the meeting.
Section 8. Action Without Meetings. Any action required or permitted
------------------------
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken by unanimous written consent without a meeting to the extent and in
the manner authorized by the laws of the State of Delaware.
ARTICLE IV
OFFICERS
Section 1. Titles and Election. The officers of the Corporation
--------------------
shall be the president, a secretary and a treasurer, who shall initially be
elected as soon as convenient by the Board of Directors and thereafter, in the
absence of earlier resignations or removals, shall be elected at the first
meeting of the Board following the annual meeting of stockholders. Each officer
shall hold office at the pleasure of the Board except as may otherwise be
approved by the Board, or until such officer's earlier resignation, removal
under these By-Laws or other termination of employment. Any person may hold
more than one office if the duties can be consistently performed by the same
person, to the extent permitted by the laws of the State of Delaware.
The Board of Directors, in its discretion, may also at any time elect
or appoint a Chairman of the Board of Directors, who shall be a director, and
one or more vice presidents, assistant secretaries and assistant treasurers and
such other officers as it may deem advisable, each of whom shall hold office at
the pleasure of the Board, except as may otherwise be approved by the Board, or
until such officer's earlier resignation, removal or other termination of
employment, and shall have such authority and shall perform such duties as shall
be prescribed or determined from time to time by the Board or, if not so
prescribed or determined by the Board, as the chief executive officer or the
then senior executive officer may prescribe or determine. The Board of
Directors may require any officer or other employee or agent to give bond for
the faithful performance of duties in such form and with such sureties as the
Board may require.
Section 2. Duties. Subject to such extension, limitations, and other
-------
provisions as the Board of Directors or these By-Laws may from time to time
-10-
<PAGE>
prescribe or determine, the following officers shall have the following powers
and duties:
(a) President. The president shall be charged with general
----------
supervision of the management and policy of the Corporation, and shall have such
other powers and perform such other duties as the Board of Directors may
prescribe from time to time. The president shall be the chief executive officer
of the Corporation, shall exercise the powers and authority and perform all of
the duties commonly incident to such office and shall perform such other duties
as chief executive officer as the Board of Directors shall specify from time to
time. The president shall, in the absence at a meeting of stockholders of the
Corporation or of the Board, or because of the inability to act, of the Chairman
of the Board, perform all duties of the Chairman of the Board and preside at all
meetings of the stockholders and of the Board of Directors, if he is a director.
(b) Vice President. The vice president or vice presidents shall
---------------
perform such duties as may be assigned to them from time to time by the Board of
Directors or by the president if the Board does not do so. In the absence or
disability of the president, the vice presidents in order of seniority may,
unless otherwise determined by the Board, exercise the powers and perform the
duties pertaining to the office of president, except that if one or more
executive vice presidents has been elected or appointed, the person holding such
office in order of seniority shall exercise the powers and perform the duties of
the office of president.
(c) Secretary. The secretary, or in the secretary's absence, an
----------
assistant secretary shall keep the minutes of all meetings of stockholders and
of the Board of Directors, give and serve all notices, attend to such
correspondence as may be assigned to such officer, keep in safe custody the seal
of the Corporation, and affix such seal to all such instruments properly
executed as may require it, and shall have such other duties and powers as may
be prescribed or determined from time to time by the Board of Directors or by
the president if the Board does not do so.
(d) Treasurer. The treasurer, subject to the order of the Board of
----------
Directors, shall have the care and custody of the moneys, funds, valuable papers
and documents of the Corporation (other than such officer's own bond, if any,
which shall be in the custody of the president), and shall have, under the
supervision of the Board of Directors, all the powers and duties commonly
incident to such office. The treasurer shall deposit all funds of the
Corporation in such bank or banks, trust company or trust companies, or with
such firm or firms doing a banking business as may be designated by the Board of
Directors or by the president if the Board does not do so. The treasurer may
endorse for deposit or collection all checks, notes and similar instruments
payable to the Corporation or to its order. The treasurer shall keep accurate
books of account of the Corporation's transactions, which shall be the property
of the Corporation and, together with all of the property of the Corporation
-11-
<PAGE>
in such officer's possession, shall be subject at all times to the inspection
and control of the Board of Directors. The treasurer shall be subject in every
way to the order of the Board of Directors, and shall render to the Board of
Directors and/or the president of the Corporation, whenever they may require it,
an account of all transactions and of the financial condition of the
Corporation. In addition to the foregoing, the treasurer shall have such duties
as may be prescribed or determined from time to time by the Board of Directors
or by the president if the Board does not do so.
(e) Delegation of Authority. The Board of Directors may at any time
------------------------
delegate the powers and duties of any officer for the time being to any other
officer, director or employee.
ARTICLE V
RESIGNATIONS AND VACANCIES
Section 1. Resignations. Any director or officer may resign at any
-------------
time by giving written notice thereof to the Board of Directors, the president
or the secretary. Any such resignation shall take effect at the time specified
therein or, if the time be not specified, upon receipt thereof; and unless
otherwise specified therein, the acceptance of any resignation shall not be
necessary to make it effective.
Section 2. Vacancies.
----------
(a) Directors. Except for the rights of the holders of any series of
----------
preferred stock to elect additional directors, newly created directorships
resulting from any increase in the authorized number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal, or other cause shall be filled only by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or in which the vacancy occurred and until such director's successor is
duly elected and has been qualified. The directors also may reduce the
authorized number of directors by the number of vacancies on the Board. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
(b) Officers. The Board of Directors may at any time or from time to
---------
time fill any vacancy among the officers of the Corporation.
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<PAGE>
ARTICLE VI
CAPITAL STOCK
Section 1. Certificate of Stock. Every stockholder shall be entitled
--------------------
to a certificate or certificates for shares of the capital stock of the
Corporation in such form as may be prescribed or authorized by the Board of
Directors, duly numbered and setting forth the number and kind of shares
represented thereby. Such certificates shall be signed by the Chairman of the
Board, the president or a vice president and by the treasurer or an assistant
treasurer or by the secretary or an assistant secretary. Any or all of such
signatures may be in facsimile if and to the extent authorized under the laws of
the State of Delaware.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate has ceased to be such
officer, transfer agent or registrar before the certificate has been issued,
such certificate may nevertheless be issued and delivered by the Corporation
with the same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
Section 2. Transfer of Stock. Shares of the capital stock of the
-----------------
Corporation shall be transferable only upon the books of the Corporation upon
the surrender of the certificate or certificates properly assigned and endorsed
for transfer. If the Corporation has a transfer agent or agents or transfer
clerk and registrar of transfers acting on its behalf, the signature of any
officer or representative thereof may be in facsimile.
The Board of Directors may appoint a transfer agent and one or more
co-transfer agents and a registrar and one or more co-registrars of transfer and
may make or authorize the transfer agents to make all such rules and regulations
deemed expedient concerning the issue, transfer and registration of shares of
stock.
Section 3. Record Dates.
------------
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix in advance a record date
which, in the case of a meeting, shall not be less than ten (10) nor more than
sixty (60) days prior to the scheduled date of such meeting and which, in the
case of any other action, shall be not more than the maximum or less than the
minimum number of days prior to any such action permitted by the laws of the
State of Delaware.
(b) If no such record date is fixed by the Board, the record date
shall be that prescribed by the laws of the State of Delaware.
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<PAGE>
(c) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 4. Lost Certificates. In case of loss or mutilation or
-----------------
destruction of a stock certificate, a duplicate certificate may be issued upon
such terms as may be determined or authorized by the Board of Directors or by
the president if the Board does not do so.
ARTICLE VII
FISCAL YEAR, BANK DEPOSITS, CHECK, ETC.
Section 1. Fiscal Year. The fiscal year of the Corporation shall
-----------
commence or end at such time as the Board of Directors may designate.
Section 2. Bank Deposits, Checks, etc. The funds of the Corporation
--------------------------
shall be deposited in the name of the Corporation or of any division thereof in
such banks or trust companies in the United States or elsewhere as may be
designated from time to time by the Board of Directors, or by such officer or
officers as the Board may authorize to make such designations.
All checks, drafts or other orders for the withdrawal of funds from
any bank account shall be signed by such person or persons as may be designated
from time to time by the Board of Directors. The signatures on checks, drafts
or other orders for the withdrawal of funds may be in facsimile if authorized in
the designation.
ARTICLE VIII
BOOKS AND RECORDS
Section 1. Place of Keeping Books. Unless otherwise expressly
----------------------
required by the laws of the State of Delaware, the books and records of the
Corporation may be kept outside of the State of Delaware.
Section 2. Examination of Books. Except as may otherwise be provided
--------------------
by the laws of the State of Delaware, the Restated Certificate of Incorporation
or these By-Laws, the Board of Directors shall have power to determine from time
to time whether and to what extent and at what times and places and under what
conditions any of the accounts, records and books of the Corporation are to be
open to the inspection of any stockholder. No stockholder shall have any right
to inspect any account or book or document of the Corporation except as
prescribed by the laws of the State of Delaware or authorized by express
resolution of the Board of Directors.
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<PAGE>
ARTICLE IX
NOTICES
Section 1. Requirements of Notice. Whenever notice is required to be
----------------------
given by the laws of the State of Delaware, the Restated Certificate of
Incorporation or these By-Laws, it shall not mean personal notice unless so
specified, but such notice may be given in writing by depositing the same in a
post office, letter box, or mail chute postpaid and addressed to the person to
whom such notice is directed at the address of such person on the records of the
Corporation, and such notice shall be deemed given at the time when the same
shall be thus mailed.
Section 2. Waivers. Any stockholder, director or officer may, in
-------
writing or by telegram or cable, at any time waive any notice or other formality
required by statute, the Restated Certificate of Incorporation or these By-Laws.
Such waiver of notice, whether given before or after any meeting or action,
shall be deemed equivalent to notice. Presence of a stockholder either in
person or by proxy at any stockholders meeting and presence of any director at
any meeting of the Board of Directors shall constitute a waiver of such notice
as may be required by any statute, the Restated Certificate of Incorporation or
these By-Laws.
ARTICLE X
SEAL
The corporate seal of the Corporation shall consist of two concentric
circles between which shall be the name of the Corporation and the date of its
incorporation, and in the center of which shall be inscribed "Corporate Seal,
Delaware."
ARTICLE XI
POWERS OF ATTORNEY
The Board of Directors may authorize one or more of the officers of
the Corporation to execute powers of attorney delegating to named
representatives or agents power to represent or act on behalf of the
Corporation, with or without power of substitution.
In the absence of any action by the Board, the president, any vice
president, the secretary or the treasurer of the Corporation may execute for and
on behalf of the Corporation waivers of notice of stockholders meetings and
proxies for such meetings in any company in which the Corporation may hold
voting securities.
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<PAGE>
ARTICLE XII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Definitions. As used in this article, the term "person"
-----------
means any past, present or future director or officer of the Corporation or any
subsidiary or operating division thereof.
Section 2. Indemnification Granted. The Corporation shall indemnify,
-----------------------
to the full extent and under the circumstances permitted by the General
Corporation Law of the State of Delaware in effect from time to time, any person
as defined above, made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director or officer of the Corporation or a subsidiary or operating
division thereof, or is or was serving at the specific request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against costs,
charges, expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person or on such
person's behalf in connection with such action, suit or proceeding and any
appeal therefrom, if such person acted in good faith and in a manner he or she
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 that his or her 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 he or she 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 such conduct was unlawful.
Section 3. Requirements for Indemnification Relating to an Action or
---------------------------------------------------------
Suit by or in the Right of the Corporation. The Corporation shall 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 such
person is or was a director or officer of the Corporation, or a subsidiary
thereof or a designated officer of an operating division of the Corporation, or
is or was serving at the specific request of the Corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity, against costs, charges and expenses (including attorneys' fees)
actually and reasonably incurred by such person or on such person's behalf in
connection with the defense or settlement of such action or suit and any appeal
therefrom, if such person acted in good faith and in a manner that such person
reasonably believed to be in or not opposed to the best interest of the
-16-
<PAGE>
Corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such costs, charges and expenses which the
Court of Chancery or such other court shall deem proper.
Section 4. Success on Merits of Any Action. Notwithstanding any
-------------------------------
other provision of this Article XII, to the extent that a director or officer of
the Corporation or any subsidiary or operating division thereof has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in this Article XII, or in defense of any claim, issue or
matter therein, such person shall be indemnified against all costs, charges and
expenses (including attorneys' fees) actually and reasonably incurred by such
person or on such person's behalf in connection therewith.
Section 5. Determination of Standard of Conduct. Any indemnification
------------------------------------
under Sections 2 and 3 of this Article XII (unless ordered by a court) shall be
paid by the Corporation only after a determination has been made (1) by the
directors who were not parties to such action, suit or proceeding, or (2) if
such quorum is not obtainable, or even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders, that indemnification of the director or officer is proper
in the circumstances of the specific case because such person has met the
applicable standard of conduct set forth in Sections 2 and 3 of this Article
XII.
Section 6. Advance Payment; Representation by Corporation. Costs,
----------------------------------------------
charges and expenses (including attorneys' fees) incurred by a person referred
to in Sections 2 and 3 of this Article XII in defending a civil or criminal
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding; provided, however, that
the payment of such costs, charges and expenses incurred by a director or
officer in such capacity as officer or director (and not in any other capacity
and which service was or is rendered by such person while a director or officer)
in advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified by
the Corporation as authorized in this Article XII. Such costs, charges and
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate. The
Corporation may, in the manner set forth above, and upon approval of such
director or officer, authorize the Corporation's counsel to represent such
person, in any
-17-
<PAGE>
action, suit or proceeding, whether or not the Corporation is a party to such
action, suit or proceeding.
Section 7. Procedure for Obtaining Indemnity. Any indemnification
---------------------------------
under Sections 2, 3 and 4, or advance of costs, charges and expenses under
Section 6, of this Article XII shall be made promptly, and in any event within
sixty (60) days, of the written notice of the director or officer. The right to
indemnification or advances as granted by this Article XII shall be enforceable
by the director or officer in any court of competent jurisdiction if the
Corporation denies such request, in whole or in part, or if no disposition
thereof is made within sixty (60) days. Such person's costs and expenses
incurred in connection with successfully establishing a right to indemnification
or advancement of expenses, in whole or in part, in any action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs, charges and
expenses under Section 6 of this Article XII where the required undertaking, if
any, has been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Section 2 or 3 of this Article XII, but the
burden of proving such defense shall be on the Corporation. Neither failure of
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) to have made a determination that indemnification
of the claimant is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Section 2 or 3 of this Article XII,
nor the fact that there has been an actual determination by the Corporation
(including its directors, its independent legal counsel and its stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 8. Indemnification Not Exclusive. This right of
-----------------------------
indemnification shall not be deemed exclusive of any other rights to which a
person indemnified herein may be entitled by law, agreement, vote of
stockholders or disinterested directors or otherwise, and shall continue as to a
person who has ceased to be a director, officer, designated officer, employee or
agent and shall inure to the benefit of the heirs, executors, administrators and
other legal representatives of such person. It is not intended that the
provisions of this Article XII be applicable to, and they are not to be
construed as granting indemnity with respect to, matters as to which
indemnification would be in contravention of the laws of Delaware or of the
United States of America, whether as a matter of public policy or pursuant to
statutory provision.
Section 9. Invalidity of Certain Provisions. If this Article XII or
--------------------------------
any portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each director,
officer, employee and agent of the Corporation or any subsidiary or operating
division thereof as to costs, charges and expenses (including attorneys' fees),
-18-
<PAGE>
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article XII that shall not have been
invalidated and to the full extent permitted by applicable law.
Section 10. Miscellaneous. The Board of Directors may also on behalf
-------------
of the Corporation grant indemnification to any individual other than a person
defined herein to such extent and in such manner as the Board in its sole
discretion may from time to time and at any time determine.
ARTICLE XIII
AMENDMENTS
These By-Laws may be altered, amended or repealed, and new By-Laws may
be made, by the affirmative vote of a majority of the directors then in office.
-19-
<PAGE>
Exhibit 4.1
[BORDER]
THIS CERTIFICATE IS
TRANSFERABLE IN
RIDGEFIELD PARK, NJ
OR NEW YORK, NY
COMMON SHARES COMMON SHARES
Number Shares
TR
TREX COMPANY, INC.
Incorporated Under the Laws of the State of Delaware
CUSIP 89531P 10 5
See Reverse For Certain Definitions
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.01 PER
SHARE, OF
Trex Company, Inc., transferable only on the books of the Corporation by the
holder hereof in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
In Witness Whereof, the Corporation has caused this Certificate to be executed
and attested to by the manual or facsimile signatures of its duly authorized
officers, under a facsimile of its corporate seal to be affixed hereto.
Dated:
[CORPORATE SEAL]
TREX COMPANY, INC.
Countersigned and Registered:
ChaseMellon Shareholder Services, L.L.C.
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
/s/ Robert G. Matheny
PRESIDENT
/s/ Anthony J. Cavanna
TREASURER
[Image of _________]
<PAGE>
Upon request, the Corporation will furnish any holder of shares of
Common Stock of the Corporation, without charge, with a full statement of the
powers, designations, preferences and relative, participating, optional or other
special rights of any class or series of capital stock of the Corporation, and
the qualifications, limitations or restrictions of such preferences and/or
rights.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - _____________ Custodian _______________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ___________________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received _______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(Please print or typewrite name and address, including postal zip code of
assignee)
________________________________ Shares of Common Stock represented by the
within Certificate, and do hereby irrevocably constitute and appoint
_____________________________________________________ Attorney
to transfer the said Stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ____________________
In presence of
- ---------------------------------
- ---------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed:
- ------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
SEC RULE 17Ad-15.
<PAGE>
EXHIBIT 10.5
CONTRIBUTION AND EXCHANGE AGREEMENT
March 19, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS.................................................................. 1
AGREEMENT................................................................. 2
ARTICLE I REORGANIZATION................................................. 2
1.1 Closing Date and Location......................................... 2
1.2 Transactions...................................................... 3
1.2.1 Special Cash Distribution............................... 3
1.2.2 Conversion of Class B Units............................. 4
1.2.3 Exercise of Repurchase Option........................... 4
1.2.4 Contribution and Exchange............................... 5
1.3 Compliance With Agreements........................................ 6
1.4 Compliance With LLC Act........................................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE CORPORATION............. 6
2.1 Organization, Qualifications and Corporate Power.................. 6
2.2 Validity.......................................................... 7
2.3 Noncontravention; Consents........................................ 7
2.4 Authorized Capital Stock.......................................... 8
2.5 Validly Issued, Fully Paid and Nonassessable Common Stock......... 9
2.6 Securities Registration Requirements.............................. 9
2.7 No Prior Activities............................................... 9
2.8 Disclosure........................................................ 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 9
3.1 Organization, Qualifications and Power............................ 9
3.2 Validity.......................................................... 10
3.3 Noncontravention; Consents........................................ 10
3.4 Ownership of Capital Stock........................................ 10
3.5 No Default or Event of Default.................................... 11
3.6 Securities Registration Requirements.............................. 11
3.7 Disclosure........................................................ 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
AND CLASS B BENEFICIAL OWNERS.......................................... 11
4.1 Validity.......................................................... 11
4.2 Noncontravention; Consents........................................ 12
4.3 Title to Membership Interests..................................... 12
4.4 Investment Representations........................................ 12
ARTICLE V REORGANIZATION CLOSING......................................... 13
5.1 Conditions to the Obligations of the Parties...................... 13
5.2 Documents Delivered at Reorganization Closing..................... 14
5.2.1 Documents Delivered by the Corporation.................. 14
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
5.2.2 Documents Delivered by the Company....................... 15
5.2.3 Documents Delivered by the Institutional Members......... 16
5.2.4 Documents Delivered by the Management Members............ 17
ARTICLE VI COVENANTS...................................................... 18
6.1 Restated Certificate of Incorporation.............................. 18
6.2 Consents and Waivers............................................... 18
6.3 Further Assurances................................................. 18
ARTICLE VII NOTE PAYMENTS AND RELATED MATTERS............................. 18
7.1 Note Payments...................................................... 18
7.2 Consent and Waiver................................................. 19
7.3 Amendment of Securities Purchase Agreement and Notes............... 19
7.4 Termination of Securities Purchase Agreement....................... 19
ARTICLE VIII MISCELLANEOUS PROVISIONS..................................... 20
8.1 No Third Party Beneficiaries....................................... 20
8.2 Entire Agreement................................................... 20
8.3 Succession and Assignment.......................................... 20
8.4 Facsimile Execution; Counterparts.................................. 20
8.5 Notices............................................................ 20
8.6 Governing Law...................................................... 22
8.7 Amendments and Waivers............................................. 22
8.8 Severability....................................................... 22
8.9 Interpretation..................................................... 23
8.10 Specific Performance.............................................. 23
8.11 Obligations Several and Not Joint................................. 23
8.12 Termination of Agreement.......................................... 23
</TABLE>
SCHEDULE I Ownership of Junior Membership Interests Before Reorganization
SCHEDULE II LLC Distribution Amount Constituting Return of Members' Capital
SCHEDULE III Class A Units to be Sold Pursuant to Repurchase Option at Minimum
IPO Price
SCHEDULE IV Calculation of Minimum IPO Price
SCHEDULE V Shares of Reorganization Common Stock Issued to Members
EXHIBIT A Form of Note
EXHIBIT B Form of Registration Rights Agreement
EXHIBIT C Form of Legal Opinion
-ii-
<PAGE>
THIS CONTRIBUTION AND EXCHANGE AGREEMENT (this "Agreement") is made as
---------
of this 19th day of March 1999 among Trex Company, Inc., a Delaware corporation
(the "Corporation"), TREX Company, LLC, a Delaware limited liability company
-----------
(the "Company"), the members of the Company identified on the signature pages of
-------
this Agreement (individually, a "Member" and collectively, the "Members") and
------ -------
those persons identified on the signature pages of this Agreement as beneficial
owners (hereinafter referred to individually as a "Class B Beneficial Owner" and
------------------------
collectively as the "Class B Beneficial Owners").
-------------------------
RECITALS
--------
A. In connection with the capitalization of the Company on August 29,
1996, the Company, the Members and the Class B Beneficial Owners entered into
certain agreements, including (i) the Limited Liability Company Agreement dated
as of August 29, 1996, as amended as of the date hereof (the "LLC Agreement"),
-------------
among the Members, the Class B Beneficial Owners and Mobil Oil Corporation (the
"Preferred Member"); (ii) the Members' Agreement dated as of August 29, 1996, as
----------------
amended as of June 15, 1998 and as of the date hereof (the "Members'
--------
Agreement"), among the Company, the Members and the Class B Beneficial Owners;
and (iii) the Securities Purchase Agreements dated as of August 29, 1996, as
amended as of March 1, 1997 and as of December 15, 1997 (the "Securities
----------
Purchase Agreements"), between the Company and certain of the Members and Class
- -------------------
B Beneficial Owners.
B. As of the date hereof, (i) the Company owns all of the issued and
outstanding common stock, $.01 par value per share (the "Common Stock"), of the
------------
Corporation, (ii) each Member owns of record the class, number and percentage of
the outstanding junior limited liability company interests in the Company (the
"Membership Interests") set forth on Schedule I hereto and (iii) each Class B
-------------------- ----------
Beneficial Owner owns beneficially the class, number and percentage of the
outstanding junior limited liability company interests in the Company set forth
on Schedule I hereto.
----------
C. The Corporation has filed a registration statement (file no. 333-
63287) (as amended from time to time, the "Registration Statement") with the
----------------------
Securities and Exchange Commission (the "SEC") covering the initial public
---
offering of the Common Stock by the Corporation and certain of its stockholders
(the "IPO") under the Securities Act of 1933, as amended (the "Securities Act").
--- --------------
D. On the Reorganization Closing Date (as defined in Section 1.1), in
accordance with the terms and conditions of the LLC Agreement and the Members'
Agreement, the Company, the Corporation and the Members will complete the
transactions described in Section 1.2 (collectively, the
<PAGE>
"Reorganization") as a result of which, among other things, the Members will
--------------
acquire all of the Common Stock issued and outstanding prior to the IPO and the
Corporation will acquire all of the issued and outstanding Membership Interests.
E. Concurrently with the consummation of the Reorganization, the
Preferred Member will exchange all of the outstanding preferred limited
liability company interests in the Company for a promissory note of the
Corporation in an original principal amount calculated in accordance with the
LLC Agreement and payable in full on the IPO closing date (the "Preferred Units
---------------
Exchange").
- --------
F. Following the Reorganization and the Preferred Units Exchange, the
Corporation will consummate the IPO.
G. The Company, the Corporation, the Members and the Class B
Beneficial Owners wish to set forth herein their agreement concerning the
Reorganization and related matters.
AGREEMENT
---------
ARTICLE I
REORGANIZATION
--------------
1.1 Closing Date and Location. The Reorganization shall be
-------------------------
consummated on the date (the "Reorganization Closing Date") on which, and,
---------------------------
except as provided in the following sentence, immediately following the time at
which, the Corporation, the stockholders offering Common Stock in the IPO (the
"Selling Stockholders") and the managing underwriters of the IPO (the
--------------------
"Underwriters") have determined the initial public offering price (the "IPO
------------ ---
Price") of the Common Stock (such determination, the "IPO Pricing") and have
- ----- -----------
executed an underwriting agreement providing for the purchase of the Common
Stock by the Underwriters at the IPO Price (the "Underwriting Agreement"). By
----------------------
mutual agreement of the parties, the Company may make the LLC Distribution
described in Section 1.2.1 before the IPO Pricing. The Reorganization Closing
Date shall occur on the business day immediately preceding the business day on
which the SEC issues an order of effectiveness under the Securities Act with
respect to the Registration Statement. The closing of the Reorganization (the
"Reorganization Closing") shall occur at the offices of Hogan & Hartson L.L.P.
----------------------
located at 555 Thirteenth Street, N.W., Washington, D.C. 20004-1190, or at such
other location as the parties shall designate by mutual agreement.
-2-
<PAGE>
1.2 Transactions. The Reorganization shall consist of the
------------
transactions described in this Section 1.2, which the parties shall consummate
in the order set forth in this Section 1.2.
1.2.1 Special Cash Distribution.
-------------------------
(a) The Company shall make a special cash distribution to each
Member (the special cash distribution payable to the Members, the "LLC
---
Distribution"), which shall consist of (i) an amount representing a return of
- ------------
such Member's capital, as set forth opposite such Member's name on Schedule II
-----------
hereto, and (ii) an amount representing the amount of the previously recognized
and undistributed taxable income of the Company through the Reorganization
Closing Date on which such Member has paid income tax before the Reorganization
Closing Date or will pay income tax from and after the Reorganization Closing
Date (the "Taxable Income Amount"). The Company shall make the LLC Distribution,
---------------------
pro rata to the Members based on the amounts set forth on Schedule II hereto, by
-----------
wire transfer of immediately available funds or other method of payment mutually
acceptable to the parties to the extent of its cash available for such
distribution on the Reorganization Closing Date. If the Company does not pay any
Member in cash on the Reorganization Closing Date the entire amount of the LLC
Distribution payable to such Member, the Company shall issue to such Member a
promissory note or notes in the form of Exhibit A hereto in the original
---------
principal amount equal to the unpaid portion of such LLC Distribution (each such
promissory note, an "LLC Distribution Note"). Each LLC Distribution Note issued
---------------------
to a Member shall be payable in full not later than the second business day
after the closing date of the IPO (the "IPO Closing Date") or any later date
----------------
agreed to by the Company and such Member.
(b) Each Member acknowledges that the Taxable Income Amount paid
to such Member as of the payment date specified in Section 1.2.1(a) will
represent the Company's estimate of such Taxable Income Amount as of such
payment date. Not later than the second business day prior to the Reorganization
Closing Date, the Company shall furnish to each Member a notice setting forth
the Company's calculation of such estimated Taxable Income Amount. Promptly
after the Company calculates the actual Taxable Income Amount payable to each
Member, which shall occur not later than 90 days after the Reorganization
Closing Date, the Company shall furnish to such Member a written notice setting
forth such calculation in reasonable detail. If the estimated Taxable Income
Amount paid to a Member is less than the actual Taxable Income Amount, the
Company shall pay the amount of such shortfall to such Member within 15 business
days after the date on which the Company furnishes the foregoing notice to such
member. If the estimated Taxable Income Amount paid to a Member exceeds the
actual Taxable Income Amount, such Member shall pay the amount of such excess to
the Company by wire transfer of immediately available funds within 15 business
days after such
-3-
<PAGE>
Member receives the foregoing notice from the Company. Notwithstanding the
foregoing provisions of this Section 1.2.1(b), any Member that disagrees with
the Company's calculation of the actual Taxable Income Amount may deliver a
notice to the Company objecting to such calculation within 15 days following
such Member's receipt of the Company's notice and calculation. Such Member shall
send a copy of its notice of objection to the other Members at the same time it
delivers such notice to the Company. If the Company and such Member do not
resolve their disagreement regarding the Company's calculation within ten days
after such Member has sent its notice of objection to the Company, the
calculation of the actual Taxable Income Amount shall be made by the independent
public accountants of the Corporation, whose calculation shall be binding on the
Company and all Members.
1.2.2 Conversion of Class B Units. Following the LLC
---------------------------
Distribution, the Members holding of record the Class B Units in the Company
(the "Institutional Members") shall convert all 1,000 issued and outstanding
---------------------
Class B Units into 1,000 issued and outstanding Class A Units in the Company
pursuant to Section 1.2(3) of the LLC Agreement (the "Conversion"). Following
----------
the Conversion, each Institutional Member shall hold of record a number of Class
A Units which is equal to the number of Class B Units shown as held of record
opposite such Institutional Member's name on Schedule I hereto.
----------
1.2.3 Exercise of Repurchase Option.
-----------------------------
(a) Immediately following the Conversion, the Company shall
exercise its option to repurchase Class A Units from the Institutional Members
granted to the Company in Section 8 of the Members' Agreement (the "Repurchase
----------
Option"). In accordance with Section 8 of the Members' Agreement, the Company
- ------
shall repurchase ratably from the Institutional Members, and the Institutional
Members shall sell ratably to the Company, at a purchase price of $.01 per Class
A Unit, that number of Class A Units which shall result, after such repurchase,
in the Institutional Members collectively retaining Class A Units representing
at least 10% of the Class A Units of the Company on a fully diluted basis.
Without limiting Section 8 of the Members' Agreement, the Company, the Members
and the Class B Beneficial Owners agree that if the IPO Price for the sale of
not fewer than 3,250,000 shares of Common Stock by the Corporation is a minimum
of $9.41 per share (the "Minimum IPO Price"), the Company shall have the right
-----------------
to repurchase from each Institutional Member, and each Institutional Member
shall be obligated to sell to the Company, the number of Class A Units set forth
opposite such Institutional Member's name on Schedule III hereto. The
------------
calculation of the Minimum IPO Price is set forth on Schedule IV hereto.
-----------
(b) By executing this Agreement, the Institutional Members and the
Class B Beneficial Owners agree that (i) the Company has satisfied in full
-4-
<PAGE>
its obligation to furnish the Institutional Members with notice of exercise of
the Repurchase Option required by Section 8(b) of the Members' Agreement,
including all calculations and any other information required to be specified
therein, provided that the Underwriting Agreement obligates the parties thereto
to consummate the IPO at the Minimum IPO Price or at any higher IPO Price, and
(ii) the Institutional Members and the Class B Beneficial Owners agree with the
Company's calculations forming part of such notice and waive any right they may
have under Section 8(b) of the Members' Agreement to disagree with or object to
such calculations, provided that the Underwriting Agreement obligates the
parties thereto to consummate the IPO at the Minimum IPO Price or at any higher
IPO Price. If the Corporation, the Selling Stockholders and the Underwriters
determine to consummate the IPO at a price which is lower than the Minimum IPO
Price, the Company shall have satisfied in full its obligation to furnish the
Institutional Members with notice of exercise of the Repurchase Option required
by Section 8(b) of the Members' Agreement, including all calculations and any
other information required to be specified therein, if the Company furnishes to
the Selling Stockholders its calculation of the number of Class A Units subject
to the Repurchase Option not later than the business day immediately preceding
the day on which the Underwriting Agreement is executed; provided, however, that
the Institutional Members shall be entitled to exercise any right they may have
under Section 8(b) of the Members' Agreement to disagree with or to object to
such calculation.
(c) The Company shall have satisfied its obligation under Section
8(a) of the Members' Agreement to pay in full the Notes, together with all
accrued interest and Prepayment Premium, if any, thereon in accordance with the
terms of the Securities Purchase Agreements (as the terms "Notes" and
-----
"Prepayment Premium" are defined in the Securities Purchase Agreements) when the
------------------
Company makes, or causes the Corporation on its behalf to make, the payments
provided for in Section 7.1 (the "Note Payments").
-------------
1.2.4 Contribution and Exchange.
-------------------------
(a) Immediately following consummation of the Repurchase Option,
each Member shall contribute to the Corporation all of the Membership Interests
of such Member. In exchange for such contribution of Membership Interests by all
Members (such contribution and exchange together, the "Exchange"), the
--------
Corporation shall issue to each Member the percentage of the shares of Common
Stock issued to all Members pursuant to this Section 1.2.4 which is equal to
such Member's percentage of the outstanding Membership Interests contributed by
all Members to the Corporation pursuant to this Section 1.2.4 (the shares of
Common Stock issued to the Members in the Exchange, the "Reorganization Common
---------------------
Stock"). If the Underwriting Agreement obligates the parties thereto to
- -----
consummate the IPO at the Minimum IPO Price or at any higher IPO Price, the
Corporation shall issue to each Member the number of shares of
-5-
<PAGE>
Reorganization Common Stock set forth opposite such Member's name on Schedule V
----------
hereto.
(b) The Corporation and the Members shall consummate the
Exchange pursuant to Section 351 of the Internal Revenue Code of 1986, as
amended (the "Code"). No party hereto shall take or omit to take any action, or
----
permit any of its affiliates to take or omit to take any action, that would
affect adversely or that would be reasonably likely to affect adversely the
qualification of the Exchange as a tax-free transaction described in Code
Section 351(a). Each party hereto shall treat the Exchange for all tax purposes
as a tax-free transaction described in Code Section 351(a).
(c) Concurrently with consummation of the Exchange, the
Corporation shall cancel the Common Stock owned by the Company prior to the
Exchange and shall reflect such cancellation in its stock transfer records.
1.3 Compliance With Agreements. The Company, the Members and the
--------------------------
Class B Beneficial Owners agree that the Reorganization shall be consummated in
accordance with the terms of this Agreement, including the terms of the LLC
Agreement, the Members' Agreement and the Securities Purchase Agreements
expressly incorporated by reference herein, and that compliance with this
Agreement shall constitute compliance with the LLC Agreement, the Members'
Agreement and the Securities Purchase Agreements in respect of the transactions
constituting the Reorganization and the Note Payments.
1.4 Compliance With LLC Act. The Company shall consummate the
-----------------------
Repurchase Option and the LLC Distribution in compliance with Section 18-607 of
the Limited Liability Company Act of the State of Delaware.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
-------------------------------------------------
The Corporation hereby represents and warrants to each Member and each
Class B Beneficial Owner as follows:
2.1 Organization, Qualifications and Corporate Power.
------------------------------------------------
(a) The Corporation is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or
-6-
<PAGE>
qualification, except where the failure to be so qualified or licensed would not
have a material adverse effect on the operating results, financial condition or
business of the Corporation and the Company considered as a single enterprise (a
"Material Adverse Effect"). The Corporation has the corporate power and
-----------------------
authority (i) to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted and (ii) to execute, deliver and
perform this Agreement.
(b) The Corporation has delivered to each Member accurate and
complete copies of the Corporation's certificate of incorporation and bylaws as
in effect on the date hereof and the forms of the Corporation's restated
certificate of incorporation (the "Restated Certificate of Incorporation") and
-------------------------------------
amended and restated bylaws that shall be in effect immediately prior to the
Reorganization.
2.2 Validity. The execution, delivery and performance by the
--------
Corporation of (i) this Agreement and (ii) the Purchase Agreement (as such term
is defined in Section 5.1(e)) and the other agreements, documents and
instruments required to be delivered by the Corporation pursuant to Section
5.2.1 in connection herewith (the "Corporation Related Documents"), and the
-----------------------------
consummation or performance by the Corporation of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
on the part of the Corporation, other than the filing of the Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware. This Agreement constitutes the legal, valid and binding obligation of
the Corporation, enforceable against the Corporation in accordance with its
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights and (ii) laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies.
2.3 Noncontravention; Consents.
--------------------------
(a) Neither the execution and delivery by the Corporation of this
Agreement or the Corporation Related Documents, nor the consummation or
performance by the Corporation of any of the transactions to be consummated or
performed by it hereunder or thereunder, shall directly or indirectly (i)
violate any provision of the Corporation's certificate of incorporation or
bylaws, (ii) contravene, result in any breach of, or constitute a default under,
or result in the creation of any mortgage, lien, pledge, charge, security
interest or other encumbrance (a "Lien") in respect of any property of the
----
Corporation under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease or any other agreement or instrument to which the
Corporation is a party or by which the Corporation or any of its properties or
assets may be bound or affected, (iii) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree or
ruling of any court, arbitrator or federal, state or municipal entity properly
-7-
<PAGE>
exercising executive, legislative, judicial, regulatory or administrative
functions of government (a "Governmental Authority") applicable to the
----------------------
Corporation or (iv) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Corporation.
(b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of the Corporation is required in connection with the
consummation of the transactions contemplated by this Agreement or any
Corporation Related Documents, except for the filing of the Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware, the
filing of Form D with the SEC and the filing of Form D and other documents with
state securities authorities.
2.4 Authorized Capital Stock. Immediately prior to the
------------------------
Reorganization, the authorized capital stock of the Corporation shall consist of
(i) 40,000,000 shares of Common Stock, of which 100 shares will be issued and
outstanding and owned by the Company, and (ii) 3,000,000 shares of Preferred
Stock, $.01 par value per share (the "Preferred Stock"), none of which will be
---------------
issued and outstanding. Immediately following consummation of the
Reorganization, the authorized capital stock of the Corporation shall consist of
(i) 40,000,000 shares of Common Stock, of which 10,250,000 shares will be issued
and outstanding and owned by the Members, as set forth on Schedule IV hereto,
and (ii) 3,000,000 shares of Preferred Stock, none of which will be issued and
outstanding. Except as authorized or contemplated by this Agreement, the
Members' Agreement, the Registration Rights Agreement (as such term is defined
in Section 5.2.1(f)), the Corporation's 1999 Stock Option and Incentive Plan,
the Corporation's 1999 Incentive Plan for Outside Directors, the Company's 1999
Employee Stock Purchase Plan or the Underwriting Agreement, there shall not
exist immediately prior to or immediately after the consummation of the
Reorganization, (i) any subscription, warrant, option, convertible security or
other right to purchase or otherwise acquire Common Stock or other equity
securities of the Corporation from the Corporation or (ii) any commitment by the
Corporation to issue Common Stock or other equity securities or any such
subscriptions, warrants, options, convertible securities or other rights or to
repurchase or redeem Common Stock or other equity securities or to make any
other payment or distribution in respect thereof.
2.5 Validly Issued, Fully Paid and Nonassessable Common Stock.
---------------------------------------------------------
When issued in accordance with this Agreement, the Reorganization Common Stock
shall be validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, and shall be free and clear of all Liens
imposed by or through the Corporation, except as set forth in the Registration
Rights Agreement. Neither the issuance nor the delivery of the Reorganization
Common Stock is subject to any preemptive or any other similar right of any
stockholder of the Corporation or of any other person.
-8-
<PAGE>
2.6 Securities Registration Requirements. The offer, issuance and
------------------------------------
delivery by the Corporation of the Reorganization Common Stock in accordance
with this Agreement may be effected without registration of the Reorganization
Common Stock under the Securities Act or applicable state securities laws.
2.7 No Prior Activities. The Corporation has not conducted any
-------------------
business or engaged in any activity other than any business or activity related
to its organization, the IPO and the transactions contemplated by this Agreement
and the Corporation Related Documents.
2.8 Disclosure. The representations and warranties by the
----------
Corporation in this Section 2 do not contain an untrue statement of a material
fact or omit a material fact necessary to make the statements contained in this
Article II, in the light of the circumstances under which they are made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to each Member and each
Class B Beneficial Owner as follows:
3.1 Organization, Qualifications and Power. The Company is a
--------------------------------------
limited liability company duly formed, validly existing and in good standing
under the laws of the State of Delaware and is duly licensed or qualified to
transact business as a foreign limited liability company and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect. The Company has the power and authority as a
limited liability company (i) to own and hold its properties and to carry on its
business as now conducted and as proposed to be conducted and (ii) to execute,
deliver and perform this Agreement.
3.2 Validity. The execution, delivery and performance by the
--------
Company of (i) this Agreement and (ii) the Purchase Agreement and the other
agreements, documents and instruments required to be delivered by the Company
pursuant to Section 5.2.2 (the "Company Related Documents"), and the
-------------------------
consummation or performance by the Company of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary action of the
Company as a limited liability company. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
-9-
<PAGE>
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights and (ii) laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
3.3 Noncontravention; Consents.
--------------------------
(a) Neither the execution and delivery by the Company of this
Agreement or the Company Related Documents, nor the consummation or performance
by the Company of any of the transactions to be consummated or performed by it
hereunder or thereunder, shall directly or indirectly (i) violate any provision
of the Company's certificate of formation or the LLC Agreement, (ii) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease or
any other agreement or instrument to which the Company is a party or by which
the Company or any of its properties or assets may be bound or affected, (iii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority applicable to the Company or (iv) violate any provision
of any statute or other rule or regulation of any Governmental Authority
applicable to the Company.
(b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of the Company is required in connection with the
consummation of the transactions contemplated by this Agreement or any Company
Related Documents, except for such consents, approvals, authorizations or orders
that have been obtained.
3.4 Ownership of Capital Stock. The Company owns beneficially and
--------------------------
of record all of the issued and outstanding shares of capital stock of the
Corporation.
3.5 No Default or Event of Default. No Default or Event of Default
------------------------------
(as such terms are defined in the Securities Purchase Agreements) with respect
to the Company exists under any Securities Purchase Agreement.
3.6 Securities Registration Requirements. The offer, issuance and
------------------------------------
delivery by the Company of the LLC Distribution Notes in accordance with this
Agreement may be effected without registration of the LLC Distribution Notes
under the Securities Act or applicable state securities laws.
3.7 Disclosure. The representations and warranties by the Company
----------
in this Section 3 do not contain an untrue statement of a material fact or
-10-
<PAGE>
omit a material fact necessary to make the statements contained in this Article
III, in the light of the circumstances under which they are made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS AND CLASS B
---------------------------------------------------------
BENEFICIAL OWNERS
-----------------
Each Member and, to the extent indicated below, Class B Beneficial
Owner hereby represents and warrants, severally as to itself, to the Corporation
and to each other Member and Class B Beneficial Owner as follows:
4.1 Validity.
--------
(a) Such Member or Class B Beneficial Owner has the legal power and
authority to execute, deliver and perform this Agreement.
(b) The execution, delivery and performance of this Agreement by such
Member, if such Member is an Institutional Member, or Class B Beneficial Owner,
and the consummation or performance by such Institutional Member or Class B
Beneficial Owner of the transactions contemplated by this Agreement, have been
duly authorized by all necessary action on the part of such Institutional Member
or Class B Beneficial Owner.
(c) This Agreement constitutes the legal, valid and binding
obligation of such Member or Class B Beneficial Owner, enforceable against such
Member or Class B Beneficial Owner in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights and (ii) laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
4.2 Noncontravention; Consents.
--------------------------
(a) Neither the execution and delivery of this Agreement by such
Member or Class B Beneficial Owner, nor the consummation or performance by such
Member or Class B Beneficial Owner of any of the transactions to be consummated
or performed by such Member or Class B Beneficial Owner pursuant hereto, shall
directly or indirectly (i) violate any provision of the organizational documents
of such Member, if such Member is an Institutional Member, or Class B Beneficial
Owner, (ii) contravene, result in any breach of, or constitute a default under,
or result in the creation of any Lien in respect of any property of such Member
or Class B Beneficial Owner under, any indenture, mortgage, deed of trust,
-11-
<PAGE>
loan, purchase or credit agreement, lease or any other agreement or instrument
to which such Member or Class B Beneficial Owner is a party or by which such
Member or Class B Beneficial Owner or any properties or assets of such Member or
Class B Beneficial Owner may be bound or affected, (iii) conflict with or result
in a breach of any of the terms, conditions or provisions of any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority
applicable to such Member or Class B Beneficial Owner or (iv) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to such Member or Class B Beneficial Owner.
(b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of such Member or Class B Beneficial Owner is required in
connection with the consummation of the transactions contemplated hereby.
4.3 Title to Membership Interests. Such Member is the record
-----------------------------
owner, and such Class B Beneficial Owner is the beneficial owner, of the
Membership Interests set forth opposite the name of such Member or Class B
Beneficial Owner on Schedule II hereto. Such Member or Class B Beneficial Owner
-----------
has as of the date of this Agreement, and on the Reorganization Closing Date
shall have and shall convey to the Corporation, free and clear of all Liens,
valid legal title or full beneficial interest, as the case may be, to the
Membership Interests to be contributed by such Member to the Corporation
pursuant to Section 1.2.3.
4.4 Investment Representations.
--------------------------
(a) Such Member is an "accredited investor" as defined in Rule 501(a)
of Regulation D under the Securities Act.
(b) If such Member is a natural person (a "Management Member"), such
-----------------
Member is acquiring the Reorganization Common Stock and any LLC Distribution
Note for his own account for investment only and not with the current intention
of making a distribution thereof. If such Member is an Institutional Member,
such Institutional Member is acquiring the Reorganization Common Stock and any
LLC Distribution Note for its own account or for one or more separate accounts
maintained by it, or for or on behalf of a Class B Beneficial Owner, and not
with the current intention of making a distribution thereof, except as described
in the Registration Statement; provided, however, that the disposition of the
property of such Institutional Member or Class B Beneficial Owner at all times
shall be within the control of such Institutional Member or Class B Beneficial
Owner.
(c) Such Member or Class B Beneficial Owner understands that the
Reorganization Common Stock and any LLC Distribution Note to be issued to such
Member has not been registered under the Securities Act or applicable state
-12-
<PAGE>
securities laws and may be sold, transferred or otherwise disposed of only if
the Reorganization Common Stock or LLC Distribution Note subject to such sale,
transfer or other disposition is registered pursuant to the Securities Act and
other applicable securities laws or if an exemption from such registration is
available.
(d) Such Member or Class B Beneficial Owner is capable of evaluating
the merits and risks of an investment in the Corporation and has been afforded
the opportunity to obtain any information deemed necessary by such Member or
Class B Beneficial Owner concerning the Corporation, the Common Stock and the
terms and conditions of such investment.
ARTICLE V
REORGANIZATION CLOSING
----------------------
5.1 Conditions to the Obligations of the Parties. Each party's
--------------------------------------------
several obligations to take the actions required to be taken by such party at
the Reorganization Closing is subject to the satisfaction, at or prior to the
Reorganization Closing Date, of each of the following conditions (any of which
may be waived by such party, in whole or in part):
(a) The representations and warranties of each other party contained
in this Agreement shall be true on and as of the Reorganization Closing Date
with the same effect as though such representations and warranties had been made
by such party on and as of the Reorganization Closing Date.
(b) The Corporation and the Company shall have performed all
obligations required pursuant to the terms of this Agreement to be performed or
observed by them on or prior to the Reorganization Closing Date.
(c) There shall be no injunction, writ, preliminary restraining order
or other order in effect of any nature issued by a court or governmental agency
of competent jurisdiction directing that the transactions contemplated hereby
not be consummated in the manner provided for in this Agreement. No action or
proceeding shall have been instituted and remain pending before a court or other
governmental body of competent jurisdiction to restrain, prohibit or otherwise
challenge any of the transactions contemplated hereby (or seeking material
damages from any party as a result thereof), other than any such action or
proceeding which would not have a Material Adverse Effect or prevent any party
from performing its obligations hereunder.
(d) The IPO Pricing shall have occurred and the Underwriting
Agreement shall have been executed by the Corporation, the Selling Stockholders
-13-
<PAGE>
and the Underwriters, except as otherwise provided in Section 1.1 with respect
to the LLC Distribution.
(e) The Corporation shall concurrently have consummated the Preferred
Units Exchange on the terms and conditions set forth in the Preferred Units
Exchange Agreement dated as of the date hereof among the Corporation, the
Company and the Preferred Member (the "Preferred Units Exchange Agreement"), a
----------------------------------
true and complete copy of which has been delivered by the Company to all of the
Members and the Class B Beneficial Owners.
(f) The parties shall have delivered the documents described in
Section 5.2.
5.2 Documents Delivered at Reorganization Closing.
---------------------------------------------
5.2.1 Documents Delivered by the Corporation. The Corporation
--------------------------------------
shall deliver copies of the following documents to the Company and the Members
at the Reorganization Closing, except for the document specified in Section
5.2.1(h), which shall be delivered to the Institutional Members:
(a) the Restated Certificate of Incorporation, certified
by the Secretary of State of the State of Delaware and dated a recent date prior
to the Reorganization Closing Date;
(b) a good standing certificate with respect to the
Corporation from the Secretary of State of the State of Delaware dated a recent
date prior to the Reorganization Closing Date;
(c) resolutions of the Board of Directors of the
Corporation approving and authorizing the execution, delivery and performance of
this Agreement and the Corporation Related Documents, and the transactions
contemplated hereby and thereby, certified as of the Reorganization Closing Date
by the Secretary or an Assistant Secretary of the Corporation as being in full
force and effect without modification or amendment;
(d) a signature and incumbency certificate of the officers
of the Corporation executing this Agreement or other documents in connection
with this Agreement;
(e) the certificates representing the Reorganization
Common Stock duly issued by and executed on behalf of the Corporation;
(f) an executed counterpart of the Registration Rights
Agreement in the form of Exhibit B hereto (the "Registration Rights Agreement");
-----------------------------
-14-
<PAGE>
(g) a certificate of the Chief Financial Officer of the
Corporation dated the Reorganization Closing Date, certifying that the
Corporation has fulfilled the conditions specified in Sections 5.1(a), 5.1(b)
and 5.1(e) to be fulfilled by the Corporation and that the condition specified
in Section 5.1(d) has been satisfied;
(h) an opinion of Hogan & Hartson L.L.P., special counsel
to the Corporation, in substantially the form of Exhibit C hereto; and
---------
(i) such other documents as the Company or any Member may
reasonably request.
5.2.2 Documents Delivered by the Company. The Company shall
----------------------------------
deliver copies of the following documents to the Corporation and the Members at
the Reorganization Closing, except for the document specified in Section
5.2.2(h), which shall be delivered to the Members, and the document specified in
Section 5.2.2(j), which shall be delivered to the Institutional Members:
(a) the Company's Certificate of Formation, certified by the
Secretary of State of the State of Delaware and dated a recent date prior to the
Reorganization Closing Date;
(b) a good standing certificate with respect to the Company from the
Secretary of State of the State of Delaware dated a recent date prior to the
Reorganization Closing Date;
(c) resolutions of the Board of Managers of the Company approving and
authorizing the execution, delivery and performance of this Agreement and the
Company Related Documents, and the transactions contemplated hereby and thereby,
certified as of the date of the Reorganization Closing Date by the Chief
Financial Officer of the Company as being in full force and effect without
modification or amendment;
(d) a signature and incumbency certificate of the officers of the
Company executing this Agreement or other documents in connection with this
Agreement;
(e) certificates representing the Class A Units to be issued by the
Company to each Institutional Member upon consummation of the Conversion, duly
executed on behalf of the Company;
(f) evidence of payment of the Repurchase Option price to the
Institutional Members;
-15-
<PAGE>
(g) cross-receipts executed by the Company acknowledging receipt from
each Institutional Member of such Institutional Member's Class A Units tendered
pursuant to exercise of the Repurchase Option;
(h) if applicable, an LLC Distribution Note payable to each
Member, duly executed by the Corporation;
(i) a certificate of the Chief Financial Officer of the Company dated
the Reorganization Closing Date, certifying that the Company has fulfilled the
conditions specified in Sections 5.1(a) and 5.1(b) to be fulfilled by the
Company;
(j) an opinion of Hogan & Hartson L.L.P., special counsel to the
Company, in substantially the form of Exhibit C hereto; and
---------
(k) such other documents as the Corporation or any Member may
reasonably request.
5.2.3 Documents Delivered by the Institutional Members. Each
------------------------------------------------
Institutional Member shall deliver copies of the following documents to the
Corporation, the Company and each other Member at the Reorganization Closing:
(a) the certificate or certificates representing such Institutional
Member's Class B Units, accompanied by appropriate instruments of transfer
endorsed to the Company, for cancellation upon the books of the Company
following consummation of the Conversion;
(b) the certificate or certificates representing the portion of such
Institutional Member's Class A Units to be sold to the Company pursuant to the
Repurchase Option, accompanied by appropriate instruments of transfer endorsed
to the Company, for cancellation upon the books of the Company following
consummation of the Repurchase Option;
(c) the certificate or certificates representing the portion of such
Institutional Member's Class A Units to be contributed to the Company pursuant
to the Exchange, accompanied by appropriate instruments of transfer endorsed to
the Company;
(d) a cross-receipt executed by such Institutional Member
acknowledging receipt of payment from the Company of the Repurchase Option price
for such Institutional Member's Class A Units;
(e) an executed counterpart of the Registration Rights Agreement; and
-16-
<PAGE>
(f) such other documents as the Corporation, the Company or any
other Member may reasonably request.
The delivery by such Institutional Member of the foregoing
documents shall be deemed to constitute a certification that such Institutional
Member has fulfilled the condition specified in Section 5.1(a) to be fulfilled
by such Institutional Member and the delivery by CIG & Co. of the foregoing
documents shall be deemed to constitute a certification that each Class B
Beneficial Owner has fulfilled the condition specified in Section 5.1(a) to be
fulfilled by such Class B Beneficial Owner.
5.2.4 Documents Delivered by the Management Members. Each
---------------------------------------------
Management Member shall deliver copies of the following documents to the
Corporation, the Company and each other Member at the Reorganization Closing:
(a) an executed counterpart of the Registration Rights
Agreement;
(b) the certificate or certificates representing the portion of
such Management Member's Class A Units to be contributed by such Member to the
Company pursuant to the Exchange, accompanied by appropriate instruments of
transfer endorsed to the Company; and
(c) a certificate dated the Reorganization Closing Date,
certifying that such Management Member has fulfilled the condition specified in
Section 5.1(a) to be fulfilled by such Management Member.
ARTICLE VI
COVENANTS
---------
6.1 Restated Certificate of Incorporation. The Corporation shall
-------------------------------------
file the Restated Certificate of Incorporation with the Secretary of State of
the State of Delaware on or before the Reorganization Closing Date.
6.2 Consents and Waivers. The Corporation and the Company shall use
--------------------
their best efforts to obtain as promptly as practicable, and in any event prior
to the IPO Pricing, all consents, approvals or waivers from third parties
necessary to permit them to consummate the Reorganization and the Preferred
Units Exchange.
6.3 Further Assurances. Each party shall execute and deliver such
------------------
additional instruments, documents or other writings as may be reasonably
requested by any other party, before or after the Reorganization Closing Date,
in
-17-
<PAGE>
order to confirm and carry out and to effectuate fully the intent and purposes
of this Agreement.
ARTICLE VII
NOTE PAYMENTS AND RELATED MATTERS
---------------------------------
The Company agrees as follows with The Lincoln National Life Insurance
Company, CIG & Co. and each Class B Beneficial Owner, acting in its capacity as
a Purchaser under the Securities Purchase Agreement between it and the Company
(each reference in this Article VII to the Securities Purchase Agreement being
to such Securities Purchase Agreement) and as a record or beneficial holder of
Notes issued by the Company pursuant to the Securities Purchase Agreement (each
reference in this Article VII to the Notes being to such Notes), with respect to
the Securities Purchase Agreement and the Notes:
7.1 Note Payments. On the first to occur of the IPO Closing Date and
-------------
the date which is the sixth business day following the Reorganization Closing
Date, the Company shall pay, or shall cause the Corporation on its behalf to
pay, the Notes, together with all accrued interest and Prepayment Premium, if
any, thereon held of record by The Lincoln National Life Insurance Company and
CIG & Co. in accordance with the terms of the Securities Purchase Agreement, as
required by Section 8(a) of the Members' Agreement; provided, however, that, in
connection with the prepayment of the Notes pursuant to this Section 7.1, The
Lincoln National Life Insurance Company, CIG & Co. and each Class B Beneficial
Owner hereby waive the Company's compliance with provisions of the Securities
Purchase Agreement relating to notice, source of funds and other conditions to
prepayment of the Notes, to the extent such provisions are not satisfied hereby.
CIG & Co. hereby confirms to the Company that prepayment of the Notes held by
CIG & Co. shall be made in accordance with the wire instructions set forth in
Schedule A to the Securities Purchase Agreement. Prepayment of the Notes held by
The Lincoln National Life Insurance Company shall be made by wire transfer in
accordance with wire instructions furnished to the Company not later than the
business day preceding the payment date.
7.2 Consent and Waiver. The Lincoln National Life Insurance Company,
------------------
CIG & Co. and each Class B Beneficial Owner hereby consent to (and hereby waive
any objections any of them may have under the Securities Purchase Agreement or
the Notes with respect to) the foregoing: (i) the formation and initial
capitalization of the Corporation and (assuming the accuracy of the
Corporation's representation and warranty in Section 2.7) the business and
activity of the Corporation through the date hereof; (ii) the consummation of
the IPO as described in the Registration Statement;
-18-
<PAGE>
(iii) the consummation of the Reorganization and the Note Payments pursuant
hereto; (iv) the consummation of the Preferred Units Exchange pursuant to the
Preferred Units Exchange Agreement; (v) the termination as of the Reorganization
Closing Date of the Class A Members' Agreement dated as of August 29, 1996 among
the Management Members; and (vi) the termination as of the IPO Closing Date of
the employment agreements between the Company and each of the Management
Members. The Lincoln National Life Insurance Company, CIG & Co. and each Class B
Beneficial Owner also hereby waive the Company's compliance with Section 10.4(a)
of the Securities Purchase Agreement for six business days following the
Reorganization Closing Date.
7.3 Amendment of Securities Purchase Agreement and Notes. Section
----------------------------------------------------
7.2 constitutes a waiver under the Securities Purchase Agreement and the Notes
that complies with the requirements of the Securities Purchase Agreement and the
Notes for a legally effective and binding amendment and waiver, including,
without limitation, the requirements of Section 17 of the Securities Purchase
Agreement.
7.4 Termination of Securities Purchase Agreement. The Company, The
--------------------------------------------
Lincoln National Life Insurance Company, CIG & Co. and each Class B Beneficial
Owner agree that, effective as of the time and date of the payment in full of
the amounts referred to in Section 7.1, the Securities Purchase Agreement shall
terminate (except to the extent provided in Section 15 of the Securities
Purchase Agreement) and have no further legal force or effect.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
8.1 No Third Party Beneficiaries. This Agreement shall not confer
----------------------------
any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
8.2 Entire Agreement. This Agreement, including the Schedules and
----------------
the Exhibits hereto, the other documents delivered expressly hereby and the
Members' Agreement, the LLC Agreement and the Securities Purchase Agreements to
the extent specifically incorporated by reference herein constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede any prior understandings, agreements or representations, written or
oral, by or among the parties hereto that may have related in any way to the
subject matter hereof.
8.3 Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the parties named herein and their respective
-19-
<PAGE>
successors and permitted assigns. No party hereto may assign either this
Agreement or any of such party's rights, interests or obligations hereunder
without the prior written consent of the other parties hereto.
8.4 Facsimile Execution; Counterparts. This Agreement may be
---------------------------------
executed in one or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. A
facsimile, telecopy or other reproduction of this Agreement may be executed by
one or more parties hereto, and an executed copy of this Agreement may be
delivered by one or more parties hereto by facsimile or similar instantaneous
electronic transmission device pursuant to which the signature of or on behalf
of such party can be seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. At the request of any party
hereto, all parties hereto agree to execute an original of this Agreement as
well as any facsimile, telecopy or other reproduction hereof.
8.5 Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be deemed effectively given when actually received and shall
be sent as follows: (i) by personal delivery to the party to be notified; (ii)
by telex or facsimile; (iii) by registered or certified mail, return receipt
requested, postage prepaid; or (iv) by a nationally recognized overnight
courier, specifying next day delivery. All communications shall be sent to the
parties hereto at the respective addresses set forth below, or as notified by
any party or, from time to time at least ten days prior to the effectiveness of
such notice:
If to the Corporation:
Trex Company, Inc.
20 South Cameron Street
Winchester, VA 22601
Attn.: Anthony J. Cavanna
Fax: (540) 678-0886
If to the Company:
TREX Company, LLC
20 South Cameron Street
Winchester, VA 22601
Attn.: Anthony J. Cavanna
Fax: (540) 678-0886
-20-
<PAGE>
If to CIG & Co. and any Class B Beneficial Owner:
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, CT 06152-2307
Attn: Private Securities Division S-307
Fax: (860) 726-7203
If to The Lincoln National Life Insurance Company:
200 East Berry Street
Renaissance Square
Fort Wayne, Indiana 46802
If to any Management Member:
c/o Trex Company, Inc.
20 South Cameron Street
Winchester, VA 22601
Fax: (540) 678-0886
8.6 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
-------------
VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
8.7 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless such amendment shall be in writing and signed by
all of the parties hereto. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. No such waiver shall be effective unless in a writing duly executed
by the party from whom the waiver is sought.
8.8 Severability. Each term and provision of this Agreement shall be
------------
construed to be valid and enforceable to the full extent permitted by law. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and
-21-
<PAGE>
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
8.9 Interpretation. The language used in this Agreement shall be
--------------
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party. The
various Article and Section headings are inserted for purposes of reference only
and shall not affect the meaning or interpretation of this Agreement or any
provision hereof.
8.10 Specific Performance. Each party hereto acknowledges and agrees
--------------------
that the other parties hereto would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each party hereto agrees
that the other parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which the other
parties may be entitled at law or in equity.
8.11 Obligations Several and Not Joint. The obligations of the
---------------------------------
parties under this Agreement are several and not joint, and no party hereto
shall be liable for any act or omission of any other party hereto.
8.12 Termination of Agreement. This Agreement shall terminate and be
------------------------
of no further force or effect if the IPO Pricing does not occur on or before
June 30, 1999; provided, however, that no termination of this Agreement pursuant
to this Section 8.12 shall relieve any party hereto of any liability for any
default by such party hereunder occurring prior to such termination.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
CORPORATION:
TREX COMPANY, INC.
By: /s/ Robert G. Matheny
________________________
Name: Robert G. Matheny
Title:President
COMPANY:
TREX COMPANY, LLC
By: /s/ Robert G. Matheny
________________________
Name: Robert G. Matheny
Title:President
INSTITUTIONAL MEMBERS:
CIG & CO.
By: /s/ Stephen A. Osborn
________________________
Name: Stephen A. Osborn
Title: Partner
-23-
<PAGE>
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management
Company, its Attorney-in-Fact
By: /s/ R. Gordon Marsh
---------------------------
Name: R. Gordon Marsh
Title: Vice President
CLASS B BENEFICIAL OWNERS:
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, on behalf of
one or more separate accounts
By: CIGNA Investments, Inc.,
authorized agent
By: /s/ Stephen A. Osborn
---------------------------
Name: Stephen A. Osborn
Title: Managing Director
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA Investments, Inc.,
authorized agent
By: /s/ Stephen A. Osborn
---------------------------
Name: Stephen A. Osborn
Title: Managing Director
LIFE INSURANCE COMPANY OF
NORTH AMERICA
By: CIGNA Investments, Inc.,
authorized agent
By: /s/ Stephen A. Osborn
---------------------------
Name: Stephen A. Osborn
Title: Managing Director
-24-
<PAGE>
MANAGEMENT MEMBERS:
/s/ Anthony J. Cavanna
_______________________________
Anthony J. Cavanna
/s/ Andrew U. Ferrari
_______________________________
Andrew U. Ferrari
/s/ Robert G. Matheny
_______________________________
Robert G. Matheny
/s/ Roger A. Wittenberg
________________________________
Roger A. Wittenberg
-25-
<PAGE>
EXHIBIT 10.11
PREFERRED UNITS EXCHANGE AGREEMENT
----------------------------------
THIS PREFERRED UNITS EXCHANGE AGREEMENT (this "Agreement") is made as
---------
of this 19th day of March 1999 among Trex Company, Inc., a Delaware corporation
(the "Corporation"), TREX Company, LLC, a Delaware limited liability company
-----------
(the "Company"), and Mobil Oil Corporation, a New York corporation ("Mobil").
------- -----
RECITALS
--------
A. Mobil owns all of the 1,000 outstanding preferred limited
liability company interests in the Company (the "Preferred Units").
---------------
B. In connection with the capitalization of the Company on August
29, 1996, the Company, the members of the Company (the "Members") and the
-------
beneficial owners of limited liability company interests in the Company (the
"Class B Beneficial Owners") entered into certain agreements, including (i) the
-------------------------
Limited Liability Company Agreement dated as of August 29, 1996, as amended (the
"LLC Agreement") among the Members other than Mobil (the "Junior Members"),
------------- --------------
Mobil and the Class B Beneficial Owners, (ii) the Members' Agreement dated as of
August 29, 1996, as amended (the "Members' Agreement"), among the Company, the
------------------
Junior Members and the Class B Beneficial Owners, and (iii) the Securities
Purchase Agreements dated as of August 29, 1996, as amended (collectively, the
"Securities Purchase Agreement"), among the Company and certain of the Junior
-----------------------------
Members and Class B Beneficial Owners.
C. As of the date hereof, the Company owns all of the issued and
outstanding common stock, $.01 par value per share (the "Common Stock"), of the
------------
Corporation.
D. The Corporation has filed a registration statement (file no. 333-
63287) (the "Registration Statement") with the Securities and Exchange
----------------------
Commission (the "SEC") covering the initial public offering of the Common Stock
---
by the Corporation and certain of its stockholders (the "IPO") under the
---
Securities Act of 1933, as amended (the "Securities Act").
--------------
E. On the Reorganization Closing Date (as defined in Section 1.1
hereof), in accordance with the terms and conditions of the LLC Agreement, the
Members' Agreement and a Contribution and Exchange Agreement of even date
herewith among the Corporation, the Company, the Junior Members and the Class B
Beneficial Owners (the "Exchange Agreement"), the Company, the Corporation and
------------------
the Junior Members will complete certain transactions as a result of which,
among other things, the Junior Members will acquire all of the Common Stock
issued and outstanding prior to the IPO and the Corporation will acquire
<PAGE>
from the Junior Members all of the issued and outstanding junior limited
liability company interests in the Company held by the Junior Members.
F. Concurrently with the consummation of such transactions, pursuant
to this Agreement, Mobil will deliver to the Corporation, in exchange for a
promissory note issued by the Corporation, all of the Preferred Units (such
exchange of the Preferred Units together with the transactions referred to in
recital "E," the "Reorganization").
--------------
G. Following the Reorganization, the Corporation will consummate the
IPO.
H. The Company, the Corporation and Mobil wish to set forth herein
their agreement concerning Mobil's exchange of the Preferred Units and related
matters.
AGREEMENT
---------
ARTICLE I
EXCHANGE OF PREFERRED UNITS
----------------------------
1.1 Closing Date and Location. The exchange of the Preferred Units
-------------------------
hereunder shall be consummated on the date (the "Reorganization Closing Date")
---------------------------
on which, and immediately following the time at which, the Corporation, the
stockholders offering Common Stock in the IPO and the managing underwriters of
the IPO have determined the initial public offering price of the Common Stock
(such determination, the "IPO Pricing") and have executed an underwriting
-----------
agreement for the purchase and sale of Common Stock in the IPO (the
"Underwriting Agreement"). The Reorganization Closing Date shall occur on the
- -----------------------
business day immediately preceding the business day on which the SEC issues an
order of effectiveness under the Securities Act with respect to the Registration
Statement. The closing of the exchange of the Preferred Units and the other
Reorganization transactions (the "Reorganization Closing") shall occur at the
----------------------
offices of Hogan & Hartson L.L.P. located at 555 Thirteenth Street, N.W.,
Washington, D.C. 20004-1190, or at such other location as the parties shall
designate by mutual agreement.
1.2 Exchange of Preferred Units. Subject to the terms and conditions
---------------------------
of this Agreement, Mobil shall deliver to the Corporation, in exchange for a
promissory note of the Corporation (the "Note"), all of the Preferred Units.
----
1.3 Note Terms. The original principal amount of the Note shall be
----------
an amount equal to the redemption price of the Preferred Units that would be
payable by the Company upon a redemption of the Preferred Units pursuant to
-2-
<PAGE>
Section 4.3(2) of the LLC Agreement. The Note shall be substantially in the form
attached hereto as Exhibit A and shall be payable in full on the earlier of the
---------
closing date of the IPO or the 90th day after the Reorganization Closing Date
(or, if such 90th day is not a business day, the next preceding business day).
1.4 Compliance With Agreements. Mobil hereby consents to the
--------------------------
consummation of the Reorganization. The Company and Mobil agree that the
exchange of the Preferred Units and the other Reorganization transactions shall
be consummated in accordance with the terms of this Agreement and the Exchange
Agreement, including the terms of the LLC Agreement, the Members' Agreement and
the Securities Purchase Agreement expressly incorporated by reference therein or
herein, and that compliance with this Agreement and the Exchange Agreement shall
constitute compliance with the LLC Agreement, the Members' Agreement and the
Securities Purchase Agreement in respect of the transactions constituting the
Reorganization.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
-------------------------------------------------
The Corporation hereby represents and warrants to Mobil as follows:
2.1 Organization, Qualifications and Corporate Power. The
------------------------------------------------
Corporation is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except where the failure to be so qualified or licensed would not
have a material adverse effect on the operating results, financial condition or
business of the Corporation and the Company considered as a single enterprise (a
"Material Adverse Effect"). The Corporation has the corporate power and
-----------------------
authority (i) to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted and (ii) to execute, deliver and
perform this Agreement.
2.2 Validity. The execution, delivery and performance by the
--------
Corporation of this Agreement and the Note, and the consummation or performance
by the Corporation of the transactions contemplated by this Agreement,
including, without limitation, the issuance of the Note in exchange for the
Preferred Units, the Reorganization and the IPO (such transactions, the
Reorganization and the IPO collectively, the "Transactions") have been duly
------------
authorized by all necessary corporate action on the part of the Corporation.
This Agreement and the Note constitute legal, valid and binding obligations of
the Corporation, enforceable against the Corporation in accordance with their
respective terms, except as such
-3-
<PAGE>
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights and (ii) laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
2.3 Noncontravention; Consents.
--------------------------
(a) Neither the execution and delivery by the Corporation of this
Agreement, nor the consummation or performance by the Corporation of any of the
Transactions to be consummated or performed by it, shall directly or indirectly
(i) violate any provision of the Corporation's certificate of incorporation or
bylaws, (ii) contravene, result in any breach of, or constitute a default under,
or result in the creation of any mortgage, lien, pledge, charge, security
interest or other encumbrance (a "Lien") in respect of any property of the
----
Corporation under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease or any other agreement or instrument to which the
Corporation is a party or by which the Corporation or any of its properties or
assets may be bound or affected, (iii) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment, decree or
ruling of any court, arbitrator or federal, state or municipal entity properly
exercising executive, legislative, judicial, regulatory or administrative
functions of government (a "Governmental Authority") applicable to the
----------------------
Corporation or (iv) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Corporation, except
for any such violation, contravention, breach, default, creation of Liens or
conflict which would not have a Material Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority or otherwise on the part of the Corporation is required in connection
with the consummation of the Transactions, except such consents of third parties
as shall be obtained on or before the Reorganization Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Mobil as follows:
3.1 Organization, Qualifications and Power. The Company is a limited
--------------------------------------
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware and is duly licensed or qualified to transact
business as a foreign limited liability company and is in good standing in each
jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except
-4-
<PAGE>
where the failure to be so qualified or licensed would not have a Material
Adverse Effect. The Company has the power and authority as a limited liability
company (i) to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted and (ii) to execute, deliver and
perform this Agreement.
3.2 Validity. The execution, delivery and performance by the Company
--------
of this Agreement, and the consummation or performance by the Company of the
Transactions, have been duly authorized by all necessary action of the Company
as a limited liability company. This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights and (ii) laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies.
3.3 Noncontravention; Consents.
--------------------------
(a) Neither the execution and delivery by the Company of this
Agreement, nor the consummation or performance by the Company of any of the
Transactions to be consummated or performed by it, shall directly or indirectly
(i) violate any provision of the Company's certificate of formation or the LLC
Agreement, (ii) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease or any other agreement or instrument to which the Company is a
party or by which the Company or any of its properties or assets may be bound or
affected, (iii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or (iv) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company, except for any such violation,
contravention, breach, default, creation of Liens or conflict which would not
have a Material Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority or otherwise on the part of the Company is required in connection with
the consummation of the Transactions, except such consents of third parties as
shall be obtained on or before the Reorganization Closing Date.
-5-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MOBIL
---------------------------------------
Mobil hereby represents and warrants to the Corporation and the
Company as follows:
4.1 Validity.
--------
(a) Mobil has the legal power and authority to execute, deliver and
perform this Agreement.
(b) The execution, delivery and performance by Mobil of this
Agreement, and the consummation or performance by Mobil of the transactions
hereunder to be consummated or performed by Mobil, have been duly authorized by
all necessary corporate action on the part of Mobil.
(c) This Agreement constitutes the legal, valid and binding
obligation of Mobil, enforceable against Mobil in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights and (ii) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
4.2 Noncontravention; Consents.
--------------------------
(a) Neither the execution and delivery by Mobil of this Agreement,
nor the consummation or performance by Mobil of any of the transactions
hereunder to be consummated or performed by Mobil, shall directly or indirectly
(i) violate any provision of the organizational documents of Mobil, (ii)
contravene, result in any breach of, or constitute a default under, or result in
the creation of any Lien in respect of any property of Mobil under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease or
any other agreement or instrument to which Mobil is a party or by which Mobil or
any of Mobil's properties or assets may be bound or affected, (iii) conflict
with or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority applicable to Mobil or (iv) violate any provision of any statute or
other rule or regulation of any Governmental Authority applicable to Mobil.
(b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of Mobil is required in connection with the consummation
of the transactions hereunder to be consummated or performed by Mobil.
-6-
<PAGE>
4.3 Title to Preferred Units. Mobil is the beneficial and record
------------------------
owner of the Preferred Units. Mobil has as of the date of this Agreement, and
on the Reorganization Closing Date shall have and shall convey to the
Corporation, free and clear of all Liens, valid title to the Preferred Units.
ARTICLE V
REORGANIZATION CLOSING
----------------------
5.1 Conditions to the Obligations of the Parties. Each party's
--------------------------------------------
obligations to take the actions required to be taken by such party at the
Reorganization Closing is subject to the satisfaction, at or prior to the
Reorganization Closing Date, of each of the following conditions (any of which
may be waived by such party, in whole or in part):
(a) The representations and warranties of each other party contained
in this Agreement shall be true on and as of the Reorganization Closing Date
with the same effect as though such representations and warranties had been made
by such party on and as of the Reorganization Closing Date.
(b) There shall be no injunction, writ, preliminary restraining order
or other order in effect of any nature issued by a court or governmental agency
of competent jurisdiction directing that the Transactions not be consummated in
the manner provided for in this Agreement. No action or proceeding shall have
been instituted and remain pending before a court or other governmental body of
competent jurisdiction to restrain, prohibit or otherwise challenge any of the
Transactions (or seeking material damages from any party as a result thereof),
other than any such action or proceeding which would not have a Material Adverse
Effect or prevent any party from performing its obligations hereunder.
(c) The IPO Pricing shall have occurred and the Underwriting
Agreement shall have been executed.
(d) The Corporation shall concurrently have consummated the
transactions contemplated by the Exchange Agreement.
(e) The parties shall have delivered the documents described in
Section 5.2 hereof.
5.2 Documents Delivered at Reorganization Closing.
---------------------------------------------
5.2.1 Documents Delivered by the Corporation. The Corporation
--------------------------------------
shall deliver copies of the following documents to Mobil at the Reorganization
Closing:
-7-
<PAGE>
(a) resolutions of the Board of Directors approving and authorizing
the execution, delivery and performance of this Agreement, including the
issuance of the Note, and the other documents relating to the transactions
hereunder, certified as of the Reorganization Closing Date by the Secretary or
an Assistant Secretary of the Corporation as being in full force and effect
without modification or amendment;
(b) a signature and incumbency certificate of the officers of the
Corporation executing this Agreement or other documents in connection with this
Agreement;
(c) the Note, duly executed on behalf of the Corporation;
(d) a cross-receipt executed by the Corporation acknowledging receipt
from Mobil of the certificate or certificates representing the Preferred Units;
(e) a certificate of the Chief Financial Officer of the Corporation
dated the Reorganization Closing Date, certifying that the Corporation has
fulfilled the condition specified in Section 5.1(a) hereof to be fulfilled by
the Corporation;
(f) an opinion of Hogan & Hartson L.L.P. in substantially the form of
Exhibit B hereto; and
- ---------
(g) such other documents as Mobil may reasonably request.
5.2.2 Documents Delivered by the Company. The Company shall deliver
----------------------------------
copies of the following documents to Mobil at the Reorganization Closing:
(a) resolutions of the Board of Managers approving and authorizing
the execution, delivery and performance of this Agreement, certified as of the
date of the Reorganization Closing Date by the Chief Financial Officer of the
Company as being in full force and effect without modification or amendment;
(b) a signature and incumbency certificate of the officers of the
Company executing this Agreement or other documents in connection with this
Agreement;
(c) a certificate of the Chief Financial Officer of the Company dated
the Reorganization Closing Date, certifying that the Company has fulfilled the
condition specified in Section 5.1(a) hereof to be fulfilled by the Company;
(d) an opinion of Hogan & Hartson L.L.P. in substantially the form of
Exhibit B hereto; and
- ---------
-8-
<PAGE>
(e) such other documents as Mobil may reasonably request.
5.2.3 Documents Delivered by Mobil. Mobil shall deliver copies of
----------------------------
the following documents to the Corporation at the Reorganization Closing:
(a) resolutions of the governing body of Mobil approving and
authorizing the execution, delivery and performance of this Agreement, certified
as of the Reorganization Closing Date by a duly authorized officer of Mobil as
being in full force and effect without modification or amendment;
(b) a signature and incumbency certificate of the officers executing
this Agreement or other documents in connection with this Agreement;
(c) the certificate or certificates representing the Preferred Units,
accompanied by appropriate instruments of transfer endorsed to the Corporation,
or other documentation reasonably satisfactory to the Corporation;
(d) a cross-receipt executed by Mobil acknowledging receipt of the
Note from the Corporation;
(e) a certificate of a duly authorized officer of Mobil dated the
Reorganization Closing Date, certifying that Mobil has fulfilled the condition
specified in Section 5.1(a) hereof to be fulfilled by Mobil; and
(f) such other documents as the Corporation may reasonably request.
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
6.1 Further Assurances. Each party shall execute and deliver such
------------------
additional instruments, documents or other writings as may be reasonably
requested by any other party, before or after the Reorganization Closing Date,
in order to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
6.2 No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
6.3 Entire Agreement. This Agreement, including the Exhibits hereto,
----------------
the other documents delivered expressly hereby and the Members' Agreement, the
LLC Agreement, the Securities Purchase Agreement and the Exchange Agreement to
the extent specifically incorporated by reference herein constitute the
-9-
<PAGE>
entire agreement among the parties with respect to the subject matter hereof and
supersede any prior understandings, agreements or representations, written or
oral, by or among the parties hereto that may have related in any way to the
subject matter hereof.
6.4 Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party hereto may assign either this
Agreement or any of such party's rights, interests or obligations hereunder
without the prior written consent of the other parties hereto.
6.5 Facsimile Execution; Counterparts. This Agreement may be
---------------------------------
executed in one or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. A
facsimile, telecopy or other reproduction of this Agreement may be executed by
one or more parties hereto, and an executed copy of this Agreement may be
delivered by one or more parties hereto by facsimile or similar instantaneous
electronic transmission device pursuant to which the signature of or on behalf
of such party can be seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. At the request of any party
hereto, all parties hereto agree to execute an original of this Agreement as
well as any facsimile, telecopy or other reproduction hereof.
6.6 Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be deemed effectively given as follows: (i) upon personal
delivery to the party to be notified; (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient hereto to the
other parties or, if not sent during normal business hours, then on the next
business day; (iii) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (iv) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
parties hereto at the respective addresses set forth below, or as notified by
any party or, from time to time at least ten days prior to the effectiveness of
such notice:
If to the Corporation:
Trex Company, Inc.
20 South Cameron Street
Winchester, VA 22601
Attn.: Anthony J. Cavanna
Fax: (540) 678-0886
-10-
<PAGE>
If to the Company:
Trex Company, LLC
20 South Cameron Street
Winchester, VA 22601
Attn.: Anthony J. Cavanna
Fax: (540) 678-0886
If to Mobil:
Mobil Oil Corporation
3225 Gallows Road
Fairfax, VA 22037
Attn: C. Dan Ruff
Fax: (703) 846-2315
with a copy to:
James H. Breed
Senior Counsel
Mobil Business Resources Corporation
3225 Gallows Road
Fairfax, VA 22037
Fax: (703) 846-4672
6.7 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia without giving
effect to any choice of law or conflict of law provision or rule (whether of the
Commonwealth of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Virginia.
6.8 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless such amendment shall be in writing and signed by
all of the parties hereto. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. No such waiver shall be effective unless in a writing duly executed
by the party from whom the waiver is sought.
6.9 Severability. Each term and provision of this Agreement shall be
------------
construed to be valid and enforceable to the full extent permitted by law.
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any
-11-
<PAGE>
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
6.10 Interpretation. The language used in this Agreement shall be
--------------
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party. The
various Article and Section headings are inserted for purposes of reference only
and shall not affect the meaning or interpretation of this Agreement or any
provision hereof.
6.11 Specific Performance. Each party hereto acknowledges and agrees
--------------------
that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each party hereto
agrees that the other parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which the other parties may be entitled at law or in equity.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
CORPORATION:
TREX COMPANY, INC.
By: /s/ Robert G. Matheny
____________________________
Name: Robert G. Matheny
Title: President
COMPANY:
TREX COMPANY, LLC
By: /s/ Robert G. Matheny
___________________________
Name: Robert G. Matheny
Title: President
MOBIL OIL CORPORATION:
By: /s/ James Harrington Breed
___________________________
Name: James Harrington Breed
Title: Attorny-in-Fact
-13-
<PAGE>
Exhibit 10.12
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is dated as of this ____
day of _______________ 1999 among Trex Company, Inc., a Delaware corporation
(the "Company"), each of the Institutional Investors named on Schedule A hereto
----------
and each of the Management Holders named on Schedule B hereto.
----------
W I T N E S S E T H:
WHEREAS, TREX Company, LLC ("TREX LLC"), the Institutional Investors and
the Management Holders are parties to a Members' Agreement, dated as of August
29, 1996, as amended (the "Members' Agreement");
WHEREAS, the Company, TREX LLC and the members of TREX LLC have consummated
a reorganization as a result of which, among other things, (i) the Company has
issued all outstanding shares of its common stock, $.01 par value per share (the
"Common Stock"), to the Institutional Investors and the Management Holders in
exchange for all outstanding junior membership interests in TREX LLC and (ii)
TREX LLC has become a wholly owned subsidiary of the Company;
WHEREAS, the Company intends to consummate an initial public offering of
the Common Stock;
WHEREAS, the Members' Agreement will be terminated upon consummation of
such initial public offering;
WHEREAS, the parties hereto wish to provide in this Agreement for the
registration rights currently set forth in the Members' Agreement;
NOW THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto mutually agree as follows:
1. CERTAIN DEFINITIONS.
--------------------
As used herein, the following terms shall have the meanings set forth
below:
"Business Day" means a day other than a Saturday, a Sunday or a day on
------------
which banks in New York City are required or permitted by law (other than
general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
"Common Stock" has the meaning set forth in the recitals herein.
------------
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
"Incidental Registration" has the meaning set forth in Section 2.2 hereof.
-----------------------
"Initiating Holders" means, at any time, the Institutional Investors
------------------
holding at least fifty percent (50%) of the Registrable Securities at such time
held by all Institutional Investors.
"Initial Public Offering Date" means the first date upon which shares of
----------------------------
the Common Stock shall have been issued or sold pursuant to an underwritten
public offering (whether on a firm commitment basis or a best efforts basis if
such best efforts are successful) thereof pursuant to an effective registration
statement filed with the SEC pursuant to the Securities Act.
"Institutional Investors" means those Persons named on Schedule A hereto.
----------------------- ----------
"Management Holders" means those persons named on Schedule B hereto.
------------------ ----------
"NASDAQ" means the National Association of Securities Dealers Automated
------
Quotation System.
"Person" means an individual, partnership, corporation, limited liability
------
company, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
"Public Offering" means any sale of Common Stock in a transaction either
---------------
registered under, or requiring registration under, Section 5 of the Securities
Act.
"Registrable Securities" means (i) all shares of Common Stock issued to the
----------------------
Institutional Investors on or prior to the date of this Agreement and (ii) any
Securities paid, issued or distributed in respect of any such Common Stock by
way of stock dividend or distribution or stock split or in connection with a
combination of shares, recapitalization, reorganization, merger, consolidation
or otherwise. As to any particular Registrable Securities once issued, such
Securities shall cease to be Registrable Securities: (i) when a registration
statement with respect to the sale of such Securities shall have become
effective under the Securities Act and such Securities shall have been disposed
of in accordance with such registration statement; (ii) when they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act; or (iii) when they shall have been otherwise
transferred and subsequent disposition of them shall not require registration or
qualification under the Securities Act or any similar state law then in force.
2
<PAGE>
"Registration" means each Required Registration and each Incidental
------------
Registration.
"Registration Expenses" means all expenses incident to the Company's
---------------------
performance of or compliance with Sections 2.1 through Section 2.5 hereof,
inclusive, including, without limitation, all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), expenses of printing certificates
for the Registrable Securities in a form eligible for deposit with the
Depository Trust Company, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of the Company's
officers and employees performing legal or accounting duties), and fees and
disbursements of counsel for the Company and its independent certified public
accountants (including the expenses of any management review, cold comfort
letters or any special audits required by or incident to such performance and
compliance), securities acts liability insurance (if the Company elects to
obtain such insurance), the reasonable fees and expenses of any special experts
retained by the Company in connection with such registration, fees and expenses
of other Persons retained by the Company and fees and expenses of counsel
(including local counsel) for holders of Registrable Securities, selected by the
Requisite Holders; but not including any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities or fees and
expenses of more than one counsel representing the holders of Registrable
Securities or any other selling expenses, discounts or commissions incurred in
connection with the sale of Registrable Securities.
"Required Registration" has the meaning set forth in Section 2.1 hereof.
---------------------
"Requisite Holders" means, with respect to any registration or proposed
-----------------
registration of Registrable Securities pursuant to Section 2 hereof, any
Institutional Investor or Institutional Investors holding at least sixty-six and
two-thirds percent (66-2/3%) of the shares of Registrable Securities to be so
registered.
"SEC" means, at any time, the Securities and Exchange Commission or any
---
other federal agency at such time administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
"Security" means "security" as defined by Section 2(1) of the Securities
--------
Act.
"Subsidiary" means, as to any Person, any corporation in which such Person
----------
or one or more Subsidiaries of such Person or such Person and one or more
3
<PAGE>
Subsidiaries of such Person owns sufficient voting securities to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
corporation. The term "Subsidiary," as used herein without reference to any
Person, shall mean a Subsidiary of the Company.
2. REGISTRATION RIGHTS.
--------------------
2.1 REQUIRED REGISTRATION.
----------------------
(a) Filing of Registration Statement. The Company will, upon the
--------------------------------
written request of the Initiating Holders given at any time after the Initial
Public Offering Date requesting that the Company effect the registration under
the Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the Registrable Securities to be sold and the intended
method of disposition thereof, promptly give written notice of such requested
registration to all holders of Registrable Securities, and thereupon will use
its best efforts to effect the registration (the "Required Registration") under
the Securities Act of:
(i) the Registrable Securities that the Company has been so
requested to register by the Initiating Holders; and
(ii) all other Registrable Securities that the Company has been
requested to register by the holders thereof by written request given to the
Company within thirty (30) days after the giving of such written notice by the
Company (which request shall specify the Registrable Securities to be sold and
the intended method of disposition of such Registrable Securities);
all to the extent required to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities so to be
registered; provided, however, that the Company shall be required to effect only
two (2) registrations pursuant to this Section 2.1 that are deemed effected
under Section 2.1(e) hereof.
(b) Time for Filing and Effectiveness. On or before the date which is
---------------------------------
ninety (90) days after the request for such registration, the Company shall file
with the SEC the Required Registration with respect to all Registrable
Securities to be so registered, and shall use its best efforts to cause such
Required Registration to become effective as promptly as practicable after the
filing thereof, and use its best efforts to cause such Required Registration to
become effective no later than the day which is one hundred eighty (180) days
after the request for such registration.
(c) Selection of Underwriters. If Registrable Securities that the
-------------------------
Company has been requested to register pursuant to a Required Registration are
to
4
<PAGE>
be disposed of in an underwritten public offering, the underwriters of such
offering shall be one or more underwriting firms of recognized standing selected
by the Requisite Holders and reasonably acceptable to the Company.
(d) Priority on Required Registrations. If the managing underwriter shall
-----------------------------------
advise the Company in writing (with a copy to each holder of Registrable
Securities requesting sale) that, in such underwriter's opinion, the number of
shares of Securities requested to be included in such Required Registration
exceeds the number that can be sold in such offering within a price range
acceptable to the Company (such writing to state the basis of such opinion and
the approximate number of shares of Securities that may be included in such
offering without such effect), the Company will include in such Required
Registration, to the extent of the number of shares of Securities that the
Company is so advised can be sold in such offering:
(i) first, Registrable Securities requested to be sold by the
Institutional Investors pursuant to this Section 2.1, pro rata among the holders
requesting sale on the basis of the number of shares of Registrable Securities
requested by each to be included in such Registration; and
(ii) second, all other Securities proposed to be registered by the
Company and the Management Holders, in such proportions as the Company and such
Management Holders shall agree.
(e) When Required Registration Is Deemed Effected. A Required
----------------------------------------------
Registration pursuant to this Section 2.1 shall not be deemed to have been
effected for purposes of the proviso to Section 2.1(a) hereof if:
(i) the registration does not become effective and remain effective
for a period of at least one hundred eighty (180) days, without interference by
the issuance by the SEC of any stop order with respect thereto;
(ii) in the case of any underwritten offering undertaken on a firm
commitment basis, all the Registrable Securities requested to be registered in
connection therewith were not sold;
(iii) the Requisite Holders withdraw their request for registration in
its entirety at any time because the Requisite Holders reasonably believed that
the registration statement or any prospectus related thereto contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein (in the case of
any prospectus, in light of the circumstances under which they were made) not
misleading, notified the Company of such fact and requested that the Company
5
<PAGE>
correct such alleged misstatement or omission, and the Company has refused to
correct such alleged misstatement or omission; or
(iv) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
Required Registration are not satisfied, other than by reason of some act or
omission by the holders of the Registrable Securities that were to have been
registered and sold.
2.2 INCIDENTAL REGISTRATION.
------------------------
(a) Filing of Registration Statement. If the Company at any time
--------------------------------
proposes to register any shares of Common Stock (an "Incidental Registration")
under the Securities Act (other than pursuant to a registration statement on
Form S-4 or Form S-8 or any successor forms thereto, in connection with an offer
made solely to existing Security holders or employees of the Company), for sale
to the public in a public offering, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so, which
notice shall be given to all such holders at least thirty (30) Business Days
prior to the date that a registration statement relating to such registration is
proposed to be filed with the SEC. Upon the written request of any such holder
to include its shares under such registration statement (which request shall be
made within fifteen (15) Business Days after the receipt of any such notice and
shall specify the Registrable Securities intended to be disposed of by such
holder), the Company will use its best efforts to effect the registration of all
Registrable Securities that the Company has been so requested to register by
such holder; provided, however, that if, at any time after giving written notice
of its intention to register any Securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such shares of Common
Stock, the Company may, at its election, give written notice of such
determination to each such holder and, thereupon, shall be relieved of its
obligation to register any Registrable Securities of such Persons in connection
with such registration.
(b) Selection of Underwriters. Notice of the Company's intention to
--------------------------
register such shares of Common Stock shall designate the proposed underwriters
of such offering (which shall be one or more underwriting firms of recognized
standing) and shall contain the Company's agreement to use its best efforts, if
requested to do so, to arrange for such underwriters to include in such
underwriting the Registrable Securities that the Company has been so requested
to sell pursuant to this Section 2.2, it being understood that the holders of
Registrable Securities shall have no right to select different underwriters for
the disposition of their Registrable Securities.
6
<PAGE>
(c) Priority on Incidental Registrations. If the managing underwriter
-------------------------------------
shall advise the Company in writing (with a copy to each holder of Registrable
Securities requesting sale) that, in such underwriter's opinion, the number of
shares of Common Stock requested to be included in such Incidental Registration
exceeds the number that can be sold in such offering within a price range
acceptable to the Company (such writing to state the basis of such opinion and
the approximate number of shares of Common Stock that may be included in such
offering without such effect), the Company will include in such Incidental
Registration, to the extent of the number of shares of Common Stock that the
Company is so advised can be sold in such offering:
(i) in the case of any registration initiated by the Company for the
purpose of selling securities for its own account:
(A) first, the number of shares of Common Stock that the
Company proposes to issue and sell for its own account; and
(B) second, Registrable Securities requested to be sold by
the Institutional Investors pursuant to this Section 2.2 and all shares of
Common Stock proposed to be registered by the Management Holders, pro rata among
such holders on the basis of the number of shares of Common Stock requested by
each to be included in such Registration; and
(ii) in the case of a registration initiated by any Management Holder
pursuant to demand or required registration rights in favor of such Management
Holder:
(A) first, Securities requested to be sold by the Management
Holders requesting such registration and Registrable Securities requested to be
sold by the Institutional Investors pursuant to this Section 2.2, pro rata among
such holders on the basis of the number of shares of Common Stock requested to
be so registered by such holders; and
(B) second, the number of shares of Common Stock that the
Company proposes to issue and sell for its own account.
2.3 REGISTRATION PROCEDURES. The Company will use its best efforts to
------------------------
effect each Required Registration pursuant to Section 2.1 hereof and any
Incidental Registration of any Registrable Securities as provided in Section 2.2
hereof, and to cooperate with the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as quickly as
practicable, and the Company will as expeditiously as possible:
7
<PAGE>
(a) subject, in the case of an Incidental Registration, to the
proviso to Section 2.2(a), prepare and file with the SEC the registration
statement and use its best efforts to cause the Registration to become
effective; provided, however, that before filing any registration statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
the holders of the Registrable Securities covered by such registration
statement, their counsel, and the underwriters, if any, and their counsel,
copies of each original registration statement proposed to be filed at least
fifteen (15) days prior thereto and copies of each amendment, prospectus and
supplement at least three (3) Business Days prior thereto, which documents will
be subject to the reasonable review, within such period, of such holders, their
counsel and the underwriters; and the Company will not file any registration
statement or amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference) to which the Requisite
Holders shall reasonably object within such period;
(b) subject, in the case of an Incidental Registration, to the
proviso to Section 2.2(a), prepare and file with the SEC such amendments and
post-effective amendments to any registration statement and any prospectus used
in connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such registration
statement until such time as all of such Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act, provided that if the
Company is not then eligible to use a registration statement on Form S-3 under
the Securities Act, the Company shall not be obligated to keep such registration
statement effective for more than two (2) years after the original effective
date of such registration statement;
(c) furnish to each holder of Registrable Securities included in such
Registration and the underwriter or underwriters, if any, without charge, at
least one signed copy of the registration statement and any post-effective
amendment thereto, upon request, and such number of conformed copies thereof and
such number of copies of the prospectus (including each preliminary prospectus
and each prospectus filed under Rule 424 under the Securities Act), any
amendments or supplements thereto and any documents incorporated by reference
therein, as such holder or underwriter may reasonably request in order to
facilitate the disposition of the Registrable Securities being sold by such
holder (it being understood that the Company consents to the use of the
prospectus and any amendment or supplement thereto by each holder of Registrable
Securities covered by such registration statement and the underwriter or
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto);
8
<PAGE>
(d) notify each holder of the Registrable Securities of any stop
order or other order suspending the effectiveness of any registration statement,
issued or threatened by the SEC in connection therewith, and take all reasonable
actions required to prevent the entry of such stop order or to remove it or
obtain withdrawal of it at the earliest possible moment if entered;
(e) if requested by the managing underwriter or underwriters or any
holder of Registrable Securities in connection with any sale pursuant to a
registration statement, promptly incorporate in a prospectus supplement or post-
effective amendment such information relating to such underwriting as the
managing underwriter or underwriters or such holder reasonably requests to be
included therein; and make all required filings of such prospectus supplement or
posteffective amendment as soon as practicable after being notified of the
matters incorporated in such prospectus supplement or post-effective amendment;
(f) on or prior to the date on which a Registration is declared
effective, use its best efforts to register or qualify, and cooperate with the
holders of Registrable Securities included in such Registration, the underwriter
or underwriters, if any, and their counsel, in connection with the registration
or qualification of the Registrable Securities covered by such Registration for
offer and sale under the securities or "blue sky" laws of each state and other
jurisdiction of the United States as any such holder or underwriter reasonably
requests in writing; use its best efforts to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be kept
effective; and do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions reasonably requested of the
Registrable Securities covered by such Registration; provided, however, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
(g) in connection with any sale pursuant to a Registration, cooperate
with the holders of Registrable Securities and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Securities to be
sold under such Registration, and enable such Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or such holders may request;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
within the United States and having jurisdiction over the Company or any
9
<PAGE>
Subsidiary as may reasonably be necessary to enable the seller or sellers
thereof or the underwriter or underwriters, if any, to consummate the
disposition of such Securities;
(i) make available for inspection by any holder of Registrable
Securities included in any Registration, any underwriter participating in any
disposition pursuant to any Registration, and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Person in connection
with such Registration;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each Registration, a
"comfort letter" from the Company's independent certified public accountants
covering such matters of the type customarily covered by "cold comfort letters"
as the Requisite Holders and the underwriters reasonably request; and
(ii) at the time of any underwritten sale pursuant to the
registration statement, a "bring-down comfort letter," dated as of the date of
such sale, from the Company's independent certified public accountants covering
such matters of the type customarily covered by comfort letters as the Requisite
Holders and the underwriters reasonably request;
(k) use its best efforts to obtain, at the time of effectiveness of
each Incidental Registration and at the time of any sale pursuant to each
Registration, an opinion or opinions, favorable to the Requisite Holders in form
and scope, from counsel for the Company in customary form;
(l) notify each seller of Registrable Securities covered by such
Registration, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly prepare, file with the SEC and furnish to
such seller or holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers or prospective purchasers of such Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they are made;
10
<PAGE>
(m) otherwise comply with all applicable rules and regulations of the
SEC, and make generally available to its security holders (as contemplated by
Section 11(a) under the Securities Act) an earnings statement satisfying the
provisions of Rule 158 under the Securities Act not later than ninety (90) days
after the end of the twelve (12) month period beginning with the first month of
the Company's first fiscal quarter commencing after the effective date of the
registration statement, which statement shall cover said twelve (12) month
period;
(n) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by each Registration from and after a
date not later than the effective date of such Registration;
(o) use its best efforts to cause all Registrable Securities covered
by each Registration to be listed subject to notice of issuance, prior to the
date of first sale of such Registrable Securities pursuant to such Registration,
on each securities exchange on which the Common Stock issued by the Company is
then listed, and admitted to trading on NASDAQ, if the Common Stock or any such
other Securities are then admitted to trading on NASDAQ; and
(p) enter into such agreements (including underwriting agreements in
customary form) and take such other actions as the Requisite Holders shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities.
The Company may require each holder of Registrable Securities that will be
included in such Registration to furnish the Company with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Company may reasonably request in writing and as is
required by applicable laws or regulations.
2.4 PREPARATION; REASONABLE INVESTIGATION. In connection with the
--------------------------------------
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so registered, their underwriters, if any, and their
respective counsel and accountants the opportunity to participate in the
preparation of such registration statement (other than reports and proxy
statements incorporated therein by reference and lawfully and properly filed
with the SEC) and each prospectus included therein or filed with the SEC, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders or such underwriters to conduct a reasonable investigation within the
meaning of the Section 11 (b)(3) of the Securities Act.
11
<PAGE>
2.5 RIGHTS OF REQUESTING HOLDERS. Each holder of Registrable Securities
-----------------------------
which makes a written request therefor within thirty (30) days after the notice
to such holders provided for in Section 2.1 or Section 2.2 hereof, as the case
may be, hereof, shall have the right to receive the copies of the information,
notices and other documents described in Section 2.3(c), Section 2.3(l) and
Section 2.3(m) hereof in connection with any proposed Registration by the
Company under the Securities Act.
2.6 REGISTRATION EXPENSES. The Company will pay all Registration Expenses
----------------------
in connection with each registration of Registrable Securities, including,
without limitation, any such registration not effected by the Company.
2.7 INDEMNIFICATION; CONTRIBUTION.
------------------------------
(a) Indemnification by the Company. The Company shall indemnify, to
-------------------------------
the fullest extent permitted by law, each holder of Registrable Securities, its
officers, directors and agents, if any, and each Person, if any, who controls
such holder within the meaning of Section 15 of the Securities Act, against all
losses, claims, damages, liabilities (or proceedings in respect thereof) and
expenses (under the Securities Act or common law or otherwise), joint or
several, resulting from any violation by the Company of the provisions of the
Securities Act or any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus (and as amended or
supplemented if amended or supplemented) or any preliminary prospectus or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any prospectus, in light of the circumstances under which they were made) not
misleading, except to the extent that such losses, claims, damages, liabilities
(or proceedings in respect thereof) or expenses are caused by any untrue
statement or alleged untrue statement contained in or by any omission or alleged
omission from information concerning any holder furnished in writing to the
Company by such holder expressly for use therein. If the offering pursuant to
any registration statement provided for under this Section 2 is made through
underwriters, no action or failure to act on the part of such underwriters
(whether or not such underwriter is an affiliate of any holder of Registrable
Securities) shall affect the obligations of the Company to indemnify any holder
of Registrable Securities or any other Person pursuant to the preceding
sentence. If the offering pursuant to any registration statement provided for
under this Section 2 is made through underwriters, the Company agrees, to the
extent required by such underwriters, to enter into an underwriting agreement in
customary form with such underwriters and to indemnify such underwriters, their
officers, directors and agents, if any, and each Person, if any, who controls
such underwriters within the meaning of Section 15 of the Securities Act to the
same extent as hereinbefore provided with respect to the
12
<PAGE>
indemnification of the holders of Registrable Securities; provided that the
Company shall not be required to indemnify any such underwriter, or any officer
or director of such underwriter or any Person who controls such underwriter
within the meaning of Section 15 of the Securities Act, to the extent that the
loss, claim, damage, liability (or proceedings in respect thereof) or expense
for which indemnification is claimed results from such underwriter's failure to
send or give a copy of an amended or supplemented final prospectus to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
amended or supplemented final prospectus prior to such written confirmation and
the underwriter was provided with such amended or supplemented final prospectus.
(b) Indemnification by the Holders. In connection with any
-------------------------------
registration statement in which a holder of Registrable Securities is
participating, each such holder, severally and not jointly, shall indemnify, to
the fullest extent permitted by law, the Company, each underwriter and their
respective officers, directors and agents, if any, and each Person, if any, who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages, liabilities (or proceedings
in respect thereof) and expenses resulting from any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of any prospectus, in
light of the circumstances under which they were made) not misleading, but only
to the extent that such untrue statement is contained in or such omission is
from information so concerning a holder furnished in writing by such holder
expressly for use therein; provided, however, that such holder's obligations
hereunder shall be limited to an amount equal to the proceeds to such holder of
the Registrable Securities sold pursuant to such registration statement.
(c) Control of Defense. Any Person entitled to indemnification under
-------------------
the provisions of this Section 2.7 shall give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, permit
such indemnifying party to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified party; and if such defense is so
assumed, such indemnifying party shall not enter into any settlement without the
consent of the indemnified party if such settlement attributes liability to the
indemnified party and such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which shall not be
unreasonably withheld); and any underwriting agreement entered into with respect
to any registration
13
<PAGE>
statement provided for under this Section 2 shall so provide. In the event an
indemnifying party shall not be entitled, or elects not, to assume the defense
of a claim, such indemnifying party shall not be obligated to pay the fees and
expenses of more than one counsel or firm of counsel for all parties indemnified
by such indemnifying party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties in respect to
such claim.
(d) Contribution. If for any reason the foregoing indemnity is
-------------
unavailable, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses:
(i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any other relevant
equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities shall be
required to contribute any amount in excess of the amount such holder would have
been required to pay to an indemnified party if the indemnity under Section
2.7(b) hereof was available. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The obligation of any Person to contribute pursuant to this
Section 2.7 shall be several and not joint.
(e) Timing of Payments. An indemnifying party shall make payments of
-------------------
all amounts required to be made pursuant to the foregoing provisions of this
Section 2.7 to or for the account of the indemnified party from time to time
promptly upon receipt of bills or invoices relating thereto or when otherwise
due or payable.
(f) Survival. The indemnity and contribution agreements contained in
---------
this Section 2.7 shall remain in full force and effect regardless of any
investigation made by or on behalf of a participating holder of Registrable
Securities, its officers,
14
<PAGE>
directors, agents or any Person, if any, who controls such holder as aforesaid,
and shall survive the transfer of such Securities by such holder.
2.8 HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS.
---------------------------------------------------
(a) In connection with each underwritten sale of Registrable Securities,
the Company agrees, and each holder of Registrable Securities by acquisition of
such Registrable Securities agrees, to enter into customary holdback agreements
concerning sale or distribution of Registrable Securities and other equity
Securities of the Company, except, in the case of any holder of Registrable
Securities, to the extent that such holder is prohibited by applicable law or
exercise of fiduciary duties from agreeing to withhold Registrable Securities
from sale or is acting in its capacity as a fiduciary or investment adviser.
Without limiting the scope of the term "fiduciary," a holder shall be deemed to
be acting as a fiduciary or an investment adviser if its actions or the
Registrable Securities proposed to be sold are subject to the Employee
Retirement Income Security Act of 1974, as amended, or the Investment Company
Act of 1940, as amended, or if such Registrable Securities are held in a
separate account under applicable insurance law or regulation.
(b) If the Company shall at any time after the date hereof provide to any
holder of any Securities of the Company rights with respect to the registration
of such Securities under the Securities Act:
(i) such rights shall not be in conflict with or adversely
affect any of the rights provided in this Section 2 to the holders of
Registrable Securities; and
(ii) if such rights are provided on terms or conditions more
favorable to such holder than the terms and conditions provided in this Section
2, the Company will provide (by way of amendment to this Agreement or otherwise)
such more favorable terms or conditions to the holders of Registrable
Securities.
2.9 AVAILABILITY OF INFORMATION. The Company will comply with the
----------------------------
reporting requirements of Sections 13 and 15(d) of the Exchange Act and will
comply with all other public information reporting requirements of the SEC as
from time to time in effect, and cooperate with the holders of Registrable
Securities, so as to permit disposition of the Registrable Securities pursuant
to an exemption from the Securities Act for the sale of any Registrable
Securities (including, without limitation, the current public information
requirements of Rule 144(c) and Rule 144A under the Securities Act). The Company
will also cooperate with each holder of any Registrable Securities in supplying
such information as may be necessary for such holder to complete and file any
information reporting forms presently or
15
<PAGE>
hereafter required by the SEC as a condition to the availability of an exemption
from the Securities Act for the sale of any Registrable Securities.
3. MISCELLANEOUS.
-------------
3.1 BINDING EFFECT. The provisions of this Agreement shall be binding
---------------
upon and inure to the benefit of parties hereto and their respective successors
and assigns.
3.2 NOTICES. All written communications provided for hereunder shall be
--------
sent by United States mail (registered or certified mail) or nationwide
overnight delivery service (with charges prepaid), or by facsimile, delivery
confirmed with a copy by first class mail or overnight courier (with charges
prepaid), and:
(a) if to the Company:
Trex Company, Inc.
20 South Cameron Street
Winchester, VA 22601
Fax: (540) 678-0886
Attention: Anthony J. Cavanna
16
<PAGE>
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 13th Street, NW
Washington, D.C. 20004
Fax: 202-637-5910
Attention: Richard J. Parrino, Esq.
or such other address as the Company shall designate to each Institutional
Investor in writing;
(b) if to any Institutional Investor, at the address set forth on
Schedule A hereto for each such Institutional Investor or such other address as
- ----------
an Institutional Investor shall designate to the Company in writing; and
(c) if to any Management Holder, at the address set forth on Schedule
--------
B hereto for each such Management Holder or such other address as a Management
- -
Holder shall designate to the Company in writing.
3.3 AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
-----------------------
the provisions of this sentence, may be amended, modified or supplemented only
by a writing duly executed by or on behalf of the Institutional Investors
holding at least sixty-six and two-thirds percent (66-2/3%) of the Registrable
Securities held by the Institutional Investors at such time and the Company;
provided, however, that compliance by the Company with the provisions of this
Agreement, with respect to any particular registration, may be waived by such
Institutional Investors holding at least sixty-six and two-thirds percent (66-
2/3%) of the Registrable Securities held by the Institutional Investors at such
time; and provided, further, that no amendment, modification or supplement of
the provisions of Section 2.1(d) or 2.2(c) hereof which adversely affects the
rights of any Management Holder shall be made without the consent of such
Management Holder.
3.4 AVAILABILITY OF INFORMATION. At any time that any class of the Common
----------------------------
Stock is registered under section 12(b) or section 12(g) of the Exchange Act,
the Company will comply with the reporting requirements of Sections 13 and 15(d)
of the Exchange Act (whether or not it shall be required to do so pursuant to
such sections) and will comply with all other public information reporting
requirements of the SEC from time to time in effect. In addition, the Company
shall file such reports and information, and shall make available to the public
and to the Institutional Investors such information, as shall be necessary to
permit such holders to offer and sell shares of Common Stock pursuant to the
provisions of Rules 144 and 144A promulgated under the Securities Act. The
Company will also cooperate with each such holder in supplying such information
as may be necessary for such holder to complete and file any information
reporting forms presently or
17
<PAGE>
hereafter required by the SEC as a condition to the availability of an exemption
from the registration provisions of the Securities Act in connection with the
sale of any shares of Common Stock. The Company will furnish to each such
holder, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its holders of equity securities, and copies of all
regular and periodic reports and all registration statements and prospectuses
filed by the Company with any securities exchange or with the SEC.
3.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
--------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF NEW YORK.
3.6 JURISDICTION; JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
-------------------------
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND INSTRUMENTS CONTEMPLATED HEREBY AND
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.
NONE OF THE PARTIES HERETO SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR OTHER LITIGATION ARISING OUT OF OR OTHERWISE RELATED TO THIS
AGREEMENT AND EACH OF THE PARTIES HERETO WAIVES ANY AND ALL RIGHT TO ANY SUCH
JURY TRIAL AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 3.6.
3.7 COUNTERPARTS. This Agreement may be executed in any number of
-------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
3.8 DESCRIPTIVE HEADINGS. Descriptive headings of the several sections of
---------------------
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
3.9 SEVERABILITY. The fact that any given provisions of this Agreement is
-------------
found to be unenforceable, void or voidable under applicable laws of any
jurisdiction shall not affect the validity of the remaining provisions of this
Agreement in such jurisdiction, and shall not affect the enforceability of the
entire Agreement under the laws of any other jurisdiction.
3.10 EFFECTIVE DATE. This Agreement shall be effective as of the date of
--------------
termination of the Members' Agreement.
18
<PAGE>
[Remainder of page intentionally left blank]
19
<PAGE>
IN WITNESS WHEREOF, the parties, each by its duly authorized signatory, have
executed this Agreement as of the date first above written.
TREX COMPANY, INC.
By ___________________________
Name:
Title:
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, on behalf of
one or more separate accounts
By: CIGNA Investments, Inc., authorized agent
By ___________________________
Name:
Title:
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc., authorized agent
By ___________________________
Name:
Title:
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA Investments, Inc., authorized agent
By ___________________________
Name:
Title:
20
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By Lincoln Investment Management Company, its Attorney-
in-Fact
By ___________________________
Name:
Title:
_______________________________
Anthony J. Cavanna
_______________________________
Roger A. Wittenberg
_______________________________
Robert G. Matheny
_______________________________
Andrew U. Ferrari
21
<PAGE>
CIG & CO.
By
-----------------------------
Name:
Title:
22
<PAGE>
SCHEDULE A
NAMES AND ADDRESSES OF INSTITUTIONAL INVESTORS
CIG & CO.
Address: c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division S-307
Fax: 860-726-7203
CONNECTICUT GENERAL LIFE INSURANCE COMPANY:
Address: 900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division S-307
Fax: 860-726-7203
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, on behalf of one or more separate
accounts:
Address: c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division S-307
Fax: 860-726-7203
LIFE INSURANCE COMPANY OF NORTH AMERICA:
Address: c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division S-307
Fax: 860-726-7203
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY:
Address: 200 East Berry Street
Renaissance Square
Fort Wayne, Indiana 46802
<PAGE>
SCHEDULE B
NAMES AND ADDRESSES OF MANAGEMENT HOLDERS
ANTHONY J. CAVANNA
Address: c/o Trex Company, Inc.
20 South Cameron Street
Winchester, Virginia 22601
Fax: 540-678-0886
ROGER A. WITTENBERG
Address: c/o Trex Company, Inc.
20 South Cameron Street
Winchester, Virginia 22601
Fax: 540-678-0886
ROBERT G. MATHENY
Address: c/o Trex Company, Inc.
20 South Cameron Street
Winchester, Virginia 22601
Fax: 540-678-0886
ANDREW U. FERRARI
Address: c/o Trex Company, Inc.
20 South Cameron Street
Winchester, Virginia 22601
Fax: 540-678-0886
<PAGE>
Exhibit 10.13
CONSENT
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AND
---
AMENDMENT TO
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MEMBERS' AGREEMENT
------------------
THIS CONSENT AND AMENDMENT TO MEMBERS' AGREEMENT (this "Amendment") is
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made as of the 19th day of March, 1999, by and among TREX Company, LLC (the
"Company"), those persons identified on the signature pages hereof as members
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(hereinafter referred to individually as a "Member," and collectively as the
------
"Members") and those persons identified on the signature pages hereof as
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beneficial owners (hereinafter referred to individually as a "Class B Beneficial
------------------
Owner" and collectively as the "Class B Beneficial Owners").
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Recitals
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A. In connection with the capitalization of the Company on August 29,
1996, the Company, the Members and the Class B Beneficial Owners entered into
certain agreements, including (i) the Members' Agreement dated as of August 29,
1996 among the Company, the Members and the Class B Beneficial Owners (as
amended as of June 15, 1998, the "Agreement"); (ii) the Limited Liability
---------
Company Agreement dated as of August 29, 1996 among the Members, the Class B
Beneficial Owners and Mobil Oil Corporation (the "Preferred Member") (as
----------------
amended as of the date hereof, the "LLC Agreement"); and (iii) the Securities
-------------
Purchase Agreements dated as of August 29, 1996 between the Company and certain
of the Members and the Class B Beneficial Owners (as amended as of March 1,
1997, as of December 15, 1997 and as of the date hereof, the "Securities
----------
Purchase Agreements").
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B. As of the date hereof, the Company owns all of the issued and
outstanding common stock, $.01 par value per share (the "Common Stock"), of Trex
------------
Company, Inc. (the "Corporation").
-----------
C. The Corporation has filed a registration statement with the
Securities and Exchange Commission covering the initial public offering of the
Common Stock by the Corporation and certain of its stockholders (the "IPO")
---
under the Securities Act of 1933, as amended.
D. In order to facilitate the IPO, the Corporation, the Company, the
Members and the Class B Beneficial Owners have entered into a Contribution and
Exchange Agreement dated as of the date hereof (the "Exchange Agreement")
------------------
pursuant to which they intend to complete the following series of transactions
(collectively, the "Reorganization") prior to the IPO in accordance with the
--------------
Agreement as amended hereby, the LLC Agreement and the Securities Purchase
Agreements: (i) the Company will make a special cash distribution to the
Members, which distribution will consist in part of a return of capital of the
Members and in part of an
<PAGE>
amount equal to the previously recognized and undistributed taxable income of
the Members on which the Members have paid or will pay income tax; (ii) the
Members of the Company holding of record Class B Units of the Company will
convert all issued and outstanding Class B Units into the same number of a new
issue of Class A Units of the Company and will be admitted to the Company as
Class A Members of the Company (the "Class A Members"); (iii) the Company will
---------------
exercise an option granted to the Company in Section 8 of the Agreement to
repurchase a portion of such newly issued Class A Units from such Class A
Members; (iv) the Class A Members will contribute all of the issued and
outstanding Class A Units to the Corporation in exchange for Common Stock,
such Class A Members will cease to be members of the Company and the
Corporation will be admitted to the Company as a Class A Member; and (v) the
Company will pay, or will cause the Corporation on its behalf to pay, all
amounts owing under the Securities Purchase Agreements, including all amounts
owing under all outstanding senior notes and subordinated notes issued pursuant
to the Securities Purchase Agreements.
E. Concurrently with the consummation of the Reorganization, the
Preferred Member will exchange all of the outstanding Preferred Units of the
Company for a promissory note of the Corporation (the "Preferred Units
---------------
Exchange") pursuant to a Preferred Units Exchange Agreement dated as of the date
hereof among the Corporation, the Company and the Preferred Member (the
"Preferred Units Exchange Agreement"), the Preferred Member will cease to be a
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member of the Company and the Corporation will be admitted to the Company as a
preferred member.
F. In connection with the Reorganization, the Common Stock held by
the Company will be canceled.
G. Upon consummation of the Reorganization and the Preferred Units
Exchange, the Corporation will own 100% of the limited liability company
interests of the Company and will operate the Company as its wholly-owned
subsidiary.
H. Following the Reorganization and the Preferred Units Exchange, the
Corporation will consummate the IPO.
I. The Company, the Members and the Class B Beneficial Owners wish to
amend the Agreement to set forth herein their agreement concerning the
Reorganization, the Preferred Units Exchange and related matters and to consent
to the consummation of the Reorganization and the Preferred Units Exchange and
to the taking of other actions hereinafter set forth.
Agreement
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1. Defined Terms. Capitalized terms used but not defined in this
-------------
Amendment, including the recitals hereof, shall have the meanings given to such
terms in the Agreement.
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<PAGE>
2. Amendment of Section 10. The definition of "Public Market Date"
-----------------------
in Section 10 of the Agreement is hereby amended by deleting such definition in
its entirety and replacing it with the following:
"Public Market Date -- means the first day upon which Common Units of
the Company have been sold by the Company and for the Company's own
account in one or more public offerings specified in either clause (i)
or clause (ii): (i) a public offering pursuant to registration
statement no. 333-63287 filed with the SEC in which the offering price
per Common Unit equals or exceeds $9.41, provided that the gross cash
proceeds received by the Company and for the Company's own account as
a result of such sale pursuant to this clause (i) equals or exceeds
$30,582,500; or (ii) one or more public offerings pursuant to a
registration statement or registration statements filed with the SEC
pursuant to the provisions of the Securities Act, in which the
aggregate gross cash proceeds received by the Company and for the
Company's own account as a result of such sale or sales pursuant to
this clause (ii) equals or exceeds $40,000,000. For purposes of
clarification, the reference to "Company" for purposes of clause (i)
shall mean Trex Company, Inc. and the reference to "Common Units" for
purposes of clause (i) shall mean common stock of Trex Company, Inc."
3. Amendment of Section 10. The following definition is hereby added
-----------------------
to Section 10 of the Agreement:
"holder -- means, at any time, the record holder at such time."
4. Amendment of Section 11. Section 11 of the Agreement is hereby
-----------------------
amended by adding the provisions set forth below as new Section 11.12, new
Section 11.13 and new Section 11.14:
11.12 Ratification of Transfers of Issuable Units. Notwithstanding
-------------------------------------------
any provision of this Agreement to the contrary, including, without
limitation, Sections 3.1, 7.1 and 7.2, the transfer of record
ownership of Class B Units from the Class B Beneficial Owners (as
defined in the Limited Liability Company Agreement, as amended) to CIG
& Co. (to the extent that such transactions were transfers covered by
this Agreement), the transfer of record and beneficial ownership of
333 Class B Units from CIG & Co., as record holder of Class B Units
for the benefit of Connecticut General Life Insurance Company, to The
Lincoln National Life Insurance Company occurring on May 8, 1998, and
all other transfers of record and/or beneficial ownership of Class
-3-
<PAGE>
B Units among the Class B Members (as defined in the Limited Liability
Company Agreement, as amended) and/or the Class B Beneficial Owners
are hereby consented to, approved and ratified in all respects. CIG &
Co. and The Lincoln National Life Insurance Company hereby agree to be
bound by the provisions of this Agreement.
11.13 Reorganization and Related Transactions.
---------------------------------------
Notwithstanding any provision of this Agreement to the contrary,
including, without limitation, Sections 3.1, 5.5, 7.1 and 7.2, and
except as provided in the next sentence of this Section 11.13, the
Company, the Members (as defined in the Limited Liability Company
Agreement, as amended) and the Class B Beneficial Owners may adopt,
enter into, and execute, deliver, acknowledge and perform, (i) the
Contribution and Exchange Agreement dated as of March 19, 1999 among
the Company, the Members and the Class B Beneficial Owners (the
"Exchange Agreement"), (ii) the Preferred Units Exchange Agreement
dated as of March 19, 1999 among the Company, Trex Company, Inc. and
Mobil Oil Corporation, (iii) the Agreement to Terminate Employment
Agreement dated as of March 19, 1999 between the Company and Anthony
J. Cavanna, (iv) the Agreement to Terminate Employment Agreement dated
as of March 19, 1999 between the Company and Robert G. Matheny, (v)
the Agreement to Terminate Employment Agreement dated as of March 19,
1999 between the Company and Andrew U. Ferrari, (vi) the Agreement to
Terminate Employment Agreement dated as of March 19, 1999 between the
Company and Roger A. Wittenberg, (vii) any amendments to the
agreements referred to in clauses (i) through (vi) above and (viii)
any and all agreements, instruments or other documents necessary or
desirable to effectuate the transactions contemplated by the
agreements referred to in clauses (i) through (vi) above, as such
agreements may be further amended, all without any further act, vote
or approval of the Members or any other person and without complying
with the terms of this Agreement. Except as expressly provided
otherwise in the Exchange Agreement, the Company shall comply with the
terms of Section 8 in connection with the Company's repurchase of
Bundled Securities pursuant to the Exchange Agreement.
11.14 Termination of Agreement. Notwithstanding any provision of
------------------------
this Agreement to the contrary, this Agreement shall terminate in its
entirety on the Public Market Date
-4-
<PAGE>
and shall have no further force or effect from and after the
Public Market Date.
5. Consent and Approval. To the extent required by the Agreement,
--------------------
the parties hereto hereby consent to and approve (i) the Exchange Agreement and
the Preferred Units Exchange Agreement and the transactions contemplated by the
Exchange Agreement and the Preferred Units Exchange Agreement, including,
without limitation, the Reorganization and the Preferred Units Exchange, (ii)
the termination as of the Reorganization closing date of the Class A Members'
Agreement dated as of August 29, 1996 among the Class A Members, (iii) the
termination as of the IPO closing date of the employment agreements dated as of
August 29, 1996 between the Company and each of the Class A Members, (iv) the
formation and initial capitalization of the Corporation, (v) the activity and
business of the Corporation through the date hereof and (vi) the IPO.
6. No Other Amendment. Except as expressly set forth in this
------------------
Amendment, the Agreement shall remain unchanged and in full force and effect in
accordance with its terms.
7. Governing Law. It is the intent of the parties hereto that all
-------------
questions with respect to the construction of this Amendment and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State of New York, without giving effect to the choice of law
rules thereof.
8. Amendment in Counterparts. This Amendment may be executed in
-------------------------
several counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. In addition, this Amendment
may contain more than one counterpart of the signature page and this Amendment
may be executed by the affixing of the signatures of each of the Company, the
Members and the Class B Beneficial Owners to one of such counterpart signature
pages; all of such signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a single
signature page.
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<PAGE>
TREX COMPANY, LLC
By: /s/ Robert G. Matheny
-----------------------
Name: Robert G. Matheny
Its: President
MEMBERS:
/s/ Anthony J. Cavanna
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Anthony J. Cavanna
/s/ Roger A. Wittenberg
-------------------------
Roger A. Wittenberg
/s/ Robert G. Matheny
------------------------
Robert G. Matheny
/s/ Andrew U. Ferrari
-----------------------
Andrew U. Ferrari
CIG & Co.
By: /s/ Stephen A. Osborn
-----------------------
Name: Stephen A. Osborn
Its: Partner
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<PAGE>
The Lincoln National Life Insurance
Company
By: Lincoln Investment Management
Company, its Attorney-in-Fact
By: /s/ R. Gordon Marsh
----------------------------------
Name: R. Gordon Marsh
Its: Vice President
CLASS B BENEFICIAL OWNERS:
Connecticut General Life Insurance Company
(on behalf of one or more separate accounts)
By: CIGNA Investments, Inc., authorized agent
By: /s/ Stephen A. Osborn
----------------------------------
Name: Stephen A. Osborn
Its: Managing Director
Connecticut General Life Insurance
Company
By: CIGNA Investments, Inc., authorized agent
By: /s/ Stephen A. Osborn
----------------------------------
Name: Stephen A. Osborn
Its: Managing Director
Life Insurance Company of North
America
By: CIGNA Investments, Inc., authorized agent
By: /s/ Stephen A. Osborn
----------------------------------
Name: Stephen A. Osborn
Its: Managing Director
-7-
<PAGE>
Exhibit 10.14
AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 23, 1999
between TREX COMPANY, LLC, a Delaware limited liability company,
and FIRST UNION NATIONAL BANK,
a national banking association.
RECITALS
WHEREAS, the Borrower and the Bank entered into a Credit Agreement dated as
of December 10, 1996, as amended from time to time (the "Original Credit
Agreement") pursuant to which the Bank made available to the Borrower a
revolving line of credit;
WHEREAS, the Borrower and the Bank have agreed to the terms of a term loan
facility to be made available by the Bank to the Borrower;
WHEREAS, the Borrower, as of the date hereof, owns all of the issued and
outstanding capital stock of TREX COMPANY, INC., a Delaware corporation;
WHEREAS, TREX COMPANY, INC. proposes to make an initial public offering
(the "IPO") of its common stock;
WHEREAS, in order to facilitate the IPO, the Borrower, TREX COMPANY, INC.
and the members of the Borrower intend to complete a series of transactions
(collectively, the "Reorganization") prior to the IPO in which, among other
things, (i) the holders of Class B Units will convert such units into Class A
Units; (ii) the Borrower will repurchase Class A Units from certain of its
members, (iii) all of the Borrower's members except Mobil Oil Corporation will
exchange their limited liability company interests in the Borrower for common
stock of TREX COMPANY, INC., (iv) Mobil Oil Corporation will exchange its
limited liability company interest in the Borrower for a promissory note of TREX
COMPANY, INC. payable on the IPO closing date, (v) the Borrower will make a
special cash distribution to each holder of its Class A Units, which will
initially be evidenced in part by a promissory note of the Borrower, will be
funded in part from IPO proceeds and in part from Revolving Loans and will
consist in part of a return of such holder's capital in the Borrower and in part
of an amount equal to the previously recognized and undistributed taxable income
of the Borrower on which such holder has paid or will pay income tax, and (vi)
the Borrower's common stock in TREX COMPANY, INC. will be canceled; and
WHEREAS, upon consummation of the Reorganization, TREX COMPANY, INC. will
own all of the issued and outstanding limited liability company interests in the
Borrower and will operate the Borrower as its wholly-owned subsidiary; and
WHEREAS, the Borrower and the Bank have agreed to amend and restate the
Original Credit Agreement to incorporate the terms of the revolving line of
credit and the term loan facility.
-1-
<PAGE>
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank agree to amend, restate and replace the
Original Credit Agreement as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. All capitalized terms used in this Agreement or
-----------
in any Appendix, Schedule or Exhibit hereto which are not otherwise defined
herein or therein shall have the respective meanings set forth in the Appendix
attached hereto identified as the Definitions Appendix. The Definitions
Appendix is incorporated herein by reference in its entirety and is a part of
this Agreement to the same extent as if it had been set forth in this Section
1.01 in full.
Section 1.02 Accounting Terms and Determinations. Unless otherwise
-----------------------------------
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles in the United States of America as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Bank.
ARTICLE II
THE CREDIT
Section 2.01 Commitment to Lend.
------------------
(a) Revolving Commitment. The Bank agrees, on the terms and conditions set
--------------------
forth in this Agreement, to make Revolving Loans to the Borrower from time to
time during the Revolving Credit Period in amounts such that the aggregate
principal amount of Revolving Loans at any one time outstanding will not exceed
the lesser of (i) the Revolving Commitment and (ii) the Borrowing Base. Within
the foregoing limit, the Borrower may borrow, prepay and reborrow Revolving
Loans at any time during the Revolving Credit Period.
(b) Term Commitment. The Bank agrees, on the terms and conditions set
---------------
forth in this Agreement, to make Term Loans to the Borrower from time to time
during the Term Loan Period in amounts such that the aggregate principal amount
of Term Loans will not exceed the Term Commitment. This commitment to make Term
Loans is not revolving in nature, and any Term Loans repaid may not be
reborrowed.
Section 2.02 Methods of Borrowing.
--------------------
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<PAGE>
(a) Notice of Borrowing. Except as otherwise provided in this Section, the
-------------------
Borrower may, with the approval of the Bank, give the Bank notice substantially
in the form of Exhibit A hereto (a "Notice of Borrowing") not later than 12:00
P.M. (local time in Winchester, Virginia) on the date of each requested Loan,
specifying the date of such Loan and the amount of such Loan.
(b) Cash Management Services. The Borrower subscribes to the Bank's cash
-------------------------
management services and such services are applicable to the Revolving Loans.
The terms of such services, as set forth in the Services Agreement, shall
control the manner in which funds are transferred between the Operating Account
and the Revolving Loans for credit or debit to the Revolving Loans.
(c) Overdrafts in Other Accounts. The Bank may, at its option, pay any
----------------------------
Item which will cause any deposit account maintained by the Borrower with the
Bank to become overdrawn, and such payment shall be deemed a Revolving Loan
hereunder.
Section 2.03 Funding of Loans. The Bank shall disburse the proceeds of
----------------
each Loan made pursuant to Section 2.02 as follows:
(a) The proceeds of each Loan under Section 2.02(a) shall be made available
by the Bank to the Borrower in Federal or other funds immediately available at
the Bank's address referred to in Section 8.01.
(b) The proceeds of each Loan under Section 2.02(b) or (c) shall be
disbursed by the Bank by way of direct payment of the relevant Item or by way of
deposit to the Operating Account pursuant to the Services Agreement, as the case
may be.
Section 2.04 Note.
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(a) Evidence of Loans. The Revolving Loans and the Term Loans shall each be
-----------------
evidenced by a single Note payable to the order of the Bank in an amount equal
to the Revolving Commitment and the Term Commitment, respectively.
(b) Records of Amounts Due. The Bank shall record the date and amount of
----------------------
each Loan made by it and the date and amount of each payment of principal made
by the Borrower with respect thereto, and may, if the Bank so elects in
connection with any transfer or enforcement of each Note, endorse on the
schedule forming a part thereof appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding; provided that the
--------
failure of the Bank to make any such recordation or endorsement shall not affect
the obligations of the Borrower hereunder or under such Note. The Bank is
hereby irrevocably authorized by the Borrower so to endorse each Note and to
attach to and make a part of such Note a continuation of any such schedule as
and when required. The Bank shall send the Borrower a copy of any endorsements
and continuations so made.
Section 2.05 Interest Rate.
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<PAGE>
(a) LIBOR Market Index-Based Rate. Each Loan shall bear interest on the
-----------------------------
outstanding principal amount thereof, for each day from the date such Loan is
made until it becomes due, at a rate per annum equal to the applicable LIBOR
Market Index-Based Rate for such day. Such interest shall be payable for each
month in arrears on the first day of the immediately succeeding calendar month.
"LIBOR Market Index-Based Rate" shall be the rate per annum equal to
the LIBOR Market Index Rate plus two percent (2.0%) as that rate may change from
day to day. "LIBOR Market Index Rate", for any day, is the rate for 1 month
U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m., London
time, on such day, or if such day is not a London business day, then the
immediately preceding London business day (or if not so reported, then as
determined by the Bank from another recognized source or interbank quotation).
(b) Overdue Amounts. Any overdue principal of or interest on any Loan
---------------
shall bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a rate
per annum equal to the sum of 2% plus the LIBOR Market Index-Based Rate
applicable to such Loan on such day.
Section 2.06 Fees.
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(a) Unused Commitment Fee. The Borrower shall pay to the Bank an unused
---------------------
commitment fee (the "Commitment Fee") for each day at a rate per annum equal to
the product of (i) 12.5 basis points multiplied by (ii) the excess of the
Revolving Commitment over the aggregate amount of the Revolving Loans on such
day. Such unused commitment fee shall accrue from and including the Effective
Date to but excluding the Termination Date (or earlier date of termination of
the Revolving Commitment in its entirety) and shall be payable quarterly in
arrears on each Quarterly Date and on the Termination Date.
(b) Audit Fee. The Borrower shall pay an audit fee, not to exceed
---------
$3,500.00, for each audit permitted to be made pursuant to Section 5.06.
Section 2.07 Adjustments of Commitment.
-------------------------
(a) Optional Termination or Reductions of Revolving Commitment. The
----------------------------------------------------------
Borrower may, upon at least three Business Days' notice to the Bank, (i)
terminate the Revolving Commitment at any time, if no Revolving Loans are
outstanding at such time or (ii) reduce from time to time the amount of the
Revolving Commitment in excess of the aggregate outstanding principal amount of
the Revolving Loans. If the Revolving Commitment is terminated in its entirety,
all accrued fees shall be payable on the effective date of such termination.
(b) Optional Extension of Commitment.
--------------------------------
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<PAGE>
(i) The Bank may elect, by notice to the Borrower not less than 15
days and not more than 45 days prior to May 31, 2000 or the first
anniversary of an Extension Date (as applicable, an "Anniversary Date"), to
extend the Revolving Credit Period until the second anniversary of such
Anniversary Date (each of the first and subsequent Anniversary Dates on
which the Revolving Credit Period is extended hereunder being referred to
herein as an "Extension Date"). Failure by the Bank to notify the Borrower
of such election within the above time period shall be deemed to constitute
an election by the Bank not to extend the Revolving Credit Period.
(ii) If the Bank shall have elected to extend the Revolving Credit
Period as provided in this Section 2.07(b), then the Revolving Credit
Period shall continue until the second anniversary of the Extension Date in
effect, and the term "Termination Date", as used herein, shall mean such
second anniversary.
Section 2.08 Maturity and Repayment of Loans.
-------------------------------
(a) Maturity of Termination Date. Each Revolving Loan shall mature, and
----------------------------
the principal amount thereof shall be due and payable, on the Termination Date.
(b) Mandatory Prepayments of Revolving Loans Exceeding Borrowing Base. If
-----------------------------------------------------------------
on any day the aggregate outstanding principal amount of all Revolving Loans
exceeds the Borrowing Base, the Borrower shall prepay, and there shall become
due and payable, on such date the principal amount of the Revolving Loans equal
to such excess, together with interest thereon to the date of repayment.
(c) Mandatory Repayments from Operating Account.
-------------------------------------------
(i) Deposits of Proceeds to Operating Account. The Borrower shall
-----------------------------------------
instruct all Account Debtors and other Persons obligated in respect of
Accounts and other Collateral to make all payments in respect of the
Accounts or other Collateral directly to the Bank (by instructing that such
payments be remitted to a post office box which shall be in the name of the
Borrower but under the control of the Bank). Except as provided in Section
3.04 of the Security Agreement, all such payments made to the Bank shall be
deposited in the Operating Account. In addition to the foregoing, the
Borrower agrees that if the proceeds of any Collateral (including the
payments made in respect of Accounts) shall be received by it, the Borrower
shall, unless Section 3.04 of the Security Agreement shall require
otherwise, as promptly as possible deposit such proceeds to the Operating
Account. Until so deposited, all such proceeds shall be held in trust by
the Borrower for and as the property of the Bank and shall not be
commingled with any other funds or property of the Borrower. The Borrower
hereby irrevocably authorizes and empowers the Bank, its officers,
employees and authorized agents to endorse and sign its name on all checks,
drafts, money orders or other media of payment so delivered, and such
endorsements or assignments shall, for all purposes, be deemed to have been
made by the Borrower prior to any endorsement or assignment thereof by the
Bank. The Bank may use any convenient or customary means for the purpose
of collecting such checks, drafts, money orders or other media of payment.
-5-
<PAGE>
(ii) Cash Management Services. The Revolving Loans shall be repaid as
------------------------
set forth in the Services Agreement, and consistent with Section 2.02(b) of
this Agreement.
(d) Term Loans. The unpaid principal balance of the Term Loans on August
----------
31, 1999 shall be payable in consecutive monthly payments on the first day of
each month, beginning October 1, 1999, equal to the quotient of the amount of
such unpaid principal balance on August 31, 1999 divided by 60; provided,
however, that the entire unpaid principal balance of the Term Loans and all
accrued interest thereon shall be due and payable in full on April 1, 2000.
(e) Optional Prepayments of Loans. The Borrower may upon at least one
-----------------------------
Business Day's notice to the Bank, prepay any Loan, in whole at any time, or
from time to time in part, without penalty, by paying the principal amount to be
prepaid together with accrued interest thereon to the date of prepayment. The
notice of prepayment delivered by the Borrower to the Bank shall not be
revocable by the Borrower following its receipt by the Bank. Any prepayment of
the Term Loans shall be applied to the Term Loans in the inverse order of their
maturities.
Section 2.09 General Provisions as to Payments. The Borrower shall make
---------------------------------
each payment of principal of and interest on the Loans and fees hereunder not
later than 12:00 Noon (local time in Winchester, Virginia) on the date when due,
without set-off, counterclaim or other deduction, in Federal or other funds
immediately available to the Bank at its address referred to in Section 8.01 or
such other location as designated by the Bank. Whenever any payment of
principal of, or interest on, the Loans or of fees shall be due on a day which
is not a Business Day, the date for payment thereof shall be extended to the
next succeeding Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
Section 2.10 Computation of Interest and Fees. Interest on Loans
--------------------------------
hereunder shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
ARTICLE III
CONDITIONS
Section 3.01 Conditions to Closing. The obligation of the Bank to make
---------------------
the first Loan hereunder is subject to the satisfaction of the following
conditions:
(a) Effectiveness. This Agreement shall have become effective in accordance
-------------
with Section 9.08.
(b) Notes. On or prior to the Closing Date, the Bank shall have received a
-----
duly executed Revolving Note and Term Note dated on or before the Closing Date
complying with the provisions of Section 2.04.
-6-
<PAGE>
(c) Other Loan Documents. Each of the Loan Documents to be executed on or
--------------------
before the Closing Date shall be in form and substance reasonably satisfactory
to the Bank and shall have been duly executed and delivered to the Bank by each
of the parties thereto.
(d) Adverse Change, etc. On the Closing Date, nothing shall have occurred
-------------------
(and the Bank shall not have become aware of any facts or conditions not
previously known) which has, or could reasonably be expected to have, a Material
Adverse Effect.
(e) Officer's Certificate. The Bank shall have received a certificate
---------------------
dated the Closing Date signed on behalf of the Borrower by the Chairman of the
Board, the President, any Vice President or the Treasurer of the Borrower
stating that (x) on the Closing Date and after giving effect to the Loan being
made on the Closing Date, no Default or Event of Default shall have occurred and
be continuing and (y) to the best knowledge and belief of such officer, the
representations and warranties of the Borrower contained in the Loan Documents
are true and correct on and as of the Closing Date.
(f) Opinion of Borrower's Counsel. On the Closing Date, the Bank shall
-----------------------------
have received from counsel to the Borrower an opinion addressed to the Bank,
dated the Closing Date, substantially in the form of Exhibit C hereto and
covering such additional matters incident to the transactions contemplated
hereby as the Bank may reasonably request.
(g) Company Proceedings. On the Closing Date, the Bank shall have received
-------------------
(i) a copy of the Borrower's Certificate of Formation, as amended, certified by
the Secretary of the State of Delaware and dated as of a recent date prior to
the Closing Date; (ii) a certificate of the Secretary of the State of Delaware
and each other state in which the Borrower is qualified as a foreign limited
liability company to do business, dated as of a recent date prior to the Closing
Date, as to the good standing of the Borrower; (iii) a copy of the Borrower's
Limited Liability Company Agreement, including all amendments thereto; and (iv)
a certificate of the appropriate officer or other authorized person of the
Borrower dated the Closing Date and certifying (A) that the documents referred
to in clause (iii) above have not been amended since the date of said
certificate, (B) that attached thereto is a true, correct and complete copy of
resolutions adopted by the managers of the Borrower authorizing the execution,
delivery and performance of the Credit Agreement, the Notes and the Security
Agreement and each other document delivered in connection herewith or therewith
and that said resolutions have not been amended and are in full force and effect
on the date of such certificate, (C) as to the incumbency and specimen
signatures of each officer or other authorized person of the Borrower executing
this Agreement, the Notes and the Security Agreement or any other document
delivered in connection herewith or therewith and (D) certifying as to the names
and respective jurisdictions of organization of all Subsidiaries of the Borrower
existing on the Closing Date.
All company and legal proceedings and instruments and agreements
relating to the transactions contemplated by this Agreement or in any other
document delivered in connection therewith shall be satisfactory in form and
substance to the Bank and its counsel, and the Bank shall have received all
information and copies of all documents and papers, including records of company
proceedings, governmental approvals, good standing certificates and bring-down
telegrams, if any, which the Bank reasonably may have requested in connection
therewith,
-7-
<PAGE>
such documents and papers where appropriate to be certified by proper company or
governmental authorities.
(h) Perfection of Security Interests; Search Reports. On or prior to the
------------------------------------------------
Closing Date, the Bank shall have received:
(i) a Perfection Certificate of the Borrower, substantially in the
form of Exhibit A to the Security Agreement;
(ii) appropriate Financing Statements (Form UCC-1 or such other
financing statements or similar notices as shall be required by local law)
fully executed for filing under the Uniform Commercial Code or other
applicable local law of each jurisdiction in which the filing of a
financing statement or giving of notice may be required, or reasonably
requested by the Bank, to perfect the security interests purported to be
created by the Loan Documents;
(iii) copies of reports from Prentice-Hall Financial Services or
other independent search service reasonably satisfactory to the Bank
listing all effective financing statements that name the Borrower (under
its present name and any previous name and, if requested by the Bank, under
any trade names) as debtor or seller that are filed in the jurisdictions
referred to in clause (i) above, together with copies of such other
financing statements (none of which shall cover the Collateral except to
the extent evidencing Permitted Liens or for which the Bank shall have
received termination statements (Form UCC-3) or such other termination
statements as shall be required by local law) fully executed for filing;
and
(iv) evidence of the completion of all other filings and recordings
of, or with respect to, the Loan Documents as may be necessary or, in the
opinion of the Bank, desirable to perfect the security interests intended
to be created by the Loan Documents.
(i) Closing Date Borrowing Base Certificate. On the Closing Date, the
---------------------------------------
Borrower shall have delivered to the Bank its initial Borrowing Base Certificate
meeting the requirements of Section 5.01(f).
(j) Payment of Fees. All reasonable costs, fees and expenses due to the
---------------
Bank on or before the Closing Date (including, without limitation, legal fees
and expenses) shall have been paid.
(k) Counsel Fees. The Bank shall have received payment from the Borrower
------------
of the reasonable fees and expenses of McGuire, Woods, Battle & Boothe, LLP
described in Section 8.03 which are billed through the Closing Date.
(l) CIGNA Agreements. The Bank shall have received a certificate of the
----------------
appropriate officer or other authorized person of the Borrower dated the Closing
Date and certifying (A) that attached thereto are true, correct and complete
copies of the CIGNA Agreements, and (B) that the documents referred to in clause
(A) above have not been amended since the date of said
-8-
<PAGE>
certificate. Furthermore, the Bank shall have received a fully executed
amendment to the Securities Purchase Agreement amending certain provisions of
the Securities Purchase Agreement which would otherwise be breached by the
execution and delivery of the Loan Documents.
The Bank shall promptly notify the Borrower of the Closing Date, and
such notice shall be conclusive and binding on all parties hereto. The
documents referred to in this Section shall be delivered to the Bank no later
than the Closing Date. The certificates and opinion referred to in this Section
shall be dated the Closing Date.
Section 3.02 Conditions to All Loans. The obligation of the Bank to make
-----------------------
each Loan is subject to the satisfaction of the following conditions:
(i) the fact that the Closing Date shall have occurred;
(ii) with respect to each Revolving Loan, the fact that, immediately
after the making of such Loan, the aggregate outstanding principal amount
of all Revolving Loans shall not exceed the lesser of (A) the Revolving
Commitment and (B) the Borrowing Base;
(iii) with respect to each Term Loan, the fact that, immediately
after the making of such Loan, the aggregate principal amount of all Term
Loans made shall not exceed the Term Commitment.
(iv) the fact that, immediately before and after the making of such
Loan, no Default shall have occurred and be continuing;
(v) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Loan; and
(vi) (A) the Bank shall in good faith have determined that its
prospect of receiving payment in full of the Obligations then outstanding
or its ability to exercise its rights and remedies hereunder and under the
other Loan Documents have not been impaired, (B) no event or condition
shall have occurred since the Effective Date which has or could reasonably
be expected to have a Material Adverse Effect or (C) the Bank shall not
reasonably suspect that one or more Events of Default have occurred and is
continuing.
Each Loan hereunder shall be deemed to be a representation and warranty by the
Borrower on the date of such Loan as to the facts specified in clauses (iv) and
(v) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
-9-
<PAGE>
Section 4.01 Existence and Power. The Borrower is a limited liability
-------------------
company duly organized, validly existing and in good standing under the laws of
the State of Delaware, and has all powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. Each of the Subsidiaries is duly organized, validly
existing and in good standing under the laws of the state of its organization
and has all powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted. Each
of the Borrower and the Subsidiaries is duly qualified as a foreign entity,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its business or the character and
location of its property, business or customers and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have a
Material Adverse Effect.
Section 4.02 Company and Governmental Authorization; No Contravention.
--------------------------------------------------------
The execution, delivery and performance by the Borrower of the Loan Documents to
which it is a party are within the limited liability company powers of the
Borrower, have been duly authorized by all necessary company action, require no
action by or in respect of, or filing with, any governmental body, agency or
official (except for any such action or filing as shall have been taken or made
and that is in full force and effect from and after the Closing Date) and do not
contravene, or constitute (with or without the giving of notice or lapse of time
or both) a default under, any provision of applicable law or of the
organizational documents of the Borrower or any Subsidiary or of any agreement,
judgment, injunction, order, decree or other instrument binding upon or
affecting the Borrower or any Subsidiary or result in the creation or imposition
of any Lien on any asset of the Borrower or any of its Subsidiaries.
Section 4.03 Binding Effect. Each Loan Document other than the Notes to
--------------
which the Borrower is a party constitutes a valid and binding agreement of the
Borrower and each Note, when executed and delivered in accordance with this
Agreement, will constitute a valid and binding obligation of the Borrower, in
each case enforceable against the Borrower in accordance with its terms except
in each case as such enforceability may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by equitable principles
of general applicability (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.04 Financial Condition.
-------------------
(a) [Intentionally deleted].
-----------------------
(b) Interim Financial Statements. The unaudited consolidated balance sheet
----------------------------
of the Borrower and its Consolidated Subsidiaries as of December 31, 1998 and
the related unaudited consolidated income statements for the month then ended,
copies of which have been delivered to the Bank, fairly present, in conformity
with generally accepted accounting principles applied on a basis consistent with
the audited financial statements for the fiscal year ended December 31, 1997,
the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of
-10-
<PAGE>
such date and their consolidated results of operations and changes in financial
position for such 12 month period (subject to normal year-end audit
adjustments).
(c) Material Adverse Change. Since December 31, 1998 there has been no
-----------------------
material adverse change in condition (financial or otherwise), results of
operations, properties, assets, business or prospects of the Borrower or of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
Section 4.05 Litigation. Except as set forth on Schedule 4.05, there is
----------
no material action, suit, proceeding or investigation pending against, or to the
knowledge of the Borrower threatened against, contemplated or affecting, the
Borrower or any of its Subsidiaries before any court, arbitrator or any
governmental body, agency or official which has, or could reasonably be expected
to have, a Material Adverse Effect, or which in any manner draws into question
the validity or enforceability of this Agreement or the Notes, and there is no
basis known to the Borrower or any of its Subsidiaries for any such action,
suit, proceeding or investigation.
Section 4.06 Regulation U; Use of Proceeds. The Borrower and its
-----------------------------
Subsidiaries do not own any "margin stock" as such term is defined in Regulation
U. The proceeds of the Loans will be used by the Borrower only for the purposes
set forth in Section 5.16 hereof.
Section 4.07 Regulatory Restrictions on Borrowing. Neither the Borrower
------------------------------------
nor any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or
otherwise subject to any regulatory scheme which restricts its ability to incur
debt.
Section 4.08 Subsidiaries. Part I of Schedule 4.08 (as such Schedule may
------------
be supplemented by a writing delivered by the Borrower to the Bank from time to
time after the Effective Date) hereto lists each Subsidiary of the Borrower (and
the direct and indirect ownership interests of the Borrower therein), in each
case existing on the Effective Date and, if applicable, upon completion of the
Reorganization. Except as set forth on Part I of such Schedule 4.08, each such
Subsidiary existing on the date hereof is, and, in the case of any additional
corporate Subsidiaries formed after the Effective Date, each of such additional
corporate Subsidiaries will be at each time that this representation is made or
deemed to be made after the Effective Date, a wholly-owned Subsidiary that is a
corporation duly incorporated, validly existing and, to the extent relevant in
such jurisdiction, in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. Except as listed on Part II of Schedule 4.08 (as
such Schedule may be supplemented by a writing delivered by the Borrower to the
Bank from time to time after the Effective Date), neither the Borrower nor any
of its Subsidiaries is engaged in any joint venture or partnership with any
other Person.
Section 4.09 Full Disclosure. All factual information (taken as a whole)
---------------
furnished by or on behalf of the Borrower or any of its Subsidiaries in writing
to the Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is true and accurate in
-11-
<PAGE>
all material respects on the date as of which such information is dated or
certified and is not incomplete by omitting to state any material fact necessary
to make such information (taken as a whole) not misleading at such time in light
of the circumstances under which such information was provided. Except for
economic trends generally known to the public affecting generally the industry
in which the Borrower and its Subsidiaries conduct their business, the Borrower
has disclosed to the Bank in writing any and all facts which materially and
adversely affect or may materially and adversely affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial
condition of the Borrower and its Consolidated Subsidiaries, taken as a whole,
or the ability of the Borrower to perform its obligations under this Agreement.
Section 4.10 Tax Returns and Payments. Each of the Borrower and its
------------------------
Subsidiaries has filed all United States Federal income tax returns and all
other material tax returns, domestic and foreign, required to be filed by it and
has paid all taxes and assessments payable by it which have become due pursuant
to such returns or pursuant to any assessment received by the Borrower or any
Subsidiary, other than those not yet delinquent and except for those contested
in good faith. Each of the Borrower and its Subsidiaries has paid, or has
provided adequate reserves (in good faith judgment of the management of the
Borrower) for the payment of, all federal, state and foreign income taxes
applicable for all prior fiscal years and for the current fiscal year to the
date hereof.
Section 4.11 Compliance with ERISA. Each member of the ERISA Group has
---------------------
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
Section 4.12 Intellectual Property. Each of the Borrower and its
---------------------
Subsidiaries owns or possesses or holds under valid non-cancelable licenses all
Patents, Trademarks, service marks, trade names, copyrights, Licenses and other
intellectual property rights that are necessary for the operation of their
respective properties and businesses, and neither the Borrower nor any of its
Subsidiaries is in violation of any provision thereof. The Borrower and its
Subsidiaries conduct their business without infringement or claim of
infringement of any material license, patent, trademark, trade name, service
mark, copyright, trade secret or any other intellectual property right of others
and there is no infringement or, except as set forth on Schedule 4.12, claim of
infringement by others of any material license, patent, trademark, trade name,
service mark, copyright, trade secret or other intellectual property right of
the Borrower and its Subsidiaries.
Section 4.13 No Burdensome Restrictions. No contract, lease, agreement or
--------------------------
other instrument to which the Borrower or any of its Subsidiaries is a party or
by which any of its property is bound or affected, no charge, corporate
restriction, judgment, decree or order and no
-12-
<PAGE>
provision of applicable law or governmental regulation has had or is reasonably
expected to have a Material Adverse Effect.
Section 4.14 Environmental Matters. In the ordinary course of its
---------------------
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted at any such facility, any costs or liabilities in connection with off-
site disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
Section 4.15 Accounts. With respect to each Account, all records, papers
--------
and documents relating thereto (if any) are genuine and in all respects what
they purport to be, and all papers and documents (if any) relating thereto: (i)
represent legal, valid and binding obligations of the respective Account Debtor,
subject to adjustments customary in the business of the Borrower, with respect
to unpaid indebtedness incurred by such Account Debtor in respect of the
performance of labor or services or the sale or lease and delivery of the
merchandise listed therein, or both, (ii) are the only original writings
evidencing and embodying such obligation of the Account Debtor named therein
(other than copies created for general accounting purposes) and are in
compliance with all applicable federal, state and local laws and applicable laws
of any relevant foreign jurisdiction.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as the Bank has any commitment to make
Revolving Loans or Term Loans hereunder or any Obligation remains unpaid:
Section 5.01 Information. The Borrower will deliver or cause to be
-----------
delivered to the Bank:
(a) Annual Financial Statements. As soon as available and in any event
---------------------------
within 90 days after the end of each fiscal year of the Borrower, a consolidated
and consolidating balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such fiscal year and the related consolidated and
consolidating statements of income, changes in members' equity and
-13-
<PAGE>
cash flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail and
accompanied by an opinion thereon by Ernst & Young, LLP or other independent
public accountants reasonably satisfactory to the Bank, which opinion shall not
be qualified as to the scope of the audit and which shall state that such
consolidated financial statements present fairly the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of the date of
such financial statements and the results of their operations for the period
covered by such financial statements in conformity with generally accepted
accounting principles applied on a consistent basis (except for changes in the
application of which such accountants concur) and shall not contain any "going
concern" or like qualification or exception or qualification arising out of the
scope of the audit.
(b) Monthly Financial Statements. As soon as available and in any event
----------------------------
within 15 days after the end of each of the first eleven months of each fiscal
year of the Borrower a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such fiscal month (with all
supporting schedules) and the related consolidated statements of income, changes
in members' equity and cash flows of the Borrower and its Consolidated
Subsidiaries for such month, setting forth in each case in comparative form the
figures for the corresponding month of the Borrower's previous fiscal year, all
certified (subject to normal year-end audit adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency by the
chief financial officer or chief accounting officer of the Borrower.
(c) Officer's Certificate. Simultaneously with the delivery of each set of
---------------------
financial statements referred to in subsections (a) and (b) above, a certificate
of the chief financial officer or chief accounting officer of the Borrower, (i)
if applicable, setting forth in reasonable detail the calculations required to
establish whether the Borrower was in compliance with the requirements of
Sections 5.18 through 5.20, on the date of such financial statements, (ii)
setting forth in reasonable detail the business outlook and performance of the
Borrower and its Consolidated Subsidiaries as of the date of such certificate,
(iii) stating whether there exists on the date of such certificate any Default
and, if any Default then exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect thereto,
and (iv) stating whether, since the date of the most recent previous delivery of
financial statements pursuant to subsections (a) and (b) of this Section, there
has been any material adverse change in the condition (financial or otherwise),
results of operations, properties, assets, business or prospects of the Borrower
or of the Borrower and its Consolidated Subsidiaries, considered as a whole,
and, if so, the nature of such material adverse change.
(d) Accountant's Certificate. Simultaneously with the delivery of each set
------------------------
of financial statements referred to in subsection (a) above, a statement of the
firm of independent public accountants which reported on such statements (x)
whether anything has come to their attention to cause them to believe that any
Default existed on the date of such statements and (y) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to subsection (c) above.
(e) Borrowing Base Certificate. Upon receipt of a notice from the Bank
--------------------------
that a Loan has been made, a Borrowing Base Certificate executed by the chief
financial officer or chief accounting officer of the Borrower setting forth the
Borrowing Base as of the date of receipt of
-14-
<PAGE>
said notice. Once a Loan has been made, the Borrower shall submit a Borrowing
Base Certificate at least monthly, within 15 days after the end of each calendar
month, until such time as the outstanding principal balance of the Loans has
been reduced to Zero Dollars ($0.00) and such balance has been maintained for
thirty (30) consecutive days, and shall resume in accordance herewith upon the
next following Loan.
(f) Accounts Receivables Agings. As soon as available and in any event
---------------------------
within 15 days after the end of each calendar month:
(A) a report listing all Accounts of the Borrower as of the last
Business Day of such month, which report shall include the amount and
age of each Account, the name and mailing address of each Account
Debtor and such other information as the Bank may reasonably require
in order to verify the Eligible Accounts, all in reasonable detail and
in form reasonably satisfactory to the Bank;
(B) a report listing all Inventory of the Borrower as of the last
Business Day of such month, which shall include the cost and location
thereof and such other information as the Bank may reasonably require
in order to verify the Eligible Inventory, all in reasonable detail
and in form reasonably satisfactory to the Bank; and
(C) a report listing all accounts payable of the Borrower in
reasonable detail and in form reasonably satisfactory to the Bank.
(g) Default. Forthwith upon the occurrence of any Default, a certificate
-------
of the chief financial officer or chief accounting officer of the Borrower
setting forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto.
(h) Litigation. As soon as reasonably practicable after obtaining
----------
knowledge of the commencement of, or of a material threat of the commencement
of, an action, suit, proceeding or investigation against the Borrower or any of
its Subsidiaries which could materially adversely affect the condition
(financial or otherwise), results of operations, properties, assets, business or
prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole, or could otherwise have a Material Adverse Effect or which in any manner
questions the validity of this Agreement or any of the other transactions
contemplated hereby or thereby, an explanation of the nature of such pending or
threatened action, suit, proceeding or investigation and such additional
information as may be reasonably requested by the Bank.
(i) Auditors' Management Letters. Promptly upon receipt thereof, copies of
----------------------------
each report submitted to the Borrower or any of its Consolidated Subsidiaries by
independent public accountants in connection with any annual, interim or special
audit made by them of the books of the Borrower or any of its Consolidated
Subsidiaries including, without limitation, each report submitted to the
Borrower or any of its Consolidated Subsidiaries concerning its accounting
practices and systems and any final comment letter submitted by such accountants
to management in connection with the annual audit of the Borrower and its
Consolidated Subsidiaries.
-15-
<PAGE>
(j) [Intentionally deleted.]
---------------------
(k) ERISA Matters. If and when any member of the ERISA Group (i) gives or
-------------
is required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
reasonably be expected to result in the imposition of a Lien or the posting of a
bond or other security, a certificate of the chief financial officer or the
chief accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of the
ERISA Group is required or proposes to take.
(l) Environmental Matters. Promptly, upon receipt of any complaint, order,
---------------------
citation, notice or other written communication from any Person with respect to,
or upon the Borrower's obtaining knowledge of, (A) the existence or alleged
existence of a violation of any applicable Environmental Law in connection with
any property now or previously owned, leased or operated by the Borrower or any
of its Subsidiaries, (B) any release on such property or any part thereof in a
quantity that is reportable under any applicable Environmental Law and (C) any
pending or threatened proceeding for the termination, suspension or non-renewal
of any permit required under any applicable Environmental Law, in each such case
under clause (A), (B) or (C) in which there is a reasonable likelihood of an
adverse decision or determination which could result in a Material Adverse
Effect.
(m) Other Information. From time to time such additional financial or
-----------------
other information regarding the condition (financial or otherwise), results of
operations, properties, assets, business or prospects of the Borrower or any of
its Subsidiaries as the Bank may reasonably request.
Section 5.02 Payment of Obligations. The Borrower will pay and discharge,
----------------------
and will cause each of its Subsidiaries to pay and discharge, as the same shall
become due and payable, (i) all their respective obligations and liabilities,
including all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons which, in any such case, if
unpaid, might by law give rise to a Lien upon any of their properties or assets
and (ii) all lawful
-16-
<PAGE>
taxes, assessments and charges or levies made upon their properties or assets,
by any governmental body, agency or official, except where any of the items in
clause (i) or (ii) of this Section 5.02 may be diligently contested in good
faith by appropriate proceedings and the Borrower or such Subsidiary shall have
set aside on its books, if required under generally accepted accounting
principles, appropriate reserves for the accrual of any such items.
Section 5.03 Maintenance of Property; Insurance.
----------------------------------
(a) Maintenance of Properties. The Borrower will keep, and will cause each
-------------------------
of its Subsidiaries to keep, all property useful and necessary in their
respective businesses in good working order and condition, subject to ordinary
wear and tear.
(b) Insurance. The Borrower will maintain, and will cause each of its
---------
Subsidiaries to maintain, insurance with financially sound and responsible
companies in such amounts (and with such risk retentions) and against such risks
as is usually carried by owners of similar businesses and properties in the same
general areas in which the Borrower and its Subsidiaries operate. The Borrower
will deliver to the Bank upon request from time to time full information as to
the insurance carried.
Section 5.04 Conduct of Business and Maintenance of Existence. The
------------------------------------------------
Borrower will continue, and will cause each of its Subsidiaries to continue, to
engage in business of the same general type as now conducted by the Borrower and
its Subsidiaries, and will preserve, renew and keep in full force and effect,
and will cause each of its Subsidiaries to preserve, renew and keep in full
force and effect, their respective corporate existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business; provided that nothing in this Section 5.04 shall prohibit the
--------
Reorganization.
Section 5.05 Compliance with Laws. The Borrower will comply, and will
--------------------
cause each of its Subsidiaries to comply, with all applicable laws, ordinances,
rules, regulations, and requirements of governmental authorities (including,
without limitation, Environmental Laws, ERISA and the rules and regulations
thereunder) except (i) where the necessity of compliance therewith is contested
in good faith by appropriate proceedings or (ii) where noncompliance could not
reasonably be expected to have a Material Adverse Effect.
Section 5.06 Accounting: Inspection of Property, Books and Records. The
-----------------------------------------------------
Borrower will keep, and will cause each of its Subsidiaries to keep, proper
books of record and account in which full, true and correct entries in
conformity with generally accepted accounting principles shall be made of all
dealings and transactions in relation to their respective businesses and
activities, will maintain, and will cause each of its Subsidiaries to maintain,
their respective fiscal reporting periods on the present basis and will permit,
and will cause each of its Subsidiaries to permit, representatives of the Bank
to visit and inspect any of their respective properties, to examine and make
copies from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their officers, employees and
independent public accountants, all at such reasonable times and as often as may
reasonably be desired, but in no event less than one year since the most recent
examination, unless a Default has occurred. Notwithstanding the above, the
Borrower shall be permitted to make adjustments
-17-
<PAGE>
to its books of record and accounts as may be required or as may be requested by
an audit or outside review, so long as the purpose of such adjustment is to
bring said books or accounts into conformity with generally accepted accounting
principles.
Section 5.07 Collection of Accounts. The Borrower shall use its best
----------------------
efforts to cause to be collected from each Account Debtor, as and when due, any
and all amounts owing under or on account of each Account (including, without
limitation, Accounts which are delinquent, such Accounts to be collected in
accordance with lawful collection procedures) and shall apply forthwith upon
receipt thereof all such amounts as are so collected to the outstanding balance
of such Account. The Borrower may rescind or cancel any indebtedness or
obligation evidenced by any Account, modify, make adjustments to, extend, renew,
compromise or settle any material dispute, claim, suit or legal proceeding
relating to or sell or assign any Account, or interest therein, provided that
--------
the Borrower obtains the written consent of the Bank prior to doing any of the
foregoing (which consent shall not be unreasonably or untimely withheld or
delayed) Notwithstanding the foregoing, subject to the rights of the Bank under
the Loan Documents, unless a Default or an Event of Default shall have occurred
and be continuing, the Borrower may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts (i) an extension or renewal of
the time or times of payment, or settlement for less than the total unpaid
balance, which the Borrower finds appropriate in accordance with sound business
judgment and (ii) a refund or credit due as a result of discounts, over-billings
and miscellaneous credits, all in accordance with the Borrower's ordinary course
of business consistent with its historical collection practices. The reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
of collection, whether incurred by the Borrower or the Bank, shall be borne by
the Borrower. Upon the sale or assignment of any Account as allowed by this
Section 5.07, the Bank will (as soon as reasonably practicable after receipt of
notice from the Borrower requesting the same but at the expense of the Borrower)
send the Borrower, for each jurisdiction in which a UCC financing statement is
on file to perfect the security interests granted to the Bank hereunder, a
termination statement to the effect that the Bank no longer claims a security
interest under such financing statement.
Section 5.08 Notification to Account Debtors. Upon the occurrence of a
-------------------------------
Default or an Event of Default, at the Bank's option, and upon notification by
the Bank to do so, the Borrower will promptly notify (and the Borrower hereby
authorizes the Bank so to notify) each Account Debtor in respect of any Account
that such Account has been assigned to the Bank and that any payments due or to
become due in respect of such Account are to be made directly to the Bank.
Section 5.09 Restriction on Liens. The Borrower will not, and will not
--------------------
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon or with respect to any Collateral, or sell any Collateral subject to
an understanding or agreement, contingent or otherwise, to repurchase such
Collateral (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income, or
file or permit the filing of any financing statement under the Uniform
Commercial Code as in effect in any applicable jurisdiction or any other similar
notice of Lien under any similar recording or notice statute; provided that the
provisions of this Section 5.09 shall not prevent the creation, incurrence,
assumption or existence of the following (with such Liens described below being
herein referred to as "Permitted Liens"):
-18-
<PAGE>
(i) Liens created by the Loan Documents;
(ii) Liens for taxes not yet due or Liens for taxes being contested in
good faith and by appropriate proceedings for which adequate reserves (in
the good faith judgment of the management of the Borrower) have been
established; and
(iii) Liens imposed by law securing the charges, claims, demands or
levies of carriers, warehousemen, mechanics and other like persons which
were incurred in the ordinary course of business which (A) do not in the
aggregate materially detract from the value of the property or assets
subject to such Lien or materially impair the use thereof in the operation
of the business of the Borrower or any Subsidiary or (B) are being
contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property or assets
subject to such lien.
Section 5.10 Limitation on Guarantees. Neither the Borrower nor any of
------------------------
its Subsidiaries shall Guarantee any Debt of any Person or Persons in excess of
$100,000.00 in the aggregate at any time.
Section 5.11 [Intentionally deleted].
-----------------------
Section 5.12 Consolidations, Mergers and Sales of Assets. Neither the
-------------------------------------------
Borrower nor any Subsidiary will (i) consolidate or merge with or into any other
Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or
substantially all of the assets of the Borrower or such Subsidiary to any other
Person or Persons; provided that so long as no Default shall have occurred after
--------
giving effect thereto, (A) a Subsidiary may merge into the Borrower if the
Borrower is the surviving entity, and (B) the Borrower or any Subsidiary may
merge into or consolidate with another Person if the Borrower or such
Subsidiary, as the case may be, is the entity surviving such merger or
consolidation.
Section 5.13 Investments: Asset Acquisitions.
-------------------------------
(a) Investments. Neither the Borrower nor any Subsidiary will hold, make
-----------
or acquire any Investment in any Person, except:
(i) the Borrower and any Subsidiary may invest in cash and Cash
Equivalents;
(ii) the Borrower and any Subsidiary may acquire and hold receivables
owing to them, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
(iii) the Borrower and any Subsidiary may acquire and own investments
(including Debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business;
-19-
<PAGE>
(iv) the Borrower and any Subsidiary may make loans and advances to
any employees in the ordinary course of business, provided such loans and
advances do not exceed at any time, in the aggregate, $250,000; and
(v) the Borrower may issue promissory notes evidencing the Class A
Distribution.
(b) Acquisitions. The Borrower will not, and will not permit any of its
------------
Subsidiaries to, enter into any Acquisition transaction except:
(i) the Borrower and any Subsidiary may acquire assets in the ordinary
course of business for fair consideration;
(ii) the Borrower and any Subsidiary may enter into any Acquisition
transaction with respect to which the purchase price consists of capital
stock of the acquiring Person; and
(iii) the Borrower and any Subsidiary may enter into any other
Acquisition transaction, but only to the extent (A) the purchase price
(including any assumption of liabilities in connection therewith, but
excluding any portion of the purchase price for any such Acquisition
consisting of capital stock or other securities of the purchaser) of all
such Acquisitions occurring during any fiscal year of the Borrower does not
exceed $5,000,000.00 and (B) after giving effect on a pro forma basis to
such Acquisition (including but not limited to any Debt to be incurred or
assumed by the purchaser in connection therewith), no Default would exist
hereunder.
Section 5.14 Payments, etc. The Borrower will not, and will not permit
--------------
any of its Subsidiaries to, make any distribution, dividend, payment or delivery
of property or cash to its members as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for a consideration, any membership
or other interests or shares of any class of its capital stock now or hereafter
outstanding (or any warrants for or options or stock appreciation rights in
respect of any of such shares), or set aside any funds for any of the foregoing
purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for
consideration any membership interest in the Borrower or any shares of capital
stock or other interest in any other Subsidiary, as the case may be, now or
hereafter outstanding (or any options or warrants or stock appreciation rights
issued by such Person with respect to its capital stock), except that:
(i) any Subsidiary of the Borrower may pay dividends to the Borrower;
(ii) provided no Default shall have occurred and be continuing or
would exist as a result thereof, before the Reorganization is completed and
the IPO is closed, the Borrower may pay Tax Distributions (as defined in
Section 3.3(1)(i) of the Operating Agreement);
-20-
<PAGE>
(iii) provided no Default shall have occurred and be continuing or
would exist as a result thereof, the Borrower may make the Class A
Distribution; and
(iv) the Borrower may pay any other dividends or distributions if,
after giving effect on a pro forma basis to such payment (A) no Default
would exist, and (B) the ratio of Total Consolidated Debt to Total
Consolidated Capitalization, as a percentage, would not exceed 50%.
Section 5.15 Use of Proceeds. The proceeds of the Revolving Loans made
---------------
under this Agreement will be used by the Borrower for permanent working capital
financing of the Borrower's accounts receivable and inventory and/or for the
Class A Distribution. The proceeds of the Term Loans made under this Agreement
will be used by the Borrower to purchase equipment. No such use of the proceeds
for general corporate purposes will be, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any "margin
stock" within the meaning of Regulation U.
Section 5.16 Transactions with Other Persons. The Borrower will not, and
-------------------------------
will not permit any of its Subsidiaries to, enter into any agreement with any
Person whereby any of them shall agree to any restriction on the right of the
Borrower or any of its Subsidiaries to amend or waive any of the provisions of
this Agreement or any other Loan Document.
Section 5.17 Limitations on Debt. The Borrower will not at any time
-------------------
(other than the period, beginning no later than June 1, 1999, of six Business
Days following completion of the Reorganization) permit the ratio of Total
Consolidated Debt to Total Consolidated Capitalization, as a percentage, to
exceed the correlative percentage set forth below for the period indicated:
<TABLE>
<CAPTION>
Maximum
Period Percentage
------ ----------
<S> <C>
Closing Date through May 31, 1999 82%
June 1, 1999 through November 30, 1999 75%
December 1, 1999 through August 31, 2000 72%
September 1, 2000 through June 30, 2001 60%
July 1, 2001 and thereafter 50%
</TABLE>
Section 5.18 Fixed Charge Coverage Ratio. The Borrower will not, as of
---------------------------
the end of any fiscal quarter on or after the end of the fiscal quarter ending
March 31, 1999, permit the Fixed Charge Coverage Ratio to be less than 2.5:1.0.
Section 5.19 Limitation on Operating Leases. The Borrower will not, and
------------------------------
will not cause any Subsidiary to, enter into any operating lease at any time if
the pro forma Fixed Charge Coverage Ratio after giving effect to such operating
lease during the most recent period used to determine compliance under Section
5.18 would be less than 2.5:1.0.
-21-
<PAGE>
Section 5.20 Year 2000 Compatibility. The Borrower and its Subsidiaries
-----------------------
shall take all action necessary to assure that the computer based systems of the
Borrower and its Subsidiaries are able to operate and effectively process data
including dates on or after January 1, 2000. At the request of the Bank, the
Borrower shall provide the Bank reasonable assurance reasonably acceptable to
the Bank of the year 2000 compatibility of the Borrower and its Subsidiaries.
Section 5.21 Independence of Covenants. All covenants contained herein
-------------------------
shall be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that such action or condition
would be permitted by an exception to, or otherwise be within the limitations of
another covenant shall not avoid the occurrence of a Default if such action is
taken or condition exists.
ARTICLE VI
DEFAULTS
Section 6.01 Events of Default. If one or more of the following events
-----------------
("Events of Default") shall have occurred and be continuing:
(i) the Borrower shall fail to pay, within 5 days after the date when
due, any principal, interest, fee, or any other amount payable hereunder or
under the Notes;
(ii) the Borrower shall fail to observe or perform any covenant
contained in Article V (other than those contained in Sections 5.01 through
5.03);
(iii) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clauses
(i) or (ii) above) for 30 days after notice thereof has been given to the
Borrower by the Bank;
(iv) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement
or other document delivered pursuant hereto or thereto shall prove to have
been incorrect in any material respect when made;
(v) the Borrower or any Subsidiary shall fail to make any payment or
perform any collateralization obligation in respect of any Material
Financial Obligations when due or within any applicable grace period;
(vi) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt of the Borrower or any
Subsidiary or enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of such Material Debt or any Person acting
on such holder's behalf to accelerate the maturity thereof;
(vii) the Borrower or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its
-22-
<PAGE>
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action to authorize
any of the foregoing;
(viii) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 90 days; or an order for relief shall be entered against
the Borrower or any Subsidiary under the federal Bankruptcy laws as now or
hereafter in effect;
(ix) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $25,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could reasonably be expected to cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $25,000;
(x) one or more judgments or orders for the payment of money in excess
of $25,000 in the aggregate shall be rendered against the Borrower or any
Subsidiary of the Borrower and such judgments or orders shall continue
unsatisfied and unstayed for a period of 30 days; or
(xi) a Change of Control shall have occurred;
then, and in every such event, while such event is continuing, the Bank may (A)
by notice to the Borrower terminate the Commitment and it shall thereupon
terminate, and (B) by notice to the Borrower declare the Loans (together with
accrued interest thereon) to be, and the Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind (except as set forth in clause (A) above), all of which are hereby
waived by the Borrower; provided that in the case of any Default or any Event of
--------
Default specified in clause 6.1(vii) or 6.1(viii) above with respect to the
Borrower, without any notice to the Borrower or any other act by the Bank, the
commitment to make Revolving Loans and Term Loans shall
-23-
<PAGE>
thereupon terminate and the Loans (together with accrued interest and accrued
and unpaid fees thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
ARTICLE VII
CHANGE IN CIRCUMSTANCES
Section 7.01 [Intentionally deleted].
-----------------------
Section 7.02 Illegality. If, on or after the date of this Agreement, the
----------
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall make it
unlawful or impossible for the Bank to make, maintain or fund Loans and the Bank
shall so notify the Borrower, until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, each Loan then
outstanding which bears interest at the LIBOR Market Index-Based Rate shall be
converted immediately to a Base Rate Loan and all new Loans shall be Base Rate
Loans.
Section 7.03 [Intentionally deleted].
-----------------------
Section 7.04 Base Rate Loans Substituted for Affected LIBOR Market Index-
------------------------------------------------------------
Based Loans. Upon the occurrence of any event or condition set forth in Section
- -----------
7.02, each Loan then outstanding which bears interest at the LIBOR Market Index-
Based Rate shall be converted immediately to a Base Rate Loan and all new Loans
shall be Base Rate Loans. If the Bank notifies the Borrower that the
circumstances giving rise to such change in interest rate no longer apply, the
principal amount of each such Base Rate Loan shall cease immediately to
constitute a Base Rate Loan and shall thereafter bear interest in accordance
with Section 2.05(a).
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Notices. Unless otherwise specified herein, all notices,
-------
requests and other communications to a party hereunder shall be in writing
(including bank wire, telex, facsimile transmission or similar writing) and
shall be given to such party: (i) at its address, facsimile number or telex
number set forth on the signature pages hereof, or (ii) at such other address,
facsimile number or telex number as such party may hereafter specify for the
purpose of communication hereunder by notice to the other party hereto. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answer back is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and
-24-
<PAGE>
confirmation of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails, certified mail, return receipt
requested, with appropriate first class postage prepaid, addressed as specified
in this Section or (iv) if given by any other means, when delivered at the
address specified in this Section 8.01. Rejection or refusal to accept, or the
inability to deliver because of a changed address of which no notice was given
shall not affect the validity of notice given in accordance with this Section.
Section 8.02 No Waivers. No failure by either party to exercise, no
----------
course of dealing with respect to, and no delay in exercising any right, power
or privilege hereunder or under the Notes shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided herein shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 8.03 Expenses. The Borrower shall pay (i) all reasonable out-of-
--------
pocket expenses of the Bank, including reasonable fees and disbursements of
special and local counsel for the Bank, in connection with the preparation and
administration of this Agreement and the other Loan Documents, any waiver or
consent thereunder or any amendment thereof or any Default or alleged Default
thereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by the Bank, including (without duplication) the reasonable
fees and disbursements of outside counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
Section 8.04 Amendments and Waivers. Any provision of this Agreement or
----------------------
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Bank.
Section 8.05 Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of the Bank.
Section 8.06 Governing Law. This Agreement and the Notes shall be
-------------
governed by and construed in accordance with the laws of the Commonwealth of
Virginia.
Section 8.07 Arbitration: Submission to Jurisdiction.
---------------------------------------
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of,
or relating to the Loan Documents between the parties hereto (a "Dispute") shall
be resolved by binding arbitration conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and the Federal Arbitration Act.
Disputes may include, without limitation, tort claims, counterclaims, disputes
as to whether a matter is subject to arbitration, claims brought as class
actions, or claims arising from documents executed in the future. A judgment
upon the award may be entered in any court
-25-
<PAGE>
having jurisdiction. Notwithstanding the foregoing, this arbitration provision
does not apply to disputes under or related to swap agreements.
(b) All arbitration hearings shall be conducted in the city in which
the office of the Bank set forth on the signature page hereof is located. A
hearing shall begin within 90 days of demand for arbitration and all hearings
shall be concluded within 120 days of demand for arbitration. These time
limitations may not be extended unless a party shows cause for extension and
then for no more than a total of 60 days. The expedited procedures set forth in
Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less
than $1,000,000. Arbitrators shall be licensed attorneys selected from the
Commercial Financial Dispute Arbitration Panel of the AAA. The parties do not
waive applicable Federal or state substantive law except as provided herein.
(c) Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
may exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by self-
help to exercise or prosecute the following remedies, as applicable: (i) all
rights to foreclose against any real or personal property or other security by
exercising a power of sale or under applicable law by judicial foreclosure
including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment. Any
claim or controversy with regard to the parties' entitlement to such remedies is
a Dispute.
(d) Each party agrees that it shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waives any right
or claim to punitive or exemplary damages it may have now or which may arise in
the future in connection with any Dispute, whether the Dispute is resolved by
arbitration or judicially.
(e) The parties acknowledge that by agreeing to binding arbitration
they have irrevocably waived any right they may have to a jury trial with regard
to a Dispute.
Section 8.08 Counterparts; Integration; Effectiveness. This Agreement may
----------------------------------------
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. Each of this Agreement, the Notes and the other Loan Documents
shall be deemed to incorporate the other of said documents by reference and all
of said documents shall constitute the entire agreement and understanding among
the parties hereto and supersede any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Bank of counterparts hereof
signed by each of the parties hereto.
Section 8.09 Confidentiality. The Bank agrees to hold all non-public
---------------
information obtained pursuant to the requirements of this Agreement in
accordance with its customary procedure for handling confidential information of
this nature and in accordance with safe and
-26-
<PAGE>
sound banking practices, provided that nothing herein shall prevent the Bank
--------
from disclosing such information (i) to any other Person if reasonably
incidental to the administration of the Loans, (ii) upon the order of any court
or administrative agency, (iii) upon the request or demand of any regulatory
agency or authority, (iv) which had been publicly disclosed other than as a
result of a disclosure by the Bank prohibited by this Agreement, (v) in
connection with any litigation to which the Bank or its subsidiaries or parent
may be a party, (vi) to the extent necessary in connection with the exercise of
any remedy hereunder and (vii) to the Bank's legal counsel and independent
auditors.
Section 8.10 Severability; Modification. If any provision hereof is
--------------------------
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction; and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provisions in any other jurisdiction.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TREX COMPANY, LLC
20 South Cameron Street
Winchester, Virginia 22601
Facsimile No.: (540) 678-1820
By: /s/ Anthony J. Cavanna
-------------------------------------------
Anthony J. Cavanna, Chief Executive Officer
FIRST UNION NATIONAL BANK
Commercial Banking
201 North Loudoun Street
Winchester, Virginia 22601
Facsimile No.: (540) 665-6672 By: /s/ B. Scott Arthur
------------------------------------------
B. Scott Arthur, Vice PresidentFirst Union
-28-
<PAGE>
EXHIBIT A
Form of Notice of Borrowing
_______________, ____
First Union National Bank
Commercial Finance Division
225 Water Street, 9th Floor
Jacksonville, Florida 32202
Attn:
----------------------
Ladies and Gentlemen:
This notice shall constitute a "Notice of Borrowing" pursuant to Section
2.02(a) of the Amended and Restated Credit Agreement dated as of ____________,
1999 (the "Credit Agreement") between TREX COMPANY, LLC (the "Borrower") and
First Union National Bank (the "Bank"). Capitalized terms not otherwise
defined herein have the meanings ascribed to them in the Credit Agreement.
The date of the Loan will be ______ , _______
The principal amount of the Loan will be $________
Transfer Instructions:
[Insert appropriate delivery instructions, which shall include bank and
account number].
TREX COMPANY, LLC
By:
Name:
Title:
<PAGE>
EXHIBIT B-1
Form of Note
Roanoke, Virginia
_______________, 1999
For value received, TREX COMPANY, LLC, a Delaware limited liability company
(the "Borrower"), promises to pay to the order of FIRST UNION NATIONAL BANK (the
"Bank") the unpaid principal amount of each Revolving Loan made by the Bank to
the Borrower pursuant to the Credit Agreement referred to below on the maturity
date provided for in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on the dates and at
the rate or rates provided for in the Credit Agreement. All such payments of
principal and interest shall be made in accordance with the provisions of the
Credit Agreement.
All Loans made by the Bank and all repayments of the principal thereof
shall be recorded by the Bank and, if the Bank so elects in connection with any
transfer or enforcement hereof, appropriate notations to evidence the foregoing
information with respect to each Revolving Loan then outstanding shall be
endorsed by the Bank on the schedule attached to and made a part hereof,
provided that the failure of the Bank to make any such recordation or
- --------
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is the Revolving Note referred to in the Amended and Restated
Credit Agreement dated as of the date hereof between the Borrower and the Bank
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the mandatory and
optional prepayment hereof and the acceleration of the maturity hereof.
TREX COMPANY, LLC
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT B-2
Form of Note
Roanoke, Virginia
_______________, 1999
For value received, TREX COMPANY, LLC, a Delaware limited liability company
(the "Borrower"), promises to pay to the order of FIRST UNION NATIONAL BANK (the
"Bank") the unpaid principal amount of each Term Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below on the maturity date
provided for in the Credit Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in accordance with the provisions of the Credit
Agreement.
All Loans made by the Bank and all repayments of the principal thereof
shall be recorded by the Bank and, if the Bank so elects in connection with any
transfer or enforcement hereof, appropriate notations to evidence the foregoing
information with respect to each Term Loan then outstanding shall be endorsed by
the Bank on the schedule attached to and made a part hereof, provided that the
--------
failure of the Bank to make any such recordation or endorsement shall not affect
the obligations of the Borrower hereunder or under the Credit Agreement.
This note is the Term Note referred to in the Amended and Restated Credit
Agreement dated as of the date hereof between the Borrower and the Bank (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined
in the Credit Agreement are used herein with the same meanings. Reference is
made to the Credit Agreement for provisions for the mandatory and optional
prepayment hereof and the acceleration of the maturity hereof.
TREX COMPANY, LLC
By:
-------------------------------
Name:
Title:
<PAGE>
Definitions Appendix
--------------------
The definitions set forth in this Definitions Appendix are incorporated by
reference into Section 1.01 of the Amended and Restated Credit Agreement dated
as of March 23, 1999 between TREX COMPANY, LLC and First Union National
Bank (as the same may be amended, modified or supplemented from time to time,
the "Credit Agreement"). Reference in this Definitions Appendix to "this
Agreement", "herein", "hereof", "hereunder" and to any Article or Section shall
be interpreted to mean the Credit Agreement and the referenced Article or
Section, including this Definitions Appendix.
Definitions
-----------
"A/R Turnover" means, as of the last day of any calendar month, the
aggregate Net Unpaid Balance of all Eligible Accounts as of said day, divided by
the Net Monthly Sales for said month, multiplied by 30, the result to be
expressed as a number of days.
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by the Borrower, and shall also mean and include all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to the Borrower arising from the sale, lease or exchange of
goods or other property by it and/or the performance of services by it
(including, without limitation, any such obligation which might be characterized
as an account, contract right or general intangible under the Uniform Commercial
Code in effect in any jurisdiction) and all of the Borrower's rights in, to and
under all purchase orders for goods, services or other property, and all of the
Borrower's rights to any goods, services or other property represented by any of
the foregoing (including returned or repossessed goods and unpaid seller's
rights of rescission, replevin, reclamation and rights to stoppage in transit)
and all monies due to or to become due to the Borrower under all contracts for
the sale, lease or exchange of goods or other property and/or the performance of
services by it (whether or not yet earned by performance on the part of the
Borrower), in each case whether now in existence or hereafter arising or
acquired including, without limitation, the right to receive the proceeds of
said purchase orders and contracts and all collateral security and guarantees of
any kind given by any Person with respect to any of the foregoing.
"Account Debtor" means, with respect to any Account, any Person obligated
to make payment thereunder, including, without limitation, any account debtor
thereon.
"Acquisition," by any Person (herein called the "Acquiror"), means any
transaction involving the purchase, lease or other acquisition by such Acquiror
of any or all of the capital stock or assets of another Person that, for
purposes of preparing a statement of cash flows for such Acquiror prepared in
accordance with GAAP, would be considered "investing activity."
"Adjusted Consolidated Net Income" means, with reference to any period, the
net income (or loss) of the Borrower and its Subsidiaries for such period (taken
as a cumulative whole), as determined in accordance with GAAP, after eliminating
all offsetting debits and credits between
<PAGE>
the Borrower and its Subsidiaries and all other items required to be eliminated
in the course of the preparation of consolidated financial statements of the
Borrower and its Subsidiaries in accordance with GAAP, provided that there shall
--------
be excluded:
(i) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Borrower or
a Subsidiary, and the income (or loss) of any Person, substantially all of
the assets of which have been acquired in any manner, realized by such
other Person prior to the date of acquisition,
(ii) the income (or loss) of any Person (other than a Subsidiary) in
which the Borrower or any Subsidiary has an ownership interest, except to
the extent that any such income has been actually received by the Borrower
or such Subsidiary in the form of cash dividends or similar cash
distributions,
(iii) the undistributed earnings of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary,
(iv) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of income accrued
during such period,
(v) any aggregate net gain (but not any aggregate net loss) during
such period arising from the sale, conversion, exchange or other
disposition of capital assets (such term to include, without limitation,
(A) all non-current assets and, without duplication, (B) the following,
whether or not current: all fixed assets, whether tangible or intangible,
all inventory sold in conjunction with the disposition of fixed assets, and
all securities),
(vi) any gains resulting from any write-up of any assets (but not any
loss resulting from any write-down of any assets),
(vii) any net gain from the collection of the proceeds of life
insurance policies,
(viii) any gain arising from the acquisition of any security, or the
extinguishment, under GAAP, of any Debt, of the Borrower or any
Subsidiary,
(ix) any net income or gain (but not any loss) during such period from
(A) any change in accounting principles in accordance with GAAP, (B) any
prior period adjustments resulting from any change in accounting principles
in accordance with GAAP, (C) any extraordinary items, or (D) any
discontinued operation or the disposition thereof,
(x) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in
such Subsidiary,
<PAGE>
(xi) in the case of a successor to the Borrower by consolidation or
merger or as a transferee of its assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets, and
(xii) any portion of such net income that cannot be freely converted
into United States Dollars.
"Advance Rate Percentage" means, for any calendar month, (i) 90%, if the
A/R Turnover for the immediately preceding calendar month was 25 days or less
and (ii) 80%, if the A/R Turnover for the immediately preceding calendar month
was more than 25 days.
"Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower (a "Controlling Person") or (ii)
any Person (other than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Credit Agreement, as it may be
amended, modified or supplemented from time to time.
"Bank" means First Union National Bank, a national banking association, and
its successors and assigns.
"Base Rate" means for any day, the Prime Rate for such day adjusted by the
Variance.
"Base Rate Loan" means a Loan which bears interest at the Base Rate.
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrower" means TREX COMPANY, LLC, a Delaware limited liability company,
and its successors.
"Borrowing Base" means at any date the sum of (i) the Advance Rate
Percentage multiplied by the aggregate Net Unpaid Balance of all Eligible
Accounts and (ii) the lesser of (A) $5,000,000 or (B) 60% of the value of all
Eligible Inventory.
<PAGE>
"Borrowing Base Certificate" means a certificate of the Borrower in a form
satisfactory to the Bank containing a computation of the Borrowing Base.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the Commonwealth of Virginia are authorized by law to
close.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligations" means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
"Cash Equivalents" means (i) direct obligations of the United States or any
agency thereof, or obligations guaranteed by the United States of any agency
thereof, (ii) commercial paper rated in the highest grade by a nationally
recognized credit rating agency or (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized under the laws of the United States
or any state thereof and has capital, surplus and undivided profits aggregating
at least $250,000,000; provided, in each case that such investment matures
--------
within one year from the date of acquisition thereof by the Borrower.
"Change of Control" means any event or condition, a result of which is that
(i) Anthony J. Cavanna, Roger A. Wittenberg, Robert G. Matheny and Andrew U.
Ferrari cease, as a group, to own beneficially (A) before the completion of the
Reorganization, at least (1) a majority of the outstanding Class A Units; or (2)
40% of the issued Class A Units and Class B Units of the Borrower on a fully
diluted basis; or (B) after the completion of the Reorganization, at least 30%
of the voting common stock of TREX COMPANY, INC.; or (ii) after the completion
of the Reorganization, TREX COMPANY, INC. ceases to own beneficially all of the
membership interests in the Borrower.
"CIGNA Agreements" means (i) that certain Members' Agreement dated as of
August 29, 1996 among the Borrower and each of the "Purchasers" and "Management
Holders" (as defined therein); (ii) that certain Limited Liability Company
Agreement dated August 29, 1996 among the members of the Borrower; and (iii) the
Securities Purchase Agreements; as said agreements exist on the Effective Date
and which have been previously delivered to the Bank.
"Class A Distribution" means the special cash distribution by the Borrower
to each holder of its Class A Units in connection with the Reorganization.
"Class A Units" has the meaning set forth in the Operating Agreement.
<PAGE>
"Class B Units" has the meaning set forth in the Operating Agreement.
"Closing Date" means the date, not later than March 15, 1999, on which the
Bank determines that the conditions specified in or pursuant to Section 3.01
have been satisfied.
"Collateral" means all right, title and interest of the Borrower in the
following, whether now owned or existing or hereafter acquired, created or
arising, whether tangible or intangible, and regardless of where located (except
only as to Equipment, which, by definition, is located in the Commonwealth of
Virginia) :
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) the Collateral Accounts, all cash deposited therein from time to
time, the Liquid Investments made pursuant to Section 3.04 of the Security
Agreement and other monies and property (including deposit accounts) of any
kind of the Borrower maintained with or in the possession or under the
control of the Bank;
(v) all books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of the Borrower pertaining to any of the Collateral;
and
(vi) all Proceeds of all or any of the Collateral described in clauses
(i) through (iv), above.
"Collateral Accounts" means the Cash Proceeds Account, the Operating
Account and the Insurance Account.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Income Available for Fixed Charges" means, with respect to
any period, Adjusted Consolidated Net Income for such period plus all amounts
deducted in the computation thereof on account of (i) Fixed Charges, (ii)
charges for depreciation and amortization for such period, (iii) charges for
management fees paid during such period, (iv) taxes imposed on or measured by
income or excess profits, (v) any prepayment penalty paid in connection with
that certain Securities Purchase Agreement dated as of August 29, 1996 between
the Borrower and each of the "Purchasers" (as defined therein), and (vi)
deferred income taxes resulting from the Reorganization.
<PAGE>
"Consolidated Net Worth" means, as of the date of determination,
(i) the total assets of the Borrower and its Subsidiaries which would
be shown as assets on a consolidated balance sheet of the Borrower and its
Subsidiaries as of such time prepared in accordance with GAAP, after eliminating
all amounts properly attributable to minority interests, if any, in the stock
and surplus of Subsidiaries, minus
-----
(ii) the total liabilities of the Borrower and its Subsidiaries which
would be shown as liabilities on a consolidated balance sheet of the
Borrower and its Subsidiaries as of such time prepared in accordance with
GAAP.
"Consolidated Subsidiary" means with respect to any Person at any date any
Subsidiary of such Person or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date in accordance with GAAP.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable arising in the ordinary course of
business), (iv) all obligations of such Person as lessee under Capital Leases,
(v) all obligations of such Person to purchase securities or other property
which arise out of or in connection with the sale of the same or substantially
similar securities or property, (vi) all non-contingent obligations (and, for
purposes of Section 5.09 and the definitions of Material Debt and Material
Financial Obligations, all contingent obligations) of such Person to reimburse
any bank or other person in respect of amounts paid under a letter of credit,
bankers' acceptance or similar instrument, (vii) all obligations of others
secured by a Lien on any asset of such Person, whether or not such obligation is
assumed by such Person and (viii) all obligations of others Guaranteed by such
Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 8.08.
<PAGE>
"Eligible Accounts" means all billed Accounts for goods delivered or
services rendered owing to the Borrower as the Bank, in its reasonable
discretion, shall from time to time elect to consider Eligible Accounts for
purposes of the Credit Agreement. Without limiting the discretion of the Bank
to consider any such accounts not to be Eligible Accounts, and by way of example
only of the types of accounts that the Bank may consider not to be Eligible
Accounts, the Bank may consider the following classes of accounts not to be
Eligible Accounts:
(i) Accounts arising out of sales that are not in the ordinary course
of the business of the Borrower;
(ii) Accounts on terms other than those normal or customary in the
business of the Borrower;
(iii) Accounts owing from any person that is an Affiliate of the
Borrower;
(iv) Accounts which are outstanding more than 70 days past the
original invoice date with respect thereto;
(v) Accounts of any Account Debtor if 50% or more of the Accounts of
such Account Debtor are more than 70 days past original invoice date;
(vi) Accounts the liability for which has been disputed by the Account
Debtor;
(vii) Accounts owing from any Person that shall take or be the
subject of any action or proceeding of the type described in Section
6.01(vii) or (viii) hereof;
(viii) Accounts owing from any Person that is also a supplier to or
creditor of the Borrower;
(ix) Accounts arising out of sales to Account Debtors outside the
United States, unless the account is (A) fully backed by an irrevocable
letter of credit containing terms acceptable to the Bank issued by a
financial institution satisfactory to the Bank or (B)on terms acceptable to
the Bank;
(x) Accounts arising out of sales on a bill-and-hold, guaranteed sale,
sale-and- return, sale on approval or consignment basis or subject to any
right of return, set-off or charge-back;
(xi) Accounts owing from an Account Debtor that is an agency,
department or instrumentality of the United States or any state
governmental authority in the United States unless the Borrower shall have
satisfied the requirements of the Assignment of Claims Act of 1940, as
amended, and any similar state legislation in respect thereof and the Bank
is satisfied as to the absence of set-offs, counterclaims and other
defenses to payment on the part of the United States or such state
governmental authority;
<PAGE>
(xii) Accounts representing billings in excess of costs and earnings
and retainage;
(xiii) Accounts in respect of which the Security Agreement does not
or has ceased to create a valid and perfected first priority Lien in favor
of the Bank, subject only to Permitted Liens; and
(xiv) any other Accounts, the validity, collectibility or amount of
which is determined in good faith by the Borrower or the Bank to be
doubtful.
"Eligible Inventory" means all Inventory of the Borrower consisting of
finished goods, to be valued at the lower of cost or fair market value, as to
which the Bank has a first priority perfected security interest subject only to
Permitted Liens, of a kind usually and customarily sold by the Borrower and
which is not, because of damage, age, unmerchantability, obsolescence or any
other condition or circumstance, materially impaired in condition, value or
marketability in the good faith opinion of the Bank or the Borrower.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by the Borrower, located in the Commonwealth of Virginia, and
shall also mean and include, without limitation, all vehicles, machinery, tools,
furniture, furnishings, office equipment and trade fixtures now owned or
hereafter acquired by the Borrower, located in the Commonwealth of Virginia.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Event of Default" has the meaning set forth in Section 6.01.
"Fixed Charge Coverage Ratio" means, at any time, the ratio of (i)
Consolidated Income Available for Fixed Charges for the period of four
consecutive fiscal quarters ending on, or most recently ended prior to, such
time to (ii) Fixed Charges for such period.
<PAGE>
"Fixed Charges" means, with respect to any period and without duplication,
the sum of (i) Interest Charges for such period and (ii) Lease Rentals for such
period.
"GAAP" means, generally accepted accounting principles as in effect from
time to time in the United States of America.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided that the term
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Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.
"Interest Charges" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Borrower and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Borrower and its Subsidiaries in accordance with
GAAP); (i) all interest in respect of Debt of the Borrower and its Subsidiaries
(including imputed interest on Capital Lease Obligations) deducted in
determining Adjusted Consolidated Net Income for such period, together with all
interest capitalized or deferred during such period, and (ii) all debt discount
and expense (other than in respect of the Notes) amortized or required to be
amortized in the determination of Adjusted Consolidated Net Income for such
period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Inventory" means all "inventory" (as defined in the UCC) now owned or
hereafter acquired by the Borrower, wherever located, and shall also mean and
include, without limitation, all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, time deposit or otherwise.
"IPO" has the meaning set forth in the recitals to this Agreement.
<PAGE>
"Item" means any "item" as defined in Section 4-104 of the UCC, and shall
also mean and include checks, drafts, money orders or other media of payment.
"Lease Rentals" means, with respect to any period, the sum of the rental
and other obligations required to be paid during such period by the Borrower or
any Subsidiary as lessee under all leases of real or personal property (other
than Capital Leases), excluding any amount required to be paid by the lessee
(whether or not therein designated as rental or additional rental) on account of
maintenance or repairs, insurance, taxes, assessments, water rates and similar
charges, provided that, if at the date of determination, any such rental or
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other obligations (or portion thereof) are contingent or not otherwise
definitely determinable by the terms of the related lease, the amount of such
obligations (or such portion thereof) (i) shall be assumed to be equal to the
amount of such obligations for the period of 12 consecutive calendar months
immediately preceding the date of determination or (ii) if the related lease was
not in effect during such preceding 12-month period, shall be the amount
estimated by the chief financial officer or chief accounting officer of the
Borrower on a reasonable basis and in good faith.
"LIBOR Market Index-Based Rate" has the meaning set forth in Section
2.05(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such asset.
"Loans" means the Revolving Loans and the Term Loans made pursuant to
Section 2.01.
"Loan Documents" means this Agreement, the Notes and the Security
Agreement, collectively, and "Loan Document" means any of them.
"Material Adverse Effect" means (i) any material adverse effect upon the
condition (financial or otherwise), results of operations, properties, assets,
business or prospects of the Borrower or of the Borrower and its Consolidated
Subsidiaries, taken as a whole; (ii) a material adverse effect on the ability of
the Borrower to consummate the transactions contemplated hereby to occur on the
Closing Date; (iii) a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement and the Notes or (iv) a material
adverse effect on the rights and remedies of the Bank under this Agreement and
the Notes.
"Material Debt" means Debt (other than the Notes) of the Borrower and/or
one or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount exceeding $100,000.
"Material Financial Obligations" means a principal or face amount of Debt
and/or payment obligations in respect of Derivatives Obligations of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $100,000.
<PAGE>
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $25,000.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Monthly Sales" means, for any calendar month, the Borrower's gross
sales for said month, less returns, allowances and discounts, and other
adjustments.
"Net Unpaid Balance" means at any date the unpaid balance of an Eligible
Account at such date not including any unearned finance charges, late payment
charges or other charges, or any extension, service or collection fees in
respect thereof.
"Notes" means the Revolving Note and the Term Note.
"Notice of Borrowing" means a Notice of Borrowing (as defined in Section
2.02(a)).
"Obligations" means:
(i) all principal of and interest (including, without limitation, any
interest which accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of the Borrower,
whether or not allowed or allowable as a claim in any such proceeding) on any
loan, fees payable or reimbursement obligation under, or any note issued
pursuant to, this Agreement or any other Loan Document;
(ii) all other amounts now or hereafter payable by the Borrower and
all other obligations or liabilities now existing or hereafter arising or
incurred (including, without limitation, any amounts which accrue after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on the part of the
Borrower pursuant to this Agreement or any other Loan Document;
(iii) all Derivatives Obligations (including, without limitation, any
amounts which accrue after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of
the Borrower, whether or not allowed or allowable as a claim in any such
proceeding) of the Borrower to the Bank;
(iv) all other indebtedness, obligations and liabilities of the
Borrower to the Bank, now existing or hereafter arising or incurred,
whether or not evidenced by notes or other instruments, and whether such
indebtedness, obligations and liabilities are direct or indirect, fixed or
contingent, liquidated or unliquidated, due or to become due, secured or
unsecured, joint, several or joint and several, related or unrelated to the
Loans, similar or
<PAGE>
dissimilar to the indebtedness arising out of or in connection with this
Agreement or of the same or a different class of indebtedness as the
indebtedness arising out of or in connection with this Agreement,
including, without limitation, any overdrafts in any deposit accounts
maintained by the Borrower with the Bank, all obligations of the Borrower
with respect to letters of credit, if any, issued by the Bank for the
account of the Borrower any indebtedness of the Borrower that is purchased
by or assigned to the Bank;
together in each case with all renewals, modifications, consolidations or
extensions thereof.
"Operating Account" means the demand deposit account maintained with the
Bank by the Borrower on which the Borrower draws checks to pay its operating
expenses, which account is linked to the cash management services provided by
the Bank to the Borrower pursuant to the Services Agreement.
"Operating Agreement" means that certain Limited Liability Company
Agreement of the Borrower dated August 29, 1996, as amended, among all of the
members of the Borrower.
"Parent" means, with respect to the Bank, any Person controlling the Bank.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Perfection Certificate" means a certificate of each of the Borrower and
Guarantor, substantially in the form of Exhibit A to the Security Agreement,
completed and supplemented with the schedules and attachments contemplated
thereby to the satisfaction of the Bank, and duly executed by the chief
executive officer, president or chief financial officer of the Borrower and the
chief executive officer of the Guarantor, respectively.
"Permitted Liens" means the Security Interests and the other Liens on the
Collateral permitted to be created, to be assumed or to exist pursuant to
Section 5.09.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate announced by the Bank from time to time as its
Prime Rate, as such rate may change from time to time with changes to occur on
the date the Bank's Prime Rate changes. The Bank's Prime Rate is one of several
interest rate bases used by the Bank. The
<PAGE>
Bank lends at rates above and below the Bank's Prime Rate, and the Borrower
acknowledges that the Bank's Prime Rate is not represented or intended to be the
lowest or most favorable rate of interest offered by the Bank.
"Proceeds" means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of or other realization upon or
payment for the use of, Collateral, including (without limitation) all claims of
the Borrower against third parties for loss of, damage to or destruction of, or
for proceeds payable under, or unearned premiums with respect to, policies of
insurance in respect of, any Collateral, and any condemnation or requisition
payments with respect to any Collateral, in each case whether now existing or
hereafter arising.
"Quarterly Date" means the first Business Day of each January, April, July
and October.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Reorganization" has the meaning set forth in the recitals to this
Agreement.
"Revolving Commitment" means $10,000,000.00, as such amount may be
increased or decreased pursuant to this Agreement.
"Revolving Credit Period" means the period from and including the Closing
Date to but not including the Termination Date.
"Revolving Loan" means a loan made pursuant to Section 2.01(a).
"Revolving Note" means a promissory note of the Borrower, substantially in
the form of Exhibit B-1 hereto, evidencing the obligation of the Borrower to
repay the Revolving Loans.
"Securities Purchase Agreements" means those certain Securities Purchase
Agreements dated as of August 29, 1996, as amended as of March 1, 1997 and as of
December 15, 1997, between the Borrower and the Purchasers (as defined therein)
and as further amended from time to time.
"Security Agreement" means the Amended and Restated Security Agreement
between the Borrower and the Bank, as it may be amended, modified or
supplemented from time to time.
"Services Agreement" means the description of the Sweep Plus Service
provided by the Bank to the Borrower, the terms of which are hereby incorporated
in this Agreement by reference.
"Subordinated Debt" of any Person means all Debt which (i) bears interest
at rates not greater than such Person shall reasonably determine to be the
prevailing market rate, at the time such Subordinated Debt is issued, for
interest on comparable subordinated debt issued by comparable issuers, (ii) is
subordinated in right of payment to such Person's indebtedness,
<PAGE>
obligations and liabilities to the Bank under the Loan Documents pursuant to
payment and subordination provisions satisfactory in form and substance to the
Bank and (iii) is issued pursuant to loan documents having covenants and events
of default that are satisfactory in form and substance to the Bank but that in
no event are less favorable, including with respect to rights of acceleration,
to the Borrower than the terms hereof.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Term Commitment" means $7,500,000.
"Term Loan" means a loan made pursuant to Section 2.01(b).
"Term Loan Period" means the period from and including the Closing Date to
but not including August 31, 1999.
"Term Note" means a promissory note of the Borrower, substantially in the
form of Exhibit B-2 hereto, evidencing the obligation of the Borrower to repay
the Term Loans.
"Termination Date" means May 31, 2001, as said date may be extended
pursuant to Section 2.07(b).
"Total Consolidated Debt" means, as of the date of determination, the total
of all Debt of the Borrower and its Subsidiaries outstanding on such date, after
eliminating all offsetting debits and credits between the Borrower and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Borrower and its
Subsidiaries in accordance with GAAP.
"Total Consolidated Capitalization" means, as of any date of determination
with respect to the Borrower, the sum of Total Consolidated Debt and
Consolidated Net Worth.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the Commonwealth of Virginia; provided that if by reason of mandatory provisions
--------
of law, for matters pertaining only to the perfection or the effect of
perfection or non-perfection of the Security Interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than Virginia, " UCC " means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most
<PAGE>
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the ERISA Group to the PBGC or
any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
"Variance" means a rate per annum (which may be a negative number) above or
below the Base Rate which the Bank, in its sole discretion, determines is
appropriate to adjust the Base Rate in order that the interest rate on the Loans
converted to Base Rate Loans in accordance with Section 7.04 of this Agreement
will be comparable to the LIBOR Market Index-Based Rate.
Usage
-----
The following rules of construction and usage shall be applicable to any
instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined meanings when
used in any instrument governed hereby and in any certificate or other document
made or delivered pursuant thereto unless otherwise defined therein.
(b) The words "hereof", "herein", "hereunder" and words of similar import
when used in an instrument refer to such instrument as a whole and not to any
particular provision or subdivision thereof; references in any instrument to
"Article", "Section" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section or subdivision of or an
attachment to such instrument; and the term "including" means "including without
limitation".
(c) The definitions contained in this Appendix are equally applicable to
both the singular and plural forms of such terms and to the masculine as well as
to the feminine and neuter genders of such terms.
(d) Any agreement, instrument or statute defined or referred to below or in
any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports with respect to the financial statements of: Trex Company,
Inc. dated January 27, 1999; TREX Company, LLC dated January 21, 1999 (except
Notes 11 and 12, as to which the date is February 8, 1999); and the Mobil
Composite Products Division of Mobil Oil Corporation dated June 24, 1998, in
Amendment No. 4 to the Registration Statement (Form S-1 No. 333-63287) and
related Prospectus of Trex Company, Inc. for the registration of 3,855,950
shares of its common stock.
/s/ Ernst & Young LLP
Vienna, Virginia
March 23, 1999
