Exhibit 10.2

 

Trex Company, Inc.

 

Description of Management Compensatory Plans and Arrangements

 

Components of Executive Compensation

 

In accordance with the rules of the New York Stock Exchange, all components of
compensation for the chief executive officer and other executive officers of
Trex Company, Inc. (the “Company”) are determined by the compensation committee
of the board of directors, all of whom meet the independence requirements
prescribed by such rules.

 

The Company’s executive compensation program includes a base salary, annual cash
bonuses and long-term incentive compensation in the form of stock options, stock
appreciation right awards, performance shares and other equity-based awards
issued under the Trex Company, Inc. 2005 Stock Incentive Plan (the “Stock
Incentive Plan”).

 

Base Salary. Base salaries of executive officers are initially determined by
evaluating the responsibilities of the position, the experience and knowledge of
the executive, and the competitive marketplace for executive talent, including a
comparison to base salaries for comparable positions at public companies in the
Company’s peer group. Base salaries for executive officers are reviewed annually
by the compensation committee based upon, among other things, individual
performance and responsibilities.

 

Annual Cash Bonuses. The Company pays annual cash bonuses to its Chief Executive
Officer, other executive officers, and other key employees generally based upon
the achievement of an earnings per share objective, which is annually approved
by the compensation committee, although other factors may be considered. For
each fiscal year, each participant in the plan is assigned a “target bonus,”
which is expressed as a percentage of the participant’s annual base salary. The
target bonus for the Chief Executive Officer is 80% of annual salary, and the
target bonus for the other executive officers can range from 55% to 75% of
annual salary. The actual amount of cash bonuses paid to executive officers is
determined by multiplying their target bonus by a performance percentage, which
is calculated based on the extent to which the performance objective is
achieved. The performance percentage can range from 0% to 150%. The compensation
committee has the discretion to award a bonus, which exceeds the otherwise
applicable maximum bonus determined as provided above, except that the value of
the bonus may not exceed $2,000,000 for any fiscal year for any employee. Bonus
payments are conditional upon the participant’s continued employment by the
Company through the date of grant, and are pro rated for employees who have
served for less than a full year.

 

Long-Term Incentive Compensation. The Company maintains a long-term executive
incentive compensation plan for the benefit of its Chief Executive Officer,
other executive officers, and other key employees. Awards under the plan are in
the form of equity-based awards under the Stock Incentive Plan and are made by
the compensation committee. In determining the amount of stock options, stock
appreciation rights, performance share awards and other equity-based awards
under the Stock Incentive Plan, the compensation committee considers each
executive’s current performance and anticipated future contributions to the
Company’s performance, as well as the amount and terms of other equity-based
awards previously granted to the executive by the Company.

 

Other Compensatory Plans

 

The Company’s executive officers also are eligible to participate in the
Company’s defined contribution money purchase pension plan and 401(k) plan and
the Company’s employee profit sharing plan, each of which is available to all
regular Company employees.