Mr. Gandhi will receive a $200,000 cash signing bonus on the Company’s first regular payroll after October 6, 2025, which shall be repayable to the Company if the Company terminates Mr. Gandhi’s employment For Cause or Mr. Gandhi elects to resign without Good Reason (as such defined terms are disclosed below in the CIC Agreement section), within 3 years after October 6, 2025. Mr. Gandhi will also receive certain perquisites including but not limited to 401K contributions, a monthly company car allowance, and life insurance premiums.
Change in Control Severance Agreement
The Company and Mr. Gandhi will enter into the Company’s standard Form of Change in Control Severance Agreement between Trex Company, Inc. and Officers other than the Chief Executive Officer (the CIC Agreement) on October 6, 2025. Under this CIC Agreement, if within the period beginning 90 days before and ending two years after a change in control of the Company (as defined in the CIC Agreement), Mr. Gandhi’s employment is terminated by the Company (other than For Cause or by reason of death or disability) or if he terminates his employment for Good Reason, Mr. Gandhi will be entitled to receive severance benefits as detailed below:
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a lump sum severance payment equal to 1.5 times the sum of (1) Mr. Gandhi’s annual base salary (in effect immediately prior to the change in control or termination, whichever is greater), plus (2) the greater of (a) Mr. Gandhi’s target annual cash incentive for the year immediately prior to the year in which the change in control occurs, (b) Mr. Gandhi’s target annual cash incentive for the year of the termination of employment, or (c) Mr. Gandhi’s actual annual cash incentive for the last fiscal year immediately prior to the year of the termination of employment; and
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continuation of group health and dental insurance, and group life insurance, on the same terms and conditions as though Mr. Gandhi had remained an active employee (or payment of the necessary amount to obtain equivalent coverage if Company coverage is not possible), for the shorter of 18 months or until coverage is obtained from a new employer.
For purpose of the CIC Agreement, “cause” and “good reason” are defined as follows:
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“Cause” includes Mr. Gandhi’s willful or grossly negligent misconduct that is materially injurious to the Company, embezzlement or misappropriation of funds or property of the Company, conviction of a felony or any crime involving fraud, dishonesty, moral turpitude or breach of trust, or willful failure or refusal to devote full business time and attention to the performance of duties.
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“Good reason” includes a material and adverse change in Mr. Gandhi’s status or position with the Company, a 10% or greater reduction in his aggregate base salary and targeted annual incentive other than as part of general reduction in executive compensation, the failure by the Company or any successor to continue in effect any employee benefit plan in which she is participating other than as a result of normal expiration of such plan in accordance with its terms, or the relocation of his office more than 50 miles from the current office and further than his then-current residence.
To receive the payment and benefits under the CIC Agreement, Mr. Gandhi must, among other things, execute a customary release and comply with customary restrictive covenants set forth in his agreements with the Company.
Severance Agreement
In addition, the Company and Mr. Gandhi will enter into the Company’s standard Form of Severance Agreement between Trex Company, Inc. and executive officers other than the Chief Executive Officer (the Severance Agreement) on October 6, 2025 providing for the payment of severance compensation and benefits to him if the Company terminates his employment without Cause or if he resigns for Good Reason. For this purpose, Cause and Good Reason are defined in the same manner as in the CIC Agreement discussed above. Upon such a termination, Mr. Gandhi will be entitled to receive the following:
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a lump-sum cash payment equal to 1 times the sum of (1) Mr. Gandhi’s base salary then in effect, plus (2) an amount equal to the greater of (a) Mr. Gandhi’s targeted annual cash incentive for the year immediately prior to the year in which his employment terminates, or (b) Mr. Gandhi’s actual annual cash incentive earned for the preceding year;
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continued health and dental plan benefits on the same terms and conditions as though the covered executive had remained an active employee (or payment of the necessary amount to obtain equivalent coverage if Company coverage is not possible), for the shorter of 12 months or until equivalent coverage is obtained from a new employer; and
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accelerated vesting of all outstanding long-term equity incentive awards, including, but not limited to, stock options, stock appreciation rights, restricted stock, restricted stock units and performance shares (at the targeted payment level).
To receive the payment and benefits under the Severance Agreement, Mr. Gandhi must, among other things, execute a customary release and comply with customary restrictive covenants set forth in his agreements with the Company.
The foregoing description of Mr. Gandhi’s CIC Agreement, Severance Agreement, and RSU Agreement with the Company is qualified in its entirety by reference to the Form of Change in Control Severance Agreement between Trex Company, Inc. and Officers other than the Chief Executive Officer filed as Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the year ending December 31, 2016 filed on February 21, 2017,the Form of Severance Agreement between Trex Company, Inc.
