layne_def14a.htm
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment
No. )
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14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
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Additional Materials
Layne Christensen
Company
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Specified In Its Charter)
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Filed:
LAYNE CHRISTENSEN COMPANY
May 5, 2010
Dear Stockholder:
You are cordially invited to attend the
Annual Meeting of Stockholders of Layne Christensen Company to be held at the
InterContinental Kansas City at the Plaza hotel, located at 401 Ward Parkway,
Kansas City, Missouri 64112, on Thursday, June 3, 2010, commencing at 10:00
a.m., local time. The business to be conducted at the meeting is described in
the attached Notice of Annual Meeting and Proxy Statement. In addition, there
will be an opportunity to meet with members of senior management and review the
business and operations of the Company.
Your Board of Directors joins with me in
urging you to attend the meeting. Whether or not you plan to attend the meeting,
however, please sign, date and return the enclosed proxy card promptly. A
prepaid return envelope is provided for this purpose. You may revoke your proxy
at any time before it is exercised and it will not be used if you attend the
meeting and prefer to vote in person.
Sincerely yours, |
|
/s/ A. B. Schmitt |
|
A. B. Schmitt |
President and Chief Executive
Officer |
LAYNE CHRISTENSEN COMPANY
1900 Shawnee Mission Parkway
Mission Woods, Kansas
66205
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3,
2010
The Annual Meeting of
Stockholders of Layne Christensen Company, a Delaware corporation ("Layne
Christensen" or the "Company"), will be held at the InterContinental Kansas City
at the Plaza hotel, located at 401 Ward Parkway, Kansas City, Missouri 64112, on
Thursday, June 3, 2010, commencing at 10:00 a.m., local time, and thereafter as
it may from time to time be adjourned, for the following
purposes:
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1. |
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To vote on the
election of the Company’s eight nominees for director to hold office for
terms expiring at the 2011 Annual Meeting of the Stockholders of Layne
Christensen and until their successors are duly elected and qualified or
until their earlier death, retirement, resignation or
removal;
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2. |
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To consider and
act upon ratification of the selection of the accounting firm of Deloitte
& Touche LLP as the independent auditors of Layne Christensen Company
for the fiscal year ending January 31, 2011;
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3. |
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To consider a
stockholder proposal described in the attached Proxy Statement, if
properly presented at the Annual Meeting; and
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4. |
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To transact
such other business as may properly come before the meeting and any
adjournment or adjournments
thereof.
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The Board of Directors of Layne Christensen has
fixed the close of business on April 22, 2010, as the record date for
determination of the stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournment or adjournments thereof.
All stockholders are cordially invited to attend
the meeting. Whether or not you intend to be present at the meeting, the Board
of Directors of Layne Christensen solicits you to sign, date and return the
enclosed proxy card promptly. A prepaid return envelope is provided for this
purpose. You may revoke your proxy at any time before it is exercised and it
will not be used if you attend the meeting and prefer to vote in person. Your
vote is important and all stockholders are urged to be present in person or by
proxy.
By Order of the Board of Directors. |
|
Steven F. Crooke |
Senior Vice President—General Counsel
and Secretary |
May 5,
2010
Mission Woods,
Kansas
Important Notice Regarding the Availability of
Proxy Materials for the Stockholder Meeting to be Held on June 3, 2010: The
Proxy Statement and Annual Report to Stockholders are available to you at
http://www.edocumentview.com/LAYN.
LAYNE CHRISTENSEN COMPANY
1900 Shawnee Mission Parkway
Mission Woods, Kansas
66205
_________________________
PROXY STATEMENT
_________________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 2010
_________________________
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Layne
Christensen Company, a Delaware corporation ("Layne Christensen" or the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of Stockholders to be
held on June 3, 2010, and at any adjournment or adjournments thereof (the
"Annual Meeting"). The Annual Meeting will commence at 10:00 a.m., local time,
and will be held at the Intercontinental Kansas City at the Plaza hotel, located
at 401 Ward Parkway, Kansas City, Missouri 64112.
This Proxy Statement and the enclosed
form of proxy were first mailed to the Company's stockholders on or about May 5,
2010.
Proxies
You are requested to complete, date and
sign the enclosed form of proxy and return it promptly to the Company in the
enclosed postage prepaid envelope. Shares represented by properly executed
proxies will, unless such proxies have been revoked prior to exercise, be voted
in accordance with the stockholders' instructions indicated in the proxies. If
no instructions are indicated, such shares will be voted in favor of the
election of the nominees for director named in this Proxy Statement, in favor of
ratifying the selection of the accounting firm of Deloitte & Touche LLP as
the Company's independent auditors for the current fiscal year, against the
stockholder proposal regarding a sustainability report, and, as to any other
matter that properly may be brought before the Annual Meeting, in accordance
with the discretion and judgment of the appointed proxies. A stockholder who has
given a proxy may revoke it at any time before it is exercised at the Annual
Meeting by filing written notice of revocation with the Secretary of the
Company, by executing and delivering to the Secretary of the Company a proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
If you plan to attend the Annual Meeting
and vote in person, you will be given a ballot when you arrive. However, if your
shares are held in the name of your broker, bank or other nominee (commonly
referred to as being held in "street" name), proof of ownership may be required
for you to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of common stock held in street name in person at the meeting, you
will have to get a written proxy in your name from the broker, bank or other
nominee who holds your shares.
Voting at the Meeting
For purposes of voting on the proposals
described herein, the presence in person or by proxy of stockholders holding a
majority of the total outstanding shares of the Company's common stock, $0.01
par value, shall constitute a quorum at the Annual Meeting. Only holders of
record of shares of the Company's common stock as of the close of business on
April 22, 2010 (the "Record Date"), are entitled to notice of, and to vote at,
the Annual Meeting or any adjournment or adjournments thereof. As of the Record
Date, 19,559,835 shares of the Company's common stock were outstanding and
entitled to be voted at the Annual Meeting. Each share of common stock is
entitled to one vote on each matter properly to come before the Annual Meeting.
Directors are elected by a plurality (a
number greater than those cast for any other candidates) of the votes cast, in
person or by proxy, of stockholders entitled to vote at the Annual Meeting for
that purpose. In accordance with Delaware law, a stockholder entitled to vote in
the election of directors can withhold authority to vote for all nominees for director or can withhold
authority to vote for certain nominees for director. Votes withheld in
connection with the election of one or more nominees for director will not be
counted as votes cast for such nominees, and will not have any effect on the
outcome of the election. All other matters will be determined by a vote of a
majority of the votes cast affirmatively or negatively by the stockholders
present in person or represented by proxy at the meeting and entitled to vote
thereon. Under Delaware law, abstentions are not considered votes cast and will
have no effect on whether a matter is approved.
On certain routine matters, such as the
ratification of the selection of Deloitte & Touche LLP as the independent
registered public accounting firm of the Company, if a stockholder that holds
its shares through a broker does not provide instructions to that broker on how
the stockholder wishes to vote, the broker will be allowed to exercise
discretion and vote on behalf of the stockholder. A broker is prohibited,
however, from voting on other non-routine matters, including the election of
directors and stockholder proposals. Broker "non-votes" will occur when a broker
does not receive voting instructions from a stockholder on a non-routine matter
or if the broker otherwise does not vote on behalf of a stockholder. Broker
non-votes will not count in determining the number of votes cast with respect to
the election of directors or a proposal that requires a majority of votes cast
and, therefore, will not affect the outcome of the election of directors or the
voting on such a proposal.
Solicitation of Proxies
This solicitation of proxies for the
Annual Meeting is being made by the Company's Board of Directors. The Company
will bear all costs of such solicitation, including the cost of preparing and
mailing this Proxy Statement and the enclosed form of proxy. After the initial
mailing of this Proxy Statement, proxies may be solicited by mail, telephone,
facsimile transmission, electronically or personally by directors, officers,
employees or agents of the Company. Brokerage houses and other custodians,
nominees and fiduciaries will be requested to forward soliciting materials to
beneficial owners of shares held of record by them, and their reasonable
out-of-pocket expenses, together with those of the Company's transfer agent,
will be paid by Layne Christensen.
A list of stockholders entitled to vote
at the Annual Meeting will be available for examination at least ten days prior
to the date of the Annual Meeting during normal business hours at the Company's
Corporate Headquarters, 1900 Shawnee Mission Parkway, Mission Woods, Kansas
66205. The list also will be available at the Annual Meeting.
ITEM 1
ELECTION OF DIRECTORS
One of the purposes of this Annual
Meeting is to elect eight directors to serve one year terms expiring at the
Annual Meeting of Stockholders in 2011 and until their successors are duly
elected and qualified or until their earlier death, retirement, resignation or
removal. The Board of Directors has designated Messrs. David A.B. Brown, J.
Samuel Butler, Anthony B. Helfet, Nelson Obus, Rene J. Robichaud, Robert R.
Gilmore, Andrew B. Schmitt and Jeffrey J. Reynolds as the nominees proposed for
election at the Annual Meeting. Messrs. Brown, Butler and Helfet have been
directors of the Company since 2003. Mr. Obus has been a director of the Company
since 2004. Messrs. Robichaud and Gilmore have been directors of the Company
since January 1, 2009. Mr. Reynolds has been a director of the Company since
2005 and Mr. Schmitt has been a director of the Company since 1993. Unless
authority to vote for the nominees is withheld, it is intended that the shares
represented by properly executed proxies in the form enclosed will be voted for
the election of the nominees for director. In the event that one or more of the
nominees should become unavailable for election, it is intended that the shares
represented by the proxies will be voted for the election of such substitute
nominee as may be designated by the Board of Directors, unless the authority to
vote for the nominee who has ceased to be a candidate has been withheld. The
nominees have indicated their willingness to serve as directors if elected, and
the Board of Directors has no reason to believe that the nominees will be
unavailable for election.
The Board of Directors unanimously
recommends that you vote FOR the election of David A.B. Brown, J. Samuel Butler,
Nelson Obus, Anthony B. Helfet, Rene J. Robichaud, Robert R. Gilmore, Jeffrey J.
Reynolds and Andrew B. Schmitt as directors of the Company.
Nominees for Director
The following table sets forth certain
information with respect to the persons nominated by the Board of Directors for
election as directors at the Annual Meeting.
2
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Name |
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Age |
|
Present Position with the
Company |
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Director Since |
NOMINEES |
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David A. B. Brown |
|
66 |
|
Director, Chairman of the
Board |
|
2003 |
|
|
Andrew B. Schmitt |
|
61 |
|
Director, President and Chief Executive
Officer |
|
1993 |
|
|
J. Samuel Butler |
|
64 |
|
Director |
|
2003 |
|
|
Anthony B. Helfet |
|
66 |
|
Director |
|
2003 |
|
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Nelson Obus |
|
63 |
|
Director |
|
2004 |
|
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Jeffrey J. Reynolds |
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43 |
|
Director, Executive Vice President of
Operations |
|
2005 |
|
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Robert R. Gilmore |
|
58 |
|
Director |
|
2009 |
|
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Rene J. Robichaud |
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51 |
|
Director |
|
2009 |
The business experience during the last five fiscal years of the persons
nominated by the Board of Directors for election as directors at the Annual
Meeting is as follows:
David A. B. Brown currently serves as Chairman of the Board of
Directors of Pride International, Inc. He is also on the board of directors of
EMCOR Group, Inc., and from 1984 to 2005 Mr. Brown was president of The Windsor
Group, a consulting firm that focuses on energy related issues facing oilfield
services and engineering companies. He has over 30 years of energy related
experience. Mr. Brown’s pertinent experience, qualifications, attributes and
skills include: financial literacy and extensive managerial experience attained
from serving as the president of The Windsor Group, and the chairman of Pride
International, Inc., the knowledge and experience he has attained from service
on other public company boards, and the knowledge and experience he has attained
from his service on the Company’s Board since 2003, and in his capacity as the
Company’s Chairman since 2005.
Andrew B. Schmitt has served as President and Chief Executive
Officer of the Company since October 1993. For approximately two years prior to
joining the Company, Mr. Schmitt was a partner in two privately owned
hydrostatic pump and motor manufacturing companies and an oil and gas service
company. He served as President of the Tri-State Oil Tools Division of Baker
Hughes Incorporated from February 1988 to October 1991. Mr. Schmitt is also a
director of Euronet Worldwide Inc. Mr. Schmitt’s pertinent experience,
qualifications, attributes and skills include: financial literacy and extensive
managerial experience attained from serving as the president of the Tri-State
Oil Tools Division of Baker Hughes Incorporated, a partner in various oil and
gas industry companies, and the president and chief executive officer of the
Company for over 16 years, the knowledge and experience he has gained from
service on other public company boards, and the knowledge and experience he has
attained from his service on the Company’s Board since 1993.
J. Samuel Butler has been president of Trinity Petroleum
Management, LLC, an oil and gas management outsourcing company, since 1996. Mr.
Butler has also served as Chairman of the Board, chief executive officer and
president of ST Oil Company, an independent oil and gas exploration and
production company, since 1996. Mr. Butler was appointed to the Colorado School
of Mines Foundation Board of Governors in 2009, and in 2007, Mr. Butler became
the Chairman of Genesis Gas & Oil Partners LLC, a private oil and gas
partnership focused on the acquisition and exploitation of coalbed methane and
other unconventional oil and gas reserves. Mr. Butler’s pertinent experience,
qualifications, attributes and skills include: financial literacy and extensive
managerial experience attained from serving as the president, chairman and chief
executive officer of two companies in the oil and gas industry, Trinity
Petroleum Management, LLC and ST Oil Company, the knowledge and experience he
has attained from service on other company boards, and the knowledge and
experience he has attained from his service on the Company’s Board since
2003.
Anthony B. Helfet, a retired investment banker, served as the
Vice Chairman and co-head of Mergers and Acquisitions for Merriman Curhan Ford
& Co. from September 2005 to September 2007. Prior to that, he was a special
advisor to UBS from September 2001 through December 2001. From 1991 to August
31, 2001, Mr. Helfet was a managing director of the West Coast operations of
Dillon, Read & Co. Inc. and its successor organization, UBS. Mr. Helfet was
also managing director of the Northwest Region of Merrill Lynch Capital Markets
from 1979 to 1989. Historically, Mr. Helfet has held other positions with Dean
Witter Reynolds Inc. and Dillon, Read & Co. Inc. Mr. Helfet also served as a
director of Alliance HealthCare Services, Inc. from 2001 to 2009. Mr. Helfet’s
pertinent experience, qualifications, attributes and skills include: financial
literacy and expertise, capital markets expertise, and managerial experience
gained through his mergers and acquisitions experience and leadership roles with
investment banking firms, Merriman Curhan Ford & Co., UBS, Dillon, Read
& Co. Inc., Merrill Lynch Capital Markets and Dean Witter Reynolds Inc., the
knowledge and experience he has attained from service on other public company
boards, and the knowledge and experience he has attained from his service on the
Company’s Board since 2003.
3
Nelson
Obus has served as
president of Wynnefield Capital, Inc. since November 1992 and as the managing
member of Wynnefield Capital Management, LLC since January 1997. Wynnefield
Capital Management manages two partnerships and Wynnefield Capital, Inc. manages
one partnership, all three of which invest in small-cap value U.S. public
equities. Mr. Obus is also a member of the board of directors of Gilman Ciocia,
Inc., a company that provides income tax return preparation, accounting and
financial planning services. Mr. Obus’ pertinent experience, qualifications,
attributes and skills include: financial literacy and expertise, capital markets
expertise and managerial experience gained through his leadership roles and
ownership interest in related investment management companies, Wynnefield
Capital Management, LLC and Wynnefield Capital, Inc., the knowledge and
experience he has attained from service on other public company boards, and the
knowledge and experience he has attained from his service on the Company’s Board
since 2004.
Jeffrey J. Reynolds
became a director of the Company on
September 28, 2005, in connection with the acquisition of Reynolds, Inc. by
Layne Christensen Company. Mr. Reynolds served as the President of Reynolds,
Inc., a company which provides products and services to the water and wastewater
industries, from 2001 until February of 2010. Mr. Reynolds also became a Senior
Vice President of the Company on September 28, 2005. On March 30, 2006, Mr.
Reynolds was promoted to Executive Vice President of the Company overseeing the
Water Infrastructure Division and on February 1, 2010, Mr. Reynolds was promoted
to Executive Vice President of Operations for the Company overseeing all of the
Company’s operating divisions. Mr. Reynolds’ pertinent experience,
qualifications, attributes and skills include: financial literacy and managerial
experience attained from serving as the president of Reynolds, Inc., and a
senior vice president and executive vice president of operations for the
Company, and the knowledge and experience he has attained from his service on
the Company’s Board since 2005.
Robert R. Gilmore is an independent CPA. From 1997 to May 2006
and from March 2008 to present, Mr. Gilmore has served as an independent
financial consultant to a number of companies. From May 2006 to February 2008,
he was CFO of NextAction Corporation, a private company engaged in multi-channel
direct marketing using technology based proprietary lead generation methods for
the retail industry. Since April 2003, Mr. Gilmore has been a Director of
Eldorado Gold Corporation, serving as Non-Executive Chairman since December of
2009 and as Chairman of its Audit Committee and as a member of its Compensation
Committee. Mr. Gilmore also served as a Director and Audit Committee Chairman of
Global Med Technologies, Inc. from March 31, 2006, until March of 2010. He
served as a member of its Compensation Committee from October 26, 2007, until
March of 2010. From July 2007 to March 2009, Mr. Gilmore was also a Director of
Frontera Copper Corporation and served as the Chairman of its Audit Committee.
Mr. Gilmore was also a Director and Audit Committee Chairman of Ram Power
Corporation from October of 2009 until April of 2010. Mr. Gilmore’s pertinent
experience, qualifications, attributes and skills include: public accounting and
financial reporting expertise (including extensive experience as a certified
public accountant), managerial experience attained from serving as the chief
financial officer of NextAction Corporation, the knowledge and experience he has
attained from service on other public company boards, and the knowledge and
experience he has attained from his service on the Company’s Board since
2009.
Rene J. Robichaud served as president and chief executive
officer of NS Group, Inc., a publicly traded manufacturer of oil country tubular
goods and line pipe, from February of 2000 until the company’s sale in December
of 2006. Prior to that, Mr. Robichaud served as president and chief operating
officer of NS Group, Inc. from June of 1999 to February of 2000. From 1997 to
1998, Mr. Robichaud served as a managing director and co-head of the Global
Metals & Mining Group for Salomon Smith Barney. Mr. Robichaud’s pertinent
experience, qualifications, attributes and skills include: managerial experience
he has attained from serving as the president, chief executive officer and chief
operating officer of NS Group, Inc., financial literacy and expertise, capital
markets expertise, and managerial expertise gained through his mergers and
acquisitions experience and leadership roles with Salomon Smith Barney, and the
knowledge and experience he has attained from his service on the Company’s Board
since 2009.
There is no arrangement or understanding
between any director and any other person pursuant to which such director was
selected as a director of the Company.
4
Compensation of Directors
Each director of the Company who is not
also an employee of the Company, except the Chairman of the Board, receives an
annual retainer of $35,000. The Chairman of the Board receives an annual
retainer of $75,000. The Chairmen of the Audit Committee and the Compensation
Committee each receive an additional retainer of $5,000 per year and the
Chairman of the Nominating & Corporate Governance Committee receives an
additional retainer of $1,500 per year. All such retainers are payable in
quarterly installments. In addition, each non-employee director receives $1,000 for each board
meeting he or she attends either in person or via teleconference and each member
of the Audit Committee, the Compensation Committee and the Nominating &
Corporate Governance Committee receives $1,000 for each committee meeting he or
she attends either in person or via teleconference. As an additional component
of their compensation package, all non-employee directors of the Company receive
a onetime award of an option to purchase 3,000 shares of the Company's common
stock upon becoming a member of the Board. Each non-employee director, except
the Chairman, also receives an annual award of restricted stock or stock options
of the Company, or a combination of both, whichever they choose, with a value
equal to $40,000 on the date of the award. The Chairman receives an annual award
of either restricted stock or stock options of the Company or a combination of
both, whichever he chooses, with a value equal to $75,000 on the date of the
award. The annual equity award is made on the first day of each new fiscal year
of the Company. The restricted stock is valued based on the market price of the
Company's common stock on the day the stock is issued, vests one year from the
date of issuance, and is otherwise subject to all of the terms and conditions of
the Company's 2006 Equity Incentive Plan, as amended (the "2006 Equity Plan"),
or such other plan under which the restricted stock may be issued. The director
options have an exercise price equal to the market price of the common stock on
the day they issued, are 100% vested upon issuance, have a ten-year life and are
otherwise subject to all of the terms and conditions of the 2006 Equity Plan or
such other plan under which the options may be issued. Directors of the Company
who are also employees of the Company receive no compensation for service to
Layne Christensen as directors.
For fiscal 2010, the Committee noted that
the number of shares available for issuance under the 2006 Equity Plan when
considering the long-term equity compensation awards payable to the executive
officers and key management were insufficient for the contemplated payout of
such non-employee director equity compensation. The Committee therefore agreed
that the number of stock options and/or restricted stock issuable to the
non-employee directors should be prorated based on the non-employee directors’
individual awards of equity compensation as compared to the total amount of
long-term equity compensation payable to the executive officers, key management
and the non-employee directors. As a result, the non-employee directors initially received equity
compensation for approximately 50% of the long-term equity compensation award
amounts described above. Following the stockholders approval at the 2009 Annual
Meeting of an amendment to the 2006 Equity Plan to increase the number of shares
available for issuance, the Company made additional long-term equity
compensation awards in June 2009 so that the non-employee directors received the
full value of their long-term equity compensation awards.
A director may elect to defer receipt of
all or a portion of their cash compensation in accordance with the terms of the
Company's Deferred Compensation Plan for Directors. Under the Company's Deferred
Compensation Plan for Directors, non-employee directors of the Company can elect
to receive deferred compensation in three forms—a cash credit, a stock credit or
a combination of the two. The value of deferrals made in the form of a stock
credit track the value of the Company's common stock. Deferrals made in the form
of a cash credit will accumulate interest at a rate based on the annual yield of
the longest term United States Treasury Bond outstanding at the end of the
preceding year. All payments made under the plan will be made in cash. As of
January 31, 2010, Mr. Brown had accumulated the equivalent of 5,096.87 shares of
common stock in his stock credit account, Mr. Butler had accumulated the
equivalent of 2,909.96 shares of common stock in his stock credit account, Mr.
Helfet had accumulated the equivalent of 3,135.26 shares of common stock in his
stock credit account, Mr. Obus had accumulated the equivalent of 5,843.44 shares
of common stock in his stock credit account, Mr. Gilmore had accumulated the
equivalent of 421.15 shares of common stock in his stock credit account, and Mr.
Robichaud had accumulated the equivalent of 1,763.41 shares of common stock in
his stock credit account.
5
The following table sets forth the
compensation paid to our directors during the fiscal year ended January 31,
2010. Messrs. Schmitt and Reynolds are our only directors who are also employees
of the Company. Messrs. Schmitt's and Reynolds' compensation is reported in our
Summary Compensation Table.
Fiscal 2010 Director Compensation
Table
|
|
Fees Earned or |
|
|
|
|
|
|
Option |
|
|
|
|
|
|
|
Paid in Cash(1) |
|
Stock Awards(2) |
|
Awards(3) |
|
Total |
Name |
|
($) |
|
($) |
|
($) |
|
($) |
David A. B. Brown |
|
|
$ |
83,000 |
|
|
|
$ |
74,993 |
|
|
|
— |
|
|
|
$ |
157,993 |
|
J. Samuel Butler |
|
|
$ |
45,000 |
|
|
|
— |
|
|
|
$ |
39,981 |
|
|
|
$ |
84,981 |
|
Anthony B. Helfet |
|
|
$ |
49,500 |
|
|
|
$ |
39,996 |
|
|
|
— |
|
|
|
$ |
89,496 |
|
Donald K. Miller(4) |
|
|
$ |
14,000 |
|
|
|
$ |
22,250 |
|
|
|
— |
|
|
|
$ |
36,250 |
|
Nelson Obus |
|
|
$ |
43,500 |
|
|
|
$ |
29,983 |
|
|
|
$ |
9,990 |
|
|
|
$ |
83,473 |
|
Rene J. Robichaud |
|
|
$ |
42,500 |
|
|
|
$ |
39,996 |
|
|
|
— |
|
|
|
$ |
82,496 |
|
Robert R.
Gilmore |
|
|
$ |
46,250 |
|
|
|
$ |
19,987 |
|
|
|
$ |
19,989 |
|
|
|
$ |
86,226 |
|
____________________
(1) |
|
Includes amounts deferred under the Company's Deferred Compensation
Plan for Directors for the accounts of Messrs. Obus, Robichaud and Gilmore
in the amounts of $30,625, $42,500 and $10,000, respectively. Messrs.
Obus, Robichaud and Gilmore all elected to defer their deferred fees to
the stock credit account. |
|
(2) |
|
As of
January 31, 2010, the Company had aggregate outstanding unvested
restricted stock awards to non-employee directors in the amounts of 4,157,
2,217, 1,662, 2,217 and 1,108 shares held by Messrs. Brown, Helfet, Obus,
Robichaud and Gilmore, respectively. The amount reported in this column is
equal to the grant date fair value computed in accordance with Accounting
Standards Codification ("ASC") 718 for each stock award. |
|
(3) |
|
As of
January 31, 2010, the Company had aggregate outstanding option awards to
non-employee directors in the amounts of 13,000, 13,030, 9,000, 10,007,
3,000 and 5,015 options held by Messrs. Brown, Butler, Helfet, Obus,
Robichaud and Gilmore, respectively. The amount reported in this column is
equal to the grant date fair value computed in accordance with ASC 718 for
each stock award. |
|
(4) |
|
Mr.
Donald K. Miller retired from the Board on June 3,
2009. |
Meetings of the Board and
Committees
During the fiscal year ended January 31,
2010, the Board of Directors of Layne Christensen held four meetings. All
directors attended at least 75% of the meetings of the Board of Directors and
the committees of the Board of Directors on which they served which were held
during such fiscal year and during the period which such director served. It
should be noted that the Company's directors discharge their responsibilities
throughout the year, not only at such Board of Directors and committee meetings,
but through personal meetings and other communications with members of
management and others regarding matters of interest and concern to the Company.
Pursuant to the Company's Bylaws, the
Board of Directors has established an Audit Committee, a Nominating &
Corporate Governance Committee and a Compensation Committee.
Audit Committee
The Audit Committee assists the Board of Directors in fulfilling its
responsibilities with respect to the oversight of (i) the integrity of the
Company's financial statements, financial reporting process and internal control
system; (ii) the Company's compliance with legal and regulatory requirements;
(iii) the independent registered public accounting firm qualifications and
independence; (iv) the performance of the Company's internal audit function and
its independent auditors and (v) the system of internal controls and disclosure
controls and procedures established by management. The Audit Committee is
responsible for the appointment of the Company's independent registered public
accounting firm and the terms of their engagement, reviewing the Company's
policies and procedures with respect to internal auditing, accounting, financial
and disclosure controls and reviewing the scope and results of audits and any
auditor recommendations. The Audit Committee held five meetings during the
fiscal year ended January 31, 2010, in addition to personal meetings and other
communications conducted throughout the year with members of management and each
other regarding issues within the committee's area of responsibility. The
Amended and Restated Audit Committee Charter is available on the Company's
website under the heading "Governance” on the Investor Relations page
(http://investor.laynechristensen.com/governance.cfm). The current members of
the Audit Committee are Robert R. Gilmore (Chairperson), Anthony B. Helfet, J.
Samuel Butler and Nelson Obus. All of the members of the Audit Committee are
independent within the meaning of SEC Regulations and the Nasdaq listing
standards. The Board has determined that each member of the Audit Committee is
qualified as an audit committee financial expert within the meaning of SEC
regulations and that all such members are financially literate and have
experience in finance or accounting resulting in their financial sophistication
within the meaning of the Nasdaq listing standards. The Report of the Audit
Committee for fiscal year 2010 appears below.
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUTE SOLICITING
MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY
OTHER COMPANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT
THE COMPANY SPECIFICALLY INCORPORATES THIS REPORT
BY REFERENCE THEREIN.
6
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of independent
directors as required by and in compliance with the listing standards of the
Nasdaq Stock Market. The Audit Committee operates pursuant to a written charter
adopted by the Board of Directors.
The functions of the Audit Committee are
set forth in its charter. One of the Audit Committee’s principle functions is
overseeing the Company’s financial reporting process on behalf of the Board of
Directors. Management of the Company has the primary responsibility for the
Company’s financial reporting process, principles and internal controls as well
as preparation of its financial statements. The Company’s independent registered
public accounting firm is responsible for performing an audit of the Company’s
financial statements and expressing an opinion as to the conformity of such
financial statements with accounting principles generally accepted in the United
States.
The Audit Committee has reviewed and
discussed the Company’s audited financial statements as of and for the year
ended January 31, 2010, with management and the independent registered public
accounting firm. The Audit Committee has discussed with the independent
registered accounting firm the matters required to be discussed under the
standards of the Public Company Accounting Oversight Board (United States),
including those matters set forth in Statement on Auditing Standards No. 114, as
amended and adopted by Rule 3200T. The independent registered public accounting
firm has provided to the Audit Committee the written disclosures and the letter
required by Rule 3526 of the Public Company Accounting Oversight Board, and the
Audit Committee has discussed with the auditors their independence from the
Company. The Audit Committee has also considered whether the independent
registered public accounting firm’s provision of information technology and
other non-audit services to the Company is compatible with maintaining the
registered public accounting firm’s independence. The Audit Committee has
concluded that the independent registered public accounting firm is independent
from the Company and its management.
Based on the reports and discussions
described above, the Audit Committee has approved the inclusion of the Company’s
audited financial statements and Management’s Report on Internal Control Over
Financial Reporting in the Company’s Annual Report on Form 10-K for the fiscal
year ended January 31, 2010.
Respectfully submitted on April 1, 2010,
by the members of the Audit Committee of the Board of Directors:
Robert R. Gilmore,
Chairman
J. Samuel Butler, Anthony B. Helfet, Nelson Obus
Nominating & Corporate Governance
Committee
The Company's Board of Directors created
a Nominating & Corporate Governance Committee (the "Nominating Committee")
on February 16, 2004. In accordance with the process described below under the
heading "Selection of Board Nominees," the Nominating Committee identifies
individuals qualified to become members of the Company's Board of Directors,
recommends to the Board proposed nominees for Board membership, recommends to
the Board directors to serve on each standing committee of the Board and assists
the Board in developing and overseeing corporate governance guidelines. The
Nominating Committee’s evaluation of director nominees takes into account their
ability to contribute to the diversity of age, background and experience
represented on the Board, and the Nominating Committee reviews its effectiveness
in balancing these considerations when assessing the composition of the Board.
The charter of the Nominating Committee is available on the Company's website
under the heading "Governance” on the Investor Relations page
(http://investor.laynechristensen.com/governance.cfm). The Nominating Committee
held two meetings during the fiscal year ended January 31, 2010, in addition to
personal meetings and other communications conducted throughout the year with
members of management and each other regarding issues within the committee's
area of responsibility. The current members of the Nominating Committee are J.
Samuel Butler (Chairperson), David A. B. Brown and Rene J. Robichaud. All of the
members of the Nominating Committee are independent within the meaning of SEC
regulations and the Nasdaq listing standards.
7
Compensation Committee
The Compensation Committee establishes
annual and long-term performance goals and objectives for the Company's
management, evaluates the performance of management and makes recommendations to
the Board of Directors regarding the compensation and benefits of the Company's
executive officers and the members of the Board of Directors. The Compensation
Committee also administers certain of the Company's incentive plans, including
the Company's Executive Incentive Compensation Plan. The charter of the
Compensation Committee is available on the Company's website under the heading
"Governance” on the Investor Relations page
(http://investor.laynechristensen.com/governance.cfm). The current members of
the Compensation Committee are Anthony B. Helfet (Chairperson), David A.B.
Brown, Nelson Obus and Rene J. Robichaud. All of the members of the Compensation
Committee are independent within the meaning of SEC regulations and the Nasdaq
listing standards. The Compensation Committee met three times during the fiscal
year ended January 31, 2010, in addition to personal meetings and other
communications conducted throughout the year with members of management and each
other regarding compensation issues within the committee's area of
responsibility.
Selection of Board Nominees
The Nominating Committee considers
candidates for Board membership suggested by its members and other Board
members, as well as management and stockholders. A stockholder who wishes to
recommend a prospective nominee for the Board should notify the Company's
Secretary in writing with whatever supporting material the stockholder considers
appropriate or that is required by the Company's bylaws relating to stockholder
nominations as described below under the heading "Advance Notice Procedures."
The Company's Secretary will forward the information to the members of the
Nominating Committee, who will consider whether to nominate any person nominated
by a stockholder pursuant to the provisions of the proxy rules, the Company's
bylaws, the Company's Nominating & Corporate Governance Committee Charter,
the Company's Corporate Governance Guidelines and the director selection
procedures established by the Nominating & Corporate Governance
Committee.
Once the Nominating Committee has
identified a prospective nominee candidate, the Committee makes an initial
determination as to whether to conduct a full evaluation of the candidate. This
initial determination is based on the information provided to the Nominating
Committee with the recommendation of the prospective candidate, as well as the
Nominating Committee's own knowledge of the candidate. This information may be
supplemented by inquiries to the person making the recommendation or others. The
preliminary determination is based primarily on the need for additional Board
members to fill vacancies or expand the size of the Board and the likelihood
that the prospective nominee can satisfy the criteria and qualifications
described below. If the Nominating Committee determines, in consultation with
the Chairman of the Board and other Board members as appropriate, that
additional consideration is warranted, the Nominating Committee then evaluates
the prospective nominees against the criteria and qualifications set out in the
Nominating Committee's Charter. Such criteria and qualifications include:
- a general understanding of
management, marketing, accounting, finance and other elements relevant to the
Company's success in today's business environment;
- an understanding of the principal
operational, financial and other plans, strategies and objectives of the
Company;
- an understanding of the results of
operations and the financial condition of the Company and its significant
business segments for recent periods;
- an understanding of the relative
standing of the Company's significant business segments vis-à-vis
competitors;
- the educational and professional
background of the prospective candidate;
- the prospective nominee's
standards of personal and professional integrity;
- the demonstrated ability and
judgment necessary to work effectively with other members of the Board to
serve the long-term interests of the stockholders;
- the extent of the prospective
nominee's business or public experience that is relevant and beneficial to the
Board and the Company;
- the prospective nominee's
willingness and ability to make a sufficient time commitment to the affairs of
the Company in order to effectively perform the duties of a director,
including regular attendance at Board and committee
meetings;
8
- the prospective nominee's commitment to the long-term growth and
profitability of the Company; and
- the prospective nominee's ability to qualify as an independent director as
defined in the Nasdaq listing standards.
However, as determining the specific
qualifications or criteria against which to evaluate the fitness or eligibility
of potential director candidates is necessarily dynamic and an evolving process,
the Board believes that it is not always in the best interests of the Company or
its stockholders to attempt to create an exhaustive list of such qualifications
or criteria. Appropriate flexibility is needed to evaluate all relevant facts
and circumstances in context of the needs of the Board and the Company at a
particular point in time.
The Nominating Committee also considers such other relevant factors as it
deems appropriate, including the current composition and diversity of age,
background and experience of the Board, the balance of management and independent directors, the need for Audit
Committee expertise and the evaluations of other prospective nominees. In
connection with this evaluation, the Nominating Committee determines whether to
interview the prospective nominee, and if warranted, one or more members of the
Nominating Committee, and others as appropriate, interview prospective nominees
in person or by telephone. After completing this evaluation and interview, the
Nominating Committee makes a recommendation to the full Board as to the persons
who should be nominated by the Board, and the Board determines the nominees
after considering the recommendation and report of the Nominating Committee.
Leadership Structure of the Board
The Company's Corporate Governance
Guidelines do not require the separation of the roles of Chairman of the Board
and Chief Executive Officer, as the Board believes that an effective board
leadership structure can be highly dependent on the experience, skills and
personal interaction between persons in leadership roles. Since 1992, the
Company has separated the positions of chairman and chief executive officer.
David A. B. Brown serves as the independent chairman and Andrew B. Schmitt
serves as the President and Chief Executive Officer. The Board believes this
structure provides strong leadership for the Board, while also positioning the
Chief Executive Officer as the leader of the Company in the eyes of our
customers, employees and other stakeholders. The Board also believes that this
structure has afforded the Company an effective combination of internal and
external experience, continuity and independence that has served the Board and
the Company well.
Risk Oversight
The Board considers oversight of Layne
Christensen's risk management efforts to be a responsibility of the entire
Board. The Board’s role in risk oversight includes receiving regular reports
from members of senior management on areas of material risk to the Company, or
to the success of a particular project or endeavor under consideration,
including operational, financial, legal and regulatory, strategic and
reputational risks. The full Board (or the appropriate Committee, in the case of
risks that are under the purview of a particular Committee) receives these
reports from the appropriate members of management to enable the Board (or
Committee) to understand the Company's risk identification, risk management, and
risk mitigation strategies. When a report is vetted at the Committee level, the
chairperson of that Committee subsequently reports on the matter to the full
Board. This enables the Board and its Committees to coordinate the Board’s risk
oversight role. The Board also believes that risk management is an integral part
of Layne Christensen's annual strategic planning process, which addresses, among
other things, the risks and opportunities facing the Company.
Part of the Audit Committee’s
responsibilities, as set forth in its charter, is to review with corporate
management, the independent auditors and the internal auditors, if applicable,
any legal matters, risks or exposures that could have a significant impact on
the financial statements and the steps management has taken to minimize the
Company’s exposure. In this
regard, Layne Christensen's Internal Audit Director prepares annually a
comprehensive risk assessment report and reviews that report with the Audit
Committee. This report identifies the material business risks for the Company,
and identifies the Company's internal controls that respond to and mitigate
those risks. The Company's management regularly evaluates these controls, and
the Audit Committee is provided regular updates regarding the effectiveness of
the controls. The Audit Committee regularly reports to the full Board.
9
Other Corporate Governance Matters
All of the members of the Board are
independent within the meaning of SEC regulations and the Nasdaq listing
standards, with the exception of Andrew B. Schmitt and Jeffrey J. Reynolds. Mr.
Schmitt and Mr. Reynolds are considered inside directors because of their
employment as executives of the Company.
Transactions with Management/Related Party
Transactions
The Company considers any transaction
that would require disclosure under Item 404(a) of Regulation S-K to be a
related-party transaction. To date, the Company has not adopted a formal written
policy with respect to related-party transactions. However, the Company has
established an informal, unwritten policy whereby all such related-party
transactions are reported to, and approved by, the full Board of Directors
(other than any interested Director).
The Company was not a party to any
transactions with any directors or executive officers of the Company during the
last fiscal year requiring disclosure under the regulations of the Securities
and Exchange Commission.
On November 25, 2003, the Company adopted
a Code of Business Conduct and Ethics that applies to all directors and
employees of the Company, including the chief executive officer, chief financial
officer and controller. The Code of Business Conduct and Ethics is available
free of charge on the Company's website under the heading "Governance” on the
Investor Relations page
(http://investor.laynechristensen.com/governance.cfm).
COMPENSATION DISCUSSION AND ANALYSIS
Objectives of Compensation Program
The objectives of our executive compensation
program for the five "Named Executive Officers" listed on page 17 (the
"Executives") are:
- to attract and retain top-quality
Executives;
- to tie annual and long-term equity
incentives to achievement of measurable corporate, business unit and
individual performance objectives; and
- to align the Executives'
incentives with stockholder value creation.
To achieve these objectives, the
Compensation Committee (the "Committee") implements and maintains compensation
plans that tie a significant portion of the Executives' overall compensation to
our financial performance. The Committee generally believes that the Company's
total compensation program should be set at, or near, the 50th percentile of
competitive general industry companies.
Role of Compensation
Consultants
The Committee engaged the third-party
compensation consulting firm of Towers Perrin in 2007 and 2008. In its June 2007
report, Towers Perrin (i) performed a competitive review and analysis of base
salary and other components of the Company's compensation program, relative to
survey market data and the Company's identified peer group, and (ii) advised the
Committee on its annual incentive plan design. In its August 2008 report, Towers
Perrin built upon its 2007 analysis, assessing the competitiveness of pay for
the top eight members of the corporate staff, as well as 13 executive positions
at the business unit level.
In its 2007 study, Towers Perrin performed a
competitive review and analysis of the base salary and other components of the
Company’s compensation program. Towers Perrin compiled actual competitive salary
data from two sources: general industry survey data from Towers Perrin's 2006
Executive Compensation Database, and proxy data from peer group companies
selected from industries comparable to the Company.
In its 2008 study, Towers Perrin compiled
actual competitive salary data from two sources: general industry survey data
from Towers Perrin's 2007 Executive Compensation Database, and proxy data from
an updated list of peer group companies selected from industries comparable to
the Company. The 2008 Towers Perrin report contained detailed information about
base salaries, total cash compensation (base salary plus annual incentives),
target annual incentives (as a percentage of base salary), the value of
long-term incentives, and total direct compensation for all of the Executives,
as well as Towers Perrin’s overall findings and recommendations. Towers Perrin
also compared year-over-year changes in market data for Executives who were
included in the 2007 study. The Committee considered the information and
recommendations of Towers Perrin, but all decisions on executive compensation
were made solely by the Committee.
10
Towers Perrin advised the Committee to place more emphasis on the general
industry survey data, rather than the Company’s peer group, when making
compensation decisions for the Executives because (i) the Company’s diverse mix
of business and holding-company-type structure is difficult to capture within a
peer group; and (ii) the general industry data provides a larger sample of
companies and can be adjusted to the Company’s size using regression analysis.
Towers Perrin told the Committee, however, that the peer group data provides
valuable additional perspective on compensation and human resource issues, such
as severance policies and succession planning.
While compiling its June 2007 and August 2008
reports, Towers Perrin took direction from the Committee, but also worked with
the Company's Vice President of Human Resources to learn about our business
operations and the job responsibilities of each of the Executives. For its June
2007 report, Towers Perrin also conducted background interviews with the
Executives to obtain additional background information about the business and
operations of the Company. Mr. Schmitt and Mr. Fanska also attended Committee
meetings in fiscal 2008 where Towers Perrin was present.
Due to the significant work that Towers Perrin
had recently performed and the Committee's decision to generally not make any
changes to base salaries for the Executives for fiscal 2010, the Committee
engaged Towers Perrin to provide only limited advice with respect to the
Executive Incentive Compensation Plan for fiscal 2010. Towers Perrin recommended
that the Committee should set the performance targets and payout amounts under
the Executive Incentive Compensation Plan in a manner consistent with prior
years.
Role of the Peer Group
In its August 2008 report, Towers Perrin
provided the Committee with proxy data for 21 peer companies. The peer group
data provided additional insights regarding competitive pay data and pay mix.
Towers Perrin selected the group of peer companies on the basis of comparable
size and operating activities to the Company. All of the peer group companies
had a significant portion of revenues in drilling or drilling-related
businesses. The peer group companies were:
Hecla Mining Co. |
SJW Corp. |
Coeur d'Alene Mines Corp. |
Sterling Construction Co. Inc. |
Stillwater Mining Co. |
Insituform Technologies Inc. |
Parker Drilling Co. |
AMCOL International Corp. |
St. Mary Land & Exploration Co. |
Penn Virginia Corp. |
Grey Wolf Inc. |
Unit Corp. |
Cimarex Energy Co. |
Newfield Exploration Co. |
Calgon Carbon Corp. |
Team Inc. |
Michael Baker Corp. |
Perini Corp. |
Pioneer Drilling Co. |
Helmerich & Payne Inc. |
Southwest Water Co. |
|
Since the Committee did not
generally increase the Executive's base salaries or incentive compensation for
fiscal 2010, the Committee determined that it was not necessary to engage Towers
Perrin to provide a peer group comparison during the fiscal year.
Role of Executive Officers
Mr. Schmitt submitted written compensation
recommendations to the Committee for each of the Executives. Based on the
general business climate and outlook for the Company, Mr. Schmitt recommended
that the Company make no salary increases for the second year in a row for any
Executive, other than Mr. Reynolds as discussed below under "—Compensation
Components—Base Salary.” Mr. Schmitt also recommended that the Company's
long-term equity incentive grants be comprised entirely of stock options in
order to provide a more competitive incentive for the Executives in the current
economic environment. Mr. Schmitt regularly attended meetings of the Committee
in 2009 and 2010, but is not a member of the Committee and does not vote on
Committee matters. Mr. Schmitt, however, was not present for certain portions of
Committee meetings, such as when the Committee held executive sessions or
discussed his individual compensation.
11
Compensation Components
Our compensation program consists of
the following components:
Base Salary.
The Committee recommends, and the Board approves, a base salary for each
Executive based on his scope of responsibilities, taking into account
competitive market compensation paid by other companies for similar positions.
The Committee annually reviews base salaries, and recommends adjustments from
time to time to realign our salaries with market levels after taking into
account individual performance, responsibilities, experience, autonomy,
strategic perspectives and marketability, as well as the recommendation of the
chief executive officer.
Generally, the Committee believes that Executive base salaries should be
targeted at, or slightly above, the 50th percentile for
executives at competitive general industry companies in similar positions and
with similar responsibilities. As shown in the table below, however, because of
current challenging economic conditions and the outlook for the Company, the
Committee, based on Mr. Schmitt's recommendation, recommended to the Board that
fiscal 2010 base salaries of the Executives not be increased, except for Mr.
Reynolds. With respect to Mr. Reynolds, Mr. Schmitt recommended a salary
increase effective July 1, 2009, based on Towers Perrin’s prior year
recommendation as to the appropriate salary for Mr. Reynolds, his increased job
responsibilities resulting from recent business acquisitions and the commencement of his participation in
the Executive Incentive Compensation Plan for fiscal year 2010 in lieu of the
Reynolds, Inc. Cash Bonus Plan. The Committee agreed with Mr. Schmitt's
recommendation and recommended to the Board a salary increase for Mr. Reynolds.
The Board approved the Committee's recommendations with respect to the
Executive's salaries for fiscal 2010. The table below sets forth the Executives
base salaries for 2009 and 2010.
Executive |
|
Fiscal 2009 |
|
Fiscal 2010 |
Andrew B. Schmitt, President and Chief
Executive Officer |
|
$620,000 |
|
$620,000 |
Jerry W. Fanska, Senior Vice President—Finance |
|
$365,000 |
|
$365,000 |
Jeffrey J. Reynolds, Executive Vice
President of Operations |
|
$247,000 |
|
$350,000 |
Steven F. Crooke, Senior Vice President—General Counsel |
|
$310,000 |
|
$310,000 |
Eric R. Despain, Senior Vice President
and President, Mineral Exploration Division |
|
$300,000 |
|
$300,000 |
Annual
Incentives.
Targets for Fiscal 2010
Our Executive Incentive Compensation Plan is
intended to provide additional incentives for Executives to promote the best
interests and profitable operation of the Company. All of the Executives
participated in the Executive Incentive Compensation Plan in fiscal
2010.
The Committee believes, based on competitive
market information provided by Towers Perrin, that the award determination
method under the Executive Incentive Compensation Plan should provide larger
increases in bonus compensation (expressed as a percentage of base salary) if
the Executives exceed established targets and larger decreases in bonus
compensation if the Executives fail to meet established targets. In setting the
targets, the Committee considered information in the Company’s business plans
and preliminary recommendations from Mr. Schmitt. For Messrs. Schmitt, Fanska,
Reynolds and Crooke, the Committee based the annual incentive on the achievement
of targeted Company consolidated earnings before interest and taxes (“EBIT”) of
$38,615,000. For Mr. Despain, the Committee based the annual incentive on the
achievement of targeted mineral exploration division EBIT of
$9,493,000.
If Mr. Schmitt achieved 100% of his target
goal, his incentive award under the plan would be 80% of his base salary. If Mr.
Schmitt achieved more than 100% of his target goal, then for each 1% increase
above the target, Mr. Schmitt’s base salary percentage would be increased by 5%
but his base salary percentage cannot be increased by more than 100%. If Mr.
Schmitt achieved less than 100% of his target goal, then for each 1% decrease
below the target, the 80% base salary percentage would be decreased by 2.5%, but
if Mr. Schmitt achieves 80% or less of the target, his base salary percentage
would be zero.
12
For each Executive other than Mr. Schmitt, if
he achieved 100% of his target goals, his incentive award under the plan would
be 60% of his base salary. If he achieved more than 100% of his target goals,
then for each 1% increase above the target goals, the Executive’s base salary
percentage would be increased by 5%, but such base salary percentage cannot be
increased by more than 100%. If such Executive achieved less than 100% of his
target goals, then for each 1% decrease below the targets, the 60% base salary
percentage would be decreased by 2.5%; provided, however that if the Executive
achieved 80% or less of the targets, his base salary percentage would be zero.
Notwithstanding the foregoing, the amount of
the incentive compensation award for fiscal 2010 for each Executive under the
Executive Incentive Compensation Plan could have been increased or decreased in
the sole discretion of the Committee (acting on behalf of the Board) by an
amount not greater than one third of the incentive compensation award.
Incentive compensation awards may be paid in
the form of cash, common stock or a combination of both, in the discretion of
the Committee (acting on behalf of the Board), and are based on an Executive's
performance during the fiscal year as compared to the targets, although
Executives may choose to defer all or a portion of their incentive compensation
awards under this plan. This deferral option is separate from deferrals that may
be made under the Company's Key Management Deferred Compensation Plan described
below. If an Executive elects to defer such an award under this plan, the
Executive will not be entitled to receive his deferred amount for six months
after separation from service. In the event an Executive's employment with the
Company terminates (for reasons other than retirement, disability or death) said
termination being instituted by the Executive or by the Company for cause, prior
to the close of a fiscal year, such Executive shall not be entitled to any
incentive compensation award for that fiscal year.
If an Executive’s employment with the Company
terminates, the Executive will not be entitled to an incentive compensation
award for that fiscal year, unless such termination is by the Company without
cause or because of the Executive's retirement, disability or death. In such
event, the Executive shall be entitled to an incentive compensation award, pro
rated as of the date of termination.
Awards for Fiscal 2010
In January and March of 2010, the Committee
discussed fiscal 2010 awards under the Executive Incentive Compensation Plan.
The Committee discussed the impact of two items that negatively affected the
Company's performance that were largely outside the control of management: (i)
low natural gas prices during fiscal 2010, which resulted in a non-cash
impairment charge to the Company's earnings and (2) the expense due to the
termination during fiscal 2010 of the Company's defined benefit pension plan for
hourly employees.
The impairment charge resulted from the
application of the “ceiling test” under the full cost method of accounting for
oil and gas operations. Under full cost accounting requirements, the carrying
value of the Company’s oil and gas properties is limited to the present value of
expected after-tax net future cash flows of proved reserves using a 10% discount
rate based on average monthly prices during the period and costs at the end of
the period, plus the cost of unevaluated oil and gas properties (i.e., the cost
center ceiling).
A ceiling test charge occurs when the carrying
value of the oil and gas properties exceeds the cost center ceiling. The
Company’s impairment charge was primarily attributable to lower average monthly
prices for natural gas for fiscal 2010 compared to natural gas prices at January
31, 2009. The ceiling test impairment charge is a non-cash item.
During fiscal 2010, the Company decided to
terminate its frozen defined benefit pension plan for its hourly workers. At the
time of termination, the pension plan was under-funded and the Company incurred
an expense in order to fully fund the defined benefit pension plan and to
recognize previously deferred costs as part of the termination.
Mr. Fanska advised the Committee that without
the ceiling test impairment charge and the expense associated with the
termination of the defined benefit pension plan, each of Messrs. Schmitt,
Fanska, Reynolds and Crooke achieved 92.2% of his target goal. With the ceiling
test impairment charge and the expense associated with the termination of the
defined benefit pension plan, none of Messrs. Schmitt, Fanska, Reynolds or
Crooke would have achieved 80% of their target goals and as a result would not
receive a bonus. Mr. Despain was not impacted by the ceiling test impairment
charge or the expense associated with the termination of the defined benefit
pension plan, because his targets were based solely on the
performance of the Company's mineral exploration division. Mr. Despain did not
achieve 80% of his target goals even if those two items were ignored and as a
result would not receive a bonus.
13
The Committee then considered and discussed
the ceiling test impairment charge, the expense associated with the termination
of the defined benefit pension plan, the Company's EBIT as measured against the
Company's business plan, and the performance of the Executives, as described by
Mr. Schmitt. The Committee then considered and agreed to recommend to the Board
the payment of a discretionary bonus to the Executives which in the aggregate
approximated the bonus they would have earned if the Company did not have a
ceiling test impairment charge or the expense associated with the termination of
the defined benefit pension plan, since those items were largely outside the
Executive's control. Mr. Schmitt noted the contributions of Mr. Despain in
managing the economic downturn and moving quickly to reduce costs during fiscal
2010 and recommended that the Committee authorize a discretionary bonus to Mr.
Despain. The Committee discussed and accepted this proposal and then unanimously
agreed to recommend that the Board approve the payment of discretionary bonuses
in the table below.
The Board approved the Committee’s recommended
discretionary bonus payments for fiscal 2010 on March 26, 2010, and the
Executives received the following amounts in cash (except for Messrs. Reynolds
and Fanska, who deferred a portion of their bonuses, as explained in footnote
(2) to the Summary Compensation Table on page 18 below):
Executive |
Total Bonus Award |
Andrew B. Schmitt, CEO |
$363,362 |
Jeffrey J. Reynolds, Executive Vice President of
Operations |
$140,505 |
Jerry W. Fanska, CFO |
$176,465 |
Steven F. Crooke, General
Counsel |
$149,874 |
Eric R. Despain, Senior Vice
President |
$
50,000 |
Equity Compensation
The Committee believes that aligning the
interests of stockholders and its Executives is achieved through ownership of
stock-based awards, such as stock options and restricted stock, which expose
Executives to the risks of downside stock prices and provide an incentive for
Executives to maximize stockholder value.
2006 Equity Incentive Plan
Awards under the Company's 2006 Equity Plan
are designed to encourage Executives to acquire a proprietary and vested
interest in the growth and performance of the Company, as well as to assist the
Company in attracting and retaining Executives by providing them with the
opportunity to participate in the success and profitability of the Company. The
2006 Equity Plan permits the grant of stock options, stock appreciation rights,
restricted stock, restricted stock units, performance shares and performance
units.
Fiscal 2010 Grants under 2006 Equity
Plan
In fiscal 2008, Towers Perrin recommended to
the Committee that the Company adopt a framework to make equity grants on an
annual basis to certain key employees. The Committee would grant awards of both
stock options and performance-contingent restricted stock in amounts initially
established (but subject to the Committee's discretion to modify) on objective
long-term incentive plan targets with 50% of the total long-term incentive
target level of award made in stock options and 50% of the total long-term
incentive level of award made in performance-contingent restricted
stock.
Towers Perrin recommended that the stock
options vest ratably over three years, while the performance-contingent
restricted stock have a three-year cliff vesting if the Executives achieve
certain preestablished performance metrics. Towers Perrin also recommended that
the performance metrics be tied to the achievement of a corporate return on net
assets ("RONA") threshold recommended by the Committee and approved by the Board
based on average RONA over the entire three-year period beginning on February 1
of the year the performance-contingent restricted stock is granted.
At a meeting in January 2009, the Committee
reviewed the recommended proposals provided by Towers Perrin and the
recommendations of and modifications proposed by management of the Company
(including Mr. Schmitt). The Committee determined that because of current
economic conditions and in order to provide a competitive incentive to the
Executives, the entire long-term incentive award would be granted in the form of
stock options and that the amount of the awards for fiscal 2010 would be the
same as for fiscal 2009.
14
Stock Options. The Committee recommended, and the Board
approved, grants of nonqualified stock options under the 2006 Equity Plan to the
following Executives for the purchase of that number of shares of Company common
stock determined by dividing the Option Long-Term Incentive Amount set forth
opposite the respective Executive's name by the value of such option determined
by the Company's option pricing model as of February 1, 2009 (the date of
grant).
Name of Executive |
|
|
Option Long-Term Incentive
Amount |
A.B. Schmitt |
|
$ |
880,000 |
|
J.W. Fanska |
|
$ |
440,000 |
|
J.J. Reynolds |
|
$ |
410,000 |
|
S.F. Crooke |
|
$ |
325,000 |
|
E.R. Despain |
|
$ |
250,000 |
|
Due to a limited number of shares being
available for issuance under the 2006 Equity Plan, each such grant was prorated
based on each Executive's individual award of stock options as compared to the
total award of long-term equity compensation to all employees and the
non-employee directors. As a result, the Executives initially received stock
option shares for approximately 50% of the incentive award amounts shown above.
Following the stockholders approval at the 2009 Annual Meeting of an amendment
to the 2006 Equity Plan to increase the number of shares available for issuance,
the Company made additional stock option grants in June 2009 so that the
Executives received the full value of their incentive awards.
The Committee recommended, and the Board
approved, an exercise price for such options in an amount equal to the Fair
Market Value (as defined in the 2006 Equity Plan) of the Company's common stock
as of the date of grant, with vesting to occur over a period of three (3) years
from the date of grant. The nonqualified stock options granted under the 2006
Equity Plan expire 10 years from the date of grant. If the Executive's
employment is terminated for cause, the option will be forfeited as of the time
of the Executive's removal. If the Executive resigns or is terminated by the
Company without cause, the Executive may exercise vested options for a period of
30 days following his termination. If the Executive dies or is disabled, the
option may be exercised for a period of 90 days following termination of
employment. Upon an Executive's qualified retirement (defined as a termination
of all employment after age 60 and after having accrued at least five years of
service with the Company), all unvested stock options would become exercisable
and would continue to be exercisable until the earlier of the third anniversary
of the Executive's retirement or the expiration of the option's original
term.
Although stock options represent fixed Company
costs regardless of the actual value to Executives, the Committee believed that
in the current economic environment, stock options would provide a more
effective incentive to the Executive than performance-vesting restricted
shares.
Benefits.
Our employees who meet minimum service requirements are entitled to receive
medical, dental, life and short-term and long-term disability insurance benefits
and may participate in a capital accumulation plan, as described below. Such
benefits are provided equally to all Company employees, other than where
benefits are provided pro rata based on the respective Executive's salary (such
as the level of disability insurance coverage).
Capital Accumulation Plan. The Company has adopted a capital
accumulation plan (the "Capital Accumulation Plan"). Each of the Company's
executive officers, including the Named Executive Officers, and substantially
all other employees of the Company are eligible to participate in the Capital
Accumulation Plan. The Capital Accumulation Plan is a defined contribution plan
qualified under Section 401, including Section 401(k), of the Internal Revenue
Code of 1986, as amended (the "Code"). The Capital Accumulation Plan provides
for two methods of Company contributions, a Company matching contribution tied
to and contingent upon participant deferrals and a Company profit sharing
contribution which is not contingent upon participant deferrals. The amount, if
any, of Company paid contributions, both matching and profit sharing, for each
fiscal year under the Capital Accumulation Plan is determined by the Board of
Directors in its discretion. Each eligible employee meeting certain service
requirements and electing to defer a portion of his or her compensation under
the Capital Accumulation Plan participates in the Company's matching
contribution program pursuant to a formula as designated by the Board of
Directors. Currently, the Company makes a matching contribution that is equal to
100% of a participant's salary deferrals that do not exceed 3% of the
participant's compensation plus 50% of a participant's salary deferrals between
3% and 5% of the participant's compensation. This form of matching contribution
qualifies as what is known as a "safe harbor" matching contribution under the
Employee Retirement Income Security Act of 1974. In addition, each eligible
employee meeting certain service requirements participates in Company profit
sharing contributions to the Capital Accumulation Plan in the proportion his or
her eligible compensation bears to the aggregate compensation of the group
participating in the Capital Accumulation Plan. At the option of the Board of
Directors, all or any portion of Company contributions to this plan may be made
in the Company's common stock. Furthermore, each participant can voluntarily
contribute, on a pre-tax basis, a portion of his or her compensation (which
cannot exceed $16,500 for participants who are 49 or younger, or $22,000 for
participants who are 50 or older, for the calendar year 2009) under the Capital
Accumulation Plan. A participant's account will be placed in a trust and
invested at the participant's direction in any one or more of a number of
available investment options. Each participant may receive the funds in his or
her Capital Accumulation Plan account upon termination of employment. For
services rendered in fiscal 2010, total Company contributions under the Capital
Accumulation Plan of $9,778, $10,065, $9,800, $9,800 and $9,800 accrued for the
accounts of Messrs. Schmitt, Fanska, Reynolds, Crooke and Despain,
respectively.
15
Deferred Compensation. The Company's Key Management Deferred
Compensation Plan was designed to provide additional retirement benefits and
income tax deferral opportunities for a select group of management and highly
compensated employees. The plan allows such key executives, including the
Executives, to defer the receipt of up to 25% of base salary and 50% of
performance-based awards. The Company matches contributions to this plan in an
amount determined annually by the Committee, generally based on recommendations
from Company management. Currently, the matching contribution is 100% of
deferrals up to $5,000. In addition, the Company may make contributions on a
discretionary basis. Company contributions to the plan are subject to a
five-year vesting schedule, with 50% of all such contributions becoming vested
after three years of completed plan participation and 100% of all such
contributions becoming vested after five years of completed plan participation.
However, Company contributions become fully vested if a participant is
involuntarily terminated by the Company within one year after a change of
control of the Company. If a plan participant is not employed by the Company as
of the last day of the plan year other than by reason of his or her retirement,
death or disability, the Company contributions, if any, for such plan year shall
be zero. In the event of an Executive's retirement, disability or death, he or
she shall be credited with the Company contribution, if any, for such plan
year.
The deferred compensation plan is a
nonqualified and unfunded plan, and participants have only an unsecured promise
from the Company to pay the amounts when they become due from the general assets
of the Company. The Committee offers this benefit to provide Executives with an
opportunity to save, on a tax deferred basis, amounts in addition to what they
can save under the Company's qualified retirement plans for retirement or future
dates. The Committee believes this plan is important as a retention and
recruitment tool because most of the companies with which the Company competes
for executive talent provide a deferral plan for their executives.
Perquisites.
The Company believes its executive compensation program described above is
sufficient for attracting talented executives and that providing significant
perquisites is neither necessary nor in the stockholders' best interests.
Accordingly, none of the executive officers received any perquisites that have a
value in the aggregate in excess of $10,000 during the fiscal year ended January
31, 2010.
Adjustments to Compensation
Plan
The Company has no formal policy on
recapturing salary or incentive awards (equity or cash) granted to an Executive,
in the event that the Company were to have to restate its financial statements
(whether arising from conduct or actions of the Executive, or otherwise).
However, the discretion retained by the Committee to make adjustments in all
types of compensation, permits it to decrease an Executive's compensation under
such circumstances if such compensation has not already been paid or become
final. There is currently no procedure to recover ("claw back") an element of
compensation that has been paid and become final. To date, the Company has never
been required to restate its financial statements.
Tax and Accounting Treatment of
Compensation
Deductibility of Compensation. The Committee has taken, and it intends to
continue to take, reasonable steps necessary to assure the Company's ability to
deduct for federal tax purposes compensation provided to senior executives.
However, such steps may not always be practical or consistent with the
Committee’s compensation objectives. Given that the earnings limit for
deductibility has remained fixed since 1993, and the value of some compensation
elements cannot be determined until year-end, there are circumstances in which
some executive compensation may not meet tax deductibility requirements. The
Company can deduct all of the compensation shown in the Summary Compensation
Table for fiscal 2010, excluding the value of equity-based awards which are
subject to taxation in a later period.
16
Nonqualified Deferred Compensation. Certain of the Company's nonqualified
compensation and benefits arrangements, incentive programs and corporate
practices (such as severance, relocation and expense reimbursements) are
considered nonqualified deferred compensation and subject to IRC Section 409A
and the related regulations. In general, Code Section 409A, restricts the timing
and manner of payment (as well as the timing of participant elections) under
these types of taxable compensation programs. The Company has amended these
arrangements, programs and practices to cause them to be in compliance with the
statutory and regulatory provisions. The changes have no financial impact on the
Company nor any material impact on the way in which it compensates the
Executives.
Accounting for Stock-Based Compensation. The Company accounts for stock-based
compensation in accordance with the requirements of FASB ASC Topic 718, which
requires the Company to expense the estimated value of certain stock-based
compensation.
Stock Ownership Guidelines and
Hedging Policies
The Board has not adopted stock ownership
guidelines for executive officers or a policy with respect to hedging the
economic risks of stock ownership.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and
discussed with management the Compensation Discussion and Analysis included in
this Proxy Statement beginning at page 10.
Based on the review and discussion with
management, the Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in this Proxy
Statement for the Company's 2010 Annual Meeting of Stockholders and be
incorporated by reference into the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 2010.
Respectfully submitted by the
members of the Compensation Committee of the Board of Directors:
Anthony B. Helfet,
Chairman
David A.B. Brown, Rene J. Robichaud, Nelson Obus
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation
Committee are set forth in the preceding section. During the most recent fiscal
year, no Layne Christensen executive officer served on the compensation
committee (or equivalent), or the board of directors, of another entity whose
executive officer(s) served on the Company's Compensation
Committee.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table sets forth for
the fiscal years ended January 31, 2010, 2009 and 2008, respectively, the
compensation of the Company's chief executive officer, chief financial officer
and of each of the Company's three other most highly compensated executive
officers whose remuneration for the fiscal year ended January 31, 2010, exceeded
$100,000 for services to the Company and its subsidiaries in all capacities
(collectively, the "Named Executive Officers"):
17
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
Value and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Compen- |
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Compen- |
|
sation |
|
Compen- |
|
|
|
|
|
Fiscal |
|
Salary(1) |
|
Bonus(2) |
|
Awards(3) |
|
Awards(3) |
|
sation(4) |
|
Earnings |
|
sation(6)(7) |
|
Total |
Name and Principal
Position |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
Andrew B. Schmitt |
|
2010 |
|
$ |
620,000 |
|
$ |
363,362 |
|
|
— |
|
$ |
879,761 |
|
|
— |
|
$ |
889,130 |
|
$ |
17,639 |
|
$ |
2,769,892 |
President, Chief Executive |
|
2009 |
|
|
618,462 |
|
|
— |
|
$ |
439,983 |
|
|
440,000 |
|
$ |
562,437 |
|
|
353,106 |
(5) |
|
26,047 |
|
|
2,440,035 |
Officer and Director |
|
2008 |
|
|
519,770 |
|
|
— |
|
|
633,900 |
|
|
728,000 |
|
|
645,000 |
|
|
182,030 |
|
|
26,428 |
|
|
2,735,128 |
|
Jerry W. Fanska |
|
2010 |
|
$ |
365,000 |
|
$ |
176,465 |
|
|
— |
|
$ |
439,880 |
|
|
— |
|
|
— |
|
$ |
15,835 |
|
$ |
997,180 |
Senior Vice President— |
|
2009 |
|
|
363,231 |
|
|
— |
|
$ |
219,974 |
|
|
219,992 |
|
$ |
248,334 |
|
|
— |
|
|
28,537 |
|
|
1,080,067 |
Finance and Treasurer |
|
2008 |
|
|
249,885 |
|
|
— |
|
|
316,950 |
|
|
364,000 |
|
|
238,669 |
|
|
— |
|
|
26,529 |
|
|
1,196,033 |
|
Jeffrey J. Reynolds |
|
2010 |
|
$ |
319,826 |
|
$ |
140,505 |
|
|
— |
|
$ |
409,881 |
|
|
— |
|
|
— |
|
$ |
16,168 |
|
$ |
886,380 |
Executive Vice President |
|
2009 |
|
|
252,109 |
|
|
— |
|
|
— |
|
|
— |
|
$ |
375,000 |
|
|
— |
|
|
24,734 |
|
|
651,843 |
of Operations and Director |
|
2008 |
|
|
246,350 |
|
|
— |
|
|
— |
|
|
— |
|
|
375,000 |
|
|
— |
|
|
24,598 |
|
|
645,948 |
|
Steven F. Crooke |
|
2010 |
|
$ |
310,000 |
|
$ |
149,874 |
|
|
— |
|
$ |
324,908 |
|
|
— |
|
|
— |
|
$ |
16,373 |
|
$ |
801,155 |
Senior Vice President— |
|
2009 |
|
|
308,692 |
|
|
— |
|
$ |
162,481 |
|
|
162,493 |
|
$ |
210,914 |
|
|
— |
|
|
25,257 |
|
|
869,836 |
General Counsel and Secretary |
|
2008 |
|
|
224,885 |
|
|
— |
|
|
316,950 |
|
|
364,000 |
|
|
214,802 |
|
|
— |
|
|
25,100 |
|
|
1,145,737 |
|
Eric R. Despain |
|
2010 |
|
$ |
300,000 |
|
$ |
50,000 |
|
|
— |
|
$ |
249,934 |
|
|
— |
|
|
— |
|
$ |
19,156 |
|
$ |
619,090 |
Senior Vice President |
|
2009 |
|
|
299,230 |
|
|
— |
|
$ |
97,488 |
|
|
97,486 |
|
$ |
272,098 |
|
|
— |
|
|
27,286 |
|
|
793,588 |
|
|
2008 |
|
|
249,885 |
|
|
— |
|
|
316,950 |
|
|
— |
|
|
250,000 |
|
|
— |
|
|
26,346 |
|
|
843,181 |
____________________
(1) |
|
Reflects salary earned for the fiscal years ended January 31, 2010,
2009 and 2008, respectively. The salary amounts in 2010 for Messrs,
Schmitt, Fanska, Reynolds, Crooke, and Despain include amounts deferred
under the Company’s Deferred Compensation Plan of $5,538, $84,616,
$30,774, $5,000 and $10,000, respectively. The salary amounts in 2009 for
Messrs. Schmitt, Fanska, Reynolds, Crooke, and Despain include amounts
deferred under the Company's Deferred Compensation Plan of $17,508,
$90,807, $25,211, $14,231 and $14,615, respectively. The salary amounts in
2008 for Messrs. Schmitt, Fanska, Reynolds, Crooke, and Despain include
amounts deferred under the Company's Deferred Compensation Plan of
$15,046, $62,472, $24,635, $15,000 and $15,000, respectively. All amounts
deferred are also reflected in the Nonqualified Deferred Compensation
table appearing on page 21 in this Proxy Statement. |
|
|
|
(2) |
|
The
incentive compensation paid with respect to fiscal 2010 is reported in the
“Bonus” column rather than the “Non-Equity Incentive Plan Compensation”
column since the Named Executive Officers did not meet the target
performance goals set under the Executive Incentive Compensation Plan due
to the ceiling test impairment charge and the expense associated with the
settlement of the terminated defined benefit pension plan. As a result,
the incentive awards for fiscal 2010 were discretionary bonuses, as
explained in detail in the Compensation Discussion and Analysis beginning
on page 10 of this Proxy Statement. The incentive amounts in 2010 for
Messrs. Fanska and Reynolds include amounts deferred under the Company’s
Deferred Compensation Plan of $44,116 and $70,253,
respectively. |
|
(3) |
|
Amounts reported in the Stock Awards and Option Awards columns
represent the aggregate grant date fair value of such awards, computed in
accordance with FASB ASC Topic 718. Pursuant to Securities and Exchange
Commission rules, the amounts shown assume performance conditions that
affect the vesting of awards granted to the named executive officers will
be met, which the Company determined was the probable outcome on the grant
date. However, the Company has subsequently determined the achievement of
the performance conditions affecting the vesting of the fiscal 2009 stock
awards is unlikely and, as a result, such awards are unlikely to vest.
These amounts do not include an estimate of forfeitures related to
time-based vesting conditions, and assume that the named executive officer
will perform the requisite service to vest in the award. For assumptions
used in determining these values, refer to Note 15 of the Company’s
financial statements in the Company’s Annual Report on Form 10-K for the
year ended January 31, 2010, as filed with the Securities and Exchange
Commission. For additional information regarding stock awards for the
named executive officers, refer to the “Grants of Plan-Based Awards in
Last Fiscal Year” and “Outstanding Equity Awards at Fiscal Year End”
tables included in this Proxy Statement beginning on page
20. |
18
(4) |
|
Reflects incentive plan compensation earned for the fiscal years
ended January 31, 2010, 2009 and 2008, respectively. The incentive amounts
in 2009 for Messrs. Fanska and Reynolds include amounts deferred under the
Company's Deferred Compensation Plan of $124,167 and $187,500,
respectively. The incentive amounts in 2008 for Messrs. Fanska and
Reynolds include amounts deferred under the Company's Deferred
Compensation Plan of $119,335 and $187,500, respectively. All amounts
deferred are also reflected in the Nonqualified Deferred Compensation
table appearing on page 21 in this Proxy Statement. |
|
(5) |
|
During
the fiscal year ended January 31, 2009, the pension measurement date was
changed from December 31 to January 31 in accordance with FASB Accounting
Standards Codification (“ASC”) Topic 715 creating a thirteen month change
in pension value equal to $382,531. The $353,106 amount reported was
calculated by multiplying $382,531 by 12/13 to arrive at a twelve month
change in pension value. |
|
(6) |
|
Excludes perquisites and other benefits, unless the aggregate
amount of such compensation exceeds $10,000. |
|
(7) |
|
All
Other Compensation for the fiscal year ended January 31, 2010, includes
Layne Christensen contributions in the amounts of $9,778, $10,065, $9,800,
$9,800 and $9,800, which accrued during such fiscal year for the accounts
of Messrs. Schmitt, Fanska, Reynolds, Crooke and Despain, respectively,
under the Company's Capital Accumulation Plan and the cost of term life
insurance paid by the Company for the benefit of Messrs. Schmitt, Fanska,
Reynolds, Crooke and Despain in the amounts of $2,322, $5,386, $578,
$1,573 and $4,356, respectively; and Company matching contributions to the
accounts of Messrs. Schmitt, Fanska, Reynolds, Crooke and Despain under
the Company’s Deferred Compensation Plan in the amounts of $5,539, $384,
$5,790, $5,000 and $5,000, respectively. |
Grants of Plan-Based Awards during Fiscal
2010
The following table sets forth
information with respect to each Named Executive Officer concerning grants
during the fiscal year ended January 31, 2010, of awards under both the
Company's equity and non-equity plans.
|
|
|
|
Payouts Under Non-Equity
Incentive |
|
Estimated Future Payouts Under |
|
All Other |
|
All Other |
|
|
|
|
|
|
Plan
Awards(1) |
|
Equity
Incentive Plan Awards |
|
Stock |
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Awards: |
|
Exercise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Number of |
|
or Base |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of |
|
Securities |
|
Price of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or |
|
Underlying |
|
Option |
|
|
|
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
Units |
|
Options |
|
Awards |
Name |
|
Grant Date |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
(#) |
|
(#) |
|
($/Sh) |
Andrew B. Schmitt |
|
02/01/09 |
|
$ |
248,000 |
|
$ |
496,000 |
|
$ |
992,000 |
|
— |
|
— |
|
— |
|
— |
|
57,612 |
|
$ |
15.78 |
|
|
06/03/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,074 |
|
$ |
21.99 |
Jerry W. Fanska |
|
02/01/09 |
|
$ |
109,500 |
|
$ |
219,000 |
|
$ |
438,000 |
|
— |
|
— |
|
— |
|
— |
|
28,806 |
|
$ |
15.78 |
|
|
06/03/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,537 |
|
$ |
21.99 |
Jeffrey J. Reynolds |
|
02/01/09 |
|
$ |
105,000 |
|
$ |
210,000 |
|
$ |
420,000 |
|
— |
|
— |
|
— |
|
— |
|
26,842 |
|
$ |
15.78 |
|
|
06/03/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,477 |
|
$ |
21.99 |
Steven F. Crooke |
|
02/01/09 |
|
$ |
93,000 |
|
$ |
186,000 |
|
$ |
372,000 |
|
— |
|
— |
|
— |
|
— |
|
21,277 |
|
$ |
15.78 |
|
|
06/03/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,476 |
|
$ |
21.99 |
Eric R. Despain |
|
02/01/09 |
|
$ |
90,000 |
|
$ |
180,000 |
|
$ |
360,000 |
|
— |
|
— |
|
— |
|
— |
|
16,367 |
|
$ |
15.78 |
|
|
06/03/09 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
— |
|
— |
|
8,828 |
|
$ |
21.99 |
____________________
(1) |
|
The amounts
reported under the Threshold, Target and Maximum columns in this table are
the possible incentive compensation awards calculated in accordance with
the provisions set forth in the Executive Incentive Compensation Plan. The
Threshold column reports the awards that would have been paid if 80% of
the performance targets were met. If less than 80% of a performance target
is met, no incentive award is paid with respect to that target. The Target
column reports the awards that would have been paid if 100% of the
performance targets were met and the Maximum column reports the maximum
awards available under the plan regardless of the amount by which the
performance targets are exceeded. For fiscal 2010, the minimum performance
threshold set by the Board was not met. As discussed in detail in the
Compensation Discussion and Analysis beginning on page 10 of this Proxy
Statement, the Named Executive Officers did receive discretionary bonuses
for their performance in Fiscal 2010. |
19
Outstanding Equity Awards at Fiscal
Year-End
The following table lists all
outstanding equity awards held by our Named Executive Officers as of January 31,
2010.
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
Incentive |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Plan Awards: |
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Market Value |
|
|
|
|
|
|
|
|
Plan |
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
or Payout |
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
Number |
|
Market |
|
Number of |
|
Value of |
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
of Shares |
|
Value of |
|
Unearned |
|
Unearned |
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
or Units |
|
Shares or |
|
Shares, Units |
|
Shares, Units |
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
of Stock |
|
Units of |
|
or Other |
|
or Other |
|
|
Unexercised |
|
Unexpired |
|
Unexercised |
|
Option |
|
Option |
|
that Have |
|
Stock that |
|
Rights that |
|
Rights that |
|
|
Options (#) |
|
Options (#) |
|
Unearned |
|
Exercise |
|
Expiration |
|
Not |
|
Have Not |
|
Have Not |
|
Have Not |
Name |
|
Exercisable |
|
Unexercisable |
|
Options (#) |
|
Price
($) |
|
Date |
|
Vested (#) |
|
Vested
($) (6) |
|
Vested (#) |
|
Vested ($)
(7) |
Andrew B. Schmitt |
|
15,000 |
(1) |
|
— |
|
|
— |
|
$ |
16.65 |
|
06/28/2014 |
|
7,500 |
|
$ |
189,975 |
|
12,321 |
|
$ |
312,091 |
|
|
52,500 |
(2) |
|
17,500 |
(2) |
|
— |
|
$ |
29.29 |
|
06/08/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
17,500 |
(3) |
|
17,500 |
(3) |
|
— |
|
$ |
42.26 |
|
06/07/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
8,869 |
(4) |
|
17,738 |
(4) |
|
— |
|
$ |
35.71 |
|
02/05/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
57,612 |
(5) |
|
— |
|
$ |
15.78 |
|
02/01/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
31,074 |
(6) |
|
— |
|
$ |
21.99 |
|
06/03/2019 |
|
|
|
|
|
|
|
|
|
|
|
Jerry W. Fanska |
|
35,000 |
(1) |
|
— |
|
|
— |
|
$ |
27.87 |
|
01/20/2016 |
|
3,750 |
|
$ |
94,988 |
|
6,160 |
|
$ |
156,033 |
|
|
8,750 |
(3) |
|
8,750 |
(3) |
|
— |
|
$ |
42.26 |
|
06/07/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
4,434 |
(4) |
|
8,869 |
(4) |
|
— |
|
$ |
35.71 |
|
02/05/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
28,806 |
(5) |
|
— |
|
$ |
15.78 |
|
02/01/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
15,537 |
(6) |
|
— |
|
$ |
21.99 |
|
06/03/2019 |
|
|
|
|
|
|
|
|
|
|
|
Jeffrey J. Reynolds |
|
57,500 |
(1) |
|
— |
|
|
— |
|
$ |
23.05 |
|
09/28/2015 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
26,842 |
(5) |
|
— |
|
$ |
15.78 |
|
02/01/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
14,477 |
(6) |
|
— |
|
$ |
21.99 |
|
06/03/2019 |
|
|
|
|
|
|
|
|
|
|
|
Steven F. Crooke |
|
17,500 |
(1) |
|
— |
|
|
— |
|
$ |
27.87 |
|
01/20/2016 |
|
3,750 |
|
$ |
94,988 |
|
4,550 |
|
$ |
115,252 |
|
|
4,375 |
(3) |
|
8,750 |
(3) |
|
— |
|
$ |
42.26 |
|
06/07/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
3,275 |
(4) |
|
6,551 |
(4) |
|
— |
|
$ |
35.71 |
|
02/05/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
21,277 |
(5) |
|
— |
|
$ |
15.78 |
|
02/01/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
11,476 |
(6) |
|
— |
|
$ |
21.99 |
|
06/03/2019 |
|
|
|
|
|
|
|
|
|
|
|
Eric R. Despain |
|
35,000 |
(1) |
|
— |
|
|
— |
|
$ |
27.87 |
|
01/20/2016 |
|
3,750 |
|
$ |
94,988 |
|
2,730 |
|
$ |
69,151 |
|
|
1,965 |
(4) |
|
3,930 |
(4) |
|
— |
|
$ |
35.71 |
|
02/05/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
16,367 |
(5) |
|
— |
|
$ |
15.78 |
|
02/01/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
8,828 |
(6) |
|
— |
|
$ |
21.99 |
|
06/03/2019 |
|
|
|
|
|
|
|
|
|
|
____________________
(1) |
|
The options are
fully vested and exercisable. |
|
(2) |
|
The options vest
in 4 equal annual installments on June 8 of each year. If they have not
yet been exercised, the options in the grant were 75% vested and 25%
unvested on January 31, 2010. |
|
(3) |
|
The options vest
in 4 equal annual installments on June 7 of each year. If they have not
yet been exercised, the options in the grant were 50% vested and 50%
unvested on January 31, 2010. |
|
(4) |
|
The options vest
in 3 equal annual installments on February 5 of each year. If they have
not yet been exercised, the options in the grant were 1/3 vested and 2/3
unvested on January 31, 2010. |
|
(5) |
|
The options vest
in 3 equal annual installments on February 1 of each year. All of the
options in the grant were unvested on January 31, 2010. |
|
(6) |
|
The options vest
in 3 equal annual installments on June 3 of each year. All of the options
in the grant were unvested on January 31, 2010. |
|
(7) |
|
The market value
of the shares of restricted stock, either earned or unearned, that have
not vested was calculated by multiplying $25.33, which was the closing
market price of the Company's common stock on January 31, 2010, by the
number of unvested shares. |
20
Option Exercises and Stock
Vested
The following table sets forth
information with respect to each Named Executive Officer concerning the exercise
of options and the vesting of stock during the fiscal year ended January 31,
2010.
|
|
Option
Awards |
|
Stock
Awards |
|
|
Number of Shares |
|
Value Realized |
|
Number of Shares Acquired |
|
Value Realized on |
Name |
|
Acquired on Exercise
(#) |
|
on Exercise
($) |
|
on Vesting
(#) |
|
Vesting ($)(1) |
Andrew B. Schmitt |
|
— |
|
— |
|
3,750 |
|
$82,800 |
Jerry W. Fanska |
|
— |
|
— |
|
1,875 |
|
$41,400 |
Jeffrey J. Reynolds |
|
— |
|
— |
|
— |
|
— |
Steven F. Crooke |
|
— |
|
— |
|
1,875 |
|
$41,400 |
Eric R. Despain |
|
— |
|
— |
|
1,875 |
|
$41,400 |
____________________
(1) |
|
The
value realized upon vesting was calculated using the closing price of the
Company’s common stock on the date the shares vested ($22.08) multiplied
by the number of shares vested. All shares reported in this column vested
on June 7, 2009. |
Pension Benefits
The following table shows the number
of years of credited service earned through January 31, 2010, and the actuarial
present value of the accumulated benefits for Mr. Andrew B. Schmitt, our
President and Chief Executive Officer, under his Supplemental Executive
Retirement Plan ("SERP"). The accumulated benefit present values were determined
using a discount rate of 5.93% and mortality assumptions based on RP2000 (made
with white collar adjustment) mortality tables. The values shown are estimates
only. The actual benefit payable will be determined upon Mr. Schmitt's
retirement or termination from the Company. The terms of Mr. Schmitt's SERP are
set forth below under the heading "Potential Payments Upon Change of Control,
Retirement, Death or Disability." Mr. Schmitt is the only Named Executive
Officer that is entitled to receive any such pension benefit. No payments were
made under the SERP to Mr. Schmitt during the last fiscal year.
|
|
|
|
Number of Years |
|
Present Value of |
|
Payments During |
Name |
|
Plan Name |
|
Credited Service
(#) |
|
Accumulated Benefit(
$) |
|
Last Fiscal Year
($) |
Andrew B. Schmitt |
|
Supplemental Executive Retirement
Plan |
|
16 |
|
$2,993,658 |
|
$0 |
Nonqualified Deferred
Compensation
The following table sets forth the
contributions made by our Named Executive Officers and the earnings accrued on
all such contributions under our Key Management Deferred Compensation Plan
during the fiscal year ended January 31, 2010.
|
|
Executive |
|
Registrant |
|
Aggregate Earnings |
|
Aggregate |
|
Aggregate Balance |
|
|
Contributions in Last |
|
Contributions in Last |
|
(Losses) in |
|
Withdrawals/ |
|
at Last Fiscal Year |
Name |
|
Fiscal
Year(1) ($) |
|
Fiscal
Year(2) ($) |
|
Last Fiscal
Year(3) ($) |
|
Distributions
($) |
|
End(4) ($) |
Andrew B. Schmitt |
|
$ |
5,538 |
|
|
$ |
5,539 |
|
|
$ |
22 |
|
|
— |
|
$ |
76,831 |
|
Jerry W. Fanska |
|
|
208,783 |
|
|
|
384 |
|
|
|
110,980 |
|
|
— |
|
|
638,051 |
|
Jeffrey J. Reynolds |
|
|
218,274 |
|
|
|
5,790 |
|
|
|
162,015 |
|
|
— |
|
|
653,810 |
|
Steven F. Crooke |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
24,956 |
|
|
— |
|
|
93,042 |
|
Eric R. Despain |
|
|
10,000 |
|
|
|
5,000 |
|
|
|
10,091 |
|
|
— |
|
|
166,578 |
|
____________________
(1) |
|
The
salary deferrals reported in this column are included in the salary of
each executive for fiscal 2010 as indicated in footnote (1) to the Summary
Compensation Table. However, the incentive compensation deferrals reported
in this column are included in the incentive compensation of each
executive for fiscal 2009 as indicated in footnote (4) to the Summary
Compensation Table, since, due to the timing of the payments, they are not
credited to the account of the executive until the succeeding fiscal
year. |
|
(2) |
|
The
amounts reported in this column are included in the All Other Compensation
column for each executive as indicated in footnote (7) to the Summary
Compensation Table. |
|
(3) |
|
The
earnings reporting in this column are not included in the Summary
Compensation Table as they are not above-market or
preferential. |
21
(4) |
|
Includes amounts reported as salary in the Summary Compensation
Table for fiscal 2010 of $5,538, $84,616, $30,774, $5,000 and $10,000 for
Messrs. Schmitt, Fanska, Reynolds, Crooke and Despain, respectively;
amounts reported as salary in the Summary Compensation Table for fiscal
2009 of $17,508, $90,807, $25,211, $14,231 and $14,615 for Messrs.
Schmitt, Fanska, Reynolds, Crooke, and Despain, respectively; and amounts
reported as salary in the Summary Compensation Table for fiscal 2008 of
$15,046, $62,472, $24,635, $15,000 and $15,000 for Messrs. Schmitt,
Fanska, Reynolds, Crooke and Despain, respectively. Also includes amounts
reported as incentive compensation in the Summary Compensation Table for
fiscal 2009 and 2008 of $124,167 and $119,335, respectively, for Mr.
Fanska and $187,500 and $187,500, respectively for Mr.
Reynolds. |
Potential Payments Upon Change of Control,
Retirement, Death or Disability
Employment Agreement with Mr. Schmitt. Pursuant to an employment agreement between
the Company and Mr. Schmitt dated October 12, 1993, Mr. Schmitt is entitled to a
lump sum payment of 24 months' salary in the event that his employment is
terminated in connection with a change of control of the Company. Under the 1993
letter agreement, Mr. Schmitt is entitled to (i) 24-months salary continuation
after a termination (other than for cause) and (ii) a lump sum severance payment
of equivalent value in the event of a change of control. The Company has entered
into a new Severance Agreement with Mr. Schmitt dated March 13, 2008 (as
described below) that is intended to replace this agreement. However, this
agreement will again become effective if Mr. Schmitt's Severance Agreement is
terminated.
SERP for Mr. Schmitt. In addition, the Company has agreed to pay Mr. Schmitt, pursuant to his
SERP, an annual retirement benefit, beginning six months after Mr. Schmitt's
separation from service with the Company, equal to 40% of the average of his
total compensation (as defined in the annual retirement benefit agreement)
received during the highest five consecutive years out of his last ten years of
employment, less 60% of his annual primary Social Security benefit (the "Annual
Benefit"). The Annual Benefit is to be reduced, however, by the annual annuity
equivalent of the value of all funds, including earnings, in the Company funded
portion of Mr. Schmitt's Capital Accumulation Plan account as of the date of his
retirement (the "Annuity Equivalent"). As of January 31, 2010, the Company
funded balance in Mr. Schmitt's account under the Capital Accumulation Plan was
$107,061. To the extent the Annual Benefit is not satisfied by the Annuity
Equivalent, payments will be made out of the general funds of the Company. If
Mr. Schmitt separates from service prior to age 65, his Annual Benefit will be
reduced further by multiplying the Annual Benefit by the percentage (referred to
under the Plan as the "Early Retirement Reduction Factor" and set forth below in
the following table) depending on Mr. Schmitt's age at the time of his
separation from service.
Age at Separation from
Service |
|
Percentage of Annual
Benefit |
55 |
|
48.81% |
56 |
|
52.06% |
57 |
|
55.59% |
58 |
|
59.45% |
59 |
|
63.68% |
60 |
|
68.32% |
61 |
|
73.43% |
62 |
|
79.06% |
63 |
|
85.31% |
64 |
|
92.26% |
If Mr. Schmitt were to have separated from
service on January 31, 2010, his Annual Benefit would have been
$253,551.
Mr. Schmitt is entitled to a disability
benefit determined in the same manner as the Annual Benefit as of the date of
termination of his service resulting from total and permanent disability (the
"Disability Benefit"). The Disability Benefit will also be reduced by the
Annuity Equivalent but is not subject to the Early Retirement Reduction Factor.
Mr. Schmitt is deemed to have become "disabled" if he (a) is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or (b) is,
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a
period of not less than 3 months under a Company-sponsored accident and health
plan. If Mr. Schmitt were to have become disabled on January 31, 2010, his
annual Disability Benefit would have been $353,023.
22
Mr. Schmitt's surviving spouse, if any, will
be entitled to receive a death benefit (the "Death Benefit") upon Mr. Schmitt's
death which will be equal to the Annual Benefit his surviving spouse would have
received if (i) he had retired at the date of his death and had received an
Annual Benefit in the form of a monthly joint and survivor benefit and (ii) he
subsequently died. The Death Benefit will be reduced by the Annuity Equivalent.
If Mr. Schmitt had died on January 31, 2010, his spouse's annual Death Benefit
would have been $223,272.
Severance Agreements. On March 13, 2008,
the Company entered into severance agreements with Messrs. Schmitt, Reynolds,
Fanska and Crooke and on July 10, 2008, entered into the same form of severance
agreement with Mr. Despain. Each of the severance agreements are the same except
that Mr. Schmitt's severance agreement reflects that, if his severance agreement
is terminated, the severance benefits that Mr. Schmitt was entitled to receive
under the 1993 letter agreement (described above) will again become effective.
The severance agreements generally provide:
- If before a change of control, the
Company terminates the Executive's employment without "cause" or if the
Company constructively terminates the Executive's employment (i.e., the
Executive leaves for "good reason"), the Executive is entitled to receive
severance benefits that include (i) 24 months of continued base salary, (ii)
continued vesting of equity-based awards and a continued right to exercise
outstanding stock options during this 24-month severance period, (iii) for any
performance-based equity award that is exercisable, payable or becomes vested
only if the applicable performance-based criteria is satisfied, such
performance-based award will become exercisable, payable or become vested at
the time of and only if the underlying performance criteria is satisfied, (iv)
for any performance-based stock options that become exercisable after the end
of the 24-month severance period, such stock options will remain exercisable
until the earlier of the original expiration date of the option or 90 days
after the end of the 24 month severance period, (v) continued participation in
the Company's welfare benefit plans (or comparable arrangements) throughout
the 24 month severance period, and (vi) payment of any applicable COBRA
premiums.
The following table summarizes the severance benefits due Messrs.
Schmitt, Fanska, Reynolds, Crooke and Despain under their severance agreements
upon their termination by the Company without cause, or their voluntary
termination due to their constructive termination (assuming such termination
occurred on January 31, 2010):
|
|
|
|
|
|
|
Unvested Equity |
|
|
|
|
|
|
|
|
Name |
|
Base Salary |
|
Compensation(2) |
|
Benefits(3) |
|
Total |
|
A.B. Schmitt (1) |
|
|
$ |
1,240,000 |
|
|
|
$ 625,962 |
|
|
|
$ 24,799 |
|
|
$ |
1,890,761 |
|
J.W. Fanska |
|
|
|
730,000 |
|
|
|
312,982 |
|
|
|
24,799 |
|
|
|
1,067,781 |
|
J.J. Reynolds |
|
|
|
700,000 |
|
|
|
203,122 |
|
|
|
32,644 |
|
|
|
935,766 |
|
S.F. Crooke |
|
|
|
620,000 |
|
|
|
255,996 |
|
|
|
32,644 |
|
|
|
908,640 |
|
E.R. Despain |
|
|
|
600,000 |
|
|
|
218,844 |
|
|
|
24,799 |
|
|
|
843,643 |
____________________
(1) |
|
For Mr. Schmitt, amounts are assumed to
be paid under his severance agreement, and accordingly, no amounts would
be payable under his employment agreement. |
|
(2) |
|
Represents value of unvested awards at
January 31, 2010 that would become vested in the 24-month period following
January 31, 2010. Stock options are valued based on the positive
difference, if any, between the closing stock price of the Company's
common stock on January 31, 2010 and the exercise price for such options.
The Company has determined that achievement of the performance conditions
associated with the restricted stock awards issued on February 5, 2008, is
unlikely. Since it is unlikely that such awards will vest, no value has
been assigned to such restricted stock for the purpose of this
table. |
|
(3) |
|
Assumes the executive earns the maximum
Company match with respect to his health savings account for each year
during the 24-month period. |
- If the Executive's employment is
terminated due to death, the Executive's estate or his beneficiaries will be
entitled to receive (i) immediate acceleration of the vesting of the
Executive's service-based equity awards and the right to exercise the
service-based stock options until the earlier of the original expiration date
of the options or 12 months after the Executive's date of death, (ii) for any
performance-based equity award that is exercisable, payable or becomes vested
only if the applicable performance-based criteria is satisfied, such
performance-based award will become exercisable, payable or become vested at
the time of and only if the underlying performance criteria is satisfied, and
(iii) for any performance-based stock option that becomes exercisable due to
the satisfaction of the underlying performance criteria, the continued right
to exercise the option until the earlier of the option's original expiration
date or 12 months after the Executive's date of death.
23
The following table summarizes the severance benefits due Messrs.
Schmitt, Fanska, Reynolds, Crooke and Despain under their severance agreements
(assuming their death occurred on January 31, 2010):
Name |
|
Unvested Equity Compensation(2) |
A.B. Schmitt (1) |
|
|
$ |
771,247 |
|
J.W. Fanska |
|
|
|
421,979 |
|
J.J. Reynolds |
|
|
|
304,694 |
|
S.F. Crooke |
|
|
|
336,514 |
|
E.R. Despain |
|
|
|
280,779 |
|
____________________
(1) |
|
For Mr. Schmitt, amounts are assumed to
be paid under his severance agreement, and accordingly, no amounts would
be payable under his employment agreement. |
|
(2) |
|
Represents value of unvested awards at
January 31, 2010 that would become vested upon death. Stock options are
valued based on the positive difference, if any, between the closing stock
price of the Company's common stock on January 31, 2010 and the exercise
price for such options. The Company has determined that achievement of the
performance conditions associated with the restricted stock awards issued
on February 5, 2008, is unlikely. Since it is unlikely that such awards
will vest, no value has been assigned to such restricted stock for the
purpose of this table. |
- If the Executive's employment is
terminated due to disability, the Executive will be entitled to (i) payment of
a lump sum disability benefit equal to 12 months base salary, (ii) immediate
acceleration of the vesting of his service-based equity awards and a
continuation of his right to exercise any service-based stock options for a
period of 12 months after the termination, (iii) for any performance-based
equity award that is exercisable, payable or becomes vested only if the
applicable performance-based criteria is satisfied, such performance-based
award will become exercisable, payable or become vested at the time of and
only if the underlying performance criteria is satisfied, and (iv) for any
performance-based stock options that have become exercisable due to the
satisfaction of the underlying performance criteria, the continued right to
exercise the options until the earlier of the option's original expiration
date or 12 months after the Executive's termination.
The following table summarizes the severance benefits due Messrs.
Schmitt, Fanska, Reynolds, Crooke and Despain under their severance agreements
upon their disability (assuming they became disabled on January 31,
2010):
|
|
|
|
|
|
|
Unvested Equity |
|
|
|
|
Name |
|
Base Salary |
|
Compensation(2) |
|
Total |
|
A.B.
Schmitt (1) |
|
|
$ |
620,000 |
|
|
|
$ |
771,247 |
|
|
$ |
1,391,247 |
|
J.W. Fanska |
|
|
|
365,000 |
|
|
|
|
421,979 |
|
|
|
786,979 |
|
J.J.
Reynolds |
|
|
|
350,000 |
|
|
|
|
304,694 |
|
|
|
654,694 |
|
S.F. Crooke |
|
|
|
310,000 |
|
|
|
|
336,514 |
|
|
|
646,514 |
|
E.R.
Despain |
|
|
|
300,000 |
|
|
|
|
280,779 |
|
|
|
580,779 |
____________________
(1) |
|
For Mr. Schmitt, amounts are assumed to
be paid under his severance agreement, and accordingly, no amounts would
be payable under his employment agreement. |
|
(2) |
|
Represents value of unvested awards at
January 31, 2010 that would become vested upon a termination without cause
or constructive termination. Stock options are valued based on the
positive difference if any between the closing stock price of the
Company's common stock on January 31, 2010 and the exercise price for such
options. The Company has determined that achievement of the performance
conditions associated with the restricted stock awards issued on February
5, 2008, is unlikely. Since it is unlikely that such awards will vest, no
value has been assigned to such restricted stock for the purpose of this
table. |
24
- Upon a change of control of the
Company, all of the Executive's equity awards will become immediately vested
on the effective date of the change. Following a change of control of the
Company and for a three-year period following the change of control, the
successor Company is obligated to both (i) continue to employ the Executive in
a substantially similar position (at an equal or greater base salary as before
the change of control) and (ii) provide the Executive with certain welfare
benefits and bonus compensation opportunities similar to those of other
similarly situated employees.
If the Executive's employment is terminated by the Company without
"cause" or is constructively terminated (i.e., the Executive leaves for "good
reason") during the three-year period following a change of control of the
Company, he is entitled to: (i) a special lump-sum severance payment equal to
the present value of the remaining base salary he would receive if he remained
an employee until the later of the end of the third anniversary of the change of
control or the second anniversary of his termination date; (ii) coverage under
all employee benefit plans that covered him prior to termination until the later
of the end of the third anniversary of the change of control or the second
anniversary of his termination date; and (iii) for any payments made pursuant to
the Severance Agreement that are subject to the Internal Revenue Code's penalty
tax provisions for excessive "golden parachute payments", then the Company will
reimburse (on an after tax basis) the Executive for the amount of any such
penalty tax.
The following table summarizes the severance benefits due Messrs.
Schmitt, Fanska, Reynolds, Crooke and Despain under their severance agreements
upon a change of control (assuming the change of control occurred on January 31,
2010 and the termination by the Company without cause, or their voluntary
termination due to their constructive termination, on such date):
|
|
|
|
|
Unvested Equity |
|
|
|
|
|
|
|
|
Name |
|
Base Salary(2) |
|
Compensation(3) |
|
Benefits(4) |
|
Tax Gross-up |
|
Total |
|
A.B. Schmitt (1) |
|
|
$ |
1,663,461 |
|
|
|
$ |
1,083,338 |
|
|
$37,198 |
|
— |
|
$ |
2,783,997 |
|
J.W. Fanska |
|
|
$ |
979,296 |
|
|
|
$ |
578,012 |
|
|
$37,198 |
|
— |
|
$ |
1,594,506 |
|
J.J. Reynolds |
|
|
$ |
939,050 |
|
|
|
$ |
304,694 |
|
|
$48,966 |
|
— |
|
$ |
1,292,710 |
|
S.F. Crooke |
|
|
$ |
831,730 |
|
|
|
$ |
451,766 |
|
|
$48,966 |
|
— |
|
$ |
1,332,462 |
|
E.R. Despain |
|
|
$ |
804,900 |
|
|
|
$ |
349,930 |
|
|
$37,198 |
|
— |
|
$ |
1,192,028 |
____________________
(1) |
|
For Mr. Schmitt, amounts are assumed to
be paid under his severance agreement, and accordingly, no amounts would
be payable under his employment agreement. |
|
(2) |
|
Represents the present value of the base
salary of the executive on January 31, 2010, paid out in bi-weekly
installments over a three-year period using a discount rate of
7.5%. |
|
(3) |
|
Represents value of unvested awards at
January 31, 2010 that would become vested upon a change of control,
including all awards subject to performance conditions. Stock options are
valued based on the positive difference, if any, between the closing price
of the Company's common stock on January 31, 2010 and the exercise price
for such options. |
|
(4) |
|
Assumes the executive earns the maximum
Company match with respect to his health savings account for each year
during the three year period. |
Generally, all severance payments under the agreements will begin
following the Executive's termination of employment. However, as is provided for
in the Severance Agreements, certain delays in payment timing may occur in order
to comply with Section 409A of the Internal Revenue Code.
25
OWNERSHIP OF LAYNE CHRISTENSEN COMMON STOCK
The following table sets forth certain
information as of March 31, 2010, except as otherwise provided, regarding the
beneficial ownership of Layne Christensen common stock by each person known to
the Board of Directors to own beneficially 5% or more of the Company's common
stock, by each director or nominee for director of the Company, by each Named
Executive Officer, and by all directors and executive officers of the Company as
a group. All information with respect to beneficial ownership has been furnished
by the respective directors, officers or 5% or more stockholders, as the case
may be.
|
|
Amount and |
|
|
|
|
|
Nature of |
|
Percentage of |
|
|
Beneficial |
|
Shares |
Name |
|
|
Ownership (1) |
|
Outstanding (1) |
Neuberger Berman Group LLC (2) |
|
2,699,583 |
|
|
13.8 |
% |
Keeley Asset Management Corp. (3) |
|
1,497,500 |
|
|
7.7 |
% |
Invesco Ltd. (4) |
|
1,469,636 |
|
|
7.5 |
% |
BlackRock, Inc. (5) |
|
1,281,815 |
|
|
6.6 |
% |
Dimensional Fund Advisors LP (6) |
|
1,001,059 |
|
|
5.1 |
% |
Jeffrey J. Reynolds |
|
475,292 |
(7) |
|
2.4 |
% |
Andrew B. Schmitt |
|
279,613 |
(7) |
|
1.4 |
% |
Jerry W. Fanska |
|
80,145 |
(7) |
|
* |
|
Steven F. Crooke |
|
50,073 |
(7) |
|
* |
|
Eric R. Despain |
|
63,260 |
(7) |
|
* |
|
Nelson Obus (8) |
|
15,688 |
|
|
* |
|
J. Samuel Butler |
|
15,359 |
(9) |
|
* |
|
Anthony B. Helfet |
|
12,789 |
(9) |
|
* |
|
David A. B. Brown |
|
24,399 |
(9) |
|
* |
|
Rene J. Robichaud |
|
10,789 |
(9) |
|
* |
|
Robert R. Gilmore |
|
8,844 |
(9) |
|
* |
|
All directors and executive officers as
a group (16 persons) |
|
1,165,762 |
(10) |
|
5.8 |
% |
____________________
* |
|
Less than 1%
|
|
(1) |
|
Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission which
generally attribute beneficial ownership of securities to persons who
possess sole or shared voting power and/or investment power with respect
to those securities and includes shares of common stock issuable pursuant
to the exercise of stock options exercisable within 60 days of March 31,
2010. Unless otherwise indicated, the persons or entities identified in
this table have sole voting and investment power with respect to all
shares shown as beneficially owned by them. Percentage ownership
calculations are based on 19,520,853 shares of common stock outstanding
plus 477,701 options exercisable within 60 days of March 31, 2010, where
said options are considered deemed shares attributed to a given beneficial
owner. |
|
(2) |
|
The ownership reported is based on a
Schedule 13G/A filed with the Securities and Exchange Commission on
February 17, 2010, by Neuberger Berman Group LLC, on behalf of itself and
the other members of its group, including Neuberger Berman LLC, Neuberger
Berman Management LLC and Neuberger Berman Equity Funds. Neuberger Berman,
LLC is deemed to be a beneficial owner of the Company's stock since it has
shared power to make decisions whether to retain or dispose, and in some
cases the sole power to vote, the securities of many unrelated clients.
Neuberger Berman, LLC does not, however, have any economic interest in the
securities of those clients. Neuberger Berman, LLC and Neuberger Berman
Management LLC are deemed to be beneficial owners of the Company's stock
since they both have shared power to make decisions whether to retain or
dispose and vote the securities. Neuberger Berman, LLC and Neuberger
Berman Management LLC serve as a sub-advisor and investment manager,
respectively, of Neuberger Berman's various Mutual Funds which hold such
shares in the ordinary course of their business and not with the purpose
nor with the effect of changing or influencing the control of the issuer.
The holdings of Lehman Brothers Asset Management LLC and Lehman Brothers
Asset Management Inc., affiliates of Neuberger Berman, LLC, are also
aggregated to comprise the holdings referenced herein. The principal
business address of Neuberger Berman Group LLC is 605 Third Avenue, New
York, New York 10158. |
26
(3) |
|
The ownership reported is based on a
Schedule 13G/A filed with the Securities and Exchange Commission on
February 12, 2010, by Keeley Asset Management Corp. and Keeley Small Cap
Value Fund, a series of Keeley Funds, Inc. The principal business address
of both of these entities is 401 South LaSalle Street, Chicago, Illinois
60605. |
|
(4) |
|
The ownership reported is based on a
Schedule 13G/A filed with the Securities and Exchange Commission on
February 12, 2010, by Invesco Ltd. on behalf of itself and its
subsidiaries, Invesco PowerShares Capital Management LLC and Invesco
National Trust Company. The principal business address of these entities
is 1555 Peachtree Street NE, Atlanta, Georgia 30309. |
|
(5) |
|
The ownership reported is based on a
Schedule 13G filed with the Securities and Exchange Commission on January
29, 2010, by BlackRock, Inc., with a principal business address of 40 East
52nd Street, New York, NY 10022. BlackRock,
Inc. became the beneficial owner of these shares upon its acquisition of
Barclays Global Investors, NA and certain of its affiliates on December 1,
2009. |
|
(6) |
|
The ownership reported is based on a
Schedule 13G filed with the Securities and Exchange Commission on February
8, 2010 by Dimensional Fund Advisors LP, with a principal business address
of Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas, 78746.
Dimensional Fund Advisors LP, an investment adviser registered under
Section 203 of the Investment Advisors Act of 1940, furnishes investment
advice to four investment companies registered under the Investment
Company Act of 1940, and serves as investment manager to certain other
commingled group trusts and separate account (such investment companies,
trusts and accounts, collectively referred to as the “Funds”). In certain
cases, subsidiaries of Dimensional Fund advisors LP may act as an adviser
or sub-adviser to certain Funds. However, all securities reported in this
schedule are owned by the Funds. Dimensional disclaims beneficial
ownership of such securities. To the knowledge of Dimensional, the
interest of any one such Fund does not exceed 5% of the class of
securities. |
|
(7) |
|
Includes options for the purchase of
121,942 shares, 62,220 shares, 66,447 shares, 35,517 shares and 44,385
shares of the Company's common stock exercisable within 60 days of March
31, 2010, granted to Messrs. Schmitt, Fanska, Reynolds, Crooke and
Despain, respectively. Also includes 12,642 shares, 5,036 shares, 5,036
shares and 6,322 shares of restricted stock of the Company held by Messrs.
Schmitt, Fanska, Crooke and Despain, respectively, all of which vest 25%
per year beginning June 7, 2008. Also includes 12,321, 6,160, 4,550 and
2,730 shares of restricted stock of the Company held by Messrs. Schmitt,
Fanska, Crooke and Despain, respectively, all of which vest at the end of
a three-year period, provided that the Company meets certain performance
targets during that period. Also includes 13,458, 6,270, 6,729, 4,970 and
3,823 shares of restricted stock of the Company held by Messrs. Schmitt,
Fanska, Reynolds, Crooke and Despain, respectively, which vest, if at all,
at the end of a three-year period in various percentages based on the
level of certain performance targets achieved by the Company during that
period. |
|
(8) |
|
Mr. Obus is president of Wynnefield
Capital, Inc. and a managing member of Wynnefield Capital Management, LLC.
Both companies have indirect beneficial ownership in securities held in
the name of Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners
Small Cap Value, L.P. I, Wynnefield Small Cap Value Offshore Fund, Ltd.,
Channel Partnership II, L.P. and the Wynnefield Capital, Inc. Profit
Sharing & Money Purchase Plan, which, combined, own 690 of the
indicated shares. Also includes options for the purchase of 10,007 shares
of the Company's common stock exercisable within 60 days of March 31,
2010. Also includes 605 shares of restricted stock that will vest on June
3, 2010, and 1,572 shares of restricted stock that will vest on February
1, 2011. |
|
(9) |
|
Includes options for the purchase of
13,000 shares, 13,030 shares, 9,000 shares, 3,000 shares and 7,736 shares
of the Company's common stock exercisable within 60 days of March 31,
2010, granted to Messrs. Brown, Butler, Helfet, Robichaud and Gilmore,
respectively. Also includes 1,513, 807, 807 and 403 shares of restricted
stock that will vest on June 3, 2010, granted to Messrs. Brown, Helfet,
Robichaud and Gilmore, respectively, and 2,948, 1,572, 1,572 and 1,572
shares of restricted stock that will vest on February 1, 2011, granted to
Messrs. Brown, Butler, Helfet and Robichaud, respectively. |
|
(10) |
|
Includes options for the purchase of
477,701 shares of the Company's common stock exercisable within 60 days of
March 31, 2010, granted to all directors and executive officers of the
Company as a group. |
27
ITEM 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected the
independent registered public accounting firm of Deloitte & Touche LLP to
audit the books, records and accounts of the Company for the year ending January
31, 2011. Stockholders will have an opportunity to vote at the Annual Meeting on
whether to ratify the Audit Committee's decision in this regard.
Deloitte & Touche LLP has served as
the Company's independent registered public accounting firm since fiscal 1990.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting. Such representatives will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
Principal Accounting Fees and
Services
During fiscal 2009 and 2010, Deloitte
& Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their
respective affiliates (collectively, "Deloitte & Touche") provided various
audit and non-audit services to the Company as follows:
|
(a) |
|
Audit Fees: Aggregate fees billed for professional
services rendered for the audit of the Company's annual financial
statements and assessment of internal controls over financial reporting,
and review of financial statements included in the Company's Form 10-Q
reports, as well as statutory audits for international entities and
procedures for registration
statements. |
Fiscal 2009 |
|
Fiscal
2010 |
$ 2,122,300 |
|
$
1,584,300 |
|
(b) |
|
Audit-Related Fees: Audit-related fees include benefit
plan audits and consultation on various
matters. |
Fiscal 2009 |
|
Fiscal
2010 |
$
50,000 |
|
$
40,250 |
|
(c) |
|
Tax Fees: Tax fees include income tax
consultation. |
Fiscal 2009 |
|
Fiscal
2010 |
$
252,400 |
|
$
241,500 |
|
(d) |
|
All Other Fees: All other fees relate to licensing of
access to an on-line accounting research facility and miscellaneous fees
for services in certain foreign jurisdictions. The Company did not incur
any fees relating to the design and implementation of financial
information systems in either fiscal 2009 or fiscal
2010. |
Fiscal 2009 |
|
Fiscal
2010 |
$ 9,000 |
|
$
7,500 |
The Audit Committee of the Board of Directors has considered whether
provision of the services described in sections (b), (c) and (d) above is
compatible with maintaining the registered public accounting firm's independence
and has determined that such services have not adversely affected Deloitte &
Touche's independence.
The Audit Committee's Policy for the
Approval of Audit, Audit-Related, Tax and Other Services provided by the
Independent Auditor provides for the pre-approval of the scope and estimated
fees associated with the current year audit. The policy also requires
pre-approval of audit-related, tax and other services specifically described by
management on an annual basis and, furthermore, additional services anticipated
to exceed the specified pre-approval limits for such services must be separately
approved by the Audit Committee. Finally, the policy outlines nine specific
restricted services outlined in the SEC's rule on auditor independence that are
not to be performed by the independent auditor. None of the services performed
by Deloitte & Touche, as described above, were approved by the Audit
Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
All of the services described in sections
(b), (c) and (d) above were pre-approved by the Audit Committee.
Submission of the selection of the
independent registered public accounting firm to the stockholders for
ratification will not limit the authority of the Audit Committee to appoint
another independent registered public accounting firm to serve as independent
auditors if the present auditors resign or their engagement otherwise is
terminated. If the stockholders do not ratify the selection of Deloitte &
Touche at the Annual Meeting, the Company intends to call a special meeting of
stockholders to be held as soon as practicable after the Annual Meeting to
ratify the selection of another independent registered public accounting firm as
independent auditors for the Company.
28
The Board of Directors unanimously recommends
that you vote FOR approval of the selection of Deloitte & Touche
LLP.
Item 3
Stockholder Proposal
The Company has been notified by Walden Asset Management, 1 Beacon
Street, Boston, MA 02108, and one of its clients that they intend to present the
following proposal for consideration at the Annual Meeting. Walden Asset
Management and its client have submitted documentation indicating that they
owned a total of 13,000 shares of the Company's common stock as of November 10,
2009. The Company will provide to any stockholder upon request the names,
addresses and number of shares held by each proponent. The Board of Directors
unanimously recommends a vote against this proposal for the reasons stated after
the proposal.
Sustainability Report
Resolution
WHEREAS:
Walden Asset Management believes
reporting on environmental, social and governance (ESG) business practices makes
a company more adaptable to the global business environment, one with finite
natural resources, shifting legislation, and changing public expectations of
corporate behavior. Reporting also helps companies better integrate and gain
strategic value from existing corporate social responsibility efforts, identify
gaps and opportunities, develop company-wide communications, publicize
innovative practices and receive feedback.
According to a 2008 KPMG report on
sustainability reporting 79% of the Global Fortune 250
companies, produce reports compared to 52% in 2005. Of the top 100 U.S.
companies by revenue, 73% produce reports compared to 32% in 2005. Small and
medium sized companies are beginning to follow this trend.
Critical ESG considerations include
environmental impact, occupational safety and health, diversity, and community
relations, as these areas can pose significant regulatory, legal, reputational
and financial risks to business. We believe that Layne Christensen has a
positive story to tell and benefits from understanding the risks and
opportunities of various sustainability issues.
As stated by the CEO Water Mandate: Water
scarcity and related problems pose material risks but can also, when well
managed, create opportunities for improvement and innovation.1 JPMorgan Chase expects
that more companies will be under increasing pressure from investors to provide
detailed statements on their water-related risks.2
The Carbon Disclosure Project (CDP), representing 475 institutional
investors globally with $55 trillion in assets, has for years requested greater
disclosure from companies on their climate change management programs. The 2009
response rate to the CDP for S&P 500 and the FTSE Global 500 was 66% and
82%, respectively.
Layne Christensen does not report in any
detail on its sustainability efforts and does not outline sustainable water use
policies or greenhouse gas emissions data and reduction plans. Transparency on
climate change is particularly crucial as it is one of the most financially
significant environmental issues currently facing investors.
RESOLVED: Shareholders
request that the Board of Directors issue a sustainability report describing the
company's ESG performance and goals, along with sustainable water management and
greenhouse gas emissions and management plans for their reduction. The report
will be prepared at reasonable cost, omitting proprietary information to be
available to investors by November 1, 2010.
SUPPORTING STATEMENT
We encourage Layne Christensen to use the
Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines
(G3)3 to prepare
the report describing corporate strategies to sustainably manage water use and
addressing other environmental and social impacts such as energy use, waste
management, and employee and community relations and to use the Carbon
Disclosure Project (CDP)4 as a means to
specifically report on its greenhouse gas emissions and reduction efforts. The
GRI is an international organization developed with representatives from the
business, environmental, human rights and labor communities. The G3 provide
guidance on report content, addressing, among other issues, direct economic
impacts, environmental performance, international labor standards and practices,
and product responsibility. The Guidelines provide a flexible reporting system
that allows companies to report incrementally over time.
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1 |
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http://www.unglobalcompact.org/Issues/Environment/CEO_Water_Mandate; |
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http://www.unglobalcompact.org/docs/news_events/8.1/Ceo_water_mandate.pdf |
2 |
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Watching Water: A Guide to Evaluating
Corporate Risks in a Thirsty World, JPMorgan Chase, March 31,
2008 |
3 |
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http://www.globalreporting.org/ReportingFramework/G3Guidelines/ |
4 |
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https://www.cdproject.net/en-US/Respond/Pages/CDP-Investors.aspx |
29
Board of Directors' Statement Against
Stockholder Proposal
The Board of Directors unanimously recommends a vote AGAINST this
stockholder proposal. The Board believes that the approval of the proposed
resolution would not be in the best interests of the Company or its
stockholders.
The Company recognizes the importance, as
both an ethical and a business responsibility, of addressing the environmental
and social impacts of our business. We are genuinely concerned about the issues
that would be covered in the sustainability report requested by the proponent.
However, the amount of time, effort and money required to produce such a
sustainability report would divert significant resources that we believe could
be better used in strengthening the Company’s business. We feel strongly that
preparing a Global Reporting Initiative-based sustainability report is
unnecessary and would not be a prudent use of the Company’s assets.
The basic tenor of the proponent’s
proposal relating to the preparation of a sustainability report creates the
impression that the report would center upon climate change, sustainable water
management and greenhouse gas emissions and their reduction. However, the
proponent’s recommendation that the Company use the Global Reporting
Initiative’s Sustainability Reporting Guidelines (the "Guidelines") reflects that the content of the requested
report is in fact intended to be far more comprehensive and well beyond
environmental considerations. For example, the Guidelines recommend that the
social impacts of sustainability to be addressed by management are to include
international labor standards and practices, human rights, society, and product
responsibility. More, the proponent's supporting statement indicates that
occupational safety and health, diversity and community relations are all
critical Environmental, Social and Governance considerations.
Overall, the Guidelines and its
appendices total one hundred thirty-seven (137) pages and include substantial
detail, yet at the same time are, in some cases, unclear. The Guidelines require
extensive and detailed scientific and technical analyses, requiring substantial
funds, personnel time and, most likely, the employment of consultants with
specialized expertise. Both the proponent and the Global Reporting Initiative
tout the flexibility of the Guidelines, but such “flexibility” only serves to
make it even more difficult for the Company to determine how to construct and
prepare a sustainability report that would be satisfactory to the proponent and,
more importantly, beneficial to our stockholders as a whole. It is abundantly
clear to us that adoption of the proponent’s resolution will require an
extraordinary amount of the Company’s time, effort and money and would divert
valuable resources from where they are most needed at the present time. The
proposal does not convey the burden involved in preparing a report using the
Guidelines other than to note that the sustainability report should be prepared
"at a reasonable cost.”
We believe that the Company has
demonstrated a long history of dedication to good corporate citizenship,
environmentally, socially, charitably and otherwise. Preparing the requested
report would deplete limited human and financial resources without providing
meaningful additional benefit to our stockholders, employees or the communities
in which we operate. We believe that it is not in our best interest or the best
interests of our stockholders to develop a report that lacks an immediate and
tangible return for our stockholders.
For all of the above reasons, the
Board of Directors unanimously recommends a vote AGAINST this stockholder
proposal.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange
Act of 1934 (the "Exchange Act") requires the Company's directors and executive
officers, and certain persons who own more than 10% of the Company's outstanding
common stock, to file with the Securities and Exchange Commission ("SEC")
initial reports of ownership and reports of changes in ownership in Layne
Christensen common stock and other equity securities. SEC regulations require
directors, executive officers and certain greater than 10% stockholders to
furnish Layne Christensen with copies of all Section 16(a) reports they
file.
To the Company's knowledge, based solely on
review of the copies of such reports furnished to Layne Christensen and written
representations that no other reports were required, during the fiscal year
ended January 31, 2010, all Section 16(a) filing requirements applicable to its
directors, executive officers and greater than 10% stockholders were met.
30
OTHER BUSINESS OF THE MEETING
The Board of Directors is not aware of, and does not intend to present,
any matter for action at the Annual Meeting other than those referred to in this
Proxy Statement. If, however, any other matter properly comes before the Annual
Meeting or any adjournment, it is intended that the holders of the proxies
solicited by the Board of Directors will vote on such matters in their
discretion in accordance with their best judgment.
ANNUAL REPORT
A copy of the Company's Annual Report to
Stockholders, containing financial statements for the fiscal year ended January
31, 2010, is being mailed with this Proxy Statement to all stockholders entitled
to vote at the Annual Meeting. Such Annual Report is not to be regarded as proxy
solicitation material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 2010 (THE "FORM 10-K"), EXCLUDING
EXHIBITS, WILL BE FURNISHED
WITHOUT CHARGE TO ANY STOCKHOLDER OF RECORD AS OF APRIL 22, 2010, UPON WRITTEN REQUEST
ADDRESSED TO THE ATTENTION OF THE SECRETARY OF LAYNE CHRISTENSEN COMPANY AT 1900 SHAWNEE MISSION PARKWAY, MISSION WOODS, KANSAS 66205. The
Company's Form 10-K is also
available on its website at www.laynechristensen.com. Layne Christensen will
provide a copy of any exhibit to the Form 10-K to any such person upon written
request and the payment of the Company's reasonable expenses in furnishing such
exhibits.
ADVANCE NOTICE PROCEDURES/
STOCKHOLDER NOMINATION SUBMISSION PROCESS
Under the Company's bylaws, no business
may be brought before an annual meeting unless it is specified in the notice of
the meeting or is otherwise brought before the meeting by or at the direction of
the Board or by a stockholder entitled to vote who has delivered written notice
to the Company's Secretary (containing certain information specified in the
bylaws about the stockholder and the proposed action) not less than 120 or more
than 150 days prior to the first anniversary of the preceding year's annual
meeting—that is, with respect to the 2011 annual meeting, between January 4 and
February 3, 2011. In addition, any stockholder who wishes to submit to the Board
a potential candidate for nomination to the Board must deliver written notice of
the nomination within this time period. Such stockholder's notice shall set
forth as to each person whom the stockholder proposes to nominate for election
or reelection as a director:
(a) the name and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated;
(b) a representation that
such stockholder is a holder of record of stock of the Company entitled to vote
in the election of directors at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice;
(c) the name and address of
such stockholder, as it appears on the Company's books, and of the beneficial
owner, if any, on whose behalf the nomination is made;
(d) the class and number of
shares of the Company which are owned beneficially and of record by the
nominating stockholder and each nominee proposed by such
stockholder;
(e) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(f) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a Proxy Statement filed pursuant to Regulation 14A (17 C.F.R.
Section 240.14a-1 et seq.) as then in effect under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and
(g) the consent of each
nominee to serve as a director of the Company if so elected.
The Company may require any proposed
nominee to furnish such other information as may reasonably be required by the
Company to determine the eligibility of such proposed nominee to serve as
director of the Company.
These requirements are separate from and
in addition to the SEC's requirements that a stockholder must meet in order to
have a stockholder proposal included in the Company's Proxy
Statement.
31
STOCKHOLDER PROPOSALS FOR 2011 ANNUAL MEETING
It is presently anticipated that the 2011
Annual Meeting of Stockholders will be held on June 2, 2011. Stockholder
proposals intended for inclusion in the Proxy Statement for the 2011 Annual
Meeting of Stockholders must be received at the Company's offices, located at
1900 Shawnee Mission Parkway, Mission Woods, Kansas 66205, no later than January
3, 2011. Such proposals must also comply with the other requirements of the
proxy solicitation rules of the Securities and Exchange Commission. Stockholder
proposals should be addressed to the attention of the Secretary or Assistant
Secretary of Layne Christensen.
HOUSEHOLDING
If you and other residents at your
mailing address own shares in street name, your broker, bank or other nominee
may have sent you a notice that your household will receive only one annual
report and Proxy Statement for each company in which you hold shares through
that broker, bank or nominee. This practice is called "householding." If you did
not respond that you did not want to participate in householding, you are deemed
to have consented to that process. If these procedures apply to you, your
broker, bank or other nominee will have sent one copy of our Annual Report to
Stockholders and Proxy Statement to your address. You may revoke your consent to
householding at any time by contacting your broker, bank or other nominee. If
you did not receive an individual copy of our Annual Report to Stockholders and
Proxy Statement, we will send copies to you if you contact us at 1900 Shawnee
Mission Parkway, Mission Woods, Kansas 66205, (913) 362-0510, Attention:
Corporate Secretary. If you and other residents at your address have been
receiving multiple copies of our Annual Report to Stockholders and Proxy
Statement and desire to receive only a single copy of these materials, you may
contact your broker, bank or other nominee or contact us at the above address or
telephone number.
By Order of the Board of Directors. |
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Steven F. Crooke |
Senior Vice President—General Counsel
and Secretary |
May 5,
2010
Mission Woods,
Kansas
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LAYNE CHRISTENSEN
COMPANY |
Using a black
ink pen, mark your votes with an X as shown in this example. Please do not
write outside the designated areas. |
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Annual Meeting Proxy
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PLEASE FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED
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Proposals |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” ITEMS 1 AND 2 AND “AGAINST” ITEM
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Item 1: Election of eight
directors to hold office for terms expiring at the 2011 annual meeting of
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Nelson Obus |
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Jeffrey J. Reynolds |
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Rene J. Robichaud |
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Andrew B. Schmitt |
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For All EXCEPT -
To withhold a vote for one or more nominees, mark the box to the left and
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Item 2: |
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Proposal to ratify the selection
of the accounting firm of Deloitte & Touche LLP as Layne Christensen’s
independent sustainability report. auditors for the fiscal year ending
January 31, 2011. |
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Item 3: |
Stockholder proposal
regarding the preparation of a sustainability report. |
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In their discretion, the proxies are
authorized to vote upon such other business as properly may come before
the Annual Meeting. |
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Non-Voting
Items |
Change of Address —
Please print new address below. |
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Authorized Signatures — This section must be completed for your
vote to be counted. — Date and Sign Below |
Please sign this proxy exactly as your name
appears hereon. When shares are held by joint tenants, both should sign.
When signing as an attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized
person. |
Date (mm/dd/yyyy) — Please print date
below.
Signature 1 — Please keep signature within the
box.
Signature 2 — Please keep signature within the
box.
YOUR VOTE IS IMPORTANT
Regardless of
whether you plan to attend the Annual Meeting of Stockholders, you can be sure
your shares are represented at the meeting by promptly returning your proxy in
the enclosed envelope.
PLEASE FOLD ALONG THE PERFORATION, DETACH
AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Proxy — LAYNE CHRISTENSEN COMPANY
2010 ANNUAL MEETING OF
STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned
hereby appoints David A.B. Brown, Andrew B. Schmitt and Steven F. Crooke, and
each of them, each with the power to act alone and with full power of
substitution and revocation, as attorneys and proxies of the undersigned to
attend the 2010 Annual Meeting of Stockholders of Layne Christensen Company
(“Layne Christensen”) to be held at the InterContinental Kansas City at the
Plaza hotel, located at 401 Ward Parkway, Kansas City, Missouri, on Thursday,
June 3, 2010, commencing at 10:00 a.m., local time, and at all adjournments
thereof, and to vote all shares of capital stock of Layne Christensen which the
undersigned is entitled to vote with respect to the matters on the reverse side,
all as set forth in the Notice of Annual Meeting of Stockholders and Proxy
Statement, dated May 5, 2010.
This Proxy, when
properly executed, will be voted in the manner directed herein by the
undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” ITEMS 1 AND 2 AND
“AGAINST” ITEM 3.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
(Continued, and
to be signed, on other side)