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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
LAYNE CHRISTENSEN COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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LAYNE CHRISTENSEN COMPANY
April 23, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Layne Christensen Company, to be held at the Corporate Headquarters of Layne
Christensen Company, located at 1900 Shawnee Mission Parkway, Mission Woods,
Kansas, on Thursday, May 30, 2002, 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 MAY 30, 2002
The Annual Meeting of Stockholders of Layne Christensen Company, a
Delaware corporation ("Layne Christensen"), will be held at the Corporate
Headquarters of Layne Christensen, located at 1900 Shawnee Mission Parkway,
Mission Woods, Kansas, on Thursday, May 30, 2002, commencing at 10:00 a.m.,
local time, and thereafter as it may from time to time be adjourned, for the
following purposes:
1. To elect two Class I directors to hold office for terms
expiring at the 2005 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;
2. To consider and act upon approval of the Layne Christensen
Company 2002 Stock Option Plan;
3. To consider and act upon ratification and approval of the
selection of the accounting firm of Deloitte & Touche LLP
as the independent auditors of Layne Christensen for the
fiscal year ending January 31, 2003; and
4. To transact such other business as may properly come before
the meeting and any adjournment or adjournments thereof.
The Board of Directors of Layne Christensen has fixed the close of
business on April 1, 2002, 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
Vice President--General Counsel
and Secretary
April 23, 2002
Mission Woods, Kansas
LAYNE CHRISTENSEN COMPANY
1900 SHAWNEE MISSION PARKWAY
MISSION WOODS, KANSAS 66205
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 2002
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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 Thursday, May 30, 2002, 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 Corporate Headquarters of Layne Christensen,
located at 1900 Shawnee Mission Parkway, Mission Woods, Kansas 66205.
This Proxy Statement and the enclosed form of proxy were first mailed
to the Company's stockholders on or about April 23, 2002.
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
previously have been revoked, 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 directors
named in this Proxy Statement, in favor of approving the Layne Christensen
Company 2002 Stock Option Plan, 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, 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.
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 1, 2002 (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, 11,707,694
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. The
affirmative vote of the holders of a majority of the shares of the Company's
common stock, represented in person or by proxy and entitled to vote at the
Annual Meeting, is required for (i) the approval of the Layne Christensen
Company 2002 Stock Option Plan, (ii) the ratification of the selection of
Deloitte & Touche LLP as the Company's independent
auditors and (iii) the approval of such other matters as properly may come
before the Annual Meeting or any adjournment thereof.
In accordance with Delaware law, a stockholder entitled to vote in the
election of directors can withhold authority to vote for all nominees for
directors or can withhold authority to vote for certain nominees for directors.
Votes withheld in connection with the election of one or more nominees for
director will not be counted as votes cast for such nominees. Abstentions from
the proposal to approve the Layne Christensen Company 2002 Stock Option Plan or
the proposal to approve the ratification of the selection of the Company's
independent auditors are treated as votes against the proposal. Broker non-votes
on a proposal are treated as shares of Layne Christensen common stock as to
which voting power has been withheld by the respective beneficial holders and,
therefore, as shares not entitled to vote on the proposal as to which there is
the broker non-vote. Accordingly, broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
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, telegram, facsimile
transmission 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
The Company's Board of Directors currently consists of six directors.
The Certificate of Incorporation of Layne Christensen divides the Board of
Directors into three classes of directors, with the directors serving staggered
terms of three years and until their respective successors are duly elected and
qualified or until their respective earlier death, retirement, resignation or
removal. The present terms of Donald K. Miller and Andrew B. Schmitt, Class I
directors, expire at this Annual Meeting. Directors in Class II (Robert J.
Dineen and Sheldon R. Erikson) and Class III (Todd A. Fisher and Edward A.
Gilhuly) have been elected to terms expiring at the time of the annual meetings
of stockholders in 2003 and 2004, respectively.
One of the purposes of this Annual Meeting is to elect two directors in
Class I to serve for three-year terms expiring at the Annual Meeting of
Stockholders in 2005 and until their successors are duly elected and qualified
or until their earlier death, retirement, resignation or removal. The Board of
Directors has designated Donald K. Miller and Andrew B. Schmitt as the nominees
proposed for election at the Annual Meeting. 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 as
directors of the nominees. In the event that one or both 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 RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
DONALD K. MILLER AND ANDREW B. SCHMITT AS CLASS I DIRECTORS OF THE COMPANY.
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NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The following table sets forth certain information with respect to the
persons nominated by the Board of Directors for election as Class I directors at
the Annual Meeting and each director whose term of office will continue after
the Annual Meeting.
PRESENT POSITION DIRECTOR
NAME AGE WITH THE COMPANY SINCE
---- --- -------------------------- --------
NOMINEES
CLASS I: TERM TO EXPIRE IN 2005
Donald K. Miller ................... 70 Director 1996
Andrew B. Schmitt................... 53 President, Chief Executive 1993
Officer and Director
DIRECTORS CONTINUING IN OFFICE
CLASS II: TERM TO EXPIRE IN 2003
Robert J. Dineen ................... 72 Chairman of the Board 1983
and Director
Sheldon R. Erikson ................. 60 Director 1997
CLASS III: TERM TO EXPIRE IN 2004
Todd A. Fisher ..................... 36 Director 1997
Edward A. Gilhuly .................. 42 Director 1992
The business experience during the last five fiscal years of the
persons nominated by the Board of Directors for election as Class I directors at
the Annual Meeting and each director whose term of office will continue after
the Annual Meeting is as follows:
ROBERT J. DINEEN has served as Chairman of the Board of the Company
since August 1992. From May 1986 until his retirement in August 1993, Mr. Dineen
was President and Chief Executive Officer of The Marley Company, a manufacturer
and supplier of engineered equipment and services for heating, fluid handling,
control and treatment and heat exchange. Mr. Dineen served as a director of
Kansas City Power & Light Company from 1987 to 2000. Mr. Dineen is currently a
director of Owens-Illinois, Inc.
SHELDON R. ERIKSON has been Chairman of the Board of Cooper Cameron
Corporation, a manufacturer of oil and gas pressure control equipment,
centrifugal air compressors, integral gas compressors and turbochargers, since
May 1996 and President and Chief Executive Officer since January 1995. He was
Chairman of the Board from 1988 to April 1995 and President and Chief Executive
Officer from 1987 to April 1995 of The Western Company of North America, an
international petroleum service company engaged in pressure pumping, well
stimulating and cementing and offshore drilling. Mr. Erikson is a director of
Spinnaker Exploration Company and NCI Building Systems, Inc.
TODD A. FISHER has been an executive of Kohlberg Kravis Roberts & Co.,
L.P. ("KKR") since June 1993 and a member of KKR & Co., L.L.C., the general
partner of KKR, since January of 2001. From July 1992 to June 1993, Mr. Fisher
was an associate at Goldman, Sachs & Co. Mr. Fisher is also a member of the
board of directors of Accuride Corporation and Willis Group Holdings Limited.
EDWARD A. GILHULY is a managing director of Kohlberg Kravis Roberts &
Co. Ltd. and has been a member of KKR & Co. L.L.C. since 1996 and a general
partner of KKR Associates, L.P. ("KKR Associates") since 1995. During 1995,
Mr. Gilhuly was a general partner of KKR. Prior to 1995, he was an executive of
KKR and a limited partner of KKR Associates for more than five years. Mr.
Gilhuly is a director of MedCath, Inc. and Owens-Illinois, Inc.
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DONALD K. MILLER has been Chairman of Axiom International Investors,
LLC, a company engaged in international equity asset management, since 1999. He
has also been President of Presbar Corporation, a private firm engaged in
private equity investing and investment banking, since 1986, and was formerly
Chairman of Greylock Financial, Inc., an affiliate of Greylock Management
Corporation, from 1986 to 1996. In addition, Mr. Miller served as Chairman and
Chief Executive Officer of Thomson Advisory Group L.P. (now PIMCO Advisors
Holdings L.P.), an asset management company, from 1990 to 1993 and as Vice
Chairman from 1993 to 1994. Mr. Miller also served as Chairman of the Board of
Directors of Christensen Boyles Corporation ("CBC") from 1986 to December 1995
and was involved in the formation of CBC and in the acquisition of Boyles Bros.
Drilling Company and Christensen Mining Products. He currently is on the Board
of Directors of Huffy Corporation and RPM, Inc. and has spent the majority of
his career in investment banking or as an investor focusing on a variety of
industries.
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.
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.
COMPENSATION OF DIRECTORS
Each director of the Company who is not also an employee of the Company
receives an annual fee of $17,500, payable in quarterly installments, except
that the director may elect to defer receipt of the compensation in accordance
with the terms of the Company's Deferred Compensation Plan for Directors.
Directors of the Company who are also employees of the Company receive no
compensation for service to Layne Christensen as directors.
Under the Company's Deferred Compensation Plan for Directors, 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, 2002, Mr. Erikson had accumulated the
equivalent of 11,357.2 shares of common stock in his stock credit account, Mr.
Fisher had accumulated the equivalent of 2,610.3 shares of common stock in his
stock credit account, Mr. Gilhuly had accumulated the equivalent of 8,479.0
shares of common stock in his stock credit account, and Mr. Miller had
accumulated the equivalent of 8,169.7 shares of common stock in his stock credit
account.
MEETINGS OF THE BOARD AND COMMITTEES
During the fiscal year ended January 31, 2002, 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. 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 Audit and Compensation Committees of the Board of Directors. There
currently is no Nominating Committee or committee performing similar functions
of the Board of Directors.
The Audit Committee assists the Board of Directors in fulfilling its
responsibilities with respect to the Company's accounting and financial
reporting practices and in addressing the scope and expense of audit and related
services provided by the Company's independent auditors. The Audit Committee is
responsible for recommending the appointment of the Company's independent
auditors and reviewing the terms of their engagement, reviewing the Company's
policies and procedures with respect to internal auditing, accounting and
financial controls and reviewing
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the scope and results of audits and any auditor recommendations. At its May 2000
meeting, the Audit Committee approved a formal Audit Committee Charter. The
complete text of the Charter was filed as Appendix A to the Company's Proxy
Statement for the fiscal year ended January 31, 2001. The current members of the
Audit Committee are Donald K. Miller, Sheldon R. Erikson and Todd A. Fisher. The
Report of the Audit Committee for fiscal year 2002 appears on page 12 below.
The Compensation Committee reviews management compensation, evaluates
the performance of management, considers management succession 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 current members of the Compensation Committee are Robert J. Dineen, Edward
A. Gilhuly and Sheldon R. Erikson. The Board of Directors determined that the
current compensation and benefit levels of the Company's executive officers were
satisfactory, so no raises or additional option grants were made during the
year. As a result, the Compensation Committee did not meet during the fiscal
year ended January 31, 2002. However, several personal meetings and other
communications were conducted throughout the year with members of management and
each other regarding compensation issues within the committee's area of
responsibility.
COMPOSITION OF THE AUDIT COMMITTEE
The Board of Directors has determined that, as a result of a change in
the ownership of the Company's common stock which resulted in KKR and/or its
affiliates once again becoming the largest shareholder of the Company, Mr. Todd
A. Fisher no longer meets the definition of an "independent director," as that
term is defined in Nasdaq Marketplace Rule 4200(a)(14). Mr. Fisher no longer
qualifies as an independent director because he is currently employed by KKR,
and, as the largest shareholder of the Company with a 17.7% ownership interest,
KKR could be deemed to be an affiliate of the Company.
However, on April 6, 2001, the Board of Directors decided to allow Mr.
Fisher to remain a member of the Audit Committee pursuant to the exception
provided in Nasdaq Marketplace Rule 4350(d)(2)(B), which allows a company to
have one director on its Audit Committee who is not independent as defined in
Nasdaq Marketplace Rule 4200(a)(14). The Board of Directors determined that Mr.
Fisher's continued membership on the Audit Committee would be in the best
interests of the Company and its shareholders because, even though Mr. Fisher is
employed by KKR and as a result does not meet the technical definition of an
"independent director," both Mr. Fisher's interests as an employee of KKR and
KKR's interests as the largest shareholder of the Company are almost perfectly
aligned with the other shareholders of the Company. Furthermore, the Board
explained that Mr. Fisher has extensive employment experience in finance and
accounting which has resulted in his financial sophistication, and his
contributions to the Audit Committee have been very valuable to the Company.
Finally, the Board noted that it has become extremely difficult to find
qualified individuals who are willing to serve on the Audit Committee of the
Board of Directors of a public company and the current size of the Company does
not warrant the cost of adding an additional director to the Board.
The other two members of the Audit Committee qualify as independent
directors under Nasdaq Marketplace Rule 4200(a)(14).
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended January 31,
2002, January 31, 2001, and January 31, 2000, respectively, the compensation of
the Company's chief executive officer and of each of the Company's four other
most highly compensated executive officers whose remuneration for the fiscal
year ended January 31, 2002, exceeded $100,000 (collectively, the "Named
Executive Officers") for services to the Company and its subsidiaries in all
capacities:
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------------ --------------------- -------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS(1) COMPENSATION(2)(3) AWARDS SARS PAYOUTS COMPENSATION(4)
POSITION YEAR ($) ($) ($) ($) # ($) ($)
-------------------------- ------ ------- -------- ------------------ ---------- -------- ------- ---------------
Andrew B. Schmitt 2002 325,000 325,000 0 0 0 0 8,456
President, Chief Executive 2001 325,000 163,321 0 0 75,000 0 8,656
Officer and Director 2000 325,000 0 0 0 87,500 0 6,456
H. Edward Coleman 2002 205,000 205,000 996 0 0 0 12,096
Executive Vice President 2001 191,154 69,726 1,531 0 0 0 12,020
2000 185,000 0 1,212 0 32,250 0 10,935
Norman E. Mehlhorn 2002 200,000 200,000 0 0 0 0 9,883
Executive Vice President 2001 189,615 69,726 0 0 0 0 8,469
2000 185,000 0 0 0 32,250 0 7,116
Jerry W. Fanska 2002 177,000 177,000 866 0 0 0 9,325
Vice President--Finance 2001 166,615 61,057 1,337 0 0 0 9,610
and Treasurer 2000 166,800 0 1,059 0 42,250 0 7,893
Gregory F. Aluce 2002 150,000 150,000 3,393 0 0 0 12,062
Senior Vice President 2001 150,000 56,534 0 0 0 0 5,078
2000 126,442 0 0 0 24,875 0 4,248
-------------------------------------------------------
(1) Reflects bonuses earned for the fiscal years ended January 31, 2002,
2001 and 2000, respectively.
(2) Excludes perquisites and other benefits, unless the aggregate amount of
such compensation exceeds the lesser of either $50,000 or 10% of the
total of annual salary and bonus reported for the Named Executive
Officer.
(3) Reflects additional compensation paid to the Named Executive Officer
for taxes incurred on the imputed income resulting from either
interest-free loans from the Company or debt forgiven by the Company.
(4) All Other Compensation for the fiscal year ended January 31, 2002,
includes Layne Christensen contributions in the amounts of $6,800,
$6,800, $7,108, $6,800 and $6,612, which accrued during such fiscal
year for the accounts of Messrs. Schmitt, Coleman, Mehlhorn, Fanska
and Aluce, respectively, under the Company's Capital Accumulation
Plan; the cost of term life insurance paid by the Company for the
benefit of Messrs. Schmitt, Coleman, Mehlhorn, Fanska and Aluce, in
the amounts of $1,656, $2,851, $2,775, $839 and $450, respectively;
imputed income from interest-free loans from the Company for the
benefit of Messrs. Coleman and Fanska, pursuant to the Company's 1992
Stock Option Plan in the amounts of $2,445 and $1,686, respectively;
and imputed income in the amount of $5,000 from the forgiveness of a
promissory note issued to the Company by Mr. Aluce in connection with
a leased vehicle buyout program.
All Other Compensation for the fiscal year ended January 31, 2001,
includes Layne Christensen contributions in the amounts of $7,000,
$6,069, $6,538, $6,501 and $4,765, which accrued during such fiscal
year for the accounts of Messrs. Schmitt, Coleman, Mehlhorn, Fanska
and Aluce, respectively, under the Company's Capital Accumulation
Plan; the cost of term life insurance paid by the Company for the
benefit of Messrs. Schmitt, Coleman, Mehlhorn, Fanska and Aluce, in
the amounts of $1,656, $2,614, $1,931, $777 and $313, respectively;
and imputed income from interest-free loans from the
6
Company for the benefit of Messrs. Coleman and Fanska pursuant to the
Company's 1992 Stock Option Plan in the amounts of $3,337 and $2,332,
respectively.
All Other Compensation for the fiscal year ended January 31, 2000,
includes Layne Christensen contributions in the amounts of $4,050,
$4,943, $4,953, $4,953 and $3,904 which accrued during such fiscal
year for the accounts of Messrs. Schmitt, Coleman, Mehlhorn, Fanska
and Aluce, respectively, under the Company's Capital Accumulation
Plan; the cost of term life insurance paid by the Company for the
benefit of Messrs. Schmitt, Coleman, Mehlhorn, Fanska and Aluce, in
the amounts of $2,406, $3,350, $2,163, $1,094 and $344, respectively;
and imputed income from interest-free loans from the Company for the
benefit of Messrs. Coleman and Fanska pursuant to the Company's 1992
Stock Option Plan in the amounts of $2,642 and $1,846, respectively.
OPTION GRANTS DURING FISCAL 2002
No stock option grants were made under the Company's 1992 Stock Option
Plan (the "1992 Option Plan") or the Company's 1996 District Stock Option Plan
(the "1996 Option Plan") and no stock appreciation rights ("SARs") were awarded
to any Named Executive Officer during the fiscal year ended January 31, 2002.
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to each Named
Executive Officer concerning the exercise of options and stock appreciation
rights ("SARs") during the fiscal year ended January 31, 2002, and unexercised
options and SARs held as of January 31, 2002.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND JANUARY 31, 2002 OPTION/SAR VALUES (1)
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
SHARES UNEXERCISED UNEXERCISED
ACQUIRED SHARES OPTIONS/ IN-THE-MONEY
ON VALUE SARS AT OPTIONS/SARS AT
EXERCISE REALIZED JANUARY 31, 2002 JANUARY 31, 2002 (2)
NAME # ($) # ($)
------------------ -------- -------- ---------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Andrew B. Schmitt 0 0 352,500 110,000 414,063 295,313
H. Edward Coleman 0 0 109,442 19,125 65,440 36,281
Norman E. Mehlhorn 0 0 109,442 19,125 65,440 36,281
Jerry W. Fanska 0 0 103,125 26,125 91,406 47,531
Gregory F. Aluce 0 0 62,820 21,679 27,984 27,984
-------------------------------
(1) No stock appreciation rights have ever been granted by the Company.
(2) As of January 31, 2002, the last reported sale price of the Company's
Common Stock, which was reported on the NASDAQ National Market System
on January 31, 2002, was $7.50 per share. Value is calculated by
determining the difference between the option exercise price and $7.50,
multiplied by the number of shares of Common Stock underlying the
options.
INCENTIVE COMPENSATION PLAN
The Company adopted an Executive Incentive Compensation Plan (the "IC
Plan") in fiscal 1993. Each of the Company's executive officers, including the
Named Executive Officers, is eligible to participate in the IC Plan. Under the
IC Plan, each participant will be eligible for an annual cash bonus in a target
amount (the "Target Bonus") equal to a percentage (approximately 50% in the case
of Mr. Schmitt and approximately 37.5% in the case of Messrs. Coleman, Mehlhorn,
Fanska and Aluce) of such participant's base compensation. The Target Bonus will
be
7
adjusted (up or down) based upon the performance of the Company as compared
to certain financial goals included in the business plan adopted and approved by
the Board of Directors. In no event, however, can a participant's annual cash
bonus under the IC Plan exceed 100% of such participant's base compensation for
the relevant year. No bonus will be payable should performance be equal to or
below 80% of the relevant goals established by the business plan. In addition,
the formula bonus derived as described in the preceding sentences can be further
adjusted (up or down) at the discretion of the Board of Directors by one-third
of the Target Bonus. All or part of an employee's incentive compensation under
the IC Plan may, at the discretion of the Board of Directors, be paid in the
form of shares of the Company's common stock which may consist of authorized but
unissued shares of common stock or shares of common stock reacquired by the
Company on the open market. Messrs. Schmitt, Coleman, Mehlhorn, Fanska and Aluce
received payments under the IC Plan for services rendered to the Company in the
fiscal year ended January 31, 2002, in the amounts of $325,000, $205,000,
$200,000, $177,000 and $150,000, respectively. See "Executive Compensation and
Other Information--Executive Compensation."
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 salaried 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
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. In
addition, 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. At the option of
the Board of Directors of the Company, all or any portion of such Company
contributions may be made in the Company's common stock. In addition, each
participant can voluntarily contribute, on a pre-tax basis, a portion of his or
her compensation (which in no event can exceed $11,000 for the calendar year
2002) 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 2002, total Company contributions
under the Capital Accumulation Plan of $6,800. $6,800, $7,108, $6,800, and
$6,612 accrued for the accounts of Messrs. Schmitt, Coleman, Mehlhorn, Fanska
and Aluce, respectively.
RETIREMENT, DISABILITY AND DEATH PLANS
The Company has agreed to pay Mr. Schmitt an annual retirement benefit
beginning at age 65 equal to 40% of the average of his total compensation (as
defined in the 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, 2002, the Company funded balance in Mr. Schmitt's account under the
Capital Accumulation Plan was $32,757. 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. The agreement includes certain provisions, exercisable at
Mr. Schmitt's election, for early retirement and joint and survivor benefits if
he is married at the time payment commences. Upon termination of Mr. Schmitt's
service for any reason other than disability or death, and subject to special
provisions in the event of a "change in control" as discussed below, his Annual
Benefit will vest in the percentage determined under the following schedule:
8
YEARS OF SERVICE VESTING PERCENTAGE
---------------- ------------------
6 20%
7 40%
8 60%
9 80%
10 100%
Mr. Schmitt currently has eight years of service credited towards his annual
retirement benefit.
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. Disability is
to be determined by an administrative committee of the Board of Directors to be
appointed at the time of any claim of disability.
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.
In the event of Mr. Schmitt's death or involuntary termination within
two years following a "change in control" (as defined in the agreement), Mr.
Schmitt's benefits under his retirement plan become fully vested effective upon
such death or involuntary termination. A "change in control" is deemed to occur
if (i) during any 24-month period, individuals who at the beginning of such
period constituted the Company's Board of Directors or whose nomination for
election by the Company's stockholders was approved by a vote of a majority of
the directors who either were directors at the beginning of such period or whose
election or nomination was previously so approved cease for any reason to
constitute a majority of the Board of Directors of the Company, or (ii) the
beneficial ownership of the Company's common stock changes resulting in KKR
having less beneficial ownership than any person or group of persons if that
person or group of persons holds 20% or more of the outstanding common stock of
the Company. Based upon the beneficial ownership of the Company's common stock
reported by third parties in filings with the Securities and Exchange
Commission, a "change in control", as defined above, did occur during fiscal
year 2000.
CERTAIN CHANGE-IN-CONTROL AGREEMENTS
The benefits which Mr. Schmitt will receive under his annual retirement
benefit program may be adjusted and, in addition, he will be entitled to a
lump-sum payment equal to 24 month's salary in the event of a change in control.
In addition, all of the executive officers who have been granted stock options
have a "change in control" provision in their respective Incentive Stock Option
Agreements ("ISO Agreements") issued in accordance with the terms of the
Company's 1992 Option Plan and the Company's 1996 Option Plan. See "Stock Option
Plans - Report of Board of Directors and Compensation Committee on Executive
Compensation." Under the terms of the ISO Agreements, the options vest at the
rate of either 20% or 25% per year beginning on the first day following the
first anniversary of the option grant date. In the event of a change in control,
however, the options become 100% vested.
Under the terms of the ISO Agreements of the executive officers
executed during or after fiscal 1999, a "change in control" is deemed to occur
if: (i) there is a change in the composition of the Board of Directors of the
Company; (ii) any person, except for certain interested parties, acquires 35% or
more of the voting power of the Company's outstanding securities; or (iii) there
is a substantial change in the Company's business structure through merger, sale
of assets or other event. No ISO Agreements were entered into during fiscal
1998. Under the terms of the ISO Agreements of the executive officers executed
in fiscal 1997, a "change in control" is deemed to occur if, during any 24-month
period, individuals who at the beginning of such period constituted the
Company's Board of Directors or whose nomination for election by the Company's
stockholders was approved by a vote of a majority of the directors who either
were directors at the beginning of such period or whose election or nomination
was previously so approved cease for any reason to constitute a majority of the
Board of Directors of the Company. A
9
"change in control" will not be deemed to have occurred, however, if such a
change in the composition of the Board of Directors occurs in connection with
any public offering by the Company, KKR or their affiliates.
REPORT OF BOARD OF DIRECTORS AND COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Company's executive compensation program currently is administered
by the Compensation Committee of the Board of Directors which is comprised of
Messrs. Dineen, Gilhuly and Erikson. It is the Compensation Committee's duty to
review the compensation levels of management, evaluate performance of management
and consider management succession and related matters. The Company's incentive
plans, including the Company's 1992 Option Plan, the Company's 1996 Option Plan
(collectively, the "Option Plans") and the Company's Executive Incentive
Compensation Plan ("Incentive Plan"), are administered by the Board of Directors
with respect to grants made to officers of the Company.
Compensation Policy. The Company's overall compensation policy is
designed to attract, retain and motivate qualified individuals who are expected
to contribute to the Company's long-term growth and success. The Company has
adopted an annual incentive compensation program which is designed to reinforce
its strategic long and short term goals and to provide executive officers with
the opportunity to receive greater compensation in those years in which the
Company achieves its financial goals than in those years in which it does not.
In addition, the Company's Option Plans are designed to promote a mutuality of
interest between executive officers and stockholders through stock purchases and
options allowing the executive officers and stockholders to share in the risks
and rewards associated with stock ownership.
Compensation Components. The Company's executive compensation program
is reviewed periodically to ensure that pay levels and incentive opportunities
are competitive and reflect the performance of the Company and the individual
executive officer. The principal components of the Company's executive
compensation package are salary, annual incentive compensation and stock
options.
Base Salary. Base pay levels largely are determined through an
assessment of the executive officer's performance during the relevant period
based upon objective and subjective criteria and, to a lesser extent, through an
informal comparison with similarly sized public companies engaged primarily in
related industries. The Company does not know of any direct competitors which
are public companies. Accordingly, the Compensation Committee has had to look at
companies outside of its industry to identify companies for which a comparison
of pay levels would be deemed by the committee to be relevant. These companies
are not necessarily the same companies which comprise the index of companies
with similar market capitalizations utilized for purposes of Company shareholder
returns in the performance graph included elsewhere in the Proxy Statement.
Actual salaries are based upon subjective assessments of individual factors such
as the responsibilities of the position and the skill, knowledge and experience
of each individual executive officer. Each executive officer's individual
performance is considered from the previous year and takes into account an
assessment of the executive officer's growth and effectiveness in the
performance of his duties.
Incentive Compensation. Under the Company's Incentive Plan, bonuses are
paid based on the officer's performance and the performance of the entire
Company. The Incentive Plan is administered by the Board of Directors. The
target bonus is 50% of base salary in the case of Mr. Schmitt and, in the case
of the remaining executive officers, 37.5% of base salary, subject to adjustment
up or down by one-third in the case of extraordinary circumstances. The
Company's performance for purposes of incentive compensation decisions is
measured against goals established for the Incentive Plan at the beginning of
the fiscal year by the Board of Directors. The maximum bonus payable is 100% of
salary, and no bonus is payable if the Company does not attain at least 80% of
the established goals. For fiscal 2002, a goal based on attainment of positive
net income and a threshold earnings before income taxes was established by the
Board in order to qualify for payment of incentive compensation.
Stock Option Plans. Under the Company's Option Plans, each Named
Executive Officer and certain other key employees are eligible to receive
options to purchase shares of the Company's common stock. The Option Plans are
administered by the Board of Directors. Under the Option Plans, the Board is
authorized from time to time to grant to executive officers and other employees
of the Company options to purchase up to an aggregate of 1,900,000 shares (as
amended) of the common stock at a price fixed by the Board. Such options may be
either incentive stock
10
options or non-qualified stock options. The price for incentive stock options
cannot be less than the fair market value of the Company's common stock on the
date of grant while the price for non-qualified options may be set at any
price. Individual grant sizes are determined after considering the Company's
performance and the competitiveness of the Named Executive Officer's long-term
compensation package. The Board also takes into account the number of shares of
the Company's common stock and stock options held by or previously granted to
each Named Executive Officer. The grant of stock options is intended to
strengthen the linkage between executive compensation and stockholder return.
No options granted under the Option Plans are exercisable more than ten
years after the date of grant. All options granted under the Option Plans are
evidenced by and subject to option agreements entered into by the Company and
the individual receiving the options.
Discussion of 2002 Compensation for the Chief Executive Officer.
Although the Board of Directors believed that the executive team, including Mr.
Schmitt, had performed well under very difficult market conditions, it
determined that the current compensation and benefit levels of all of the
Company's executive officers, including Mr. Schmitt, were satisfactory. As a
result, no raises or additional option grants were made to any executive officer
during fiscal 2002.
Mr. Schmitt is a participant under the Incentive Plan. The Company met
the performance criteria established by the Board for fiscal 2002 under the
Incentive Plan. As a result, Mr. Schmitt received an incentive compensation
award for fiscal 2002 in the amount of $325,000.
Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, places a limit of $1 million on the
amount of annual compensation that may be deducted by the Company in any year
with respect to the Company's Chief Executive Officer and its other four most
highly compensated executive officers. Certain performance-based compensation
approved by stockholders is not subject to this deduction limitation, and is,
therefore, deductible.
The Company intends to maximize the deductibility of executive
compensation while retaining the discretion necessary to compensate executive
officers in a manner commensurate with performance and the competitive market
for executive talent, and, therefore, the Committee and/or the Board may from
time to time, in circumstances it deems appropriate, award compensation in
addition to these option grants and bonus payments that may not be deductible.
COMPENSATION COMMITTEE
BOARD OF DIRECTORS OF THE BOARD OF DIRECTORS
Robert J. Dineen Donald K. Miller Robert J. Dineen
Edward A. Gilhuly Sheldon R. Erikson Edward A. Gilhuly
Todd A. Fisher Andrew B. Schmitt Sheldon R. Erikson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 31, 2002, the members of the
Compensation Committee were Messrs. Dineen, Gilhuly and Erikson. As discussed
above under "Report of Board of Directors and Compensation Committee on
Executive Compensation," all decisions relating to the compensation of executive
officers for fiscal 2002 were made by the Board or the Compensation Committee.
Among the members of the Compensation Committee, Mr. Dineen is the only employee
or current or former officer of the Company or any of its subsidiaries. KKR has
agreed to render management consulting and financial services to the Company for
an annual fee. The annual fee for the fiscal year ended January 31, 1999 was
$125,000. Beginning with fiscal year 2000, the Company and KKR agreed to suspend
the fee until such time as the Company's earnings prospects have improved. Such
services include, but are not necessarily limited to, advice and assistance
concerning any and all aspects of the operations, planning and financing of the
Company, as required from time to time by the Company. KKR Associates, the
general partners of which are the general partners of KKR, owns approximately
17.7% of the Company's common stock.
11
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUE 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.
REPORT OF THE AUDIT COMMITTEE
On May 18, 2000, the Board of Directors adopted a written charter for
the Audit Committee. The complete text of the charter, which reflects standards
set forth in SEC regulations and Nasdaq rules, was filed as an appendix to the
Company's proxy statement for the fiscal year ended January 31, 2001.
As set forth in more detail in the charter, the Audit Committee's
primary responsibilities fall into three broad categories:
1. First, the Committee is to serve as an independent and
objective party to monitor the Company's financial reporting
process and internal control systems;
2. Second, the Committee is charged with reviewing and appraising
the audit efforts of the Company's independent accountants; and
3. Third, the Committee is to provide an open avenue of
communication among the independent accountants, financial and
senior management and the Board of Directors.
The Committee meets periodically to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or appropriate
to each of the matters assigned to it under the Committee's charter. To carry
out its responsibilities, the Committee met formally one time during fiscal
2002. In addition, the Committee delegated the responsibility of reviewing the
Company's quarterly financial statements to the Chairman of the Committee, whose
actions were later ratified by the full Committee. Finally, it should be noted
that the Committee discharges its responsibilities throughout the year, not only
at committee meetings, but through personal meetings and other communications
with members of management and each other regarding issues within the
Committee's area of responsibility.
In monitoring the Company's financial reporting process, the Committee
met with both management and the Company's outside auditors to review and
discuss all financial statements prior to their issuance and to discuss
significant accounting issues. Management advised the Committee that all
financial statements were prepared in accordance with generally accepted
accounting principles, and the Committee discussed the statements with both
management and the outside auditors. The Committee's discussions with the
outside auditors took place both with and without management present. The
Committee's review included discussion with the outside auditors of matters
required to be discussed pursuant to Statement on Auditing Standards No. 61
(Communication with Audit Committees).
With respect to the Company's outside auditors, the Committee, among
other things, discussed with Deloitte & Touche LLP matters relating to its
independence, including the written disclosures made to the Committee as
required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees).
In reliance on the reviews and discussions outlined above, the
Committee recommended to the Board of Directors that the Board approve the
inclusion of the Company's audited financial statements in the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 2002, for filing with
the Securities and Exchange Commission. The Committee has also recommended to
the Board, subject to shareholder ratification, the selection of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
January 31, 2003.
12
Respectfully submitted on March 20, 2002, by the members of the Audit
Committee of the Board of Directors:
Donald K. Miller, Chairman
Sheldon R. Erikson
Todd A. Fisher
COMPANY PERFORMANCE
The following performance graph shows a comparison of cumulative total
returns for the Company, the NASDAQ Market Value index and an index of companies
selected by the Company having market capitalization similar to that of the
Company (the "SMC Group") for the period from January 31, 1997 through January
31, 2002.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
Among Layne Christensen Company,
The NASDAQ Stock Market (U.S.) Index and a Peer Group
[GRAPH]
The cumulative total returns on investment for the Company, the NASDAQ
Market Value index and an index of the SMC Group are based on the stock price or
index at January 31, 1997. The performance graph assumes that the value of an
investment in the Company's common stock and each index was $100 at January 31,
1997, and that all dividends were reinvested. The information presented in the
performance graph is historical in nature and is not necessarily indicative of
future performance.
The comparison of cumulative total returns presented in the above graph
was plotted using the following index values and common stock price value:
1/31/97 1/31/98 1/31/99 1/31/00 1/31/01 1/31/02
------- ------- ------- ------- ------- -------
Layne Christensen Company $ 100.00 $ 93.33 $ 45.83 $ 38.75 $ 31.25 $ 50.00
NASDAQ Market Value $ 100.00 $ 117.99 $ 184.64 $ 288.57 $ 202.09 $ 141.89
SMC Group $ 100.00 $ 69.22 $ 54.07 $ 36.01 $ 27.52 $ 34.79
Source: Research Data Group, Inc.
13
The performance graph compares the performance of the Company with that
of the NASDAQ Market Value index and an index of the SMC Group. The Company is
not aware of any published industry or line-of-business index in which its
common stock is included and was not able to reasonably identify a peer group of
issuers on an industry, line-of-business or other basis. The Company believes
that it is one of the largest water well drilling, well repair and maintenance
and mineral exploration drilling companies in the United States. The Company's
competitors primarily are local and regional firms and the Company is not aware
of any other publicly held company principally engaged in the Company's
line-of-business. Accordingly, in order to provide a more meaningful comparison
of cumulative total returns for the Company in the above performance graph, the
Company used an index of the SMC Group; companies having market capitalization
similar to that of the Company. Companies in the index of the SMC Group are
Ashanti Goldfields, Ltd., Cadiz, Inc., Calgon Carbon Corporation, Coeur d' Alene
Mines, Echo Bay Mines, Ltd., Hecla Mining Company, Osmonics, Inc., Perini
Corporation and Waterlink, Inc.
OWNERSHIP OF LAYNE CHRISTENSEN COMMON STOCK
The following table sets forth certain information as of February 28,
2002, 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 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)
---- ------------ ---------------
KKR Associates, L.P. (2) ......................................... 2,067,000 17.7%
Marley G.P., Inc. (2) ............................................ 53,436 *
T. Rowe Price Associates, Inc. (3) ............................... 1,726,100 14.7%
Dimensional Fund Advisors, Inc. (4)............................... 994,600 8.5%
State of Wisconsin Investment Board (5) .......................... 925,000 7.9%
Wynnefield Partners Small Cap Value Funds (6)..................... 700,000 6.0%
FleetBoston Financial Corporation (7)............................. 636,600 5.4%
Robert J. Dineen ................................................. 152,683 (8) 1.3%
Andrew B. Schmitt ................................................ 459,375 (8) 3.8%
Donald K. Miller ................................................. 112,860 (9) *
Edward A. Gilhuly (2) ............................................ -- --
Todd A. Fisher (2) ............................................... -- --
Sheldon R. Erikson ............................................... -- --
H. Edward Coleman ................................................ 181,551 (8) 1.5%
Norman E. Mehlhorn ............................................... 140,546 (8) 1.2%
Jerry W. Fanska .................................................. 129,288 (8) 1.1%
Gregory F. Aluce ................................................. 78,051 (8) *
All directors and officers as a group (12 persons) ............... 1,361,597(10) 10.8%
------------------------------------
* 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
immediately exercisable stock options. 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 11,707,694
shares of common stock outstanding plus 904,151 options exercisable
within 60 days of February 28, 2002, where said options are considered
deemed shares attributed to a given beneficial owner.
14
(2) Mr. Gilhuly, Henry R. Kravis, George R. Roberts, Paul E. Raether,
Robert I. MacDonnell, Michael W. Michelson, James H. Greene, Jr.,
Michael T. Tokarz, Perry Golkin, Clifton S. Robbins and Scott Stuart
are the general partners of KKR Associates and Messrs. Kravis and
Roberts are also the members of the Executive Committee of KKR
Associates, and in such capacity may be deemed to share beneficial
ownership of the shares of Common Stock that KKR Associates may
beneficially own or be deemed to beneficially own. Mr. Fisher is a
limited partner of KKR Associates. Messrs. Gilhuly and Fisher are
directors of the Company. Messrs. Roberts and Gilhuly are the
directors and are officers of Marley G.P., Inc. Marley G.P., Inc. is a
corporation the stockholders of which are (i) certain past and present
general and limited partners of KKR Associates, (ii) certain past and
present employees of KKR and (iii) partnerships and trusts for the
benefit of the families of such partners and employees. Marley G.P.,
Inc. and KKR Associates may be deemed to be a group in relation to
their respective investment in the Company, but do not affirm the
existence of a group. The foregoing individuals disclaim beneficial
ownership of the Shares owned by KKR Associates and Marley G.P., Inc.
The business address of KKR Associates and Marley G.P., Inc. is
9 West 57th Street, New York, New York 10019.
(3) According to its most recent Schedule 13G filing with the Securities
and Exchange Commission dated February 14, 2002, these securities are
owned by various individual and institutional investors including T.
Rowe Price Small Cap Value Fund, Inc. (which owns 601,300 shares,
representing 5.1% of the shares outstanding), which T. Rowe Price
Associates, Inc. ("Price Associates") serves as investment adviser with
power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Securities Exchange
Act of 1934, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities. The business
address of Price Associates is 100 East Pratt Street, Baltimore,
Maryland 21202.
(4) The ownership reported is based upon the most recent Schedule 13G of
Dimensional Fund Advisors, Inc. ("Dimensional") filed with the
Securities and Exchange Commission on February 12, 2002. Dimensional is
an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940. Dimensional 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 accounts. These investment companies, trusts and
accounts are the "Funds". In its role as investment adviser or manager,
Dimensional possesses voting and/or investment power over the
securities of the Company owned by the Funds. For the purposes of
reporting requirements of the Securities Exchange Act of 1934,
Dimensional is deemed to be a beneficial owner of such securities;
however, Dimensional expressly disclaims that it is, in fact, the
beneficial owner of such securities. The business address of
Dimensional is 1299 Ocean Avenue, 11th Floor, Santa Monica, California
90401.
(5) The ownership reported is based upon the most recent Schedule 13G of
the State of Wisconsin Investment Board as filed with the Securities
and Exchange Commission dated February 15, 2002. The business address
for the State of Wisconsin Investment Board is Post Office Box 7842,
Madison, Wisconsin 53707.
(6) The ownership reported is based upon the most recent Schedule 13G of
Wynnefield Partners Small Cap Value, L.P. ("Partners"), Wynnefield
Partners Small Cap Value, L.P. I ("Partners I") and Wynnefield Small
Cap Value Offshore Fund, Ltd. ("Offshore Fund") filed with the
Securities and Exchange Commission on January 25, 2001. Partners,
Partners I and the Offshore Fund are collectively referred to herein as
the "Wynnefield Partners Small Cap Value Funds." The Schedule 13G
reports that as of December 21, 2000, Partners beneficially owned
261,300 shares of the Company's common stock, Partners I beneficially
owned 308,500 shares of the Company's common stock, and the Offshore
Fund beneficially owned 130,200 shares of the Company's common stock,
for a total of 700,000 shares. The business address for the Wynnefield
Partners Small Cap Value Funds is 450 Seventh Avenue, Suite 509, New
York, New York 10123.
(7) The ownership report is based upon the most recent Schedule 13G of
FleetBoston Financial Corporation ("FleetBoston") filed with the
Securities and Exchange Commission on February 14, 2002. The Schedule
13G reports that as of December 31, 2001, FleetBoston beneficially
owned 636,600 shares of the
15
Company's common stock. The business address for FleetBoston is
100 Federal Street, Boston, Massachusetts 02110.
(8) Includes options for the purchase of 72,164 shares, 374,375 shares,
117,505 shares, 117,505 shares, 113,688 shares and 70,164 shares of the
Company's common stock exercisable within 60 days granted to Messrs.
Dineen, Schmitt, Coleman, Mehlhorn, Fanska and Aluce, respectively.
Also includes 6,323 shares of the Company's common stock held by Mr.
Aluce indirectly through the stock fund in his Capital Accumulation
Plan account.
(9) Includes 2,626 shares owned by Mr. Miller's two sons. Mr. Miller has
sole voting and investment power with respect to 110,234 shares. Mr.
Miller has shared voting and investment power with respect to
2,626 shares.
(10) Includes options for the purchase of 904,151 shares of the Company's
common stock exercisable within 60 days granted to all directors and
officers of the Company as a group.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company, through a wholly owned subsidiary, leases a facility in
Phoenix, Arizona for its parts and material supply business from Air Park
Investments L.L.C., an Arizona limited liability company. The members of Air
Park Investments L.L.C. are Mr. Mehlhorn and two of his brothers. The lease term
is for three years through October 31, 2003. Total payments to the lessor under
the lease in fiscal 2002 were $100,928.
ITEM 2
APPROVAL OF THE 2002 STOCK OPTION PLAN
On March 19, 2002, the Company's Board of Directors unanimously adopted
the Layne Christensen Company 2002 Stock Option Plan (the "Plan"), subject to
stockholders' approval at the Annual Meeting. The aggregate number of shares of
common stock, $0.01 par value, of the Company that may be issued pursuant to the
exercise of options granted under the Plan is limited to 600,000 shares, subject
to increase or decrease in the event of any change in the Company's capital
structure. See "Dilution or Enlargement." The Company currently intends to
register the shares of common stock underlying options on Form S-8 under the
Securities Act of 1933 and any applicable state securities laws.
The Board of Directors believes that options and awards of Company
stock will continue to be a significant benefit to the Company in attracting and
retaining key executive employees and by providing a long-range incentive for
such employee to work for the continued success of the Company. As a result, the
Board has recommended that the stockholders of the Company approve the Plan.
The approval of the Layne Christensen Company 2002 Stock Option Plan
requires approval by a majority of the votes cast at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
PLAN.
The following summary of the Plan is qualified in its entirety by
reference to the full text of the Plan.
General. The Plan is sponsored by the Company for any employee of the
Company, or its subsidiaries, who has made or is expected to make a significant
contribution to the Company ("Key Employees"). The Company has established the
Plan to offer Key Employees the opportunity to become owners of capital stock of
the Company by exercising stock options. The Plan provides for options intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and options intended to be
"nonqualified stock
16
options." Nonqualified stock options are options which are not entitled to the
special tax treatment afforded incentive stock options under Section 422 of the
Code.
Purpose. The purpose of the Plan is to secure for the Company and its
stockholders the benefits of the incentive inherent in ownership of its Common
Stock by certain Key Employees. It is generally recognized that stock option
plans aid in retaining and encouraging such persons by furnishing a means
whereby they can build capital resources and increase their income through the
opportunity to participate in the future growth of the business.
Eligible Participants. Options to purchase shares of common stock may
be granted under the Plan to Key Employees of the Company and its subsidiaries,
except that no incentive stock option may be granted under the Plan to any
employee who, immediately before the option is granted, owns (either directly or
by application of the rules contained in Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its subsidiaries. This ownership limitation does not
apply if at the time the incentive stock option is granted (i) the option price
is at least 110% of the fair market value of the stock subject to such incentive
stock option, and (ii) such incentive stock option will expire no later than
five years from the date on which it is granted.
In addition, the aggregate fair market value (as of the grant date) of
common stock with respect to which incentive stock options are exercisable for
the first time by an optionee during any calendar year (under the Plan or under
any other plan of the Company or its subsidiaries which qualifies as an
incentive stock option plan under Section 422 of the Code) may not exceed
$100,000. To the extent such fair market value exceeds $100,000 during any
calendar year, amounts in excess of $100,000 are treated as nonqualified stock
options.
As of April 12, 2002, the Company had not granted options to purchase
any shares of common stock pursuant to the Plan. The number and dollar amount of
benefits that will be received by or allocated to each officer named in the
Summary Compensation Table under "Executive Compensation and Other
Information--Executive Compensation" in Item 1, all executive officers as a
group, all directors who are not executive officers as a group, and all
employees, including officers who are not executive officers, as a group under
the Plan therefore are not currently determinable.
Administration of the Plan. The Plan is currently administered by the
Company's Board of Directors. The Board is permitted, however, to delegate its
discretionary authority over the Plan to a committee of the Board (the
"Committee"). Any reference hereafter made to the Committee shall mean either
the Board or the Committee, as the case may be. Members of the Committee may be
removed at the discretion of the Board.
The Committee is authorized to interpret the Plan and to adopt rules
from time to time to carry out the Plan. Any interpretations or rules in regard
to incentive stock options shall be consistent with the basic purpose of the
Plan to grant incentive stock options within the meaning of Section 422(b) of
the Code. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan.
Terms of Options. Each option shall be evidenced by a written stock
option agreement, executed by the optionee and an authorized officer of the
Company. The terms and conditions of a stock option agreement shall be
consistent with the Plan, but the Committee has the authority to include terms
and conditions not inconsistent with the Plan. Stock option agreements
evidencing incentive stock options shall contain such terms and conditions
necessary to qualify such options as incentive stock options under Section
422(b) of the Code. There is no obligation to grant any two options on the same
terms, and options granted at the same time to different individuals or at
different times to the same individual may have different terms.
Subject to the provisions of the stock option agreement and the other
restrictions contained in the Plan, an option becomes exercisable at such times
and in such installments (which may be cumulative) as the Committee provides in
the terms of each individual option. The period during which an option (or
installment) may be exercised (the "option period") terminates at such times as
the Committee provides in the terms of each individual option. The Committee may
adopt a resolution after an option is granted which accelerates the option
period. No option may be exercised to any extent by anyone after the first to
occur of the following events:
(a) in the case of an incentive stock option, the expiration
of ten years from the date the incentive stock option is granted;
17
(b) if an optionee owned (either directly or by application of
the rules contained in Section 424(d) of the Code) stock possessing
more than 10% of the total combined voting power of all classes of
stock of the Company or its subsidiaries immediately before an
incentive stock option is granted to such optionee, then the expiration
of five years from the date the incentive stock option is granted;
(c) the time of the optionee's termination of employment
unless such termination of employment results from his death, permanent
disability or retirement;
(d) the expiration of 30 days from the time of the optionee's
termination of employment by reason of his permanent disability or
retirement;
(e) the expiration of 90 days from the time of the optionee's
termination of employment by reason of his death; or
(f) the optionee engages in willful misconduct which injures
the Company or any of its subsidiaries.
Except as set forth in subsections (c), (d) and (e) above, an
incentive stock option is not exercisable during the option period unless the
optionee has been continuously employed by the Company or a subsidiary from the
date the incentive stock option was granted until its date of exercise.
Price. The price of the shares subject to each option is
determined by the Committee and set forth in the respective stock option
agreement. The price for shares subject to an incentive stock option may not be
less than 100% of the fair market value of such shares on the date the option is
granted, except that the price per share may not be less than 110% of the fair
market value of such shares on the date an incentive stock option is granted in
the case of an optionee then owning (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or its subsidiaries.
Payment for Shares. An option may be exercised by delivery to
the Secretary of the Company the following items during the time such option is
exercisable:
(a) Notice stating that the option (or portion thereof) is
exercised, in a form complying with all applicable rules established by
the Committee; and
(b) Full payment (in cash, by check or by delivering
certificates of common stock with a fair market value equal to the
purchase price) for the shares subject to such option, and for all
amounts the Company is required to withhold under applicable law.
Amendment and Termination of the Plan. The Plan will terminate
on February 29, 2012, except as to options then outstanding under the Plan.
Options which are outstanding on the date of such termination shall remain in
effect until they have been exercised or have expired.
The Committee has the right to amend, modify or terminate the
Plan. With the exception of those amendments described under "Dilution or
Enlargement," however, the Committee must seek stockholder approval in order to:
(a) increase the maximum number of shares subject to the Plan, (b) alter the
eligibility requirements under the Plan, (c) extend the period during which
options may be granted or exercised, (d) change the provisions as to option
price (other than to change the manner of determining fair market value of
shares to conform with applicable law), or (e) amend or modify the Plan in any
manner requiring stockholder approval pursuant to Securities and Exchange
Commission Rule 16b-3. No amendment, modification or termination of the Plan may
adversely affect the rights of any optionee under any then outstanding option
granted under the Plan without the consent of that optionee.
Dilution or Enlargement. In the event the common stock is
changed into or exchanged for a different number or kind of securities of the
Company by reason of merger, consolidation, recapitalization, reclassification,
stock split, stock dividend or combination of shares, the Committee shall make
an appropriate and equitable adjustment in the number and kind of shares (a) as
to which options may be granted, including adjustments of the aggregate number
of
18
shares which may be issued under the Plan; and (b) as to which options, or
portions thereof unexercised, shall be exercisable, such that after such event
each optionee's proportionate interest shall be maintained as before the
occurrence of such event. No such adjustment shall be made which would
disqualify an incentive stock option within the meaning of Section 424(h) of the
Code. Any adjustment to an outstanding option shall be made with any necessary
corresponding adjustment in option price per share and without change in the
total price applicable to the options or the unexercised portion of the options
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices). Any such adjustment made by the Committee shall be
final and binding upon all optionees, the Company and all other interested
persons.
Employee Retirement Income Security Act of 1974. The Plan is
not subject to any provision of the Employee Retirement Income Security Act of
1974.
Assignment. An option granted pursuant to the Plan shall not
be transferable or assignable by the optionee other than by will or the laws of
descent and distribution, and during the lifetime of the optionee, the option
shall be exercisable only by the optionee.
Miscellaneous Information. The Plan provides that the shares
of common stock issued upon the exercise of options granted thereunder shall
consist of authorized but unissued shares of common stock or shares of common
stock reacquired by the Company. Shares of common stock subject to options
granted under the Plan which expire or terminate without being exercised in full
become available, to the extent unexercised, for future grants under the Plan.
No optionee shall be deemed to be a holder of any shares of
common stock subject to an option granted under the Plan unless and until
certificates for such shares are issued to such optionee under the terms of the
Plan.
The market value of the common stock of the Company on April
10, 2002, computed by reference to the last sale price of the common stock, was
$109,232,785.
Federal Income Tax Consequences--General. The following is a
brief discussion of the federal income tax consequences of grants, exercises and
sales of stock received pursuant to the exercise of stock options granted under
the Plan. This discussion is not intended to be exhaustive and does not describe
state, local or foreign tax consequences.
Incentive Stock Options ("ISOs"). An optionee will not
recognize taxable income and the Company will not be entitled to a tax deduction
with respect to the grant or exercise of an ISO. If shares of common stock are
issued to an optionee pursuant to the exercise of an ISO, and if no disposition
of such shares is made by the optionee within two years after the date of grant
or within one year after the transfer of such shares of common stock to the
optionee, then (i) upon the sale of such shares of common stock, any amount
realized in excess of the option price will be taxable to the optionee as a
long-term capital gain and any loss sustained will be a long-term capital loss;
and (ii) no deduction will be allowed to the Company for federal income tax
purposes.
If the shares of common stock acquired by an optionee upon
exercise of an ISO are disposed of prior to the expiration of either holding
period described above, generally (i) the optionee will recognize ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of such shares of common stock at exercise (or, if less,
the amount on the disposition of such shares of common stock) over the exercise
price the optionee paid for such shares of common stock; and (ii) the Company
will be entitled to deduct for federal income tax purposes the amount included
as ordinary income by the optionee, subject to applicable income tax withholding
requirements and the limitations imposed by the Code on the deduction of such
amounts. Any further gain (or loss) realized by the optionee will be taxed as
short-term or long-term capital gain (or loss), as the case may be.
Subject to certain exceptions for disability or death, if an
ISO is exercised more than three months following termination of employment, the
exercise of the option by the optionee will generally be taxed as the exercise
of a non-qualified stock option.
19
The exercise of an ISO may give rise to an increase in
alternative minimum taxable income that could result in alternative minimum tax
liability for the optionee, unless the optionee engages, within the same year of
exercise, in a disqualifying disposition of the shares of common stock received
upon exercise. In substance, a taxpayer is required to pay the higher of his or
her alternative minimum tax liability or his or her "regular" income tax
liability. As a result, a taxpayer has to determine his or her potential
liability under the alternative minimum tax.
You are encouraged to consult with your tax advisor for
purposes of determining your alternative minimum taxable income. In general, for
purposes of determining an optionee's alternative minimum taxable income, the
exercise of an ISO will be treated essentially as if it were the exercise of a
non-qualified stock option. As a result, the rules of Section 83 of the Code
relating to transfers of property, including restricted property, will apply in
determining an optionee's alternative minimum taxable income. Consequently,
generally, if an optionee exercises an ISO with respect to unrestricted shares
of common stock the optionee will have income, for purposes of determining his
or her alternative minimum tax, in an amount equal to the difference between the
option price for the shares of common stock and the fair market value of the
shares of common stock on the date of exercise.
Non-Qualified Stock Options ("NQSOs"). Except as noted below
for corporate insiders, with respect to NQSOs: (i) an optionee will not
recognize any income at the time the option is granted; (ii) generally, at
exercise, the optionee will recognize ordinary income in an amount equal to the
difference between the option price the optionee paid for the shares and the
fair market value of the shares of common stock, if unrestricted, on the date of
exercise; and (iii) upon sale of the shares acquired, appreciation (or
depreciation) after the date of exercise is treated as either short-term or
long-term capital gain (or loss) depending on how long the optionee has held the
shares of common stock.
If an optionee is a corporate insider, the optionee will
generally be taxed immediately upon the exercise of a NQSO, provided at least
six months have elapsed from the date of option grant to the date of exercise.
The tax rules discussed above with respect to NQSOs will generally apply to
insiders as well as non-insiders. However, insiders are subject to special rules
with respect to options exercised within six months from the date of grant and
with respect to options which are exercised at a time when the exercise price
exceeds the fair market value of the stock (i.e., "out-of-the-money options").
The Company is generally entitled to an income tax deduction
with respect to the exercise of a NQSO equal to the amount included as ordinary
income at the time such amount is included in the optionee's income, subject to
applicable income tax withholding requirements and the limitations imposed by
the Code upon the deduction of such amounts.
Stock for Stock Exercises. Under the Plan, the Company may
permit an optionee to pay some or all of the exercise price by using shares of
common stock which have been owned by the optionee for some period of time.
(Generally, such period of time will be at least six months.) Based upon several
published but non-binding rulings of the Internal Revenue Service, the tax
consequences for such so-called "stock for stock exercises" will differ
depending on the facts surrounding this method of exercise. For example, if an
optionee were to constructively pay the exercise price of an ISO with shares
previously acquired through the exercise of an ISO that had not yet been held by
the optionee for the required ISO holding period, under current tax law the
optionee will be deemed to have engaged in a disqualifying disposition and thus
will recognize compensation income on such constructively paid ISO shares equal
to the difference between the original option price and the fair market value at
the time the original ISO was exercised. Because of unique and special tax
consequences such as this, before you engage in a stock for stock exercise, you
are encouraged to consult with your tax adviser.
The Plan is not one which can be qualified under section
401(a) of the Code.
THE DISCUSSION ABOVE IS INTENDED ONLY AS A SUMMARY AND DOES
NOT PURPORT TO BE A COMPLETE DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO
RECIPIENTS OF OPTIONS UNDER THE PLAN. AMONG OTHER ITEMS, SUCH DISCUSSION DOES
NOT ADDRESS TAX CONSEQUENCES UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN
JURISDICTION, OR ANY TAX TREATIES OR CONVENTIONS BETWEEN THE UNITED STATES AND
20
FOREIGN JURISDICTIONS. SUCH DISCUSSION IS BASED UPON CURRENT LAW AND
INTERPRETATIONAL AUTHORITIES WHICH ARE SUBJECT TO CHANGE AT ANY TIME. IT IS
STRONGLY URGED THAT INDIVIDUALS CONSULT WITH THEIR TAX ADVISERS CONCERNING THE
TAX CONSEQUENCES OF RECEIPT AND EXERCISE OF OPTIONS AND RELATED TRANSACTIONS
WITH RESPECT TO THEIR PERSONAL TAX CIRCUMSTANCES.
ITEM 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the independent certified public
accounting firm of Deloitte & Touche LLP as the Company's independent auditors
to audit the books, records and accounts of the Company for the year ending
January 31, 2003. Stockholders will have an opportunity to vote at the Annual
Meeting on whether to ratify the Board's decision in this regard.
Deloitte & Touche LLP has served as the Company's independent auditors
since fiscal 1990. A representative of Deloitte & Touche LLP is expected to be
present at the Annual Meeting. Such representative will have an opportunity to
make a statement if he or she desires to do so and will be available to respond
to appropriate questions.
During fiscal 2002, Deloitte & Touche LLP 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 fiscal 2002 annual
financial statements and review of financial statements
included in the Company's Form 10-Q reports for fiscal 2002:
$236,634.
(b) FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
None.
(c) ALL OTHER FEES:
(i) Benefit plan audits: $34,500.
(ii) Income tax and other consultation: $70,512.
The Audit Committee of the Board of Directors has considered whether
provision of the services described in sections (b) and (c) above is compatible
with maintaining the independent accountant's independence and has determined
that such services have not adversely affected Deloitte & Touche LLP's
independence.
Submission of the selection of the independent auditors to the
stockholders for ratification will not limit the authority of the Board of
Directors to appoint another independent certified 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 LLP 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 certified public
accounting firm as independent auditors for the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
SELECTION OF DELOITTE & Touche LLP.
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
21
directors, executive officers and certain greater than 10% stockholders to
furnish Layne Christensen with copies of all Section 16(a) reports they file.
Except as provided hereafter, 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, 2002, all Section 16(a) filing requirements applicable to
its directors, executive officers and greater than 10% stockholders were met.
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, 2002, 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, 2002 (THE "FORM 10-K"), EXCLUDING EXHIBITS, WILL BE FURNISHED
WITHOUT CHARGE TO ANY STOCKHOLDER OF RECORD AS OF APRIL 1, 2002, AS SOON AS IT
IS AVAILABLE, UPON WRITTEN REQUEST ADDRESSED TO THE ATTENTION OF THE SECRETARY
OF LAYNE CHRISTENSEN AT 1900 SHAWNEE MISSION PARKWAY, MISSION WOODS, KANSAS
66205. 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.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
It is presently anticipated that the 2003 Annual Meeting of
Stockholders will be held on May 22, 2003. Stockholder proposals intended for
inclusion in the proxy statement for the 2003 Annual Meeting of Stockholders
must be received at the Company's offices, located at 1900 Shawnee Mission
Parkway, Mission Woods, Kansas 66205, within a reasonable time before the
solicitation with respect to the meeting is made, but in no event later than
December 24, 2002. 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.
By Order of the Board of Directors.
Steven F. Crooke
Vice President--General Counsel
and Secretary
April 23, 2002
Mission Woods, Kansas
22
APPENDIX A
-----------
LAYNE CHRISTENSEN COMPANY
2002 STOCK OPTION PLAN
Layne Christensen Company, a Delaware corporation (the
"Company"), desires to provide additional incentive for key employees to promote
the success of the Company and any subsidiaries by allowing such employees to
share in the future growth of the business and to participate in the ownership
of the Company. Accordingly, the Company hereby establishes the 2002 Stock
Option Plan of Layne Christensen Company (the "Plan") to offer eligible
employees the opportunity to become owners of capital stock of the Company under
stock options, certain of which are intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended, and
certain of which are intended to be nonqualified stock options. The Plan is
adopted, as follows, effective March 1, 2002.
ARTICLE I
DEFINITIONS
-----------
Whenever the following terms are used in this Plan, they shall
have the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
1.1 BOARD -- "Board" shall mean the Board of Directors
of the Company. Members of the Board shall be referred to as "Directors."
1.2 CHANGE OF CONTROL -- "Change of Control" for
purposes of this Plan shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (in effect on the date hereof) promulgated under the Securities Exchange
Act of 1934, as in effect on the date hereof; provided, however, that, without
limitation, such a Change of Control shall be deemed to occur when either (i) a
person (other than KKR Associates, L.P. and/or any of its affiliates, or a
Director nominated or selected by the Committee or an Officer elected by the
Board) acquires beneficial ownership (as defined by Securities and Exchange
Commission Rule 13d-3) of 25% or more of the combined voting power of the
Company's voting securities, or (ii) less than a majority of the Directors are
persons who were either nominated or selected by the Board.
1.3 CODE -- "Code" shall mean the Internal Revenue Code
of 1986, as amended.
1.4 COMMITTEE - "Committee" means (i) the Board or (ii)
one or more committees of the Board to whom the Board has delegated all or part
of its authority under this Plan.
1.5 COMPANY -- "Company" shall mean Layne Christensen
Company, a Delaware corporation.
1.6 EMPLOYEE -- An individual employed by the Company or
a Subsidiary.
1.7 EXCHANGE ACT -- "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
1.8 FAIR MARKET VALUE - the "Fair Market Value" of a
share of the Stock as of any applicable date shall be:
(a) the closing price of the
Stock on the principal exchange on which shares
of the Stock are then trading, if any, on the day
previous to such date, or, if shares were not traded
on the day previous to such date, then on the next
preceding trading day during which a sale occurred;
i
(b) if the Stock is not so
listed on a principal exchange but is traded on
the Nasdaq Stock Market (whether Nasdaq National
Market or Nasdaq Small Cap Market), the closing
price, regular way, of the security on the Nasdaq
Stock Market on the day previous to such date, or if
no such reported sale of the security shall have
occurred on such date, on the latest preceding date
on which there was a reported sale, or
(c) if the Stock is not listed
for trading on a principal exchange or the Nasdaq
Stock Market, the average of the closing bid and
asked prices as reported by the Nasdaq Over the
Counter Bulletin Board, or, if no such prices shall
have been so reported for such date, on the latest
preceding date for which such prices were reported;
or
(d) if the Stock is not
publicly traded on an exchange and is not listed on
the Nasdaq Stock Market, the Nasdaq Over the Counter
Bulletin Board or a successor quotation system, the
fair market value of the security as determined in
good faith by the Committee.
1.9 INCENTIVE STOCK OPTION -- "Incentive Stock Option" shall
mean an option granted hereunder which qualifies under Section 422 of the Code
as an incentive stock option and which is designated as an Incentive Stock
Option by the Committee.
1.10 KEY EMPLOYEE -- "Key Employee" shall mean any Employee of
the Company who, in the sole discretion of the Committee, has made or is
expected to make, a significant contribution to the Company.
1.11 NONQUALIFIED STOCK OPTION -- "Nonqualified Stock Option"
shall mean an option granted hereunder which is not an Incentive Stock Option
and which is designated as a Nonqualified Stock Option by the Committee.
1.12 OFFICER -- "Officer" shall mean an officer of the Company
or any Subsidiary as defined in the Securities and Exchange Commission Rule 16a
- 1(f), as amended.
1.13 OPTION -- "Option" shall mean an option to purchase
common stock of the Company granted under the Plan. "Option" includes both
Incentive Stock Options and Nonqualified Stock Options.
1.14 OPTIONEE -- "Optionee" shall mean an Employee to whom an
Option has been granted under the Plan.
1.15 OPTION PERIOD -- "Option Period" shall mean the period
during which an Option may be exercised as determined by the Committee under the
terms of Section 4.3(a) hereof and as set forth in the individual Option
Agreement.
1.16 PERMANENT DISABILITY -- "Permanent Disability" shall mean
a condition of permanent disability as determined in good faith by a majority of
the Committee.
1.17 PLAN -- "Plan" shall mean the 2002 Stock Option Plan of
Layne Christensen Company
1.18 RETIREMENT -- "Retirement" shall mean retirement from the
Company at age 62 or older (or such earlier age as may be approved by the
Committee).
1.19 SECURITIES ACT -- "Securities Act" shall mean the
Securities Act of 1933, as amended.
1.20 STOCK -- "Stock" or "Shares" shall mean shares of the
common stock of the Company.
ii
1.21 SUBSIDIARY -- "Subsidiary" or "Subsidiaries" shall mean
subsidiary corporations or a subsidiary corporation of the Company within the
meaning of Section 424(f) of the Code.
1.22 TERMINATION OF EMPLOYMENT -- "Termination of Employment"
shall mean the time when the employer-employee relationship between the Company
or a Subsidiary and the Optionee ceases for any reason. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment including, but not limited to, whether a
particular leave of absence constitutes a Termination of Employment; provided,
however, that with respect to Incentive Stock Options, a leave of absence shall
constitute a Termination of Employment if, and to the extent that, such leave of
absence interrupts employment for the purposes of Section 422(a)(2) of the Code
and the then applicable rulings and regulations under such Section.
ARTICLE II
STOCK SUBJECT TO PLAN
---------------------
2.1 STOCK SUBJECT TO PLAN -- Options granted under this Plan
shall be granted solely with respect to shares of Stock. Subject to any
adjustments made pursuant to the provisions of Section 2.4 hereof, the aggregate
number of shares of stock which may be issued under this Plan shall not exceed
600,000. The shares of Stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have been reacquired by the Company.
2.2 INCENTIVE STOCK OPTION - $100,000 Limitation -- The
aggregate fair market value (determined as of the time the Incentive Stock
Option is granted) of the Stock with respect to which Incentive Stock Options
are exercisable for the first time by an Optionee during any calendar year under
the Plan (or any other plan of the Company or its Subsidiaries which qualifies
as an incentive stock option plan under Section 422 of the Code) shall not
exceed $100,000. If the fair market value (determined as of the time the Option
is granted) of the Stock with respect to which Options are exercisable by an
Optionee exceeds $100,000 during any calendar year, the amount in excess of
$100,000 shall be treated as Options which are not Incentive Stock Options.
2.3 UNEXERCISED OPTIONS -- If any Option expires or is
canceled without having been fully exercised, the number of shares subject to
such Option but as to which such Option was not exercised prior to its
expiration or cancellation may again be made available for grant hereunder,
subject to the limitations of Sections 2.1 and 2.2.
2.4 ADJUSTMENTS IN COMPANY'S SHARES -- In the event the Stock
is changed into or exchanged for a different number or kind of securities of the
Company by reason of merger, consolidation, recapitalization, reclassification,
stock split, stock dividend or combination of shares, the Committee shall make
an appropriate and equitable adjustment in the number and kind of shares (a) as
to which Options may be granted, including adjustments of the limitation in
Section 2.1; and (b) as to which Options, or portions thereof unexercised, shall
be exercisable, to the end that after such event each Optionee's proportionate
interest shall be maintained as before the occurrence of such event; provided,
however, that no such adjustment shall be made which would disqualify an
Incentive Stock Option within the meaning of Section 424(h) of the Code. Such
adjustment in an outstanding Option shall be made with any necessary
corresponding adjustment in Option price per share and without change in the
total price applicable to the Options or the unexercised portion of the Options
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices). Any such adjustment made by the Committee shall be
final and binding upon all Optionees, the Company and all other interested
persons.
ARTICLE III
ELIGIBILITY AND GRANTING OF OPTIONS
-----------------------------------
3.1 ELIGIBILITY --
(a) Options to purchase shares of Stock shall be
granted under this Plan only to Key Employees of the Company and its
Subsidiaries.
iii
(b) Incentive Stock Option - Ownership Limitation --
Notwithstanding the provisions of subsection (a), no Incentive Stock
Option shall be granted under this Plan to any Employee of the Company
or its Subsidiaries who, immediately before the Option is granted, owns
(either directly or by application of the rules contained in Section
424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its
Subsidiaries. This ownership limitation shall not apply if at the time
the Incentive Stock Option is granted (i) the option price is at least
110% of the fair market value of the stock subject to such Incentive
Stock Option, and (ii) such Incentive Stock Option will expire no later
than five years from the date on which it is granted.
3.2 GRANTING OF OPTIONS --
(a) The Committee shall from time to time and
in its absolute discretion:
(i) Determine which Key Employees (including
those to whom Options have been previously granted under the
Plan) should be granted Options;
(ii) Determine the number of shares to be
subject to such Options granted to such selected Key
Employees, and determine whether such Options are to be
Incentive Stock Options or Nonqualified Stock Options; and
(iii) Determine the terms and conditions
of such Options, consistent with the Plan.
(b) Upon the selection of a Key Employee to be
granted an Option, the Committee shall grant such Option and may impose
such conditions on the grant of such Option as it deems appropriate.
Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an
Optionee that the Optionee surrender for cancellation some or all of
the unexercised Options which have been previously granted to him. An
Option the grant of which is conditioned upon such surrender may have
an option price lower (or higher) than the option price of the
surrendered Option, may cover the same (or a lesser or greater) number
of shares as the surrendered Option, may contain such other terms as
the Committee deems appropriate and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, option
period or any other term or condition of the surrendered Option.
(c) No Option may be granted hereunder after ten (10)
years from the earlier of (i) the date the Plan is adopted by the
Committee or (ii) the date the Plan is approved by the stockholders of
the Company.
(d) An Option shall be deemed granted on the date the
Committee approves the granting of such Option; provided, however, that
any Option shall terminate thirty (30) days after the date upon which
it shall have been granted unless a Stock Option Agreement duly
executed by the Optionee shall have been redelivered to the Company
within such thirty (30) day period.
ARTICLE IV
TERMS OF OPTION
---------------
4.1 OPTION AGREEMENT -- Each Option shall be evidenced by a
written Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company. The terms and conditions of a Stock Option
Agreement shall be consistent with the Plan, but the Committee shall have the
power and authority to include such other terms and conditions which are not
inconsistent with the Plan. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to qualify
such Options as "incentive stock options" under Section 422 of the Code.
4.2 OPTION PRICE -- The price of the shares subject to each
Option shall be determined by the Committee and set forth in the respective
Stock Option Agreement; provided, however, that the price per share for
iv
shares subject to an Incentive Stock Option shall (i) be not less than 100% of
the Fair Market Value of such shares on the date such Incentive Stock Option is
granted and (ii) be not less than 110% of the Fair Market Value of such shares
on the date such Incentive Stock Option is granted in the case of a grant to an
Optionee then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or its Subsidiaries.
4.3 PERIOD AND EXERCISE OF OPTION --
-----------------------------
(a) PERIOD -- Subject to the provisions of the Stock
Option Agreement and the other restrictions contained in the Plan, an
Option shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms
of each individual Option Agreement, and the period during which such
Option (or installment) may be exercised shall terminate at such times
as the Committee shall provide in the terms of each individual Option
Agreement. The Committee may adopt a resolution after an Option is
granted and on such terms and conditions as it deems appropriate
whereby the time during which such Option or any portion thereof may be
exercised is accelerated. Each Option shall expire, in all cases, upon
the first to occur of the following events:
(i) in the case of an Incentive Stock
Option, the expiration of ten (10) years from the date the
Incentive Stock Option is granted;
(ii) if an Optionee owned (either directly
or by application of the rules contained in Section 425(d) or
the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or its
Subsidiaries immediately before an Incentive Stock Option is
granted to such Optionee, then the expiration of five (5)
years from the date the Incentive Stock Option is granted;
(iii) the time of the Optionee's Termination
of Employment unless such Termination of Employment results
from his death, Permanent Disability or Retirement;
(iv) the expiration of thirty (30) days
from the time of the Optionee's Termination of Employment by
reason of his Permanent Disability or Retirement;
(v) the expiration of ninety (90) days
from the time of the Optionee's Termination of Employment by
reason of his death; or
(vi) the Optionee shall engage in willful
misconduct which injures the Company or any of its
Subsidiaries.
Except as set forth in subsections (iii), (iv) and
(v) above, an Incentive Stock Option shall not be exercisable during
the Option Period unless the Optionee shall have been continuously
employed by the Company or a Subsidiary from the date the Incentive
Stock Option was granted until its date of exercise.
Upon expiration of the Option Period, as accelerated
if applicable, the Option shall terminate with respect to all shares of
Stock not already actually purchased and paid for in full by the
Optionee.
(b) PERSONS ELIGIBLE TO EXERCISE -- An Option granted
hereunder (or portion thereof) shall be exercisable only by the
Optionee; provided, however, that in the event of an Optionee's death,
the heirs, executors or personal representatives of such Optionee may
exercise the Option subject to the time periods set forth above in
Section 4.3(a).
(c) PARTIAL EXERCISE -- Any exercisable portion of
the Option or the entire Option, if then wholly exercisable, may be
exercised in whole or in part during the applicable Option Period;
provided, however, that the Company shall not be required to issue
fractional shares and the Committee may, by the terms of the Option,
require any partial exercise to be with respect to a specified minimum
number of shares.
v
(d) MANNER OF EXERCISE -- An exercisable Option, or
any exercisable portion thereof, may be exercised solely by delivery to
the Secretary of the Company or his office of all of the following
prior to the time when such Option or portion thereof becomes
unexercisable under the terms of this Plan or the applicable Stock
Option Agreement:
(i) Notice in writing signed by the Optionee
or other person then entitled to exercise such Option or
portion thereof, stating that such Option or portion thereof
is exercised, such notice complying with all applicable rules
established by the Committee;
(ii) Full payment for the shares with
respect to which such Option or portion thereof is exercised
through one or more of the following methods:
A. Cash or certified bank check; or
B. By delivery to the Company of
certificates representing the number of Shares then
owned by the Optionee, the Fair Market Value of which
equals the purchase price of the Stock purchased
pursuant to the Option, properly endorsed for
transfer to the Company; provided however, that
Shares used for this purpose must have been held by
the Optionee for such minimum period of time as may
be established from time to time by the Committee;
and provided further that the Fair Market Value of
any Shares delivered in payment of the purchase price
upon exercise of the Options shall be the Fair Market
Value as of the exercise date, which shall be the
date of delivery of the certificates for the Stock
used as payment of the Option Price.
In lieu of actually surrendering to
the Company the stock certificates representing the
number of Shares then owned by the Optionee, the
Committee may, in its discretion permit the Optionee
to submit to the Company a statement affirming
ownership by the Optionee of such number of Shares
and request that such Shares, although not actually
surrendered, be deemed to have been surrendered by
the Optionee as payment of the exercise price;
(iii) Such representations and documents as
the Committee, in its absolute discretion, deems necessary or
advisable to effect compliance with all applicable provisions
of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its
absolute discretion, also take whatever additional actions it
deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars;
(iv) Full payment (in cash or by check) to
the Company of all amounts which, under federal, state or
local law, it is required to withhold in connection with the
exercise of the Option; and
(v) In the event the Option or portion
thereof shall be exercised by any person or persons other than
the Optionee, appropriate proof of the right of such person or
persons to exercise the Option.
4.4 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES -- The
Company shall not be required to issue or deliver any certificate or
certificates for shares of Stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The completion of any registration or other
qualification of or notice regarding such shares under any state or
federal law or under the rules or regulations of the Securities and
Exchange Commission or any other governmental regulatory body, which
the Committee shall, in its absolute discretion, deem necessary or
advisable;
vi
(b) The obtaining of any approval or other clearance
from any state or federal governmental agency which the Committee
shall, in its absolute discretion, determine to be necessary or
advisable; and
(c) The lapse of such reasonable period of time
following the exercise of the Option as the Committee may establish
from time to time for reasons of administrative convenience, provided
that, upon issuance, the shares shall be considered issued and
outstanding as of the date such Option was exercised.
4.5 RIGHTS AS STOCKHOLDERS -- The holders of Options shall not
be, nor have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by the
Company to such holders.
4.6 REORGANIZATION, CHANGE IN CONTROL, OR LIQUIDATION -- In
the event the Company shall not be the surviving corporation in any merger,
consolidation, or reorganization, or in the event of acquisition by another
corporation of all or substantially all of the assets of the Company, every
Option outstanding hereunder may be assumed (with appropriate changes) by the
surviving, continuing, successor or purchasing corporation, as the case may be,
subject to any applicable provisions of the Code or replaced with new Options of
comparable value (in accordance with Section 424(a) of the Code). In the event
(i) that such surviving, continuing, successor or purchasing corporation, as the
case may be, does not assume or replace the outstanding Options hereunder, or
(ii) of liquidation or dissolution of the Company, the Committee may provide
that each Optionee shall have the right, within a period commencing not more
than thirty (30) days immediately prior to and ending on the day immediately
prior to such merger, consolidation, reorganization or acquisition by another
corporation of all or substantially all of the assets of the Company or the
liquidation or dissolution of the Company, to exercise the Optionee's
outstanding Options to the extent of all or any part of the aggregate number of
shares subject to such Option(s). In the event of a Change of Control the
Committee may accelerate the time at which Options granted under this Plan may
be exercised by the Optionee.
4.7 TRANSFER RESTRICTIONS -- The Committee, in its absolute
discretion, may impose such other restrictions on the transferability of the
shares purchasable upon the exercise of an Option as it deems appropriate. Any
such other restriction shall be set forth in the respective Stock Option
Agreement and may be referred to on the certificates evidencing such shares. The
Committee may require the Employee to give the Company prompt notice of any
disposition of shares of stock, acquired by exercise of an Incentive Stock
Option, within two (2) years from the date of granting such Option or one (1)
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
ARTICLE V
ADMINISTRATION
--------------
5.1 DUTIES AND POWERS OF THE COMMITTEE -- The Committee shall
have the power to interpret this Plan and any Stock Option Agreement and to
adopt such rules for the administration, interpretation and application of the
Plan as are consistent herewith and to interpret, amend, or revoke any such
rules. Any such interpretations and rules in regard to Incentive Stock Options
shall be consistent with the basic purpose of the Plan to grant "incentive stock
options" within the meaning of Section 422 of the Code. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or an Option.
5.2 EXPENSES: INDEMNIFICATION -- All reasonable expenses and
liabilities actually incurred in connection with the administration of the Plan
shall be borne by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Company and its Officers
and Directors shall be fully justified in relying, or acting in good faith upon
the advice, opinion, valuations or information furnished by such persons. All
actions taken and all interpretations and determinations made by the Committee
in good faith shall be final and binding upon all Optionees, the Company and all
other interested persons. Each person who is or shall have been a member of the
Committee shall be indemnified and held harmless by the Company against and from
any and all loss, cost, liability or expense that may be imposed upon or
reasonably incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which such person may be or becomes a party
or in which such person may be or becomes involved by reason of any action taken
or failure to act under the Plan and against and from
vii
any and all amounts paid by such person in settlement thereof (with the
Company's written approval) or paid by such person in satisfaction of a judgment
in any such action, suit or proceeding, except a judgment in favor of the
Company based upon a finding of such person's lack of good faith; subject,
however, to the condition that upon the institution of any claim, action, suit
or proceeding against such person, such person shall, in writing, give the
Company notice and an opportunity, at its own expense, to handle his own
defense. The foregoing right of indemnification shall not be exclusive of any
other right to which such person may be entitled as a matter of law or otherwise
or any other right or power that the Company may have to indemnify or hold such
person harmless.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 OPTIONS NOT TRANSFERABLE -- Neither an Option nor any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition is voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that this Section 6.1 shall not prevent transfers by will or by the
applicable laws of descent and distribution.
6.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN -- No
Option shall be granted pursuant to this Plan after February 29, 2012, on which
date this Plan will terminate except as to Options then outstanding under the
Plan. Options outstanding as of February 29, 2012, shall remain in effect until
they are exercised or they expire. The Committee may at any time before such
date amend, modify or terminate the Plan; provided, however, that, except as
provided in Section 2.4, the Committee may not, without further approval by the
holders of a majority of the issued and outstanding shares of Stock,
(a) increase the maximum number of shares of Stock as
to which Options may be granted pursuant to this Plan,
(b) change the class of Employees eligible to be
granted options pursuant to this Plan,
(c) extend the period during which Options may be
granted or exercised,
(d) change the provisions of Article IV hereof with
respect to the determination of the option price, other than to change
the manner of determining the fair market value of shares of Stock to
conform with any then applicable provisions of the Code or the
regulations issued thereunder, or
(e) amend or modify the Plan in a manner requiring
shareholder approval under Rule 16b-3.
No amendment, modification or termination of this Plan may adversely affect the
rights of any Optionee under any then outstanding Option granted hereunder
without the consent of such Optionee.
6.3 APPROVAL OF PLAN BY SHAREHOLDERS -- This Plan will be
submitted for the approval of the Company's shareholders within twelve (12)
months after the date of the Board's initial adoption of the Plan and thereafter
at any such time as may be required under the Code, Securities Act or the
Exchange Act. Options may be granted prior to such shareholder approval;
provided, however, that (a) such Options shall not be exercisable prior to the
time when the shareholders shall have approved the Plan, and (b) if the
shareholders have not approved the Plan by the end of the twelve (12) month
period, all Options previously granted under the Plan shall thereupon be
canceled and become null and void.
6.4 EFFECT OF PLAN UPON OTHER COMPENSATION PLANS -- Nothing in
this Plan shall be construed to limit the right of the Company (a) to establish
any other forms of incentive or other compensation for Employees, or (b) to
grant or assume options otherwise than under this Plan in connection with any
proper corporate purpose including,
viii
without limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
6.5 EFFECT OF PLAN UPON EMPLOYMENT -- Nothing in this Plan
shall be construed as an obligation of the Company or its Subsidiaries to
continue the employment of any Employee.
6.6 TITLES -- Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or construction of this Plan.
6.7 GOVERNING LAW -- The laws of the State of Kansas shall
govern the interpretation, validity and performance of the terms of this Plan
regardless of the law that might be applied under principles of conflicts of
laws.
6.8 CONFORMITY TO SECURITIES LAWS -- The Plan is intended to
conform to the extent necessary with all provisions of the Securities Act and
the Exchange Act, and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder including, without limitation,
Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be
administered, and Options shall be granted and may be exercised, only in such
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and Options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
IX
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
2002 ANNUAL MEETING OF STOCKHOLDERS OF LAYNE CHRISTENSEN COMPANY
The undersigned hereby appoints Robert J. Dineen, 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 2002 Annual Meeting of Stockholders of Layne
Christensen Company ("Layne Christensen") to be held at the Corporate
Headquarters of Layne Christensen, located at 1900 Shawnee Mission Parkway,
Mission Woods, Kansas, on Thursday, May 30, 2002, 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 following matters, all as set forth in the Notice
of Annual Meeting of Stockholders and Proxy Statement, dated April 23,
2002:
THE BOARD OF DIRECTORS OF LAYNE CHRISTENSEN RECOMMENDS
A VOTE "FOR" EACH ITEM.
Item 1: Election of two Class I directors to hold office for terms expiring
at the 2005 annual meeting of stockholders.
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to
vote for the nominees listed below
NOMINEES: Donald K. Miller, Andrew B. Schmitt
Item 2: Proposal to approve the Layne Christensen Company 2002 Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3: Proposal to ratify the selection of the accounting firm of Deloitte
& Touche LLP as Layne Christensen's independent auditors for the
fiscal year ending January 31, 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed, on other side)
(Continued from other side)
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the Annual Meeting.
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, 2 AND 3.
Dated: _________________________, 2002
---------------------------
Signature
---------------------------
Signature (if held jointly)
Please sign exactly as 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.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED POSTAGE PREPAID ENVELOPE.