FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------
Commission File Number 33-48432
Layne Christensen Company
(Exact name of registrant as specified in its charter)
Delaware 48-0920712
-------------------------------- ------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1900 SHAWNEE MISSION PARKWAY, MISSION WOODS, KANSAS 66205
(Address of principal executive offices) (Zip Code)
(913) 362-0510
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if
changed since last report.)
-----------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
There were 11,641,192 shares of common stock, $.01 par
value per share, outstanding on June 4, 1998.
<PAGE>
PART I
ITEM 1. Financial Statements
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
April 30, January 31,
1998 1998
---------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,804 $ 2,954
Customer receivables, less allowance
of $4,003 and $2,583, respectively 53,745 49,595
Costs and estimated earnings in excess of
billings on uncompleted contracts 7,711 6,777
Inventories 29,276 27,812
Deferred income taxes 9,544 9,610
Other 1,803 2,346
--------- ---------
Total current assets 107,883 99,094
--------- ---------
Property and equipment:
Land 9,070 8,851
Buildings 15,140 14,678
Machinery and equipment 152,504 143,338
--------- ---------
176,714 166,867
Less - Accumulated depreciation (83,469) (79,948)
--------- ---------
Net property and equipment 93,245 86,919
--------- ---------
Other assets:
Investment in foreign affiliates 20,608 19,456
Goodwill and other intangible assets,
at cost less accumulated amortization 33,074 32,836
Other 6,246 5,594
--------- ---------
Total other assets 59,928 57,886
--------- ---------
$ 261,056 $ 243,899
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
(in thousands, except share and per share data)
<CAPTION>
April 30, January 31,
1998 1998
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 20,751 $ 20,365
Accrued compensation 10,383 10,924
Accrued insurance expense 8,657 9,059
Other accrued expenses 8,370 9,626
Billings in excess of costs and estimated
earnings on uncompleted contracts 11,422 9,459
--------- ---------
Total current liabilities 59,583 59,433
--------- ---------
Noncurrent and deferred liabilities:
Long-term debt 72,500 57,500
Deferred income taxes 4,695 5,228
Accrued insurance expense 6,649 6,019
Other 1,633 1,460
--------- ---------
Total noncurrent and deferred liabilities 85,477 70,207
--------- ---------
Contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share,
5,000,000 shares authorized, none issued and
outstanding - -
Common stock, par value $.01 per share,
30,000,000 shares authorized, 11,641,192
and 11,631,556 shares issued and
outstanding, respectively 116 116
Capital in excess of par value 83,099 82,889
Retained earnings 36,640 35,614
Unrealized gain (loss) on investment (68) 250
Notes receivable from management stockholders 152) (175)
Unrecognized pension cost (503) (527)
Cumulative translation adjustment (3,136) (3,908)
--------- ---------
Total stockholders' equity 115,996 114,259
--------- ---------
$ 261,056 $ 243,899
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
<CAPTION>
Three Months
Ended April 30,
1998 1997
--------- ---------
<S> <C> <C>
Revenues:
Net service revenues $ 62,492 $ 49,471
Net product sales 5,849 8,279
--------- ---------
Total 68,341 57,750
--------- ---------
Cost of revenues (exclusive of depreciation
shown below):
Cost of service revenues 45,256 36,202
Cost of product sales 4,502 5,943
--------- ---------
Total 49,758 42,145
--------- ---------
Gross profit 18,583 15,605
Selling, general and administrative expenses 11,804 10,327
Depreciation and amortization 5,080 2,832
--------- ---------
Operating income 1,699 2,446
Other income (expense):
Equity earnings of foreign affiliates 1,302 820
Interest (1,197) (614)
Other, net (94) 62
--------- ---------
Income before income taxes 1,710 2,714
Income tax expense 684 1,031
--------- ---------
Net income $ 1,026 $ 1,683
========= =========
Basic earnings per share $ 0.09 $ 0.19
========= =========
Diluted earnings per share $ 0.09 $ 0.18
========= =========
Weighted average number of common and dilutive
equivalent shares outstanding:
Weighted average shares outstanding 11,633,000 8,872,000
Dilutive stock options 360,000 362,000
---------- ---------
11,993,000 9,234,000
========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
<CAPTION>
Three Months
Ended April 30,
1998 1997
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 1,026 $ 1,683
Adjustments to reconcile net income to cash
from operations:
Depreciation and amortization 5,080 2,832
Deferred income taxes (509) 511
Equity earnings in foreign affiliates (1,302) (820)
Dividends received from foreign affiliates 150 351
Gain from disposal of property and
equipment (80) (22)
Changes in current assets and liabilities
(exclusive of effects of acquisitions):
Increase in customer receivables 54) (6,577)
Increase in cost and estimated earnings in
excess of billings on uncompleted contracts (953) (1,842)
Increase in inventories (1,387) (1,285)
Decrease in other current assets 286 252
Decrease in accounts payable and accrued
expenses (6,460) (1,588)
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 1,980 2,158
Other, net 1,611 1,057
-------- --------
Cash used in operating activities (612) (3,290)
-------- --------
Cash flow from investing activities:
Additions to property and equipment (5,640) (2,873)
Proceeds from disposal of property and equipment 152 207
Acquisitions of businesses, net of cash acquired (6,293) -
Investment in foreign affiliates - (19)
-------- --------
Cash used in investing activities (11,781) (2,685)
-------- --------
Cash flow from financing activities:
Net borrowings under revolving facility 15,000 5,500
Repayments of long-term debt - (28)
Payments on notes receivable from management
stockholders 23 24
-------- --------
Cash from financing activities 15,023 5,496
-------- --------
Effects of exchange rate changes on cash 220 -
-------- --------
Net increase in cash and cash equivalents 2,850 (479)
Cash and cash equivalents at beginning of period 2,954 1,697
-------- --------
Cash and cash equivalents at end of period $ 5,804 $ 1,218
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
LAYNE CHRISTENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies and Basis of Presentation
The consolidated financial statements include the accounts of
Layne Christensen Company and its subsidiaries (together, the
Company), all of which are wholly owned. All significant
intercompany transactions have been eliminated. Investments
in affiliates (33% to 50% owned) in which the Company
exercises influence over operating and financial policies are
accounted for on the equity method. The unaudited
consolidated financial statements should be read in
conjunction with the consolidated financial statements of the
Company for the year ended January 31, 1998 as filed in its
Annual Report on Form 10-K.
The accompanying unaudited consolidated financial statements
include all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary
for a fair presentation of financial position, results of
operations and cash flows. Results of operations for interim
periods are not necessarily indicative of results to be
expected for a full year.
Earnings per common share are based upon the weighted average
number of common and dilutive equivalent shares outstanding.
Options to purchase common stock are included based on the
treasury stock method for dilutive earnings per share, except
when their effect is antidilutive.
The amounts paid for income taxes and interest are as follows
(in thousands):
Three Months Ended
April 30,
------------------------
1998 1997
---------- ----------
Income taxes $ 2,498 $ 386
Interest 1,536 1,012
During the first quarter of fiscal 1999, the Company issued
9,636 shares of common stock and 22,688 stock options to
employees related to fiscal 1998 compensation awards. The
total value of these awards was approximately $210,000, which
was accrued at January 31, 1998.
Certain amounts for prior periods have been reclassified to
conform with the current presentation.
2. Acquisitions
On March 26, 1998, the Company completed a transaction to
purchase certain assets of Hydro Group, Inc., a New Jersey
based drilling contractor (the "Hydro Acquisition") for
approximately $6,293,000 in cash. The acquisition has been
accounted for using the purchase method of accounting. Had
this acquisition taken place as of February 1, 1998, pro forma
operating results would not have been significantly different
from those reported.
<PAGE>
The Hydro Acquisition was accounted for using the purchase
method and accordingly, the operations of Hydro Group, Inc.
have been included from the date of acquisition. The purchase
price was allocated as follows (in thousands of dollars):
Property and equipment $7,167
Working capital (874)
------
Total purchase price, net of cash acquired $6,293
======
3. Inventories
The Company values inventories at the lower of cost (first-in,
first-out) or market (in thousands):
As of
---------------------------
April 30, January 31,
1998 1998
----------- -----------
Raw materials $ 1,889 $ 1,552
Work in process 2,049 1,673
Finished products,
parts and supplies 25,338 24,587
----------- -----------
Total $ 29,276 $ 27,812
=========== ===========
4. Comprehensive Income
Effective February 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" which requires prominent disclosure of
comprehensive income. Comprehensive income for the three
months ended April 30, 1998 and 1997 were $1,504,000 and
$1,698,000, respectively. Comprehensive income includes net
income, unrealized gains or losses on the Company's available
for sale securities and foreign currency cumulative
translation adjustment for the periods presented.
5. Contingencies
The Company's drilling activities involve certain operating
hazards that can result in personal injury or loss of life,
damage and destruction of property and equipment, damage to
the surrounding areas, release of hazardous substances or
wastes and other damage to the environment, interruption or
suspension of drill site operations and loss of revenues and
future business. The magnitude of these operating risks is
amplified when the Company, as is frequently the case,
conducts a project on a fixed-price, "turnkey" basis where the
Company delegates certain functions to subcontractors but
remains responsible to the customer for the subcontracted
work. In addition, the Company is exposed to potential
liability under foreign, federal, state and local laws and
regulations, contractual indemnification agreements or
otherwise in connection with its provision of services and
products. Litigation arising from any such occurrences may
result in the Company's being named as a defendant in lawsuits
asserting large claims. Although the Company maintains
insurance protection that it considers economically prudent,
there can be no assurance that any such insurance
<PAGE>
will be sufficient or effective under all circumstances or
against all claims or hazards to which the Company may be
subject or that the Company will be able to continue to obtain
such insurance protection. A successful claim or damage
resulting from a hazard for which the Company is not fully
insured could have a material adverse effect on the Company.
In addition, the Company does not maintain political risk
insurance or business interruption insurance with respect to
its foreign operations.
The Company is involved in various matters of litigation,
claims and disputes which have arisen in the ordinary course
of the Company's business. While the resolution of any of
these matters may have an impact on the financial results for
the period in which the matter is resolved, the Company
believes that the ultimate disposition of these matters will
not, in the aggregate, have a material adverse effect upon its
business or consolidated financial position, results of
operations or cash flows.
6. Subsequent Event - Debt
During May, 1998, the Company entered into an interest rate
Swap agreement (the "Swap Agreement") with Bank of America
National Trust and Savings Association ("BofA"). The Swap
Agreement, which effectively fixes the interest rate at 6.47%
on $25,000,000 of the Company's outstanding indebtedness under
its credit agreement, calls for quarterly interest payments
commencing on August 15, 1998. The Swap Agreement will
terminate in May, 2002.
=============================================
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Cautionary Language Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act of 1934. Such statements are
indicated by words or phrases such as "anticipate,"
"estimate," "project," "believe," "intend," "expect," "plan"
and similar words or phrases. Such statements are based on
current expectations and are subject to certain risks,
uncertainties and assumptions, including but not limited to
prevailing prices for various metals, unanticipated slowdowns
in the Company's major markets, the impact of competition, the
effectiveness of operational changes expected to increase
efficiency and productivity, worldwide economic and political
conditions and foreign currency fluctuations that may affect
worldwide results of operations. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary
materially and adversely from those anticipated, estimated or
projected. These forward-looking statements are made as of
the date of this filing, and the Company assumes no obligation
to update such forward-looking statements or to update the
reasons why actual results could differ materially from those
anticipated in such forward-looking statements.
Results of Operations
The Company substantially consummated the acquisition of
Stanley Mining Services Pty Limited (the "Stanley
Acquisition"), a mineral exploration drilling company with
operations in Australia and Africa, at the end of July, 1997.
Stanley has been reflected in Layne Christensen's results of
operations beginning in the third quarter ending October 31,
1997. The Stanley Acquisition was accounted for using the
purchase method of accounting, and will have a significant
effect on Layne Christensen's future operations and on
comparisons of income and expense items in future periods in
relation to the first six months of fiscal 1998. Among other
things, the Company has incurred a substantial increase in
long-term debt and goodwill and will incur a substantial
increase in interest expense and goodwill amortization in
future periods.
The following table presents, for the periods indicated, the
percentage relationship which certain items reflected in the
Company's consolidated statements of income bear to revenues
and the percentage increase or decrease in the dollar amount
of such items period to period.
<PAGE>
<TABLE>
<CAPTION>
Period-to-
Three Months Period
Ended April 30, Change
1998 1997 Three Months
------ ------ ------------
<S> <C> <C> <C>
Revenues:
Water well drilling and maintenance 44.1 47.6 9.7%
Mineral exploration drilling 32.2 27.3 39.8
Geotechnical drilling 9.1 4.7 129.7
Environmental drilling 6.0 6.1 16.4
----- -----
Total service revenues 91.4 85.7 26.3
Product sales 8.6 14.3 (29.4)
----- -----
Total revenues 100.0% 100.0% 18.3
===== =====
Cost of revenues:
Cost of service revenues 72.4% 73.2% 25.0
Cost of product sales 77.0 71.8 (24.2)
----- -----
Total cost of revenues 72.8 73.0 18.1
----- -----
Gross profit 27.2 27.0 19.1
Selling, general and administrative
expenses 17.3 17.9 14.3
Depreciation and amortization 7.4 4.9 79.4
----- -----
Operating income 2.5 4.2 (30.5)
Other income (expense):
Equity earnings of foreign affiliates 1.9 1.4 58.8
Interest (1.8) (1.0) 95.0
Other, net (.1) .1 *
----- -----
Income before income taxes 2.5 4.7 (37.0)
Net income tax expense 1.0 1.8 (33.7)
----- -----
Net income 1.5% 2.9% (39.0)
===== =====
_______________
* Not meaningful.
</TABLE>
Revenues for the three months ended April 30, 1998 increased
$10,591,000, or 18.3%, to $68,341,000 from the three months
ended April 30, 1997.
Water well drilling and maintenance revenues increased 9.7%,
to $30,155,000 for the three months ended April 30, 1998,
compared to revenues of $27,495,000 for the three months ended
April 30, 1997. The increase in water well drilling and
maintenance revenues was primarily the result of the
acquisition of Stamm-Scheele, Inc., a water well drilling
company based in Louisiana, in July, 1997, along with
increased demand in the south central United States.
Mineral exploration drilling revenues increased 39.8%, to
$21,967,000 for the three months ended April 30, 1998, from
$15,715,000 for the three months ended April 30, 1997. The
increase was a result of the Stanley Acquisition combined with
the Company's ongoing expansion into Africa. Exclusive of
these two events, mineral exploration revenues were down 49.3%
due to lower demand for the Company's services as a result of
the decrease in exploration and development activities
conducted by mining companies, particularly with respect to
gold and
<PAGE>
copper. Mineral exploration is highly speculative and is
influenced by a variety of factors, including the prevailing
prices for various metals which often fluctuate widely. In
this connection, the recent decline in the price of various
metals could continue to impact the level of mineral
exploration and development activities conducted by mining
companies and could have a material adverse effect on the
Company.
Geotechnical drilling revenues increased 129.7%, to $6,250,000
for the three months ended April 30, 1998, compared to
revenues of $2,721,000 for the three months ended April 30,
1997. This increase was primarily the result of the Company's
previously announced ground freeze project in Timmins,
Ontario, Canada. This project was substantially completed
this last quarter. In light of the size of the Timmins
Project, there can be no assurance that this level of revenues
will be sustained in the geotechnical construction product
line. Exclusive of the Timmins Project, geotechnical revenues
increased 37.3% as a result of certain other large
geotechnical contracts performed by the Company in the
northwest and northeast regions of the United States.
Product sales decreased 29.4%, to $5,849,000 for the three
months ended April 30, 1998 from $8,279,000 for the three
months ended April 30, 1997. The decrease is attributed to
decreased activity in the mining industry as previously
discussed.
Gross profit as a percentage of revenues remained relatively
constant at 27.2% for the three months ended April 30, 1998,
compared to 27.0% for the same period last year.
Selling, general and administrative expenses increased to
$11,804,000 (or 17.3% of revenues) for the three months ended
April 30, 1998 compared to $10,327,000 (or 17.9% of revenues)
for the three months ended April 30, 1997. The period-to-
period increase was primarily a result of operating costs
associated with the Stanley Acquisition and the Hydro
Acquisition. The increases were partially offset by cost
reduction measures initiated by the Company.
Depreciation and amortization increased to $5,080,000 for the
three months ended April 30, 1998, compared to $2,832,000 for
the same period last year. The increase was primarily the
result of the Stanley Acquisition and capital expenditures
during fiscal 1998.
Equity in earnings of foreign affiliates was $1,302,000 for
the three months ended April 30, 1998, compared to $820,000
for the same period last year. The period-to-period change
was a result of improved weather conditions from the prior
period when projects were delayed as a result of heavy rains
and flooding.
Interest expense increased $583,000 for the three months ended
April 30, 1998, as compared to the three months ended April
30, 1997. The increase was primarily the result of additional
borrowings made to finance acquisitions and capital
expenditures during the period.
<PAGE>
Income taxes of $684,000 for the three months ended April 30,
1998, decreased from $1,031,000 in the same period last year
as a result of lower income before taxes.
Changes in Financial Condition
Cash used in operations was $612,000 for the three months
ended April 30, 1998 compared to $3,290,000 for the same
period last year. The change in operating cash flows is
primarily the result of a nominal increase in receivables, net
of the Hydro Acquisition, as compared to the prior period
change in receivables. This was partially offset by a
decrease in accounts payable and accrued expenses resulting
from various accrued compensation and income tax payments
during the quarter. Borrowings under the Company's available
credit agreement were used for additions to property and
equipment of $5,640,000 and the Hydro Acquisition during the
quarter.
The Company believes that borrowings from its available credit
agreement and cash from operations will be sufficient for the
Company's seasonal cash requirements and to fund its budgeted
capital expenditures for at least the balance of the fiscal
year.
The Company has undergone an internal assessment of the impact
of the year 2000 issue and is in the process of modifying
systems as necessary. Based on this review, the Company
presently believes the year 2000 issue will not pose
significant operational problems for its computer systems.
However, the Company intends to continue to use internal
resources to test its systems for year 2000 compliance and
believes the compliance process will be completed timely and
modification costs will be insignificant.
<PAGE>
PART II
ITEM 1 - Legal Proceedings
NONE
ITEM 2 - Changes in Securities
NOT APPLICABLE
ITEM 3 - Defaults Upon Senior Securities
NOT APPLICABLE
ITEM 4 - Submission of Matters to a Vote of Security Holders
NONE
ITEM 5 - Other Information
NONE
ITEM 6 - Exhibits and Reports on Form 8-K
The exhibits filed with or incorporated by reference in
this report are listed below:
Exhibit No. Description
10(1) Form of Stock Option Agreement between the
Company and Management of the Company
effective February 1, 1998
27(1) Financial Data Schedule
<PAGE>
* * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Layne Christensen Company
-------------------------------
(Registrant)
DATE: June 11, 1998 /s/ A.B. Schmitt
-------------------------------
A.B. Schmitt, President
and Chief Executive Officer
DATE: June 11, 1998 /s/ Jerry W. Fanska
-------------------------------
Jerry W. Fanska, Vice President
Finance and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 5,804
<SECURITIES> 0
<RECEIVABLES> 65,459
<ALLOWANCES> 4,003
<INVENTORY> 29,276
<CURRENT-ASSETS> 107,883
<PP&E> 176,714
<DEPRECIATION> 83,469
<TOTAL-ASSETS> 261,056
<CURRENT-LIABILITIES> 59,583
<BONDS> 72,500
0
0
<COMMON> 116
<OTHER-SE> 115,880
<TOTAL-LIABILITY-AND-EQUITY> 261,056
<SALES> 5,849
<TOTAL-REVENUES> 68,341
<CGS> 49,758
<TOTAL-COSTS> 54,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,197
<INCOME-PRETAX> 1,710
<INCOME-TAX> 684
<INCOME-CONTINUING> 1,026
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,026
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
LAYNE CHRISTENSEN COMPANY
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT dated _____________ ___, ______ (the
"Granting Date"), is made by and between Layne Christensen Company,
a Delaware corporation (the "Company"), and _________________ (the
"Optionee").
WHEREAS, the Company has adopted the Layne Christensen
Company 1992 Stock Option Plan (the "Plan") pursuant to which the
Company may, from time to time, grant options to Key Employees to
purchase shares of the Company's common stock;
WHEREAS, the Stock Option Committee has determined that
the Optionee is a Key Employee of the Company or a Subsidiary who
has made or is expected to make a significant contribution to the
Company or a Subsidiary; and
WHEREAS, the Company desires to grant to the Optionee an
incentive stock option (under Section 422 of the Internal Revenue
Code of 1986, as amended) to purchase shares of the Company's
common stock on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. INCORPORATION OF PLAN. The Plan is attached hereto
as EXHIBIT A and incorporated herein by this reference, and all of
the terms and conditions therein shall be deemed to be included as
part of the terms and conditions of this Agreement. In the event
of a conflict, the terms and conditions of the Plan shall control.
All terms used herein which are defined in the Plan shall have the
meanings given them in the Plan.
2. GRANT OF STOCK OPTION. The Company hereby grants
the Optionee an option (the "Option") to purchase at the times
hereinafter set forth, in one or more exercises, all or any part of
an aggregate of ___________ shares of the Company's common stock
(the "Shares") for an exercise price of $________ per share.
3. CONSIDERATION TO THE COMPANY. In consideration of
the granting of this Option by the Company, the Optionee agrees to
render faithful and efficient services to the Company or a
Subsidiary, with such duties and responsibilities as the Company
shall from time to time prescribe. Nothing in this Agreement or in
the Plan shall confer upon the Optionee any right to continue in
the employ of the Company or any Subsidiary or shall interfere with
or restrict in any way the rights of the Company and its
Subsidiaries, which are hereby expressly reserved, to discharge the
Optionee at any time for any reason whatsoever, with or without
cause. In addition, nothing in this Agreement or in the Plan shall
require the Optionee to continue in the employ of the Company or
any Subsidiary.
<PAGE>
4. TIMING AND MANNER OF EXERCISE. The Option shall be
and become exercisable as follows: 20% on the day after the first
anniversary of the Granting Date, 40% on the day after the second
anniversary of the Granting Date, 60% on the day after the third
anniversary of the Granting Date, 80% on the day after the fourth
anniversary of the Granting Date, and 100% on the day after the
fifth anniversary of the Granting Date.
Provided, however, that the Option shall be 100%
exercisable upon and after a "Change in Control." A Change in
Control shall be deemed to exist if:
(i) less than a majority of the Directors are persons
who were either nominated or selected by the Board; or
(ii) any "person", as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than KKR Associates,
L.P. and/or any of its affiliates, a Director nominated or selected
by the Board or an Officer elected by the Board, the Company, a
subsidiary, an affiliate, or a Company employee benefit plan,
including any trustee of such plan acting as trustee) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company (or a
successor to the Company) representing 35% or more of the combined
voting power of the then outstanding securities of the Company or
such successor; or
(iii) (A) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the
Voting Securities (as defined below) of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities
of the surviving entity) at least 80 percent of the total voting
power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or (B) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of
the Company's assets, or (C) any other event which the Board
determines, in its discretion, would materially alter the structure
of the Company or its ownership. As used in this paragraph,
"Voting Securities" shall mean any securities of the Company which
vote generally in the election of Directors.
No additional portion of the Option shall become
exercisable after the Optionee's Termination of Employment.
The Option shall expire as to all of the Shares ten (10)
years after the Granting Date except the Option (or a portion
thereof) shall terminate earlier as provided in Section 4.3(a) of
the Plan.
The Optionee may exercise the Option for all or any part
of the Shares subject to each installment listed above on or after
the respective exercise date listed above by delivering to the
Company a written notice in accordance with Section 4.3(d) of the
Plan.
<PAGE>
5. NOTICES. Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Secretary
of the Company at Layne Christensen Company, 1900 Shawnee Mission
Parkway, Mission Woods, Kansas 66205, and any notice to be given to
the Optionee shall be addressed to him at the address given beneath
his signature hereto. By a notice given pursuant to this Section
5, either party may hereafter designate a different address for
notices to be given to him. Any notice which is required to be
given to the Optionee shall, if the Optionee is then deceased, be
given to the Optionee's personal representative if such representa-
tive has previously informed the Company of his status and address
by written notice under this Section 5. Any notice shall be deemed
duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United
States Postal Service.
6. NOTIFICATION OF DISPOSITION. The Optionee shall
give prompt notice to the Company of any disposition or other
transfer of any shares of stock acquired under this Agreement if
such disposition or transfer is made (a) within two (2) years from
the Granting Date of the Option with respect to such shares or (b)
within one (1) year after the transfer of such shares to him. Such
notice shall specify the date of such disposition or other transfer
and the amount realized, in cash, other property, assumption of
indebtedness or other consideration, by the Optionee in such
disposition or other transfer.
7. TITLES. Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or
construction of this Agreement.
8. AMENDMENT. This Agreement may be amended only by a
writing executed by the parties hereto which specifically states
that it is amending this Agreement.
9. GOVERNING LAW. The laws of the State of Kansas
shall govern the interpretation, validity and performance of the
terms of this Agreement regardless of the law that might be applied
under principles of conflicts of laws.
10. NON-ASSIGNABILITY. Except as otherwise provided
herein or in the Plan, the Option and the rights and privileges
conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment, or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of the Option, or of any right or privilege
conferred hereby, or upon the levy of any attachment or similar
process upon the rights and privileges conferred hereby, contrary
to the provisions hereby, this Option and the rights and privileges
conferred hereby shall immediately become null and void.
11. BINDING EFFECT. Except as expressly stated herein
to the contrary, the Agreement shall be binding upon and inure to
the benefit of the respective heirs, legal representatives,
successors and assigns of the parties hereto.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
The Company: LAYNE CHRISTENSEN COMPANY
By:
---------------------------
Name:
Title:
The Optionee:
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Address of the Optionee:
