EXHIBIT 10.1

Layne Christensen Company

1900 Shawnee Mission Parkway • Mission Woods, Kansas 66205 • (913) 362-0510 •
Fax: (913) 362-0133

JERRY W. FANSKA
V.P. Finance - Treasurer

May 3, 2005

Andrew B. Schmitt
310 West 49th Street, No. 1202
Kansas City, Missouri 64112

     Re: Retirement Benefit (as Amended and Restated to Comply with Section 409A

Dear Andy:

          As a result of new tax legislation contained in the American Jobs
Creation Act of 2004, we are amending and restating your existing supplemental
retirement benefit originally set forth in the letter agreement between yourself
and Layne, Inc., predecessor to Layne Christensen Company, dated April 3, 1995
(the “Original Agreement”). With this new letter agreement, the Original
Agreement is null and void and replaced, in its entirety, by the terms and
conditions of this new agreement. Unless otherwise defined herein, all
capitalized terms shall have the meaning as defined in Appendix A.

          As soon as reasonably practicable after the date which is six
(6) months after your Separation from Service (or, if earlier, the date of your
death), Layne Christensen Company (“Layne”) will provide you with an annual
retirement benefit equal to 40% of the average of your total Compensation
received during the highest five consecutive years out of your last ten years of
employment, less 60% of your annual primary Social Security benefit, and further
reduced, if at all, in the event your Separation from Service is prior to you
attaining age 65 by the Early Retirement Reduction Factor (the “Annual
Benefit”).

          A portion of your Annual Benefit will be deemed to have been funded by
the Layne funded portion of the Layne Capital Accumulation Plan (“CAP Plan”).
Accordingly, your Annual Benefit will be reduced by the annuity equivalent of
the value of the Layne funded portion of the CAP Plan. The annuity equivalent
shall be deemed to be equal to the annual amount payable if Layne had purchased
an annuity which would be (i) purchased on the date of your Separation from
Service, (ii) purchased from a company of Layne’s choice with a top Best rating
for life insurance companies, (iii) payable annually, beginning on the date your
Annual Benefit is to commence, for the remainder of your life (or the life of
the last to die of you and your wife, as applicable), and (iv) purchased for a
lump sum premium payment equal to the value of the Layne funded portion of your
CAP Plan account, including earnings, as of the date of your Separation from
Service.

          Payment of your Annual Benefit shall commence as soon as reasonably
practicable after the date which is six (6) months after your Separation from
Service. If you are married at the time payment commences, your Annual Benefit
shall be paid in the form of a monthly joint and 100% survivor annuity benefit
such that you will receive a smaller benefit than you otherwise would have if
such annuity was based on your life expectancy alone, however, one hundred
percent (100%) of the amount of such benefit will continue over the lifetime of
your surviving spouse or you, whoever is the

 

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Andrew B. Schmitt
May 3, 2005
Page 2      

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survivor. If you are not married when your Annual Benefit payments commence,
your Annual Benefit shall be paid monthly in the form of a single lifetime
annuity based upon your life and shall terminate upon your death.

          You shall be eligible for a disability benefit as described in
Appendix A if your Separation from Service is on account of a Disability.

          You shall be eligible for a death benefit as described in Appendix A
if your Separation from Service is on account of your death.

          Your rights to payment under this agreement are those of a general
unsecured creditor of Layne and this agreement constitutes a mere promise by
Layne to make benefit payments in the future. It is the intention of the parties
that this arrangement be unfunded for tax purposes and for purposes of Title I
of ERISA. Further, your rights to benefit payments under this agreement are not
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by your creditors or your
beneficiary’s creditors. All disputes regarding any payment made or to be made
under this agreement shall be handled in accordance with the claims procedures
established and maintained by Layne, a copy of which shall be provided to you
upon request.

          This letter (including, without limitation, the annuity assumptions
contained herein) does not alter the amount otherwise due to you or the terms of
payment under the CAP Plan.

Sincerely,

/s/ Jerry W. Fanska

Jerry W. Fanska

          I have read, consulted with an advisor to the extent I believe
necessary, and fully understand this letter and Appendix A. I agree that this
letter agreement replaces, in its entirety, the letter agreement between myself
and Layne, Inc. dated April 3, 1995. I further agree that this letter and
Appendix A, along with the sums payable to me under the terms of the CAP Plan,
describe fully and completely all retirement or pension benefits due to me from
Layne, any of Layne’s predecessors, or any of its subsidiaries or affiliates.

/s/ A. B. Schmitt          
Andrew B. Schmitt

 

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A P P E N D I X  A

Definitions

     “Code” means the Internal Revenue Code of 1986, as it may be amended from
time to time, and the rules and regulations promulgated thereunder.

     “Compensation” shall mean salary before withholding for taxes or any other
purpose plus incentive compensation payments, overtime, overtime premium,
commissions and bonuses, including any such amounts deferred under any plan or
arrangement whatsoever, but excluding the value of fringe benefits and any other
discretionary, nonrecurring or irregular payments.

     “Disability” means you (a) are unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, or (b) are, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not less
than 3 months under an accident and health plan covering employees of Layne.

     “Early Retirement Reduction Factor” shall be that percentage set forth
below applicable to the age at which you Separate from Service.

     “Separation from Service”, “Separate from Service” or “Separated from
Service” shall have the same meaning as the term “separation from service” is
referred to under Code Section 409A(a)(2)(A)(i) and interpreted pursuant to the
applicable guidance issued thereunder.

Death Benefit

          The Death Benefit shall be equal to the Annual Benefit your surviving
spouse would have received if (i) you had Separated from Service on the date of
your death and had received the Annual Benefit, and (ii) you subsequently died;
provided, however that no Early Retirement Reduction Factor shall be applied if
your death occurs prior to your 65th birthday; provided further, however, that
the Death Benefit shall be reduced by the annuity equivalent of the value of the
Layne funded portion of the CAP Plan.

          Payment of the Death Benefit shall commence upon the last day of the
month in which your death occurred. Any Death Benefit payable hereunder shall
terminate upon the death of your surviving spouse entitled to receive such death
benefit. No Death Benefit shall be payable to any beneficiary other than your
surviving spouse.

Disability Benefit

          The Disability Benefit shall be determined in the same manner as the
Annual Benefit is determined in the attached letter as of the time of your
Separation from Service on account of Disability except that no Early Retirement
Reduction Factor shall be applied if such Disability occurs prior to your 65th
birthday. The Disability Benefit shall be reduced by the annuity equivalent of
the value of the Layne

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funded portion of the CAP Plan and shall be paid in the same manner and commence
at the same time as if you had Separated from Service without a Disability.

Early Retirement Reduction Factor

          In the event your Separation from Service occurs prior to your 65th
birthday, the Annual Benefit so paid shall be the Annual Benefit (as computed in
the attached letter) multiplied by the following percentage depending upon your
age at the time you Separated from Service:

      Age at Separation from Service   Percentage of Annual Benefit       55  
48.81% 56   52.06% 57   55.59% 58   59.45% 59   63.68% 60   68.32% 61   73.43%
62   79.06% 63   85.31% 64   92.26%

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