Document:

EX-10.1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

               EMPLOYMENT AGREEMENT (this “Agreement”), dated as of April 3, 2006, by and between
ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation (the “Company”), and WAYNE
FREDRICK, an individual residing in the State of Ohio (the “Executive”).

W I T N E S S E T H:

               WHEREAS, the Executive previously served as Vice President of Sales of Alside Products, a
division of the Company;

               WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of March 16, 2002,
among Associated Materials Holdings Inc. (formerly known as Harvest/AMI Holdings Inc.)
(“Parent”), Simon Acquisition Corp. and the Company (the “Merger Agreement”), the
Company became a wholly-owned subsidiary of Parent upon consummation of the transactions
contemplated by the Merger Agreement (the “Merger”);

               WHEREAS, since the Merger, the Executive has served as Vice President of Sales of Alside
Products;

               WHEREAS, on March 4, 2004, all of the stock of Parent was exchanged for stock of AMH Holdings,
Inc. (“AMH”) as part of a series of corporate reorganization transactions, and Parent
became a wholly-owned subsidiary of AMH;

               WHEREAS, on December 22, 2004, all of the stock of Parent was exchanged for stock of AMH II
Holdings, Inc. (“AMH II”) as part of a series of corporate reorganization transactions, and
Parent became an indirect wholly-owned subsidiary of AMH II;

               WHEREAS, the Company desires to continue to retain the services and employment of the
Executive on behalf of the Company, and the Executive desires to continue his employment with the
Company, upon the terms and conditions hereinafter set forth.

               NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for
good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto,
each intending to be legally bound hereby, agree as follows:

     1. Employment. On the terms and subject to the conditions set forth herein, the
Company hereby employs the Executive as Executive Vice President of Sales for the Company, and the
Executive accepts such employment, for the Employment Term (as defined in Section 3). During the
Employment Term, the Executive shall serve as the Executive Vice President of Sales for the Company
and shall report to the President and Chief Executive Officer of the Company, performing such
duties as shall be reasonably required of a vice president, and shall have such other powers and
perform such other duties as may from time to time be assigned to him by the

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President and Chief Executive Officer of the Company and the Board of Directors of the Company
(the “Board”). To the extent requested by the Company’s President and Chief Executive
Officer or the Board, the Executive shall also serve on the Board or any committee of the Board
and/or as a director, officer or employee of AMH II or any other person or entity which, from time
to time, is a direct or indirect subsidiary of AMH II (AMH II and each such subsidiary, person or
entity, other than the Company, are hereinafter referred to collectively as the
“Affiliates,” and individually as an “Affiliate”). The Executive’s service as a
director of the Company or as a director, officer or employee of any Affiliate shall be without
additional compensation.

     2. Performance. The Executive will serve the Company faithfully and to the best of
his ability and will devote his full business time, energy, experience and talents to the business
of the Company and the Affiliates; provided, however, that it shall not be a violation of this
Agreement for the Executive to manage his personal investments and business affairs, or to engage
in or serve such civic, community, charitable, educational, or religious organizations as he may
reasonably select so long as such service does not interfere with the Executive’s performance of
his duties hereunder.

     3. Employment Term. Unless earlier terminated pursuant to Section 6, the Executive’s
term of employment hereunder shall begin on April 1, 2006 (hereinafter referred to as the
“Commencement Date”), and continue through the date which is one (1) year following the
Commencement Date (the “Initial Term”); provided that such term shall be automatically
extended for additional one (1) year periods commencing on the first day immediately following the
expiration date of the Initial Term and successively thereafter on the first day immediately
following the expiration of each such one-year period (each such period an “Additional
Term”) unless the Company shall have given notice to the Executive that the Company does not
desire to extend the term of this Agreement, such notice to be given at least thirty (30) days
prior to the end of the Initial Term or the applicable Additional Term (the Initial Term and any
Additional Terms, if applicable, collectively, the “Employment Term”).

     4. Compensation and Benefits.

          (a) Salary. As compensation for his services hereunder and in consideration of the
Executive’s other agreements hereunder, during the Employment Term, the Company shall pay the
Executive a base salary, payable in equal installments in accordance with the Company’s payroll
procedures, at an annual rate of Three Hundred Thousand Dollars ($300,000), subject to annual
review by the Board, which may increase, but not decrease, the Executive’s base salary.

          (b) Annual Incentive Bonus; Stock Options. The Executive shall be entitled to
participate in an annual incentive bonus arrangement established by the Company on terms and
conditions substantially as set forth in Exhibit A hereto. The Executive shall not be
entitled to participate in any other annual cash bonus plan, program or arrangement with respect to
any period to which the annual incentive bonus arrangement described in the immediately preceding
sentence applies. The Executive shall also be entitled to participate in the stock option plan
established by Parent or AMH II.

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          (c) Retirement, Medical, Dental and Other Benefits. During the Employment Term, the
Executive shall, in accordance with the terms and conditions of the applicable plan documents and
all applicable laws, be eligible to participate in the various retirement, medical, dental and
other employee benefit plans made available by the Company, from time to time, for its executives.

          (d) Vacation; Sick Leave. During the Employment Term, the Executive shall be entitled
to not less than five (5) weeks of vacation during each calendar year and sick leave in accordance
with the Company’s policies and practices with respect to its executives.

          (e) Business Expenses. The Company shall reimburse or advance payment to the
Executive for all reasonable expenses actually incurred by him in connection with the performance
of his duties hereunder in accordance with policies established by the Company from time to time
and subject to receipt by the Company of appropriate documentation.

     5. Covenants of the Executive. The Executive acknowledges that in the course of his
employment with the Company he has and will become familiar with the Company’s and the Affiliates’
trade secrets and with other confidential information concerning the Company and the Affiliates,
and that his services are of special, unique and extraordinary value to the Company and the
Affiliates. Therefore, the Company and the Executive mutually agree that it is in the interest of
both parties for the Executive to enter into the restrictive covenants set forth in this Section 5
and that such restrictions and covenants are reasonable given the nature of the Executive’s duties
and the nature of the Company’s business.

          (a) Noncompetition. During the Employment Term and for the Restricted Period (as
hereinafter defined) following termination of the Employment Term, the Executive shall not, within
any jurisdiction or marketing area in which the Company or any Affiliate is doing or is qualified
to do business, directly or indirectly, own, manage, operate, control, be employed by or
participate in the ownership, management, operation or control of, or be connected in any manner
with, any Business (as hereinafter defined), provided that the Executive’s ownership of securities
of two percent (2%) or less of any class of securities of a public company shall not, by itself, be
considered to be competition with the Company or any Affiliate. For purposes of this Agreement,
“Business” shall mean the manufacturing, production, distribution or sale of exterior
residential building products, including, without limitation, vinyl siding, windows, fencing,
decking, railings and garage doors, or any other business of a type and character engaged in by the
Company or an Affiliate during the Employment Term. For purposes of this Agreement, the
“Restricted Period” shall be (1) twenty-four (24) months if such termination occurs during
the two-year period following the Commencement Date; or (2) one (1) year if such termination occurs
after such two-year period following the Commencement Date.

          (b) Nonsolicitation. During the Employment Term and for the Restricted Period
following termination of the Employment Term, the Executive shall not, directly or indirectly, (i)
employ, solicit for employment or otherwise contract for the services of any individual who is or
was an employee of the Company or any Affiliate during the Employment Term; (ii) otherwise induce
or attempt to induce any employee of the Company or an Affiliate to leave the employ of the Company
or such Affiliate, or in any way knowingly interfere with the relationship between the Company or
any Affiliate and any employee respectively thereof; or (iii) induce or attempt to

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induce any customer, supplier, licensee or other business relation of the Company or any
Affiliate to cease doing business with the Company or such Affiliate, or interfere in any way with
the relationship between any such customer, supplier, licensee or business relation and the Company
or any Affiliate.

          (c) Nondisclosure; Inventions. For the Employment Term and thereafter, (i) the
Executive shall not divulge, transmit or otherwise disclose (except as legally compelled by court
order, and then only to the extent required, after prompt notice to the Board of any such order),
directly or indirectly, other than in the regular and proper course of business of the Company and
the Affiliates, any customer lists, trade secrets or other confidential knowledge or information
with respect to the operations or finances of the Company or any Affiliates or with respect to
confidential or secret processes, services, techniques, customers or plans with respect to the
Company or the Affiliates (all of the foregoing collectively hereinafter referred to as,
“Confidential Information”), and (ii) the Executive will not use, directly or indirectly,
any Confidential Information for the benefit of anyone other than the Company and the Affiliates;
provided, however, that the Executive has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter shall become
available to the general public other than through disclosure by the Executive. All Confidential
Information, new processes, techniques, know-how, methods, inventions, plans, products, patents and
devices developed, made or invented by the Executive, alone or with others, while an employee of
the Company which are related to the business of the Company and the Affiliates shall be and become
the sole property of the Company, unless released in writing by the Board, and the Executive hereby
assigns any and all rights therein or thereto to the Company.

          (d) Nondisparagement. During the Employment Term and thereafter, the Executive shall
not take any action to disparage or criticize the Company or any Affiliate or their respective
employees, directors, owners or customers or to engage in any other action that injures or hinders
the business relationships of the Company or any Affiliate. Nothing contained in this Section 5(d)
shall preclude the Executive from enforcing his rights under this Agreement.

          (e) Return of Company Property. All Confidential Information, files, records,
correspondence, memoranda, notes or other documents (including, without limitation, those in
computer-readable form) or property relating or belonging to the Company or an Affiliate, whether
prepared by the Executive or otherwise coming into his possession in the course of the performance
of his services under this Agreement, shall be the exclusive property of the Company and shall be
delivered to the Company, and not retained by the Executive (including, without limitations, any
copies thereof), promptly upon request by the Company and, in any event, promptly upon termination
of the Employment Term.

          (f) Enforcement. The Executive acknowledges that a breach of his covenants contained
in this Section 5 may cause irreparable damage to the Company and the Affiliates, the exact amount
of which would be difficult to ascertain, and that the remedies at law for any such breach or
threatened breach would be inadequate. Accordingly, the Executive agrees that if he breaches or
threatens to breach any of the covenants contained in this Section 5, in addition to any other
remedy which may be available at law or in equity, the Company and the Affiliates shall be entitled
to specific performance and injunctive relief to prevent the breach or any

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threatened breach thereof without bond or other security or a showing that monetary damages
will not provide an adequate remedy.

          (g) Scope of Covenants. The Company and the Executive further acknowledge that the
time, scope, geographic area and other provisions of this Section 5 have been specifically
negotiated by sophisticated commercial parties and agree that all such provisions are reasonable
under the circumstances of the activities contemplated by this Agreement. In the event that the
agreements in this Section 5 shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of time or over too great a
geographical area or by reason of their being too extensive in any other respect, they shall be
interpreted to extend only over the maximum period of time for which they may be enforceable and/or
over the maximum geographical area as to which they may be enforceable and/or to the maximum extent
in all other respects as to which they may be enforceable, all as determined by such court in such
action.

     6. Termination. The employment of the Executive hereunder shall automatically
terminate at the end of the Employment Term. The employment of the Executive hereunder and the
Employment Term may also be terminated at any time by the Company with or without Cause. For
purposes of this Agreement, except as otherwise provided in Section 8, “Cause” shall mean:
(i) embezzlement, theft or misappropriation by the Executive of any property of the Company or an
Affiliate; (ii) any breach by the Executive of the Executive’s covenants under Section 5; (iii) any
breach by the Executive of any other material provision of this Agreement which breach is not
cured, to the extent susceptible to cure, within thirty (30) days after the Company has given
notice to the Executive describing such breach; (iv) willful failure by the Executive to perform
the duties of his employment hereunder which continues for a period of fourteen (14) days following
written notice thereof by the Company to the Executive; (v) the conviction of, or a plea of nolo
contendere (or a similar plea) to, any criminal offense that is a felony or involves fraud, or any
other criminal offense punishable by imprisonment of at least one year or materially injurious to
the business or reputation of the Company involving theft, dishonesty, misrepresentation or moral
turpitude; (vi) gross negligence or willful misconduct on the part of the Executive in the
performance of his duties as an employee, officer or director of the Company or an Affiliate;
(vii) the Executive’s breach of his fiduciary obligations to the Company or an Affiliate; (viii)
the Executive’s commission of intentional, wrongful damage to property of the Company or an
Affiliate; (ix) any chemical dependence of the Executive which adversely affects the performance of
his duties and responsibilities to the Company or an Affiliate; or (x) the Executive’s violation of
the Company’s or an Affiliate’s code of ethics, code of business conduct or similar policies
applicable to the Executive. The existence or non-existence of Cause shall be determined in good
faith by the Board. The employment of the Executive may also be terminated at any time by the
Executive by notice of resignation delivered to the Company not less than ninety (90) days prior to
the effective date of such resignation.

     7. Severance. Except as otherwise provided in Section 8, if the Executive’s
employment hereunder is terminated during the Employment Term by the Company, other than for Cause
or due to disability (as determined in the good faith discretion of the Board), death or
termination due to expiration of the Employment Term following notice by the Company not to extend
the Employment Term in accordance with Section 3, the Executive shall be entitled to receive as
severance: (i) an amount equal to the Executive’s base salary as in effect immediately

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prior to the date of the Executive’s termination of employment for twelve (12) months
(payable, at the Company’s option, in a lump-sum or in equal installments in accordance with the
Company’s payroll procedures during the twelve months following the date of the Executive’s
termination) (such twelve-month period, the “Severance Period”); (ii) continued medical and
dental benefits described in Section 4(c) for the Severance Period, at the same rate of employee
and Company shared costs of such coverage as in effect from time to time for active employees of
the Company; and (iii) a pro rata portion (based on the number of days the Executive was employed
by the Company during the calendar year of termination) of any incentive bonus otherwise payable in
accordance with Section 4(b) for the year of termination of the Executive’s employment, payable no
earlier than the date on which such bonus, if any, would have been paid under the applicable plan
or policy of the Company absent such termination of employment. With respect to any such continued
medical and dental benefits described in clause (ii) of the immediately preceding sentence for
which the Executive is eligible, (I) if the Company cannot continue such benefits, the Company
shall pay the Executive for the cost of such benefits; (II) such benefits shall be discontinued in
the event the Executive becomes eligible for similar benefits from a successor employer (and the
Executive’s eligibility for any such benefits shall be reported by the Executive to the Company);
and (III) the Executive’s period of “continuation coverage” for purposes of Section 4980B of the
Internal Revenue Code of 1986, as amended (the “Code”), shall be deemed to commence on the
date of the Executive’s termination of employment.

     8. Change in Control. This Section 8 will be binding upon the Restatement Date, but
notwithstanding anything in this Agreement to the contrary, this Section 8 will not be operative
unless and until a Change in Control occurs. Upon the occurrence of a Change in Control at any
time during the Employment Term, this Section 8 shall become immediately operative without further
action; provided, however, that if, prior to a Change in Control, the Executive ceases for any
reason to be an employee of the Company and any Affiliate, the effectiveness of this Section 8 will
immediately terminate without further action and be of no further effect. Certain capitalized
terms used in this Section 8 are defined for purposes of this Section 8 in Section 8(e).

          (a) Termination Following a Change in Control. In the event of a Change in Control,
if the Executive’s employment is terminated by the Company or an Affiliate during the Post-Change
Period, the Executive shall be entitled to the benefits provided by Section 8(c) unless such
termination is the result of the occurrence of one or more of the following events:

	 	(i)	 	The Executive’s death;
	 
	 	(ii)	 	If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits under, the long-term disability plan applicable to the
Executive immediately prior to the Change in Control; or
	 
	 	(iii)	 	Cause (as defined in Section 8(e)(i)).

If, during the Post-Change Period, the Executive’s employment is terminated by the Company
or an Affiliate other than as described in clause (i), (ii) or (iii) of this Section 8(a),
the Executive will be entitled to the benefits provided by Section 8(c).

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          (b) Termination by Executive. In the event of a Change in Control, the Executive may
terminate employment with the Company during the Post-Change Period with the right to severance
compensation as provided in Section 8(c) upon the occurrence of one or more of the following events
(regardless of whether any other reason, other than death, permanent disability or Cause, for such
termination has occurred, including other employment):

	 	(i)	 	the failure to maintain the Executive in the position, or a
substantially equivalent or superior position, with the Company and/or with a
direct or indirect parent company of the Company that the Executive held
immediately prior to the Change in Control, which is not remedied by the
Company within 10 calendar days after receipt by the Company of notice from the
Executive of such failure;
	 
	 	(ii)	 	(A) a reduction in the Executive’s base salary pursuant to
Section 4(a) hereof or (B) the termination or significant reduction in the
aggregate of the Executive’s right to participate in employee benefit plans or
programs of the Company as in effect prior to the Change in Control (other than
Incentive Pay (as hereinafter defined) or any other bonus, incentive or stock
or equity-based compensation or benefits), in either case which is not remedied
by the Company within 10 calendar days after receipt by the Company of notice
from the Executive of such reduction or termination;
	 
	 	(iii)	 	a reduction or elimination of the Executive’s opportunity to
earn Incentive Pay pursuant to any plan or program in effect immediately prior
to the Change in Control which is not remedied by the Company within 10
calendar days after receipt by the Company of notice from the Executive of such
reduction or elimination (for the avoidance of doubt, changes in the value or
performance of the Company or an Affiliate or successor of either following the
Change in Control shall not be considered a reduction or elimination of the
Executive’s opportunity to earn Incentive Pay); or
	 
	 	(iv)	 	the Company requires the Executive to have his principal place
of work changed to any location that is more than 35 miles from the location
thereof immediately prior to the Change in Control, without his prior written
consent.

          (c) Change in Control Severance. If, following the occurrence of a Change in Control,
the Company or an Affiliate terminates the Executive’s employment during the Post-Change Period
other than as described in clause (i), (ii) or (iii) of Section 8(a), or if the Executive
terminates his employment pursuant to Section 8(b), the Executive shall not be entitled to the
severance compensation described in Section 7, and the Company will (i) pay or cause to be paid to
the Executive the amounts described in Sections 8(c)(1), 8(c)(2), 8(c)(3), 8(c)(6) and 8(c)(7)
within five business days after the Termination Date; (ii) pay or cause to be paid to the Executive
the amount described in Section 8(c)(4), such amount to be payable no earlier than the date on
which such Incentive Pay, if any, would have been paid under the applicable plan or policy of the
Company absent such termination of employment; and (iii) provide the Executive the benefits
described in Section 8(c)(5) for the period described therein.

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	 	(1)	 	A lump sum payment in an amount equal to all Base Pay and
Incentive Pay (other than for the calendar year of such termination of
employment) owed to the Executive for periods on or prior to the Termination
Date.
	 
	 	(2)	 	A lump sum payment in an amount equal to two times the
Executive’s base salary pursuant to Section 4(a) (at the rate in effect
immediately prior to the Termination Date).
	 
	 	(3)	 	A lump sum payment equal to two times Incentive Pay (in an
amount equal to the highest amount of Incentive Pay earned by the Executive in
any calendar year during the three calendar years immediately preceding the
calendar year in which the Change in Control occurred).
	 
	 	(4)	 	In the event that the Termination Date occurs after June 30 in
any calendar year, a lump sum payment equal to one times Incentive Pay for such
calendar year, multiplied by a fraction, the numerator of which is the number
of days between (and including) January 1 of the calendar year in which the
Termination Date occurs and the Termination Date, and the denominator of which
is 365.
	 
	 	(5)	 	For a period of 24 months following the Termination Date (the
“Continuation Period”), the Company will provide the Executive with
medical, dental and life insurance benefits consistent with the terms in effect
for such benefits for active employees of the Company during the Continuation
Period. If and to the extent that any benefit described in this Section
8(c)(5) is not or cannot be paid or provided under any Company plan or program,
then the Company will pay or provide for the payment to the Executive, his
dependants and beneficiaries, of such employee benefits. Without otherwise
limiting the purposes of Section 8(d), employee benefits otherwise receivable
by the Executive pursuant to this Section 8(c)(5) will be reduced to the extent
comparable welfare benefits are actually received by the Executive from another
employer during the Continuation Period following the Executive’s Termination
Date, and any such benefits actually received by the Executive shall be
reported by the Executive to the Company.
	 
	 	(6)	 	The Company will pay to the Executive the cost of employee
outplacement services for the Executive in the amount of $30,000.

          (d) No Mitigation Obligation; Effect on Other Rights The payment of the severance
compensation by the Company to the Executive in accordance with the terms of this Section 8 is
hereby acknowledged by the Company to be reasonable, and the Executive will not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking other employment or
otherwise, except as expressly provided in the last sentence of Section 8(c)(5). This Section 8
will not affect any rights (other than any rights to severance, termination, retention or similar
compensation or benefits) that the Executive may have pursuant to any

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agreement, plan or policy of the Company or a Subsidiary providing employee benefits, which
rights shall be governed by the terms thereof.

          (e) Certain Defined Terms. The following terms have the following meanings when used
in this Section 8:

	 	(i)	 	“Cause” means that, prior to any termination pursuant
to Section 8(b), the Executive shall have:

	 	(1)	 	been convicted of a criminal violation
involving fraud, embezzlement or theft;
	 
	 	(2)	 	committed intentional wrongful damage to
property of the Company or any Affiliate; or
	 
	 	(3)	 	committed intentional wrongful disclosure of
confidential information of the Company or any Affiliate.
	 
	 	 	 	Nothing herein will limit the right of the Executive or his
beneficiaries to contest the validity of any determination by the
Company to terminate the Executive for Cause.

	 	(ii)	 	“Change in Control” means (A) a stock sale, merger,
consolidation, combination, reorganization or other transaction involving the
Company resulting in less than fifty percent (50%) of the combined voting power
of the surviving or resulting entity being owned by the shareholders of the
Company immediately prior to such transaction; (B) a stock sale, merger,
consolidation, combination, reorganization or other transaction involving AMH
II, AMH or Parent resulting in less than fifty percent (50%) of the combined
voting power of the surviving or resulting entity being owned by the
shareholders of AMH II, AMH or Parent, as applicable, immediately prior to such
transaction or (C) the liquidation or dissolution of the Company, AMH II, AMH
or Parent or the sale or other disposition of all or substantially all of the
assets or business of the Company, AMH II, AMH or Parent (other than, in the
case of either clause (A), (B) or (C) above, in connection with any employee
benefit plan of the Company or an Affiliate).
	 
	 	(iii)	 	“Incentive Pay” means an annual cash bonus or annual
cash incentive compensation, in addition to base salary, made or to be made in
regard to services rendered in any year or other period pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar agreement,
policy, plan, program or arrangement (whether or not funded) of the Company or
an Affiliate, or any successor thereto; provided that the Incentive Pay
shall not include any stock options or other stock-based compensation or any
special management bonuses paid in connection with any debt offering or
recapitalization of AMH II and/or another Affiliate.

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	 	 	 	For the avoidance of doubt, as of the date hereof, Incentive Pay shall mean
the annual incentive bonus arrangement described in Section 4(b).
	 
	 	(iv)	 	“Post-Change Period” means the period of time
commencing on the date of the first occurrence of a Change in Control and
continuing until the second anniversary of the occurrence of such Change in
Control.
	 
	 	(v)	 	“Termination Date” means the date on which the
Executive’s employment with the Company or an Affiliate is terminated.

     9. Termination of Compensation and Benefits; Execution of Release; Coordination of
Provisions. If the Executive’s employment terminates otherwise than in a termination entitling
him to severance pay and benefits pursuant to Section 7 or Section 8, the Executive shall not be
entitled to any severance, termination pay or similar compensation or benefits, provided that the
Executive shall be entitled to any benefits then due or accrued in accordance with the applicable
employee benefit plans of the Company or applicable law, including “continuation coverage” under
the Company’s group health plans for purposes of Section 4980B of the Code. As a condition of
receiving any severance compensation for which the Executive otherwise qualifies under Section 7 or
Section 8, the Executive agrees to execute a general release of the Company and the Affiliates and
their respective officers, directors and employees from any and all claims, obligations and
liabilities of any kind whatsoever arising from or in connection with the Executive’s employment or
termination of employment with the Company or this Agreement (including, without limitation, civil
rights claims), in such form as is requested by the Company. Any severance compensation and
benefits to which the Executive may be entitled under Section 8 shall be in lieu of any severance
compensation or benefits to which the Executive may be entitled under Section 7. The Executive
acknowledges and agrees that, except as specifically described in Section 7 and Section 8, all of
the Executive’s rights to any compensation, benefits (other than base salary earned through the
date of termination of employment and any benefits due or accrued prior to termination of
employment in accordance with the applicable employee benefit plans of the Company or applicable
law), bonuses or severance from the Company or any Affiliate after termination of the Employment
Term shall cease upon such termination.

     10. Limitation on Payments and Benefits. Notwithstanding any provision of this
Agreement to the contrary, no amount or benefit shall be paid or provided under this Agreement to
an extent or in a manner that would result in payments or benefits (or other compensation) not
being fully deductible by the Company or an Affiliate for federal income tax purposes because of
Section 280G of the Code, or any successor provision thereto (or that would result in the Executive
being subject to the excise tax imposed by Section 4999 of the Code, or any successor provision
thereto). The determination of whether any such payments or benefits to be provided under this
Agreement or otherwise would not be so deductible (or whether the Executive would be subject to
such excise tax) shall be made at the expense of the Company, if requested by either the Executive
or the Company, by a firm of independent accountants or a law firm selected by the Company and
reasonably acceptable to the Executive. In the event that any payment or benefit intended to be
provided under this Agreement or otherwise would constitute a “parachute payment,” as defined in
Section 280G of the Code, the Executive shall be entitled to designate the payments and/or benefits
to be reduced or modified so that the Company or an Affiliate is not denied any federal income tax
deductions for any such parachute payment because of Section

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280G of the Code (or so that the Executive is not subject to the excise tax imposed by Section
4999 of the Code). The Company shall provide the Executive with all information reasonably
requested by the Executive to permit the Executive to make such designation. In the event that the
Executive fails to make such designation within 10 business days of the Termination Date, the
Company may effect such reduction in any manner it deems appropriate.

     11. Notice. Any notices required or permitted hereunder shall be in writing and shall
be deemed to have been given when personally delivered or when mailed, certified or registered
mail, or sent by reputable overnight courier, postage prepaid, to the addresses set forth as
follows:

	 	 	 	 	 	 	 	 	 
	 	 	If to the Company:	 	Associated Materials Incorporated	 	 
	 	 	 	 	3773 State Road	 	 
	 	 	 	 	Cuyahoga Falls, Ohio 44223	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	With copies to:	 	Harvest Partners, Inc.	 	 
	 	 	 	 	280 Park Avenue, 33rd Floor	 	 
	 	 	 	 	New York, New York 10017	 	 
	 	 	 	 	Attention: Ira D. Kleinman	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	and	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	White & Case LLP	 	 
	 	 	 	 	1155 Avenue of the Americas	 	 
	 	 	 	 	New York, New York 10036	 	 
	 	 	 	 	Attention: Oliver C. Brahmst, Esq.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	If to the Executive:	 	Wayne Fredrick	 	 
	 

	 	 	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

or to such other address as shall be furnished in writing by either party to the other party;
provided that such notice or change in address shall be effective only when actually received by
the other party.

     12. General.

          (a) Governing Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York applicable to contracts executed
and to be performed entirely within said State.

          (b) Construction and Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or impaired, and the
parties undertake to implement all efforts which are necessary, desirable and sufficient to amend,
supplement or substitute all and any such invalid, illegal or unenforceable provisions with

-11-

 

enforceable and valid provisions which would produce as nearly as may be possible the result
previously intended by the parties without renegotiation of any material terms and conditions
stipulated herein.

          (c) Assignability. The Executive may not assign his interest in or delegate his
duties under this Agreement. This Agreement is for the employment of the Executive, personally,
and the services to be rendered by him under this Agreement must be rendered by him and no other
person. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the
Company and its successors and assigns. Without limiting the foregoing and notwithstanding
anything else in this Agreement to the contrary, the Company may assign this Agreement to, and all
rights hereunder shall inure to the benefit of, any subsidiary of the Company or any person, firm
or corporation resulting from the reorganization of the Company or succeeding to the business or
assets of the Company by purchase, merger, consolidation or otherwise.

          (d) Warranty by the Executive. The Executive represents and warrants to the Company
that the Executive is not subject to any contract, agreement, judgment, order or decree of any
kind, or any restrictive agreement of any character, that restricts the Executive’s ability to
perform his obligations under this Agreement or that would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.

          (e) Compliance with Rules and Policies. The Executive shall perform all services in
accordance with the lawful policies, procedures and rules established by the Company and the Board.
In addition, the Executive shall comply with all laws, rules and regulations that are generally
applicable to the Company or its subsidiaries and their respective employees, directors and
officers.

          (f) Withholding Taxes. All amounts payable hereunder shall be subject to the
withholding of all applicable taxes and deductions required by any applicable law.

          (g) Entire Agreement; Modification. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof, supersedes all prior agreements
and undertakings, both written and oral, and may not be modified or amended in any way except in
writing by the parties hereto. As of the date hereof, the Severance Agreement, dated as of July
27, 2004, between the Company and the Executive shall be cancelled and be of no further force or
effect, without the payment of any additional consideration by or to either of the parties thereto.

          (h) Duration. Notwithstanding the Employment Term hereunder, this Agreement shall
continue for so long as any obligations remain under this Agreement.

          (i) Survival. The covenants set forth in Section 5 and the parties’ respective rights
and obligations under Section 8 shall survive and shall continue to be binding upon the Executive
and the Company, as the case may be, notwithstanding the termination or expiration of this
Agreement or the termination of the Executive’s employment following a Change in Control for any
reason whatsoever.

          (j) Waiver. No waiver by either party hereto of any of the requirements imposed by
this Agreement on, or any breach of any condition or provision of this Agreement to be

-12-

 

performed by, the other party shall be deemed a waiver of a similar or dissimilar requirement,
provision or condition of this Agreement at the same or any prior or subsequent time. Any such
waiver shall be express and in writing, and there shall be no waiver by conduct. Pursuit by either
party of any available remedy, either in law or equity, or any action of any kind, does not
constitute waiver of any other remedy or action. Such remedies are cumulative and not exclusive.

          (k) Counterparts. This Agreement may be executed in two or more counterparts, all of
which taken together shall constitute one instrument.

          (l) Section References. The words Section and paragraph herein shall refer to
provisions of this Agreement unless expressly indicated otherwise.

               IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed
this Agreement as of the day and year first written above.

	 	 	 	 	 	 	 	 	 
	 	 	ASSOCIATED MATERIALS INCORPORATED	 	 
	 
	 	 	 	 	 	 	 	 
	Date: April 3, 2006	 	By:	 	/s/ D. Keith LaVanway	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	D. Keith LaVanway	 	 
	 

	 	 	 	Title:
	 	Vice President — Finance,	 	 
	 

	 	 	 	 	 	Chief Financial Officer,	 	 
	 

	 	 	 	 	 	Treasurer and Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	WAYNE FREDRICK	 	 
	 
	 	 	 	 	 	 	 	 
	Date: April 3, 2006	 	 	 	/s/ Wayne D. Fredrick	 	 
	 	 	 	 	 	 	 

-13-

 

Exhibit A

Annual Incentive Bonus

          The Executive’s annual incentive bonus for each calendar year during the Employment Term shall
be a percentage of the Executive’s base salary based upon the achievement by AMH II of annual
EBITDA Hurdles with respect to the applicable calendar year, as follows:

	 	 	 	 	 
	Achievement of EBITDA Hurdles	 	Percentage of Base Salary
	Less than threshold
	 	Zero
	Threshold
	 	 	20.00	%
	Target
	 	 	60.00	%
	Maximum
	 	 	100.00	%

          If the actual EBITDA for a particular calendar year is between two EBITDA Hurdles, the
applicable percentage of base salary shall be determined by linear interpolation based on the
difference between such EBITDA Hurdles. For the avoidance of doubt, in no event shall the annual
incentive bonus exceed 100% of base salary. For purposes of the Executive’s annual incentive bonus
and the computation thereof:

	1.	 	Base salary shall mean the annual rate of base salary in effect under this Agreement as of
April 1 of the calendar year to which the bonus relates.
	 
	2.	 	“EBITDA Hurdle” means threshold, target and maximum amounts of EBITDA with respect to a
calendar year, as determined in good faith by the Board.
	 
	3.	 	EBITDA shall mean the consolidated net income of AMH II, adjusted to exclude deduction of
interest expense (net of interest income), income taxes, depreciation and amortization and the
Harvest Fee pursuant to the Management Agreement, dated as of April 19, 2002, between Harvest
Partners, Inc. and Associated Materials Incorporated, as amended from time to time, and to
exclude gain or loss from sale of capital assets, and including deduction of all bonuses paid
or accrued with respect to the Executive and all other officers and employees of AMH II and
its subsidiaries (including, without limitation, the Executive’s bonus hereunder), for the
relevant calendar year, calculated otherwise in accordance with generally accepted accounting
principles, subject to any adjustments made in good faith by the Board. EBITDA shall be
determined by the Company’s management, subject to audit or review by AMH II’s external
accountants and approval, in good faith, by the Board. EBITDA shall exclude, without
duplication, any transaction- or merger-related costs which are expensed rather than
capitalized; any revenue, expense, gain or loss from operations divested during the relevant
calendar year; the effect of inventory write-ups made due to purchase accounting; and any
other

 

 

Exhibit A

	 	 	non-recurring, extraordinary items subject to approval, in good faith, by the Board.
	4.	 	Any annual incentive bonus to which the Executive is entitled under this Agreement for any
calendar year shall be paid in a cash lump-sum within thirty days following the close of AMH
II’s books and completion of AMH II’s annual audit by its external accountants for such
calendar year but in any event shall not be paid later than March 15 of the calendar year
immediately following the calendar year to which the bonus relates.

The Executive’s entitlement to an annual incentive bonus shall be determined by the Board in good
faith in accordance with this Exhibit A.Exhibit 10.1

 

Exhibit 10.1

SETTLEMENT AGREEMENT

     THIS SETTLEMENT AGREEMENT (this “Agreement”) dated as of March 31, 2006 is by and
among Layne Christensen Company, a Delaware corporation (the “Company”), and Steel Partners
II, L.P. (the “Partners”), a Delaware limited partnership, Steel Partners, L.L.C., a Delaware
limited liability company, and Warren G. Lichtenstein (collectively, the “Investors”).

R E C I T A L S

     A.     The Company has outstanding approximately 15,225,240 shares of common stock (the
“Common Stock”).

     B.     On February 2, 2006, the Investors, James Henderson and John Quicke filed an eighth
amendment to the Schedule 13D previously filed by the Investors with respect to the Company whereby
Partners nominated a slate of two candidates, specifically Mr. Henderson and Mr. Quicke, for
election as directors at the Company’s 2006 annual meeting of stockholders, which is currently
scheduled to be held on June 8, 2006 (the “2006 Annual Meeting”).

     C.     The Company and the Investors desire to establish in this Agreement certain restrictions
concerning the future actions by the Investors and the Company as set forth herein including the
withdrawal of the two candidates nominated by Partners.

     NOW, THEREFORE, in consideration of the premises and the representations, warranties,
covenants and agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each of the Company and the Investors
(each a “Party”), intending to be legally bound, hereby agrees as follows:

ARTICLE I.

DEFINITIONS AND CONSTRUCTION

     Section 1.1.     Certain Definitions. As used in this Agreement, the following terms
shall have the meanings specified below:

     “Affiliate” shall have the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.

     “Applicable Law” shall mean all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including common law), rules, regulations, ordinances or codes of any
Governmental Authority, and (b) orders, decisions, injunctions, judgments, awards and decrees of
any Governmental Authority.

     “Associate” shall have the meaning ascribed to such term in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act.

 

 

     “Business Day” shall mean a day other than a Saturday, a Sunday, a day on which
banking institutions in the States of Kansas or New York are authorized or obligated by law or
required by executive order to be closed, or a day on which the Nasdaq National Market is closed.

     “Disinterested Directors” shall mean those members of the Board of Directors of the
Company that are members of the Board of Directors on the date of this Agreement other than Mr.
Lichtenstein and shall not include the Investor Nominee if appointed to the Board of Directors.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

     “Governmental Authority” shall mean any federal, state, local or political
subdivision, governmental or administrative body, instrumentality, department or agency or any
court, administrative hearing body, arbitration tribunal, commission or other similar dispute
resolution panel or body, and any other entity exercising executive, legislative, judicial,
regulatory or administrative functions of a government.

     “Investor Nominee” shall mean John Quicke.

     “Person” shall mean an individual, a partnership, an association, a joint venture, a
corporation, a limited liability company, a business, a trust, any entity organized under
Applicable Law, an unincorporated organization or any Governmental Authority.

     “SEC” shall mean the Securities and Exchange Commission.

     Section 1.2.   Interpretation and Construction of this Agreement. The definitions in
Section 1.1 shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed
by the phrase “without limitation.” All references herein to Articles and Sections shall be deemed
to be references to Articles and Sections of this Agreement unless the context shall otherwise
require. The headings of the Articles and Sections are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
Unless the context shall otherwise require or provide, any reference to any agreement or other
instrument or statute or regulation is to such agreement, instrument, statute or regulation as
amended and supplemented from time to time (and, in the case of a statute or regulation, to any
successor provision).

ARTICLE II.

COVENANTS OF INVESTORS; DIRECTOR NOMINEE

     Section 2.1.   Withdrawal of Nominees. The Investors shall withdraw their slate of
nominees for election to the Board of Directors at the 2006 Annual Meeting. In addition, the
Investors shall not, and they shall cause each of their Affiliates and Associates not to otherwise
propose any slate of nominees for election to the Board of Directors at the 2006 Annual Meeting.

2

 

     Section 2.2.   Filing Covenant. Within two (2) Business Days of the date of this
Agreement, the Investors shall file, or cause to be filed on their behalf, with the SEC an
amendment to their Schedule 13D with respect to this Agreement.

     Section 2.3.   Company Covenants. The Company agrees that the following actions shall
be taken:

                    (a)   The Board of Directors of the Company shall cause the number of members of the Board of
Directors to be reduced to eight (8) effective as of the 2006 Annual Meeting, with such
directorship being removed from Class II. Up to and through the 2007 annual meeting of
stockholders, the size of the Board of Directors shall not be increased without the unanimous
consent of the Board of Directors.

                    (b)   In the event Mr. Lichtenstein resigns his position as a member of the Board of Directors
prior to the 2007 annual meeting of stockholders, the Board of Directors shall immediately appoint
the Investor Nominee to fill such vacancy for the remainder of the term accorded such directorship.

                    (c)   Within two (2) Business Days of the date of this Agreement, the Company shall issue a
press release in the form attached hereto as Exhibit A which, among other things, announces
the reorganization of the Company’s water and infrastructure businesses and the retention of Morgan
Joseph & Co. Inc to assist the Board of Directors in evaluating and refining the Company as a
whole.

     Section 2.4.   Press Releases, Etc. by the Investors. Unless required by Applicable Law
or legal process, neither the Investors nor any of their Affiliates or Associates on the one hand,
nor the Company or the Disinterested Directors on the other hand, may make any press release,
public announcement or other communication with respect to the existence of this Agreement, the
negotiations related to this Agreement or the circumstances leading up to this Agreement or that
would be disparaging as the case may be, to the Company, its directors, executive officers or
employees, or, to the Investors or their Affiliates and Associates. Nothing in this Section
2.4 shall permit the Investors to take any action which would otherwise violate any provision
contained in Section 2.1.

ARTICLE III.

TERM AND TERMINATION

     Section 3.1.   Termination. This Agreement shall have an initial term commencing on the
date of this Agreement and ending on the date of the first annual meeting of stockholders following
the end of the Company’s fiscal year ending January 31, 2007. Any termination of this Agreement as
provided herein shall be without prejudice to the rights of any Party arising out of the breach by
any other Party of any provision of this Agreement.

ARTICLE IV.

MISCELLANEOUS

     Section 4.1.   Legal Fees and Expenses. Each party hereto shall pay its own fees and
expenses, including expenses of its legal counsel, in connection with the director nominations by

3

 

the Investors, the negotiation and preparation of this Agreement and any other matters subject
to this Agreement except that the Company shall reimburse the Investors for up to $20,000 of out of
pocket fees and expenses, including expenses of its legal counsel, relating to the director
nominations by the Investors, the negotiation and preparation of this Agreement and any other
matters subject to this Agreement.

     Section 4.2.   Notices. All notices and other communications required or permitted by
this Agreement shall be made in writing and shall be deemed delivered when delivered in person,
transmitted by telecopier, or three days after it has been sent by mail, as follows:

	 	 	 
	The Company:

	 	Layne Christensen Company
	 

	 	1900 Shawnee Mission Parkway
	 

	 	Mission Woods, KS 66205
	 

	 	Attn: Andrew B. Schmitt
	 

	 	Telecopy No.: 913/362-8823
	 
	 	 
	with a copy to:

	 	Stinson Morrison Hecker LLP
	 

	 	1201 Walnut Street
	 

	 	Kansas City, Missouri 64106
	 

	 	Attn: Patrick J. Respeliers
	 

	 	Telecopy No.: 816-691-3495
	 
	 	 
	Investor:

	 	c/o Steel Partners, II L.P.
	 

	 	590 Madison Avenue, 32nd Floor
	 

	 	New York, New York 10022
	 

	 	Attn: Warren G. Lichtenstein
	 

	 	Telecopy No.: (212) 520 — 2331
	 
	 	 
	with a copy to:

	 	Olshan Grundman Frome Rosenzweig & Wolosky LLP
	 

	 	Park Avenue Tower
	 

	 	65 East 55th Street
	 

	 	New York, New York 10022
	 

	 	Attn: Steven Wolosky, Esq.
	 

	 	Telecopy No.: (212) 451-2222

     The Parties shall promptly notify each other in the manner provided in this Section 4.2 of
any change in their respective addresses. A notice of change of address shall not be deemed to
have been given until received by the addressee. Communications by telecopier also shall be sent
concurrently by mail, but shall in any event be effective as stated above.

     Section 4.3.   Assignment. No Party will assign this Agreement or any rights, interests
or obligations hereunder, or delegate performance of any of its obligations hereunder, without the
prior written consent of each other Party.

     Section 4.4.   Entire Agreement. This Agreement embodies the entire agreement and
understanding of the Parties in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the Parties with respect to such subject
matter.

4

 

     Section 4.5.   Waiver, Amendment, etc. This Agreement may not be amended or
supplemented, and no waivers of or consents to departures from the provisions hereof shall be
effective, unless set forth in a writing signed by, and delivered to, all the Parties. No failure
or delay of any Party in exercising any power or right under this Agreement will operate as a
waiver thereof, nor will any single or partial exercise of any right or power, or any abandonment
or discontinuance of steps to enforce such right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.

     Section 4.6.   Binding Agreement; No Third Party Beneficiaries. This Agreement will be
binding upon and inure to the benefit of the Parties and their successors and permitted assigns.
Nothing expressed or implied herein is intended or will be construed to confer upon or to give to
any third party any rights or remedies by virtue hereof.

     Section 4.7.   Governing Law. This Agreement shall be governed by the laws of the State
of Delaware, without regard to conflict or choice of laws principles.

     Section 4.8.   Severability. The invalidity or unenforceability of any provision hereof
in any jurisdiction will not affect the validity or enforceability of the remainder hereof in that
jurisdiction or the validity or enforceability of this Agreement, including that provision, in any
other jurisdiction. To the extent permitted by Applicable Law, each Party waives any provision of
Applicable Law that renders any provision hereof prohibited or unenforceable in any respect. If
any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted
rather than voided, if possible, in order to achieve the intent of the Parties to the extent
possible.

     Section 4.9. Counterparts. This Agreement may be executed in one or more counterparts
each of which when so executed and delivered will be deemed an original but all of which will
constitute one and the same Agreement.

[remainder of page intentionally left blank; signature page follows]

5

 

     IN WITNESS WHEREOF, the Company and the Investors have caused their respective duly authorized
officers to execute this Agreement as of the day and year first above written.

	 	 	 	 	 
	LAYNE CHRISTENSEN COMPANY

 	 
	By:  	/s/ A.B. Schmitt
 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	STEEL PARTNERS II, L.P.

	By:	Steel Partners, L.L.C.,

Its general partner

 	 
	 	By:  	/s/ Warren Lichtenstein
 	 
	 	 	Name:  Warren G. Lichtenstein 	 
	 	 	Title:    Managing Member 	 
	 
	STEEL PARTNERS, L.L.C.

 	 
	By:  	/s/ Warren Lichtenstein
 	 
	 	Name:  	Warren G. Lichtenstein 	 
	 	Title:  	Managing Member 	 
	 
	 	 
	/s/ Warren Lichtenstein
 	 
	Warren G. Lichtenstein 	 
	 	 
	 

6

 

Exhibit A

News Release

Layne Christensen Announces Withdrawal of Director Nominations by Steel Partners, Reorganization of
Water and Infrastructure Businesses and Retention of Morgan Joseph & Co. Inc.

MISSION WOODS, Kan.—(Business Wire)—March 31, 2006—Layne Christensen Company (Nasdaq:LAYN) and
Steel Partners II, L.P. (“Steel Partners”) announced today that they had reached an agreement,
which will result in the withdrawal by Steel Partners of its director nominations for Layne’s
upcoming 2006 annual meeting. David Brown, Chairman of Layne’s Board, said “We are pleased to be
able to resolve our issues on mutually acceptable terms and to avoid the cost to our shareholders
of engaging in a contested election.”

Under the terms of the agreement, Steel Partners has agreed to withdraw its two nominees for
directors at the upcoming annual meeting and Layne has agreed to reduce the size of the Board from
nine to eight members effective at the upcoming annual meeting. In addition, Layne has agreed not
to expand the size of the Board of Directors above eight through and until the 2007 annual meeting
without the unanimous consent of the directors. In the event that Mr. Lichtenstein desires to
resign from the Board prior to the expiration of his term, the Board of Directors has agreed to
nominate John Quicke of Steel Partners to fill his position.

The Company also announced today that it will be reorganizing its water and infrastructure
businesses—consisting of Layne’s Water Resources Division, Layne’s Geoconstruction Division and
Reynolds, Inc.—into a single combined business segment that will be known as the Water and
Wastewater Infrastructure Group. Jeff Reynolds, who was the chief executive officer of Reynolds
prior to its acquisition by Layne in August 2005, has been appointed to the Water and Wastewater
Infrastructure Group and will report directly to Andrew B. Schmitt, Layne’s Chief Executive
Officer. Mr. Schmitt stated, “A key facet of Layne’s acquisition of Reynolds is our ability to tap
the rapid growth in water, wastewater, and infrastructure, by capitalizing on the synergies between
Reynolds and the water/infrastructure activities in Layne. My confidence level is high that this
new organizational approach will best accomplish these goals.”

Additionally, Layne has retained the investment banking firm of Morgan Joseph & Co. Inc. to assist
the Board of Directors in evaluating and refining Layne Christensen as a whole. Mr. Brown stated,
“The Board believes that it is important to obtain input from independent advisers as to the
strategy that will best maximize long-term shareholder value.”

Important Additional Information Will Be Filed with the SEC

Layne plans to file with the SEC and mail to its stockholders a Proxy Statement in connection with
Layne’s 2006 annual meeting of stockholders. The Proxy Statement will contain important information
about Layne and the matters to be voted on at the annual meeting. Investors and security holders
are urged to read the Proxy Statement carefully when it becomes available. Investors and security
holders will be able to obtain free copies of the Proxy Statement and other documents filed with
the SEC by Layne through the web site maintained by the SEC at www.sec.gov. In addition, investors
and security holders will

7

 

be able to obtain free copies of the Proxy Statement from Layne by contacting Mr. Steve Crooke,
Layne’s Vice President and General Counsel at 913-677-6864.

Layne and its directors and executive officers may be deemed to be participants in the solicitation
of proxies in respect of the annual meeting and the matters to be voted on at such meeting.
Information regarding Layne’s directors and executive officers may be obtained by reading Layne’s
Annual Report on Form 10-K for the year ended January 31, 2005 and its definitive proxy statement
dated May 13, 2005 in connection with Layne’s annual meeting of stockholders held on June 9, 2005.
Additional information regarding the participants in the solicitation may be obtained by reading
the Proxy Statement in connection with Layne’s 2006 annual meeting of stockholders when it becomes
available.

8

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