Document:

EX-10.1

 

Exhibit 10.1

SEVERANCE AGREEMENT

     This Severance Agreement (the “Agreement”) is made as of March 13, 2008 (the “Effective Date”)
by and between Layne Christensen Corporation, a Delaware corporation (“Company”), and Andrew B.
Schmitt (“Employee”).

RECITALS

     Whereas, Employee currently serves as a key employee of Company and the services and
knowledge of Employee are valuable to Company in connection with the management of the Company’s
business;

     Whereas, Company’s Board of Directors (the “Board”) has determined that it is in the
best interest of Company and its stockholders to secure the Employee’s continued service and to
ensure Employee’s continued dedication and objectivity by providing Employee with certain severance
benefits if Company were to actually or constructively terminate Employee’s employment.

     Now, Therefore, in consideration of the premises and the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the adequacy of which
is hereby acknowledged, Company and Employee, each intending to be legally bound, agree as follows:

     1. Term. The term of this Agreement (the “Term”) shall commence on the Effective Date
and shall continue until the earlier of (i) the date on which Employee’s employment with Company
terminates pursuant to Section 3 or 4 of this Agreement or (ii) twelve (12) months following the
date of delivery to the Employee of written notice by the Company of its intent to terminate this
Agreement. Notwithstanding the foregoing, however, and regardless of whether written notice by the
Company of its intent to terminate this Agreement has already been provided, this Agreement may not
be terminated by the Company during the Three-Year Period (as defined in Section 4(a) hereof).
This Agreement shall, as of the Effective Date, supersede and replace the provisions of Section 6
of that certain letter agreement dated October 12, 1993 (the “KKR Letter”), between Employee and
Kohlberg Kravis Roberts and Co.; provided, however, if this Agreement is terminated by the Board as
provided in clause (ii) above, the provisions of Section 6 of the KKR Letter will again become
effective.

     2. Restrictions on Employee’s Conduct.

          (a) Exclusive Services. During the Term, Employee shall at all times devote
Employee’s full-time attention, energies, efforts and skills to the business of Company (which term
shall hereinafter include each of Company’s subsidiaries) and shall not, directly or indirectly,
engage in any other business activity, whether or not for profit, gain or other pecuniary
advantages, without Company’s written consent, provided that such prior consent shall not be
required with respect to: (i) business interests that neither compete with Company nor interfere
with the performance of Employee’s duties and obligations under this Agreement; or (ii) Employee’s
charitable, philanthropic or professional association activities which do not interfere with the
performance of Employee’s duties and obligations under this Agreement.

          (b) Confidential Information. During the Term and after the termination of the Term,
Employee shall not disclose or use, directly or indirectly, any Confidential Information. For the
purposes of this Agreement, “Confidential Information” shall mean all information disclosed to
Employee, or known by him as a consequence of or through Employee’s employment with Company (under
this Agreement or prior to this Agreement) where such information is not generally known in the
trade or industry or was regarded or treated as confidential by Company, and where such information
refers or relates in any manner whatsoever to the business activities, processes, services or
products of Company. Confidential Information shall include business and development plans
(whether contemplated, initiated or completed), information with respect to the development of
technical and management services, business contacts, methods of operation, results of analysis,
business forecasts, financial data, costs, revenues, and similar information. Upon termination of
the Term, Employee shall immediately return to Company all property of Company and all Confidential
Information, which is in tangible form, including all copies, extracts, and summaries thereof and
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Confidential Information stored electronically on tapes computer disks or in any other manner.

     (c) Business Opportunities and Conflicts of Interests.

          (i) During the Term, Employee shall promptly disclose to Company each business
opportunity of a type which, based upon its prospects and relationship to the existing
businesses of Company, Company might reasonably consider pursuing. After termination of
this Agreement, regardless of the circumstances thereof, Company shall have the exclusive
right to participate in or undertake any such opportunity on its own behalf without any
involvement of Employee.

          (ii) During the Term, Employee shall refrain from engaging in any activity, practice or
act which conflicts with, or has the potential to conflict with, the interests of Company,
and he shall avoid any acts or omissions which are disloyal to, or competitive with Company.

          (d) Non-Solicitation. For a period of two years following any termination of this
Agreement, Employee shall not, except in the course of Employee’s duties under this Agreement,
directly or indirectly, induce or attempt to induce or otherwise counsel, advise, ask or encourage
any person to leave the employ of Company, or solicit or offer employment to any person who was
employed by Company at any time during the twelve-month period preceding the solicitation or offer.

          (e) Covenant Not to Compete.

          (i) During the Term, Employee shall not, without Company’s prior written consent,
directly or indirectly, either as an officer, director, employee, agent, advisor,
consultant, principal, stockholder, partner, owner or in any other capacity, on Employee’s
own behalf or otherwise, in any way engage in, represent, be connected with or have a
financial interest in, any business which is, or to Employee’s knowledge, is about to
become, engaged in any business with which Company is currently or has previously done
business or any subsequent line of business developed by Company or any business planned
during the Term to be established by Company. Notwithstanding the foregoing, Employee shall
be permitted to own passive investments in publicly held companies provided that such
investments do not exceed five percent (5%) of any such company’s outstanding equity.

          (ii) For a period of two years following any termination of this Agreement and without
regard to whether Company or Employee terminates this Agreement, Employee shall not, engage
in competition with Company, or solicit, from any person or entity who purchased any product
or service from Company during Employee’s employment hereunder, the purchase of any product
or service in competition with then existing products or services of Company.

          (iii) For purposes of this Agreement, Employee shall be deemed to engage in competition
with Company if he shall directly or indirectly, either individually or as a stockholder,
director, officer, partner, consultant, owner, employee, agent, or in any other capacity,
consult with or otherwise assist any person or entity engaged in services similar to those
provided by Company or any member of Company’s group of companies. The provisions of this
Section 2(e) shall apply in any location in which Company has established, or is in the
process of establishing, a business presence.

          (f) Employee Acknowledgment. Employee hereby agrees and acknowledges that the
restrictions imposed upon him by the provisions of this Section 2 are fair and reasonable
considering the nature of Company’s business, and are reasonably required for Company’s protection.

          (g) Invalidity. If a court of competent jurisdiction or an arbitrator shall declare
any provision or restriction contained in this Section 2 as unenforceable or void, the provisions
of this Section 2 shall remain in full force and effect to the extent not so declared to be
unenforceable or void, and the court may modify the invalid provision to make it enforceable to the
maximum extent permitted by law.

          (h) Specific Performance. Employee agrees that if he breaches any of the provisions
of this Section 2, the remedies available at law to Company would be inadequate and in lieu
thereof, or in

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addition thereto, Company shall be entitled to appropriate equitable remedies,
including specific performance and injunctive relief. Employee agrees not to enter into any
agreement, either written or oral, which may conflict with this Agreement, and Employee authorizes
Company to make known the terms of this Section 2 to any person, including future employers of
Employee.

          (i) Termination of Agreement by Company. Notwithstanding anything to the contrary,
the provisions of Sections 2(d) and (e) above shall not apply with respect to the Employee upon the
termination of this Agreement by the Company pursuant to clause (ii) of Section 1 hereof.

     3. Termination.

          (a) Termination by Company for Cause. Subject to the last sentence of this Section
3(a), at any time during the Term of this Agreement, Company may terminate Employee’s employment
for Cause, as defined below, upon at least fourteen (14) days written notice setting forth a
description of the conduct constituting Cause. If Employee’s employment is terminated for Cause,
he shall be entitled to:

          (i) payment of any earned but unpaid portion of Employee’s annual base salary as in
effect from time to time (“Base Salary”) through the effective date of such termination;

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense he
has incurred in performing Employee’s duties hereunder;

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (iv) payment of any accrued but unpaid benefits (including without limitation, any
bonus due by virtue of having met all applicable performance targets prior to the effective
date of such termination), and any other rights, as required by the terms of any employee
benefit plan or program of Company.

For purposes of this Agreement, “Cause” shall mean: (1) conviction of Employee of, or the entry of
a plea of guilty or nolo contendere by Employee to, any felony, or any misdemeanor involving moral
turpitude; (2) fraud, misappropriation or embezzlement by Employee; (3) Employee’s wilful failure,
gross negligence or gross misconduct in the performance of Employee’s assigned duties for Company;
and (4) wilful failure by Employee to follow reasonable instructions of any officer to whom
Employee reports or the Board. Notwithstanding the provisions of this Section 3(a) defining
“Cause,” in the event of a Change of Control, as defined hereafter, a Termination for Cause shall
mean only a termination for an act of dishonesty by Employee constituting a felony which was
intended to or resulted in gain or personal enrichment of Employee at Company’s expense. For
purposes of this entire agreement and for the avoidance of doubt, the “termination” of Employee’s
employment is intended to be a “separation from service” under Code section 409A(a)(2)(A)(i) and is
to be interpreted in a manner consistent with such section and applicable Treasury regulations
issued thereunder.

          (b) Termination by Company Without Cause or Constructive Termination Not in Connection
with a Change of Control. At any time before a Change of Control, Company may terminate
Employee’s employment without Cause, by giving written notice of termination. If Employee’s
employment is terminated without Cause, or if there is a constructive termination without Cause, as
defined below, Employee shall be entitled to receive from Company the following:

               (i) severance benefits including:

          (A) subject to Section 3(h) below, payment of the then current Base Salary for
a severance Period of 24-months commencing on the effective date of Employee’s
termination (the “Severance Period”), in accordance with Company’s regular salary
payment practices;

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          (B) continuation of the vesting of any outstanding stock options, restricted
stock awards and other equity incentive awards (“Equity-Based Awards”) and
continuation of the Employee’s rights to exercise any outstanding Equity-Based
Awards, through the full 24 month Severance Period. Employee shall be considered to
be an Employee of the Company during the entire Severance Period, and shall abide by
the Covenant Not to Compete of Section 3(e) of this Agreement.

          (C) for any outstanding stock options, restricted stock awards or other equity
incentive awards which are exercisable, payable or become vested only if one or more
pre-established performance criteria are satisfied (“Performance-Based Equity
Awards”), each Performance-Based Equity Award will become exercisable, payable or
become vested at the time of and only if the underlying performance criteria are
satisfied. In the case of any Performance-Based Equity Award that is a stock option
which becomes exercisable after the end of the Severance Period, such option will
remain exercisable until the earlier of the award’s original expiration date or 90
days after the end of the Severance Period; and

          (D) continued coverage for Employee (and, if applicable under the applicable
welfare benefit plan(s), his spouse and family) coverage under employee benefit
plans (such as medical, dental, disability and life) that covered him (or them)
immediately before Employee’s termination as if he had remained in employment until
the end of the Severance Period. If Employee’s participation in any plan is barred,
the Company shall either arrange to provide Employee (his spouse and family, if
applicable) substantially similar benefits or pay Employee the equivalent tax
affected value of the substantially similar benefits in cash, provided such cash
payment(s) are made in the tax years such that the payments are compliant with the
payment rules under Code section 409A.

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense
Employee has incurred in performing his duties hereunder during the Term;

          (iii) payment of any accrued but unpaid benefits up to and including the effective date
of the termination of employment (including without limitation, any tax equalization
payments, bonus due up to the date on which the Severance Period commences), and any other
rights, as required by the terms of any employee benefit plan or program of Company;

          (iv) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (v) payment of COBRA premiums.

For purposes of this Agreement, termination “without Cause” shall mean involuntary termination of
employment, at the direction of Company, in the absence of “Cause” as defined above. For purposes
of this Agreement, “constructive termination without Cause” shall mean a termination of Employee at
Employee’s own initiative within one year following the occurrence, without Employee’s prior
written consent, of one or more of the following events not on account of Cause (“Constructive
Termination Events”):

          (i) a significant and adverse diminution in the nature or scope of Employee’s
authority, title, responsibilities or duties, unless Employee is given new authority or
duties that are substantially comparable to Employee’s previous authority or duties;

          (ii) a reduction in Employee’s then-current Base Salary, or a significant reduction in
Employee’s opportunities for earnings under Employee’s incentive compensation plans (not
attributable to economic conditions or business performance at the time), or the termination
or significant reduction of any employee benefit or perquisite enjoyed by him (except as
part of a general reduction that applies to substantially all similarly situated employees
or participants);

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          (iii) a change in Employee’s place of employment such that Employee is required to work
more than 50 miles from Employee’s then current place of employment; or

          (iv) the failure of Company to obtain an assumption in writing of its obligation to
perform this Agreement by any successor to all or substantially all of the assets of Company
within 45 days after a merger, consolidation, sale or similar transaction.

If Employee believes there exists a basis for a constructive termination without Cause, Employee
shall provide Company written notice within 30 days of the occurrence of the Constructive
Termination Event describing such event, and Company shall be provided the opportunity to cure the
cause of the constructive termination event within a 30-day period following Company’s receipt of
the written notice. If the cause of the constructive termination is cured, then no constructive
termination without Cause shall be found to have taken place.

          (c) Voluntary Termination by Employee. Employee may terminate this Agreement at any
time by giving 60 days’ written notice to Company. If Employee voluntarily terminates his
employment for reasons other than Employee’s death, disability, or constructive termination without
Cause, he shall be entitled to:

          (i) payment of any earned but unpaid portion of Employee’s then current Base Salary
through the effective date of such termination;

          (ii) reimbursement of any reasonable, unreimbursed and documented business expense
Employee has incurred in performing Employee’s duties hereunder.

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (iv) payment of any accrued but unpaid benefits, and any other rights, as required by
the terms of any employee benefit plan or program of Company.

Any payments made under this Section 3(c) shall be made within 30 days of Employee’s termination of
employment.

          (d) Termination Due to Death. Employee’s employment and this Agreement shall
terminate immediately upon Employee’s death. If Employee’s employment is terminated because of
Employee’s death, Employee’s estate or Employee’s beneficiaries, as the case may be, shall be
entitled to:

          (i) payment of any earned but unpaid portion of Employee’s then current Base Salary
through the effective date of such termination;

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense
Employee incurred in performing Employee’s duties hereunder;

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law;

          (iv) any pension survivor benefits that may become due pursuant to any employee benefit
plan or program of Company, and

          (v) immediate acceleration of the vesting of any Service-Based Equity Awards and
continuation of the Employee’s beneficiary’s rights to exercise any outstanding
Service-Based Equity-Based Awards until the earlier of the Award’s original expiration date
or 12 months following such death;

          (vi) for any Performance-Based Equity Awards, each Performance-Based Equity Award will
become exercisable, payable or become vested at the time of and only if the underlying
performance criteria are satisfied and in the case of any Performance-Based Equity Award
that is a stock option which becomes exercisable pursuant to this Section 3(d)(vi), such
option will remain exercisable until the earlier of the award’s original expiration date or
12 months following such termination;

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          (vii) payment of any accrued but unpaid benefits and any other rights as provided by
the terms of any employee benefit plan or program of Company.

Any payments made under this Section 3(d) shall be made within 30 days of Employee’s death.

          (e) Termination Due to Disability. Company may terminate Employee’s employment at any
time if Employee becomes disabled, upon written notice by Company to Employee. If Employee’s
employment is terminated because of Employee’s disability, he shall be entitled to:

          (i) payment of a lump-sum disability benefit equal to 12 months’ then current Base
Salary;

          (ii) immediate acceleration of the vesting of any Service-Based Equity Awards and
continuation of the Employee’s rights to exercise any outstanding Service-Based Equity-Based
Awards through the effective date of such termination and for a period of 12 months
following such termination;

          (iii) for any Performance-Based Equity Awards, each Performance-Based Equity Award will
become exercisable, payable or become vested if the underlying performance criteria are
satisfied and in the case of any Performance-Based Equity Award that is a stock option which
becomes exercisable pursuant to this Section 3(e)(iii), such option will remain exercisable
until the earlier of the award’s original expiration date or 12 months following such
termination;

          (iv) reimbursement for any reasonable, unreimbursed and documented business expense he
has incurred in performing Employee’s duties hereunder;

          (v) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (vi) payment of any accrued but unpaid benefits and any other rights as provided by the
terms of any employee benefit plan or program of Company.

Any payments under this Section 3(e) shall be made within 30 days of Employee’s termination of
employment. “Disability,” as used in this paragraph, means a physical or mental illness, injury,
or condition that (a) prevents, or is likely to prevent, as certified by a physician, Employee from
performing one or more of the essential functions of Employee’s position, for at least 120
consecutive calendar days or for at least 150 calendar days, whether or not consecutive, in any 365
calendar day period, and (b) which cannot be accommodated with a reasonable accommodation, without
undue hardship on Company, as specified in the Americans with Disabilities Act.

          (f) Payments Terminated. If the Board of Company has determined in good faith that
the Employee has failed to comply with the requirements of the Confidentiality, Non-Solicitation
and Non-Competition provisions referenced in Section 2 hereof at any time following any
termination, then Company shall have no further obligation to pay any amounts or provide any
benefits under this Agreement.

          (g) No Obligation to Mitigate. Following any termination under this Section 3,
Employee shall not be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise and except as expressly set forth herein no such other
employment, if obtained, or compensation or benefits payable in connection therewith shall reduce
any amounts or benefits to which Employee is entitled hereunder.

          (h) Payments to Specified Employee. If Employee is a “specified employee” (as defined in
section 409A(a)(2)(B)(i) of the Internal Revenue Code (the “Code”) (hereinafter a “Specified
Employee”)) at the time Employee is eligible to be paid any amounts under Section 3(b)(i)(A) and
(B), such payment(s) shall be made as follows:

          (i) That portion of the total amount to be paid to Employee which does not exceed two
times the lesser of (A) and (B), below, shall be paid in equal installments in accordance
with Company’s regular salary payment practices over the Severance Period —

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          (A) The sum of Employee’s annualized compensation based upon the annual rate of
pay for services provided to Company for Company’s taxable year preceding Employee’s
taxable year in which Employee has a separation from service with Company (adjusted
for any increase during that year that was expected to continue indefinitely if
Employee had not terminated employment); or

          (B) The maximum amount that may be taken into account under a qualified plan
pursuant to section 401(a)(17) for the year of Employee’s termination of employment.

          (ii) That portion which exceeds the amount that may be paid under Section 3(h)(i) above
shall be paid in equal installments in accordance with Company’s regular salary payment
practices over the Severance Period except that no payments shall be made during the first
six months following Employee’s termination of employment and each such payment which
otherwise would have been made during such initial six-month time period shall be held in
arrears by Company until the first day after six months following Employee’s termination of
employment, at which time all amounts held in arrears shall be paid in a lump sum and the
remaining 18 months of severance pay shall be paid in equal installments in accordance with
Company’s regular salary payment practices over the remainder of the Severance Period.

4. Continuation of Employment Upon Change of Control.

          (a) Continuation of Employment. Subject to the terms and conditions of this Section
4, in the event of a Change of Control of Company (as defined in Section 4(d)) at any time during
Employee’s employment hereunder, Employee will remain in the employ of Company for a period of an
additional three years from the date of such Change of Control (the “Change Control Date”).
Company shall, for the three year period (the “Three-Year Period”) immediately following the
Control Change Date, continue to employ Employee in a position without substantial adverse
alteration in the nature or status of Employee’s authority, duties or responsibility as compared
with the position Employee held immediately prior to the Change of Control. During the Three-Year
Period, Company shall continue to pay Employee salary on the same basis, at the same intervals and
at a rate not less than, that paid to Employee at the Control Change Date. Any termination of
employment by the Company following a Control Change Date and during the Three-Year Period (a
“Post-CoC Termination”) shall be governed by this Section 4 rather than the provisions of Section
3(a) or (b).

          (b) Benefits. During the Three Year Period, Employee shall be entitled to receive the
following benefits and participate, on the basis of his employment position, in each of the
following plans (collectively, the “Specified Benefits”) in existence, and in accordance with the
terms thereof, at the Control Change Date:

          (i) any incentive compensation plans including eligibility to receive grants under any
Company equity compensation plans;

          (ii) any benefit plan and trust fund associated therewith, related to life, health,
dental, disability, or accidental death and dismemberment insurance, and

          (iii) any other benefit plans hereafter made generally available to employees at
Employee’s level or to the employees of Company generally.

In addition, all outstanding Service-Based Equity Awards and Performance-Based Equity Awards held
by Employee shall become immediately vested on the Control Change Date.

          (c) Definition of Change of Control. For purposes of this Section, a “Change of
Control” means the first to occur of the following events:

          (i) Any person is or becomes the Beneficial Owner (within the meaning set forth in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates (as defined below)
representing

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50% or more of the combined voting power of the Company’s then outstanding securities,
excluding any person who becomes such a Beneficial Owner in connection with a transaction
described in clause (x) of paragraph (iii) of this Section 4(c); or

          (ii) During any 12-month period, the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who, on the
Effective Date, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of directors
of the Company) whose appointment or election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved or recommended; or

          (iii) There is consummated a merger or consolidation of the Company with any other
corporation, OTHER THAN (x) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee benefit plan of the
Company at least 50% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the Company or any
person (an “Affiliate”) that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company other than in
connection with the acquisition by the Company or its Affiliates of a business) representing
50% or more of the combined voting power of the Company’s then outstanding securities; or

          (iv) The stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets to an entity,
at least 50% of the combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their ownership of the
Company immediately prior to such sale.

     Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated transactions immediately
following which the record holders of the Company’s common stock immediately prior to such
transaction or series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the Company’s assets immediately
following such transaction or series of transactions.

          (d) Termination Without Cause After Change of Control. Notwithstanding any other
provision of this Section 4, at any time after the Control Change Date, Company may terminate the
employment of Employee with or without Cause. To the extent Employee experiences a Post-CoC
Termination:

          (i) Company shall pay Employee any earned but unpaid portion of Employee’s Base Salary
through the effective date of such Post-CoC Termination;

          (ii) Company shall reimburse Employee for any reasonable, unreimbursed

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and documented business expenses Employee incurred in performing Employee’s duties
hereunder;

          (iii) Company shall pay Employee an amount (the “Special Severance Payment”) equal to
the present value (calculated using a discount rate equal to 7.5% per annum) of Employee’s
Base Salary that would have been paid to Employee had Employee remained an employee until
the later of (A) the end of the Three-Year Period or (B) 24 months following the effective
date of Employee’s Post-CoC Termination (such additional 24 month period in this Section
4(d)(iii)(B) hereinafter referred to as the “Extended Period”);

          (iv) Company shall provide Employee (and, if applicable under the applicable welfare
benefit plan(s), his spouse and family) coverage under employee benefit plans (such as
medical, dental, disability and life) that covered him (or them) immediately before
Employee’s termination as if he had remained in employment until the end of the Three-Year
Period, or, if longer, the end of the Extended Period. If Employee’s participation in any
plan is barred, the Company shall either arrange to provide Employee (his spouse and family,
if applicable) substantially similar benefits or pay Employee the equivalent tax affected
value of the substantially similar benefits in cash, provided such cash payment(s) are made
in the tax years such that the payments are compliant with the payment rules under Code
section 409A.

          Subject to Section 4(f) below, all payments required under paragraphs (i) through (iii) above
shall be made no later than the fifth business day following the effective date of Employee’s
termination of employment.

          (e) Resignation following a Change of Control. If, within the Three-Year Period
Employee experiences a Constructive Termination Event, and after providing written notice to
Company no later than 90 days of the date the Constructive Termination Event first arose or
occurred, Company fails to cure the event or condition giving rise to the Constructive Event within
the 30-day period following Company’s receipt of the written notice, Employee may, effective at the
end of such 30-day cure period, resign his employment with Company (the “Resignation”). In
connection with such Resignation, Company shall pay to Employee the same amounts and benefits
Employee would have been entitled to receive if he experienced a Post-CoC Termination under Section
4(d) above.

          (f) Timing of Payments. The time at which all payments due under Sections 4(d) or
4(e) above will commence and the form in which such payments will be made will depend upon the
following two factors: (1) whether Employee is a Specified Employee and (2) whether the Post-CoC
Termination occurs on or before, or after the second anniversary of the Control Change Date. Each
of the payment scenarios is set forth below.

          (i) If Employee is a Specified Employee at the time Employee is eligible to be paid any
amounts under Section 4(d) or 4(e), and Employee’s termination from employment is on or
before the second anniversary of the Control Change Date, such payment(s) shall be made as
follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2) below shall be paid in a lump sum payment
within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

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          (B) That portion which exceeds the amounts that may be paid under Section
4(f)(i)(A) above shall be paid, in a lump sum, on the first day after the six month
anniversary of the effective date of Employee’s termination of employment.

          (ii) If Employee is not a Specified Employee at the time Employee is eligible to be
paid any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is
on or before the second anniversary of the Control Change Date, such payment(s) shall be
paid in a lump sum payment within 5 business days of Employee’s termination of employment.

          (iii) If Employee is a Specified Employee at the time Employee is eligible to be paid
any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is after
the second anniversary of the Control Change Date, such payment(s) shall be made as follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2) below shall be paid in a lump sum payment
within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

          (B) That portion which exceeds the amount that may be paid under Section
4(f)(iii)(A) above shall be paid in equal installments in accordance with Employee’s
regular salary payment practices over the Severance Period except that no payments
shall be made during the first six months following Employee’s termination of
employment and each such payment which otherwise would have been made during such
initial six-month time period shall be held in arrears by Company until the first
payment made six months and one day following Employee’s termination of employment
at which time all amounts held in arrears shall be paid in a lump sum and the
remaining 18 months of severance pay shall be paid in equal installments in
accordance with Company’s regular salary payment practices over the Severance
Period.

          (iv) If Employee is not a Specified Employee at the time Employee is eligible to be
paid any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is
after the second anniversary of the Control Change Date, such payment(s) shall be made as
follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2), below, shall be paid in a lump sum
payment within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s

10

 

termination of employment.

          (B) That portion which exceeds the amount that may be paid under Section
4(f)(iv)(A), above, shall be paid in equal installments over the Severance Period in
accordance with Company’s regular salary payment practices.

          (g) Mitigation and Expenses.

          (i) Other Employment. After the Control Change Date, Employee shall not be
required to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and except as expressly set forth herein no such other
employment, if obtained, or compensation or benefits payable in connection therewith shall
reduce any amounts or benefits to which Employee is entitled hereunder.

          (ii) Expenses. If any dispute should arise under this Agreement after the
Control Change Date involving an effort by Employee to protect, enforce or secure rights or
benefits claimed by Employee hereunder, Company shall pay (promptly upon demand by Employee
accompanied by reasonable evidence of incurrence) all reasonable expenses (including
attorney’s fees) incurred by Employee in connection with such dispute, without regard to
whether Employee prevails in such dispute except that Employee shall repay Company any
amounts so received if a court having jurisdiction shall make a final, non-appealable
determination that Employee acted frivolously or in bad faith by such dispute

          (h) Successors in Interest. The rights and obligations of Company and Employee under
this Section 4 shall inure to the benefit of and be binding in each and every respect upon the
direct and indirect successors and assigns of Company and Employee, regardless of the manner in
which such successors or assigns shall succeed to the interest of Company or Employee hereunder and
this Section 8 shall not be terminated by the voluntary or involuntary dissolution of Company or
any merger or consolidation or acquisition involving Company, or upon any transfer of all or
substantially all of Company’s assets, or terminated otherwise than in accordance with its terms.
In the event of any such merger or consolidation or transfer of assets, the provision of this
Section 4 shall be binding upon and shall inure to the benefit of the surviving corporation or the
corporation or other person to which such assets shall be transferred.

     5. Deductions and Withholding. Employee agrees that Company may withhold from any and
all payments required to be made by Company to Employee under this Agreement all taxes or other
amounts that Company is required by law to withhold in accordance with applicable laws or
regulations from time to time in effect.

     6. Gross Up Payment. If at any time or from time to time, it shall be determined by
tax counsel mutually agreeable to Company and Employee that any payment or other benefit to
Employee pursuant to this Agreement or otherwise (“Potential Parachute Payment”) is or will become
subject to the excise tax imposed by Section 4999 of the Code or any similar tax (“Excise Taxes”),
then Company shall, subject to the limitations below, pay or cause to be paid a tax gross-up
payment (“Gross-Up Payment”) with respect to all such Excise Taxes and other taxes on the Gross-Up
Payment. The Gross-Up Payment shall be an amount equal to the product of (a) the amount of the
Excise Taxes multiplied by (b) a fraction (the “Gross-Up Multiple”), the numerator or which is one
(1.0), and the denominator of which is one (1.0) minus the lesser of (i) the sum, expressed as a
decimal fraction, of the effective marginal rates of any taxes and any Excise Taxes applicable to
the Gross-Up Payment or (ii) .80, it being intended that the Gross-Up Multiple shall in no event
exceed five (5.0). If different rates of tax are applicable to various portions of a Gross-Up
Payment, the weighted average of such rates shall be used. Excise Taxes and other penalties under
Section 409A of the Code shall not be “any similar tax” for purposes of this Agreement.

          (a) To the extent possible, any payments or other benefits to Employee pursuant to this
Agreement shall be allocated as consideration for Employee’s entry into the covenants made by him
in Paragraph 4(a).

11

 

          (b) Notwithstanding any other provisions of this Section 6, if the aggregate After-Tax Amount
(as defined below) of the Potential Parachute Payments and Gross-Up Payment that, but for this
limitation, would be payable to Employee, does not exceed 120% of After-Tax Floor Amount (as
defined below), then no Gross-Up Payment shall be made to Employee and the aggregate amount of
Potential Parachute Payments payable to Employee shall be reduced (but not below the Floor
Amount) to the largest amount which would both (i) not cause any Excise Tax to be payable by
Employee and (ii) not cause any Potential Parachute Payments to become nondeductible by Company by
reason of Section 280G of the Code (or any successor provision). For purposes of the preceding
sentence, Employee shall be deemed to be subject to the highest effective after-tax marginal rate
of taxes. For purposes of this Agreement:

          (i) “After-Tax Amount” means the portion of a specified amount that would remain after
payment of all taxes paid or payable by Employee in respect of such specified amount; and

          (ii) “Floor Amount” means the greatest pre-tax amount of Potential Parachute Payments
that could be paid to Employee without causing Employee to become liable for any
Excise Taxes in connection therewith; and

          (iii) “After-Tax Floor Amount” means the After-Tax Amount of the Floor Amount.

          (c) If for any reason tax counsel mutually agreeable to Company and Employee later determine
that the amount of Excise Taxes payable by Employee is greater than the amount initially determined
pursuant to the above provisions of this Section 6, then Company shall, subject to Sections 6(d)
and 6(e) pay Employee, within thirty (30) days of such determination, or pay to the IRS as required
by applicable law, an amount (which shall also be deemed a Gross-Up Payment) equal to the
product of (a) the sum of (i) such additional Excise Taxes and (ii) any interest, penalties,
expenses or other costs incurred by Employee as a result of having taken a position in accordance
with a determination made pursuant to Paragraph 6(d), multiplied by (b) the Gross-Up Multiple.

          (d) Employee shall immediately notify Company in writing (an “Employee’s Notice”) of any
claim by the IRS or other taxing authority (an “IRS Claim”) that, if successful, would
require the payment by Employee of Excise Taxes in respect of Potential Parachute Payments in an
amount in excess of the amount of such Excise Taxes determined in accordance with Section 6.
Employee’s Notice shall fully inform Company of all particulars of the IRS Claim and the date on
which such IRS Claim is due to be paid (the “IRS Claim Deadline”).

     Company shall direct the Employee as to whether to pay all or part of the IRS Claim or to
contest the IRS Claim or to pursue a claim for a refund (a “Refund Claim”) of all or any portion
of such Excise Taxes, other taxes, interest or penalties as may be specified by Company in a
written notice to Employee. If Company directs Employee to pay all or part of the IRS Claim, the
amount of such payment shall also be deemed a Gross-Up Payment, which Company shall pay to the
Employee or the IRS, as appropriate. The Employee shall cooperate fully with Company in good faith
to contest such IRS Claim or pursue such Refund Claim (including appeals) and shall permit Company
to participate in any proceedings relating to such IRS Claim or Refund Claim.

     Company shall control all proceedings in connection with such IRS Claim or Refund Claim (as
applicable) and in its discretion may cause Employee to pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the Internal Revenue Service or other taxing
authority.

     Company shall pay directly all legal, accounting and other costs and expenses (including
additional interest and penalties) incurred by Company or Employee in connection with any IRS Claim
or Refund Claim, as applicable, and shall indemnify Employee, on an after-tax basis, for any Excise
Tax or income tax, including related interest and penalties, imposed as a result of such payment
of costs or expenses.

          (e) If Employee receives any refund with respect to Excise Taxes, Employee shall (subject to
Company’s complying with any applicable requirements of Section 6(d)) promptly pay Company the
amount of such refund (together with any interest paid or credited thereon after taxes applicable
thereto).

12

 

Any contest of a denial of refund shall be controlled by Section 6(d).

          (f) 409A Compliance. Any Gross-Up Payment made under this Agreement shall be made no
later than by the end of Employee’s taxable year next following Employee’s taxable year in which he
remits the Excise Taxes. In the event Employee has a right to a Gross-Up Payment due to a tax
audit or litigation addressing the existence or amount of a tax liability, whether Federal, state,
local, or foreign, any Gross-Up Payment relating thereto will be made by the end of Employee’s
taxable year following Employee’s taxable year in which the taxes that are the subject of the audit
or litigation are remitted to the taxing authority, or where as a result of such audit or
litigation no taxes are remitted, the end of Employee’s taxable year in which the audit is
completed or there is a final and nonappealable settlement or other resolution of the litigation.

     7. Arbitration. Whenever a dispute arises between the Parties concerning this
Agreement or any of the obligations hereunder, or Employee’s employment generally, Company and
Employee shall use their best efforts to resolve the dispute by mutual agreement. If any dispute
cannot be resolved by Company and Employee, it shall be submitted to arbitration to the exclusion
of all other avenues of relief and adjudicated pursuant to the American Arbitration Association’s
Rules for Employment Dispute Resolution then in effect. The decision of the arbitrator must be in
writing and shall be final and binding on the Parties, and judgment may be entered on the
arbitrator’s award in any court having jurisdiction thereof. The expenses of the arbitration will
be split equally between the parties and each party shall be responsible for paying his or its own
costs, including attorneys’ fees associated with such arbitration. Nothing in this Section 7 shall
be construed to derogate Company’s rights to seek legal and equitable relief in a court of
competent jurisdiction as contemplated by Section 2(h).

     8. Non-Waiver. It is understood and agreed that one party’s failure at any time to
require the performance by the other party of any of the terms, provisions, covenants or conditions
hereof shall in no way affect the first party’s right thereafter to enforce the same, nor shall the
waiver by either party of the breach of any term, provision, covenant or condition hereof be taken
or held to be a waiver of any succeeding breach.

     9. Severability. If any provision of this Agreement conflicts with the law under
which this Agreement is to be construed, or if any such provision is held invalid or unenforceable
by a court of competent jurisdiction or any arbitrator, such provision shall be deleted from this
Agreement and the Agreement shall be construed to give full effect to the remaining provisions
thereof.

     10. Survivability. Unless otherwise provided herein, upon termination or expiration
of the Term, the provisions of Sections 2 through 14 above shall nevertheless remain in full force
and effect but shall under no circumstance extend the Term of this Agreement (or the Executive’s
right to accrue additional benefits beyond the expiration of the Term as determined in accordance
with Section 1 but without regard to this Section).

     11. Governing Law. This Agreement shall be interpreted, construed and governed
according to the laws of the State of Delaware without regard to the conflict of law provisions
thereof.

     12. Construction. The Section headings and captions contained in this Agreement are
for convenience only and shall not be construed to define, limit or affect the scope or meaning of
the provisions hereof. All references herein to Sections shall be deemed to refer to numbered
sections of this Agreement.

     13. Entire Agreement. This Agreement contains and represents the entire agreement of
Company and Employee and supersedes all prior agreements, representations or understandings, oral
or written, express or implied with respect to the subject matter hereof. This Agreement may not
be modified or amended in any way unless in a writing signed by each of Company and Employee. No
representation, promise or inducement has been made by either Company or Employee that is not
embodied in this Agreement, and neither Company nor Employee shall be bound by or liable for any
alleged representation, promise or inducement not specifically set forth herein.

     14. Assignability. Neither this Agreement nor any rights or obligations of Company or
Employee hereunder may be assigned by Company or Employee without the other Party’s prior written
consent. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit
of Company

13

 

and Employee and their heirs, successors and assigns.

     15. Code Section 409A. This Agreement is intended to meet the requirements of Section
409A of the Code and may be administered in a manner that is intended to meet those requirements
and shall be construed and interpreted in accordance with such intent. To the extent that any
payment or benefit provided hereunder is subject to Section 409A of the Code, such payment or
benefit shall be provided in a manner that will meet the requirements of Section 409A of the Code,
including regulations or other guidance issued with respect thereto, such that the payment or
benefit shall not be subject to the excise tax applicable under Section 409A of the Code. Any
provision of this Agreement that would cause any payment or benefit to fail to satisfy Section 409A
of the Code shall be amended (in a manner that as closely as practicable achieves the original
intent of this Agreement) to comply with Section 409A of the Code on a timely basis, which may be
made on a retroactive basis, in accordance with regulations and other guidance issued under Section
409A of the Code.

     16. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed properly given if delivered personally or sent by certified or registered mail,
postage prepaid, return receipt requested, or sent by telegram, telex, telecopy or similar form of
telecommunication, and shall be deemed to have been given when received. Any such notice or
communication shall be addressed:

	 	 	 
	if to Company, to

	 	Layne Christensen Company

Attention: General Counsel

1900 Shawnee Mission Parkway

Mission Woods, Kansas 66205

Fax: (913) 362-8823
	 
	 	 
	if to Employee, to

	 	Andrew B. Schmitt

or to such other address as Company or Employee shall have furnished to the other in writing.

     IN WITNESS WHEREOF, the Parties have duly executed this Agreement, to be effective as of the
date first above written.

	 	 	 	 	 
	 	 	 
	 	By:  	     /s/ A. B. Schmitt
 	 
	 	 	Andrew B. Schmitt 	 
	 
	 	Layne Christensen Company

 	 
	 	By:  	/s/ Jerry W. Fanska
 	 
	 	 	Jerry W. Fanska 	 
	 	 	Senior Vice President—Finance 	 
	 

14EX-10.2

 

Exhibit 10.2

SEVERANCE AGREEMENT

     This Severance Agreement (the “Agreement”) is made as of March 13, 2008 (the “Effective Date”)
by and between Layne Christensen Corporation, a Delaware corporation (“Company”), and Gregory F.
Aluce, (“Employee”).

RECITALS

     Whereas, Employee currently serves as a key employee of Company and the services and
knowledge of Employee are valuable to Company in connection with the management of the Company’s
business;

     Whereas, Company’s Board of Directors (the “Board”) has determined that it is in the
best interest of Company and its stockholders to secure the Employee’s continued service and to
ensure Employee’s continued dedication and objectivity by providing Employee with certain severance
benefits if Company were to actually or constructively terminate Employee’s employment.

     Now, Therefore, in consideration of the premises and the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the adequacy of which
is hereby acknowledged, Company and Employee, each intending to be legally bound, agree as follows:

     1. Term. The term of this Agreement (the “Term”) shall commence on the Effective Date
and shall continue until the earlier of (i) the date on which Employee’s employment with Company
terminates pursuant to Section 3 or 4 of this Agreement or (ii) twelve (12) months following the
date of delivery to the Employee of written notice by the Company of its intent to terminate this
Agreement. Notwithstanding the foregoing, however, and regardless of whether written notice by the
Company of its intent to terminate this Agreement has already been provided, this Agreement may not
be terminated by the Company under clause (ii) above during the Three-Year Period (as defined in
Section 4(a) hereof). This Agreement shall, as of the Effective Date, supersede and replace in its
entirety any written or verbal employment agreement then in effect between Company and Employee.

     2. Restrictions on Employee’s Conduct.

          (a) Exclusive Services. During the Term, Employee shall at all times devote
Employee’s full-time attention, energies, efforts and skills to the business of Company (which term
shall hereinafter include each of Company’s subsidiaries) and shall not, directly or indirectly,
engage in any other business activity, whether or not for profit, gain or other pecuniary
advantages, without Company’s written consent, provided that such prior consent shall not be
required with respect to: (i) business interests that neither compete with Company nor interfere
with the performance of Employee’s duties and obligations under this Agreement; or (ii) Employee’s
charitable, philanthropic or professional association activities which do not interfere with the
performance of Employee’s duties and obligations under this Agreement.

          (b) Confidential Information. During the Term and after the termination of the Term,
Employee shall not disclose or use, directly or indirectly, any Confidential Information. For the
purposes of this Agreement, “Confidential Information” shall mean all information disclosed to
Employee, or known by him as a consequence of or through Employee’s employment with Company (under
this Agreement or prior to this Agreement) where such information is not generally known in the
trade or industry or was regarded or treated as confidential by Company, and where such information
refers or relates in any manner whatsoever to the business activities, processes, services or
products of Company. Confidential Information shall include business and development plans
(whether contemplated, initiated or completed), information with respect to the development of
technical and management services, business contacts, methods of operation, results of analysis,
business forecasts, financial data, costs, revenues, and similar information. Upon termination of
the Term, Employee shall immediately return to Company all property of Company and all Confidential
Information, which is in tangible form, including all copies, extracts, and summaries thereof and
any Confidential Information stored electronically on tapes computer disks or in any other manner.

 

 

          (c) Business Opportunities and Conflicts of Interests.

          (i) During the Term, Employee shall promptly disclose to Company each business
opportunity of a type which, based upon its prospects and relationship to the existing
businesses of Company, Company might reasonably consider pursuing. After termination of
this Agreement, regardless of the circumstances thereof, Company shall have the exclusive
right to participate in or undertake any such opportunity on its own behalf without any
involvement of Employee.

          (ii) During the Term, Employee shall refrain from engaging in any activity, practice or
act which conflicts with, or has the potential to conflict with, the interests of Company,
and he shall avoid any acts or omissions which are disloyal to, or competitive with Company.

          (d) Non-Solicitation. For a period of two years following any termination of this
Agreement, Employee shall not, except in the course of Employee’s duties under this Agreement,
directly or indirectly, induce or attempt to induce or otherwise counsel, advise, ask or encourage
any person to leave the employ of Company, or solicit or offer employment to any person who was
employed by Company at any time during the twelve-month period preceding the solicitation or offer.

          (e) Covenant Not to Compete.

          (i) During the Term, Employee shall not, without Company’s prior written consent,
directly or indirectly, either as an officer, director, employee, agent, advisor,
consultant, principal, stockholder, partner, owner or in any other capacity, on Employee’s
own behalf or otherwise, in any way engage in, represent, be connected with or have a
financial interest in, any business which is, or to Employee’s knowledge, is about to
become, engaged in any business with which Company is currently or has previously done
business or any subsequent line of business developed by Company or any business planned
during the Term to be established by Company. Notwithstanding the foregoing, Employee shall
be permitted to own passive investments in publicly held companies provided that such
investments do not exceed five percent (5%) of any such company’s outstanding equity.

          (ii) For a period of two years following any termination of this Agreement and without
regard to whether Company or Employee terminates this Agreement, Employee shall not, engage
in competition with Company, or solicit, from any person or entity who purchased any product
or service from Company during Employee’s employment hereunder, the purchase of any product
or service in competition with then existing products or services of Company.

          (iii) For purposes of this Agreement, Employee shall be deemed to engage in competition
with Company if he shall directly or indirectly, either individually or as a stockholder,
director, officer, partner, consultant, owner, employee, agent, or in any other capacity,
consult with or otherwise assist any person or entity engaged in services similar to those
provided by Company or any member of Company’s group of companies. The provisions of this
Section 2(e) shall apply in any location in which Company has established, or is in the
process of establishing, a business presence.

          (f) Employee Acknowledgment. Employee hereby agrees and acknowledges that the
restrictions imposed upon him by the provisions of this Section 2 are fair and reasonable
considering the nature of Company’s business, and are reasonably required for Company’s protection.

          (g) Invalidity. If a court of competent jurisdiction or an arbitrator shall declare
any provision or restriction contained in this Section 2 as unenforceable or void, the provisions
of this Section 2 shall remain in full force and effect to the extent not so declared to be
unenforceable or void, and the court may modify the invalid provision to make it enforceable to the
maximum extent permitted by law.

          (h) Specific Performance. Employee agrees that if he breaches any of the provisions
of this Section 2, the remedies available at law to Company would be inadequate and in lieu
thereof, or in addition thereto, Company shall be entitled to appropriate equitable remedies,
including specific performance

2

 

and injunctive relief. Employee agrees not to enter into any agreement, either written or oral,
which may conflict with this Agreement, and Employee authorizes Company to make known the terms of
this Section 2 to any person, including future employers of Employee.

          (i) Termination of Agreement by Company. Notwithstanding anything to the contrary,
the provisions of Sections 2(d) and (e) above shall not apply with respect to the Employee upon the
termination of this Agreement by the Company pursuant to clause (ii) of Section 1 hereof.

     3. Termination.

          (a) Termination by Company for Cause. Subject to the last sentence of this Section
3(a), at any time during the Term of this Agreement, Company may terminate Employee’s employment
for Cause, as defined below, upon at least fourteen (14) days written notice setting forth a
description of the conduct constituting Cause. If Employee’s employment is terminated for Cause,
he shall be entitled to:

          (i) payment of any earned but unpaid portion of Employee’s annual base salary as in
effect from time to time (“Base Salary”) through the effective date of such termination;

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense he
has incurred in performing Employee’s duties hereunder;

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (iv) payment of any accrued but unpaid benefits (including without limitation, any
bonus due by virtue of having met all applicable performance targets prior to the effective
date of such termination), and any other rights, as required by the terms of any employee
benefit plan or program of Company.

For purposes of this Agreement, “Cause” shall mean: (1) conviction of Employee of, or the entry of
a plea of guilty or nolo contendere by Employee to, any felony, or any misdemeanor involving moral
turpitude; (2) fraud, misappropriation or embezzlement by Employee; (3) Employee’s wilful failure,
gross negligence or gross misconduct in the performance of Employee’s assigned duties for Company;
and (4) wilful failure by Employee to follow reasonable instructions of any officer to whom
Employee reports or the Board. Notwithstanding the provisions of this Section 3(a) defining
“Cause,” in the event of a Change of Control, as defined hereafter, a Termination for Cause shall
mean only a termination for an act of dishonesty by Employee constituting a felony which was
intended to or resulted in gain or personal enrichment of Employee at Company’s expense. For
purposes of this entire agreement and for the avoidance of doubt, the “termination” of Employee’s
employment is intended to be a “separation from service” under Code section 409A(a)(2)(A)(i) and is
to be interpreted in a manner consistent with such section and applicable Treasury regulations
issued thereunder.

          (b) Termination by Company Without Cause or Constructive Termination Not in Connection
with a Change of Control. At any time before a Change of Control, Company may terminate
Employee’s employment without Cause, by giving written notice of termination. If Employee’s
employment is terminated without Cause, or if there is a constructive termination without Cause, as
defined below, Employee shall be entitled to receive from Company the following:

          (i) severance benefits including:

          (A) subject to Section 3(h) below, payment of the then current Base Salary for
a severance Period of 24-months commencing on the effective date of Employee’s
termination (the “Severance Period”), in accordance with Company’s regular salary
payment practices;

3

 

          (B) continuation of the vesting of any outstanding stock options, restricted
stock awards and other equity incentive awards (“Equity-Based Awards”) and
continuation of the Employee’s rights to exercise any outstanding Equity-Based
Awards, through the full 24 month Severance Period. Employee shall be considered to
be an Employee of the Company during the entire Severance Period, and shall abide by
the Covenant Not to Compete of Section 3(e) of this Agreement;

          (C) for any outstanding stock options, restricted stock awards or other equity
incentive awards which are exercisable, payable or become vested only if one or more
pre-established performance criteria are satisfied (“Performance-Based Equity
Awards”), each Performance-Based Equity Award will become exercisable, payable or
become vested at the time of and only if the underlying performance criteria are
satisfied. In the case of any Performance-Based Equity Award that is a stock option
which becomes exercisable after the end of the Severance Period, such option will
remain exercisable until the earlier of the award’s original expiration date or 90
days after the end of the Severance Period; and

          (D) continued coverage for Employee (and, if applicable under the applicable
welfare benefit plan(s), his spouse and family) coverage under employee benefit
plans (such as medical, dental, disability and life) that covered him (or them)
immediately before Employee’s termination as if he had remained in employment until
the end of the Severance Period. If Employee’s participation in any plan is barred,
the Company shall either arrange to provide Employee (his spouse and family, if
applicable) substantially similar benefits or pay Employee the equivalent tax
affected value of the substantially similar benefits in cash, provided such cash
payment(s) are made in the tax years such that the payments are compliant with the
payment rules under Code section 409A.

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense
Employee has incurred in performing his duties hereunder during the Term;

          (iii) payment of any accrued but unpaid benefits up to and including the effective date
of the termination of employment (including without limitation, any tax equalization
payments, bonus due up to the date on which the Severance Period commences), and any other
rights, as required by the terms of any employee benefit plan or program of Company;

          (iv) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (v) payment of COBRA premiums.

For purposes of this Agreement, termination “without Cause” shall mean involuntary termination of
employment, at the direction of Company, in the absence of “Cause” as defined above. For purposes
of this Agreement, “constructive termination without Cause” shall mean a termination of Employee at
Employee’s own initiative within one year following the occurrence, without Employee’s prior
written consent, of one or more of the following events not on account of Cause (“Constructive
Termination Events”):

          (i) a significant and adverse diminution in the nature or scope of Employee’s
authority, title, responsibilities or duties, unless Employee is given new authority or
duties that are substantially comparable to Employee’s previous authority or duties;

          (ii) a reduction in Employee’s then-current Base Salary, or a significant reduction in
Employee’s opportunities for earnings under Employee’s incentive compensation plans (not
attributable to economic conditions or business performance at the time), or the termination
or significant reduction of any employee benefit or perquisite enjoyed by him (except as
part of a general reduction that applies to substantially all similarly situated employees
or participants);

4

 

          (iii) a change in Employee’s place of employment such that Employee is required to work
more than 50 miles from Employee’s then current place of employment; or

          (iv) the failure of Company to obtain an assumption in writing of its obligation to
perform this Agreement by any successor to all or substantially all of the assets of Company
within 45 days after a merger, consolidation, sale or similar transaction.

If Employee believes there exists a basis for a constructive termination without Cause, Employee
shall provide Company written notice within 30 days of the occurrence of the Constructive
Termination Event describing such event, and Company shall be provided the opportunity to cure the
cause of the constructive termination event within a 30-day period following Company’s receipt of
the written notice. If the cause of the constructive termination is cured, then no constructive
termination without Cause shall be found to have taken place.

          (c) Voluntary Termination by Employee. Employee may terminate this Agreement at any
time by giving 60 days’ written notice to Company. If Employee voluntarily terminates his
employment for reasons other than Employee’s death, disability, or constructive termination without
Cause, he shall be entitled to:

          (i) payment of any earned but unpaid portion of Employee’s then current Base Salary
through the effective date of such termination;

          (ii) reimbursement of any reasonable, unreimbursed and documented business expense
Employee has incurred in performing Employee’s duties hereunder.

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (iv) payment of any accrued but unpaid benefits, and any other rights, as required by
the terms of any employee benefit plan or program of Company.

Any payments made under this Section 3(c) shall be made within 30 days of Employee’s termination of
employment.

          (d) Termination Due to Death. Employee’s employment and this Agreement shall
terminate immediately upon Employee’s death. If Employee’s employment is terminated because of
Employee’s death, Employee’s estate or Employee’s beneficiaries, as the case may be, shall be
entitled to:

          (i) payment of any earned but unpaid portion of Employee’s then current Base Salary
through the effective date of such termination;

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense
Employee incurred in performing Employee’s duties hereunder;

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law;

          (iv) any pension survivor benefits that may become due pursuant to any employee benefit
plan or program of Company, and

          (v) immediate acceleration of the vesting of any Service-Based Equity Awards and
continuation of the Employee’s beneficiary’s rights to exercise any outstanding
Service-Based Equity-Based Awards until the earlier of the Award’s original expiration date
or 12 months following such death;

          (vi) for any Performance-Based Equity Awards, each Performance-Based Equity Award will
become exercisable, payable or become vested at the time of and only if the underlying
performance criteria are satisfied and in the case of any Performance-Based Equity Award
that is a stock option which becomes exercisable pursuant to this Section 3(d)(vi), such
option will remain exercisable until the earlier of the award’s original expiration date or
12 months following such termination;

5

 

          (vii) payment of any accrued but unpaid benefits and any other rights as provided by
the terms of any employee benefit plan or program of Company.

Any payments made under this Section 3(d) shall be made within 30 days of Employee’s death.

          (e) Termination Due to Disability. Company may terminate Employee’s employment at any
time if Employee becomes disabled, upon written notice by Company to Employee. If Employee’s
employment is terminated because of Employee’s disability, he shall be entitled to:

          (i) payment of a lump-sum disability benefit equal to 12 months’ then current Base
Salary;

          (ii) immediate acceleration of the vesting of any Service-Based Equity Awards and
continuation of the Employee’s rights to exercise any outstanding Service-Based Equity-Based
Awards through the effective date of such termination and for a period of 12 months
following such termination;

          (iii) for any Performance-Based Equity Awards, each Performance-Based Equity Award will
become exercisable, payable or become vested if the underlying performance criteria are
satisfied and in the case of any Performance-Based Equity Award that is a stock option which
becomes exercisable pursuant to this Section 3(e)(iii), such option will remain exercisable
until the earlier of the award’s original expiration date or 12 months following such
termination;

          (iv) reimbursement for any reasonable, unreimbursed and documented business expense he
has incurred in performing Employee’s duties hereunder;

          (v) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (vi) payment of any accrued but unpaid benefits and any other rights as provided by the
terms of any employee benefit plan or program of Company.

Any payments under this Section 3(e) shall be made within 30 days of Employee’s termination of
employment. “Disability,” as used in this paragraph, means a physical or mental illness, injury,
or condition that (a) prevents, or is likely to prevent, as certified by a physician, Employee from
performing one or more of the essential functions of Employee’s position, for at least 120
consecutive calendar days or for at least 150 calendar days, whether or not consecutive, in any 365
calendar day period, and (b) which cannot be accommodated with a reasonable accommodation, without
undue hardship on Company, as specified in the Americans with Disabilities Act.

          (f) Payments Terminated. If the Board of Company has determined in good faith that
the Employee has failed to comply with the requirements of the Confidentiality, Non-Solicitation
and Non-Competition provisions referenced in Section 2 hereof at any time following any
termination, then Company shall have no further obligation to pay any amounts or provide any
benefits under this Agreement.

          (g) No Obligation to Mitigate. Following any termination under this Section 3,
Employee shall not be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise and except as expressly set forth herein no such other
employment, if obtained, or compensation or benefits payable in connection therewith shall reduce
any amounts or benefits to which Employee is entitled hereunder.

          (h) Payments to Specified Employee. If Employee is a “specified employee” (as defined in
section 409A(a)(2)(B)(i) of the Internal Revenue Code (the “Code”) (hereinafter a “Specified
Employee”)) at the time Employee is eligible to be paid any amounts under Section 3(b)(i)(A) and
(B), such payment(s) shall be made as follows:

          (i) That portion of the total amount to be paid to Employee which does not exceed two
times the lesser of (A) and (B), below, shall be paid in equal installments in accordance
with Company’s regular salary payment practices over the Severance Period —

6

 

          (A) The sum of Employee’s annualized compensation based upon the annual rate of
pay for services provided to Company for Company’s taxable year preceding Employee’s
taxable year in which Employee has a separation from service with Company (adjusted
for any increase during that year that was expected to continue indefinitely if
Employee had not terminated employment); or

          (B) The maximum amount that may be taken into account under a qualified plan
pursuant to section 401(a)(17) for the year of Employee’s termination of employment.

          (ii) That portion which exceeds the amount that may be paid under Section 3(h)(i) above
shall be paid in equal installments in accordance with Company’s regular salary payment
practices over the Severance Period except that no payments shall be made during the first
six months following Employee’s termination of employment and each such payment which
otherwise would have been made during such initial six-month time period shall be held in
arrears by Company until the first day after six months following Employee’s termination of
employment, at which time all amounts held in arrears shall be paid in a lump sum and the
remaining 18 months of severance pay shall be paid in equal installments in accordance with
Company’s regular salary payment practices over the remainder of the Severance Period.

4. Continuation of Employment Upon Change of Control.

          (a) Continuation of Employment. Subject to the terms and conditions of this Section
4, in the event of a Change of Control of Company (as defined in Section 4(d)) at any time during
Employee’s employment hereunder, Employee will remain in the employ of Company for a period of an
additional three years from the date of such Change of Control (the “Change Control Date”).
Company shall, for the three year period (the “Three-Year Period”) immediately following the
Control Change Date, continue to employ Employee in a position without substantial adverse
alteration in the nature or status of Employee’s authority, duties or responsibility as compared
with the position Employee held immediately prior to the Change of Control. During the Three-Year
Period, Company shall continue to pay Employee salary on the same basis, at the same intervals and
at a rate not less than, that paid to Employee at the Control Change Date. Any termination of
employment by the Company following a Control Change Date and during the Three-Year Period (a
“Post-CoC Termination”) shall be governed by this Section 4 rather than the provisions of Section
3(a) or (b).

          (b) Benefits. During the Three Year Period, Employee shall be entitled to receive the
following benefits and participate, on the basis of his employment position, in each of the
following plans (collectively, the “Specified Benefits”) in existence, and in accordance with the
terms thereof, at the Control Change Date:

          (i) any incentive compensation plans including eligibility to receive grants under any
Company equity compensation plans;

          (ii) any benefit plan and trust fund associated therewith, related to life, health,
dental, disability, or accidental death and dismemberment insurance, and

          (iii) any other benefit plans hereafter made generally available to employees at
Employee’s level or to the employees of Company generally.

In addition, all outstanding Service-Based Equity Awards and Performance-Based Equity Awards held
by Employee shall become immediately vested on the Control Change Date.

          (c) Definition of Change of Control. For purposes of this Section, a “Change of
Control” means the first to occur of the following events:

          (i) Any person is or becomes the Beneficial Owner (within the meaning set forth in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates (as defined below)
representing

7

 

50% or more of the combined voting power of the Company’s then outstanding securities,
excluding any person who becomes such a Beneficial Owner in connection with a transaction
described in clause (x) of paragraph (iii) of this Section 4(c); or

          (ii) During any 12-month period, the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who, on the
Effective Date, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of directors
of the Company) whose appointment or election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved or recommended; or

          (iii) There is consummated a merger or consolidation of the Company with any other
corporation, OTHER THAN (x) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee benefit plan of the
Company at least 50% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the Company or any
person (an “Affiliate”) that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company other than in
connection with the acquisition by the Company or its Affiliates of a business) representing
50% or more of the combined voting power of the Company’s then outstanding securities; or

          (iv) The stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets to an entity,
at least 50% of the combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their ownership of the
Company immediately prior to such sale.

     Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated transactions immediately
following which the record holders of the Company’s common stock immediately prior to such
transaction or series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the Company’s assets immediately
following such transaction or series of transactions.

          (d) Termination Without Cause After Change of Control. Notwithstanding any other
provision of this Section 4, at any time after the Control Change Date, Company may terminate the
employment of Employee with or without Cause. To the extent Employee experiences a Post-CoC
Termination:

          (i) Company shall pay Employee any earned but unpaid portion of Employee’s Base Salary
through the effective date of such Post-CoC Termination;

          (ii) Company shall reimburse Employee for any reasonable, unreimbursed and documented
business expenses Employee incurred in performing Employee’s duties hereunder;

8

 

          (iii) Company shall pay Employee an amount (the “Special Severance Payment”) equal to
the present value (calculated using a discount rate equal to 7.5% per annum) of Employee’s
Base Salary that would have been paid to Employee had Employee remained an employee until
the later of (A) the end of the Three-Year Period or (B) 24 months following the effective
date of Employee’s Post-CoC Termination (such additional 24 month period in this Section
4(d)(iii)(B) hereinafter referred to as the “Extended Period”);

          (iv) Company shall provide Employee (and, if applicable under the applicable welfare
benefit plan(s), his spouse and family) coverage under employee benefit plans (such as
medical, dental, disability and life) that covered him (or them) immediately before
Employee’s termination as if he had remained in employment until the end of the Three-Year
Period, or, if longer, the end of the Extended Period. If Employee’s participation in any
plan is barred, the Company shall either arrange to provide Employee (his spouse and family,
if applicable) substantially similar benefits or pay Employee the equivalent tax affected
value of the substantially similar benefits in cash, provided such cash payment(s) are made
in the tax years such that the payments are compliant with the payment rules under Code
section 409A.

          Subject to Section 4(f) below, all payments required under paragraphs (i) through (iii) above
shall be made no later than the fifth business day following the effective date of Employee’s
termination of employment.

          (e) Resignation following a Change of Control. If, within the Three-Year Period
Employee experiences a Constructive Termination Event, and after providing written notice to
Company no later than 90 days of the date the Constructive Termination Event first arose or
occurred, Company fails to cure the event or condition giving rise to the Constructive Event within
the 30-day period following Company’s receipt of the written notice, Employee may, effective at the
end of such 30-day cure period, resign his employment with Company (the “Resignation”). In
connection with such Resignation, Company shall pay to Employee the same amounts and benefits
Employee would have been entitled to receive if he experienced a Post-CoC Termination under Section
4(d) above.

          (f) Timing of Payments. The time at which all payments due under Sections 4(d) or
4(e) above will commence and the form in which such payments will be made will depend upon the
following two factors: (1) whether Employee is a Specified Employee and (2) whether the Post-CoC
Termination occurs on or before, or after the second anniversary of the Control Change Date. Each
of the payment scenarios is set forth below.

          (i) If Employee is a Specified Employee at the time Employee is eligible to be paid any
amounts under Section 4(d) or 4(e), and Employee’s termination from employment is on or
before the second anniversary of the Control Change Date, such payment(s) shall be made as
follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2) below shall be paid in a lump sum payment
within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

          (B) That portion which exceeds the amounts that may be paid under Section
4(f)(i)(A) above shall be paid, in a lump sum, on the first day after the six month

9

 

anniversary of the effective date of Employee’s termination of employment.

          (ii) If Employee is not a Specified Employee at the time Employee is eligible to be
paid any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is
on or before the second anniversary of the Control Change Date, such payment(s) shall be
paid in a lump sum payment within 5 business days of Employee’s termination of employment.

          (iii) If Employee is a Specified Employee at the time Employee is eligible to be paid
any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is after
the second anniversary of the Control Change Date, such payment(s) shall be made as follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2) below shall be paid in a lump sum payment
within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

          (B) That portion which exceeds the amount that may be paid under Section
4(f)(iii)(A) above shall be paid in equal installments in accordance with Employee’s
regular salary payment practices over the Severance Period except that no payments
shall be made during the first six months following Employee’s termination of
employment and each such payment which otherwise would have been made during such
initial six-month time period shall be held in arrears by Company until the first
payment made six months and one day following Employee’s termination of employment
at which time all amounts held in arrears shall be paid in a lump sum and the
remaining 18 months of severance pay shall be paid in equal installments in
accordance with Company’s regular salary payment practices over the Severance
Period.

          (iv) If Employee is not a Specified Employee at the time Employee is eligible to be
paid any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is
after the second anniversary of the Control Change Date, such payment(s) shall be made as
follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2), below, shall be paid in a lump sum
payment within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

          (B) That portion which exceeds the amount that may be paid under

10

 

Section 4(f)(iv)(A), above, shall be paid in equal installments over the
Severance Period in accordance with Company’s regular salary payment practices.

          (g) Mitigation and Expenses.

          (i) Other Employment. After the Control Change Date, Employee shall not be
required to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and except as expressly set forth herein no such other
employment, if obtained, or compensation or benefits payable in connection therewith shall
reduce any amounts or benefits to which Employee is entitled hereunder.

          (ii) Expenses. If any dispute should arise under this Agreement after the
Control Change Date involving an effort by Employee to protect, enforce or secure rights or
benefits claimed by Employee hereunder, Company shall pay (promptly upon demand by Employee
accompanied by reasonable evidence of incurrence) all reasonable expenses (including
attorney’s fees) incurred by Employee in connection with such dispute, without regard to
whether Employee prevails in such dispute except that Employee shall repay Company any
amounts so received if a court having jurisdiction shall make a final, non-appealable
determination that Employee acted frivolously or in bad faith by such dispute

          (h) Successors in Interest. The rights and obligations of Company and Employee under
this Section 4 shall inure to the benefit of and be binding in each and every respect upon the
direct and indirect successors and assigns of Company and Employee, regardless of the manner in
which such successors or assigns shall succeed to the interest of Company or Employee hereunder and
this Section 8 shall not be terminated by the voluntary or involuntary dissolution of Company or
any merger or consolidation or acquisition involving Company, or upon any transfer of all or
substantially all of Company’s assets, or terminated otherwise than in accordance with its terms.
In the event of any such merger or consolidation or transfer of assets, the provision of this
Section 4 shall be binding upon and shall inure to the benefit of the surviving corporation or the
corporation or other person to which such assets shall be transferred.

     5. Deductions and Withholding. Employee agrees that Company may withhold from any and
all payments required to be made by Company to Employee under this Agreement all taxes or other
amounts that Company is required by law to withhold in accordance with applicable laws or
regulations from time to time in effect.

     6. Gross Up Payment. If at any time or from time to time, it shall be determined by
tax counsel mutually agreeable to Company and Employee that any payment or other benefit to
Employee pursuant to this Agreement or otherwise (“Potential Parachute Payment”) is or will become
subject to the excise tax imposed by Section 4999 of the Code or any similar tax (“Excise Taxes”),
then Company shall, subject to the limitations below, pay or cause to be paid a tax gross-up
payment (“Gross-Up Payment”) with respect to all such Excise Taxes and other taxes on the Gross-Up
Payment. The Gross-Up Payment shall be an amount equal to the product of (a) the amount of the
Excise Taxes multiplied by (b) a fraction (the “Gross-Up Multiple”), the numerator or which is one
(1.0), and the denominator of which is one (1.0) minus the lesser of (i) the sum, expressed as a
decimal fraction, of the effective marginal rates of any taxes and any Excise Taxes applicable to
the Gross-Up Payment or (ii) .80, it being intended that the Gross-Up Multiple shall in no event
exceed five (5.0). If different rates of tax are applicable to various portions of a Gross-Up
Payment, the weighted average of such rates shall be used. Excise Taxes and other penalties under
Section 409A of the Code shall not be “any similar tax” for purposes of this Agreement.

          (a) To the extent possible, any payments or other benefits to Employee pursuant to this
Agreement shall be allocated as consideration for Employee’s entry into the covenants made by him
in Paragraph 4(a).

          (b) Notwithstanding any other provisions of this Section 6, if the aggregate After-Tax Amount
(as defined below) of the Potential Parachute Payments and Gross-Up Payment that, but for this

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limitation, would be payable to Employee, does not exceed 120% of After-Tax Floor Amount (as
defined below), then no Gross-Up Payment shall be made to Employee and the aggregate amount of
Potential Parachute Payments payable to Employee shall be reduced (but not below the Floor
Amount) to the largest amount which would both (i) not cause any Excise Tax to be payable by
Employee and (ii) not cause any Potential Parachute Payments to become nondeductible by Company by
reason of Section 280G of the Code (or any successor provision). For purposes of the preceding
sentence, Employee shall be deemed to be subject to the highest effective after-tax marginal rate
of taxes. For purposes of this Agreement:

          (i) “After-Tax Amount” means the portion of a specified amount that would remain after
payment of all taxes paid or payable by Employee in respect of such specified amount; and

          (ii) “Floor Amount” means the greatest pre-tax amount of Potential Parachute Payments
that could be paid to Employee without causing Employee to become liable for any
Excise Taxes in connection therewith; and

          (iii) “After-Tax Floor Amount” means the After-Tax Amount of the Floor Amount.

          (c) If for any reason tax counsel mutually agreeable to Company and Employee later determine
that the amount of Excise Taxes payable by Employee is greater than the amount initially determined
pursuant to the above provisions of this Section 6, then Company shall, subject to Sections 6(d)
and 6(e) pay Employee, within thirty (30) days of such determination, or pay to the IRS as required
by applicable law, an amount (which shall also be deemed a Gross-Up Payment) equal to the
product of (a) the sum of (i) such additional Excise Taxes and (ii) any interest, penalties,
expenses or other costs incurred by Employee as a result of having taken a position in accordance
with a determination made pursuant to Paragraph 6(d), multiplied by (b) the Gross-Up Multiple.

          (d) Employee shall immediately notify Company in writing (an “Employee’s Notice”) of any
claim by the IRS or other taxing authority (an “IRS Claim”) that, if successful, would
require the payment by Employee of Excise Taxes in respect of Potential Parachute Payments in an
amount in excess of the amount of such Excise Taxes determined in accordance with Section 6.
Employee’s Notice shall fully inform Company of all particulars of the IRS Claim and the date on
which such IRS Claim is due to be paid (the “IRS Claim Deadline”).

          Company shall direct the Employee as to whether to pay all or part of the IRS Claim or to
contest the IRS Claim or to pursue a claim for a refund (a “Refund Claim”) of all or any portion
of such Excise Taxes, other taxes, interest or penalties as may be specified by Company in a
written notice to Employee. If Company directs Employee to pay all or part of the IRS Claim, the
amount of such payment shall also be deemed a Gross-Up Payment, which Company shall pay to the
Employee or the IRS, as appropriate. The Employee shall cooperate fully with Company in good faith
to contest such IRS Claim or pursue such Refund Claim (including appeals) and shall permit Company
to participate in any proceedings relating to such IRS Claim or Refund Claim.

          Company shall control all proceedings in connection with such IRS Claim or Refund Claim (as
applicable) and in its discretion may cause Employee to pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the Internal Revenue Service or other taxing
authority.

          Company shall pay directly all legal, accounting and other costs and expenses (including
additional interest and penalties) incurred by Company or Employee in connection with any IRS Claim
or Refund Claim, as applicable, and shall indemnify Employee, on an after-tax basis, for any Excise
Tax or income tax, including related interest and penalties, imposed as a result of such payment
of costs or expenses.

          (e) If Employee receives any refund with respect to Excise Taxes, Employee shall (subject to
Company’s complying with any applicable requirements of Section 6(d)) promptly pay Company the
amount of such refund (together with any interest paid or credited thereon after taxes applicable
thereto). Any contest of a denial of refund shall be controlled by Section 6(d).

12

 

          (f) 409A Compliance. Any Gross-Up Payment made under this Agreement shall be made no
later than by the end of Employee’s taxable year next following Employee’s taxable year in which he
remits the Excise Taxes. In the event Employee has a right to a Gross-Up Payment due to a tax
audit or litigation addressing the existence or amount of a tax liability, whether Federal, state,
local, or foreign, any Gross-Up Payment relating thereto will be made by the end of Employee’s
taxable year following Employee’s taxable year in which the taxes that are the subject of the audit
or litigation are remitted to the taxing authority, or where as a result of such audit or
litigation no taxes are remitted, the end of Employee’s taxable year in which the audit is
completed or there is a final and nonappealable settlement or other resolution of the litigation.

     7. Arbitration. Whenever a dispute arises between the Parties concerning this
Agreement or any of the obligations hereunder, or Employee’s employment generally, Company and
Employee shall use their best efforts to resolve the dispute by mutual agreement. If any dispute
cannot be resolved by Company and Employee, it shall be submitted to arbitration to the exclusion
of all other avenues of relief and adjudicated pursuant to the American Arbitration Association’s
Rules for Employment Dispute Resolution then in effect. The decision of the arbitrator must be in
writing and shall be final and binding on the Parties, and judgment may be entered on the
arbitrator’s award in any court having jurisdiction thereof. The expenses of the arbitration will
be split equally between the parties and each party shall be responsible for paying his or its own
costs, including attorneys’ fees associated with such arbitration. Nothing in this Section 7 shall
be construed to derogate Company’s rights to seek legal and equitable relief in a court of
competent jurisdiction as contemplated by Section 2(h).

     8. Non-Waiver. It is understood and agreed that one party’s failure at any time to
require the performance by the other party of any of the terms, provisions, covenants or conditions
hereof shall in no way affect the first party’s right thereafter to enforce the same, nor shall the
waiver by either party of the breach of any term, provision, covenant or condition hereof be taken
or held to be a waiver of any succeeding breach.

     9. Severability. If any provision of this Agreement conflicts with the law under
which this Agreement is to be construed, or if any such provision is held invalid or unenforceable
by a court of competent jurisdiction or any arbitrator, such provision shall be deleted from this
Agreement and the Agreement shall be construed to give full effect to the remaining provisions
thereof.

     10. Survivability. Unless otherwise provided herein, upon termination or expiration
of the Term, the provisions of Sections 2 through 14 above shall nevertheless remain in full force
and effect but shall under no circumstance extend the Term of this Agreement (or the Executive’s
right to accrue additional benefits beyond the expiration of the Term as determined in accordance
with Section 1 but without regard to this Section).

     11. Governing Law. This Agreement shall be interpreted, construed and governed
according to the laws of the State of Delaware without regard to the conflict of law provisions
thereof.

     12. Construction. The Section headings and captions contained in this Agreement are
for convenience only and shall not be construed to define, limit or affect the scope or meaning of
the provisions hereof. All references herein to Sections shall be deemed to refer to numbered
sections of this Agreement.

     13. Entire Agreement. This Agreement contains and represents the entire agreement of
Company and Employee and supersedes all prior agreements, representations or understandings, oral
or written, express or implied with respect to the subject matter hereof. This Agreement may not
be modified or amended in any way unless in a writing signed by each of Company and Employee. No
representation, promise or inducement has been made by either Company or Employee that is not
embodied in this Agreement, and neither Company nor Employee shall be bound by or liable for any
alleged representation, promise or inducement not specifically set forth herein.

13

 

     14. Assignability. Neither this Agreement nor any rights or obligations of Company or
Employee hereunder may be assigned by Company or Employee without the other Party’s prior written
consent. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit
of Company and Employee and their heirs, successors and assigns.

     15. Code Section 409A. This Agreement is intended to meet the requirements of Section
409A of the Code and may be administered in a manner that is intended to meet those requirements
and shall be construed and interpreted in accordance with such intent. To the extent that any
payment or benefit provided hereunder is subject to Section 409A of the Code, such payment or
benefit shall be provided in a manner that will meet the requirements of Section 409A of the Code,
including regulations or other guidance issued with respect thereto, such that the payment or
benefit shall not be subject to the excise tax applicable under Section 409A of the Code. Any
provision of this Agreement that would cause any payment or benefit to fail to satisfy Section 409A
of the Code shall be amended (in a manner that as closely as practicable achieves the original
intent of this Agreement) to comply with Section 409A of the Code on a timely basis, which may be
made on a retroactive basis, in accordance with regulations and other guidance issued under Section
409A of the Code.

     16. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed properly given if delivered personally or sent by certified or registered mail,
postage prepaid, return receipt requested, or sent by telegram, telex, telecopy or similar form of
telecommunication, and shall be deemed to have been given when received. Any such notice or
communication shall be addressed:

	 	 	 	 	 
	 

	 	if to Company, to
	 	Layne Christensen Company
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	1900 Shawnee Mission Parkway
	 

	 	 	 	Mission Woods, Kansas 66205
	 

	 	 	 	Fax: (913) 362-8823
	 
	 	 	 	 
	 

	 	if to Employee, to
	 	Gregory F. Aluce

or to such other address as Company or Employee shall have furnished to the other in writing.

     IN WITNESS WHEREOF, the Parties have duly executed this Agreement, to be effective as of the
date first above written.

	 	 	 	 	 
	 	 	 
	 	     /s/ Greg Aluce
 	 
	 	Gregory F. Aluce 	 
	 
	 	Layne Christensen Company

 	 
	 	By:  	/s/ A. B. Schmitt
 	 
	 	 	Andrew B. Schmitt 	 
	 	 	President 	 
	 

14

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