Document:

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                                                                   Exhibit 10.38

                                  AMENDMENT TO

                      CHANGE OF CONTROL SEVERANCE AGREEMENT

     This Amendment to Change of Control Severance Agreement (the "Amendment")
is made and entered into by and between Arthur W. Beckman (the "Executive") and
Indus International, Inc., a Delaware Corporation (the "Company"), effective as
of May 9, 2006 (the "Effective Date").

                                    RECITALS

     1. The Company and Executive have entered into a Change of Control
Severance Agreement (the "Agreement") with an effective date of May 5, 2005, as
previously amended;

     2. The Board, acting upon the recommendation of its Compensation Committee,
has determined that it is in the best interests of the Company and its
stockholders to offer the Executive this Amendment;

                                    AMENDMENT

     NOW, THEREFORE, in consideration of the mutual covenants contained herein
and the continued employment of Executive by the Company, the parties agree as
follows:

     1. Amended and Restated Section 3(a). Section 3(a) is hereby amended and
restated to read as follows:

          "(a) Involuntary Termination Following a Change of Control. If within
twenty-four (24) months following a Change of Control (A) the Executive
terminates his or her employment with the Company (or any parent or subsidiary
of the Company) for "Good Reason" (as defined herein) or the Company (or any
parent or subsidiary of the Company) terminates the Executive's employment for
other than "Cause" (as defined herein), and (B) the Executive signs the
Company's standard separation agreement and release of claims with the Company,
then the Executive shall be entitled to receive the following severance benefits
from the Company: (i) a lump sum amount equal to two (2) times the sum of (x)
Executive's then-current base salary plus (y) a payment equal to Executive's
annual bonus target for the performance year in which the Change in Control
occurs, or if such amount is not determinable, Executive's annual bonus paid or
payable, including any bonus or portion thereof which has been earned but
deferred, for the most recently completed fiscal year; and (ii) reimbursement
for full COBRA (for the Executive and any of Executive's dependents that
Executive had elected to cover by Company's benefit plans during Executive's
employment at the Company) expenses for the earlier of eighteen (18) months or
until Executive receives health, medical and/or dental benefits, respectively,
from a new employer. In addition, Executive's outstanding options to purchase
shares of the Company's Common Stock (the "Options") and unvested restricted
shares of the Company's Common Stock (the "Restricted Stock") shall immediately
vest and, in the case of Options, become exercisable. In all other respects the
Options and Restricted Stock shall continue to be bound by and subject to the
terms of their respective agreements."

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     2. Miscellaneous Provisions.

          (a) Definitions; Integration. A capitalized terms not otherwise
defined herein shall have the meaning given such term in the Agreement. This
Amendment, together with the Agreement, constitutes the entire understanding of
the parties as regards to the subject matter hereof and cannot be modified
except by further written agreement of the parties.

          (b) Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.

     IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the
case of the Company by its duly authorized officer, as of the day and year set
forth below.

                                        COMPANY

                                        By: /s/ Gregory J. Dukat
                                            ------------------------------------
                                        Title: President and Chief Executive
                                               Officer
                                        Date: 5/9/2006

                                        EXECUTIVE

                                        By: /s/ Arthur w. Beckman
                                            ------------------------------------
                                        Title: Executive Vice President and
                                               Chief Technical Officer
                                        Date: 5/15/2006

                                      -2-EX-10.1

 

Exhibit 10.1

LAYNE CHRISTENSEN COMPANY

2006 EQUITY INCENTIVE PLAN

SECTION 1

INTRODUCTION

	1.1	 	Establishment. Layne Christensen Company, a corporation organized and existing under
the laws of the state of Delaware (the “Company”), hereby establishes the Layne Christensen
Company 2006 Equity Incentive Plan (the “Plan”) for certain employees and non-employee
directors of the Company.

	1.2	 	Purpose. The purpose of this Plan is to encourage employees of the Company and its
affiliates and subsidiaries to acquire a proprietary and vested interest in the growth and
performance of the Company. The Plan is also designed to assist the Company in attracting and
retaining employees and non-employee directors by providing them with the opportunity to
participate in the success and profitability of the Company.

	1.3	 	Duration. The Plan shall commence on the Effective Date and shall remain in effect,
subject to the right of the Board to amend or terminate the Plan at any time pursuant to
Section 14 hereof, until all Shares subject to it shall have been issued, purchased or
acquired according to the Plan’s provisions. Unless the Plan shall be reapproved by the
stockholders of the Company and the Board renews the continuation of the Plan, no Awards shall
be issued pursuant to the Plan after the tenth (10th) anniversary of the Plan’s
Effective Date.

SECTION 2

DEFINITIONS

	2.1	 	The following terms shall have the meanings set forth below.

	 	(a)	 	"1933 Act” means the Securities Act of 1933, as amended. Reference to a
specific section of the 1933 Act or regulation thereunder shall include such section or
regulation, any valid regulation promulgated under such section, and any comparable
provision of any future legislation or regulation amending, supplementing, or
superseding such section or regulation.
	 
	 	(b)	 	"1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to
a specific section of the 1934 Act or regulation thereunder shall include such section
or regulation, any valid regulation promulgated under such section, and any comparable
provision of any future legislation or regulation amending, supplementing, or
superseding such section or regulation.
	 
	 	(c)	 	“Affiliate” of the Company means any person, corporation, partnership,
association or other business or professional entity that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by, or is under common
Control with the Company.
	 
	 	(d)	 	“Award” means a grant made under this Plan in any form which may include but
is not limited to Stock Options, Restricted Stock, Restricted Stock Units, Performance
Shares, Stock Appreciation Rights and Performance Units.
	 
	 	(e)	 	“Award Agreement” means a written agreement or instrument between the Company
and a Holder evidencing an Award.
	 
	 	(f)	 	"Beneficiary” means the person, persons, trust or trusts which have been
designated by a Holder in his or her most recent written beneficiary designation filed
with the Company to receive the benefits specified under this Plan upon the death of
the Holder, or, if there is no designated Beneficiary or surviving designated
Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of
descent and distribution to receive such benefits.
	 
	 	(g)	 	“Board” means the Board of Directors of the Company.

 

 

	 	(h)	 	“Cause” means, unless otherwise defined in an Award Agreement,

	 	(i)	 	Participant’s conviction of, plea of guilty to, or plea of nolo
contendere to a felony or other crime that involves fraud or dishonesty,
	 
	 	(ii)	 	any willful action or omission by a Participant which would
constitute grounds for immediate dismissal under the employment policies of the
Company by which Participant is employed, including but not limited to
intoxication with alcohol or illegal drugs while on the premises of the
Company, or violation of sexual harassment laws or the internal sexual
harassment policy of the Company by which Participant is employed,
	 
	 	(iii)	 	Participant’s habitual neglect of duties, including but not limited
to repeated absences from work without reasonable excuse, or
	 
	 	(iv)	 	Participant’s willful and intentional material misconduct in the
performance of his duties that results in financial detriment to the Company;

	 	 	 	provided, however, that for purposes of clauses (ii), (iii) and (iv), Cause shall
not include any one or more of the following: bad judgment, negligence or any act
or omission believed by the Participant in good faith to have been in or not opposed
to the interest of the Company (without intent of the Participant to gain, directly
or indirectly, a profit to which the Participant was not legally entitled). A
Participant who agrees to resign from his affiliation with the Company in lieu of
being terminated for Cause may be deemed to have been terminated for Cause for
purposes of this Plan.

	 	(i)	 	“Change in 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 1934 Act), 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)
representing 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 2.1(i); or

	 	(ii)	 	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

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	 	 	 	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
its Affiliates 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 in 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.

	 	(j)	 	“Code” means the Internal Revenue Code of 1986, as it may be amended from time
to time, and the rules and regulations promulgated thereunder.
	 
	 	(k)	 	“Committee” means (i) the Board, or (ii) one or more committees of the Board
to whom the Board has delegated all or part of its authority under this Plan.
	 
	 	(l)	 	“Company” means Layne Christensen Company, a Delaware corporation, and any
successor thereto.
	 
	 	(m)	 	“Continuing Director” means any person who was a member of the Board as of the
Effective Date, and any person who subsequently becomes a member of such Board if such
person’s appointment, election or nomination for election to such Board is recommended
or approved by a majority of the then Continuing Directors, unless the Continuing
Directors designate such person as not a Continuing Director.
	 
	 	(n)	 	“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.
	 
	 	(o)	 	“Covered Employee” means an Employee that meets the definition of “covered
employee” under Section 162(m)(3) of the Code, or any successor provision thereto.
	 
	 	(p)	 	“Date of Grant” or “Grant Date” means, with respect to any Award, the date as
of which such Award is granted under the Plan.
	 
	 	(q)	 	“Disabled” or “Disability” means an individual (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve (12)
months, receiving income replacement benefits for a period of not less than 3 months
under a Company-sponsored accident and health plan. Notwithstanding the above, with
respect to an Incentive Stock Option and the period after time following a separation
from service a Holder has to exercise such Incentive Stock Option, “disabled” shall
have the same meaning as defined in Code section 22(e)(3).

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	 	(r)	 	“Effective Date” means June 8, 2006, such date being the date this Plan was
approved by the Company’s stockholders .
	 
	 	(s)	 	“Eligible Employees” means key employees (including, without limitations,
officers and directors who are also employees) of the Company or an Affiliate upon
whose judgment, initiative and efforts the Company is, or will be, important to the
successful conduct of its business.
	 
	 	(t)	 	“Executive Officer” means (i) the president of the Company, any vice president
of the Company in charge of a principal business unit, division or function (such as
sales, administration, or finance), any other officer who performs a policy making
function or any other person who performs similar policy making functions for the
Company and (ii) Executive Officers (as defined in part (i) of this definition) of
subsidiaries of the Company who perform policy making functions for the Company.
	 
	 	(u)	 	“Fair Market Value” means, as of any date, the value of the Stock determined
in good faith, from time to time, by the Committee in its sole discretion and the
Committee may adopt such formulas as in its opinion shall reflect the true fair market
value of such stock from time to time and may rely on such independent advice with
respect to such fair market value as the Committee shall deem appropriate. In the
event that the Shares of the Company are traded on a national securities exchange, the
Committee may determine that the Fair Market Value of the Stock shall be based upon the
last sale before or the first sale after the Grant Date, the closing price on the
trading day before or the trading day of the grant, or any other reasonable basis using
actual transactions in such Stock as reported in The Wall Street Journal and
consistently applied. The determination of Fair Market Value also may be based upon an
average selling price during a specified period that is within 30 days before or 30
days after the Grant Date, provided that the commitment to grant the stock right based
on such valuation method must be irrevocable before the beginning of the specified
period, and such valuation method must be used consistently for grants of stock rights
under the same and substantially similar programs.
	 
	 	(v)	 	"Freestanding SAR” means any SAR that is granted independently of any Option.
	 
	 	(w)	 	“Holder” means a Participant, Beneficiary or Permitted Transferee who is in
possession of an Award Agreement representing an Award that (i) in the case of a
Participant has been granted to such individual, (ii) in the case of a Beneficiary has
transferred to such person under the laws of descent and distribution or (iii) in the
case of a Permitted Transferee, has been transferred to such person as permitted by the
Committee, and such Award Agreement has not expired, been canceled or terminated.
	 
	 	(x)	 	“Incentive Stock Option” means any Option designated as such and granted in
accordance with the requirements of Section 422 of the Code or any successor provisions
thereto.
	 
	 	(y)	 	“Nonqualified Stock Option” means any Option to purchase Shares that is not an
Incentive Stock Option.
	 
	 	(z)	 	“Option” means a right to purchase Stock at a stated price for a specified
period of time. Such definition includes both Nonqualified Stock Options and Incentive
Stock Options.
	 
	 	(aa)	 	“Option Agreement” or “Option Award Agreement” means a written agreement or
instrument between the Company and a Holder evidencing an Option.
	 
	 	(bb)	 	“Option Exercise Price” means the price at which Shares subject to an Option
may be purchased, determined in accordance with Section 6.2(b).
	 
	 	(cc)	 	"Option Holder” shall have the meaning as set forth in Section 6.2. For the
avoidance of any doubt, in situations where the Option has been transferred to a
Permitted Transferee or passed to a

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	 	 	 	Beneficiary in accordance with the laws of descent and distribution, the Option
Holder will not be the same person as the Holder of the Option.
	 
	 	(dd)	 	“Participant” means a Service Provider of the Company designated by the
Committee from time to time during the term of the Plan to receive one or more Awards
under the Plan.
	 
	 	(ee)	 	“Performance Period” means the period of time as specified by the Committee
over which Performance Units are to be earned.
	 
	 	(ff)	 	“Performance Shares” means an Award made pursuant to Section 9 which entitles
a Holder to receive Shares, their cash equivalent, or a combination thereof based on
the achievement of performance targets during a Performance Period.
	 
	 	(gg)	 	“Performance Units” means an Award made pursuant to Section 9 which entitles
a Holder to receive cash, Stock or a combination thereof based on the achievement of
performance targets during a Performance Period.
	 
	 	(hh)	 	“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of
the 1934 Act and used in Sections 13(d) and 14(d) thereof, including “group” as defined
in Section 13(d) thereof.
	 
	 	(ii)	 	“Plan” means the Layne Christensen Company 2006 Equity Incentive Plan, as set
forth in this instrument and as hereafter amended from time to time.
	 
	 	(jj)	 	“Plan Year” means each 12-month period beginning January 1 and ending the
following December 31, except that for the first year of the Plan it shall begin on the
Effective Date and extend to December 31 of that year.
	 
	 	(kk)	 	“Restricted Stock” means Stock granted under Section 8 that is subject those
restrictions set forth therein and the Award Agreement.
	 
	 	(ll)	 	“Restricted Stock Unit” means an Award granted under Section 8 evidencing the
Holder’s right to receive a Share (or cash payment equal to the Fair Market Value of a
Share) at some future date.
	 
	 	(mm)	 	"Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, and any future
regulation amending, supplementing, or superseding such regulation.
	 
	 	(nn)	 	"SAR” or “Stock Appreciation Right” means an Award, granted either alone or
in connection with an Option, that is designated as a SAR pursuant to Section 7.
	 
	 	(oo)	 	"SAR Holder” shall have the meaning as set forth in Section 7.2.
	 
	 	(pp)	 	"Section 16 Person” means a Person who is subject to obligations under
Section 16 of the 1934 Act with respect to transactions involving equity securities of
the Company.
	 
	 	(qq)	 	“Service Provider” means an Eligible Employee or a non-employee director of the Company.
	 
	 	(rr)	 	“Share” means a share of Stock.
	 
	 	(ss)	 	“Stock” means authorized and issued or unissued common stock of the Company,
at such par value as may be established from time to time.
	 
	 	(tt)	 	“Subsidiary” means (i) in the case of an Incentive Stock Option a “subsidiary
corporation,” whether now or hereafter existing, as defined in section 424(f) of the
Code, and (ii) in the case of any other type of Award, in addition to a subsidiary
corporation as defined in (i), a limited liability

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	 	 	 	company, partnership or other entity in which the Company controls fifty percent
(50%) or more of the voting power or equity interests.
	 
	 	(uu)	 	"Tandem SAR” means a SAR which is granted in connection with, or related to,
an Option, and which requires forfeiture of the right to purchase an equal number of
Shares under the related Option upon the exercise of such SAR; or alternatively, which
requires the cancellation of an equal amount of SARs upon the purchase of the Shares
subject to the Option.
	 
	 	(vv)	 	“Vested Option” means any Option, or portion thereof, which is fully
exercisable by the Holder. Vested Options remain exercisable only for that period of
time as provided for under this Plan and any applicable Option Award Agreement. Once a
Vested Option is no longer exercisable after otherwise having been exercisable, the
Option shall become null and void.

	2.2	 	Gender and Number. Except when otherwise indicated by the context, the masculine
gender shall also include the feminine gender, and the definition of any term herein in the
singular shall also include the plural.

SECTION 3

PLAN ADMINISTRATION

	3.1	 	Composition of Committee. The Plan shall be administered by the Committee. To the
extent the Board considers it desirable for transactions relating to Awards to be eligible to
qualify for an exemption under Rule 16b-3, the Committee shall consist of two or more
directors of the Company, all of whom qualify as “non-employee directors” within the meaning
of Rule 16b-3. To the extent the Board considers it desirable for compensation delivered
pursuant to Awards to be eligible to qualify for an exemption from the limit on tax
deductibility of compensation under Section 162(m) of the Code, the Committee shall consist of
two or more directors of the Company, all of whom shall qualify as “outside directors” within
the meaning of Code section 162(m).

	3.2	 	Authority of Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee by the Plan,
the Committee shall have full power and authority to:

	 	(a)	 	select the Service Providers to whom Awards may from time to time be granted
hereunder;
	 
	 	(b)	 	determine the type or types of Awards to be granted to eligible Service
Providers;
	 
	 	(c)	 	determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with, Awards;
	 
	 	(d)	 	determine the terms and conditions of any Award;
	 
	 	(e)	 	determine whether, and to what extent, and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or other
property;
	 
	 	(f)	 	determine whether, and to what extent, and under what circumstance Awards may
be canceled, forfeited, or suspended and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended;
	 
	 	(g)	 	correct any defect, supply an omission, reconcile any inconsistency and
otherwise interpret and administer the Plan and any instrument or Award Agreement
relating to the Plan or any Award hereunder;

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	 	(h)	 	modify and amend the Plan, establish, amend, suspend, or waive such rules,
regulations and procedures of the Plan, and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and
	 
	 	(i)	 	make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.

	3.3	 	Committee Delegation. The Committee may delegate to any member of the Board or
committee of Board members such of its powers as it deems appropriate, including the power to
sub-delegate, except that only a member of the Board (or a committee thereof) may grant Awards
from time to time to specified categories of Service Providers in amounts and on terms to be
specified by the Board; provided that no such grants shall be made other than by the Board or
the Committee to individuals who are then Section 16 Persons or other than by the Committee to
individuals who are then or are deemed likely to become a “covered employee” within the
meaning of Code Section 162(m). A majority of the members of the Committee may determine its
actions and fix the time and place of its meetings.

	3.4	 	Determination Under the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, adjustments, interpretations, and other decisions under or with
respect to the Plan, any Award or Award Agreement shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive, and binding upon all
persons, including the Company, any Participant, any Holder, and any stockholder. No member of
the Committee shall be liable for any action, determination or interpretation made in good
faith, and all members of the Committee shall, in addition to their rights as directors, be
fully protected by the Company with respect to any such action, determination or
interpretation.

SECTION 4

STOCK SUBJECT TO THE PLAN

	4.1	 	Number of Shares. Subject to adjustment as provided in Section 4.3 and subject to
the maximum amount of Shares that may be granted to an individual in a calendar year as set
forth in Section 5.5, no more than a total of 600,000 Shares are authorized for issuance under
the Plan in accordance with the provisions of the Plan and subject to such restrictions or
other provisions as the Committee may from time to time deem necessary. Any Shares issued
hereunder may consist, in whole or in part, of authorized and
unissued shares or treasury shares. The Shares may be divided among the various Plan components as the Committee shall
determine. Shares that are subject to an underlying Award and Shares that are issued pursuant
to the exercise of an Award shall be applied to reduce the maximum number of Shares remaining
available for use under the Plan. The Company shall at all times during the term of the Plan
and while any Awards are outstanding retain as authorized and unissued Stock, or as treasury
Stock, at least the number of Shares from time to time required under the provisions of the
Plan, or otherwise assure itself of its ability to perform its obligations hereunder.

	4.2	 	Unused and Forfeited Stock. Any Shares that are subject to an Award under this Plan
that are not used because the terms and conditions of the Award are not met, including any
Shares that are subject to an Award that expires or is terminated for any reason, any Shares
that are used for full or partial payment of the purchase price of Shares with respect to
which an Option is exercised and any Shares retained by the Company pursuant to Section 15.2
shall automatically become available for use under the Plan. Notwithstanding the foregoing,
any Shares used for full or partial payment of the purchase price of the Shares with respect
to which an Option is exercised and any Shares retained by the Company pursuant to Section
15.2 that were originally Incentive Stock Option Shares must still be considered as having
been granted for purposes of determining whether the Share limitation provided for in Section
4.1 has been reached for purposes of Incentive Stock Option grants.

	4.3	 	Adjustments in Authorized Shares. If, without the receipt of consideration therefore
by the Company, the Company shall at any time increase or decrease the number of its
outstanding Shares or change in any way the rights and privileges of such Shares such as, but
not limited to, the payment of a stock dividend or any other distribution upon such Shares
payable in Stock, or through a stock split, subdivision, consolidation,

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	 	 	combination, reclassification or recapitalization
involving the Stock, such that any adjustment is
determined by the Committee to be appropriate in order
to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under
the Plan then in relation to the Stock that is affected
by one or more of the above events, the numbers, rights
and privileges of (i) the Shares as to which Awards may
be granted under the Plan, and (ii) the Shares then
included in each outstanding Award granted hereunder,
shall be increased, decreased or changed in like manner
as if they had been issued and outstanding, fully paid
and non assessable at the time of such occurrence.

	4.4	 	General Adjustment Rules.

	 	(a)	 	If any adjustment or substitution provided for in this Section 4 shall result
in the creation of a fractional Share under any Award, such fractional Share shall be
rounded to the nearest whole Share and fractional Shares shall not be issued.
	 
	 	(b)	 	In the case of any such substitution or adjustment affecting an Option or a
SAR (including a Nonqualified Stock Option) such substitution or adjustments shall be
made in a manner that is in accordance with the substitution and assumption rules set
forth in Treasury Regulations 1.424-1 and the applicable guidance relating to Code
section 409A.

SECTION 5

PARTICIPATION

	5.1	 	Basis of Grant. Participants in the Plan shall be those Service Providers, who, in
the judgment of the Committee, are performing, or during the term of their incentive
arrangement will perform, important services in the management, operation and development of
the Company, and significantly contribute, or are expected to significantly contribute, to the
achievement of long-term corporate economic objectives.

	5.2	 	Types of Grants; Limits. Participants may be granted from time to time one or more
Awards; provided, however, that the grant of each such Award shall be separately approved by
the Committee or its designee, and receipt of one such Award shall not result in the automatic
receipt of any other Award. Written notice shall be given to such Person, specifying the
terms, conditions, right and duties related to such Award. Under no circumstance shall
Incentive Stock Options be granted to (i) non-employee directors or (ii) any person not
permitted to receive Incentive Stock Options under the Code.

	5.3	 	Award Agreements. Each Participant shall enter into an Award Agreement(s) with the
Company, in such form as the Committee shall determine and which is consistent with the
provisions of the Plan, specifying such terms, conditions, rights and duties. Unless otherwise
explicitly stated in the Award Agreement, Awards shall be deemed to be granted as of the date
specified in the grant resolution of the Committee, which date shall be the date of any
related agreement(s) with the Participant. Unless explicitly provided for in a particular
Award Agreement that the terms of the Plan are being superseded, in the event of any
inconsistency between the provisions of the Plan and any such Award Agreement(s) entered into
hereunder, the provisions of the Plan shall govern.

	5.4	 	Restrictive Covenants. The Committee may, in its sole and absolute discretion, place
certain restrictive covenants in an Award Agreement requiring the Participant to agree to
refrain from certain actions. Such Restrictive Covenants, if contained in the Award
Agreement, will be binding on the Participant.

	5.5	 	Maximum Annual Award. The maximum number of Shares with respect to which an Award or
Awards may be granted to any Participant in any one taxable year of the Company (the “Maximum
Annual Participant Award”) shall not exceed 200,000 Shares (increased, proportionately, in the
event of any stock split or stock dividend with respect to the Shares). If an Option is in
tandem with a SAR, such that the exercise of the Option or SAR with respect to a Share cancels
the tandem SAR or Option right, respectively, with respect to each Share, the tandem Option
and SAR rights with respect to each Share shall be counted as covering but one Share for
purposes of the Maximum Annual Participant Award.

8

 

SECTION
6

STOCK OPTIONS

	6.1	 	Grant of Options. A Participant may be granted one or more Options. The Committee
in its sole discretion shall designate whether an Option is an Incentive Stock Option or a
Nonqualified Stock Option. The Committee may grant both an Incentive Stock Option and a
Nonqualified Stock Option to the same Participant at the same time or at different times.
Incentive Stock Options and Nonqualified Stock Options, whether granted at the same or
different times, shall be deemed to have been awarded in separate grants, shall be clearly
identified, and in no event shall the exercise of one Option affect the right to exercise any
other Option or affect the number of Shares for which any other Option may be exercised.

	6.2	 	Option Agreements. Each Option granted under the Plan shall be evidenced by a
written Option Award Agreement which shall be entered into by the Company and the Participant
to whom the Option is granted (the “Option Holder”), and which shall contain the following
terms and conditions, as well as such other terms and conditions not inconsistent therewith,
as the Committee may consider appropriate in each case.

	 	(a)	 	Number of Shares. Each Option Award Agreement shall state that it covers a
specified number of Shares, as determined by the Committee. To the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Option Holder during
any calendar year exceeds $100,000 or, if different, the maximum limitation in effect
at the time of grant under Section 422(d) of the Code, or any successor provision, such
Options in excess of such limit shall be treated as Nonqualified Stock Options. The
foregoing shall be applied by taking Options into account in the order in which they
were granted. For the purposes of the foregoing, the Fair Market Value of any Share
shall be determined as of the time the Option with respect to such Share is granted. In
the event the foregoing results in a portion of an Option designated as an Incentive
Stock Option exceeding the $100,000 limitation, only such excess shall be treated as a
Nonqualified Stock Option.
	 
	 	(b)	 	Price. Each Option Award Agreement shall state the Option Exercise Price at
which each Share covered by an Option may be purchased. Such Option Exercise Price
shall be determined in each case by the Committee, but in no event shall the Option
Exercise Price for each Share covered by an Option be less than the Fair Market Value
of the Stock on the Option’s Grant Date, as determined by the Committee; provided,
however, that the Option Exercise Price for each Share covered by an Incentive Stock
Option granted to an Eligible Employee who then owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any parent or
Subsidiary corporation of the Company must be at least 110% of the Fair Market Value of
the Stock subject to the Incentive Stock Option on the Option’s Grant Date.
	 
	 	(c)	 	Duration of Options. Each Option Award Agreement shall state the period of
time, determined by the Committee, within which the Option may be exercised by the
Option Holder (the “Option Period”). The Option Period must expire, in all cases, not
more than ten years from the Option’s Grant Date; provided, however, that the Option
Period of an Incentive Stock Option granted to an Eligible Employee who then owns Stock
possessing more than 10% of the total combined voting power of all classes of Stock of
the Company must expire not more than five years from the Option’s Grant Date. Each
Option Award Agreement shall also state the periods of time, if any, as determined by
the Committee, when incremental portions of each Option shall become exercisable. If
any Option or portion thereof is not exercised during its Option Period, such
unexercised portion shall be deemed to have been forfeited and have no further force or
effect.
	 
	 	(d)	 	Termination of Service, Death, Disability, etc. Each Option Agreement shall
state the period of time, if any, determined by the Committee, within which the Vested
Option may be exercised after an Option Holder ceases to be a Service Provider on
account of the Participant’s death, Disability, voluntary resignation, removal from the
Board or the Company having terminated such Option Holder’s employment with or without
Cause.

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	 	(e)	 	Transferability. Except as otherwise determined by the Committee, Options
shall not be transferable by the Option Holder except by will or pursuant to the laws
of descent and distribution. Each Vested Option shall be exercisable during the Option
Holder’s lifetime only by him or her, or in the event of Disability or incapacity, by
his or her guardian or legal representative. Shares issuable pursuant to any Option
shall be delivered only to or for the account of the Option Holder, or in the event of
Disability or incapacity, to his or her guardian or legal representative.
	 
	 	(f)	 	Exercise, Payments, etc.

	 	(i)	 	Unless otherwise provided in the Option Award Agreement, each Vested
Option may be exercised by delivery to the Corporate Secretary of the Company a
written notice specifying the number of Shares with respect to which such
Option is exercised and payment of the Option Exercise Price. Such notice shall
be in a form satisfactory to the Committee or its designee and shall specify
the particular Vested Option that is being exercised and the number of Shares
with respect to which the Vested Option is being exercised. The exercise of the
Vested Option shall be deemed effective upon receipt of such notice by the
Corporate Secretary and payment to the Company. The purchase of such Stock
shall take place at the principal offices of the Company upon delivery of such
notice, at which time the purchase price of the Stock shall be paid in full by
any of the methods or any combination of the methods set forth in (ii) below.

	 	(ii)	 	The Option Exercise Price shall be paid by any of the following
methods:

	 	A.	 	Cash or Certified bank check;
	 
	 	B.	 	By delivery to the Company of certificates representing the
number of Shares then owned by the Holder, the Fair Market Value of
which equals the purchase price of the Stock purchased pursuant to the
Vested Option, properly endorsed for transfer to the Company; provided,
however, that Shares used for this purpose must have been held by the
Holder for such minimum period of time as may be established from time
to time by the Committee; and provided further that the Fair Market
Value of any Shares delivered in payment of the purchase price upon
exercise of the Options shall be the Fair Market Value as of the
exercise date, which shall be the date of delivery of the certificates
for the Stock used as payment of the Option Exercise Price.
	 
	 	 	 	In lieu of actually surrendering to the Company the stock
certificates representing the number of Shares then owned by the
Holder, the Committee may, in its discretion permit the Holder to
submit to the Company a statement affirming ownership by the Holder
of such number of Shares and request that such Shares, although not
actually surrendered, be deemed to have been surrendered by the
Holder as payment of the exercise price.
	 
	 	C.	 	For any Holder other than an Executive Officer or except as
otherwise prohibited by the Committee, by payment through a broker in
accordance with procedures permitted by Regulation T of the Federal
Reserve Board.
	 
	 	D.	 	Any combination of the consideration provided in the foregoing
subsections (A), (B) and (C).

	 	(iii)	 	The Company shall not guaranty a third-party loan obtained by a
Holder to pay part or the entire Option Exercise Price of the Shares.

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	 	(g)	 	Date of Grant. Unless otherwise specifically specified in the Option Award
Agreement, an option shall be considered as having been granted on the date specified
in the grant resolution of the Committee.
	 
	 	(h)	 	Withholding.

	 	(A)	 	Nonqualified Stock Options. Each Option Award Agreement covering
Nonqualified Stock Options shall provide that, upon exercise of the Option, the
Option Holder shall make appropriate arrangements with the Company to provide
for the minimum amount of additional withholding required by applicable federal
and state income tax and payroll laws, including payment of such taxes through
delivery of Stock or by withholding Stock to be issued under the Option, as
provided in Section 15.

	 	(B)	 	Incentive Stock Options. In the event that an Option Holder makes a
disposition (as defined in Section 424(c) of the Code) of any Stock acquired
pursuant to the exercise of an Incentive Stock Option prior to the later of (i)
the expiration of two years from the date on which the Incentive Stock Option
was granted or (ii) the expiration of one year from the date on which the
Option was exercised, the Participant shall send written notice to the Company
at its principal office (Attention: Corporate Secretary) of the date of such
disposition, the number of shares disposed of, the amount of proceeds received
from such disposition, and any other information relating to such disposition
as the Company may reasonably request. The Option Holder shall, in the event of
such a disposition, make appropriate arrangements with the Company to provide
for the amount of additional withholding, if any, required by applicable
Federal and state income tax laws.

	 	(i)	 	Adjustment of Options. Subject to the limitations set forth below and those
contained in Sections 6 and 14, the Committee may make any adjustment in the Option
Exercise Price, the number of Shares subject to, or the terms of, an outstanding Option
and a subsequent granting of an Option by amendment or by substitution of an
outstanding Option. Such amendment, substitution, or re-grant may result in terms and
conditions (including Option Exercise Price, number of Shares covered, vesting schedule
or exercise period) that differ from the terms and conditions of the original Option.
The Committee may not, however, adversely affect the rights of any Option Holder to
previously granted Options without the consent of such Option Holder. If such action is
affected by the amendment, the effective date of such amendment shall be the date of
the original grant. Any adjustment, modification, extension or renewal of an Option
shall be effected such that the Option is either exempt from, or is compliant with,
Code section 409A.

	6.3	 	Stockholder Privileges. No Holder shall have any rights as a stockholder with
respect to any Shares covered by an Option until the Holder becomes the holder of record of
such Stock, and no adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date such Holder becomes the holder of
record of such Stock, except as provided in Section 4.

SECTION 7

STOCK APPRECIATION RIGHTS

	7.1	 	Grant of SARs. Subject to the terms and conditions of this Plan, a SAR may be
granted to a Participant at any time and from time to time as shall be determined by the
Committee in its sole discretion. The Committee may grant Freestanding SARs or Tandem SARs, or
any combination thereof.

	 	(a)	 	Number of Shares. The Committee shall have complete discretion to determine
the number of SARs granted to any Participant, subject to the limitations imposed in
this Plan and by applicable law.

	 	(b)	 	Exercise Price and Other Terms. All SARs shall be granted with an exercise
price no less than the Fair Market Value of the underlying Shares on the SARs’ Date of
Grant. The Committee, subject

11

 

	 	 	 	to the provisions of this Plan, shall have complete discretion to determine the
terms and conditions of SARs granted under this Plan. The exercise price per Share
of Tandem SARs shall equal the exercise price per Share of the related Option. In no
event shall a SAR granted to a Section 16 Person become exercisable until at least
six (6) months after the Date of Grant or such shorter period as may be permissible
while maintaining compliance with Rule 16b-3.

	7.2	 	SAR Award Agreement. Each SAR granted under the Plan shall be evidenced by a written
SAR Award Agreement which shall be entered into by the Company and the Participant to whom the
SAR is granted (the “SAR Holder”), and which shall specify the exercise price per share, the
terms of the SAR, the conditions of exercise, and such other terms and conditions as the
Committee in its sole discretion shall determine.

	7.3	 	Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares
subject to the related Option upon the surrender of the right to exercise the equivalent
portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares
for which its related Option is then exercisable. With respect to a Tandem SAR granted in
connection with an Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the payout with respect
to the Tandem SAR shall be for no more than one hundred percent (100%) of the difference
between the Exercise Price per Share of the underlying Incentive Stock Option and the Fair
Market Value per Share of the Shares subject to the underlying Incentive Stock Option at the
time the Tandem SAR is exercised; and (c) the Tandem SAR shall be exercisable only when the
Fair Market Value per Share of the Shares subject to the Incentive Stock Option exceeds the
per share Option Price per Share of the Incentive Stock Option.

	7.4	 	Exercise of Freestanding SARs. Freestanding SARs shall be exercisable on such terms
and conditions as the Committee in its sole discretion shall determine; provided, however,
that no Freestanding SAR granted to a Section 16 Person shall be exercisable until at least
six (6) months after the Date of Grant or such shorter period as may be permissible while
maintaining compliance with Rule 16b-3.

	7.5	 	Expiration of SARs. A SAR granted under this Plan shall expire on the date set forth
in the SAR Award Agreement, which date shall be determined by the Committee in its sole
discretion. Unless otherwise specifically provided for in the SAR Award Agreement, a
Freestanding SAR granted under this Plan shall terminate according to the same rules under
which a Nonqualified Stock Option would terminate in the event of a SAR Holder’s termination
of employment, death or Disability as provided for in the SAR Award Agreement. Unless
otherwise specifically provided for in the SAR Award agreement, a Tandem SAR granted under
this Plan shall be exercisable at such time or times and only to the extent that the related
Option is exercisable. The Tandem SAR shall terminate and no longer be exercisable upon the
termination or exercise of the related Options, except that Tandem SARs granted with respect
to less than the full number of shares covered by a related Option shall not be reduced until
the exercise or termination of the related Option exceeds the number of Shares not covered by
the SARs.

	7.6	 	Payment of SAR Amount. Upon exercise of a SAR, a Holder shall be entitled to receive
payment from the Company in an amount determined by multiplying (i) the positive difference
between the Fair Market Value of a Share on the date of exercise over the exercise price per
Share by (ii) the number of Shares with respect to which the SAR is exercised. The payment
upon a SAR exercise may be in whole Shares of equivalent value, cash, or a combination of
whole Shares and cash. Fractional Shares shall be rounded down to the nearest whole Share.

SECTION 8

AWARDS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

	8.1	 	Restricted Stock Awards Granted by Committee. Coincident with or following
designation for participation in the Plan and subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Restricted Stock to any Service
Provider in such amounts as the Committee shall determine.

12

 

	8.2	 	Restricted Stock Unit Awards Granted by Committee. Coincident with or following
designation for participation in the Plan and subject to the terms and provisions of the Plan,
The Committee may grant a Service Provider Restricted Stock Units, in connection with or
separate from a grant of Restricted Stock. Upon the vesting of Restricted Stock Units, the
Holder shall be entitled to receive the full value of the Restricted Stock Units payable in
either Shares or cash.

	8.3	 	Restrictions. A Holder’s right to retain Shares of Restricted Stock or be paid with
respect to Restricted Stock Units shall be subject to such restrictions, including but not
limited to, him or her continuing to perform as a Service Provider for a restriction period
specified by the Committee, or the attainment of specified performance goals and objectives,
as may be established by the Committee with respect to such Award. The Committee may in its
sole discretion require different periods of service or different performance goals and
objectives with respect to (i) different Holders, (ii) different Restricted Stock or
Restricted Stock Unit Awards, or (iii) separate, designated portions of the Shares
constituting a Restricted Stock Award. Any grant of Restricted Stock or Restricted Stock
Units shall contain terms such that the Award is either exempt from Code section 409A or
complies with such section.

	8.4	 	Privileges of a Stockholder, Transferability. Unless otherwise provided in the Award
Agreement, a Participant shall have all voting, dividend, liquidation and other rights with
respect to Shares of Restricted Stock, provided however that any dividends paid on Shares of
Restricted Stock prior to such Shares becoming vested shall be held in escrow by the Company
and subject to the same restrictions on transferability and forfeitability as the underlying
Shares of Restricted Stock. Any voting, dividend, liquidation or other rights shall accrue to
the benefit of a Holder only with respect to Shares of Restricted Stock held by, or for the
benefit of, the Holder on the record date of any such dividend or voting date. A Participant’s
right to sell, encumber or otherwise transfer such Restricted Stock shall, in addition to the
restrictions otherwise provided for in the Award Agreement, be subject to the limitations of
Section 11.2 hereof. The Committee may determine that a Holder of Restricted Stock Units is
entitled to receive dividend equivalent payments on such units. If the Committee determines
that Restricted Stock Units shall receive dividend equivalent payments, such feature will be
specified in the applicable Award Agreement. Restricted Stock Units shall not have any voting
rights.

	8.5	 	Enforcement of Restrictions. The Committee may in its sole discretion require one or
more of the following methods of enforcing the restrictions referred to in Section 8.2 and
8.3:

	 	(a)	 	placing a legend on the stock certificates, or the Restricted Stock Unit Award
Agreement, as applicable, referring to restrictions;
	 
	 	(b)	 	requiring the Holder to keep the stock certificates, duly endorsed, in the
custody of the Company while the restrictions remain in effect;
	 
	 	(c)	 	requiring that the stock certificates, duly endorsed, be held in the custody
of a third party nominee selected by the Company who will hold such Shares of
Restricted Stock on behalf of the Holder while the restrictions remain in effect; or
	 
	 	(d)	 	inserting a provision into the Restricted Stock Award Agreement prohibiting
assignment of such Award Agreement until the terms and conditions or restrictions
contained therein have been satisfied or released, as applicable.

	8.6	 	Termination of Service, Death, Disability, etc. In the event of the death or
Disability of a Participant, all service period and other restrictions applicable to
Restricted Stock Awards then held by him or her shall lapse, and such Awards shall become
fully nonforfeitable. Subject to Section 10, in the event a Participant ceases to be a Service
Provider for any other reason, any Restricted Stock Awards as to which the service period or
other vesting conditions for have not been satisfied shall be forfeited.

13

 

SECTION 9

PERFORMANCE SHARES AND PERFORMANCE UNITS

	9.1	 	Awards Granted by Committee. Coincident with or following designation for
participation in the Plan, a Participant may be granted Performance Shares or Performance
Units.

	9.2	 	Amount of Award. The Committee shall establish a maximum amount of a Holder’s Award,
which amount shall be denominated in Shares in the case of Performance Shares or in dollars in
the case of Performance Units.

	9.3	 	Communication of Award. Written notice of the maximum amount of a Holder’s Award and
the Performance Period determined by Committee shall be given to a Participant as soon as
practicable after approval of the Award by the Committee.

	9.4	 	Amount of Award Payable. The Committee shall establish maximum and minimum
performance targets to be achieved during the applicable Performance Period. Performance
targets established by the Committee shall relate to corporate, group, unit or individual
performance and may be established in terms of (i) specified levels of earnings per share
from continuing operations, (ii) operating income, (iii) revenues, (iv) gross margin, (v)
return on operating assets (whether all assets or designated assets), (vi) return on equity,
(vii) economic value added, (viii) stock price appreciation, (ix) total stockholder return
(measured in terms of stock price appreciation and dividend growth), (x) net income, (xi) debt
reduction, (xii) cost control, or (xiii) such other measures or standards determined by the
Committee. Multiple performance targets may be used and the components of multiple performance
targets may be given the same or different weighting in determining the amount of an Award
earned, and may relate to absolute performance or relative performance measured against other
groups, units, individual or entities. Achievement of the maximum performance target shall
entitle the Holder to payment (subject to Section 9.6) at the full or maximum amount specified
with respect to the Award: provided, however, that notwithstanding any other provisions of
this Plan, in the case of an Award of Performance Shares the Committee in its discretion may
establish an upper limit on the amount payable (whether in cash or Stock) as a result of the
achievement of the maximum performance target. The Committee may also establish that a portion
of a full or maximum amount of a Holder’s Award will be paid (subject to Section 9.6) for
performance which exceeds the minimum performance target but falls below the maximum
performance target applicable to such Award.

	9.5	 	Adjustments. At any time prior to payment of a Performance Share or Performance Unit
Award, the Committee may adjust previously established performance targets or other terms and
conditions to reflect events such as changes in law, regulations, or accounting practice, or
mergers acquisitions or divestitures.

	9.6	 	Payment of Awards. Following the conclusion of each Performance Period, the
Committee shall determine the extent to which performance targets have been attained, and the
satisfaction of any other terms and conditions with respect to an Award relating to such
Performance Period. The Committee shall determine what, if any, payment is due with respect to
an Award and whether such payment shall be made in cash, Stock or some combination. Payment
shall be made in a lump sum, as determined by the Committee, commencing as promptly as
practicable following the end of the applicable Performance Period, subject to such terms and
conditions and in such forms as may be prescribed by the Committee. All Awards shall be paid
no later than March 15th of the Plan Year following the Plan Year in which the
Committee determines that a Participant is entitled to receive the performance award.

	9.7	 	Termination of Employment. If a Participant ceases to be a Service Provider for any
reason other than having been terminated for Cause after the end of a Performance Period yet
before receiving payment as provided for in Section 9.6, the Holder (or the Holder’s
Beneficiaries) shall be entitled to receive the full amount payable as soon as practicable
after such amount has been determined by the Committee. If a Holder ceases to be a Service
Provider before the end of a Performance Period by reason of his or her death or Disability,
the Performance Period for such Holder for the purpose of determining the amount of the Award
payable shall end at the end of the calendar quarter immediately preceding the date on which
such Holder ceased to be a Service Provider. The amount of an Award payable to a Holder to
whom the preceding sentence is applicable shall be paid at the end of the Performance Period
and shall be that fraction

14

 

	 	 	of the Award computed pursuant to the preceding sentence the numerator of which is the
number of calendar quarters during the Performance Period during all of which said Holder
was a Service Provider and the denominator of which is the number of full calendar quarters
in the Performance Period. In the event a Holder is terminated as a Service Provider for
Cause, either before the end of the Performance Period or after the end of the Performance
Period but prior to the amount of the Award having been paid, the Holder’s participation in
the Plan shall cease, all outstanding Awards of Performance Shares or Performance Units to
such Participant and any right to receive the payment for any Awards (whether or not any
Performance Period has been completed) shall be canceled.

SECTION 10

REORGANIZATION, CHANGE IN CONTROL OR LIQUIDATION

Except as otherwise provided in an Award Agreement or other agreement approved by the Committee to
which any Participant is a party, in the event that the Company undergoes a Change in Control, each
Option, share of Restricted Stock and/or other Award shall without regard to any vesting schedule,
restriction or performance target, automatically become fully exercisable, fully vested or fully
payable, as the case may be, as of the date of such Change in Control. In addition to the
foregoing, in the event the Company undergoes a Change in Control or in the event of a corporate
merger, consolidation, major acquisition of property (or stock), separation, reorganization or
liquidation in which the Company is a party and in which a Change in Control does not occur, the
Committee, or the board of directors of any corporation assuming the obligations of the Company,
shall have the full power and discretion to prescribe and amend the terms and conditions for the
exercise, or modification, of any outstanding Awards granted hereunder. The Committee may remove
restrictions on Restricted Stock and Restricted Stock Units and may modify the performance
requirements for any other Awards. The Committee may provide that Options or other Awards granted
hereunder must be exercised in connection with the closing of such transactions, and that if not so
exercised such Awards will expire. Any such determinations by the Committee may be made generally
with respect to all Participants, or may be made on a case-by-case basis with respect to particular
Participants. Notwithstanding the foregoing, any transaction undertaken for the purpose of
reincorporating the Company under the laws of another jurisdiction, if such transaction does not
materially affect the beneficial ownership of the Company’s capital stock, such transaction shall
not constitute a merger, consolidation, major acquisition of property for stock, separation,
reorganization, liquidation, or Change in Control.

SECTION 11

RIGHTS OF EMPLOYEES; PARTICIPANTS

	11.1	 	Employment. Nothing contained in the Plan or in any Award granted under the Plan
shall confer upon any Participant any right with respect to the continuation of his or her
services as a Service Provider or interfere in any way with the right of the Company, subject
to the terms of any separate employment or consulting agreement to the contrary, at any time
to terminate such services or to increase or decrease the compensation of the Participant from
the rate in existence at the time of the grant of an Award. Whether an authorized leave of
absence, or absence in military or government service, shall constitute a termination of
Participant’s services as a Service Provider shall be determined by the Committee at the time.

	11.2	 	Nontransferability. Except as provided in Section 11.3, no right or interest of any
Holder in an Award granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Participant, either voluntarily or involuntarily, or be subjected to any lien,
directly or indirectly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge or bankruptcy. In the event of a Participant’s death, a
Holder’s rights and interests in all Awards shall, to the extent not otherwise prohibited
hereunder, be transferable by testamentary will or the laws of descent and distribution, and
payment of any amounts due under the Plan shall be made to, and exercise of any Options or
SARs may be made by, the Holder’s legal representatives, heirs or legatees. If, in the opinion
of the Committee, a person entitled to payments or to exercise rights with respect to the Plan
is disabled from caring for his or her affairs because of a mental condition, physical
condition or age, payment due such person may be made to, and such rights shall be exercised
by, such person’s guardian, conservator, or other legal personal representative upon
furnishing the Committee with evidence satisfactory to the Committee of such status.
“Transfers” shall not be deemed to include transfers to the Company or “cashless exercise”
procedures with third parties who provide financing for the purpose of (or who otherwise
facilitate) the exercise of Awards consistent with applicable laws and the authorization of
the Committee.

15

 

	11.3	 	Permitted Transfers. Pursuant to conditions and procedures established by the
Committee from time to time, the Committee may permit Awards to be transferred to, exercised
by and paid to certain persons or entities related to a Participant, including but not limited
to members of the Participant’s immediate family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the Participant’s immediate
family and/or charitable institutions (a “Permitted Transferee”). In the case of initial
Awards, at the request of the Participant, the Committee may permit the naming of the related
person or entity as the Award recipient. Any permitted transfer shall be subject to the
condition that the Committee receive evidence satisfactory to it that the transfer is being
made for estate and/or tax planning purposes on a gratuitous or donative basis and without
consideration (other than nominal consideration). Notwithstanding the foregoing, Incentive
Stock Options shall only be transferable to the extent permitted in Section 422 of the Code,
or such successor provision thereto, and the treasury regulations thereunder.

SECTION 12

GENERAL RESTRICTIONS

	12.1	 	Investment Representations. The Company may require any person to whom an Option or
other Award is granted, as a condition of exercising such Option or receiving Stock under the
Award, to give written assurances in substance and form satisfactory to the Company and its
counsel to the effect that such person is acquiring the Stock subject to the Option or the
Award for his own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems necessary or
appropriate in order to comply with federal and applicable state securities laws. Legends
evidencing such restrictions may be placed on the certificates evidencing the Stock.

	12.2	 	Compliance with Securities Laws.

	 	(a)	 	Each Award shall be subject to the requirement that, if at any time counsel to
the Company shall determine that the listing, registration or qualification of the
Shares subject to such Award upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental or regulatory body, is necessary as
a condition of, or in connection with, the issuance or purchase of Shares thereunder,
such Award may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or obtained
on conditions acceptable to the Committee. Nothing herein shall be deemed to require
the Company to apply for or to obtain such listing, registration or qualification.

	 	(b)	 	Each Holder who is a director or an Executive Officer is restricted from
taking any action with respect to any Award if such action would result in a (i)
violation of Section 306 of the Sarbanes-Oxley Act of 2002, and the regulations
promulgated thereunder, whether or not such law and regulations are applicable to the
Company, or (ii) any policies adopted by the Company restricting transactions in the
Stock.

	12.3	 	Stock Restriction Agreement. The Committee may provide that Shares issuable upon
the exercise of an Option shall, under certain conditions, be subject to restrictions whereby
the Company has (i) a right of first refusal with respect to such shares, (ii) specific rights
or limitations with respect to the Participant’s ability to vote such shares, or (iii) a right
or obligation to repurchase all or a portion of such shares, which restrictions may survive a
Participant’s cessation or termination as a Service Provider.

SECTION 13

OTHER EMPLOYEE BENEFITS

The amount of any compensation deemed to be received by a Participant as a result of the exercise
of an Option or the grant, payment or vesting of any other Award shall not constitute “earnings”
with respect to which any other benefits of such Participant are determined, including without
limitation benefits under (a) any pension, profit sharing, life insurance or salary continuation
plan or other employee benefit plan of the Company or (b) any agreement between the Company and the
Participant, except as such plan or agreement shall otherwise expressly provide.

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SECTION 14

PLAN AMENDMENT, MODIFICATION AND TERMINATION

	14.1	 	Amendment, Modification, and Termination. The Board may at any time terminate, and
from time to time may amend or modify, the Plan; provided, however, that no amendment or
modification may become effective without approval of the amendment or modification by the
stockholders if stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, to comply with the requirements for listing on any
exchange where the Shares are listed, or if the Company, on the advice of counsel, determines
that stockholder approval is otherwise necessary or desirable.

	14.2	 	Adjustment Upon Certain Unusual or Nonrecurring Events. The Board may make
adjustments in the terms and conditions of Awards in recognition of unusual or nonrecurring
events (including the events described in Section 4.3) affecting the Company or the financial
statements of the Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Board determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan.

	14.3	 	Awards Previously Granted. Notwithstanding any other provision of the Plan to the
contrary (but subject to Section 2.1(h) and Section 14.2), no termination, amendment or
modification of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Holder of such Award.

SECTION 15

WITHHOLDING

	15.1	 	Withholding Requirement. The Company’s obligations to deliver Shares upon the
exercise of an Option, or upon the vesting of any other Award, shall be subject to the
Holder’s satisfaction of all applicable federal, state and local income and other tax
withholding requirements.

	15.2	 	Withholding with Stock. At the time the Committee grants an Award, it may, in its
sole discretion, grant the Holder an election to pay all minimum required amounts of tax
withholding, or any part thereof, by electing to transfer to the Company, or to have the
Company withhold from Shares otherwise issuable to the Holder, Shares (which have been held by
the Participant for more than six (6) months in the case of a transfer of currently owned
shares) having a value equal to the minimum amount required to be withheld under federal,
state or local law or such lesser amount as may be elected by the Holder. All elections shall
be subject to the approval or disapproval of the Committee. The value of Shares to be withheld
shall be based on the Fair Market Value of the Stock on the date that the amount of tax to be
withheld is to be determined (the “Tax Date”), as determined by the Committee. Any such
elections by Holder to have Shares withheld for this purpose will be subject to the following
restrictions:

	 	(a)	 	All elections must be made prior to the Tax Date;
	 
	 	(b)	 	All elections shall be irrevocable; and
	 
	 	(c)	 	If the Holder is an officer or director of the Company within the meaning of
Section 16 of the 1934 Act (“Section 16”), the Holder must satisfy the requirements of
such Section 16 and any applicable rules thereunder with respect to the use of Stock to
satisfy such tax withholding obligation.

SECTION 16

SECTION 162(m) PROVISIONS

	16.1	 	Limitations. Notwithstanding any other provision of this Plan, if the Committee
determines at the time any Award is granted to a Participant that such Participant is, or is
likely to be at the time he or she recognizes income for federal income tax purposes in
connection with such Award, a Covered Employee, then the Committee may provide that this
Section 16 is applicable to such Award.

17

 

	16.2	 	Performance Goals. If an Award is subject to this Section 16, then the lapsing of
restrictions thereon and the distribution of cash, Shares or other property pursuant thereto,
as applicable, shall be subject to the achievement of one or more objective performance goals
established by the Committee, which shall be based on the attainment of one or any combination
of the following: (i) specified levels of earnings per share from continuing operations, (ii)
operating income, (iii) revenues, (iv) gross margin, (v) return on operating assets (whether
all assets or designated assets), (vi) return on equity, (vii) economic value added, (viii)
stock price appreciation, (ix) total stockholder return (measured in terms of stock price
appreciation and dividend growth), (x) net income, (xi) debt reduction, or (xii) cost control,
of the Company for or within which the Participant is primarily employed. Such performance
goals shall be set by the Committee within the time period prescribed by, and shall otherwise
comply with the requirements of, Section 162(m) of the Code and the regulations thereunder.

	16.3	 	Adjustments. Notwithstanding any provision of the Plan other than Section 4.3 or
Section 10, with respect to any Award that is subject to Section 16, the Committee may not
adjust upwards the amount payable pursuant to such Award, nor may it waive the achievement of
the applicable performance goals except in the case of the death or disability of the
Participant.

	16.4	 	Other Restrictions. The Committee shall have the power to impose such other
restrictions on Awards subject to this Section 16 as it may deem necessary or appropriate to
insure that such Awards satisfy all requirements for “performance-based compensation” within
the meaning of Section 162(m)(4)(B) of the Code or any successor thereto.

SECTION 17

NONEXCLUSIVITY OF THE PLAN

	17.1	 	Neither the adoption of the Plan by the Board nor the submission of the Plan to
stockholders of the Company for approval shall be construed as creating any limitations on the
power or authority of the Board to continue to maintain or adopt such other or additional
incentive or other compensation arrangements of whatever nature as the Board may deem
necessary or desirable or preclude or limit the continuation of any other plan, practice or
arrangement for the payment of compensation or fringe benefits to employees, or non-employee
directors generally, or to any class or group of employees, or non-employee directors, which
the Company now has lawfully put into effect, including, without limitation, any retirement,
pension, savings and stock purchase plan, insurance, death and disability benefits and
executive short-term incentive plans.

SECTION 18

REQUIREMENTS OF LAW

	18.1	 	Requirements of Law. The issuance of Stock and the payment of cash pursuant to the
Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or stock exchanges as may be required. Notwithstanding any
provision of the Plan or any Award, Holders shall not be entitled to exercise, or receive
benefits under any Award, and the Company shall not be obligated to deliver any Shares or
other benefits to a Holder, if such exercise or delivery would constitute a violation by the
Holder or the Company of any applicable law or regulation.

	18.2	 	Code Section 409A. In the event that any provision of this Plan shall be determined
to contravene Code section 409A, the regulations promulgated thereunder, regulatory
interpretations or announcements with respect to section 409A or applicable judicial decisions
construing section 409A, any such provision shall be void and have no effect. Moreover, this
Plan shall be interpreted at all times in such a manner that the terms and provisions of the
Plan comply with Code section 409A, the regulations promulgated thereunder, regulatory
interpretations or announcements with respect to section 409A and applicable judicial
decisions construing section 409A.

	18.3	 	Rule 16b-3. Transactions under the Plan and to the extent even applicable, within
the scope of Rule 16b-3 are intended to comply with all applicable conditions of Rule 16b-3.
To the extent any provision of the Plan or any action by the Committee under the Plan fails to
so comply, such provision or action shall, without

18

 

	 	 	further action by any person, be deemed to be automatically amended to the extent necessary
to effect compliance with Rule 16b-3; provided, however, that if such provision or action
cannot be amended to effect such compliance, such provision or action shall be deemed null
and void to the extent permitted by law and deemed advisable by the Committee.

	18.4	 	Governing Law. The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware without giving effect to the
principles of the conflict of laws to the contrary.

SUBJECT TO THE STOCKHOLDER APPROVAL REQUIREMENT NOTED BELOW, THIS LAYNE CHRISTENSEN COMPANY EQUITY
INCENTIVE PLAN IS HEREBY ADOPTED BY THE BOARD OF DIRECTORS OF LAYNE CHRISTENSEN COMPANY THIS 24th
DAY OF April, 2006.

THE PLAN SHALL BECOME EFFECTIVE ONLY IF APPROVED BY THE STOCKHOLDERS OF THE COMPANY AND THE
EFFECTIVE DATE OF THE PLAN SHALL BE SUCH DATE OF STOCKHOLDER APPROVAL.

	 	 	 	 	 
	 	 	LAYNE CHRISTENSEN COMPANY

	 	 	/s/ A. B. Schmitt
	 	 	 

	 
	 	 	 	 
	 

	 	By:
	 	Andrew B. Schmitt

 

	 

	 	Title:
	 	President, Chief Executive Officer
 

19

 

Amendment to the

Layne Christensen Company

2006 Equity Incentive Plan

     This Amendment , dated May 31, 2006, by Layne Christensen Company (the
“Company”), amends the Layne Christensen Company 2006 Equity Incentive Plan (the “Plan”).

     A. On April 24, 2006, the Company’s Board of Directors (the “Board”) approved the Plan,
subject to stockholder approval being received prior to April 23, 2007, in order to encourage
employees of the Company and its affiliates and subsidiaries to acquire a proprietary and vested
interest in the growth and performance of the Company.

     B. The Board desires to amend the Plan to prohibit the “repricing” of any stock options
granted under the Plan without Company stockholder approval.

     C. Pursuant to Section 14.1 of the Plan, the Board may amend the Plan.

Amendment :

     Now, Therefore , the Board hereby amends the Plan by replacing Section
6.2(i) in its entirety with the following Section 6.2(i):

	 	(i)	 	Adjustment of Options. Subject to the limitations set forth below and those
contained in Sections 6 and 14, the Committee may make any adjustment in the Option
Exercise Price, the number of Shares subject to, or the terms of, an outstanding Option
and a subsequent granting of an Option by amendment or by substitution of an
outstanding Option. Such amendment, substitution, or re-grant may result in terms and
conditions (including Option Exercise Price, number of Shares covered, vesting schedule
or exercise period) that differ from the terms and conditions of the original Option;
provided, however, the Committee may not, without stockholder approval (i) amend an
Option to reduce its Option Exercise Price, (ii) cancel an Option and regrant an Option
with a lower Option Exercise Price than the original Option Exercise Price of the
cancelled Option, or (iii) take any other action (whether in the form of an amendment,
cancellation or replacement grant) that has the effect of “repricing” an Option, as
defined under applicable NASDAQ rules or the rules of the established stock exchange or
quotation system on which the Company Stock is then listed or traded. The Committee
also may not adversely affect the rights of any Option Holder to previously granted
Options without the consent of such Option Holder. If such action is affected by the
amendment, the effective date of such amendment shall be the date of the original
grant. Any adjustment, modification, extension or renewal of an Option shall be
effected such that the Option is either exempt from, or is compliant with, Code section
409A.

     In Witness Whereof , the Company has caused this Amendment to be adopted by
its duly authorized officer as of the date first stated above.

	 	 	 	 	 
	 	 	Layne Christensen Company 

	 

	 	By:
	 	/s/ A.B. Schmitt
	 

	 	 	 	 
	 

	 	 	 	Andrew B. Schmitt, President

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