Document:

EX-4.1

 

Exhibit 4 (1)

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made as of September 28, 2005, among
Layne Christensen Company, a Delaware corporation (“Layne”), and the holders of Layne Common Stock
listed on the signature pages to this Agreement (each, a “Stockholder” and, collectively, the
"Stockholders”).

     Layne, Merger Sub, Reynolds and the Stockholders are parties to a Merger Agreement, dated as
of August 30, 2005 (the “Merger Agreement”). In connection with the closing of the transactions
contemplated by the Merger Agreement, a portion of the Merger Consideration issued to the
Stockholders will consist of Layne Common Stock. This Layne Common Stock will not be registered
pursuant to the Securities Act. The execution and delivery of this Agreement is a condition to the
closing of the transactions contemplated by the Merger Agreement.

     Therefore, the parties agree as follows:

     1. Certain Definitions. Capitalized terms not otherwise defined in this Agreement
have the meanings ascribed to them in the Merger Agreement. Section 8.10 of the Merger Agreement
is hereby incorporated herein in its entirety. As used in this Agreement, the following terms have
the following respective meanings:

     “Commission” means the United States Securities and Exchange Commission or any
successor agency thereof.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, or
any successor law thereto and the rules and regulations promulgated thereunder, as in effect
from time to time.

     “Holder” means each holder of, and any Permitted Transferee of, Registrable Securities.

     “Layne Common Stock” means the outstanding shares of the common stock of Layne, $.01
per share par value.

     “Permitted Transferee” means (i) the spouse, lineal descendant or adopted children of a
Holder if such transfer is made for estate planning purposes, (ii) a trust established for
estate planning purposes solely for the benefit of one or more of the Persons described in
clause (i) of this definition, (iii) a Holder’s heirs, administrators or assigns, upon the
death of such Holder, or (iv) to an Affiliate of such Holder.

     “Register,” “registered” and “registration” refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness by the Commission of such registration
statement.

 

 

     “Registrable Securities” means (i) with respect to each Stockholder, that number of shares of Layne Common Stock listed opposite such Stockholder’s name on Exhibit A,
and (ii) any Layne Common Stock or other equity securities issued or issuable with respect
to the securities referred to in clause (i) by way of a stock dividend or stock split or in
connection with a combination or shares, recapitalization, merger, consolidation or other
reorganization; provided, however, that “Registrable Securities” does not include any
securities (a) registered and sold pursuant to the Securities Act, (b) sold to the public
pursuant to Rule 144 promulgated under the Securities Act (together with any successor rule,
“Rule 144”) or (c) held by a Holder if such securities may be sold immediately under Rule
144 without registration or pursuant to Rule 144(k).

     “Registration Expenses” means all expenses incurred by Layne in complying with Sections
3, 4 and 5, including all registration, qualification and filing fees, printing expenses,
messenger and delivery expenses, escrow fees, fees and disbursements of legal counsel for
Layne and all independent certified public accountants, underwriters (excluding discounts,
commissions, fees and disbursements of legal counsel for the Holders) and Persons retained
by Layne (but excluding the compensation of regular employees of Layne that will be paid in
any event by Layne), blue sky fees and expenses, and the expenses of any special audits
incident to or required by any such registration, but excluding all Selling Expenses.

     “Securities Act” means the United States Securities Act of 1933, as amended, or any
successor law thereto and the rules and regulations promulgated thereunder.

     “Selling Expenses” means all underwriting discounts, selling commissions, and stock
transfer taxes applicable to the securities registered by the Holders and any fees of
counsel to any Holder or group of Holders.

     2. Restrictions on Transferability. The Registrable Securities may not be transferred
in violation of the provisions of the Securities Act.

     3. Company Registration.

     (a) Notice of Registration. If Layne decides to register any Layne Common
Stock for its own account other than: (i) a registration relating solely to employee
benefit plans or (ii) a registration relating solely to a transaction pursuant to Rule 145
promulgated under the Securities Act (a “Piggyback Registration”), Layne will:

     (i) promptly give to each Holder at least 20 days written notice thereof; and

     (ii) include in such registration and in any underwriting involved therein, the
Registrable Securities specified in a written request or requests, made within 20
days after receipt of such written notice from Layne, by any Holder or Holders.

     (b) Cut-back and Allocation. Notwithstanding any other provision of this
Section, if the managing underwriter (or Layne, if the Piggyback Registration is not being

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underwritten) determines in good faith that marketing factors require a limitation of
the number of shares of Layne Common Stock to be underwritten, the managing underwriter (or
Layne, if the Piggyback Registration is not being underwritten) may limit the number of
Registrable Securities of Holders to be included in the registration and underwriting. If
the number of Registrable Securities or other securities are to be limited, Layne will
notify in writing all Holders of Registrable Securities who would otherwise have their
Registrable Securities registered and underwritten pursuant hereto (and any other holder of
Capital Stock of Layne entitled to include securities in such underwriting (a “Capital Stock
Holder”)) of the amount of Registrable Securities or other securities to be included in the
registration and underwriting based on the following order of priority:

     (i) first, the securities proposed by Layne to be sold for its own account; and

     (ii) second, the securities requested to be included in such registration and
underwriting by the Holders of Registrable Securities and any Capital Stock Holder
in proportion, as nearly as practicable, to the amounts of securities requested by
each such Holder of Registrable Securities or other Capital Stock Holder to be
included in the Piggyback Registration;

provided, however, that with respect to the second Piggyback Registration hereunder, if the
number of Registrable Securities or other securities are to be limited, the amount of
Registrable Securities or other securities to be included in such registration and
underwriting will be in proportion, as nearly as practicable, to the amounts of securities
proposed to be sold by Layne for its own account and the amounts requested by each such
Holder of Registrable Securities or other Capital Stock Holder to be included in the
Piggyback Registration.

If any Holder disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to Layne and the managing underwriter. Any Registrable
Securities excluded or withdrawn from such underwriting will be withdrawn from such
registration.

     (c) Right to Terminate Registration. Layne will have the right to terminate or
withdraw any registration initiated by it under this Section 3 prior to the effectiveness of
such registration whether or not any Holder has elected to include securities in such
registration.

     4. Expenses of Registration. All Registration Expenses will be borne by Layne. All
Selling Expenses relating to securities registered by the Holders pursuant to Section 3 will be
borne by the Holders of such securities pro rata based on the number of shares of Layne Common
Stock so registered.

     5. Registration Procedures.

     (a) In the case of each registration effected by Layne pursuant to this Agreement,
Layne will keep each Holder advised in writing as to the initiation of each registration and
as to the completion thereof. Layne agrees to use commercially

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reasonable efforts to effect or cause such registration to permit the sale of the
Registrable Securities covered thereby by the Holders thereof in accordance with the
intended method or methods of distribution thereof described in such registration statement.
In connection with any registration of any Registrable Securities pursuant to Section 3,
Layne will, as soon as reasonably possible:

     (i) prepare and file with the Commission a registration statement with respect
to such Registrable Securities and use commercially reasonable efforts to cause such
registration statement filed to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto, Layne
will comply with Section 5(a)(iii)) as soon as reasonably possible thereafter;

     (ii) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus included therein as may be necessary
to effect and maintain the effectiveness of such registration statement as may be
required by the applicable rules and regulations of the Commission and the
instructions applicable to the form of such registration statement and furnish to
the holders of the Registrable Securities covered thereby copies of any such
supplement or amendment prior to this being used or filed with the Commission;

     (iii) provide (A) the Holders of the Registrable Securities to be included in
such registration statement, (B) the underwriters, if any, (C) the sales or
placement agent, if any, (D) one counsel for such underwriters or agent, and (E) at
the expense of such Holders, not more than one counsel for all the Holders of such
Registrable Securities the opportunity to review such registration statement as it
relates to the Holders, each prospectus included therein or filed with the
Commission, and each amendment or supplement thereto;

     (iv) for a reasonable period prior to the filing of such registration
statement, make available for inspection by the parties referred to in Section
5(a)(iii) such financial and other information and books and records of Layne, and
cause the officers, directors, employees, counsel and independent certified public
accountants of Layne to respond to such inquires, as is reasonably necessary to
conduct a reasonable investigation within the meaning of the Securities Act;
provided, however, that each such party will be required to maintain in confidence
and not disclose to any other Person any information or records reasonably
designated by Layne in writing as being confidential, until such time as (a) such
information becomes a matter of public record (whether by virtue of its inclusion in
such registration statement or otherwise), (b) such party will be required so to
disclose such information pursuant to the subpoena or order of any court or other
governmental agency or body having jurisdiction of the matter, or (c) such
information is required to be set forth in such registration statement or the
prospectus included therein or in an amendment to such registration statement or an
amendment or supplement to such prospectus in order that such registration
statement, prospectus, amendment or supplement, as the case may be, does not

4

 

include an untrue statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not misleading;
and provided, further, that Layne need not make such information available, nor need
it cause any officer, director, employee, counsel or independent certified public
accountants to respond to such inquiry, unless each such Holder of Registrable
Securities to be included in a registration statement hereunder and such counsel,
upon Layne’s request, executes and delivers to Layne an undertaking to substantially
the same effect contained in the second preceding proviso;

     (v) promptly notify the Holders of Registrable Securities to be included in a
registration statement hereunder, the sales or placement agent, if any, therefor and
the managing underwriter of the securities being sold and confirm such advice in
writing, (A) when such registration statement or the prospectus included therein or
any prospectus amendment or supplement or post-effective amendment has been filed,
and, with respect to such registration statement or any post-effective amendment,
when the same has become effective, (B) of any comments by the Commission with
respect thereto or any request by the Commission for amendments or supplements to
such registration statement or the prospectus or for additional information, (C) of
the issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation of any proceedings for the purpose, or
(D) if it is the case, at any time when a prospectus is required to be delivered
under the Securities Act, that such registration statement, prospectus, or any
document incorporated by reference, in any of the foregoing contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in light
of the circumstances under which they were made;

     (vi) use commercially reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any post-effective
amendment thereto or any order suspending or preventing the use of any related
prospectus or suspending the qualification of any Registrable Securities included in
such registration statement for sale in any jurisdiction at the earliest practicable
date;

     (vii) furnish to each Holder of Registrable Securities to be included in such
registration statement hereunder, each placement or sales agent, if any, therefor,
each underwriter, if any, thereof and the counsel referred to in Section 5(a)(iii)
such number of copies of the prospectus included in the registration statement
(including each preliminary prospectus and any summary prospectus), in conformity
with the requirements of the Securities Act, as such Holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Holder, sold by such agent or
underwritten by such underwriter and to permit such Holder, agent and underwriter to
satisfy the prospectus delivery requirements of the Securities Act; and Layne hereby
consents to the use of such prospectus and any amendment or

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supplement thereto by each such Holder and by any such agent and underwriter,
in each case in the form most recently provided to such party by Layne, in
connection with offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or any supplement or
amendment thereto.

     (viii) cooperate with the Holders of the Registrable Securities to be included
in a registration statement hereunder and the managing underwriters to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates will be printed, lithographed or engraved,
or produced by any combination of such methods, on steel engraved borders and which
will not bear any restrictive legends; and enable such Registrable Securities to be
in such denominations and registered in such names as the managing underwriters may
request at least two Business Days prior to any sale or the Registrable Securities;

     (ix) if underwriters are engaged in connection with the registration, Layne
will provide usual and customary representations, covenants and assurances to the
underwriters in form and substance reasonably satisfactory to such underwriters as
is consistent with prevailing practice in the market place;

     (x) use commercially reasonable efforts to cause all such Registrable
Securities registered pursuant to such registration statement to be listed on each
securities exchange or quoted on the quotation system on which Layne Common Stock is
then listed or quoted.

     (b) If Layne would be required, pursuant to Section 5(a)(v)(D), to notify the Holders
of the Registrable Securities included in a registration statement hereunder, the sales or
placement agent, if any, and the managing underwriters, if any, of the securities being
sold, Layne will prepare and furnish to each such Holder, to each such agent, if any, and to
each underwriter, if any, a reasonable number of copies of a prospectus supplement or
amendment so that, as thereafter delivered to the purchasers of Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Each Holder agrees
that upon receipt of any notice from Layne pursuant to Section 5(a)(v)(D), such Holder will
forthwith discontinue the distribution of Registrable Securities until such Holder has
received copies of such amended or supplemented registration statement or prospectus, and if
so directed by Layne, such Holder will deliver to Layne all copies, other than permanent
file copies, then in such Holder’s possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice.

     (c) Layne may require each Holder of Registrable Securities as to which any registration
is being effected to furnish to Layne such information regarding such Holder and such
Holder’s method of distribution of such Registrable Securities as Layne may from time to time
reasonably request in writing but only to the extent that such information is required in
order to comply with the Securities Act. Each such Holder

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agrees to notify Layne as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to Layne or of the occurrence of any event in
either case as a result of which any prospectus relating to such registration contains or
would contain an untrue statement of a material fact regarding such Holder or the
distribution of such Registrable Securities or omits to state any material fact regarding
such Holder or the distribution of such Registrable Securities required to be stated therein
or necessary to make the statements therein not misleading in light of the circumstances then
existing, and promptly furnish to Layne any additional information required to correct and
update any previously furnished or required information so that such prospectus does not
contain, with respect to such Holder or the distribution of such Registrable Securities, an
untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of the
circumstances then existing.

     6. Lock-up Agreement.

     (a) To the extent not inconsistent with applicable Law, each Holder whose Registrable
Securities are included in a registration statement filed pursuant to a Piggyback
Registration hereunder, if requested by the managing underwriter for such registration,
agrees not to effect any public sale or distribution of Registrable Securities (except as
part of such Piggyback Registration or to a Permitted Transferee that agrees to be bound by
a similar restriction), including a sale pursuant to Rule 144, during the 15 Business Days
prior to, and during the 180-day period (or such shorter period as may be agreed to by such
underwriters) beginning on the effective date of any such registration statement.

     (b) Layne may instruct its transfer agent to place stop-transfer notations in its
records to enforce the provisions of this Section 6. This Section 6 supersedes any
conflicting provisions of this Agreement. Notwithstanding any other provision of this
Agreement, Layne may assign each Holder’s obligations under this Section 6 to any
underwriter of a public offering of Layne Common Stock.

     7. Indemnification.

     (a) To the extent permitted by Law, Layne will indemnify and hold harmless each Holder,
each of its officers, directors and managers, each Person controlling such Holder within the
meaning of Section 15 of the Securities Act and each underwriter, if any, and each Person
who controls any underwriter within the meaning of Section 15 of the Securities Act, against
all expenses, claims, losses, damages and liabilities (joint or several) (or actions in
respect thereof), including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement, final prospectus, or
any amendment or supplement thereto, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading, and will
reimburse each such Holder, each of its officers, directors and managers, and each Person
controlling such Holder, each such

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underwriter and each Person who controls any such underwriter, for any legal and any
other expenses reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action; provided that Layne will not be liable in
any such case to the extent that any such claim, loss, damage, liability or expense arises
out of or is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with information furnished to Layne by or
on behalf of such Holder or underwriter for use therein.

     (b) To the extent permitted by Law, each Holder will, severally and not jointly, if
Registrable Securities held by such Holder are included in the securities as to which such
registration is being effected, indemnify Layne, each of its directors, each of its officers
who have signed the registration statement, each underwriter, if any, of Layne’s securities
covered by such a registration statement, each Person who controls Layne or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such Holder, each of
its officers, directors and managers, and each Person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages, expenses
and liabilities (joint or several) (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact contained in any
such registration statement, final prospectus, or any amendment or supplement thereto,
offering circular or other document, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse Layne, such Holders, such directors, officers and
managers, underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating, preparing or defending any such claim, loss,
expense, damage, liability or action, in each case to the extent that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such registration
statement, final prospectus, or any amendment or supplement thereto in reliance upon and in
conformity with information furnished to Layne by or on behalf of such Holder for use
therein.

     (c) Each party entitled to indemnification under this section (the “Indemnified Party”)
will promptly give notice to the party required to provide indemnification (the
“Indemnifying Party”) of any claim as to which indemnity may be sought, and will permit the
Indemnifying Party to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who will conduct the defense of
such claim or litigation, must be approved by the Indemnified Party (whose approval may not
be unreasonably withheld, conditioned or delayed), and the Indemnified Party may participate
in such defense at such party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein will not relieve the Indemnifying Party
of its obligations under this Agreement, except to the extent that the Indemnifying Party’s
ability to defend against such claim or litigation is impaired as a result of such failure
to give notice. No Indemnifying Party, in the defense of any such claim or litigation,
will, except with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all liability in
respect to

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such claim or litigation. No Indemnified Party will consent to entry of any judgment
or enter into any settlement without the consent of the Indemnifying Party.

     (d) If the indemnification provided for in this section is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability,
claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, will contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim, damage or expense in
such proportion as is appropriate to reflect the relative fault of the Indemnifying Party,
on the one hand, and of the Indemnified Party, on the other hand, in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable considerations. The relative fault of the Indemnifying
Party and of the Indemnified Party will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

     8. Information by Holder. The Holder or Holders of Registrable Securities included in
any registration will furnish to Layne such information regarding such Holder or Holders and the
distribution proposed by such Holder or Holders as Layne may reasonably request in writing and as
is required in connection with any registration referred to in this Agreement.

     9. Transfer of Rights. The rights granted hereunder to cause Layne to register
securities may be assigned only to a Permitted Transferee of Registrable Securities.

     10. Governing Law. This Agreement is governed by and is to be construed and enforced
in accordance with the laws of the State of Delaware without giving effect to the principles of
conflicts of laws thereof.

     11. Entire Agreement. Except for the Merger Agreement (which remains in full force
and effect), this Agreement cancels and supersedes all previous agreements relating to the subject
matter of this Agreement, written or oral, among the parties and contains the entire understanding
of the parties with respect to the subject matter hereof.

     12. Notices. Any notice, request, consent or communication under this Agreement will
be effective only if it is in writing and (i) personally delivered, (ii) sent by certified mail,
return receipt requested, postage prepaid, (iii) sent by a nationally recognized overnight delivery
service, with delivery confirmed, or (iv) sent via facsimile transmission, with a copy
simultaneously sent by one of the methods set forth in clauses (i) or (iii), addressed as follows:

	 	 	 	 	 
	 

	 	if to Layne:
	 	Layne Christensen Company
	 

	 	 	 	Attention: President
	 

	 	 	 	1900 Shawnee Mission Parkway
	 

	 	 	 	Mission Woods, Kansas 66205
	 

	 	 	 	Fax: (913) 362-8823

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	 	with a copy to:
	 	Layne Christensen Company
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	1900 Shawnee Mission Parkway
	 

	 	 	 	Mission Woods, Kansas 66205
	 

	 	 	 	Fax: (913) 362-8823
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Patrick J. Respeliers
	 

	 	 	 	Stinson Morrison Hecker LLP
	 

	 	 	 	1201 Walnut Street
	 

	 	 	 	Kansas City, Missouri 64104
	 

	 	 	 	Fax: (816) 691-3495
	 
	 	 	 	 
	 

	 	if to any Stockholder to:
	 	Jeffrey Reynolds
	 

	 	 	 	Reynolds, Inc
	 

	 	 	 	4520 North State Road
	 

	 	 	 	Orleans, Indiana 47452
	 

	 	 	 	Fax: (812) 278-4538
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Steven K. Humke
	 

	 	 	 	Ice Miller
	 

	 	 	 	One American Square
	 

	 	 	 	Box 82001
	 

	 	 	 	Indianapolis, Indiana 46282-0002
	 

	 	 	 	Fax: (317) 592-4659

or such other Persons or addresses as are furnished in writing by any party to the other party, and
will be deemed to have been given only upon its delivery in accordance with this Section 12.

     13. Amendment. Any provision of this Agreement may be amended, waived or modified
upon the written consent of (i) Layne and (ii) Holders of a majority of the Registrable Securities;
provided, however, that no such amendment, waiver or modification may discriminate against the
rights of any Holder without such Holder’s prior written consent. Any Holder may waive any of his
or her rights or Layne’s obligations hereunder without obtaining the consent of any other Person.

     14. Severability. The invalidity or unenforceability of any of the provisions of this
Agreement will not affect the validity or enforceability of the remaining provisions hereof.

     15. Remedies. Layne acknowledges and agrees that any failure by Layne to comply with
its obligations hereunder may result in material irreparable injury to the Holder for which there
is not adequate remedy at law, that it will not be possible to measure damages for such injuries
precisely and that in the event of any such failure, the Holders may obtain such relief as may be
required to specifically enforce Layne’s obligations hereunder. Layne further agrees to waive the
defense in any action for specific performance that a remedy at law would be adequate.

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     16. Counterparts. This Agreement may be executed in one or more counterparts, each of
which are deemed to be an original but all of which constitute one and the same agreement.

     17. Waiver of Jury Trial. Each party hereby irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement.

(Signature Pages Follow)

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     The undersigned have executed this Registration Rights Agreement as of the date set forth
above.

	 	 	 	 	 
	 	LAYNE CHRISTENSEN COMPANY

 	 
	 	By:  	/s/ Jerry W. Fanska
 	 
	 	 	Name:  	Jerry W. Fanska 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 
	 

	 	/s/ Jerry Reynolds
	 

	 	 
	 

	 	JERRY REYNOLDS
	 
	 	 
	 

	 	/s/ Jeff Reynolds
	 

	 	 
	 

	 	JEFFREY REYNOLDS
	 
	 	 
	 

	 	/s/ Debbie Chastain
	 

	 	 
	 

	 	DEBBIE CHASTAIN
	 
	 	 
	 

	 	/s/ Ben Reynolds
	 

	 	 
	 

	 	BEN REYNOLDS
	 
	 	 
	 

	 	/s/ Patrick Schmidt
	 

	 	 
	 

	 	PATRICK SCHMIDT
	 
	 	 
	 

	 	/s/ Mark Accetturo
	 

	 	 
	 

	 	MARK ACCETTURO
	 
	 	 
	 

	 	/s/ Jim Wells
	 

	 	 
	 

	 	JIM WELLS

 

 

	 	 	 
	 

	 	/s/ Carl Arvin
	 

	 	 
	 

	 	CARL ARVIN
	 
	 	 
	 

	 	/s/ Brian Schmidt
	 

	 	 
	 

	 	BRIAN SCHMIDT
	 
	 	 
	 

	 	/s/ Larry Purlee
	 

	 	 
	 

	 	LARRY PURLEE
	 
	 	 
	 

	 	/s/ Jay Burton
	 

	 	 
	 

	 	JAY BURTON

(Signature page to Registration Rights Agreement)

 

 

Exhibit A

	 	 	 	 	 
	 	 	Number of Registrable 	 
	Name of Stockholder	 	Shares	 
	Jerry Reynolds
	 	 	156,598	 
	Jeff Reynolds
	 	 	160,956	 
	Debbie Chastain
	 	 	33,138	 
	Ben Reynolds
	 	 	37,486	 
	Patrick Schmidt
	 	 	24,169	 
	Mark Accetturo
	 	 	14,994	 
	Jim Wells
	 	 	4,686	 
	Carl Arvin
	 	 	4,686	 
	Brian Schmidt
	 	 	3,514	 
	Larry Purlee
	 	 	2,343	 
	Jay Burton
	 	 	1,874	 
	Total
	 	 	444,444EX-10.1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is entered effective this 10th day of
September, 2007 (the “Effective Date”), between MAX & ERMA’S RESTAURANTS, INC., a Delaware
corporation (the “Company”) and MICHAEL A. NAHKUNST (the “Employee”).

     WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”)
has approved and authorized the entry into this Agreement with the Employee; and

     WHEREAS, the parties desire to enter into this Agreement setting forth the terms and
conditions for the employment relationship of the Employee with the Company.

     NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements herein
contained and intending to be legally bound hereby, the Company and the Employee hereby agree as
follows;

     1. Employment. The Employee shall be employed as the Chief Operating Officer of the
Company from September 10, 2007 (the “Commencement Date”), until the third anniversary of this
Agreement, unless such employment is terminated earlier in accordance with this Agreement;
provided, however, commencing on the third anniversary of this Agreement, the term of this
Agreement shall be extended for a period of two (2) years (the “Initial Renewal Term”) and, on the
second anniversary of the Initial Renewal Term, the term of this Agreement shall be extended for a
consecutive period of five (5) years, unless either party gives written notice to the other, at
least 60 days prior to the end of the initial term or at least 60 days prior to the end of the
Initial Renewal Term. The Employee shall have such duties and responsibilities customarily
incident to such position or as may be designated to him by the Board of Directors of the Company
(the “Board”) from time to time. The Employee shall be generally responsible for overseeing the
operations of the Company and meeting the reasonable performance standards and objectives as set by
the Board of Directors. Employee shall report directly to the Chief Executive Officer of the
Company or his designee. Employee shall devote substantially all of his time, attention and
energies to the business and affairs of the Company.

     2. Salary. The Company shall pay the Employee a salary at an annual rate of
$300,000.00 less applicable deductions (the “Base Salary), such Base Salary may be increased at
such times and in such amounts as determined by the Committee. The Base Salary shall be payable by
the Company to the Employee in installments at such times as the Company customarily pays its other
employees. Participation in deferred compensation, mandatory or discretionary bonus, retirement,
stock option and other employee benefit plans and in fringe benefits shall not reduce the Base
Salary.

     3. Bonus. Employee shall be entitled to participate in the Company’s executive cash
bonus program pursuant to which Employee will be eligible to receive a cash bonus, in an

 

amount determined by the Committee, based on the Company achieving certain levels of annual
budgeted pre-tax profit, plus other operations performance targets, payable quarterly based on
estimates and adjusted for the annual amount at the fiscal year-end, unless otherwise adjusted by
the Committee for all participating senior executives. Except as otherwise provided in paragraph
10 herein, if this Agreement is terminated prior to the payment date of any bonus provided for in
this paragraph, no bonus payment shall be made following the termination date of the Agreement
unless otherwise agreed by the Company.

     4. Participation in Retirement, Welfare and Other Benefit Plans and Programs.
Employee shall be entitled to participate in all employee retirement and welfare benefit plans and
programs, including health insurance, dental insurance, group life and long-term disability and
401(k) plan, made available to the Company’ senior level executives as a group, as such retirement
and welfare plans may be in effect from time to time and subject to the eligibility of such plans.

     5. Automobile. The Company shall provide the Employee a car allowance of $750.00 per
each four-week period, payable in accordance with the Company’s policy. In addition, the Company
shall reimburse Employee for reasonable expenses incurred in operating the vehicle used for
business purposes subject to the provisions of paragraph 7.

     6. Vacation. The Employee shall be entitled to three (3) weeks annual paid vacation
in accordance with the Company’s policy, in addition to holidays and other paid time off (excluding
vacation) provided to similarly situated executive officers of the Company.

     7. Business Expenses. During such time as the Employee is rendering services
hereunder, the Employee shall be entitled to incur and be reimbursed by the Company for all
reasonable business expenses, including but not limited to mobile telephone charges. The Company
agrees that it will reimburse the Employee for all such expenses upon the presentation by the
Employee, on a monthly basis, of an itemized account of such expenditures setting forth the date,
the purposes for which incurred, and the amounts thereof, together with such receipts showing
payments in conformity with the Company’s established policies. Reimbursement for approved
expenses shall be made within a reasonable period not to exceed 30 days after the approval of
Employee ’s itemized account.

     8. Other Expense Reimbursements.

     8.1 Travel Relocation Expenses. The Company will promptly reimburse Employee for
reasonable travel relocation expenses associated with the Employee’s relocation to Columbus, Ohio
upon the presentation by the Employee of an itemized account of such expenditures setting forth the
date, the purposes for which incurred, and the amounts thereof, together with such receipts showing
payments in conformity with the Company’s established policies; provided, however, the Company
shall not be obligated to reimburse Employee for such reimbursable travel relocation expenses in
excess of $5,000.

     8.2 Legal Fees and Expenses. The Company shall promptly reimburse the Employee for
legal fees and expenses incurred by the Employee in the review and negotiation of

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this Agreement in an amount not to exceed $2,500, upon presentation by the Employee of an itemized
account of such fees and expenses.

     9. Indemnity. The Company shall to the extent permitted by law, indemnify and hold the
Employee harmless from costs, expense (including reasonable attorneys fees) or liability arising
out of or relating to any acts or decisions made by the Employee in the course of his employment to
the same extent the Company indemnifies and holds harmless other officers and directors of the
Company in accordance with the Company’s established policies. The Company agrees to continuously
maintain Directors and Officers Liability Insurance with reasonable limits of coverage and to
include the Employee within said coverage.

     10. Termination. This Agreement shall terminate on the third anniversary date of the
Commencement Date, unless renewed pursuant to paragraph 1 above or sooner pursuant to any of the
following:

     10.1 Death. This Agreement shall terminate upon the Employee’s death. The Company
shall pay the Employee’s estate (i) on the date it would have been payable to Employee any unpaid
Base Salary earned prior to the date of Employee’s death, (ii) within 30 days of the conclusion of
the quarter following Employee’s death, any unpaid Bonus prorated to the date of Employee’s death,
and (iii) any unpaid reimbursements due Employee for expenses incurred by the Employee prior to
Employee’s death, upon receipt from the Employee’s personal representative of receipts therefore.
Any options that have not vested as of the date of Employee’s death shall terminate on the date of
Employee’s death.

     10.2 Disability. If, as a result of the Employee’s incapacity due to physical or
mental illness, he shall have been absent from the full time performance of substantially all of
his material duties with the Company for 90 consecutive days or 180 days total within any 12-month
period, his employment may be terminated by the Company for “Disability.” Termination shall occur
30 days after a notice of a written termination is delivered to Employee by the Company (the
“Effective Date of Termination”). The Company shall pay the Employee (i) on the date it would have
been payable to Employee, any unpaid Base Salary earned prior to the date of Employee’s Effective
Date of Termination, (ii) within 30 days of the end of the quarter following Employee’s Effective
Date of Termination, any unpaid Bonus prorated to the Employee’s last day of actual employment,
(iii) any unpaid reimbursements due Employee for expenses incurred by the Employee prior to
Employee’s Effective Date of Termination, pursuant to paragraph 7, and (iv) if employee is not
covered by any other comprehensive insurance, the Company will pay Employee an amount equivalent to
Employee’s COBRA payments up to 18 months following the Effective Date of Termination or the
maximum term allowable by then applicable law for coverage of Employee and his eligible dependents.
Any options that have not vested as of the Employee’s Effective Date of Termination shall terminate
on the date of Employee’s Effective Date of Termination.

     10.3 Cause. This Agreement may be terminated by the Company at any time for “Cause”
by the delivery to Employee of a written notice of termination stating the date of termination and
the basis upon which this Agreement is being terminated. As used in this Agreement, the term
“Cause” shall include:

3

 

               (i) failure, neglect or refusal to perform or observe any or all of Employee’s material
obligations (“Breach”) under this Agreement which Breach remains uncured after written notice from
the Company to the Employee and an opportunity to correct such performance within a reasonable
period of time as determined by the Company, of at least 15 days after notice from the Company
regarding the Breach;

               (ii) conviction of Employee of any felony or other crime involving dishonesty or moral
turpitude;

               (iii) fraudulent conduct by the Employee or any act of dishonesty in connection with the
Company’s business; or

               (iv) unauthorized or unfair competition with the Company or any of its affiliates, including
the unauthorized use or disclosure of trade secrets, confidential or proprietary business
information or the substantial breach of any material covenants.

          In the event of termination for Cause, Employee will be entitled to such Base Salary and
benefits as have accrued under this Agreement through the date of termination, but will not be
entitled to any other salary, benefits, bonuses or other compensation after such date.

     10.4 Without Cause. This Agreement may also be terminated by Company at any time
without Cause by the delivery to Employee of a written notice of termination not less than 30 days
prior to the date of termination. Upon such termination, Employee will be paid such Base Salary,
vacation, prorated bonus and other benefits as have been earned under this Agreement through the
date of termination (including, without limitation, the Company will pay Employee’s COBRA payments
for the earlier of the maximum term allowable by then applicable law or the date Employee becomes
covered under a different health plan, for coverage of Employee and his eligible dependents). So
long as Employee reasonably cooperates in the transition of Employee’s duties, as determined in the
Company’s sole but reasonable discretion, Employee will be paid an amount equivalent to his monthly
Base Salary, on a monthly basis, for the remaining term of the Agreement, or six (6) months,
whichever is shorter. Employee will receive the foregoing payment regardless of any mitigation.
However, Employee acknowledges that he has a duty to mitigate and seek other employment. If there
are more than six (6) months remaining on the term of the Agreement, and Employee is unable to
secure comparable employment during the six (6) months following termination, the Company will
continue paying Employee’s Base Salary, on a monthly basis, for an additional six (6) months or
until Employee secures comparable employment, whichever is shorter. Failure to make reasonable
efforts to mitigate will justify cessation of the payment of the Base Salary under this paragraph.
Any options that have not vested as of the date of Employee’s termination, shall fully vest as of
the date of Employee’s termination. Except as provided in this paragraph, Employee will not be
entitled to any other salary, benefits, bonuses or other compensation after such termination.

     10.5 By Employee. Employee may terminate this Agreement upon 30 days written notice
to the Company. The Company shall pay the Employee (i) on the date it would have been payable to
Employee, any unpaid Base Salary earned prior to the date of Employee’s

4

 

termination, and (ii) any unpaid reimbursements due Employee for expenses incurred by the Employee
prior to the date of Employee’s termination, pursuant to paragraphs 5 and 7. Any options that have
not vested as of the date of Employee’s termination shall terminate on the date of Employee’s
termination.

     10.6 Expiration of Term. If the parties do not execute a new written agreement, upon
expiration of the term of the Agreement, the employment of Employee shall continue on the same
terms and conditions (including the then applicable compensation as provided in paragraphs 2
through 7) as provided in this Agreement. The parties acknowledge and agree that any such
employment following the term shall be terminable “at will” for any reason, with or without cause,
pursuant to applicable Ohio law.

     11. Assignment.

     11.1 No Assignment by Employee. This Agreement may not be assigned by Employee.

     11.2 This Agreement may be assigned by the Company provided that the Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly assume and agree to
perform under this Agreement in the same manner and to the same extent that the Company would be
required to perform as if no such succession had taken place.

     12. Confidential Information.

     12.1 Confidential Information. During the term of this Agreement and thereafter, the
Employee shall not, except as may be required to perform his duties hereunder or as required by
applicable law or court order, disclose to others for use, whether directly or indirectly, any
Confidential Information regarding the Company. “Confidential Information” shall mean information
about the Company, its subsidiaries and affiliates, and their respective clients and customers that
is not available to the general public and that was learned by the Employee in the course of his
employment by the Company, including, without limitation, any data, formulae, recipes, methods,
information, proprietary knowledge, trade secrets and client and customer lists and all papers,
resumes, records and other documents containing such Confidential Information. The Employee
acknowledges that such Confidential Information is specialized, unique in nature and of great value
to the Company, and that such information gives the Company a competitive advantage. Upon the
termination of his employment, the Employee will promptly deliver to the Company all documents,
maintained in any format, including electronic or print, (and all copies thereof) in his possession
containing any Confidential Information.

     12.2 Noncompetition. Except as otherwise provided herein, the Employee agrees that
during the term of this Agreement he will not, directly or indirectly, without the prior written
consent of the Company, provide consulting services with or without pay, or own, manage, operate,
join, control, participate in, or be connected as a stockholder, partner, or otherwise with any
business, individual, partner, firm, corporation, or other entity which is then in competition with
the Company or any present affiliate of the Company; provided, however, that the “beneficial
ownership” by the Employee, either individually or as a member of a “group,” as

5

 

such terms are used in Rule 13d of the General Rules and Regulations under the Securities Exchange
Act of 1934 (“Exchange Act”), of not more than 1% of the voting stock of any corporation shall not
be a violation of this Agreement.

     12.3 Right to Company Materials. The Employee agrees that all styles, designs,
recipes, lists, materials, books, files, reports, correspondence, records, and other documents
(“Company Material”) used, prepared, or made available to the Employee, shall be and shall remain
the property of the Company. Upon the termination of his employment and/or the expiration of this
Agreement, all Company Materials shall be returned immediately to the Company, and Employee shall
not make or retain any copies thereof.

     12.4 Anti-solicitation. The Employee understands and agrees that in the course of
employment with the Company, the Employee will obtain access to and/or acquire Company trade
secrets, including Confidential Information, which are solely the property of the Company.
Therefore, to protect such trade secrets, the Employee promises and agrees that during the term of
this Agreement, and for a period of two years thereafter, he will not influence or attempt to
influence employees, customers, franchisees, landlords, or suppliers of the Company or any of its
present or future subsidiaries or affiliates, either directly or indirectly, to divert their
employment or business to or with any individual, partnership, firm, corporation or other entity
then in competition with the business of the Company, or any subsidiary or affiliate of the
Company.

     12.5 Injunctive Relief. It is further expressly agreed that the breach of this
paragraph would result in immediate irreparable injury which would constitute grounds for
injunctive relief in a tribunal of appropriate jurisdiction, and the parties further consent and
stipulate to the entry of appropriate provisional injunctive relief in any appropriate tribunal
having jurisdiction over the parties.

     13. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered or when mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth below, or to such other addresses
as either party may have furnished to the other in writing in accordance herewith, exception that
notice of a change of address shall be effective only upon actual receipt:

	 	 	 	 	 
	 

	 	Company:
	 	Max & Erma’s Restaurants, Inc.

4849 Evanswood Drive

Columbus, Ohio 43229
	 

	 	Attention:
	 	Chief Executive Officer
	 
	 	 	 	 
	 

	 	Employee:
	 	Michael A. Nahkunst

P.O. Box 1247

Dripping Springs, Texas 78620

     14. Amendments or Additions. No amendment or additions to this Agreement shall be
binding unless in writing and signed by both parties hereto.

6

 

     15. Paragraph Headings. The paragraph headings used in this Agreement are included
solely for convenience and shall not affect, or be used in connection with, the interpretation of
this Agreement.

     16. Severability. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.

     17. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but both of which together will constitute one and the same
instrument.

     18. Arbitration. Except as provided herein, any controversy or claim arising out of
or relating in any way to this Agreement or the breach thereof, or Employee’s employment and any
statutory claims including all claims of employment discrimination shall be subject to private and
confidential arbitration in the City of Columbus, Ohio in accordance with the laws of the State of
Ohio. This provision will not apply provisional remedies as in connection with claims under
paragraph 12, or as otherwise provided herein.

     (a) The arbitration shall be conducted in a procedurally fair manner by a mutually agreed upon
neutral arbitrator selected in accordance with the National Rules for the Resolution of Employment
Disputes (“Rules”) of the American Arbitration Association or if none can be mutually agreed upon,
then by one arbitrator appointed pursuant to the Rules;

     (b) The arbitration shall be conducted confidentially in accordance with the Rules;

     (c) The arbitration fees shall be paid by the Company;

     (d) Each party shall have the right to conduct discovery including (3) three depositions,
requests for production of documents and such other discovery as permitted under the Rules or
ordered by the arbitrator;

     (e) The statute of limitations or any cause of action shall be that prescribed by law;

     (f) The arbitrator shall have the authority to award any damages authorized by law for the
claims presented including punitive damages and shall have the authority to award reasonable
attorneys fees to the prevailing party;

     (g) The decision of the arbitrator shall be final and binding on all parties and shall be the
exclusive remedy of the parties; and

The award shall be in writing in accordance with the Rules, and shall be subject to judicial
enforcement in accordance with Ohio law.

     19. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by

7

 

the Employee and such officer as may be specifically designated by the Committee. No waiver by
either party hereto at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this

Agreement shall be governed by the laws of the State of Ohio without regard to its conflicts of law
principles. All references to sections of the Exchange Act shall be deemed also to refer to any
successor provisions to such sections. Notwithstanding anything in this Agreement to the contrary,
upon and following Employee’s death, this Agreement shall inure to the benefit of and be
enforceable by Employee’s personal or legal representatives, executors, heirs, distributees,
devisees and legatees, as the case may be, with respect to the payments due by the Company as set
forth in paragraph 10.1 of this Agreement.

(remainder of page left intentionally blank; signature page follows)

8

 

     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on the date first
indicated above.

	 	 	 	 	 	 
	 	 	MAX & ERMA’S RESTAURANTS, INC.
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Todd Barnum
	 

	 	 	 	 
	 

	 	 	 	Todd Barnum

Chief Executive Officer
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	EMPLOYEE:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	/s/ Michael A. Nahkunst
	 

	 	 	 	 
	 

	 	 	 	michael a. nahkunst

9

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