EXHIBIT 10(19)
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (this "Agreement") dated as of March 26, 2004
is by and among Layne Christensen Company, a Delaware corporation (the
"Company"), and Wynnefield Partners Small Cap Value, L.P., Wynnefield Small Cap
Value Offshore Fund, Ltd., Wynnefield Partners Small Cap Value L.P. I, Channel
Partnership II, L.P., Wynnefield Capital Management, LLC, Wynnefield Capital,
Inc., Wynnefield Capital, Inc. Profit Sharing & Money Purchase Plan, Nelson Obus
and Joshua Landes (collectively, the "Investors").
R E C I T A L S
A. The Company has outstanding approximately 12,357,915 shares of common
stock (the "Common Stock").
B. On August 22, 2003, the Investors filed a Schedule 13D with the SEC
reporting that they owned a total of 929,150 shares of the Common Stock and that
Mr. Obus planned to seek representation on the Company's Board of Directors.
C. On November 11, 2003, the Investors filed an amendment to the Schedule
13D indicating that the Investors intended to become activist shareholders with
respect to the Company.
D. On February 4, 2004, the Investors delivered a notice to the Company of
their intent to nominate two candidates including Mr. Obus, to the Company's
Board of Directors at the Company's 2004 annual meeting of stockholders and to
solicit proxies in support of their election.
E. On February 11, 2004, the Investors filed a second amendment to the
Schedule 13D reporting that (i) the Investors had submitted a shareholder
proposal to the Company for inclusion in the Company's proxy statement with
respect to the Company's 2004 annual meeting of stockholders recommending that
the Board of Directors of the Company take the necessary steps to amend the
Company's Certificate of Incorporation and to take such other actions as may be
necessary in order to cause all directors of the Company to be elected annually
and not by classes (the "Shareholder Proposal") and (ii) indicating that they
planned to seek representation on the Company's Board of Directors by nominating
a slate of two candidates, including Mr. Obus, for election as directors at the
Company's 2004 annual meeting of stockholders and by engaging in a competing
proxy solicitation to elect their nominated slate.
F. The Company and the Investors desire to establish in this Standstill
Agreement certain restrictions concerning the future actions by the Investors
relating to the Company and the appointment of a representative of the Investors
to the Company's Board of Directors and the nomination of such representative
for re-election to the Company's Board of Directors at its 2004 annual meeting
of stockholders.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each of the Company and the Investors (each a "Party"),
intending to be legally bound, hereby agrees as follows:
ARTICLE I.
DEFINITIONS AND CONSTRUCTION
Section 1.1. Certain Definitions. As used in this Agreement, the
following terms shall have the meanings specified below:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Applicable Law" shall mean all applicable provisions of all (a)
constitutions, treaties, statutes, laws (including common law), rules,
regulations, ordinances or codes of any Governmental Authority, and (b) orders,
decisions, injunctions, judgments, awards and decrees of any Governmental
Authority.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations of the Exchange Act.
"Disinterested Directors" shall mean those members of the Board of
Directors of the Company that are members of the Incumbent Board.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Governmental Authority" shall mean any federal, state, local or
political subdivision, governmental or administrative body, instrumentality,
department or agency or any court, administrative hearing body, arbitration
tribunal, commission or other similar dispute resolution panel or body, and any
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of a government.
"Group" shall mean any group within the meaning of Section 13(d)(3) of
the Exchange Act as in effect on the date hereof or Rule 13d-5(b) thereunder.
"Incumbent Board" shall mean those individuals who, as of the date
hereof, constitute the Board of Directors; provided, however, that any
individual who becomes a director subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors. For the
avoidance of doubt, the Investor Nominee shall not be a member of the Incumbent
Board.
"Investor Nominee" shall mean Nelson Obus.
"Person" shall mean an individual, a partnership, an association, a
joint venture, a corporation, a limited liability company, a business, a trust,
any entity organized under Applicable Law, an unincorporated organization or any
Governmental Authority.
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"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall man the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Vote" shall mean, as to any entity, the ability to cast a vote at a
stockholders' or comparable meeting of such entity with respect to the election
of directors or other members of such entity's governing body.
"Voting Securities" shall mean the Common Stock and any other
securities of the Company having the right to Vote.
Section 1.2. Interpretation and Construction of this Agreement. The definitions
in Section 1.1 shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." All references herein to Articles and Sections shall be deemed to
be references to Articles and Sections of this Agreement unless the context
shall otherwise require. The headings of the Articles and Sections are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement. Unless the context shall
otherwise require or provide, any reference to any agreement or other instrument
or statute or regulation is to such agreement, instrument, statute or regulation
as amended and supplemented from time to time (and, in the case of a statute or
regulation, to any successor provision).
ARTICLE II.
COVENANTS OF INVESTORS; DIRECTOR NOMINEE
Section 2.1. Standstill Covenants. The Investors agree that they will
not, and they will cause each of their respective Affiliates and use their
reasonable best efforts to cause each of their Associates not to, directly or
indirectly, alone or in concert with others, unless specifically requested in
writing by the President of the Company or by a resolution of a majority of the
Disinterested Directors, take any of the actions set forth below:
(a) effect, seek, offer, propose (whether publicly or
otherwise) or cause or participate in, other than solely in connection with the
nomination or election of the Investor Nominee to the Company's Board of
Directors, any "solicitation" of "proxies" (as such terms are used in the proxy
rules of the SEC) with respect to the Company resulting in a Person becoming a
"participant" in any "election contest" (as such terms are used in the proxy
rules of the SEC) with respect to the Company. For the avoidance of doubt,
nothing herein shall prevent the Investors, their Affiliates or Associates from
voting for, or refraining from voting for, any nominee to the Board of
Directors, in their absolute discretion;
(b) submit, or request the Company to submit, the Shareholder
Proposal, or another shareholder proposal having the same effect, to a vote of
stockholders of the Company pursuant to Rule 14a-8 (or successor provision) of
the Exchange Act or otherwise and Wynnefield Partners Small Cap Value, L.P.
hereby withdraws the Shareholder Proposal; provided that nothing in this Section
2.1(b) shall restrict the manner in which the Investor
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Nominee may (i) vote on any matter submitted to the Company's Board of
Directors, (ii) participate in deliberations or discussions of the Company's
Board of Directors (including making suggestions, proposals and raising issues
to the Board) in his capacity as a member of the Company's Board of Directors or
(iii) otherwise exercise his fiduciary duty to the fullest extent authorized by
law. For the avoidance of doubt, nothing herein shall prevent the Investors,
their Affiliates or Associates from voting for or against any matter which is
submitted to stockholders for approval, in their absolute discretion; or
(c) form, join or participate in a Group with respect to any
Voting Securities (other than any Group whose members consist solely of the
Investors and any of their Affiliates and Associates) for the purpose of
effecting any of the actions set forth in Sections 2.1 (a) or (b).
Section 2.2. Investor Nominee.
(a) Within ten (10) calendar days of the date of this
Agreement, the Board of Directors of the Company will cause the number of
members of the Board of Directors to be increased to eight (8), with the
additional directorship being added to Class III, and the Board of Directors
will appoint the Investor Nominee to fill the newly created vacancy until the
next annual meeting. The Board of Directors will nominate the Investor Nominee
for election to such additional director position at the annual meeting of
stockholders scheduled to be held on June 3, 2004 for a term which will expire
at the first annual meeting of stockholders following the end of the Company's
fiscal year ending January 31, 2007. The Company's Board of Directors will
recommend the election of such Investor Nominee to the Company's stockholders
and the Company will solicit proxies for the election of such Investor Nominee
pursuant to its proxy statement for such meeting to the same extent and in the
same manner that it customarily solicits such proxies for other nominees of the
Company's Board of Directors. The Investor Nominee shall be appointed to the
Audit Committee and the Compensation Committee of the Board of Directors.
(b) The Company's obligation to solicit proxies for the
election of Investor Nominee pursuant to this Section 2.2 is subject to the
Investors and Investor Nominee providing all information requested by the
Company and reasonably necessary for the Company to prepare the proxy statement
in accordance with the SEC's proxy rules and the Company's bylaws in a timely
and complete manner.
Section 2.3. Press Releases, Etc. by the Investors. Unless required by
Applicable Law or legal process, neither the Company nor the Investors nor any
of their respective Affiliates or Associates may make any press release, public
announcement or other communication with respect to the existence or contents of
this Agreement, without the prior written consent of the President of the
Company or by a resolution of a majority of the Disinterested Directors of the
Company, on behalf of the Company, and by the Investor Nominee, on behalf of the
Investors. Nothing in this Section 2.3 shall prevent the Investors from
disclosing the contents of this Agreement and attaching a copy thereof as an
amendment to their Schedule 13D, and the Company from disclosing the contents of
this Agreement to the extent legally required in any reports or proxy materials
filed with the SEC.
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ARTICLE III.
TERM AND TERMINATION
Section 3.1. Termination. This Agreement shall have an initial term
commencing on the date of this Agreement and ending on the earlier of (y) the
date the Investor Nominee ceases, for any reason, to be a member of the Board of
Directors, or (z) the date which is thirty (30) days prior to the last date on
which a stockholder may give notice to the Company of his intention to submit
nominees for election to the Company's Board of Directors or otherwise submit a
matter for action at the Company's 2007 annual meeting of stockholders. Any
termination of this Agreement as provided herein shall be without prejudice to
the rights of any Party arising out of the breach by any other Party of any
provision of this Agreement.
ARTICLE IV.
MISCELLANEOUS
Section 4.1. Notices. All notices and other communications required or
permitted by this Agreement shall be made in writing and shall be deemed
delivered when delivered in person, transmitted by telecopier, or three days
after it has been sent by mail, as follows:
The Company: Layne Christensen Company
1900 Shawnee Mission Parkway
Mission Woods, KS 66205
Attn: Vice President and General Counsel
Telecopy No.: 913/362-8823
with a copy to: Stinson Morrison Hecker LLP
2600 Grand Avenue
Kansas City, Missouri 64108
Attn: Patrick J. Respeliers
Telecopy No.: 816-474-4208
Investor: Wynnefield Capital Management
450 Seventh Avenue
Suite 509
New York, New York 10123
Attn: Nelson Obus
Telecopy No.: 212-760-0824
with a copy to: Kane Kessler PC
1350 6th Avenue
New York, New York 10019
Attn: Jeffrey S. Tullman, Esq.
Telecopy No.: 212-245-3009
The Parties shall promptly notify each other in the manner provided in this
Section 4.1 of any change in their respective addresses. A notice of change of
address shall not be deemed to have been given until received by the addressee.
Communications by telecopier also shall be sent concurrently by mail, but shall
in any event be effective as stated above.
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Section 4.2. Assignment. No Party will assign this Agreement or any
rights, interests or obligations hereunder, or delegate performance of any of
its obligations hereunder, without the prior written consent of each other
Party.
Section 4.3. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the Parties in respect of the subject matter
contained herein, provided that this provision shall not abrogate any other
written agreement between the Parties executed simultaneously with this
Agreement. This Agreement supersedes all prior agreements and understandings
between the Parties with respect to such subject matter.
Section 4.4. Waiver, Amendment, etc. This Agreement may not be amended
or supplemented, and no waivers of or consents to departures from the provisions
hereof shall be effective, unless set forth in a writing signed by, and
delivered to, all the Parties. No failure or delay of any Party in exercising
any power or right under this Agreement will operate as a waiver thereof, nor
will any single or partial exercise of any right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.
Section 4.5. Binding Agreement; No Third Party Beneficiaries. This
Agreement will be binding upon and inure to the benefit of the Parties and their
successors and permitted assigns. Nothing expressed or implied herein is
intended or will be construed to confer upon or to give to any third party any
rights or remedies by virtue hereof.
Section 4.6. Governing Law. This Agreement shall be governed by the
laws of the State of Delaware, without regard to conflict or choice of laws
principles.
Section 4.7. Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. If any provision of this Agreement is held to be unenforceable for
any reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the Parties to the extent possible.
Section 4.8. Counterparts. This Agreement may be executed in one or
more counterparts each of which when so executed and delivered will be deemed an
original but all of which will constitute one and the same Agreement.
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IN WITNESS WHEREOF, the Company and the Investors have caused their
respective duly authorized officers to execute this Agreement as of the day and
year first above written.
LAYNE CHRISTENSEN COMPANY
By: /s/ A. B. Schmitt
----------------------------
Name: Andrew B. Schmitt
Title: President
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P.
By: /s/ Nelson Obus
----------------------------
Name:
Title:
WYNNEFIELD SMALL CAP VALUE OFFSHORE FUND, LTD.
By: /s/ Nelson Obus
----------------------------
Name:
Title:
WYNNEFIELD PARTNERS SMALL CAP VALUE L.P. I,
By: /s/ Nelson Obus
----------------------------
Name:
Title:
CHANNEL PARTNERSHIP II, L.P.
By: /s/ Nelson Obus
----------------------------
Name:
Title:
WYNNEFIELD CAPITAL MANAGEMENT, LLC
By: /s/ Nelson Obus
----------------------------
Name:
Title:
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WYNNEFIELD CAPITAL, INC.
By: /s/ Nelson Obus
----------------------------
Name:
Title:
WYNNEFIELD CAPITAL, INC. PROFIT SHARING & MONEY PURCHASE PLAN
By: /s/ Nelson Obus
----------------------------
Name:
Title:
/s/ Nelson Obus
----------------------------
Nelson Obus
/s/ Joshua Landes
----------------------------
Joshua Landes
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