LAYN Layne Christensen Company (delisted)

COMPENSATION DISCUSSION AND ANALYSIS

The following is a discussion and analysis of the compensation arrangements of our named executive officers (our “NEOs” or “Executives”) for fiscal 2018. We recommend that it be read together with the compensation tables and related disclosures below.

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EXECUTIVE SUMMARY

Our compensation program for our Executives is designed to:

Our executive compensation program seeks to achieve these objectives and to implement our commitment to a strong pay-for-performance philosophy by emphasizing performance-based incentive compensation under our Executive Short-Term Incentive Plan (the “STI Plan”) and our Long-Term Incentive Plan (the “LTI Plan”).

CEO and Other NEOs Target Compensation Mix

The Board of Directors and Compensation Committee engage in robust oversight of Layne’s executive compensation program. Below is a summary of the key features of our executive compensation program:

At our 2017 Annual Meeting, approximately 88% of votes cast were "FOR" our Say on Pay proposal. The Board of Directors believes the strong level of support for the Company’s executive compensation program reflects the

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Committee’s continued focus on ensuring that the total short- term and long-term incentive compensation for the Company’s executive officers is linked to the Company’s performance as discussed in this Form 10-K/A .

We continue to pay close attention to the views of Layne’s shareholders regarding executive compensation and other matters.

These components are described below, together with the decisions made under each component for fiscal 2018. We also may pay discretionary bonuses if the Committee determines such awards are necessary to appropriately reward performance.

The following sections also contain information on the performance targets for the various compensation components, the extent to which they were achieved, and how the compensation under each component was determined.

Our compensation plans tie a significant portion of the Executives’ total compensation to our financial and share price performance. The Committee believes that the Company’s target total compensation program should ideally be set at, or near, the 50th percentile of the market. Based on the most recent benchmarking study provided by the Committee’s compensation consultant, the aggregate target total compensation of our Executives is slightly below the 50th percentile of the benchmark data.

The Committee annually reviews base salaries, and recommends adjustments from time to time to realign our salaries with market levels paid by other companies for similar positions after taking into account individual performance, responsibilities, experience, autonomy, strategic perspectives and marketability, as well as the recommendation of the Chief Executive Officer.

For fiscal 2018, the Committee, with input from Mr. Caliel (for Executives other than himself), recommended to the Board of Directors that no changes be made to the base salaries for Messrs. Caliel, Maher or Crooke. The Committee, with input from Mr. Caliel, recommended to the Board of Directors that the base salaries for Messrs. Anderson and Purlee be increased from $400,000 to $425,000, and from $264,000 to $300,000, respectively.  The increase for Mr. Anderson was due to additional operational responsibilities that were assigned to him during the past fiscal year.  The increase for Mr.

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Purlee was based on competitive benchmarking data and the long-term historica l financial performance of the Inliner division.

The table below lists the Executives’ annual base salaries for fiscal 2018.

The STI Plan is designed to annually reward participants for their individual performance and contributions to the Company’s overall financial and operational performance. Participants may receive cash awards based on the extent to which they meet pre-established annual performance goals approved by the Committee in the first quarter of each fiscal year. In general, performance goals relate to both corporate-level and individual performance, and in the case of division presidents, division-level performance.

Individual bonus targets for each Executive are expressed as a percentage of base salary and reflect the executive’s position and scope of responsibilities. Consistent with our pay-for-performance philosophy, Executives may earn 0-200% of their bonus target for each category of performance goals based on the degree of achievement relative to the pre-established annual performance goals for that category.

The total target annual incentive award opportunities of each participating Executive under the STI Plan for fiscal 2018 are listed below.

The bonus payout for Mr. Maher related to the Minerals division was primarily due to its strong Adjusted EBITDA performance.  The Minerals division also achieved 88% of its safety target.  Mr. Maher achieved all of his individual goals for the Minerals division.  The Committee recommended, and the Board of Directors approved, a 19% reduction in the amount payable to Mr. Maher due to the Minerals division's conservative business plan being exceeded in large part due to an industry-wide increase in activity.

The Water Resources division did not achieve the threshold level of performance for its Adjusted EBITDA and safety goals and Mr. Maher did not achieve his individual performance goals related to the Water Resources division.  As a result, the Committee recommended, and the Board of Directors approved, no bonus for Mr. Maher related to the Water Resources division.

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The Committee believes that aligning the interests of stockholders and its Executives is supported through the grant of stock-based awards, which expose the Executives to the risks of declining stock prices and provide an incentive for Executives to maximize stockholder value. Awards are designed to encourage Executives to acquire a proprietary and vested interest in the growth and performance of the Company, as well as to assist the Company in attracting and retaining Executives by providing them with the opportunity to participate in the success and profitability of the Company.

Awards are made under the Company’s 2006 Equity Incentive Plan, which permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units.

Each Executive’s award (i.e., the participant’s “LTI Target Opportunity”) is expressed as a percentage of the participant’s current base salary, which will vary depending on the participant’s position in the Company. Under the LTI Plan, the percentages range from 200% of base salary for the Company’s Chief Executive Officer to 75% of base salary for the Company’s Senior Vice President of Water & Mineral Services. A percentage of each participant’s LTI Target Opportunity, as determined by the Committee, is granted in the form of time-vested restricted stock units (“RSUs”) and performance shares. The Committee has sole discretion to increase or decrease these percentages, recognizing that circumstances surrounding annual LTI grants will change from year to year.  

Fiscal 2018 Grants Under LTI Plan . Under the LTI Plan for fiscal 2018, the Committee, after consultation with Meridian, recommended and the Board of Directors approved equity awards consisting of a combination of time-vested restricted stock units and performance shares. The percentages for the time-vested RSUs and performance shares were set at 35% and 65%, respectively, of each participant’s LTI Target Opportunity. Awards were made to participating Executives that were employed by the Company on April 3, 2017.

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Time-Vested Restricted Stock Units . The Committee recommended, and the Board of Directors approved , grants of time-vested RSUs determined by dividing the RSU amount set forth in the table below by the closing price of our Common Stock as of April 3 , 201 7 (the date of grant).

Each RSU grant vests and is payable as follows: 33% on April 3, 2018, 34% on April 3, 2019 and 33% on April 3, 2020.  See “Executive Compensation and Other Information—Potential Payments Upon Change of Control, Retirement, Death or Disability” below for a description of the amounts the Executives may receive if the Executive's employment with the Company terminates prior to April 3, 2020 due to a termination without cause, retirement, death or disability or within two years following a change of control.

Performance Shares . The Committee also recommended, and the Board of Directors approved, grants of performance shares of Company Common Stock determined by dividing the Performance Share amount set forth in the table below by the value of such shares determined by the Company’s performance share valuation method as of April 3, 2017 (the date of grant).

The grants of performance shares are subject to performance and time-vesting requirements. If the trailing average closing price of the Company’s Common Stock during any 30 consecutive trading-day period is at or above any of the following stock price goals during the period commencing on April 3, 2017 and ending on April 3, 2020, then the performance shares will vest as follows: 33% will vest if at or above $11.19 per share; 67% will vest if at or above $12.81 per share and 100% will vest if at or above $14.59 per share. In addition, the performance shares are issuable only if the Executive is employed with the Company on the third anniversary of the date of grant. See “Executive Compensation and Other Information—Potential Payments Upon Change of Control, Retirement, Death or Disability” below for a description of the amounts the Executives may receive if the Executive's employment with the Company terminates prior to April 3, 2020 due to a termination without cause, retirement, death or disability or within two years following a change of control.

Retention Bonuses . On February 13, 2018, we entered into an agreement and plan of merger with Granite Construction Incorporated ("Granite Construction"), providing for the merger of a wholly-owned subsidiary of Granite Construction with and into Layne, with Layne surviving as a wholly-owned subsidiary of Granite Construction (the "Merger").

In connection with the Merger, the Company entered into a Retention Bonus Agreement with each of Mr. Maher and Mr. Purlee.  The agreements provide that the Company will pay Mr. Maher $50,000 and Mr. Purlee $100,000 if (1) he is continuously employed by the Company through the six-month anniversary of the closing of the Merger, (2) the Company terminated his employment other than for "cause" (as defined in the Retention Bonus Agreements) before the closing of the Merger and the Merger subsequently closes; or (3) the Company terminates his employment other than for cause prior to the six-month anniversary of the closing of the Merger.

If Mr. Maher or Mr. Purlee is no longer employed by the Company by reason of voluntary resignation, death, disability or dismissal for "cause” before the six-month anniversary of the closing of the Merger, he will forfeit his right to the payments under his Retention Bonus Agreement.

Inducement Awards . In conjunction with their employment with the Company, Messrs. Caliel and Anderson received a special inducement grant in the form of cash, stock options and RSUs. Vesting of the cash and RSU awards for Mr. Caliel

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were subject to performance-vesting based on the increase in the price of our common stock over a three year vesting period . The award s vest ed in 25% increments upon achievement of a Layne common stock price of $9, $10, $12 and $15. For vesting to occur, the stock price was required to remain at or above the specified price for at least ten consecutive trading days during the th ree year period commencing on the start date and Mr. Caliel was required to remain employed through that three-year period. The three-year vesting period ended on January 2, 2018 and Mr. Caliel received $750,000 in cash and 51,299 shares of common stock (r epresenting 75% of the maximum potential award) . Mr. Caliel was also granted options for 109,409 shares of common stock with an exercise price of $10.06 per share . These options also became vested and exercisable on January 2, 2018 .  

Mr. Anderson received a special inducement grant in the form of cash, stock options and RSUs. The awards to Mr. Anderson were all subject to performance-vesting.  Each of the awards will vest in 25% increments upon achievement of pre-established Layne common stock price goals of $9.37, $10.40, $13.00 and $15.00. For vesting to occur, the stock price must remain at or above the specified price for at least ten consecutive trading days during the three-year period commencing on the start date and Mr. Anderson must remain employed through that three-year period. The three-year vesting period for the award will end on July 20, 2018.  The awards consist of a cash award of up to $400,000, options to acquire up to 10,000 shares of our common stock and an RSU award of up to 61,728 shares.  As of January 31, 2018, 75% of the maximum potential award had been earned based on the increase in the price of our common stock since July 20, 2015.  As of the date of this Form 10-K/A the remaining 25% of the maximum potential award has been earned. See "Executive Compensation and Other Information—Potential Payments Upon Change of Control, Retirement, Death or Disability—Equity Award Agreements" for additional information regarding these grants.

BENEFITS

Our Executives who meet minimum service requirements are entitled to receive medical, dental, life and short-term and long-term disability insurance benefits and may participate in a capital accumulation plan, as described below. Such benefits are provided equally to all Company employees, other than where benefits are provided pro-rata based on the respective Executive’s salary (such as the level of disability insurance coverage).

Each of the Company’s executive officers, including the Executives, and substantially all other employees of the Company are eligible to participate in the Capital Accumulation Plan. The Capital Accumulation Plan is a defined contribution plan qualified under Section 401, including Section 401(k), of the Internal Revenue Code of 1986, as amended (the "Code").

The Capital Accumulation Plan provides for two methods of Company contributions: (i) a Company matching contribution tied to and contingent upon participant deferrals and (ii) a Company profit sharing contribution that is not contingent upon participant deferrals. The amount, if any, of Company paid contributions, both matching and profit sharing, for each fiscal year under the Capital Accumulation Plan is determined by the Board of Directors in its discretion. Each eligible employee meeting certain service requirements and electing to defer a portion of his or her compensation under the Capital Accumulation Plan participates in the Company’s matching contribution program pursuant to a formula as designated by the Board of Directors.

Currently, the Company makes a matching contribution that is equal to 100% of a participant’s salary deferrals that do not exceed 3% of the participant’s compensation plus 50% of a participant’s salary deferrals between 3% and 5% of the participant’s compensation. This form of matching contribution qualifies as what is known as a “safe harbor” matching contribution under the Employee Retirement Income Security Act of 1974. In addition, each eligible employee meeting certain service requirements participates in Company profit sharing contributions to the Capital Accumulation Plan in the proportion his or her eligible compensation bears to the aggregate compensation of the group participating in the Capital Accumulation Plan. At the option of the Board of Directors, all or any portion of Company contributions to this plan may be made in the Company’s Common Stock. Furthermore, each participant can voluntarily contribute, on a pre-tax basis, a portion of his or her compensation (which cannot exceed $18,000 for participants who are 49 or younger, or $24,000 for participants who are 50 or older, for the calendar year 2017) under the Capital Accumulation Plan. A participant’s account will be placed in a trust and invested at the participant’s direction in any one or more of a number of available investment options. Each participant may receive the funds in his or her Capital Accumulation Plan account upon termination of employment.

For services rendered in fiscal 2018, total Company contributions under the Capital Accumulation Plan were as follows:

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(1) The Capital Accumulation Plan match for Mr. Caliel includes $11,000 made in the first month of calendar year 2018, primarily related to his cash inducement award that was paid in calendar year 2018.

The Company’s Key Management Deferred Compensation Plan was designed to provide additional retirement benefits and income tax deferral opportunities for a select group of management and highly compensated employees. The plan allows such key executives, including the Executives, to defer the receipt of up to 50% of base salary and 100% of performance-based awards. The Company may match contributions to this plan in an amount determined annually by the Committee, generally based on recommendations from Company management. Currently, the Company is not making a matching contribution under the plan. In addition, the Company may make contributions on a discretionary basis.

Company contributions to the plan are subject to a five-year vesting schedule, with 50% of all such contributions becoming vested after three years of completed plan participation and 100% of all such contributions becoming vested after five years of completed plan participation or upon a participant turning 60 years of age. However, Company contributions become fully vested if a participant is involuntarily terminated by the Company within one year after a change of control of the Company. If a plan participant is not employed by the Company as of the last day of the plan year other than by reason of his or her retirement, death or disability, the Company contributions, if any, for such plan year shall be zero. In the event of an Executive’s retirement, disability or death, he or she is credited with the Company contribution, if any, for such plan year.

The deferred compensation plan is a nonqualified and unfunded plan, and participants have only an unsecured promise from the Company to pay the amounts when they become due from the general assets of the Company. The Committee offers this benefit to provide Executives with an opportunity to save, on a tax-deferred basis, amounts in addition to what they can save under the Company’s qualified retirement plans for retirement or future dates.

PERQUISITES

The Company believes its executive compensation program described above is generally sufficient for attracting talented executives and that providing other significant perquisites is generally neither necessary nor in the stockholders’ best interests. No Executives received perquisites with a value in the aggregate in excess of $10,000 during fiscal 2018.

ROLE OF COMPENSATION CONSULTANTS

To assist in carrying out its responsibilities, the Committee has from time to time retained independent consultants to provide advice on executive compensation and to perform specific tasks as requested by the Committee. Any consultant retained by the Committee reports directly to the Committee. On an annual basis, the Committee reviews and assesses the independence and performance of any consultant then engaged in order to confirm that the consultant is independent, free of any potential conflicts and meets all applicable regulatory requirements.

In late fiscal 2017, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant. Meridian provided an objective perspective as to the reasonableness of our executive compensation programs and practices and their effectiveness in supporting our strategic and compensation objectives. Meridian advised the Compensation Committee with respect to compensation trends and best practices, incentive plan design, competitive pay levels, proxy disclosure, and individual pay decisions with respect to our Executives. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC rules and concluded that no conflict of interests exists that would prevent Meridian from independently advising the Compensation Committee.

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COMPENSATION BENCHMARKING

From time to time, the Compensation Committee directs its consultant to assess the competitiveness of the compensation of our Executives relative to executives in similar roles at reasonably comparable companies. In preparation of these competitive assessments, the Committee’s consultant analyzes and matches the position and responsibilities of each Executive to benchmarking data to ensure that our compensation programs are market-based.

The Committee believes that Layne does not have a robust group of direct peer companies. In consultation with Meridian, the Committee approved the use of a methodology to develop a comparator group for compensation benchmarking purposes. The selection process was defined as follows:

The following is the resulting list of companies that comprised our “Compensation Benchmarking Group” for the fiscal year ended January 31, 2018 FY2018: Archrock, Inc., Coeur Mining, Inc., Core Laboratories N.V., ESCO Technologies Inc., LGI Homes, Inc., Lindsay Corporation, Lydall, Inc., Marten Transport, Ltd., MTS Systems Corporation, Myers Industries, Inc., Oil States International, Inc., Powell Industries, Inc., Quanex Building Products Corporation, Rayonier Advanced Materials Inc., Standex International Corporation, Sterling Construction Company, Inc., Stillwater Mining Company (acquired by Sibanye Gold Limited in May 2017), Tahoe Resources Inc., Tennant Company, TimkenSteel Corporation, TriMas Corporation, U.S. Silica Holdings, Inc., VSE Corporation and Wheaton Precious Metals Corp. (f/k/a Silver Wheaton Corp.).

Benchmark data from the Compensation Benchmarking Group helped the Compensation Committee determine appropriate actions to take regarding our executives’ target compensation for FY2018. However, benchmarking was not the sole factor considered when the Committee set compensation. The Committee’s final decisions on compensation take into consideration various subjective and other factors.

ROLE OF EXECUTIVE OFFICERS

Michael J. Caliel, our Chief Executive Officer, regularly attended meetings of the Committee during fiscal 2018 but was not a member of the Committee and did not vote on Committee matters. Mr. Caliel was not present for certain portions of Committee meetings, such as when the Committee held executive sessions or discussed CEO compensation.

In early fiscal 2018, Mr. Caliel submitted compensation recommendations to the Committee for each of the Executives (other than himself). In March 2018, Mr. Caliel also recommended to the Committee the amount of STI Plan bonuses to be paid to each of the Executives (other than himself) for fiscal 2018.

CLAWBACK POLICY

The Board of Directors has adopted a policy that gives the Board, or if designated by the Board, the Committee, the ability to recoup cash and equity-based incentive compensation due to misconduct resulting in the Company’s material noncompliance with any financial reporting requirement under the securities laws. For purposes of the clawback policy, incentive compensation does not include compensation, in any form, for which vesting, payment, delivery, or exercisability is not based on goal or performance achievement. The Board of Directors, or the Committee, has discretion to seek recovery of any amount that it determines was received by any Executive during the three-year period preceding the date on which the Company is required to prepare an accounting restatement; other than payments of amounts that were earned and deferred by the Executive more than three years prior to such date.

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STOCK OWNERSHIP GUIDELINES

The Company has stock ownership guidelines for certain executive officers as follows:

Executive officers subject to these guidelines are required to achieve the applicable ownership level within five years of the later of the effective date of the policy (April 15, 2015) or the date an individual becomes subject to the stock ownership guidelines. If an individual becomes subject to a greater ownership amount for any reason (e.g., due to promotion or increase in base salary), the individual is expected to meet the higher ownership amount within the later of the original period of becoming subject to the stock ownership guidelines or five years from the effective date of the increased requirement.

HEDGING POLICIES

Our policy statement regarding Securities Trading and Handling of Nonpublic Information prohibits our executive officers and directors from engaging in certain types of hedging activity, such as short sales or buying or selling put or call options of any of our securities.

ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Company conducts an advisory vote on executive compensation each year at its annual meeting. While the votes are not binding on the Company, its Board of Directors, or the Committee, the Committee believes that an annual advisory vote on executive compensation offers stockholders the opportunity to express their views regarding the Company’s compensation program and the Committee’s decisions on executive compensation. The Board of Directors and the Committee value the opinions of stockholders and each year the Committee closely examines stockholders’ concerns and evaluates whether any actions are necessary to address those concerns.

At last year’s annual meeting, approximately 88% of the votes cast “for” and “against” the advisory vote on executive compensation were voted “for” the Company’s named executive officer compensation as disclosed in the proxy statement. The Board of Directors believes the percentage of votes cast “for” the Company’s named executive officer compensation reflects the Committee’s continued focus on ensuring that the total short- and long-term incentive compensation for the Company’s executive officers is linked to the Company’s performance as discussed elsewhere in this Form 10-K/A.

TAX AND ACCOUNTING TREATMENT OF COMPENSATION

Prior to the enactment of the Tax Cuts and Jobs Act ("TCJA") on December 22, 2017, Section 162(m) of the Code generally disallowed a tax deduction to publicly held companies for compensation paid to certain executive officers in excess of $1 million per officer in any year that did not qualify as performance based. In evaluating the annual compensation plan with respect to the fiscal year ended January 31, 2018, the Committee considered the potential tax deductibility of executive compensation under Section 162(m) of the Code and sought to qualify certain elements of these applicable executives’ compensation as performance-based while also delivering competitive levels and forms of compensation. The TCJA repealed the performance-based exception under 162(m) of the Code. As a result, subject to certain exceptions, the $1 million dollar deduction limit now applies to all compensation paid to anyone serving as the chief executive officer or the chief financial officer at any time during the taxable year and the top three other highest compensated executive officers serving at fiscal year end. The new rules generally apply to taxable years beginning after December 31, 2017, but do not apply to remuneration provided pursuant to a written binding contract in effect on November 2, 2017, that is not modified in any material respect after that date. Stock options granted under the 2006 Equity Incentive Plan with an exercise price of at least fair market value and performance shares granted under the 2006

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Equity Incentive Plan are intended to qualify as performance-based compensa tion under Section 162(m) of the Code prior to its amendment.

The Committee believes that it is in the Company’s best interests to maintain flexibility in the administration of the compensation program. In order to retain the flexibility to compensate the Company’s management in the manner best promoting the Committee’s policy objectives, the Committee does not require that all compensation be deductible. Accordingly, certain payments, including payments under the STI Plan grants of RSUs are not intended to qualify as performance-based compensation and may be subject to the $1 million deductibility limitation of Section 162(m) of the Code.

The Committee evaluated the impact of the TCJA on the Company’s existing compensation plans in coordination with the Company’s compensation based policy objectives and determined that no changes to the Company’s compensation program are required at this time. However, the Committee will continue to evaluate the impacts of the TCJA and the Company’s policy objectives to ensure that the Company’s compensation program is administered in a manner that serves the best interests of the Company and its stockholders.

Certain of the Company’s nonqualified compensation and benefits arrangements, incentive programs and corporate practices (such as severance, relocation and expense reimbursements) are considered nonqualified deferred compensation and subject to Section 409A of the Internal Revenue Code of 1986, as amended, and the related regulations. In general, Section 409A restricts the timing and manner of payment (as well as the timing of participant elections) under these types of taxable compensation programs. The Company’s arrangements, programs and practices comply with these statutory and regulatory provisions.

The Company accounts for stock-based compensation in accordance with the requirements of ASC Topic 718, which requires the Company to expense the estimated value of certain stock-based compensation.

The members of the Compensation Committee are set forth in the preceding section. During the most recent fiscal year, no Layne Christensen executive officer served as (i) a member of the compensation committee (or equivalent), or the board of directors, of another entity, one of whose executive officers served on the Company’s Compensation Committee or (ii) a member of the compensation committee (or equivalent) of another entity, one of whose executive officers served as a director of the Company.

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RISK OVERSIGHT

The Board of Directors considers oversight of the Company’s risk management efforts to be a responsibility of the entire Board. The Board of Director’s role in risk oversight includes receiving regular reports from members of senior management on areas of material risk to the Company, or to the success of a particular project or endeavor under consideration, including operational, financial, legal and regulatory, security, strategic and reputational risks. The full Board of Directors (or the appropriate Committee, in the case of risks that are under the purview of a particular Committee) receives these reports from the appropriate members of management to enable the Board (or Committee) to understand the Company’s risk identification, risk management, and risk mitigation strategies. When a report is vetted at the Committee level, the chairperson of that Committee subsequently reports on the matter to the full Board. This enables the Board and its Committees to coordinate the Board’s risk oversight role.

Part of the Audit Committee’s responsibilities, as set forth in its charter, is to review with corporate management, the independent auditors and the internal auditors, if applicable, any legal matters, risks or exposures that could have a significant impact on the financial statements and the steps management has taken to minimize the Company’s exposure. In this regard, the Company’s internal auditors prepare annually a comprehensive risk assessment report and review that report with the Audit Committee. This report identifies the material business risks for the Company, and identifies the Company’s internal controls that respond to and mitigate those risks. The Company’s management regularly evaluates these controls, and the Audit Committee is provided regular updates regarding the effectiveness of the controls. The Audit Committee regularly reports to the full Board.

RISK ASSESSMENT OF COMPENSATION POLICIES

In March 2018, the Company conducted a risk assessment of its compensation policies and practices. The Company’s compensation policies and practices were evaluated to ensure that they do not foster risk-taking above the level of risk associated with the Company’s business model. The Company considered the design and operation of its compensation arrangements, including the performance objectives and target levels used in connection with incentive awards, and evaluated the relationship between the Company’s risk management and these arrangements. The results of the assessment were then reported to the Compensation Committee. Based on this assessment, the Compensation Committee concluded that the Company has a balanced pay and performance program that does not encourage unnecessary or excessive risk-taking and that any risks arising from the Company’s compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.

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POTENTIAL PAYMENTS UPON CHANGE OF CONTROL, RETIREMENT, DEATH OR DISABILITY

The following section describes the benefits that may become payable to certain Executives in connection with a termination of their employment with the Company or a change in control of the Company under arrangements in effect on January 31, 2018.

The Company has entered into severance agreements with Messrs. Caliel, Anderson, Crooke and Maher, which provide payments and benefits in connection with a termination of employment in certain circumstances, including enhanced benefits for certain terminations that occur in connection with a change in control.  

On February 13, 2018, we entered into an agreement and plan of merger with Granite Construction providing for the acquisition of Layne by Granite Construction pursuant to the Merger. The closing of the Merger would constitute a change in control for purposes of each Executive’s severance agreement.

The severance agreements subject these Executives to certain restrictive covenants including covenants not to compete, confidentiality and non-solicitation of Company employees, which run during the term of the severance agreement. If an Executive fails to comply with these covenants (subject to a notice and right to cure period), the terminated Executive would not be entitled to receive the severance benefits described in this section. The severance agreements also contain

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covenants not to compete and non-solicitation provisions that apply for 24 months after termination with respect to Messrs. Caliel, Anderson and Crooke and for 12 months after termination with respect to Mr. Maher.

The severance agreements with Messrs. Caliel, Anderson, Crooke and Maher generally provide:

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In connection with the Merger, the Company entered into a Retention Bonus Agreement with each of Mr. Maher and Mr. Purlee.  The agreements provide that the Company will Mr. Maher $50,000 and Mr. Purlee $100,000 if (1) he is continuously employed by the Company through the six-month anniversary of the closing of the Merger, (2) the Company terminated his employment other than for "cause" (as defined in the Retention Bonus Agreements) before the closing of the Merger and the Merger subsequently closes; or (3) the Company terminates his employment other than for cause prior to the six-month anniversary of the closing of the Merger.  If Mr. Maher or Mr. Purlee is no longer employed by the Company by reason of voluntary resignation, death, disability or dismissal for "cause” before the six-month anniversary of the closing of the Merger, he will forfeit his right to the payments under his Retention Bonus Agreement.

The Executives are parties to RSU award, stock option award, performance share and cash incentive award agreements made pursuant to the Company’s 2006 Equity Incentive Plan. The award agreements and the 2006 Equity Incentive Plan provide in varying degrees, as described in greater detail below, for acceleration of the vesting of the awards in connection with a change of control, the Executive’s retirement and the Executive’s death or disability.

Prior to May 31, 2017, the 2006 Equity Incentive Plan provided that, unless otherwise specified in an award agreement or other agreement approved by Layne’s Compensation Committee to which a participant is a party, upon a change of control of the Company each of the Executives’ equity awards will become immediately vested. Under the 2006 Equity Incentive Plan, as amended and restated effective May 31, 2017, unless otherwise specified in an award agreement or other agreement approved by the Company's Compensation Committee to which a participant is a party, awards will only become vested if a participant’s employment is involuntarily termination (without cause) during the two-year period following a change in control. Under the terms of Mr. Anderson’s severance agreement, the 2006 Equity Incentive Plan’s automatic change of control vesting provisions are not applicable to an equity award held by Mr. Anderson unless otherwise specifically stated in the equity award agreement.

Upon the “retirement” of an Executive, which is defined under the equity award agreements as the Executive’s termination from all employment after attaining the age of 60 after having been employed by the Company or one of its affiliates for five years or more, the award agreements provide for various treatment of the awards. Under the performance share award agreements, the awards vest for the portion of the period during the term of the award in which the Executive was employed by the Company, subject to the satisfaction of the performance criteria specified therein. Under the RSU and option award agreements, the awards are accelerated in full upon the Executive’s retirement, except that under the fiscal 2018 RSU award agreements, the awards vest for the portion of the period during the term of the award in which the Executive was employed by the Company.

Upon the death or “disability” of an Executive, the award agreements provide for various treatment of the awards. Under the RSU and option award agreements, the vesting of the awards is accelerated, except that under the fiscal 2018 RSU award agreements, the awards vest for the portion of the period during the term of the award in which the Executive was employed by the Company. Under the performance share award agreements, the amount of the award is payable at the end of the performance period subject to the achievement of the performance targets and is pro-rated based on the number of quarters during the performance period that the Executive was employed, except that under the fiscal 2018

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perf ormance share award agreements, the awards are payable with 60 days of the death or disability in an amount equal to 67% of the award (the target amount) and is pro-rated for the portion of the period during the term of the award in which the Executive was employed by the Company .

Prior to the awards for fiscal 2018, the award agreements did not provide for the acceleration of vesting upon a termination of employment without cause.  Under the fiscal 2018 RSU award agreements, upon a termination of an Executive without cause, the awards vest for the portion of the period during the term of the award in which the Executive was employed by the Company. Under the fiscal 2018 performance share award agreements, upon a termination of an Executive without cause, the amount of the award is payable at the end of the performance period subject to the achievement of the performance targets and is pro-rated based on the number of quarters during the performance period that the Executive was employed.

Mr. Anderson received a special inducement grant in the form of cash, stock options and RSUs, all of which are performance-vesting. These award grants are not governed by the terms of his severance agreement. Mr. Anderson must be employed by the Company on the third anniversary of his start-date for any of the inducement grant to vest. Each inducement award agreement provides for the acceleration of the vesting of the awards, regardless of the achievement of any performance criteria (with respect to the stock option, RSU and cash incentive awards) upon the occurrence of a change of control of the Company. Additionally, each agreement provides for proportionate vesting or exercisability (with respect to the stock option award) upon the occurrence of a “Qualifying Involuntary Termination” (as defined under Mr. Anderson’s severance agreement) based on the number of days he was employed in the vesting period. If Mr. Anderson’s employment is terminated for any other reason, including his death, “disability”, “Cause” (as defined under his severance agreement) or other voluntary resignation, the award agreements each provide that he forfeits any unvested award amounts.

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The following table summarizes the severance benefits due Messrs. Crooke and Purlee upon their retirement under his restricted stock, stock option, RSU and performance share award agreements (assuming their retirement occurred on January 31, 2018). Messrs. Caliel, Anderson and Maher are not retirement-eligible under the terms of the 2006 Equity Incentive Plan.

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The following table summarizes the severance benefits due Messrs. Caliel, Anderson, Crooke and Maher under their severance agreements, retention bonus agreements and equity award agreements and the benefits due Mr. Purlee under his restricted stock, stock option, RSU and performance share award agreements upon a change of control (assuming the change of control occurred on January 31, 2018 and, for Messrs. Caliel, Anderson, Crooke and Maher, the termination by the Company without cause, or their voluntary termination due to their constructive termination, on such date):

Generally, all severance payments under the agreements will begin following the Executive’s termination of employment. However, as is provided for in the Severance Agreements, certain delays in payment timing may occur in order to comply with Section 409A of the Internal Revenue Code.

Granite Construction Merger

The proxy statement/prospectus to be delivered to our shareholders in connection with their approval of the Merger will identify potential change in control payments to the Executives in connection with the Merger. The payments identified in the proxy statement/prospectus relating to the Merger will differ from the information set forth above because the disclosure requirements, time periods and assumptions differ from those set forth in the proxy statement/prospectus relating to the Merger. The payments our Executives will receive, if any, will differ from the information set forth in the proxy statement/prospectus relating to the Merger and from what is set forth above.

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CEO PAY RATIO

Layne’s compensation and benefits philosophy and the overall structure of our compensation and benefit programs are broadly similar across the organization to encourage and reward all employees who contribute to our success. We strive to ensure the pay of every Layne employee reflects the level of their job impact and responsibilities and is competitive within our peer group. Compensation rates are benchmarked and set to be market-competitive in the country in which the jobs are performed. Layne’s ongoing commitment to pay equity is critical to our success in supporting a diverse workforce with opportunities for all employees to grow, develop, and contribute. Layne employs over 2,000 people mostly in the U.S. and smaller groups in Mexico and Brazil.

Under rules adopted pursuant to the Dodd-Frank Act of 2010, Layne is required to calculate and disclose the total compensation paid to its median paid employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to Layne’s CEO. The paragraphs that follow describe our methodology and the resulting CEO Pay ratio.

Our CEO to Median Employee pay ratio was calculated in accordance with what the SEC requires pursuant to Item 402(u) of Regulation S-K. We identified the Median Employee by examining the calendar year 2017 total gross compensation for all individuals, excluding our CEO, who were employed by us on December 31, 2017 (i.e., the last day of calendar year 2017). We included all employees, whether employed on a full-time, part-time, or seasonal basis.

The following adjustments were made with respect to total gross compensation:

The following pay elements were  included  in the total gross compensation for each employee:

The following pay elements were  excluded  in the total gross compensation for each employee:

We determined our Median Employee by: 

After identifying the Median Employee based on total gross compensation, we calculated the fiscal 2018 total compensation for such employee using the same methodology we use for our named executive officers as set forth in the Summary Compensation Table above.

As illustrated in the table below, our fiscal 2018 CEO to Median Employee pay ratio is 65:1.

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COMPENSATION OF DIRECTORS

Each non-employee director of the Company, except the Chairman of the Board, received an annual retainer equal to $65,000, and the Chairman of the Board received an annual retainer equal to $100,000. The Chairmen of the Audit, Compensation and Nominating & Corporate Governance Committees received additional annual retainers of $25,000, $17,500 and $10,000, respectively, while the members of each such committee received additional annual retainers of $10,000, $7,500 and $5,000, respectively. All such retainers were paid in quarterly installments.

For fiscal 2018, each non-employee director, except the Chairman, also received an annual award of restricted stock of the Company with a value approximately equal to $50,000 on the date of the award. For fiscal 2018, the Chairman received an annual award of restricted stock with a value equal to $75,000 on the date of the award as consideration for his services as a director. The annual equity award for fiscal 2018 was made on April 3, 2017. The restricted stock is valued based on the market price of the Company’s Common Stock on the day the stock is issued, vests one year from the date of issuance, and is otherwise subject to all of the terms and conditions of the Company’s 2006 Equity Incentive Plan, or such other plan under which the restricted stock may be issued. Directors of the Company who are also employees of the Company receive no compensation for service to the Company as directors.

A director may elect to defer receipt of all or a portion of his cash compensation in accordance with the terms of the Company’s Deferred Compensation Plan for Directors. Under the Company’s Deferred Compensation Plan for Directors, non-employee directors of the Company can elect to receive deferred compensation in three forms—a cash credit, a stock credit or a combination of the two. The value of deferrals made in the form of a stock credit track the value of the Company’s Common Stock. Deferrals made in the form of a cash credit will accumulate interest at a rate based on the annual yield of the longest term United States Treasury Bond outstanding at the end of the preceding year. All payments made under the plan will be made in cash. As of January 31, 2018, Mr. Brown had accumulated the equivalent of 28,813 shares of Common Stock in his stock credit account, Mr. Butler had accumulated the equivalent of 2,940 shares of

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Common Stock in his stock credit account, Mr. Obus had accumulated the equivalent of 47,323 shares of Common Stock in his stock credit account and Mr. Gilmore had accumulated the equivalent of 152 shares of Common Stock in his stock credit accou nt. Mr. Nesser and Mr. Krusi had no shares of Common Stock in their respective stock credit accounts

The following table sets forth the compensation paid to our directors during the fiscal year ended January 31, 2018. Because Mr. Caliel was also an employee of the Company during the fiscal year, his compensation is reported in our Summary Compensation Table and not in the following table.

As of January 31, 2018, the Company had aggregate outstanding option awards to non-employee directors in the amounts of 168,345; 64,960; 39,885; 22,673, 6,444 and 32,874 held by Messrs. Brown, Butler, Obus, Gilmore, Nesser and Krusi, respectively.

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