EXHIBIT 10.1


 


REXNORD CORPORATION EXECUTIVE BONUS PLAN


(as amended March 31, 2006)


 


General
Description


 


Rexnord Corporation (the “Company”)
provides an incentive compensation bonus plan for key officers and directors
(the “Executive Bonus Plan”).  The purpose
of the Executive Bonus Plan is to provide a variable component of pay that
provides an incentive for the leadership of the company to achieve key business
objectives.


 


Each bonus fiscal year will
begin on April 1 and end on March 31. 
The first bonus fiscal year will begin on April 1, 2003 and end on March
31, 2004.


 


The form of bonus to be
received by participating executives is called the Performance Bonus and is
based on (i) the performance of the Company during the bonus fiscal year (the “Company
Performance Bonus”) and (ii) the performance of the executive in meeting
individual goals (Annual Improvement Priorities or “CEO approved AIP’s”) as
determined by the Compensation Committee, not to exceed five personal
performance goals (the “Individual Performance Bonus”).


 


PERFORMANCE
MEASURES AND WEIGHTING


 


The Performance Bonus amount
will be based on the measures below and weighted as follows:


 


•                  40% based on
total EBITDA


•                  40% based on
total Debt Repayment


•                  20% based on CEO
approved AIP’s (Individual Performance Bonus)


 


MINIMUM PERFORMANCE ACHIEVEMENT


 


Company Performance Bonus


 


Minimum performance achievement must be met
to trigger eligibility to receive a Company Performance Bonus payment under the
plan. The [EXECUTIVE’S TITLE] of the Company will be eligible to receive a
Company Performance Bonus for each bonus fiscal year in which both EBITDA and
Debt Repayment equal or exceed 90% of both of their respective EBITDA and Debt
Repayment targets as described below in the Section entitled “Achievement Targets”
(“EBITDA Target” and “Debt Repayment Target”).  
If the Company meets these minimum performance triggers, then the amount
of the Company Performance Bonus that the executive is eligible to receive will
be determined based upon the level of achievement of the performance measures
as described below under “Calculation of Performance Bonus - Company
Performance Bonus.”


 


Individual Performance Bonus 


 


EBITDA and Debt Repayment must equal or
exceed 70% of their respective Targets in order for the [EXECUTIVE’S TITLE] to
be eligible to receive a Individual Performance Bonus.  If the Company meets these minimum
performance triggers, then the amount of the Individual Performance Bonus that


 

















 


the executive is eligible to receive will be
determined based upon the level of achievement of the CEO approved AIP
performance measures as described below under “Calculation of Performance Bonus
- Individual Performance Bonus.”


 


CALCULATION OF PERFORMANCE BONUS 


 


Company Performance Bonus 


 


If the
executive is eligible to receive a Company Performance bonus, then the amount
of the bonus  that the executive will be
eligible to receive will be determined by the level of achievement of the
EBITDA and Debt Repayment performance measures, each computed
individually.  The bonus amount is based
on [Applicable Percentage]% of the [EXECUTIVE’S TITLE]’s base pay
times the respective performance measure weighting (the “Base Bonus”) and
adjusted for performance greater than or less than the Target amounts.  Accordingly, if the Company achieves 100% of
the EBITDA Target for a given bonus fiscal year, the [EXECUTIVE’S TITLE]’s
bonus amount will be [Applicable Percentage]% of the [EXECUTIVE’S TITLE]’s base
pay during the bonus fiscal year times 40%. Similarly, if the Company achieves
100% of the Debt Repayment Target for a given bonus fiscal year, the [EXECUTIVE’S
TITLE]’s bonus amount will be [Applicable Percentage]% of the [EXECUTIVE’S
TITLE]’s base pay during the bonus fiscal year times 40%.  If the Company achieves greater or less than
100% of the respective EBITDA and Debt Repayment Targets, the [EXECUTIVE’S
TITLE]’s bonus amounts will increase or decrease as a percentage of the Base
Bonus as set forth in the table below.


 


	
  Percent of

  EBITDA and

  Debt Reduction Target Achievement

  	
   

  	
  < 90%

  of

  Target

  	
   

  	
  90%

  of

  Target

  	
   

  	
  95%

  of

  Target

  	
   

  	
  100%

  of

  Target

  	
   

  	
  105%

  of

  Target

  	
   

  	
  110%

  of

  Target

  	
   

  	
  115%

  of

  Target

  	
   

  	
  120%

  of

  Target

  	
   

  	
  125%

  of

  Target

  	
   

  	
  130%

  or > of

  Target

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Percent of Base Bonus

  	
   

  	
  0%

  	
   

  	
  50%

  	
   

  	
  75%

  	
   

  	
  100%

  	
   

  	
  125%

  	
   

  	
  150%

  	
   

  	
  200%

  	
   

  	
  250%

  	
   

  	
  300%

  	
   

  	
  350%

  and >*

  	
   

  



 










*For each
additional 5% increase in the percent of Bonus Plan achievement target after an
achievement of 115%, the executive will receive an increase of 50% of the
percentage of the Base Bonus.


 


Individual Performance Bonus 


 


The Individual
Performance Bonus to be received by the executive for each bonus fiscal year
will be based on the performance of the executive with respect to the CEO
approved AIP’s as determined by the Compensation Committee in its sole
discretion. The bonus amount is based on [Applicable Percentage]% of the
[EXECUTIVE’S TITLE]’s base pay, times a weighting of 20%. Although a weighting
of 20% is given to the Individual Performance Bonus in accordance with the
40/40/20 weighting specified above, the Compensation Committee may, at its
discretion, award a payment based on a weighting percentage ranging from 0 to
40% to this measure.


 

















 


ACHIEVEMENT TARGETS


 


For the 2004
fiscal year, the EBITDA target shall be $137.6 million and the Debt Repayment
Target shall be $38 million.  The EBITDA
and Debt Repayment Targets for the 2005 through 2008 fiscal years shall be
determined in good faith by the Compensation Committee at its sole discretion.


 


“EBITDA” for a
given bonus fiscal year shall mean consolidated earnings before interest,
taxes, depreciation and amortization.   “Debt
Repayment” for a given bonus fiscal year shall mean the positive excess, if
any, of (a) debt outstanding at the beginning of the fiscal year, over (b) debt
outstanding  at the end of the fiscal
year. In both cases, EBITDA and Debt Repayment shall be computed in a manner
consistent with the Rexnord Management Incentive Plan including adjustments, if
any, as determined by the Compensation Committee, in its sole discretion.


 


The EBITDA and
Debt Repayment Targets are based upon certain revenue and expense assumptions
about the future business of the Company (the “Base Targets”).  Accordingly, in the event that the
Compensation Committee determines, in its sole discretion, that an adjustment
to target(s) is appropriate in order to maintain eligibility or prevent
dilution or enlargement of the Performance Bonus intended to be made available
under the Executive Bonus Plan, the Compensation Committee shall adjust the
financial targets in good faith and in any manner as it may deem equitable. In
the event of an acquisition or divestiture, the Base Targets would be adjusted
by the Compensation Committee for the purposes of bonus calculations.


 


	
  Base Targets

  	
   

  	
  2006

  	
   

  	
  2007

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base Debt Repayment Target

  	
   

  	
  $

  	
  54

  	
   

  	
  $

  	
  67

  	
   

  	
  $

  	
  92

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base EBITDA Target

  	
   

  	
  $

  	
  196.5

  	
   

  	
  $

  	
  222.7

  	
   

  	
  $

  	
  241.9

  	
   

  



 


The Base Targets above were
revised to reflect the Company’s acquisition of The Falk Corporation on May 16,
2005.


 


PAYMENT OF PERFORMANCE BONUS


 


The
Performance Bonus is calculated once the bonus fiscal year ends, the Company
receives its year-end financial audit, and performance reviews are
completed.  The Compensation Committee
shall then determine eligibility and the amount of Performance Bonus the
[EXECUTIVE’S TITLE] will receive under the terms of the Executive Bonus Plan.


 


If the
[EXECUTIVE’S TITLE] leaves the Company prior to the end of the bonus fiscal
year, he is not eligible for a bonus payment. 
The only exceptions are if the [EXECUTIVE’S TITLE] is terminated because
he formally retires under the pension plan (or retires meeting the requirements
of that plan), resigns with Good Reason or is terminated for other than Cause
(as such terms are defined in the [EXECUTIVE’S TITLE]’s employment
agreement).  Under these circumstances, a
pro-rated bonus will be paid at the time bonuses are paid to other executives.