Exhibit 10.4


 


AMENDMENT NO. 1 TO


EMPLOYMENT AGREEMENT


 


This Amendment
No. 1 to the Employment Agreement (the “Amendment”), dated March 31, 2006 by
and between Rexnord Corporation, a Delaware Corporation (together with any
successor thereto, the “Company”), and Michael N. Andrzejewski (the “Executive”).


R E C
I T A L S:


 


WHEREAS, the Company and the Executive have
previously entered into an Employment Agreement, dated November 25, 2002 (the “Agreement”),
and the Rexnord Corporation Executive Bonus Plan in the form then in effect was
attached to the Agreement as Exhibit A (the “Original Exhibit A”); and


 


WHEREAS, effective March 31, 2006 the Company
amended its Executive Bonus Plan to include certain revised target amounts
relating to the Executive’s bonus; and


 


WHEREAS, the Company and the Executive wish
to amend the Agreement pursuant to the terms herein set forth to reflect such
amendments to the Executive Bonus Plan.


 


NOW, THEREFORE, in consideration of the
foregoing and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties, intending to be legally bound, hereto agree
as follows:


 


A G R
E E M E N T


 


1.             The
Rexnord Corporation Executive Bonus Plan, as amended by the Company on March
31, 2006 and set forth on the Exhibit A to this Amendment (the “Amended Exhibit
A”), shall become Exhibit A to the Agreement in lieu of the Original Exhibit A
and shall replace the Original Exhibit A in its entirety.


 


2.             All
other terms of the Agreement shall remain unchanged.


 


IN WITNESS WHEREOF,
the parties have executed this Agreement on the date and year first written
above.


 


[Signature Pages Follow]


 

















 


 


	
   

  	
  REXNORD CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James T.
  Strahley

  	
   

  
	
   

  	
  Name: James
  Strahley

  
	
   

  	
  Title: VP
  Human Resources

  
	
   

  
	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael
  N. Andrzejewski

  	
   

  
	
   

  	
  Name:  Michael N. Andrzejewski

  



 

















 


EXHIBIT A


 


REXNORD CORPORATION EXECUTIVE BONUS PLAN


 


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 Vice President of Business Development of the Company (“VP”) 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 VP 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 35% of the VP’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 VP’s bonus amount will be
35% of the VP’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 VP’s bonus amount will be 35% of the VP’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 VP’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 35% of the VP’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 VP will receive
under the terms of the Executive Bonus Plan.


 


If the VP 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 VP 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 VP’s
employment agreement).  Under these
circumstances, a pro-rated bonus will be paid at the time bonuses are paid to
other executives.