Exhibit 10.1


 


REXNORD
CORPORATION


 


CHANGE
OF CONTROL RETENTION AGREEMENT


 


This Change of Control Retention Agreement
(the “Agreement”) is entered into as of March 22, 2006 (the “Effective Date”)
by and between Rexnord Corporation (the “Company”) and Robert A. Hitt (the “Executive”).


 


RECITALS


 


A.            It is expected that the Company from time to time will
consider the possibility of a Change of Control (as defined below).  The Board of Directors of the Company (the “Board”)
recognizes that such consideration can be a distraction to the Executive and
can cause the Executive to consider alternative employment opportunities.


 


B.            The Board believes that it is in the best interests of
the Company and its shareholders to provide the Executive with an incentive to
continue his or her employment and to maximize the value of the Company upon a
Change of Control for the benefit of its shareholders.


 


C.            In order to provide the Executive with enhanced financial
security and sufficient encouragement to remain with the Company notwithstanding
the possibility of a Change of Control, the Board believes that it is
imperative to provide the Executive with certain severance benefits upon the
Executive’s termination of employment.


 


AGREEMENT


 


In consideration of the mutual covenants herein
contained and the continued employment of Executive by the Company, the parties
agree as follows:


 


1.             Severance
Benefits.


 


(a) Termination of Employment.  In the event Executive’s employment with the
Company terminates for any reason, Executive will be entitled to any
(i) unpaid Base Salary accrued up to the effective date of termination,
(ii) unpaid, but earned and accrued annual incentive for any completed
fiscal year as of Executive’s termination of employment, (iii) benefits or
compensation as provided under the terms of any employee benefit and
compensation agreements or plans applicable to Executive, and
(iv) unreimbursed business expenses required to be reimbursed to
Executive.


 


(b) Termination Without Cause or for Good Reason
Following a Change of Control.  If
Executive’s employment is (i) terminated by the Company without Cause or (ii)
terminated by the Executive for Good Reason, within eighteen (18) months
following a Change of Control, and not due to Executive’s death, Disability or
resignation (other than for Good Reason), then, subject to Executive’s
compliance with Section 2, Executive will be entitled to receive:


 


(i)    Severance pay in the amount equal to
eighteen (18) months of Executive’s base salary, as in effect immediately prior
to the date of termination of employment or


 

















 


Change of Control, whichever is greater,
which shall be paid over eighteen (18) months (the “Severance Pay Period”)
at regular pay day intervals in accordance with the Company’s customary payroll
procedures;


 


(ii)   The bonus the Executive would have received
if Executive remained employed with the Company through the end of the bonus
performance period in which Executive’s employment terminates, which bonus, to
the extent bonuses are paid by the Company for such performance period, shall
be based on the Company’s performance in relation to the performance targets
set forth in the bonus plan applicable to the Executive (such amount to be
determined in good faith by the Compensation Committee of the Board), which
shall be paid in the calendar year in which the end of the bonus period falls;


 


(iii)   Group medical and dental insurance coverage
through the Severance Pay Period, or until Executive is covered by the plan of
another employer, provided Executive continues to make any required
contributions to such plans; and


 


(iv)  Payments equal to eighteen (18) months of the
premium cost for life insurance coverage (excluding supplemental life insurance
coverage) under the Company’s life insurance plan in effect for the Executive
immediately prior to the date of termination, payable over the Severance Pay
Period at regular pay day intervals in accordance with the Company’s customary
patrol procedures.


 


(c) Termination for Cause, Due to Death or
Disability, Resignation by Executive. 
If Executive’s employment with the Company is terminated for Cause by
the Company, terminated due to Executive’s death or Disability, or terminated
due to Executive’s resignation (other than for Good Reason), then
(i) Executive’s outstanding equity awards will terminate in accordance
with the terms and conditions of the applicable award agreement(s);
(ii) all payments of compensation by the Company to Executive hereunder
will terminate immediately, and (iii) Executive will be eligible for severance
benefits only in accordance with the Company’s then established plans,
programs, and practices.


 


(d) Sole Right to Severance.  This Agreement is intended to represent
Executive’s sole entitlement to severance payments and benefits in connection
with the termination of Executive’s employment within eighteen (18) months
following a Change of Control.  To the
extent Executive is entitled to receive severance or similar payments and/or
benefits under any other Company plan, program, agreement, policy, practice, or
the like, severance payments and benefits due to Executive under this Agreement
will be so reduced.


 


2.     Conditions
to Receipt of Severance; No Duty to Mitigate.


 


(a) Separation Agreement and Release of Claims.  The receipt of any severance pursuant to Section 1
will be subject to Executive promptly signing and not revoking a separation
agreement and release of claims in the form provided to Executive by the
Company.  No severance will be paid or
provided until the separation agreement and release agreement becomes effective
(the “Release Effective Date”).


 


(b) Nondisparagement.  During Executive’s services as an employee
with the Company, its successor entity, any respective subsidiary or director
or indirect parent entity and for 12 months thereafter, Executive will not
knowingly disparage, criticize, or otherwise make any derogatory statements
regarding the Company, its affiliates, its successors, its directors, or its
officers.  The


 

















 


foregoing restrictions will not apply to any
statements that are made truthfully in response to a subpoena or other
compulsory legal process.


 


(c) Other Requirements.  Executive agrees to continue to comply with
the terms of (i) that certain Stockholders Agreement by and among RBS Global,
Inc., the Company’s parent entity (“Global”), and signatories thereto, as
amended and restated on May 13, 2005 (the “Stockholders Agreement”), (ii) the
Option Agreement entered into by and between Global and Executive, and (iii) the Company’s Employee Patent and Confidential
Information Agreement entered into by Executive (the “Confidential Information
Agreement”).


 


(d) Confidentiality.  Executive shall keep this Agreement and its
terms confidential and shall not disclose or discuss the same with anyone other
than his attorney, accountant and spouse, if any.


 


(e) No Duty to Mitigate.  Executive will not be required to mitigate
the amount of any payment contemplated by this Agreement, nor will any earnings
that Executive may receive from any other source reduce any such payment.


 


3.     Definitions.


 


(a) Cause. 
For the purposes of this Agreement, “Cause” shall mean, (i) the Board’s
determination that the Executive failed to substantially perform his or her
duties (other than any such failure resulting from the Executive’s
Disability);  (ii) the Board’s
determination that the Executive failed to carry out, or comply with any lawful
and reasonable directive of the Board or the Executive’s immediate supervisor,
which is not remedied within ten days after receipt of written notice from the
Company specifying such failure;  (iii)
the Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of
unadjudicated probation for any felony, indictable offence or crime involving
moral turpitude;  (iv) the Executive’s
unlawful use (including being under the influence) or possession of illegal
drugs on the Company’s premises or while performing the Executive’s duties and
responsibilities; or (v) the Executive’s commission of a material act of fraud,
embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty
against the Company, Global, any of their respective subsidiaries or successor
entities.


 


(b) Change of Control.  “Change of Control” shall mean the
consummation of any transaction or series of transactions pursuant to which one
or more persons or entities or group of persons or entities (other than the
Initial Carlyle Stockholders (as defined in the Stockholders Agreement), its
affiliates or any transfer as a result of any liquidation or dissolution of any
Carlyle Stockholder (as defined in the Stockholders Agreement)) acquires (i)
capital stock of Global or the Company possessing the voting power sufficient
to elect a majority of the members of the Board of Directors of Global or the
Company, respectively, or their respective successor(s) (whether such
transaction is effected by merger, consolidation, recapitalization, sale or
transfer of Global’s or the Company’s capital stock or otherwise) or (ii) all
or substantially all of the assets of Global or the Company and their
respective subsidiaries


 


(c) Disability.  For purposes of this Agreement, “Disability”
shall mean that Executive is unable to perform his or her material duties and
responsibilities to the full extent required by the Board


 

















 


of Directors of the Company by reason of
physical or mental illness, impairment or incapacity for twenty-six (26) weeks
in any fifty-two (52) week period.


 


(d) Good
Reason.  The Executive shall have “Good
Reason” to resign his employment upon the occurrence of (i) a material diminution
in the nature or scope of the Executive’s responsibilities, duties or authority
or (ii) the relocation of the Executive’s principal place of business to a
location that is in excess of 50 miles from the Executive’s current place of
business or (iii) the Company requiring the Executive to relocate the
Executive’s principal residence to a location that is closer to the Executive’s
principal place of business; provided, however, that the Executive provided the
Company with at least 30 days prior written notice of his intent to resign for
Good Reason and the Company has not remedied the alleged violation(s) within
the 30-day period.


 


4.     Assignment.  This Agreement will be binding upon and inure
to the benefit of (a) the heirs, executors, and legal representatives of
Executive upon Executive’s death, and (b) any successor of the
Company.  Any such successor of the
Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes.  For this
purpose, “successor” means any person, firm, corporation, or other business
entity which at any time, whether by purchase, merger, or otherwise, directly
or indirectly acquires all or substantially all of the assets or business of
the Company.  None of the rights of
Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution.  Any other attempted
assignment, transfer, conveyance, or other disposition of Executive’s right to
compensation or other benefits will be null and void.


 


5.     Notices.  All notices, requests, demands, and other
communications called for hereunder will be in writing and will be deemed given
(a) on the date of delivery if delivered personally, (b) one day
after being sent overnight by a well established commercial overnight service,
or (c) four days after being mailed by registered or certified mail,
return receipt requested, prepaid and addressed to the parties or their
successors at the following addresses, or at such other addresses as the
parties may later designate in writing:


 


If to the Company:


Attn:
General Counsel


Rexnord
Corporation


4701
Greenfield Avenue


Milwaukee, WI
53214


 


If to Executive:


at the last residential address known by the
Company.


 


6.     Severability.  If any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable, or
void, this Agreement will continue in full force and effect without said
provision.


 

















 


7.     Arbitration.  The Parties agree that any and all disputes
arising out of the terms of this Agreement, their interpretation, and any of
the matters herein released, will be subject to binding arbitration in
Milwaukee, Wisconsin before the American Arbitration Association under its
National Rules for the Resolution of Employment Disputes.  The Parties agree that the prevailing party
in any arbitration will be entitled to injunctive relief in any court of
competent jurisdiction to enforce the arbitration award.  The Parties hereby agree to waive their right
to have any dispute between them resolved in a court of law by a judge or jury.  This paragraph will
not prevent either party from seeking injunctive relief (or any other
provisional remedy) from any court having jurisdiction over the Parties and the
subject matter of their dispute relating to Executive’s obligations under this
Agreement.


 


8.     Integration.  This Agreement represents the entire
agreement and understanding between the parties as to the subject matter herein
regarding severance in connection with a change of control and
supersedes all prior or contemporaneous agreements regarding severance in
connection with a change of control whether written or oral, including any
agreements that provide for severance benefits in such circumstances.  This
Agreement, however, shall not supersede the Employment Agreement between the
parties dated November 25, 2002, as may be amended, and the terms of that
agreement (as may be amended), including, without limitation, the provision of
severance benefits, notice, and provisions concerning rights upon a
change in position shall remain in full force and effect.  No waiver,
alteration, or modification of any of the provisions of this Agreement will be
binding unless in a writing that specifically references this Section and is
signed by duly authorized representatives of the parties hereto.


 


9.     Waiver
of Breach.  The waiver of a breach of
any term or provision of this Agreement, which must be in writing, will not
operate as or be construed to be a waiver of any other previous or subsequent
breach of this Agreement.


 


10.   Headings.  All captions and Section headings used in
this Agreement are for convenient reference only and do not form a part of this
Agreement.


 


11.   Tax
Withholding.  All payments made
pursuant to this Agreement will be subject to withholding of applicable taxes.


 


12.   Governing
Law.  This Agreement will be governed
by the laws of the State of Wisconsin (with the exception of its conflict of
laws provisions).


 


13.   Acknowledgment.  Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.


 


14.   Counterparts.  This Agreement may be executed in
counterparts, and each counterpart will have the same force and effect as an
original and will constitute an effective, binding agreement on the part of
each of the undersigned.


 


[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


 

















 


IN WITNESS WHEREOF, each of the
parties has executed this Agreement, in the case of the Company by a duly
authorized officer, as of the day and year written below.


 


	
   

  	
   

  	
   

  	
   

  	
  REXNORD CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name: James
  T. Strahley

  
	
   

  	
   

  	
   

  	
   

  	
  Title: Vice
  President, Human Resources

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name: