Document:

Exhibit 10.8

[Rexnord Corporation Letterhead]

July 21, 2006

[                          ]

 

Re:          Plan
Participation Letter:  Rexnord
Corporation Special Signing Bonus Plan

Dear [                ]:

 

Rexnord Corporation (the “Company”) has adopted
the Rexnord Corporation Special Signing Bonus Plan (the “Plan”) pursuant
to which certain employees, directors, consultants and other service providers
of the Company (or any of its Subsidiaries) who are designated by the Company
as Participants in the Plan may receive a Bonus on the terms set forth in the
Plan and this Plan Participation Letter. 
Capitalized terms used but not defined in this Plan Participation Letter
have the meaning ascribed to such terms in the Plan.

 

In consideration for services rendered or to be rendered
to the Company (or any of its Subsidiaries), you have been designated by the
Company as a Participant in the Plan. 
The amount of your Bonus under the Plan is $[            ],
such amount to be payable in accordance with the terms of the Plan on or within
30 days after [                      ],
unless an earlier Payment Date is called for under Section 1.3 of the
Plan.  As a Participant in the Plan, you
hereby agree to be bound by and subject to the terms and conditions of the
Plan, including, without limitation, the terms affecting the payment of the
Bonus and the mandatory arbitration and waiver of jury trial rights in Section
2.8 of the Plan.

 

Nothing in the Plan or this Plan Participation Letter
constitutes an employment or service commitment by the Company (or any of its
Affiliates).  You and the Company hereby
acknowledge and agree that this Plan Participation Letter and the Plan set
forth the entire agreement and understanding of the parties and supersede all
prior written or oral agreements or understandings with respect to the subject
matter hereof.

 

[Signature
Page to Follow]

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  REXNORD CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED AND AGREED:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:
  [                ]Exhibit 10.9

 

2006 STOCK OPTION PLAN

OF

REXNORD HOLDINGS, INC.

 

Rexnord
Holdings, Inc. (the “Company”), a Delaware corporation, hereby
adopts this 2006 Stock Option Plan of Rexnord Holdings, Inc.  The purposes of the Plan are as follows:

 

(1)                                  To further the growth, development and
financial success of the Company and its Subsidiaries (as defined herein), by
providing additional incentives to employees, consultants and directors of the
Company and its Subsidiaries who have been or will be given responsibility for
the management or administration of the Company’s or one of its Subsidiaries’
business affairs, by providing a means through which they can purchase Common
Stock, thereby benefiting directly from the growth, development and financial
success of the Company and its Subsidiaries.

 

(2)                                  To enable the Company and its Subsidiaries to
obtain and retain the services of the type of professional, technical and
managerial employees, consultants and directors considered essential to the
long-range success of the Company and its Subsidiaries by providing and
offering them an opportunity to purchase Common Stock upon exercise of Options,
including, in the case of employees, Options that are intended to qualify as “incentive
stock options” under Section 422 of the Code (as defined herein).

 

ARTICLE I.

DEFINITIONS

 

Whenever
the following terms are used in the Plan, they shall have the meaning specified
below unless the context clearly indicates otherwise.  The singular pronoun shall include the plural
where the context so indicates.

 

“Affiliate”
shall mean, with respect to any Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person, through one or more intermediaries or otherwise.  For purposes of this definition, “control”
shall mean, when used with respect to any Person, the power to direct the
management and policies of such Person, directly or indirectly, through the
ownership of voting securities, by contract or otherwise.

 

“Board”
shall mean the Board of Directors of the Company.

 

“CEO”
shall mean the Chief Executive Officer of the Company.

 

“Closing
Date” shall mean July 21, 2006.

 

“Code”
shall mean the Internal Revenue Code of 1986, as amended.

 

“Committee”
shall mean the Committee appointed as provided in Section 6.1.

 

“Common
Stock” shall mean the Common Stock, par value $0.01 per share, of the
Company.

 

1

 

“Company”
shall mean Rexnord Holdings, Inc., a Delaware corporation.  In addition, “Company” shall mean any
corporation assuming, or issuing new employee stock options in substitution
for, Incentive Stock Options outstanding under the Plan in a transaction to
which Section 424(a) of the Code applies.

 

“Consultant”
shall mean any Person who has entered into a consulting agreement with the
Company or any of its Subsidiaries.

 

“Corporate
Event” shall mean, as determined by the Committee (or by the Board, in the
case of Options granted to Non-Employee Directors) in its sole discretion, any
transaction or event described in Section 7.1(a) or any unusual or
nonrecurring transaction or event affecting the Company, any Subsidiary of the
Company, or the financial statements of the Company or any Subsidiary of the
Company, or changes in applicable laws, regulations, or accounting principles.

 

“Director”
shall mean a member of the Board.

 

“Eligible
Representative” for an Optionee shall mean such Optionee’s personal
representative or such other Person as is empowered under the deceased Optionee’s
will or the then applicable laws of descent and distribution to represent the
Optionee hereunder.

 

“Employee”
shall mean any employee (as defined in accordance with the regulations and
revenue rulings then applicable under Section 3401(c) of the Code) of
the Company or one of its Subsidiaries, whether such employee is so employed at
the time the Plan is adopted or becomes so employed subsequent to the adoption
of the Plan.

 

“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Incentive
Stock Option” shall mean an Option which qualifies under Section 422
of the Code and is designated as an Incentive Stock Option by the Committee.

 

“Liquidity
Event” shall mean:

 

(a)                                  Approval by stockholders of the Company (or,
if no stockholder approval is required, by the Board alone) of the complete
dissolution or liquidation of the Company, other than in the context of a
Business Combination (as defined below) that does not constitute a Liquidity
Event under paragraph (c) below;

 

(b)                                 The acquisition by any Person of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 50% or more of the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of
this paragraph (b), the following acquisitions shall not constitute a Liquidity
Event; (A) any acquisition directly from the Company or any of its
Subsidiaries, (B) any acquisition by the Company or any of its
Subsidiaries, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its Affiliates or a
successor, (D) any acquisition by any entity pursuant

 

2

 

to
a Business Combination, (E) any acquisition by a Person who is the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of the Outstanding Company Common Stock and/or the
Outstanding Company Voting Securities on the Closing Date (or an Affiliate,
heir or descendant of such Person) or (F) any acquisition by the Principal
Stockholder(s) or one of its (their) Affiliated investment funds; or

 

(c)                                  Consummation of a reorganization, merger,
statutory share exchange or consolidation or similar corporate transaction
involving the Company or any of its Subsidiaries, a sale or other disposition
of all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, or the acquisition of assets or stock of another entity by
the Company or any of its Subsidiaries (each, a “Business Combination”),
in each case unless, following such Business Combination, (1) all or
substantially all of the individuals and entities that were the beneficial
owners of the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of
the combined voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity that, as a result of such transaction, owns the Company or all or
substantially all of the Company’s assets directly or through one or more
subsidiaries (a “Parent”)), and (2) no Person (excluding any
individual or entity described in clauses (C), (E) or (F) of
paragraph (b) above) beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, more than 50% of
the combined voting power of the then-outstanding voting securities of such
entity, except to the extent that the ownership in excess of 50% existed prior
to the Business Combination;

 

provided,
however, that an
underwritten public offering of the securities of the Company or any of its
Subsidiaries shall in no event constitute a Liquidity Event for purposes of the
Plan.

 

“Merger
Agreement” shall mean that certain Agreement and Plan of Merger, dated as
of May 24, 2006, by and among Chase Acquisition I, Inc., a Delaware
corporation, Chase Merger Sub, Inc., a Delaware corporation, RBS Global, Inc.,
a Delaware corporation, and TC Group, L.L.C., a Delaware limited liability
company.

 

“Non-Employee
Director” shall mean a member of the Board who is not an Employee of the
Company or any of its Subsidiaries.

 

“Non-Qualified
Stock Option” shall mean an Option which is not an “incentive stock option”
under Section 422 of the Code and shall include an Option which is
designated as a Non-Qualified Stock Option by the Committee.

 

“Officer”
shall mean an officer of the Company, as defined in Rule 16a-l(f) under
the Exchange Act, as such Rule may be amended in the future.

 

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“Option”
shall mean an option granted under the Plan to purchase Common Stock.  “Options” include both Incentive Stock
Options and Non-Qualified Stock Options.

 

“Optionee”
shall mean an Employee, Consultant or Non-Employee Director to whom an Option
is granted under the Plan.

 

“Person”
shall mean an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.

 

“Plan”
shall mean this 2006 Stock Option Plan of Rexnord Holdings, Inc., as it
may be amended from time to time.

 

“Principal
Stockholder(s)” shall mean Apollo Management VI, L.P. or any of its
Affiliated investment funds to which (a) Apollo Management VI, L.P. or any
other Person transfers Common Stock, or (b) the Company issues Common
Stock.

 

“Secretary”
shall mean the Secretary of the Company.

 

“Securities
Act” shall mean the Securities Act of 1933, as amended.

 

“Stockholders’
Agreement” shall mean, with respect to an Optionee, that certain agreement
by and among the Optionee, the Company and the other stockholders of the
Company party thereto, which contains certain restrictions and limitations
applicable to the shares of Common Stock acquired upon Option exercise (and to
other shares of Common Stock, if any, held by the Optionee during the term of
such agreement).  If an Optionee is not a
party to a Stockholders’ Agreement at the time of exercise of the Option (or
any portion thereof), the exercise of the Option shall be subject to the
condition that the Optionee enter into a Stockholders’ Agreement with the
Company.

 

“Subsidiary”
means, with respect to any Person, any other Person of which 50% or more of the
voting power of the equity securities or equity interests sufficient to elect
at least a majority of its Board of Directors or other governing body (or, if
there is no such voting power, 50% or more of the equity securities or equity
interests) is owned, directly or indirectly, by such Person.

 

“Termination
of Consultancy” shall mean the time when the Optionee’s consulting
relationship with the Company and all of its Subsidiaries terminates for any
reason.  The Board, in its sole
discretion, shall determine the effect of all matters and questions relating to
a Termination of Consultancy.

 

“Termination
of Directorship” shall mean the time when an Optionee who is a Non-Employee
Director ceases to be a Director for any reason, including but not by way of
limitation, a termination by resignation, failure to be elected or appointed,
death or retirement.  The Board, in its
sole discretion, shall determine the effect of all matters and questions
relating to a Termination of Directorship.

 

4

 

“Termination
of Employment” shall mean the time when the employee-employer relationship
between an Optionee and the Company or one of its Subsidiaries is terminated
for any reason, with or without cause, including, but not by way of limitation,
a termination by resignation, discharge, death or retirement, but excluding a
termination where there is a simultaneous reemployment by the Company or one of
its Subsidiaries.  The Committee shall
determine the effect of all matters and questions relating to a Termination of
Employment, including, but not by way of limitation, the question of whether a
Termination of Employment resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Employment; provided, however, that, with respect to Incentive
Stock Options, a leave of absence shall constitute a Termination of Employment
if, and to the extent that, such leave of absence interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable
regulations and revenue rulings under Section 442(a)(2) of the Code.

 

ARTICLE II.

SHARES SUBJECT TO PLAN

 

Section 2.1                                      Shares Subject To Plan

 

The
shares of stock subject to Options shall be shares of Common Stock.  Subject to Section 7.1, the aggregate
number of such shares of Common Stock which may be issued upon exercise of
Options is 2,000,000.

 

Section 2.2                                      Unexercised Options

 

If
any Option (or portion thereof) expires or is canceled without having been
fully exercised, the number of shares of Common Stock subject to such Option
(or portion thereof) but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1.

 

ARTICLE III.

GRANTING OF OPTIONS

 

Section 3.1                                      Eligibility

 

Any
Employee, Non-Employee Director and Consultant shall be eligible to be granted
Options, except as provided in Section 3.2.

 

Section 3.2                                      Qualification Of Incentive Stock Options

 

No
Incentive Stock Option shall be granted to any Person who is not an Employee.

 

5

 

Section 3.3                                      Granting Of Options To Employees Or
Consultants

 

(a)                                  The Committee shall from time to time:

 

(i)                                     Select from among the Employees or
Consultants (including those to whom Options have been previously granted under
the Plan) such of them as in its opinion should be granted Options;

 

(ii)                                  Determine the number of shares of Common
Stock to be subject to such Options granted to such Employees or Consultants,
and determine whether such Options are to be Incentive Stock Options or
Non-Qualified Stock Options; and

 

(iii)                               Determine the terms and conditions of such
Options (provided such terms and conditions are consistent with the Plan).

 

(b)                                 Upon the selection of an Employee or
Consultant to be granted an Option pursuant to Section 3.3(a), the
Committee shall instruct the Secretary or another authorized officer of the
Company to issue such Option and may impose such conditions on the grant of
such Option as it deems appropriate. 
Without limiting the generality of the preceding sentence, the Committee
may require as a condition to the grant of an Option to an Employee or
Consultant that the Employee or Consultant surrender for cancellation some or
all of the unexercised Options which have been previously granted to such
Employee or Consultant.  An Option the
grant of which is conditioned upon such surrender may have an Option price
lower or higher than the Option price of the surrendered Option, may cover the
same or a lesser or greater number of shares of Common Stock as the surrendered
Option, may contain such other terms as the Committee deems appropriate and
shall be exercisable in accordance with its terms, without regard to the number
of shares of Common Stock, price, period of exercisability or any other term or
condition of the surrendered Option.

 

Section 3.4                                      Granting Of Option To Non-Employee Directors

 

(a)                                  The Board shall from time to time:

 

(i)                                     Select from among the Non-Employee Directors
(including those to whom Options have previously been granted under the Plan)
such of them as in its opinion should be granted Options;

 

(ii)                                  Determine the number of shares of Common
Stock to be subject to such Options granted to such selected Non-Employee
Directors; and

 

(iii)                               Determine the terms and conditions of such
Options (provided such terms and conditions are consistent with the Plan); provided, however,
that all Options granted to Non-Employee Directors shall be Non-Qualified Stock
Options.

 

(b)                                 Upon the selection of a Non-Employee Director
to be granted an Option pursuant to Section 3.4(a), the Board shall
instruct the Secretary or another authorized officer of the Company to issue
such Option and may impose such conditions on the grant of such Option as it
deems appropriate.  Without limiting

 

6

 

the
generality of the preceding sentence, the Board may require as a condition to
the grant of an Option to a Non-Employee Director that the Non-Employee
Director surrender for cancellation some or all of the unexercised Options
which have been previously granted to such Non-Employee Director.  An Option the grant of which is conditioned
upon such surrender may have an Option price lower or higher than the Option
price of the surrendered Option, may cover the same or a lesser or greater
number of shares of Common Stock as the surrendered Option, may contain such
other terms as the Board deems appropriate (provided such terms and conditions
are consistent with the Plan) and shall be exercisable in accordance with its
terms, without regard to the number of shares of Common Stock, price, period of
exercisability or any other term or condition of the surrendered Option.

 

ARTICLE IV.

TERMS OF OPTIONS

 

Section 4.1                                      Stock Option Agreement

 

Each
Option shall be evidenced by a written Stock Option Agreement, which shall be
executed by the Optionee and an authorized Officer of the Company and which
shall contain such terms and conditions as the Committee (or the Board, in the
case of Options granted to Non-Employee Directors) shall determine (provided
such terms and conditions are consistent with the Plan).  In the event of a conflict between the terms
of the Stock Option Agreement and the terms of the Plan, the terms of the Plan
shall govern.  Stock Option Agreements
evidencing Incentive Stock Options shall contain such terms and conditions as
may be necessary to qualify such Options as “incentive stock options” under Section 422
of the Code.

 

Section 4.2                                      Exercisability Of Options

 

(a)                                  Each Option shall become exercisable
according to the terms of the applicable Stock Option Agreement; provided, however,
that by a resolution adopted after an Option is granted the Committee (or the
Board, in the case of Options granted to Non-Employee Directors) may, on such
terms and conditions as it may determine to be appropriate, accelerate the time
at which such Option or any portion thereof may be exercised.

 

(b)                                 Except as otherwise provided in the
applicable Stock Option Agreement, no portion of an Option which is
unexercisable at Termination of Employment, Termination of Directorship or
Termination of Consultancy, as applicable, shall thereafter become exercisable.

 

(c)                                  To the extent that the aggregate fair market
value of stock with respect to which “incentive stock options” (within the
meaning of Section 422 of the Code, but without regard to Section 422(d) of
the Code) are exercisable for the first time by an Optionee during any calendar
year (under the Plan and all other incentive stock option plans of the Company
or any Subsidiary thereof) exceeds $100,000, such options shall be treated and
taxable as Non-Qualified Stock Options. 
The

 

7

 

rule set
forth in the preceding sentence shall be applied by taking options into account
in the order in which they were granted, and the stock issued upon exercise of
options shall designate whether such stock was acquired upon exercise of an
Incentive Stock Option.  For purposes of
these rules, the fair market value of stock shall be determined as of the date
of grant of the Option granted with respect to such stock and in the manner set
forth in Section 4.3(b).

 

Section 4.3                                      Option Price

 

(a)                                  The price of the Common Stock subject to each
Option shall be set by the Committee (or the Board, in the case of Options
granted to Non-Employee Directors); provided,
however, that the price per share
of Common Stock shall be not less than 100% of the fair market value of such
shares on the date such Option is granted (determined as set forth in Section 4.3(b));
and, that, with respect to an Incentive Stock Option, in the case of an
individual then owning (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company, the price per share of Common Stock shall not be less than 110%
of the fair market value of such shares on the date such Incentive Stock Option
is granted (determined as set forth in Section 4.3(b)).

 

(b)                                 For purposes of the Plan, the fair market
value of a share of Common Stock as of a given date shall be:

 

(i)                                     if the Common Stock is listed on one or more
National Securities Exchanges (within the meaning of the Exchange Act), each
share of Common Stock shall be valued at the closing price of a share of Common
Stock on the principal exchange on which such shares are then trading, or, if
no sales of Common Stock were made on such exchange on that date, the closing
price of a share of Common Stock for the next preceding day on which sales of
Common Stock were made on the exchange;

 

(ii)                                  if the Common Stock is not traded on a
National Securities Exchange but is quoted on NASDAQ or a successor quotation
system and the Common Stock is listed as a National Market Issue under the NASD
National Market System, each share of Common Stock shall be valued at the last
sales price per share of Common Stock on such date as reported by NASDAQ or
such successor quotation system, or, if no sales of Common Stock were reported
by NASDAQ or such successor quotation system on that date, the last price of a
share of Common Stock as reported by NASDAQ or such successor quotation system
for the next preceding day on which sales of Common Stock were reported by
NASDAQ or such successor quotation system; or

 

(iii)                               if the Common Stock is not publicly traded on
a National Securities Exchange and is not quoted on NASDAQ or a successor

 

8

 

quotation
system, the fair market value of the Common Stock shall be determined in good
faith by the Committee.

 

Section 4.4                                      Expiration Of Options

 

No
Option may be exercised to any extent by anyone after the first to occur of the
following events:

 

(a)                                  The expiration of ten years from the date the
Option was granted; or

 

(b)                                 With respect to an Incentive Stock Option in
the case of an Optionee owning (within the meaning of Section 424(d) of
the Code), at the time the Incentive Stock Option was granted, more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary of the Company, the expiration of five years from the date the
Incentive Stock Option was granted.

 

ARTICLE V.

EXERCISE OF OPTIONS

 

Section 5.1                                      Person Eligible To Exercise

 

During
the lifetime of the Optionee, only the Optionee may exercise an Option (or any
portion thereof) granted to the Optionee; provided,
however, that the Optionee’s
Eligible Representative may exercise the Optionee’s Option during the period of
the Optionee’s disability (as defined in Section 22(e)(3) of the
Code) notwithstanding that an Option so exercised may not qualify as an
Incentive Stock Option.  After the death
of the Optionee, any exercisable portion of an Option may, prior to the time
when such portion becomes unexercisable under the Plan or the applicable Stock
Option Agreement, be exercised by the Optionee’s Eligible Representative.

 

Section 5.2                                      Partial Exercise

 

At
any time and from time to time prior to the time when the Option becomes
unexercisable under the Plan or the applicable Stock Option Agreement, the
exercisable portion of an Option may be exercised in whole or in part; provided, however,
that the Company shall not be required to issue fractional shares and the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may, by the terms of the Option, require any partial exercise to
exceed a specified minimum number of shares of Common Stock.

 

Section 5.3                                      Manner Of Exercise

 

An
exercisable Option, or any exercisable portion thereof, may be exercised solely
by delivery to the Secretary of all of the following prior to the time when
such Option or such portion becomes unexercisable under the Plan or the
applicable Stock Option Agreement:

 

(a)                                  Notice in writing signed by the Optionee or
the Optionee’s Eligible Representative, stating that such Option or portion is
exercised, and specifically stating the number of shares of Common Stock with
respect to which the Option is being exercised;

 

9

 

(b)                                 A copy of a Joinder to the Stockholders’
Agreement designated by the Company (in the form attached to such Stockholders’
Agreement) signed by the Optionee or Eligible Representative, as applicable;

 

(c)                                  Full payment (in cash or by personal,
certified or bank cashier check) for the shares of Common Stock with respect to
which such Option or portion is thereby exercised; or

 

(i)                                     Unless otherwise determined by the Committee
(or the Board, in the case of Options to Non-Employee Directors), (A) shares
of Common Stock owned by the Optionee duly endorsed for transfer to the
Company; or (B) except with respect to Incentive Stock Options, shares of
the Common Stock issuable to the Optionee upon exercise of the Option, with a
fair market value (as determined under Section 4.3(b)) on the date of
Option exercise equal to the aggregate Option price of the shares of Common
Stock with respect to which such Option or portion is thereby exercised; or

 

(ii)                                  Unless otherwise determined by the Committee
(or the Board, in the case of Options granted to Non-Employee Directors), any
combination of the consideration listed in this Section 5.3(c);

 

(d)                                 The payment to the Company (in cash or by
personal, certified or bank cashier check or by any other means of payment
approved by the Committee and set forth in Section 5.3(c)) of all amounts
necessary to satisfy any and all federal, state and local tax withholding
requirements arising in connection with the exercise of the Option or
otherwise;

 

(e)                                  Such representations and documents as the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other applicable federal or
state securities laws or regulations.  The
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may, in its sole discretion, also take whatever additional actions
it deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer orders to
transfer agents and registrars; and

 

(f)                                    In the event that the Option or portion
thereof shall be exercised pursuant to Section 5.1 by any Person or
Persons other than the Optionee, appropriate proof of the right of such Person
or Persons to exercise the Option or portion thereof.

 

Section 5.4                                      Conditions To Issuance Of Stock Certificates

 

The
shares of Common Stock issuable and deliverable upon the exercise of an Option,
or any portion thereof, may be either previously authorized but unissued shares
of Common Stock or issued shares of Common Stock which have then been
reacquired by the Company.  A

 

10

 

certificate of shares of
Common Stock will be delivered to the Optionee at the Company’s principal place
of business within thirty days of receipt by the Company of the written notice
and payment, unless an earlier date is agreed upon.  Notwithstanding the above, the Company shall
not be required to issue or deliver any certificate or certificates for shares
of Common Stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:

 

(a)                                  The admission of such shares of Common Stock
to listing on any and all stock exchanges on which such class of stock is then
listed;

 

(b)                                 The completion of any registration or other
qualification of such shares of Common Stock under any state or federal law or
under the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body, which the Committee (or the Board, in
the case of Options granted to Non-Employee Directors) shall, in its sole
discretion, deem necessary or advisable;

 

(c)                                  The obtaining of any approval or other
clearance from any state or federal governmental agency which the Committee (or
the Board, in the case of Options granted to Non-Employee Directors) shall, in
its sole discretion, determine to be necessary or advisable; and

 

(d)                                 The payment to the Company of all amounts
which it is required to withhold under federal, state or local law in
connection with the exercise of the Option or otherwise.

 

Section 5.5                                      Rights As Stockholders

 

The
holder of an Option shall not be, nor have any of the rights or privileges of,
a stockholder of the Company in respect of any shares of Common Stock
purchasable upon the exercise of any part of an Option unless and until such
holder has signed a Joinder to the Stockholders’ Agreement designated by the
Company (in the form attached to such Stockholders’ Agreement) and certificates
representing such shares of Common Stock have been issued by the Company to
such holder.

 

Section 5.6                                      Transfer Restrictions

 

Shares
of Common Stock acquired upon exercise of an Option shall be subject to the
terms and conditions of a Stockholders’ Agreement.  In addition, the Committee (or the Board, in
the case of Options granted to Non-Employee Directors), in its sole discretion,
may impose further restrictions on the transferability of the shares of Common
Stock purchasable upon the exercise of an Option as it deems appropriate.  Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares of Common Stock.  The Committee may require the Employee to
give the Company prompt notice of any disposition of shares of Common Stock,
acquired by exercise of an Incentive Stock Option, within two years from the
date of granting such Option or one year after the transfer of such shares of
Common Stock to such Employee.  The
Committee may direct that the certificates evidencing shares of Common Stock
acquired by exercise of an Incentive Stock Option refer to such requirement.

 

11

 

ARTICLE VI.

ADMINISTRATION

 

Section 6.1                                      Committee

 

The
Committee shall be the Compensation Committee of the Board.  Any action required or permitted to be taken
by the Committee hereunder or under any Stock Option Agreement may be taken by
the Board.

 

Section 6.2                                      Delegation By Committee

 

To
the extent permitted by applicable law, the Committee, in its sole discretion,
may delegate all rights, powers and duties of the Committee under the Plan
(except those granted pursuant to Sections 3.3, 4.3, 5.3(c), 5.3(e), 5.6 and Article VII)
to the CEO pursuant to a written instrument signed by each member of the
Committee.

 

Section 6.3                                      Duties And Powers Of CEO And The Committee

 

It
shall be the duty of the Committee (or, if administrative authority is
delegated by the Committee to the CEO pursuant to Section 6.2, the CEO, subject
to the approval of the Committee) to conduct the general administration of the
Plan in accordance with its provisions, and the Committee (or, if
administrative authority is delegated by the Committee to the CEO pursuant to Section 6.2,
the CEO, subject to the approval of the Committee) shall have the power to
interpret the Plan and the Options and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules.  Notwithstanding the foregoing, the full
Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to Options granted to Non-Employee
Directors.  Any such interpretations and rules in
regard to Incentive Stock Options shall be consistent with the terms and
conditions applicable to “incentive stock options” within the meaning of Section 422
of the Code.  All determinations and
decisions made by the Committee (or, if administrative authority is delegated
to the CEO pursuant to Section 6.2, by the CEO and approved by the
Committee) under any provision of the Plan or of any Option granted thereunder
shall be final, conclusive and binding on all persons.

 

Section 6.4                                      Compensation, Professional Assistance, Good
Faith Actions

 

The
members of the Committee shall receive such compensation for their services
hereunder as may be determined by the Board. 
All expenses and liabilities incurred by the members of the Committee or
the Board in connection with the administration of the Plan shall be borne by
the Company.  The Committee or the Board
may employ attorneys, consultants, accountants, appraisers, brokers or other
persons.  The Committee, the Company and
its Officers and Directors shall be entitled to rely upon the advice, opinions
or valuations of any such persons.  All
actions taken and all interpretations and determinations made by the CEO, the
Committee and the Board, in good faith shall be final and binding upon all
Optionees, the Company and all other interested persons.  No member of the Board or the CEO shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options, and all members of the Board
shall be indemnified by the Company in respect to any such action,
determination or interpretation.

 

12

 

ARTICLE VII.

OTHER PROVISIONS

 

Section 7.1                                      Changes In Common Stock; Disposition Of
Assets And Corporate Events.

 

(a)                                  Subject to Section 7.1(d), (x) in the
event that the Committee (or the Board, in the case of Options granted to
Non-Employee Directors) determines that any dividend or other distribution
(whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole (including, but not limited to, a Liquidity
Event), or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Committee’s sole discretion (or in the case of Options granted to
Non-Employee Directors, the Board’s sole discretion), affects the Common Stock
or the value thereof, or (y) in the event of the issuance of securities of the
Company or any of its Subsidiaries or interim holding companies, in addition to
the securities of any such entities outstanding as of the Closing Date, that
would dilute (on a fully diluted basis) the equity interests of Optionees under
the Plan in the Company and its Subsidiaries to a greater degree than any such
issuance would dilute (on a fully diluted basis) the equity interests of the
Principal Stockholder(s) and its (their) Affiliated investment funds, taken as
a whole, in the Company and its Subsidiaries (taking into account any
consideration received with respect to such securities), then the Committee (or
the Board, in the case of Options granted to Non-Employee Directors) shall, in
such manner and at such time, and, for an event described in clause (x) above,
to such extent as it deems appropriate and equitable in the circumstances,
adjust any or all of the following so as to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an Option:

 

(i)                                     The number and kind of shares (or other
securities or property) with respect to which Options may be granted under the
Plan (including, but not limited to, adjustments of the limitations in Section 2.1
on the maximum number and kind of shares which may be issued);

 

(ii)                                  The number and kind of shares (or other
securities or property) subject to outstanding Options;

 

(iii)                               The exercise price with respect to any
Option; and

 

(iv)                              The financial or other “targets” specified in
a Stock Option Agreement for determining the exercisability of Options.

 

13

 

(b)                                 Subject to Section 7.1(d) and the
terms of outstanding Options, upon the occurrence of a Corporate Event, the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors), in its sole discretion, is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Non-Employee Directors) determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any Option under the Plan, to facilitate such Corporate Event or to give
effect to such changes in laws, regulations or principles:

 

(i)                                     In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may provide, either by the terms of
the applicable Stock Option Agreement or by action taken prior to the
occurrence of such Corporate Event and either automatically or upon the
Optionee’s request, for either the purchase of any such Option for an amount of
cash, securities, or other property equal to the amount that could have been
attained upon the exercise of the vested portion of such Option (and such
additional portion of the Option as the Board or Committee may determine) immediately
prior to the occurrence of such transaction or event, or the replacement of
such vested (and/or other) portion of such Option with other rights or property
selected by the Committee (or the Board, in the case of Options granted to
Non-Employee Directors) in its sole discretion;

 

(ii)                                  In its sole discretion, the Committee (or the
Board, in the case of Options granted to Non-Employee Directors) may provide,
either by the terms of the applicable Stock Option Agreement or by action taken
prior to the occurrence of such Corporate Event, that the Option (or any
portion thereof) cannot be exercised after such event;

 

(iii)                               In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may provide, either by the terms of
the applicable Stock Option Agreement or by action taken prior to the
occurrence of such Corporate Event, that for a specified period of time prior
to such Corporate Event, such Option shall be exercisable as to all shares of
Common Stock covered thereby or a specified portion of such shares of Common
Stock, notwithstanding anything to the contrary in (A) Section 4.2;
or (B) the provisions of the applicable Stock Option Agreement;

 

(iv)                              In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may provide, either by the terms of
the applicable Stock Option Agreement or by action taken prior to the

 

14

 

occurrence
of such Corporate Event, that upon such Corporate Event, such Option (or any
portion thereof) be assumed by the successor or survivor corporation, or a
parent or subsidiary thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor or survivor corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and the exercise price subject to such Option; and

 

(v)                                 In its sole discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may make adjustments in the number
and type of shares of Common Stock (or other securities or property) subject to
outstanding Options (or any portion thereof) and/or in the terms and conditions
of (including the exercise price), and the criteria included in, outstanding
Options and Options which may be granted in the future.

 

(c)                                  Subject to Section 7.1(d), the Committee
(or the Board, in the case of Options granted to Non-Employee Directors) may,
in its sole discretion, include such further provisions and limitations in any
Stock Option Agreement as it may deem equitable and in the best interests of
the Company and its Subsidiaries.

 

(d)                                 With respect to Incentive Stock Options, no
adjustment or action described in this Section 7.1 or in any other
provision of the Plan shall be authorized or permitted to be taken or
implemented to the extent that such adjustment or action would cause the Plan
to violate Section 422(b)(1) of the Code or any successor provisions
thereto, unless the Committee determines that the Plan and/or the Options are
not to comply with Section 422(b)(1) of the Code.

 

Section 7.2                                      Options Not Transferable

 

No
Option or interest or right therein or part thereof shall be encumbered by any
debts, contracts or engagements of the Optionee or the Optionee’s successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, hypothecation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect. 
Notwithstanding the foregoing, nothing in this Section 7.2 shall
prevent transfers of the Option to the Company or by will or by the applicable
laws of descent and distribution.

 

Section 7.3                                      Amendment, Suspension Or Termination Of The
Plan

 

The
Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board or the Committee in a
written instrument.  However, without
stockholder approval within 12 months before or after such action no action of
the Board or the Committee may, except as provided in Section 7.1,
increase any limit imposed in Section 2.1 on the maximum number of shares
of Common Stock which may be

 

15

 

issued on exercise of
Options, reduce the minimum Option price requirements of Section 4.3(a),
or extend the limit imposed in this Section 7.3 on the period during which
Options may be granted.  Except as
provided by Section 7.1, neither the amendment, suspension nor termination
of the Plan shall, without the consent of the holder of the Option, alter or
impair any rights or obligations under any Option theretofore granted.  No Option may be granted during any period of
suspension nor after termination of the Plan, and in no event may any Option be
granted under the Plan after the expiration of ten years from the date the Plan
is adopted by the Board.

 

Section 7.4                                      Effect Of Plan Upon Other Option And
Compensation Plans

 

The
adoption of the Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary of the Company.  Nothing in the Plan shall be construed to limit
the right of the Company or any Subsidiary of the Company (a) to establish
any other forms of incentives or compensation for directors, consultants or
employees of the Company or any Subsidiary of the Company; or (b) to grant
or assume options other than under the Plan in connection with any proper
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any Person.

 

Section 7.5                                      Approval Of Plan By Board and Stockholders

 

This
Plan is effective as of July 21, 2006 pursuant to the approval of this
Plan by the Board and the Company’s stockholders on such date.

 

Section 7.6                                      Titles

 

Titles
are provided herein for convenience only and are not to serve as a basis for
interpretation or construction of the Plan.

 

Section 7.7                                      Conformity to Laws Generally

 

The
Plan, the granting and vesting of Options under the Plan, and the offer,
issuance and delivery of shares of Common Stock are subject to compliance with
all applicable federal and state laws, rules and regulations (including
but not limited to state and federal securities laws, federal margin
requirements and, to the extent applicable as the Company’s state of
incorporation, the laws of the state of Delaware) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of counsel
for the Corporation, be necessary or advisable in connection therewith.  The person acquiring any securities under
this Plan will, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Administrator may deem necessary or
desirable to assure compliance with all applicable legal and accounting
requirements.

 

Section 7.8                                      Conformity To Securities Laws

 

The
Plan is intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder to the extent the Company
or any Optionee is subject to the provisions thereof.  Notwithstanding anything herein to the
contrary, the Plan shall

 

16

 

be administered, and Options
shall be granted and may be exercised, only in such a manner as to conform to
such laws, rules and regulations. 
To the extent permitted by applicable law, the Plan and Options granted
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

Section 7.9                                      Governing Law

 

To
the extent not preempted by federal law, the Plan shall be construed in
accordance with and governed by the laws of the state of New York, without
regard to conflicts of law provisions that would give effect to the laws of
another jurisdiction.

 

Section 7.10                                Severability

 

In
the event any portion of the Plan or any action taken pursuant thereto shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provisions had not been included, and the
illegal or invalid action shall be null and void.

 

Section 7.11                                Amendment of Stock Option Agreements

 

The
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) at any time, and from time to time, may amend the terms of any one
or more existing Stock Option Agreements by agreement or resolution; provided, however, that the rights of an
Optionee under a Stock Option Agreement shall not be adversely impaired without
the Optionee’s written consent.  The
Company shall provide an Optionee with notice and a copy of any amendment made
to such Optionee’s existing Stock Option Agreement.

 

17

 

I
hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Rexnord Holdings, Inc. on July 21, 2006.

 

Executed
on this 21st day of July, 2006.

 

 

	
   

  	
  REXNORD HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  /s/
  Thomas J. Jansen

  	
   

  
	
   

  	
  Name:

  	
  Thomas J. Jansen

  
	
   

  	
  Title:

  	
  Executive Vice President
  and Chief

  
	
   

  	
   

  	
  Financial Officer

  
				

 

18

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