Document:

Exhibit
10.2

Employment
Agreement

This Employment Agreement (the “Agreement” or this “Agreement”),
entered into as of this 21st day of July 2006, by and between Rexnord
Corporation, a Delaware corporation (together with any successor thereto, the “Company”),
and Robert A. Hitt (the “Executive”), shall be effective immediately following,
and subject to, the Closing (within the meaning of the Merger Agreement, as
defined below) (the date of such Closing, the “Effective Date”).

RECITALS

A.                                   It is the desire of the Company to assure
itself of the services of the Executive by engaging the Executive to perform
services under the terms hereof.

B.                                     The Executive desires to provide services
to the Company on the terms herein provided.

C.                                     RBS Global, Inc., a Delaware corporation and
parent company of the Company, Chase Acquisition I, Inc., Chase Merger Sub,
Inc. (“Merger Sub”), and TC Group, L.L.C. entered into an Agreement and Plan of
Merger dated as of May 24, 2006 (the “Merger Agreement”), pursuant to which
Merger Sub shall merge with and into the Company (the “Merger”) and continue
its existence as a wholly-owned subsidiary of Rexnord Holdings, Inc., a
Delaware corporation (“Parent,” and together with its subsidiaries, “Rexnord”)).

D.                                    The Executive’s agreement to enter into
this Agreement and to be bound by the terms hereof was a material factor in the
decision of Chase Acquisition I, Inc. to enter into the Merger Agreement and
constitutes partial consideration for the payments and commitments made or to
be made by Chase Acquisition I, Inc. and its affiliates in connection with the
Merger.

E.                                      In connection with the consummation of
the Merger, the Executive and the Company wish to enter into this new
employment agreement and to supersede (i) the employment agreement dated as of
as of November 25, 2002, by and between the Company and the Executive (the “Prior
Agreement”) and (ii) the change of control retention agreement dated as of
March 22, 2006 by and between the Company and the Executive (the “CIC Agreement”).

F.                                      This Agreement shall be effective
immediately following the Closing on the Effective Date; provided that, in the
event the Merger Agreement shall terminate and the Closing shall not occur,
this Agreement shall be of no further force or effect and the Prior Agreement
and the CIC Agreement shall remain in effect.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and
of the respective covenants and agreements set forth below and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

 

1.                                      Certain Definitions.

(a)                                  “Agreement” shall have the meaning set
forth in the preamble hereto.

(b)                                 “Annual Base Salary” shall have the
meaning set forth in Section 3(a).

(c)                                  “Board” shall mean the Board of Directors
of the Company.

(d)                                 The Company shall have “Cause” to
terminate the Executive’s employment hereunder upon:

(i)                                     the Board’s determination that the
Executive failed to carry out, or comply with, in any material respect, any
lawful and reasonable directive of the Board consistent with the terms of this
Agreement, which (if capable of cure) is not remedied within 30 days after
receipt of written notice from the Company specifying such failure;

(ii)                                  the Executive’s conviction, plea of no contest,
plea of nolo contendere, or imposition of
unadjudicated probation for any felony;

(iii)                               the Executive’s unlawful use (including
being under the influence) or possession of illegal drugs;

(iv)                              the Executive’s commission of an act of
fraud, embezzlement, misappropriation, willful misconduct, or breach of
fiduciary duty against the Company; or

(v)                                 the Executive’s material breach of that
certain Stockholders’ Agreement, dated as of July 21, 2006, by and among
Parent, Rexnord Acquisition Holdings I, LLC, a Delaware limited liability
company, Rexnord Acquisition Holdings II, LLC, a Delaware limited liability
company, the Executive and the other stockholders of Parent party thereto, as
the same may be amended from time to time (the “Stockholders’ Agreement”).

(e)                                  “Change in Control” means:

(i)                                     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 Change
in Control under paragraph (iii) below;

(ii)                                  The acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) (a “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 

 

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                                                of directors (the “Outstanding Company Voting Securities”);
provided, however, that, for purposes of
this paragraph (ii), the following acquisitions shall not constitute a Change
in Control; (A) any acquisition directly from the Company or any of its
Subsidiaries (as defined below), (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 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 Voting Securities on the Effective Date (or an affiliate,
heir or descendant of such Person) or (F) any acquisition by Apollo Management
VI, L.P., a Delaware limited partnership, or one of its affiliated investment funds;
or

(iii)                               Consummation of a reorganization, merger,
statutory share exchange or consolidation or similar corporate transaction
involving the Company or any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company (a “Subsidiary”), 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 (ii) 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 Change in Control.

(f)                                    “Company” shall have the meaning set
forth in the preamble hereto.

 

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(g)                                 “Compensation Committee” means the
Compensation Committee of the Board or its successor or designee.

(h)                                 “Date of Termination” shall mean
(i) if the Executive’s employment is terminated by his death, the date of
his death; (ii) if the Executive’s employment is terminated pursuant to Sections
4(a)(ii) - (vi) either the date indicated in the Notice of Termination or
the date specified by the Company pursuant to Section 4(b), whichever is
earlier; (iii) if the Executive’s employment is terminated pursuant to Section
4(a)(vii) or Section 4(a)(viii), the expiration of the
then-applicable Term.

(i)                                     “Disability” shall mean, at any time the
Company or any of its affiliates sponsors a long-term disability plan for the
Company’s employees, “disability” as defined in such long-term disability plan
for the purpose of determining a participant’s eligibility for benefits; provided, however, if the long-term disability plan contains
multiple definitions of disability, “Disability” shall refer to that definition
of disability which, if the Executive qualified for such disability benefits,
would provide coverage for the longest period of time.  The determination of whether the Executive
has a Disability shall be made by the person or persons required to make disability
determinations under the long-term disability plan.  At any time the Company does not sponsor a
long-term disability plan for its employees, “Disability” shall mean the
Executive’s inability to perform, with or without reasonable accommodation, the
essential functions of his position hereunder for a total of three months
during any six month period as a result of incapacity due to mental or physical
illness as determined by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive’s legal representative, such
agreement as to acceptability not to be unreasonably withheld or delayed.  Any refusal by the Executive to submit to a
medial examination for the purpose of determining Disability shall be deemed to
constitute conclusive evidence of the Executive’s Disability.

(j)                                     “Effective Date” shall have the meaning
set forth in the preamble hereto.

(k)                                  “Executive “shall have the meaning set
forth in the preamble hereto.

(l)                                     (i)            The
Executive shall have “Good Reason” to resign his employment upon the occurrence
of any of the following:

(A)                              failure of the Company to continue the
Executive in the position of Chief Executive Officer and as a member of the
Board with the Executive’s primary contact being the chairman of the Board; or

(B)                                a material diminution in the nature or
scope of the Executive’s responsibilities, duties or authority;

(C)                                failure of the Company to make any material
payment or provide any material benefit under this Agreement;

 

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(D)                               the Company’s material breach of this
Agreement; or

(E)                                 the Company’s material breach of the
Stockholders’ Agreement.

(ii)                                  The Executive may not resign his
employment of Good Reason unless:

(A)                              the Executive provided the Company with
at least 30 days prior written notice of his intent to resign for Good Reason;
and

(B)                                the Company has not remedied the alleged
violation(s) within the 30-day period.

(m)                               “Inventions” shall have the meaning set
forth in Section 8.

(n)                                 “Notice of Termination” shall have the
meaning set forth in Section 4(b).

(o)                                 “Severance Period” shall have the meaning
set forth in Section 5(c)(i).

(p)                                 “Term” shall have the meaning set forth
in Section 2(b).

2.                                      Employment

(a)                                  The Company shall employ the Executive
and the Executive shall enter the employ of the Company, for the period set
forth in Section 2(b), in the position set forth in Section 2(c),
and upon the other terms and conditions herein provided.

(b)                                 The initial term of employment under this
Agreement (the “Initial Term”) shall be for the period beginning on the
Effective Date of this Agreement and ending on the fifth anniversary thereof,
unless earlier terminated as provided in Section 4.  The employment term hereunder shall
automatically be extended for successive one-year periods (collectively with
the Initial Term, the “Term”) unless either party gives notice of non-extension
to the other no later than 90 days prior to the expiration of the
then-applicable Term.

(c)                                  Position and Duties.  During
the Term, the Executive shall serve as the Chief Executive Officer of the
Company with such customary responsibilities, duties and authority as may from
time to time be assigned to the Executive by the Board.  The Executive shall report to the Board with
the Executive’s primary contact being the non-executive chairman of the
Board.  The Executive shall devote
substantially all his working time and efforts to the business and affairs of Rexnord.  The Executive agrees to observe and comply
with Rexnord’s rules and policies as adopted by Rexnord from time to time.  During the Term, it shall not be a violation
of this Agreement for the Executive to (i) serve on industry trade, civic
or charitable boards or committees; (ii) deliver lectures or fulfill
speaking engagements; or (iii) manage personal investments, as long as
such activities do not interfere with the performance of the Executive’s duties
and responsibilities as an employee of the Company.  During his employment and thereafter, the
Executive agrees not to disparage in any material respect Rexnord or any of its

 

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                                                products or practices, or any of its
directors, officers, agents, representatives, stockholders or affiliates,
either orally or in writing.  The Company
agrees that during the Executive’s employment and thereafter, neither Rexnord
nor the Company, nor any officers of Rexnord or the Company, shall, directly or
indirectly, issue or communicate any public statement, or statement likely to
become public, that is disparaging of or damaging to the Executive.  The provisions of the preceding sentence
shall not be violated by truthful responses required by law or legal process.

(d)                                 Investment.  On the
Effective Date, the Executive shall invest in Parent the investment amount
described in the Executive’s binding term sheet with Chase Acquisition I, Inc.
dated as of May 24, 2006 (the “Binding Term Sheet”), and set forth on the
Confidential Annex hereto, which amount shall be invested by the rollover of
vested options to purchase shares of common stock of the Company as
contemplated by the Binding Term Sheet. 
Such contributions shall be evidenced by a stock option assumption
agreement that shall be executed prior to or on the Effective Date.

3.                                      Compensation and Related Matters.

(a)                                  Annual Base Salary. 
During the Term, the Executive shall receive a base salary at a rate of
$575,000 per annum, which shall be paid in accordance with the customary
payroll practices of the Company, subject to increase as determined by the
Compensation Committee (the “Annual Base Salary”).  The Executive’s Annual Base Salary shall be
reviewed by the Compensation Committee annually, beginning for the fiscal year
that commences on April 1, 2007.

(b)                                 Annual Bonus.  For
the fiscal year ending March 31, 2007, the Executive shall be eligible to
receive a bonus as set forth in the Company’s Executive Bonus Plan as in effect
immediately prior to the closing of the Merger if the Executive satisfies the
performance targets and other criteria set forth therein.  For the fiscal year beginning April 1, 2007
and fiscal years thereafter, the Executive shall be eligible to participate in
an annual bonus plan to be established by the Company.

(c)                                  Equity/Membership Arrangement. 
In addition to the options contemplated by Section 2(d), on the
Effective Date, the Executive shall be granted options to purchase 230,706
shares of Parent common stock at an exercise price of $47.50 per share.  The grant of such stock options shall be
governed by the terms of the stock option plan and stock option agreement attached
hereto as Exhibit A and Exhibit B, respectively.

(d)                                 Benefits.  During the
Term, the Executive shall be entitled to participate, at a minimum, in the same
benefit programs as are applicable generally to other senior executives of the
Company, with the value of the Executive’s benefits under such plans, in the
aggregate, to be substantially comparable to those historically provided to the
Executive under the Prior Agreement.

 

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(e)                                  Vacation.  During the Term,
the Executive shall be entitled to vacation each calendar year in accordance
with the Company’s policy.  Any vacation
shall be taken at the reasonable and mutual convenience of the Company and the
Executive.

(f)                                    Expenses.  The Company
shall reimburse the Executive for all reasonable travel and other business
expenses incurred by him in the performance of his duties to the Company in
accordance with the Company’s expense reimbursement policy.

(g)                                 Key Person Insurance. 
At any time during the Term, the Company shall have the right to insure
the life of the Executive for the Company’s sole benefit.  The Company shall have the right to determine
the amount of insurance and the type of policy. 
The Executive shall cooperate with the Company in obtaining such
insurance by submitting to physical examinations, by supplying all information
reasonably required by any insurance carrier, and by executing all necessary
documents reasonably required by any insurance carrier.  The Executive shall incur no financial obligation
by executing any required document, and shall have no interest in any such
policy.

4.                                      Termination.

The Executive’s employment hereunder may be terminated
by the Company or the Executive, as applicable, without any breach of this
Agreement only under the following circumstances:

(a)                                  Circumstances.

(i)                                     Death.  The Executive’s
employment hereunder shall terminate upon his death.

(ii)                                  Disability.  If the
Executive has incurred a Disability, the Company may give the Executive written
notice of its intention to terminate the Executive’s employment.  In that event, the Executive’s employment
with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive, provided that
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of his duties.

(iii)                               Termination for Cause. 
The Company may terminate the Executive’s employment for Cause.

(iv)                              Termination without Cause. 
The Company may terminate the Executive’s employment without Cause.

(v)                                 Resignation for Good Reason. 
The Executive may resign his employment for Good Reason.

 

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(vi)                              Resignation without Good Reason. 
The Executive may resign his employment without Good Reason.

(vii)                           Non-extension of Term by the Company. 
The Company may give notice of non-extension to the Executive pursuant
to Section 2(b).

(viii)                        Non-extension of Term by the Executive. 
The Executive may give notice of non-extension to the Company pursuant
to Section 2(b).

(b)                                 Notice of Termination. 
Any termination of the Executive’s employment by the Company or by the
Executive under this Section 4 (other than termination pursuant to
paragraph (a)(i)) shall be communicated by a written notice to the other party
hereto indicating the specific termination provision in this Agreement relied
upon, setting forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment under the
provision so indicated, and specifying a Date of Termination which, if
submitted by the Executive, shall be at least 30 days following the date of
such notice (a “Notice of Termination”); provided, however,
that the Company may, in its sole discretion, accelerate the Date of Termination
to any date following the Company’s receipt of the Notice of Termination.  Subject to the provisions of Section
4(a)(ii), a Notice of Termination submitted by the Company may provide for a
Date of Termination on the date the Executive receives the Notice of
Termination, or any date thereafter elected by the Company in its sole
discretion.  The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Cause or Good Reason shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive’s or the Company’s rights hereunder.

(c)                                  Company Obligations upon Termination.  Upon termination of the Executive’s
employment, the Executive (or the Executive’s estate) shall be entitled to
receive the sum of the Executive’s Annual Base Salary through the Date of
Termination not theretofore paid, any expenses owed to the Executive under Section 3(f),
any accrued vacation pay owed to the Executive pursuant to Section 3(e),
and any amounts earned and vested or otherwise payable under any employee
benefit plans, programs or arrangements under Section 3(d), which
amounts shall be payable in accordance with the terms and conditions of such
employee benefit plans, programs or arrangements.

5.                                      Severance Payments.

(a)                                  Termination upon Death. 
If the Executive’s employment shall terminate as a result of the
Executive’s death pursuant to Section 4(a)(i), the Company shall
pay to the Executive’s estate a prorated amount of the Executive’s annual bonus
based on the Company’s year-to-date performance through the Date of Termination
in relation to the performance targets and other criteria set forth in the annual
bonus 

 

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                                                plan as then in effect (such amount to be
determined in good faith by the Compensation Committee). 

(b)                                 Termination upon Disability. 
If the Executive’s employment shall terminate as a result of the
Executive’s Disability pursuant to Section 4(a)(ii), the Company
shall pay to the Executive, subject to the Executive’s (or his representative’s)
execution and non-revocation of a general release of claims against Rexnord and
its stockholders and affiliates on customary terms and conditions:

(i)                                     in accordance with the Company’s regular
payroll practice following the Date of Termination, an amount equal to the
Annual Base Salary that the Executive would have been entitled to receive if
the Executive had continued his employment for a period of six months following
the Date of Termination; and

(ii)                                  a prorated amount of the Executive’s annual
bonus based on the Company’s year-end performance in relation to the
performance targets and other criteria set forth in the applicable annual bonus
plan as then in effect, which amount will be paid at the end of the bonus
period when the year-end performance of the Company has been determined and
bonuses are paid to other executives (such amount to be determined in good
faith by the Compensation Committee).

(c)                                  Termination without Cause or resignation
for Good Reason.  If the Executive’s employment shall terminate
without Cause pursuant to Section 4(a)(iv) or for Good Reason
pursuant to Section 4(a)(v), the Company shall, subject to the
Executive’s execution and non-revocation of a general release of claims against
Rexnord and its stockholders and affiliates on customary terms and conditions:

(i)                                     pay to the Executive, in accordance with
the Company’s regular payroll practice following the Date of Termination, an
amount equal to the Annual Base Salary that the Executive would have been
entitled to receive if the Executive had continued his employment hereunder for
a period of 18 months following the Date of Termination (the “Severance Period”);
and

(ii)                                  subject to Section 5(e),
continue to provide during the Severance Period, to the extent provided to the
Executive as of the Date of Termination, coverage for the Executive and any
dependents under all Company group health benefit plans (including health,
dental and vision coverage) in which the Executive and any dependents were
entitled to participate immediately prior to the Date of Termination, to the
extent permitted thereunder;

provided that, in the event that
the Executive’s termination of employment by the Company without Cause or by
the Executive for Good Reason occurs within 18 months after a Change in
Control, the Executive also will be entitled to receive the following:

 

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(iii)                               the bonus the Executive would have
received if the Executive remained employed with the Company through the end of
the bonus performance period in which the Date of Termination occurs, 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),
which shall be paid at the end of such bonus performance period when the
year-end performance of the Company has been determined and bonuses otherwise
would be payable to executives in the ordinary course; 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 Period at regular intervals in accordance with the Company’s
customary payroll procedures.

(d)                                 Survival.  The
expiration or termination of the Term shall not impair the rights or
obligations of any party hereto, which shall have accrued prior to such
expiration or termination.

(e)                                  Mitigation of Damages. 
In the event of any termination of the Executive’s employment by the
Company other than for retirement or upon death or Disability, the Executive
shall be required to seek other employment to mitigate damages, and any employee
benefits received by the Executive from other full-time employment or
self-employment shall be offset against any obligation of the Company to
provide benefits to the Executive pursuant to this Section 5.

(f)                                    Other Employment Terminations. 
The Executive shall not be entitled to any payments or benefits under
this Section 5 in the event of a termination of the Executive’s employment
described in Section 4(a)(iii), 4(a)(vi), 4(a)(vii) or 4(a)(viii).

6.                                      Competition.

(a)                                  The Executive shall not, at any time during
the Term of this Agreement and for 24 months following the Date of Termination,
directly or indirectly engage in, have any equity interest in, or manage or
operate any person, firm, corporation, partnership or business (whether as
director, officer, employee, agent, representative, partner, security holder,
consultant or otherwise) that engages in any business which competes with any
business of the Company or any entity owned by the Company anywhere in the
world; provided, however, that the Executive
shall be permitted to acquire a passive stock or equity interest in such a
business provided the stock or other equity interest acquired is not more than
five percent (5%) of the outstanding interest in such business.

 

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(b)                                 During the Term of this Agreement and for
24 months following the Date of Termination, the Executive will not, and will
not permit any of his affiliates to, directly or indirectly, (i) recruit or
otherwise solicit or induce (or attempt to recruit or otherwise solicit or induce)
any employee of Rexnord to leave the employ of 
Rexnord, or in any way interfere with the relationship between Rexnord,
on the one hand, and any employee thereof, on the other hand, (ii) hire any
person or entity who is or any time was an employee of Rexnord until six (6)
months after such individual’s employment relationship with Rexnord has ended,
or (iii) induce or attempt to induce any customer, supplier, licensee or other
business relation of Rexnord to cease doing business with Rexnord, or in any
way interfere with the relationship between any such customer, supplier,
licensee or business relation, on the one hand, and Rexnord, on the other hand.

(c)                                  In the event terms of this Section 6
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time or over too great a
geographical area or by reason of its being too extensive in any other respect,
it will be interpreted to extend only over the maximum period of time for which
it may be enforceable, over the maximum geographical area as to which it may be
enforceable, or to the maximum extent in all other respects as to which it may
be enforceable, all as determined by such court in such action.

7.                                      Nondisclosure of Proprietary Information.

(a)                                  Except as required in the faithful
performance of the Executive’s duties hereunder or pursuant to Section 7(c),
the Executive shall, in perpetuity, maintain in confidence and shall not
directly, indirectly or otherwise, use, disseminate, disclose or publish, or
use for his benefit or the benefit of any person, firm, corporation or other
entity any confidential or proprietary information or trade secrets of or
relating to Rexnord, including, without limitation, information with respect to
Rexnord’s operations, processes, products, inventions, business practices,
finances, principals, vendors, suppliers, customers, potential customers,
marketing methods, costs, prices, contractual relationships, regulatory status,
compensation paid to employees or other terms of employment, or deliver to any
person, firm, corporation or other entity any document, record, notebook, computer
program or similar repository of or containing any such confidential or
proprietary information or trade secrets. 
The parties hereby stipulate and agree that as between them the
foregoing matters are important, material and confidential proprietary
information and trade secrets and affect the successful conduct of the
businesses of Rexnord (and any successor or assignee of Rexnord).

(b)                                 Upon termination of the Executive’s
employment with the Company for any reason, the Executive will promptly deliver
to the Company all correspondence, drawings, manuals, letters, notes,
notebooks, reports, programs, plans, proposals, financial documents, or any
other documents concerning Rexnord’s customers, business plans, marketing
strategies, products or processes.

 

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(c)                                  The Executive may respond to a lawful and
valid subpoena or other legal process but shall give the Company the earliest
possible notice thereof, shall, as much in advance of the return date as
possible, make available to the Company and its counsel the documents and other
information sought and shall assist such counsel in resisting or otherwise
responding to such process.

8.                                      Inventions.

All rights to discoveries, inventions, improvements
and innovations (including all data and records pertaining thereto) related to
the business of Rexnord, whether or not patentable, copyrightable, registrable
as a trademark, or reduced to writing, that the Executive may discover, invent
or originate during the Term, and for a period of 12 months thereafter, either
alone or with others and whether or not during working hours or by the use of
the facilities of the Company (“Inventions”), shall be the exclusive property
of Rexnord.  The Executive shall promptly
disclose all Inventions to the Company, shall execute at the request of the
Company any assignments or other documents the Company may deem necessary to
protect or perfect its rights therein, and shall assist the Company, at the
Company’s expense, in obtaining, defending and enforcing the Company’s rights
therein.  The Executive hereby appoints
the Company as his attorney-in-fact to execute on his behalf any assignments or
other documents deemed necessary by the Company to protect or perfect Rexnord’s
rights to any Inventions.

9.                                      Injunctive Relief.

It is recognized and acknowledged by the Executive
that a breach of the covenants contained in Section 6, 7 or 8
will cause irreparable damage to Rexnord and its goodwill, the exact amount of
which will be difficult or impossible to ascertain, and that the remedies at
law for any such breach will be inadequate. 
Accordingly, the Executive agrees that, in the event of a breach of any
of the covenants contained in Section 6, 7 or 8, in addition to
any other remedy which may be available at law or in equity, the Company will
be entitled to specific performance and injunctive relief.

10.                               Assignment and Successors.

The Company may assign its rights and obligations
under this Agreement to any entity, including any successor to all or
substantially all the assets of the Company, by merger or otherwise, and may
assign or encumber this Agreement and its rights hereunder as security for
indebtedness of the Company and its affiliates. 
The Executive may not assign his rights or obligations under this
Agreement to any individual or entity. 
This Agreement shall be binding upon and inure to the benefit of the
Company, the Executive and their respective successors, assigns, personnel and
legal representatives, executors, administrators, heirs, distributes, devisees,
and legatees, as applicable.

11.                               Governing Law.

This Agreement shall be governed by and construed in accordance with the
domestic laws of the state of New York without regard to the conflicts of laws
provisions or principles thereof that would cause the application of the laws
of any jurisdiction other than the state of New York.

 

12

 

12.                               Validity.

The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

13.                               Notices.

All notices, requests, consents and other
communications hereunder to any party hereto shall be deemed to be sufficient
if contained in a written instrument and shall be deemed to have been duly
given when delivered in person, by telecopy, by nationally-recognized overnight
courier, or by first class registered or certified mail, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by the addressee to the addressor:

(i)            if
to the Company, to:

Rexnord Corporation

4701 Greenfield Avenue

Milwaukee, WI 53214

Attention:  Patty Whaley

 

with copies to:

Rexnord Holdings, Inc.

c/o Apollo Management, L.P.

10250 Constellation Blvd, Suite 2900

Los Angeles, CA 90067

Fax:  (310) 843-1933

Attention:  Larry Berg

 

and

 

Rexnord Corporation

c/o Apollo Management, L.P.

9 West 57th Street, 43rd Floor

New York, NY 10019

Fax:  (212)
515-3288

Attention:  Steven
Martinez

 

and

 

O’Melveny & Myers LLP

Times Square Tower

7 Times Square

New York, New York 10036

Fax:  (212)
326-2061

Attention:  John
M. Scott, Esq.

 

13

 

 

(ii)           if
to the Executive, to the Executive’s home address on file with the Company.

14.                               Counterparts.

This Agreement may be executed in several
counterparts, including via facsimile transmission, each of which shall be
deemed to be an original, but all of which together will constitute one and the
same Agreement.

15.                               Entire Agreement.

The terms of this Agreement and the other agreements
and instruments contemplated hereby or referred to herein (collectively the “Related
Agreements”) are intended by the parties to be the final expression of their
agreement with respect to the employment of the Executive by the Company and
may not be contradicted by evidence of any prior or contemporaneous agreement
or understanding (all of which are superseded hereby), including, without
limitation, the Prior Agreement, the CIC Agreement and the Binding Term Sheet.  The parties further intend that this
Agreement and the Related Agreements shall constitute the complete and
exclusive statement of their terms and that no extrinsic evidence whatsoever
may be introduced in any judicial, administrative, or other legal proceeding to
vary the terms of this Agreement and the Related Agreements.

16.                               No Conflicts.

The Executive hereby represents and warrants that he is
not a party to any agreement or understanding, or subject to any court order,
judgment, law or regulation that would interfere with his ability to enter into
this Agreement or perform the services contemplated hereby.

17.                               Amendments; Waivers.

This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by the Executive and a
duly authorized officer of Company.  By
an instrument in writing similarly executed, the Executive or a duly authorized
officer of the Company may waive compliance by the other party or parties with
any provision of this Agreement that such other party was or is obligated to
comply with or perform; provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure.  No
failure to exercise and no delay in exercising any right, remedy, or power
hereunder preclude any other or further exercise of any other right, remedy, or
power provided herein or by law or in equity.

18.                               No Inconsistent Actions.

The parties hereto shall not voluntarily undertake or
fail to undertake any action or course of action inconsistent with the
provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties
hereto to act in a fair and reasonable manner with respect to the
interpretation and application of the provisions of this Agreement.

 

14

 

19.                               Construction.

This Agreement shall be deemed drafted equally by both
the parties.  Its language shall be
construed as a whole and according to its fair meaning.  Any presumption or principle that the
language is to be construed against any party shall not apply.  The headings in this Agreement are only for
convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs,
sections or subsections are to those parts of this Agreement, unless the
context clearly indicates to the contrary.

20.                               Arbitration; Waiver of Jury Trial.

Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before an arbitrator in New York, New York in accordance with the
applicable rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitration
award in any court having jurisdiction, provided, however, that the Company shall be entitled to seek a
restraining order or injunction in any court of competent jurisdiction to
prevent any continuation of any violation of the provisions of Sections 6,
7 or 8 of the Agreement and the Executive hereby consents that such
restraining order or injunction may be granted without requiring the Company to
post a bond.  Only individuals who are
(i) lawyers engaged fulltime in the practice of law; and (ii) on the
AAA register of arbitrators shall be selected as an arbitrator.  Within 20 days of the conclusion of the
arbitration hearing, the arbitrator shall prepare written findings of fact and
conclusions of law.  It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable, provided, however, that the parties hereto agree that the arbitrator
shall not be empowered to award punitive damages against any party to such
arbitration.  The arbitrator’s fees and
expenses will be borne equally by each party. 
In the event that an action is brought to enforce the provisions of this
Agreement pursuant to this Section 20, each party shall pay its own
attorney’s fees and expenses regardless of whether in the opinion of the court
or arbitrator deciding such action there is a prevailing party.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL, INCLUDING TRIAL BY JURY, IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

21.                               Enforcement.

If any provisions of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a portion of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement.  Furthermore,
in lieu of such illegal, invalid or unenforceable provision there shall be
added automatically as part of this Agreement a provision as similar as
possible in terms that are legal, valid and enforceable.

 

15

 

22.                               Withholding.

The Company shall be entitled to withhold from any
amounts payable under this Agreement any federal, state, local or foreign
withholding or other taxes or charges which the Company is required to
withhold.  The Company shall be entitled
to rely on an opinion of counsel if any questions as to the amount or
requirement of withholding shall arise.

23.                               Employee Acknowledgement.

The Executive acknowledges that he has read and
understands this Agreement, is fully aware of its legal effect, has not acted
in reliance upon any representations or promises made by the Company other than
those contained in writing herein, and has entered into this Agreement freely
based on his own judgment.

[Signature
Pages Follow]

 

 

16

 

 

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

	
   

  	
   

  	
  REXNORD
  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael N.
  Andrzejewski

  
	
   

  	
   

  	
   

  	
  Name: Michael N.
  Andrzejewski

  
	
   

  	
   

  	
   

  	
  Title:   Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert A.
  Hitt

  
	
   

  	
   

  	
   

  	
  Name: Robert A.
  Hitt

  
	
   

  	
   

  	
   

  	
  Address: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

17Exhibit 10.3

 

MANAGEMENT
CONSULTING AGREEMENT

THIS
MANAGEMENT CONSULTING AGREEMENT (this “Agreement”) is entered into as of this 21st
day of July 2006, by and among Rexnord Corporation, a Delaware corporation (the
“Company”), George M.  Sherman (“GMS”),
Cypress Group, LLC, a Maryland limited liability company (“Cypress”), and
Cypress Industrial Holdings, LLC, a Maryland limited liability company (“Cypress
Industrial”), effective as of and subject to the Closing (within the meaning of
the Merger Agreement, as defined below) (the date of such Closing, the “Effective
Date”)

RECITALS

A.            The
Company desires to engage Cypress to assist the Company on the terms and
conditions set forth herein.

B.            The
Company believes that it is in its best interest to engage Cypress on the terms
and conditions set forth herein and for Cypress to arrange for GMS to provide
the services contemplated by this Agreement.

C.            The
Company desires that GMS be the individual responsible for performing the
duties on behalf of Cypress set forth in this Agreement.

D.            The
Company, Cypress, Cypress Industrial and GMS wish to enter into this new
consulting agreement and supersede the existing management consulting agreement
by and among the Company, GMS, Cypress, and Cypress Industrial, effective as of
November 25, 2002 (the “Prior Agreement”). 
The parties agree that the Prior Agreement and any other prior
consulting agreements between the Company and any of its subsidiaries or parent
entities, on the one hand, and GMS, Cypress, or Cypress Industrial, on the
other hand, shall be terminated and of no further force or effect as of the
Effective Date, except for the consulting agreements being entered into and
effective as of the Closing.

E.             RBS Global, Inc., a Delaware corporation and parent
company of the Company, Chase Acquisition I, Inc., Chase Merger Sub, Inc. (“Merger
Sub”), and TC Group, L.L.C. entered into an Agreement and Plan of Merger dated
as of May 24, 2006 (the “Merger Agreement”) pursuant to which Merger Sub shall
merge with and into the Company (the “Merger”) and continue its existence as a
wholly-owned subsidiary of Rexnord Holdings, Inc (“Parent,” and, together with
its subsidiaries, “Rexnord”).

F.             Cypress’,
GMS’ and Cypress Industrial’s agreement to enter into this Agreement and to be
bound by the terms hereof was a material factor in the decision of Chase
Acquisition I, Inc. to enter into the Merger Agreement and constitutes partial
consideration for the payments and commitments made or to be made by Chase
Acquisition I, Inc. and its affiliates in connection therewith.

G.            Cypress
desires to be engaged, and GMS desires Cypress to be engaged, by the Company in
the capacities and on the terms and conditions described herein.

 

 

AGREEMENT

For
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree
as follows:

1.             Scope
of Engagement.  The Company agrees to
engage Cypress, and Cypress hereby accepts such engagement, on the terms and
conditions set forth herein effective as of the Effective Date, until this
Agreement is terminated in accordance with Section 4.  GMS and Cypress agree that, unless otherwise
agreed in writing by the Company, GMS shall provide all consulting services to
be performed under this Agreement by Cypress (including the duties set forth in
Section 2).  GMS understands that
the Company will classify Cypress and GMS as independent contractors for all
purposes.  Payments due to Cypress
hereunder shall not be subject to withholding except as required by law.

2.             Duties.

a.             During the term of this Agreement, GMS agrees to serve
as a director in the capacity of Non-Executive Chairman of the Board of
Directors of the Company and the Board of Directors of Rexnord Holdings, Inc.
(the “Boards”), a Delaware corporation (“Parent”).

b.             GMS and Cypress acknowledge and agree that GMS and
Cypress have a duty to act in the best interests of Rexnord.  GMS and Cypress acknowledge and agree not to
knowingly commit any act that would injure the business, interests or
reputation of Rexnord or, to the best of GMS’ and Cypress’ knowledge, any of
Rexnord’s subsidiaries or affiliates.

c.             During the term of this Agreement, GMS shall
(i) devote at least two days on average per month advising Rexnord with
respect to management strategy; and (ii) attend at least four meetings of each
Board per year.

d.             On the Effective Date, GMS shall, or shall cause Cypress
Industrial Holdings, LLC to, invest in Parent the investment amount described
in Cypress’, GMS’ and Cypress Industrial’s binding term sheet with Chase
Acquisition I, Inc. dated as of May 24, 2006 (the “Binding Term Sheet”), and
set forth on the Confidential Annex hereto, which amount shall be invested in
part by contribution of shares of common stock of RBS Global, Inc. and in part
by the rollover of vested options to purchase shares of common stock of RBS
Global, Inc. into vested options to purchase shares of common stock of Parent, as
contemplated by the Binding Term Sheet. 
Such contributions shall be evidenced by a subscription agreement and a
stock option assumption agreement that shall be executed prior to or on the
Effective Date.

3.             Compensation. 
As compensation for GMS’ services, GMS or Cypress (as applicable) shall
receive the following amounts:

a.             Subject to Section 5, the Company shall pay
Cypress a base consulting fee at a rate of $250,000 per year (“Base Consulting
Fee”) on a monthly basis for causing GMS to perform the duties set forth in Section
2.

b.             The Company shall reimburse Cypress for all reasonable out-of-pocket
expenses incurred by GMS during the term of this Agreement for travel, lodging,
entertainment, 

 

2

 

and other reasonable
out-of-pocket business expenses incurred in connection with performing the
services hereunder.  For purposes of
clarity, such expenses shall not include amounts paid for maintenance of an
office (including a home office) or secretarial support.

c.             On the Effective Date, GMS shall be granted
non-qualified stock options to purchase 576,765 shares of common stock (the “Common
Stock”) of Parent, at a price of $47.50 per share.  Such options shall be governed by the terms
of the Non-Qualified Stock Option Agreement, a copy of which is attached hereto
as Exhibit A.

4.             Termination. 
This Agreement shall be terminable as follows:

a.             automatically upon the death of GMS;

b.             by either the Company, GMS or Cypress for any reason
with 15 days’ prior written notice to the other party;

c.             by the Company for “Cause.”  The Company shall have “Cause” to terminate
this Agreement upon:

(i)                                     failure by GMS to carry out, or comply
with, in any material respect, any lawful and reasonable directive of a Board
consistent with the terms of this Agreement that, if capable of being cured, is
not remedied within 30 days after receipt of written notice from the Company
specifying such failure;

(ii)                                  GMS’ conviction, plea of no contest, plea
of nolo contendere, or imposition of unadjudicated probation for any felony;

(iii)                               GMS’ unlawful use (including being under
the influence) or possession of illegal drugs;

(iv)                              GMS’ commission of an act of fraud,
embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty
against Rexnord;

(v)                                 GMS’, Cypress’ or Cypress Industrial’s
material breach of this Agreement or that certain Stockholders Agreement
entered into among Parent, Rexnord Acquisition Holdings I, LLC, Rexnord
Acquisition Holdings II, LLC, GMS and Cypress Industrial (the “Cypress
Stockholders Agreement”), pursuant to the terms thereof and such breach
continues unremedied for 30 days after receipt by GMS of written notice; or

d.             by GMS, Cypress or Cypress Industrial for “Good Reason.”  GMS, Cypress or Cypress Industrial shall have
Good Reason to terminate this Agreement upon:

(i)                                     failure by the Company to continue GMS as
non-executive Chairman of the Board of Directors of the Company or the Board 

 

3

 

                                                of Directors of Parent (or if Parent does
not own, directly or indirectly a majority of the capital stock of the Company,
the Board of Directors of any entity that does);

(ii)                                  material diminution in GMS’
responsibilities, duties or authority with the Company and such diminution
continues unremedied for 30 days after receipt of written notice thereof;

(iii)                               the Company’s breach of this Agreement
and such breach continues unremedied for a period of 30 days after the Company
receives written notice of such breach; or

(iv)                              the Company’s material breach of the
Cypress Stockholders Agreement and such breach continues unremedied for 30 days
after receipt of written notice of such breach.

5.             Effect of Termination.  The sole liability of the Company and its
affiliates under this Agreement upon termination of this Agreement shall be (a)
to reimburse Cypress pursuant to Section 3b for reasonable expenses
incurred by Cypress or GMS during the term of this Agreement; (b) to pay any
earned Base Consulting Fee not theretofore paid pursuant to Section 3a
(appropriately pro-rated to the date of termination); and (c) to comply with
any other obligations under this Agreement which expressly survive termination
of Cypress’ engagement, including, without limitation, the indemnification
obligations set forth in Section 9 hereof.

6.             Nondisclosure of Proprietary Information.

a.             Except as required in the faithful performance of
Cypress’ or GMS’ duties hereunder or pursuant to Section 6c below or as
expressly authorized by the Company in writing, GMS, Cypress and Cypress
Industrial shall, in perpetuity, maintain in confidence and shall not directly,
indirectly or otherwise, use, disseminate, disclose or publish, or use for its
or his benefit or the benefit of any person, firm, corporation or other entity
any confidential and proprietary information or trade secrets of Rexnord, including,
without limitation, information that is confidential and proprietary with
respect to Rexnord’s business operations, processes, products, inventions,
business practices, finances, principals, vendors, suppliers, customers,
potential customers, marketing methods, costs, prices, contractual
relationships, regulatory status, or deliver to any person, firm, corporation
or other entity any document, record, notebook, computer program or similar
repository of or containing any such confidential and proprietary information
or trade secrets.  The parties hereby
stipulate and agree that between them the foregoing information is important
and material and affects the successful conduct of the businesses of Rexnord
(and any successors or assignees of Rexnord). 
Information that (i) is generally known by the public, other than as a
result of GMS’, Cypress’ or Cypress Industrial’s acts or failure to act; (ii)
is obtained by GMS, Cypress or Cypress Industrial from third persons not known
to GMS, Cypress or Cypress Industrial to be under an agreement to maintain the
confidentiality of the information received; or (iii) GMS, Cypress or Cypress
Industrial is legally required to disclose, is not subject to the restrictions
of this Section 6a.

 

4

 

b.             Upon termination of this Agreement for any reason, GMS,
Cypress and Cypress Industrial will promptly deliver to the Company all
correspondence, drawings, manuals, letters, notes, notebooks, reports,
programs, plans, proposals, financial documents or any other documents
concerning the customers, business plans, marketing strategies, products and/or
processes of Rexnord.

c.             GMS, Cypress, or Cypress Industrial may respond to a
lawful and valid subpoena or other legal process but shall give the Company the
earliest possible notice thereof, shall, as much in advance of the return date
as possible, make available to the Company and its counsel the documents and
other information sought and shall assist the Company and such counsel at the
Company’s expense in lawfully resisting or otherwise responding to such
process.

7.             No Competition; No Disparagement.

a.             Except as otherwise permitted herein, during the term of
Cypress’ and GMS’ engagement hereunder and until the conclusion of the 24-month
period following the cessation of Cypress’ and GMS’ services to Rexnord
hereunder, none of GMS, Cypress or Cypress Industrial shall:

(i)                                     without the prior written consent of the
Company, which consent may be granted or withheld by the Company in its sole
discretion, directly or indirectly engage in, consult, have any equity interest
in, or manage or operate any person, firm, corporation, partnership or business
(whether as director, officer, employee, agent, representative, partner,
security holder, consultant or otherwise) that engages in any business which
competes with any material business of Rexnord anywhere in the world (as
conducted during the term of this engagement); provided,
however, that (A) GMS, Cypress, and Cypress Industrial shall be permitted
to acquire stock or membership interests in such an entity provided the entity
is publicly traded and the acquired interest is not more than five percent (5%)
of the outstanding shares or membership interests of the entity; and (B) GMS,
Cypress, and Cypress Industrial shall be permitted to hold stock or membership
interests in companies and businesses in which GMS, Cypress, Cypress Industrial
or other entities affiliated with GMS hold stock or membership interests
immediately prior to the Effective Date (including, without limitation, stock
in Colfax, Inc. and related entities), or invested prior to the Effective Date;
or

(ii)                                  hire, solicit or accept, if offered, with
or without solicitation, on GMS’, Cypress’, or Cypress Industrial’s behalf or
on behalf of any other person, the services of any person who is (or was at any
time in the preceding six months) an employee of Rexnord, nor solicit any of
Rexnord’s employees to terminate employment with Rexnord (it being understood
that the foregoing shall not apply to employees solicited or hired without GMS’
knowledge and shall 

 

5

 

                                                not preclude Cypress, Cypress Industrial
or other companies or businesses associated with GMS from soliciting employees
generally though newspaper or other mass media advertising); or

(iii)                               induce or attempt to induce any customer,
supplier, licensee or other business relation of Rexnord to cease doing
business with Rexnord, or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation, on the one hand,
and Rexnord, on the other hand.

b.             During the term of GMS’ engagement and thereafter, none
of GMS, Cypress or Cypress Industrial shall, directly or indirectly, issue or
communicate any public statement, or statement likely to become public, that is
disparaging of or damaging to Rexnord, any of its products or practices, or any
of its officers, directors, employees, representatives or stockholders.  During the term of GMS’ engagement hereunder
and thereafter, neither Rexnord nor any officers of Rexnord shall, directly or
indirectly, issue or communicate any public statement, or statement likely to
become public, that is disparaging of or damaging to GMS, Cypress or Cypress
Industrial.  The foregoing shall not be
violated by truthful responses required by law or legal process.

c.             In the event the terms of this Section 7 shall be
determined by any court of competent jurisdiction to be unenforceable because
the provision extends for too great a period of time, over too great a
geographical area, or for any other reason, the provision shall be interpreted
to extend only over the maximum period of time for which it may be enforceable,
and/or over the maximum geographical area as to which it may be enforceable
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.

8.             Injunctive Relief, Survival

a.             GMS, Cypress and Cypress Industrial recognize and
acknowledge that a breach of the covenants contained in Section 6 and Section
7 will cause irreparable damage to Rexnord and its goodwill, the exact
amount of which will be difficult or impossible to ascertain, and that the
remedies at law for any breach will be inadequate.  Accordingly, GMS, Cypress and Cypress
Industrial agree that in the event of a breach of any of the covenants
contained in Section 6 and Section 7, in addition to any other
remedy which may be available at law or in equity, the Company will be entitled
to specific performance and injunctive relief. 
Parent and the Company recognize and acknowledge that a breach of the
covenants in Section 7b will cause irreparable damage to GMS, Cypress
and Cypress Industrial and the goodwill of Cypress and Cypress Industrial, the
exact amount of which will be difficult or impossible to ascertain, and that
the remedies at law for any breach will be inadequate.  Accordingly, Parent and the Company agree
that in the event of a breach of the covenants contained in Section 7b,
in addition to any other remedy which may be available at law or in equity,
GMS, Cypress and Cypress Industrial will be entitled to specific performance
and injunctive relief.

 

6

 

b.             The rights and obligations of the parties arising under Section
6 and Section 7 of this Agreement shall survive, and will not be
impaired by, the expiration of GMS’ engagement by the Company.

9.             Indemnification. 
The Company agrees that during the term of this Agreement and following the
time GMS’ and Cypress’ relationship with the Company is terminated, GMS,
Cypress and Cypress Industrial shall be entitled to receive indemnification
from time to time from the Company in accordance with the Company’s charter,
bylaws and applicable law to the extent GMS, Cypress or Cypress Industrial
(each such person, for purposes of this Section 9, an “Indemnitee” and
collectively the “Indemnitees”) becomes subject to suits, claims, actions,
causes of action, proceedings or investigations or would otherwise be entitled
to or could seek indemnification thereunder in respect of matters which involve
actions GMS or Cypress have taken or omitted to take prior to the termination
date of their relationship with the Company as an employee, officer, director,
consultant or agent of or to the Company. 
The Company shall provide such indemnification to the fullest extent
permitted by its charter, bylaws and applicable law.  Without limiting the generality of and in
addition to the foregoing, to the fullest extent permitted by its charter,
bylaws and applicable laws, the Company shall defend, indemnify and hold the
Indemnitees harmless for, from and against all demands, suits, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs, judgments,
proceedings, investigations and expenses (including, without limitation,
interest, penalties, reasonable attorneys’ fees and disbursements) (“Losses”),
imposed on or incurred by the Indemnitees relating to GMS’ or Cypress’
relationship with the Company, including by reason of actions or omissions
taken or made by GMS or Cypress during the term of this Agreement.  The Company will also advance reasonable fees
and expenses to the Indemnitees to the maximum extent permitted by law to the
extent the Indemnitees become subject to or involved in any suit, claim,
action, cause of action, proceeding or investigation involving the Company, provided that each such person agrees and undertakes to
reimburse the Company for all expenses paid by the Company to such Indemnitee
pursuant hereto in the event and only to the extent that it shall be finally
determined by a court of competent jurisdiction that Indemnitee is not
entitled, under the provisions of the Company’s charter, bylaws, this
Agreement, applicable law, or otherwise, to be indemnified by the Company for
such expenses, or if Indemnitee receives reimbursement of such expenses from
any other source.

Promptly
after receipt by any Indemnitee of notice of the commencement of any action,
suit, or proceeding, such Indemnitee will, if a claim in respect thereof is to
be made against the Company under this Agreement, notify the Company of the
commencement thereof.  The failure of
such Indemnitee to notify the Company shall have no effect on the obligations
of the Company hereunder except if, and only to the extent that, the Company
suffers actual prejudice or material loss resulting from such failure.  The Company will be entitled to participate
in any such action, suit or proceeding at its own expense.  Except as otherwise provided below, to the
extent that it may wish, the Company shall be entitled to assume the defense
thereof with counsel satisfactory to such Indemnitee.  After notice from the Company to such
Indemnitee of its election to assume the defense thereof, the Company will not
be liable to such Indemnitee under the Agreement for any legal or other
expenses subsequently incurred by such Indemnitee in connection with the
defense thereof except as otherwise provided below.  The Indemnitees shall have the right to
employ counsel in such action, suit, or proceeding, but the fees and expenses
of such counsel incurred after notice from the Company of its assumption of the
defense thereof 

 

7

 

shall be at the expense of
the Indemnitees (and not subject to indemnification or reimbursement hereunder)
unless (a) the employment of counsel by the Indemnitees has been authorized by
the Company, (b) the Indemnitees shall have reasonably concluded that there may
be a conflict of interest between the Company and the Indemnitees in the
conduct of the defense of such action, or (c) the Company shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of one counsel acting on behalf of the Indemnitees
shall be at the expense of the Company. 
The Company shall not be entitled to assume the defense of any action,
suit, or proceeding brought by or on behalf of the Company.  The Company shall not be liable to indemnify any
Indemnitee under this Agreement for any amounts paid in settlement of any
action or claim effected without the Company’s written consent.  The Company shall not settle any such action
or claim in any manner without such Indemnitee’s written consent.  Neither the Company nor any Indemnitee will
unreasonably withhold its or his consent to any proposed settlement.  Notwithstanding anything to the contrary
contained herein, the Company shall not indemnify any Indemnitee for any costs
of defense incurred by, or any judgment rendered against, any Indemnitee as a
result of any acts or omissions that constitute fraud, intentional misconduct,
or gross negligence.

During
the term of this Agreement and for a period of six (6) years following its
termination, the Company shall maintain directors and officers liability
insurance with the limits and retentions substantially similar to the insurance
which is in effect as of immediately before the Effective Date and GMS shall be
covered thereunder.

For
purposes of this Section 9, the term “Company” shall include Parent, the
Company, and each of their subsidiaries.

10.           Legal Fees.  The Company agrees that it shall reimburse
GMS, Cypress or Cypress Industrial for reasonable legal fees and expenses GMS,
Cypress or Cypress Industrial collectively incurred in connection with the
negotiation and execution of this Agreement and the Cypress Stockholders
Agreement, and the transactions contemplated hereby.

11.           Public Communications.  The Company agrees that Cypress and GMS shall
have a right to approve in good faith the terms of any communications by the
Company, other than communications not intended for the public generally, with
respect to Cypress and GMS, including communications concerning the engagement
and the termination of GMS’ and Cypress’ engagement with the Company.  Notwithstanding the foregoing, the Company
may make any disclosure required by law, court order, or applicable exchange or
regulatory body without the approval of GMS or Cypress and may respond truthfully
to inquiries from journalists regarding the Company and the role of GMS or
Cypress therein.

12.           Directors and Officers Liability
Insurance.  The Company shall
purchase directors and officers liability insurance coverage in the amount of
$25 million from, and at all times maintain such coverage with, an insurer
selected by the Company.

13.           Assignment.  None of GMS, Cypress or Cypress Industrial
shall be entitled to assign this Agreement by operation of law or otherwise
without the prior written consent of the Company, and the Company shall not be
entitled to assign this Agreement to any party by operation of law or otherwise
without the prior written consent of GMS and Cypress.  This Agreement shall be binding upon the Company,
GMS, Cypress, Cypress Industrial and their respective successors, assigns,
personnel and legal representatives, executors, administrators, 

 

8

 

heirs, distributes,
devisees, and legatees, as applicable. 
Cypress shall be entitled to assign its right to receive all or a
portion of the Base Consulting Fee and to direct that all or a part of such
payments be made payable to any other person, including GMS, in the manner
contemplated by this Agreement.

14.           Complete Agreement.  This Agreement constitutes the complete
agreement and understanding concerning the arrangement between the parties and
supersedes all other agreements, understandings or commitments between the
parties as to the arrangement, including, without limitation, (a) the portions
of the Binding Term Sheet that address the terms of GMS’ and Cypress’
consulting arrangement with the Company, (b) the Prior Agreement, and (c) any
other consulting agreement between the Company and Rexnord, on the one hand,
and GMS, Cypress, or Cypress Industrial, on the other hand.

15.           Counterparts.  This Agreement may be executed in several
counterparts, including via facsimile, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
Agreement.

16.           Notice.  All notices, requests, consents and other
communications hereunder to any party hereto shall be deemed to be sufficient
if contained in a written instrument and shall be deemed to have been duly
given when delivered in person, by telecopy, by nationally-recognized overnight
courier, or by first class registered or certified mail, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by the addressee to the addressor:

(i)            if to the Company, to:

Rexnord Corporation

4701 Greenfield Avenue

Milwaukee, WI 53214

Attention:  Patty Whaley

with copies to:

Rexnord Holdings, Inc.

c/o Apollo Management, L.P.

10250 Constellation Blvd, Suite 2900

Los Angeles, CA 90067

Fax:  (310) 843-1933

Attention:  Larry Berg

 

and

 

Rexnord Corporation

c/o Apollo Management, L.P.

9 West 57th Street, 43rd Floor

New York, NY 10019

Fax:  (212)
515-3288

Attention: 
Steven Martinez

 

and

 

 

9

 

O’Melveny & Myers LLP

Times Square Tower

7 Times Square

New York, New York 10036

Fax:  (212) 326-2061

Attention:  John M. Scott, Esq.

(ii)           if to GMS, Cypress or Cypress
Industrial, to:

c/o Cypress Group, LLC

___________________

___________________

Attention: George M.  Sherman

with a copy to:

King & Spalding LLP

1700 Pennsylvania Avenue, NW

Washington, DC  20006

Fax:  (202) 626-3737

Attention:  Glenn C. Campbell

17.           Waiver.  No party shall be deemed to have waived any
right, power or privilege under this Agreement or any provisions hereof unless
the waiver shall have been duly executed in writing and acknowledged by the
party to be charged with the waiver.  The
failure of any party at any time to insist upon performance of any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
provision of this Agreement, nor in any way to affect the validity of this
Agreement or any part hereof.  No waiver
of any breach of this Agreement shall be held to be a waiver of any subsequent
breach.

18.           Governing Law.  This Agreement shall be governed by and
construed in accordance with the domestic laws of the state of New York without
regard to the conflicts of laws provisions or principles thereof that would
cause the application of the laws of any jurisdiction other than the state of
New York.

19.           Amendment.  This Agreement may not be amended or modified
at any time except by a written instrument executed by the Company, Cypress,
Cypress Industrial and GMS.

20.           Construction.  This Agreement shall be deemed drafted equally
by the parties.  The language contained
in this Agreement shall be construed as a whole and according to its fair
meaning.  Any presumption or principle
that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for
convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs,
sections or subsections are to those parts of this Agreement, unless the context
clearly indicates to the contrary.

21.           Representations/Warranties.  GMS, Cypress and Cypress Industrial represent
and warrant to Rexnord that (i) no legal impediment, and (ii) no arrangement or
understanding 

 

10

 

between GMS, Cypress,
Cypress Industrial or any of their affiliated entities, on the one hand, and TC
Group, L.L.C. or any of its affiliated entitles or any other person or entity,
on the other hand, precludes GMS, Cypress and Cypress Industrial from entering
into this Agreement and rendering the services contemplated hereby.

22.           Arbitration; Waiver of Jury Trial.  Any dispute or controversy arising under, out
of, or in connection with or in relation to this Agreement shall be finally
determined and settled by arbitration in New York, New York in accordance with
the Commercial Rules of the American Arbitration Association, and judgment upon
the award may be entered in any court having jurisdiction.  Within 20 days of the conclusion of the
arbitration hearing, the arbitrator shall prepare written findings of fact and
conclusions of law.  It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable; provided, however,
that the parties hereto agree that the arbitrator shall not be empowered to
award punitive damages against any party to such arbitration.  To the extent permitted by law, the
arbitrator’s fees and expenses will be borne equally by each party.  In the event that an action is brought to
enforce the provisions of this Agreement pursuant to this Section 22,
each party shall pay its own attorney’s fees and expenses regardless of whether
in the opinion of the court or arbitrator deciding such action there is a
prevailing party.  EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL, INCLUDING TRIAL BY JURY,
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.

23.           Enforcement.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, the provision shall be fully severable; this
Agreement shall be construed and enforced as if the illegal, invalid or
unenforceable provision had never comprised a portion of this Agreement; and
the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid
or unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar as possible in terms that are legal, valid and
enforceable.

[Signature page follows]

 

11

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

 

	
  COMPANY:

  	
   

  	
   

  
	
   

  	
  REXNORD
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Thomas J. Jansen

  
	
   

  	
  Name:

  	
  Thomas
  J. Jansen

  
	
   

  	
  Title:
  

  	
  Executive
  Vice President and Chief Financial Officer 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GMS:

  	
   

  	
   

  
	
   

  	
  GEORGE
  M. SHERMAN

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  George M. Sherman

  
	
   

  	
  Name:

  	
  George
  M. Sherman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CYPRESS:

  	
   

  	
   

  
	
   

  	
  CYPRESS
  GROUP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  George M. Sherman

  
	
   

  	
  Name:

  	
  George
  M. Sherman

  
	
   

  	
  Title:

  	
  Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CYPRESS INDUSTRIAL:

  	
   

  	
   

  
	
   

  	
  CYPRESS
  INDUSTRIAL HOLDINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  George M. Sherman

  
	
   

  	
  Name:

  	
  George
  M. Sherman

  
	
   

  	
  Title:

  	
  Managing
  Member

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