Exhibit 10.2
Employment
Agreement
This Employment Agreement (the
“Agreement” or this “Agreement”), entered
into as of this 21 st 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 vacat
