Exhibit 10.2

AMENDED AND RESTATED

NON-QUALIFIED STOCK OPTION AGREEMENT

OF

REXNORD HOLDINGS, INC.

THIS AGREEMENT (this “Agreement”) dated as of April 16, 2010 is made by and between Rexnord Holdings, Inc., a Delaware corporation (the “Company”), and Praveen Jeyarajah, an employee of the Company or one of its Subsidiaries (as defined herein) and a member of the Board of Directors of the Company (the “Optionee”).

WHEREAS, the Company and the Optionee are parties to that certain Non-Qualified Stock Option Agreement dated as of April 19, 2007 (the “Prior Agreement”), which evidenced the grant to the Optionee of the Non-Qualified Stock Option (the “Option”) to purchase shares of its common stock, par value $0.01 per share (“Common Stock”) under the 2006 Stock Option Plan of Rexnord Holdings, Inc. (as may be amended from time to time, the “Plan”), the terms of were incorporated by reference and made a part of the Prior Agreement, as an inducement for the Optionee to enter into or remain in the service of the Company or one of its Subsidiaries and as an incentive for increased efforts by the Optionee during such service;

WHEREAS, effective as of April 5, 2010, the Optionee ceased to be a consultant to the Company and its Subsidiaries and became an employee of Rexnord LLC; and

WHEREAS, the Company and the Optionee desire to amend and restate the Prior Agreement to provide for the continuation of the vesting and term of the Option during the term of the Optionee’s employment with the Company and its Subsidiaries and during the Optionee’s service as a member of the Board and to make certain other changes to reflect the Optionee’s change in status from consultant to an employee.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I

DEFINITIONS

Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates otherwise. Capitalized terms used in this Agreement and not defined herein shall have the meaning given to such terms in the Plan. The singular pronoun shall include the plural, where the context so indicates.

“Cause” shall have the meaning ascribed to it in any employment agreement in effect between the Company or any of its Subsidiaries and the Optionee as of the date of the Optionee’s Termination of Service and, in the absence of any such employment agreement, “Cause” shall mean,

(a) the Board’s determination that the Optionee failed to carry out, or comply with, in each case in any material respect, any lawful and reasonable directive of the Board or the Board of Directors of Rexnord LLC or any of their respective designees consistent with the terms of the Optionee’s employment, which is not remedied within 30 days after the receipt of written notice from the Company specifying such failure;

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

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

(d) the Optionee’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against the Company or any of its Subsidiaries;

(e) the breach by the Optionee of any of the provisions contained in Article IV below or similar provisions contained in any other agreement with the Company or any of its Subsidiaries or other Affiliates; or

(f) the Optionee’s material breach of the Stockholders’ Agreement.

“Cumulative Debt Repayment” for a given fiscal year shall mean the positive excess, if any, of (a) the weighted average of the debt outstanding during the 60 calendar days preceding April 30, 2007, as such debt outstanding may be increased or decreased as appropriate for the effect of any post closing adjustment as determined by the Committee, over (b) the weighted average of the debt outstanding during the 60 calendar days preceding April 30 of the fiscal year immediately following the given fiscal year.

“Cumulative Debt Repayment Target” for a period commencing on or after April 1, 2007 shall be as set forth in Appendix A to this Agreement, subject to the provisions of Section 6.6 hereof.

“Cumulative EBITDA” as of a given date shall mean the total of EBITDA from and after April 1, 2007 through such date.

“Cumulative EBITDA Target” for a given period commencing on or after April 1, 2007, shall be as set forth in Appendix A of this Agreement, subject to the provisions of Section 6.6 hereof.

“Debt Repayment” for a given fiscal year of the Company shall mean, excluding any debt repayment in conjunction with an equity offering of securities of the Company, the positive excess, if any, of (a) the weighted average of the debt outstanding during the 60 calendar days preceding April 30 of the given fiscal year, over (b) the weighted average of the debt outstanding during the 60 calendar days preceding April 30 of the fiscal year immediately following the given fiscal year.

“Debt Repayment Target” for a period commencing on or after April 1, 2007 shall be as set forth in Appendix A to this Agreement, subject to the provisions of Section 6.6 hereof.

“EBITDA” for a given period shall mean consolidated net income before interest, taxes, depreciation, amortization, extraordinary items (including Other Income and Expense items as well as LIFO Income and Expense items) and management or similar fees payable to Apollo Management, L.P. or any of its Affiliates, as reflected on the Company’s audited consolidated financial statements for such period. Consolidated net income shall be determined in accordance with generally accepted accounting principles except that gains or losses from extraordinary, unusual or non-recurring items may be excluded in the discretion of the Committee.

“EBITDA Target” for a given period commencing on or after April 1, 2007, shall be as set forth in Appendix A of this Agreement, subject to the provisions of Section 6.6 hereof.

“Good Reason” shall have the meaning ascribed to it in any employment agreement in effect between the Company or any of its Subsidiaries and the Optionee as of the date of the Optionee’s Termination of Service and, in the absence of any such employment agreement, “Good Reason” shall mean,

(a) the failure of the Company to continue the Optionee’s employment at the level of the Optionee’s position as of the date hereof or higher;

(b) a material diminution in the nature or scope of the Optionee’s responsibilities, duties or authorities;

(c) the failure of the Company to make any material payment or provide any material benefit to which the Optionee is entitled; or

(d) the material breach by the Company or any of its Subsidiaries of the Stockholders’ Agreement;

provided, however, that the Optionee may not terminate the Optionee’s employment for Good Reason unless the Optionee provides the Company or the Subsidiary of the Company that employs the Optionee with at least 30 days’ prior written notice of the Optionee’s intent to resign for Good Reason, with such notice to set forth the event or events constituting Good Reason, and the Company or the Subsidiary of the Company that employs the Optionee has not remedied the alleged violation(s) within the 30-day period.

“Principal Stockholder(s) Investment” means direct or indirect investments in shares of Common Stock, preferred stock or other debt or equity securities of the Company or any of its Subsidiaries made by the Principal Stockholder(s) on or after July 21, 2006.

“Principal Stockholder(s) CAGR” means the pretax compound annual growth rate calculated on a quarterly basis based on the cash proceeds realized to the Principal Stockholder(s) in a Liquidity Event on the Principal Stockholder(s) Investment (which proceeds, for purposes hereof, shall be determined after deducting all transaction costs and all investment banking, accounting, attorney, consultant and similar fees paid or payable by the Principal Stockholder(s) to the extent not paid or reimbursed by the Company or any other third party) and the aggregate amount invested by the Principal Stockholder(s) for all Principal Stockholder(s) Investments, assuming all Principal Stockholder(s) Investments were purchased by one Person and were held continuously by such Person, after dilution for outstanding options, warrants or other rights to acquire shares of Common Stock or other equity securities of the Company. The Principal Stockholder(s) CAGR shall be determined based on the actual time of each Principal Stockholder(s) Investment and including, as a return on such investment, any cash dividends, cash distributions or cash interest paid by the Company or any Subsidiary of the Company in respect of such investment during such period, but shall exclude any management or monitoring fees paid to Apollo Management, L.P. or any of its Affiliates.

“Termination of Service” shall mean the date of the Optionee’s Termination of Employment, unless, immediately following such Termination of Employment, the Optionee is a member of the Board, in which case the Termination of Service shall not be the date of such Termination of Employment but shall be the date of the Optionee’s Termination of Directorship.

ARTICLE II

GRANT OF OPTION

Section 2.1 Grant of Option

In consideration of the Optionee’s agreement to enter into or remain in the service of the Company or one of its Subsidiaries and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, on April 19, 2007 the Company irrevocably granted to the Optionee the Option to purchase any part or all of an aggregate of 55,707 shares of Common Stock upon the terms and conditions set forth in the Plan and this Agreement. The Optionee hereby agrees that (i) except as required by law, the Optionee will not disclose to any Person other than the Optionee’s spouse and legal, financial and other advisors (if any) the grant of the Option or any of the terms or provisions hereof without the prior approval of the Committee, and (ii) in the discretion of the Committee, the Option shall terminate and any unexercised portion of such Option (whether or not vested) shall be forfeited if the Optionee violates the non-disclosure provisions of this Section 2.1.

Section 2.2 Option Subject to Plan

The Option granted hereunder is subject to the terms and provisions of the Plan, including without limitation, Article V and Sections 7.1, 7.2, 7.3 and 7.10 thereof.

Section 2.3 Option Price

The purchase price of the shares of Common Stock covered by the Option shall be $19.94 per share (without commission or other charge).

ARTICLE III

EXERCISABILITY

Section 3.1 Commencement of Exercisability

(a) Subject to Section 3.1(e) and Section 3.3 of this Agreement, 50% of the Option shall become vested in five cumulative installments, provided that the Optionee remains continuously employed by or in active service to the Company or one of its Subsidiaries from the date of grant through such date, as follows:

(i) The first installment shall consist of 10% of the shares of Common Stock covered by such Option and shall become vested on February 7, 2008;

(ii) The second installment shall consist of 10% of the shares of Common Stock covered by such Option and shall become vested on February 7, 2009;

(iii) The third installment shall consist of 10% of the shares of Common Stock covered by such Option and shall become vested on February 7, 2010;

(iv) The fourth installment shall consist of 10% of the shares of Common Stock covered by such Option and shall become vested on February 7, 2011; and

(v) The fifth installment shall consist of 10% of the shares of Common Stock covered by such Option and shall become vested on February 7, 2012.

(b) Subject to Section 3.1(e) and Section 3.3, 50% of the Option shall become vested as follows:

(i) An installment of up to 2.5% of the shares of Common Stock covered by the Option shall become vested on, or within 120 days following, March 31 of each fiscal year 2008 through 2012, in each case as determined by the Committee in its sole discretion as follows:

(A) with respect to the fiscal year ending March 31, 2008, if the Debt Repayment for such fiscal year equals or exceeds the Debt Repayment Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(B) with respect to the fiscal year ending March 31, 2009:

(1) if the Debt Repayment for such fiscal year equals or exceeds 95%, but is less than 100%, of the Debt Repayment Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(2) if the Debt Repayment for such fiscal year equals or exceeds the Debt Repayment Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(C) with respect to each fiscal year ending March 31, 2010, 2011 and 2012:

(1) if the Debt Repayment for any such fiscal year equals or exceeds 90%, but is less than 95%, of the Debt Repayment Target for such fiscal year, then 1.25% of the shares of Common Stock covered by the Option shall become vested; or

(2) if the Debt Repayment for any such fiscal year equals or exceeds 95%, but is less than 100%, of the Debt Repayment Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(3) if the Debt Repayment for any such fiscal year equals or exceeds the Debt Repayment Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested.

(ii) An installment of up to 2.5% of the shares of Common Stock covered by the Option shall become vested on, or within 120 days following, March 31 of each fiscal year 2008 through 2012 as determined by the Committee in its sole discretion as follows:

(A) with respect to the fiscal year ending March 31, 2008, if the Cumulative Debt Repayment for such fiscal year equals or exceeds the Cumulative Debt Repayment Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(B) with respect to the fiscal year ending March 31, 2009:

(1) if the Cumulative Debt Repayment for such fiscal year equals or exceeds 95%, but is less than 100%, of the Cumulative Debt Repayment Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(2) if the Cumulative Debt Repayment for such fiscal year equals or exceeds the Cumulative Debt Repayment Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(C) with respect to each fiscal year ending March 31, 2010, 2011 and 2012:

(1) if the Cumulative Debt Repayment for such fiscal year equals or exceeds 90%, but is less than 95%, of the Cumulative Debt Repayment Target for such fiscal year, then 1.25% of the shares of Common Stock covered by the Option shall become vested; or

(2) if the Cumulative Debt Repayment for such fiscal year equals or exceeds 95%, but is less than 100%, of the Cumulative Debt Repayment Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(3) if the Cumulative Debt Repayment for such fiscal year equals or exceeds the Cumulative Debt Repayment Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested.

(iii) If the Cumulative Debt Repayment as of the end of any fiscal year 2008 through 2012 is less than the Cumulative Debt Repayment Target through the end of such fiscal year, that portion of the Option that was subject to accelerated vesting pursuant to Section 3.1(b)(i) and 3.1(b)(ii), but which did not become vested pursuant to Sections 3.1(b)(i)(A), (B) or (C) or 3.1(b)(ii)(A), (B) or

(C), with respect to such fiscal year, subject to Sections 3.2 and 3.4, shall become vested, as determined by the Committee, on, or within 120 days following, the last day of the first fiscal year in which the Cumulative Debt Repayment equals or exceeds the Cumulative Debt Repayment Target for such fiscal year.

(iv) An installment of up to 2.5% of the shares of Common Stock covered by the Option shall become vested on, or within 120 days following, March 31 of each fiscal year 2008 through 2012 as determined by the Committee in its sole discretion as follows:

(A) with respect to the fiscal year ending March 31, 2008, if EBITDA for such fiscal year equals or exceeds the EBITDA Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(B) with respect to the fiscal year ending March 31, 2009:

(1) if EBITDA for such fiscal year equals or exceeds 95%, but is less than 100%, of the EBITDA Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(2) if EBITDA for such fiscal year equals or exceeds the EBITDA Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(C) with respect to each fiscal year ending March 31, 2010, 2011 and 2012:

(1) if EBITDA for any such fiscal year equals or exceeds 90%, but is less than 95%, of the EBITDA Target for such fiscal year, then 1.25% of the shares of Common Stock covered by the Option shall become vested; or

(2) if EBITDA for any such fiscal year equals or exceeds 95%, but is less than 100%, of the EBITDA Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(3) if EBITDA for any such fiscal year equals or exceeds the EBITDA Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested.

(v) An installment of up to 2.5% of the shares of Common Stock covered by the Option shall become vested on, or within 120 days following, March 31 of each fiscal year 2008 through 2012 as determined by the Committee in its sole discretion as follows:

(A) with respect to the fiscal year ending March 31, 2008, if Cumulative EBITDA for such fiscal year equals or exceeds the Cumulative EBITDA Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(B) with respect to the fiscal year ending March 31, 2009:

(1) if Cumulative EBITDA for such fiscal year equals or exceeds 95%, but is less than 100%, of the Cumulative EBITDA Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(2) if Cumulative EBITDA for such fiscal year equals or exceeds the Cumulative EBITDA Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested;

(C) with respect to each fiscal year ending March 31, 2010, 2011 and 2012:

(1) if Cumulative EBITDA for such fiscal year equals or exceeds 90%, but is less than 95%, of the Cumulative EBITDA Target for such fiscal year, then 1.25% of the shares of Common Stock covered by the Option shall become vested; or

(2) if Cumulative EBITDA for such fiscal year equals or exceeds 95%, but is less than 100%, of the Cumulative EBITDA Target for such fiscal year, then 1.875% of the shares of Common Stock covered by the Option shall become vested; or

(3) if Cumulative EBITDA for such fiscal year equals or exceeds the Cumulative EBITDA Target for such fiscal year, then 2.5% of the shares of Common Stock covered by the Option shall become vested.

(vi) if Cumulative EBITDA as of the end of any fiscal year 2008 through 2012 is less than the Cumulative EBITDA Target through the end of such fiscal year, that portion of the Option that was subject to accelerated vesting pursuant to Sections 3.1(b)(iv) and 3.1(b)(v), but which did not become vested pursuant to Sections 3.1(b)(iv)(A), (B) or (C) or 3.1(b)(v)(A), (B) or (C), with respect to such fiscal year, subject to Sections 3.2 and 3.4, shall become vested, as determined by the Committee, on, or within 120 days following, the last day of the first fiscal year in which Cumulative EBITDA equals or exceeds the Cumulative EBITDA Target for such fiscal year.

(c) Notwithstanding the foregoing provisions of this Section 3.1, but subject to Section 3.1(e), upon the occurrence of the first Liquidity Event, the following shall immediately prior to the effective date of such Liquidity Event become vested in full:

(i) that portion of the Option that remains eligible to become vested pursuant to Section 3.1(a);

(ii) at the election and sole discretion of the Committee, that portion of the Option that has not, as of such Liquidity Event, become eligible to become vested pursuant to Sections 3.1(b)(i), 3.1(b)(ii), 3.1(b)(iv) or 3.1(b)(v);

(iii) that portion of the Option that remains eligible to become vested pursuant to Section 3.1(b), but only if the Principal Stockholder(s) CAGR as of the Liquidity Event equals or exceeds 25%.

(d) The Committee shall make the determination as to whether the respective Debt Repayment, Cumulative Debt Repayment, EBITDA, and Cumulative EBITDA Targets have been met, and shall determine the extent, if any, to which the Option as become vested, on any such date as the Committee in its sole discretion shall determine; provided, however, that with respect to each fiscal year such date shall not be later than the 120^th day following March 31 of such fiscal year.

(e) Except with respect to any portion of the Option that as of the Optionee’s Termination of Service is eligible to vest pursuant to Section 3.1(b) for the fiscal year preceding the fiscal year in which the Optionee’s Termination of Service occurs, no portion of the Option which is unvested at the Optionee’s Termination of Service shall thereafter become vested.

Section 3.2 Duration of Exercisability

The installments provided for in Section 3.1 are cumulative. Each such installment which becomes vested pursuant to Section 3.1 shall remain vested and may be exercised until the Option expires pursuant to Section 3.3.

Section 3.3 Expiration of Option

The Option may not be exercised to any extent by any Person after the first to occur of any of the following events:

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

(b) If the Optionee’s Termination of Service is for any reason other than (i) by the Company or any Subsidiary of the Company for Cause, or (ii) on account of the Optionee’s death or disability (as defined in Section 22(e)(3) of the Code), the later of (x) the ninetieth day following the date of the Optionee’s Termination of Service or (y) to the extent that, as of the Optionee’s Termination of Service, any portion of the Option remains eligible to vest pursuant to Section 3.1(b) for the fiscal year preceding the fiscal year in which the Optionee’s Termination of Service occurs, the thirtieth day following the date of the Committee’s determination under Section 3.1(d) for such fiscal year;

(c) The date of the Optionee’s Termination of Service by the Company or any Subsidiary of the Company for Cause;

(d) If the Optionee’s Termination of Service is on account of the Optionee’s death or disability (within the meaning of Section 22(e)(3) of the Code), the expiration of 12 months from the date of the Optionee’s Termination of Service; or

(e) The occurrence of a Liquidity Event, provided that any portion of the Option that is vested as of the occurrence of the Liquidity Event may be exercised concurrently therewith.

Section 3.4 Partial Exercise

Any vested portion of the Option or the entire Option, if then wholly vested, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof expires; provided, however, that each partial exercise shall be for not less than 100 shares of Common Stock and shall be for whole shares of Common Stock only.

Section 3.5 Exercise of Option

The exercise of the Option shall be governed by the terms of this Agreement and the terms of the Plan, including without limitation, the provisions of Article V of the Plan, which, among other things, require that the Optionee (or, in the event of the Optionee’s death or disability, the Optionee’s Eligible Representative) deliver an executed copy of a Joinder to the Stockholders’ Agreement designated by the Company (in the form attached to such Stockholders’ Agreement) to the Secretary as a condition to the exercise of the Option.

ARTICLE IV

RESTRICTIVE COVENANTS

Section 4.1 Non-Competition

During the term of the Optionee’s services to the Company or any of its Subsidiaries and for a period of two years thereafter, the Optionee shall not, 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 Optionee 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.

Section 4.2 Customer Non-Solicitation

During the term of the Optionee’s services to the Company or any of its Subsidiaries and for a period of two years thereafter, the Optionee agrees not to, and will not permit any of the Optionee’s Affiliates to, directly or indirectly, induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any of its Subsidiaries to cease doing business with the Company or any of its Subsidiaries, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation, on the one hand, and the Company or any of its Subsidiaries, on the other hand.

Section 4.3 Non-Solicitation/Non-Hiring of Employees

During the term of the Optionee’s services to the Company or any of its Subsidiaries and for a period of two years thereafter, the Optionee agrees not to, and will not permit any of the Optionee’s Affiliates to, directly or indirectly, (i) recruit or otherwise solicit or induce (or attempt to recruit or otherwise solicit or induce) any employee of the Company or any of its Subsidiaries

to leave the employ of the Company or any of its Subsidiaries, or in any way interfere with the relationship between the Company or any of its Subsidiaries, on the one hand, and any employee thereof, on the other hand, or (ii) hire any Person who is or at any time was an employee of the Company or any of its Subsidiaries until six (6) months after such Person’s employment relationship with the Company or any of its Subsidiaries has ended.

Section 4.4 Non-Disparagement

During the term of the Optionee’s services to the Company or any of its Subsidiaries and thereafter in perpetuity, the Optionee shall not knowingly disparage, criticize, or otherwise make derogatory statements regarding the Company or any of its Affiliates, Subsidiaries, successors, directors, officers, customers or suppliers. During the term of the Optionee’s services to the Company or any of its Subsidiaries and thereafter in perpetuity, none of the Company, Rexnord Corporation, nor any of their respective officers shall knowing disparage, criticize, or otherwise make derogatory statements regarding the Optionee. The restrictions of this Section 4.4 shall not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process.

Section 4.5 Non-Disclosure of Confidential Information

During the term of the Optionee’s services to the Company or any of its Subsidiaries and thereafter in perpetuity, the Optionee shall maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for the Optionee’s benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company or any of its Subsidiaries or Affiliates, including, without limitation, information with respect to the Company’s or any of its Subsidiaries’ 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 any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. Upon the Optionee’s Termination of Service for any reason, the Optionee shall promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Company’s or any of its Subsidiaries’ customers, business plans, marketing strategies, products or processes. The Optionee 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.

Section 4.6 Injunctive Relief

The Optionee hereby acknowledges that a breach of the covenants contained in this Article IV will cause irreparable damage to the Company 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 Optionee hereby agrees that, in the event of a breach of any of the covenants contained in this Article IV, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief. The Company hereby acknowledges that a breach of the Company’s covenant contained in Section 4.4 will cause irreparable damage to the Optionee, 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 Company hereby agrees that, in the event of a breach of the Company’s covenant contained in Section 4.4, in addition to any other remedy which may be available at law or in equity, the Optionee shall be entitled to specific performance and injunctive relief.

ARTICLE V

LIMITED CALL RIGHT

Section 5.1 Defined Terms

Capitalized terms used in this Article V and not otherwise defined in the Plan or this Agreement shall have the meanings ascribed to them in the Stockholders’ Agreement to which the Optionee has or, as a condition to exercise of the Option, will become a party.

Section 5.2 Company’s Call Right Generally

From and after a Repurchase Event, the Company shall have the right, but not the obligation, to repurchase all or any portion of the Equity Securities held by the Optionee (including any Equity Securities received upon a distribution from any deferred compensation plan or other Equity Incentive Plan or any Equity Securities issuable upon exercise of any option, warrant or similar equity-linked Security of the Company held by the Optionee) in accordance with Section 4 of the Stockholders’ Agreement, as modified by this Article V (the “Repurchase Right”). Any repurchase described in the immediately preceding sentence shall be for fair market value (as determined under the Stockholders’ Agreement), but subject to Section 5.3, and subject further to any provisions to the contrary contained in an employment agreement between the Company or any of its Subsidiaries and the Optionee (if any). The Company may exercise the Repurchase Right by written notice (a “Repurchase Notice”) to the Optionee within six months after the Repurchase Event; provided, however, that with respect to Equity Securities acquired by the Optionee after such Repurchase Event (whether by exercise of any option, warrant or similar equity-linked Security of the Company, distribution of shares from any deferred compensation plan or otherwise), the Company may exercise the Repurchase Right by delivering a Repurchase Notice to the Optionee within six months after the acquisition of such Equity Securities by the Optionee (each date on which any such repurchase is executed with respect to the subject Equity Securities, the “Repurchase Date”). The determination date for purposes of determining the fair market value shall be the Repurchase Date applicable to the subject Equity Securities. Subject to Section 6 of the Stockholders’ Agreement, the Repurchase Date with respect to any repurchase of Equity Securities pursuant to the exercise of the Repurchase Right shall take place on the later of (i) the date specified by the Company, which shall in no event be later than thirty (30) days following the date of the Repurchase Notice and (ii) within ten (10) days following the receipt by the Company of all necessary government approvals.

Section 5.3 Company’s Call Right Upon Certain Terminations

Notwithstanding anything contained herein to the contrary, unless otherwise provided in an employment agreement between the Company or any of its Subsidiaries and the Optionee (if any), in the event the Optionee incurs a Termination of Service by the Company or any of its Subsidiaries for Cause, then the Company may exercise the Repurchase Right by delivering a Repurchase Notice to the Optionee within the time periods set forth in Section 5.2 above at a price equal to the lesser of (i) in the case of Common Stock, the original acquisition cost to the Optionee of such shares of Common Stock and (ii) the fair market value (as determined under

the Stockholders’ Agreement) of such Equity Securities. The determination date for purposes of determining the fair market value shall be the closing date of the purchase of the applicable Equity Securities.

Section 5.4 Apollo’s Call Right

The Company shall give prompt written notice to Apollo stating whether the Company will exercise the Repurchase Right pursuant to Section 5.2 or Section 5.3 above. If such notice states that the Company will not exercise such Repurchase Rights for all or any portion of the applicable Equity Securities subject thereto, Apollo (or its designee) shall have the right (exercisable by delivery of written notice to the Optionee on or before the later of (i) the 30^th day following the receipt of such notice or (ii) 6 months after the Repurchase Event) to purchase any such Equity Securities not purchased by the Company on the same terms and conditions as the Company set forth in Section 5.2 or Section 5.3.

Section 5.5 Closing

The Repurchase Date shall take place on a date designated by the Company or Apollo, as applicable, in accordance with Section 5.2 or Section 5.4, respectively; provided, however, that the closing may be deferred to a date designated by the Company or Apollo, as applicable, or, to the extent required to avoid liability under applicable securities laws, the Optionee, until such time as the Optionee has held the Equity Securities for a period of at least six months and one day. The purchase price shall be paid at the closing in the form of a check, wire transfer of immediately available funds, or by cancellation of money purchase indebtedness of the Optionee, as determined in the sole discretion of the Company or Apollo, as applicable. The Company or Apollo, as applicable, may effect such repurchase of Equity Securities and the Company shall record such Transfer on its books whether or not the Optionee attends such closing or delivers certificates representing such Equity Securities to the Company. The Optionee hereby grants an irrevocable proxy and power of attorney which, it is agreed, is coupled with an interest to any nominee of the Company or Apollo, as applicable, to take all necessary actions and execute and deliver all documents deemed necessary and appropriate by such nominee to effect such purchase of Equity Securities. If the Optionee fails to take all necessary actions and execute and deliver all documents necessary and appropriate to fulfill his or her obligations under this Article V, the Optionee shall indemnify, defend and hold such nominee harmless against all liability, loss or damage, together with all reasonable costs and expenses (including reasonable legal fees and expenses), relating to or arising from such nominee’s exercise of the proxy and power of attorney granted hereby. In addition, the Optionee shall immediately lose all rights the Optionee may have under Section 8 of the Stockholders’ Agreement in the event of any such purchase.

ARTICLE VI

OTHER PROVISIONS

Section 6.1 Not a Contract of Employment

Nothing in this Agreement or in the Plan shall (i) confer upon the Optionee any right to continue in the service of the Company or any of its Subsidiaries, or (ii) interfere with or restrict in any way the rights of the Company or its Subsidiaries, which are hereby expressly reserved, to terminate the services of the Optionee at any time for any reason whatsoever, with or without Cause, except pursuant to an employment agreement, if any, executed by and between the Company or any of its Subsidiaries, on the one hand, and the Optionee, on the other hand, and approved by the Board.

Section 6.2 Shares Subject to Plan and Stockholder Agreement

The Optionee acknowledges that any shares of Common Stock acquired upon exercise of the Option are subject to the terms of the Plan and the Stockholders’ Agreement, including without limitation, the restrictions set forth in Section 5.6 of the Plan.

Section 6.3 Construction

This Agreement shall be administered, interpreted and enforced under the laws of the state of New York, without regard to conflicts of laws provisions that would give effect to the laws of another jurisdiction.

Section 6.4 Conformity to Securities Laws

The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation, Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

Section 6.5 280G Compliance

In the event that the Optionee becomes entitled to payments or benefits under this Agreement and/or any other payments or benefits by reason of a “change of control” as defined in Section 280G of the Code and regulations thereunder (collectively, the “Payments”), and any such Payment constitutes a “parachute payment” as defined in Section 280G of the Code and regulations thereunder, the Company and the Optionee shall use their respective reasonable best efforts to obtain stockholder approval of such Payments in the manner provided in Section 280G(b)(5)(B) of the Code and regulations thereunder; provided, however, that nothing in this Section 6.5 shall be interpreted to require the Optionee to waive any of the Optionee’s rights under the Option or otherwise.

Section 6.6 Adjustments in Debt Repayment and EBITDA Targets

The Debt Repayment and EBITDA Targets (including the Cumulative Debt Repayment and Cumulative EBITDA Targets) specified in Appendix A are based upon certain revenue and expense assumptions about the future business of the Company as of the date the Option is granted. Accordingly, in the event that, after such date, the Committee determines, in its sole discretion, that any acquisition or disposition of any business by the Company or any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or change in

applicable laws, regulations, or accounting principles occurs such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option, then the Committee shall, in good faith and in such manner as it may deem equitable, adjust the financial targets set forth on Appendix A to reflect the projected effect of such transaction(s) or event(s) on Debt Repayment and/or EBITDA, subject to Section 7.1 of the Plan.

Section 6.7 Entire Agreement

The parties hereto acknowledge that this Agreement and the Plan set forth the entire agreement and understanding of the parties and supersede all prior written or oral agreements or understandings with respect to the subject matter hereof, except that any provisions therein regarding confidentiality or non-competition remain in full force and effect in favor of the Company and its Subsidiaries as if the agreements containing such provisions were not so superseded. The obligations imposed by this Agreement are severable and should be construed independently of each other. The invalidity of one provision shall not affect the validity of any other provision. If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, or as applied to any circumstances, under the laws of any jurisdiction which may govern for such purpose, then such provision shall be deemed, to the extent allowed by the laws of such jurisdiction, to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, either generally or as applied to such circumstance, or shall be deemed exercised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.

Section 6.8 Amendment

The Board at any time, and from time to time, may amend the terms of this Agreement, provided, however, that the rights of the Optionee shall not be adversely impaired without the Optionee’s written consent. The Company shall provide the Optionee with notice and a copy of any amendment made to this Agreement

Section 6.9 Arbitration; Waiver of Jury Trial

Any dispute or controversy arising under, out of, or in connection with or in relation to this Agreement or the Plan 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 or the Plan pursuant to this Section 6.9, 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 THE PLAN OR THIS AGREEMENT.

Section 6.10 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 Holdings, Inc.

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 Holdings, Inc.

c/o Apollo Management, L.P.

9 West 57^th Street, 43^rd 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, NY 10036

Fax: (212) 326-2061

Attention: John M. Scott, Esq.

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

Section 6.11 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.

[Signature Page to Follow]

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the day, month and year first set forth above.