EXHIBIT 10(a)

The provisions of the 2005 Restatement of the Applied Industrial Technologies,
Inc. Deferred Compensation Plan are subject to further amendment pursuant to
expected guidance from the Internal Revenue Service and the reserved amendment
rights of the Company.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(2005 Restatement)

 

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APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(2005 Restatement)
TABLE OF CONTENTS

          Section   Page
ARTICLE I
       
DEFINITIONS
       
 
       
1.1   Definitions
    2  
1.2   Construction
    5  
 
       
ARTICLE II
       
ELECTIONS BY ELIGIBLE EMPLOYEES
       
 
       
2.1   Election to Defer
    6  
2.2   Time of Elections
    6  
2.3   Special Transition Elections
    7  
2.4   Other Election Provisions
    8  
 
       
ARTICLE III
       
ACCOUNTS AND INVESTMENTS
       
 
       
3.1   Establishment and Crediting of Accounts
    9  
3.2   Amount of Deferrals
    9  
3.3   Adjustment of Accounts
    10  
 
       
ARTICLE IV
       
DISTRIBUTION OF ACCOUNTS
       
 
       
4.1   Form of Payments
    11  
4.2   Time of Payments
    11  
4.3   Changing Time or Form of Payments
    11  
4.4   No Acceleration
    12  
4.5   Emergency Distribution
    12  
4.6   Distribution Upon Death
    13  
4.7   Taxes
    13  
 
       
ARTICLE V
       
MISCELLANEOUS
       
 
       
5.1   Amendment and Termination of Plan
    14  
5.2   Non-Alienation
    14  
5.3   Payment of Benefits to Others
    14  

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          Section   Page
5.4   Plan Non-Contractual
    14  
5.5   Taxability of Plan Benefits
    15  
5.6   Funding
    15  
5.7   Section 16b Procedures
    15  
5.8   Interpretation
    16  
5.9   Claims Procedures
    16  
5.10 Section 409A Amendments
    18  
5.11 Severability
    19  
5.12 Governing Law
    19  

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APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(2005 Restatement)
     WHEREAS, effective as of July 1, 1993, Bearings, Inc., the predecessor plan
sponsor of Applied Industrial Technologies, Inc. (hereinafter referred to as the
“Company”), established the Bearings, Inc. Deferred Compensation Plan which is
now known as the Applied Industrial Technologies, Inc. Deferred Compensation
Plan (hereinafter referred to as the “Plan”), to provide key employees of the
Company and its Affiliates with a means by which to defer receipt of all or a
portion of their incentive compensation received from the Company; and
     WHEREAS, in order to comply with Section 409A of the Internal Revenue Code
of 1986, as amended (hereinafter referred to as “Section 409A”) and to
facilitate administration of certain nonqualified deferrals thereunder, the Plan
is hereby bifurcated effective January 1, 2005; and
     WHEREAS, the Plan, as in effect on October 3, 2004 (hereinafter referred to
as the “Frozen Terms”), is hereby frozen and shall not be modified except as
permitted under Section 409A so as to preserve the grandfathered status of
deferrals and related earnings thereunder; and
     WHEREAS, deferrals retained under the Frozen Terms shall be those employee
deferrals earned and vested as of December 31, 2004, as well as income
attributable to such grandfathered deferrals; and
     WHEREAS, the Plan, as amended and restated effective January 1, 2005, for
compliance with Section 409A shall constitute the “2005 Restatement”; and
     WHEREAS, deferrals earned or vested after December 31, 2004, and before the
Plan was bifurcated and amended have been made and administered in good faith in
accordance with the requirements of Section 409A; and
     WHEREAS, such non-grandfathered deferrals and related earnings have been
transferred to, and have become part of, accounts under the 2005 Restatement;
and
     WHEREAS, deferrals of Participants for the Fiscal Year beginning July 1,
2007, and subsequent Fiscal Years shall be made under the 2005 Restatement;
     NOW THEREFORE, effective January 1, 2005, the 2005 Restatement of the Plan
is hereinafter set forth.

 

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ARTICLE I
DEFINITIONS
     1.1 Definitions. As used herein, the following words shall have the
meanings hereinafter set forth unless otherwise specifically provided.
     (1) The term “Affiliate” shall mean any member of a controlled group of
corporations (as determined under Section 414(b) of the Code) of which the
Company is a member and any member of a group of trades or business under common
control (as determined under Section 414(c) of the Code) with the Company; any
member of an affiliated service group (as determined under Section 414(m) of the
code) of which the Company is a member; and any other entity which is required
to be aggregated with the Company pursuant to the provisions of Section 414(o)
of the Code.
     (2) The term “Award” shall mean the aggregate benefit payable to a Plan
Participant under an Incentive Plan or a Performance Plan for a Fiscal Year.
     (3) The term “Beneficiary” shall mean the person or persons who, in
accordance with the provisions of Article V, is entitled to distribution
hereunder in the event a Participant dies before his interest under the Plan has
been distributed to him in full.
     (4) The term “Board” shall mean the Board of Directors of the Company.
     (5) The term “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time.
     (6) The term “Committee” shall mean the Executive Organization and
Compensation Committee of the Board, or such other committee of the Board that
is designated by the Board to administer the Plan. The Committee shall be
constituted so as to satisfy any applicable legal requirements including the
requirements of Rule 16b-3 promulgated under the Securities Exchange Act of 1934
or any similar rule which may subsequently be in effect. The members shall be
appointed by, and serve at the pleasure of, the Board and any vacancy on the
Committee shall be filled by the Board.
     (7) The term “Common Shares” shall mean the common stock of the Company.

 

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     (8) The term “Company” shall mean Applied Industrial Technologies, Inc.,
its corporate successors, and any corporation into or with which it is merged or
consolidated.
     (9) The term “Comprehensive Plan” shall mean the Applied Industrial
Technologies, Inc. Comprehensive Deferred Compensation and Supplemental Benefit
Plan (formerly known as the Bearings, Inc. Comprehensive Deferred Compensation
and Supplemental Benefit Plan.)
     (10) The term “Deferral” shall mean that portion of an Award which a
Participant elects to defer pursuant to the terms of the Plan.
     (11) The term “Deferral Account” shall mean the bookkeeping account
established under the Plan in the name of each Participant to reflect the
Deferrals of such Participant.
     (12) The term “Eligible Employee” shall mean any highly compensated or
select management employee of the Company or an Affiliate who is designated by
the Committee to participate in an Incentive Plan or Performance Plan with
respect to a particular Fiscal Year.
     (13) The term “Fair Market Value” shall mean the average of the high and
low prices of a Common Share as reported on the composite tape for securities
listed on the New York Stock Exchange for the date in question, provided that if
no sales of Common Shares were made on said exchange on that date, the average
of the high and low prices of a Common Share as reported on said composite tape
for the nearest preceding day on which sales of Common Shares were made on said
Exchange.
     (14) The term “Fiscal Year” shall mean the fiscal year of the Company,
which begins on each July 1 and ends on the subsequent June 30.
     (15) The term “Frozen Terms” shall mean the terms of the Plan, as in effect
on October 3, 2004.
     (16) The term “Fund” shall mean any investment fund designated by the
Committee in which Deferrals can be deemed to be invested; provided, however,
that one such Fund shall be deemed to be invested in Common Shares.
     (17) The term “Incentive Plan” shall mean any incentive plan adopted by the
Board for key employees.

 

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     (18) The term “Participant” shall mean an Eligible Employee who elects to
defer all or any portion of an Award under the Plan pursuant to the provisions
of Article II.
     (19) The term “Performance-Based Compensation” shall mean compensation that
is not equity-based compensation and that is contingent on the satisfaction of
pre-established organizational or individual performance criteria relating to a
Fiscal Year performance period of at least twelve (12) consecutive months in
which Participants perform services. Performance criteria shall be established
in writing not later than ninety (90) days after the commencement of the period
of service to which the criteria relate. Compensation shall not be
Performance-Based Compensation if any amount or portion will be paid regardless
of performance or is based upon a level of performance that is substantially
certain to be met at the time the criteria are established.
     (20) The term “Performance Plan” shall mean any long term performance plan
approved by Company shareholders for key employees.
     (21) The term “Plan” shall mean The Applied Industrial Technologies, Inc.
Deferred Compensation Plan which, effective as of January 1, 2005, shall consist
of the Frozen Terms and the 2005 Restatement and which is part of the
Comprehensive Plan and listed on Exhibit A attached thereto.
     (22) The term “Section 409A” shall mean Section 409A of the Internal
Revenue Code of 1986, as amended, and the regulations and rulings promulgated
thereunder.
     (23) The term “Separation from Service” shall mean the termination of
employment of a Participant with the Company and all Affiliates for any reason
other than death; provided, however, that a Company-approved leave of absence
shall not be considered a termination of employment if the leave does not exceed
six (6) months or, if longer, so long as the Participant’s right to reemployment
is provided either by statute or by contract. Notwithstanding the foregoing,
whether or not a Participant has incurred a Separation from Service shall be
determined in accordance with Section 409A.
     (24) The term “Specified Employee” shall mean a “specified employee” within
the meaning of Section 409A.
     (25) The term “Trust” shall mean the trust maintained pursuant to the terms
of the Applied Industrial Technologies, Inc. Supplemental Executive Retirement
Benefits Trust Agreement.

 

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     (26) The term “2005 Restatement” shall mean Applied Industrial
Technologies, Inc. Deferred Compensation Plan, as amended and restated herein
with respect to Deferrals earned or vested after December 31, 2004, with all
amendments, supplements, and modifications hereafter made.
     (27) The term “Valuation Date” shall mean the last day of each Fiscal Year
quarter and any other date as may be designated as such by the Committee.
     1.2 Construction. Where necessary or appropriate to the meaning herein, the
singular shall be deemed to include the plural and the masculine pronoun to
include the feminine.

 

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ARTICLE II
ELECTIONS BY ELIGIBLE EMPLOYEES
     2.1 Election to Defer. As a condition of participation in the Plan, an
Eligible Employee must complete, sign, and return to the Committee a Deferral
Election Form (including a form in electronic, telephonic, or other format) (an
“Election Form”) within the times permitted hereunder for making elections. A
Participant’s Election Form shall specify the amount or percentage of an Award
being deferred and the time and form of payment in accordance with Article IV.
The election to defer, including the election of the time and form of payment,
shall be irrevocable as of the dates specified in Section 2.2. Pursuant to
Article IV, a Participant may make a subsequent election to delay payment and
change the form of payment of a Deferral. Under no circumstances may any
election to defer be made under the 2005 Restatement unless the Award to be
deferred is “fiscal year compensation.” For purposes of the 2005 Restatement,
“fiscal year compensation” means compensation relating to a period of service
coextensive with one or more Fiscal Years of the Company, of which no amount is
paid or payable during the service period.
2.2 Time of Elections.
          (a) Non-Performance-Based Compensation. On or before each June 30
immediately preceding the first Fiscal Year during which services giving rise to
an Award that is not Performance-Based Compensation will be performed, an
Eligible Employee may elect to defer receipt of all or a portion of such an
Award that he may receive under an Incentive Plan or a Performance Plan as a
Deferral under the Plan. Such election shall be irrevocable, upon delivery of
the Election Form to the Committee, as of the end of such June 30 with respect
to the Award for which an election has been made.

 

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          (b) Performance-Based Compensation. On or before each December 31 that
is at least six (6) months before the end of the performance period for an Award
that is Performance-Based Compensation, an Eligible Employee may elect to defer
receipt of all or a portion of an Award of Performance-Based Compensation that
he may receive under an Incentive Plan or a Performance Plan as a Deferral under
the Plan; (i) provided that the Eligible Employee has continuously performed
services from a date no later than ninety (90) days after the commencement of
the performance period through a date no earlier than the date on which the
deferral election is made, and (ii) provided further that in no event shall such
election be made after such Award has become both substantially certain to be
paid and readily ascertainable. Such election shall be irrevocable as of the end
of each December 31 with respect to the Award for which an election has been
made.
          (c) New Hires and Promotions. In the first Fiscal Year in which an
Eligible Employee becomes eligible to participate in the Plan (taking into
consideration eligibility under all other nonqualified account balance plans of
the Company and any Affiliate that are required to be aggregated with the Plan
under Section 409A in determining whether such Fiscal Year is in fact the first
year of eligibility), such Eligible Employee may make an initial deferral
election within thirty (30) days of becoming first eligible with respect to that
portion of an Award that relates to services to be performed subsequent to the
election. Such an election shall be irrevocable.
     2.3 Special Transition Elections.
          (a) Changes in Payment Elections. During 2005, 2006, and 2007, a
Participant may make elections to receive payment of his Deferrals without
complying with the requirements of Section 4.3; provided that such election(s)
shall only be effective:
(i) If made in 2006, if it applies only to amounts that would not otherwise be
payable in 2006 and does not cause an amount to be paid in 2006 that would not
otherwise be payable in 2006; and

 

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(ii) If made in 2007, if it applies only to amounts that would not otherwise be
payable in 2007 and does not cause an amount to be paid in 2007 that would not
otherwise be payable in 2007.
          (b) 2005 Deferral Elections. In accordance with Q&A-21 of Notice 2005
— 1 and Section 3.06 of Notice 2006-79, initial deferral elections for calendar
year 2005 were permitted to be made on or before March 15, 2005, with respect to
amounts that were not paid or payable at the time of such election.
     2.4 Other Election Provisions. Each deferral election shall indicate the
allocation of the Deferral to be deemed invested in the Funds. Subject to the
provisions of Article IV and Section 5.7, amounts deferred pursuant to any
election hereunder shall be invested and distributed in the manner and at the
time set forth in such election.

 

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ARTICLE III
ACCOUNTS AND INVESTMENTS
     3.1 Establishment and Crediting of Accounts. The Deferral Account of each
Participant shall have subaccounts, which shall reflect the Funds into which
Deferrals are deemed invested and credited pursuant to the applicable Election
Form filed by the Participant with the Committee. The crediting of any Deferral
or portion thereof deemed to be invested in a Fund shall be made to a
Participant’s Deferral Account within thirty (30) days after the date on which
the Deferral would otherwise have been payable to the Participant under the
applicable Incentive Plan or Performance Plan, and Common Shares of a Fund so
credited to a Deferral Account shall be valued at Fair Market Value.
Notwithstanding any other provision to the contrary, the number of Common Shares
comprising a Fund in which Deferrals made on and after October 21, 2003 under
Section 3.2 are deemed invested shall be limited to 1,800,000 (adjusted
accordingly, however, for stock splits occurring after said date), until
subsequent approval by shareholders.
     3.2 Amount of Deferrals.
          (a) Prior to July 1, 2007. Effective for Awards related to Fiscal
Years beginning before July 1, 2007, if a Participant (i) elects to have less
than 50% of any Award from an Incentive Plan deferred under the Plan as a
Deferral, or (ii) elects to have any stock portion of an Award from a
Performance Plan deferred under the Plan as a Deferral, 100% of the amount of
such Deferral shall be credited to his Deferral Account and subaccounts in
accordance with his duly filed Election Form. Effective for Awards related to
Fiscal Years beginning before July 1, 2007, if a Participant (i) elects to have
at least 50% of an Award from an Incentive Plan deferred under the Plan as a
Deferral and further elects to have at least 50% of such Award deemed to be
invested in a Fund comprised of Common Shares, or (ii) elects to have any cash
portion of an Award from a Performance Plan deferred under the Plan as a
Deferral and further elects to have any portion of such Award deemed to be
invested in a Fund comprised of Common Shares, 110% of the amount of such

 

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Deferral deemed so invested in Common Shares shall be credited to his Deferral
Account and subaccounts in accordance with the terms of his duly filed Election
Form.
          (b) After June 30, 2007. Effective for Awards related to Fiscal Years
beginning after June 30, 2007, 100% of the amount of an Eligible Employee’s
Deferral shall be credited to his Deferral Account and subaccounts in accordance
with his duly filed Election Form.
     3.3 Adjustment of Accounts. As of each Valuation Date, the value of each
Deferral Account shall be adjusted to reflect deemed earnings, losses, and
dividends determined by the Committee. Common Shares of a Fund credited to any
Deferral Account shall be valued at Fair Market Value. Records shall relate such
adjustments to Deferrals based upon common distribution dates elected by the
Participant.

 

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ARTICLE IV
DISTRIBUTION OF ACCOUNTS
     4.1 Form of Payments. The value of a Participant’s Deferral Account deemed
invested in a Fund comprised of Common Shares shall be distributed in Common
Shares and the value of a Participant’s Deferral Account deemed otherwise
invested shall be distributed in cash. Such value shall be determined as of the
most recent Valuation Date. Subject to the provisions of Section 4.2, a
distribution from a Participant’s Deferral Account with respect to a particular
Award shall be made either in a lump sum or in equal annual installments over a
period of not more than ten (10) years as specified in such Participant’s
Election Form.
     4.2 Time of Payments. As permitted by the Committee in accordance with
Section 409A, a Participant shall specify on his Election Form an objectively
determinable payment date, which may include attainment of a specific age or
Separation from Service, at the time he defers an Award. Except as otherwise
provided in this Article IV, distribution of the value of a Deferral (and
related earnings and losses) from a Participant’s Deferral Account with respect
to a particular Award shall commence within sixty (60) days of the date
specified for commencement in his applicable Election Form. Notwithstanding any
other provision of the Plan to the contrary, a distribution payable, as
determined by the Committee in accordance with Section 409A, to a Specified
Employee upon a Separation from Service shall not be distributed, or begin to be
distributed, until the first day of the seventh month following his Separation
from Service. The amount of the first payment shall include the accumulated
amount of the payments, if any, that would otherwise have been made during the
first six months but for the fact that the Participant is a Specified Employee.
     4.3 Changing Time or Form of Payments. A Participant may elect to delay
payment or to change the form of payment if all the following conditions are
met:
     (i) Such election will not take effect until at least twelve (12) months
after the date on which the election is made; and

 

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     (ii) The payment with respect to which such election is made is deferred
for a period of not less than five (5) years from the date such payment would
otherwise be made; and
     (iii) Any election for a “specified time (or pursuant to a fixed schedule)”
within the meaning of Section 409A(a)(2)(A)(iv) of the Code, may not be made
less than twelve (12) months prior to the date of the first scheduled payment.
To the extent permitted under Section 409A, installment payments shall be
treated as a single payment.
     4.4 No Acceleration. Except as permitted under Section 409A, no
acceleration of the time or form of payment of a Participant’s Deferral Account
shall be permitted.
     4.5 Emergency Distribution. Upon the written request of a Participant and
the showing of an Unforeseeable Emergency, the Committee may, upon its
determination that such an emergency exists, direct that an amount of such
Participant’s Deferral Account be paid to him. The amount that can be paid shall
not exceed the amount necessary to satisfy the Unforeseeable Emergency, plus an
amount necessary to pay taxes reasonably anticipated because of such
distribution, after taking into account the extent to which such emergency is or
may be relieved through reimbursement or compensation by insurance or otherwise
or by liquidation of the Participant’s assets (to the extent the liquidation
would not itself cause severe financial hardship). Payment shall be made within
30 days of the Committee’s determination that an Unforeseeable Emergency exists.
For purposes of this Section 4.5, an Unforeseeable Emergency shall mean a severe
financial hardship of the Participant resulting from an illness or accident of
the Participant, the Participant’s spouse, or the Participant’s dependent (as
defined in Section 152(a) of the Code); loss of the Participant’s property due
to casualty (including the need to rebuild a home following damage to the home
by natural disaster not otherwise covered by

 

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insurance), or other similar or extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant.
     4.6 Distribution Upon Death. In the event that a Participant dies prior to
commencement of payments or while receiving payments under the 2005 Restatement,
the Company shall pay his Beneficiary the remainder of his Deferral Account
under the 2005 Restatement in a single sum within 60 days of the Participant’s
death. The Company shall provide Participants with the form for designating his
Beneficiary. A Participant may change his Beneficiary designation at any time
(without the prior consent of any prior beneficiary) by executing a revised
Beneficiary designation form and delivering it to the Company before his death.
If no Beneficiary is designated or if the Beneficiary predeceases the
Participant or cannot be located, the Participant’s Deferral Account shall be
paid to the Participant’s estate.
     4.7 Taxes. In the event any taxes are required by law to be withheld or
paid from any Deferrals or payments under the Plan, the Committee shall cause
such amounts to be withheld from other income or from such payments and shall
transmit the withheld amounts to the appropriate taxing authority.

 

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ARTICLE V
MISCELLANEOUS
     5.1 Amendment and Termination of Plan. The Company reserves the right to
amend or terminate the Plan at any time; provided, however, that no amendment or
termination shall affect the rights of Participants to amounts previously
credited to their Deferral Accounts.
     5.2 Non-Alienation. No benefit under the Plan shall at any time be subject
in any manner to alienation or encumbrance. If any Participant or Beneficiary
shall attempt to, or shall, alienate or in any way encumber his rights or
benefits under the Plan, or any part thereof, or if by reason of his bankruptcy
or other event happening at any time any such benefits would otherwise be
received by anyone else or would not be enjoyed by him, his interest in all such
benefits shall automatically terminate and the same shall be held or applied to
or for the benefit of such person, his spouse, children, or other dependents as
the Committee may select.
     5.3 Payment of Benefits to Others. If any Participant or Beneficiary to
whom a benefit is payable under the Plan is unable to care for his affairs
because of illness or accident, any payment due (unless prior claim therefor
shall have been made by a duly qualified guardian or other legal representative)
may be paid to the spouse, parent, brother, sister, adult child, or any other
individual deemed by the Company to be maintaining or responsible for the
maintenance of such person. Any payment made in accordance with the provisions
of this Section 5.3 shall be a complete discharge of any liability of the Plan
with respect to the benefit so paid.
     5.4 Plan Non-Contractual. Nothing contained herein shall be construed as a
commitment or agreement on the part of any person employed by the Company or an
Affiliate to continue his employment with the Company or Affiliate, and nothing
herein contained shall be construed as a commitment on the part of the Company
or Affiliate to continue the employment or the annual rate of compensation of
any such person for any period, and all Participants shall remain subject to
discharge to the same extent as if the Plan had never been established.

 

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     5.5 Taxability of Plan Benefits. This Plan is intended to be treated as an
unfunded deferred compensation plan under the Code. If, at any time, it is
determined that amounts deferred pursuant to the Plan are currently taxable to a
Participant or his Beneficiary under Section 409A, the amounts credited to such
Participant’s Deferral Account which become so taxable shall be distributed
immediately to him; provided, however, that in no event shall amounts so payable
under the Plan to a Participant exceed the value of his Deferral Account.
     5.6 Funding. The Company may cause Plan benefits to be paid from the Trust
which is a grantor trust that provides full funding of the Plan benefits in the
event of a potential change in control or change in control. Subject to the
provisions of the Trust, the obligation of the Company under the Plan to provide
a Participant or Beneficiary with a benefit constitutes the unsecured promise of
the Company to make payments as provided herein, and no person shall have any
interest in, or a lien or prior claim upon, any property of the Company.
Notwithstanding any other provision of the Plan, Plan benefits shall be limited
to the balance of a Participant’s Deferral Account.
     5.7 Section 16b Procedures. In conjunction with rules promulgated by the
Securities and Exchange Commission under Section 16 of the Securities Exchange
Act of 1934, as amended, the Company has established Section 16b Procedures
which affect certain transactions under the Plan involving Employer Securities
held for the benefit of an Officer. Such Procedures, which are hereby
incorporated into the Plan shall constitute for all purposes a part of the Plan.
In the event that the Procedures conflict with any other provision of the Plan,
the Procedures shall override such other provision and shall be controlling. For
purposes of this Section, the following terms shall have the meaning hereinafter
set forth.
     (a) The term “Employer Security” shall mean any qualifying employer
security as defined in Section 407(d)(5) of ERISA which is also an equity
security as defined under the Securities Exchange Act of 1934, as amended.

 

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     (b) The term “Officer” shall mean any person who is designated as an
“Officer” of the Company for purposes of Section 16 of the Securities Exchange
Act of 1934, as amended.
     (c) The term “Section 16b Procedures” or “Procedures” shall mean the
Administrative Procedures Applicable to Officers and Directors Under Employee
Benefit Plans Maintained by Applied Industrial Technologies, Inc., effective as
of January 1, 1997, with all amendments, supplements, and modifications
thereafter made.
     5.8 Interpretation. The Board and the Committee shall have full power and
authority to interpret, construe, and administer the 2005 Restatement, and the
interpretation and construction thereof and actions thereunder by the Board or
the Committee, including any valuation of a Participant’s Deferral Account and
the amount or recipient of the payments to be made from such Deferral Account,
shall be binding and conclusive on all persons for all purposes. No member of
the Board and no designee shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan.
     5.9 Claims Procedures. Generally benefits shall be paid under the 2005
Restatement without the necessity of filing a claim. An Eligible Employee,
Participant, Beneficiary, or other person who believes he is entitled to a
benefit under the 2005 Restatement (hereinafter referred to as the “Claimant”)
may file a written claim with the Company. A claim must state with specificity
the determination desired by the Claimant.
     The Company shall consider the Claimant’s claim within a reasonable time,
but no later than 90 days of receipt of the claim. If the Company determines
that special circumstances require an extension of time for processing the
claim, the Company shall notify the Claimant in writing of the extension before
the end of the initial 90-day period and the written notice shall indicate the
special circumstances requiring an extension of time and the date by which the
Company expects to make a decision. The extension of time shall not exceed
90 days from the end of the initial 90-day period.

 

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     The Company shall notify the Claimant (in writing or electronically) that a
determination has been made and that the claim is either allowed in full or
denied in whole or in part. If the claim is denied in whole or in part, the
Company shall notify (in writing or electronically) such Claimant or an
authorized representative of the Claimant, as applicable, of any adverse benefit
determination within 90 days of receipt of the claim. Any adverse benefit
determination notice shall describe the specific reason or reasons for the
denial, refer to the specific Plan provisions on which the determination was
based, describe any additional material or information necessary for the
Claimant to perfect his claim and explain why that material or information is
necessary, describe the Plan’s review procedures and the time limits applicable
to those procedures, including a statement of the Claimant’s right to bring a
civil action under ERISA Section 502(a) following a denial upon review. If the
notification is made electronically, it must comply with applicable Department
of Labor Regulations.
     Upon receipt of an adverse benefit determination, a Claimant may, within
60 days after receiving notification of that determination, submit a written
request asking the Board to review the Claimant’s claim. Each Claimant, when
making his request for review of his adverse benefit determination, shall have
the opportunity to submit written comments, documents, records, and any other
information relating to the claim for benefits. Each Claimant shall also be
provided, upon request and free of charge, reasonable access to, and copies of,
all documents, records, and other information relevant to such Claimant’s claim
for benefits. The review shall take into account all comments, documents,
records, and other information submitted by the Claimant relating to the claim,
regardless of whether the information was submitted or considered in the initial
benefit determination. If a Claimant does not submit his request for review in
writing within the 60-day period described above, his claim shall be deemed to
have been conclusively determined for all purposes of the Plan and the adverse
benefit determination will be deemed to be correct.

 

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     If the Claimant submits in writing a request for review of the adverse
benefit determination within the 60-day period described above, the Board (or
its designee) shall notify (in writing or electronically) him of its
determination on review within a reasonable period of time but not later than
60 days from the date of receipt of his request for review, unless the Board (or
its designee) determines that special circumstances require an extension of
time. If the Board (or its designee) determines that an extension of time for
processing a Claimant’s request for review is required, the Board (or its
designee) shall notify him in writing before the end of the initial 60-day
period and inform him of the special circumstances requiring an extension of
time and the date by which the Board (or its designee) expects to render its
determination on review. The extension of time will not exceed 60 days from the
end of the initial 60-day period.
     If the Board (or its designee) confirms the adverse benefit determination
upon review, the notification will describe the specific reason or reasons for
the adverse determination, refer to the specific Plan provisions on which the
benefit determination is based, include a statement that the Claimant is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records, and other information relevant to the
Claimant’s claim and include a statement describing the Claimant’s right to
bring an action under ERISA Section 502(a), and any other required information
under applicable Department of Labor Regulations. The claims procedure described
above shall be administered in a manner not inconsistent with ERISA Section 503
and applicable Department of Labor Regulations.
     A Claimant’s compliance with the foregoing claims procedures shall be a
mandatory prerequisite to the Claimant’s right to commence any legal action with
respect to any claim for benefits under the Plan.
     5.10 Section 409A Amendments. Notwithstanding any provision to the contrary
in the 2005 Restatement, nothing shall restrict the Company’s right to amend the
Plan, the 2005 Restatement, the Frozen Terms, any deferral agreement, and/or any
deferral Election Form, without the consent of Participants and without
additional consideration to affected Participants,

 

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to the extent necessary to avoid taxation, penalties, and/or interest arising
under Section 409A, even if such amendments reduce, restrict, or eliminate
rights granted thereunder before such amendments. Although the Company shall use
its best efforts to avoid the imposition of taxation, penalties, and/or interest
under Section 409A, tax treatment of deferrals and other credits under the Plan
(whether the Frozen Terms or the 2005 Restatement) is not warranted or
guaranteed. The Company, the Board, any Affiliate, or any delegatee shall not be
held liable for any taxes, penalties, interest, or other monetary amounts owed
by any Participant, Eligible Employee, Beneficiary, or other person as a result
of the deferral or payment of any amounts under the Plan (whether the Frozen
Terms or the 2005 Restatement) or as a result of the administration of amounts
subject to the Plan (whether the Frozen Terms or the 2005 Restatement).
     5.11 Severability. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
     5.12 Governing Law. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio, without regard to
its conflict or choice of law principles.
     Executed at Cleveland, Ohio, this 5th day of April, 2007.

            APPLIED INDUSTRIAL TECHNOLOGIES, INC.
      By:   D. L. Pugh         Title: Chairman & CEO