Filed by Bowne Pure Compliance





EXHIBIT 10.3




APPLIED INDUSTRIAL TECHNOLOGIES, INC.

DEFERRED COMPENSATION PLAN

(Post-2004 Terms)




WHEREAS, effective as of July 1, 1993, Bearings, Inc., the predecessor plan sponsor to 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 into two
parts; namely, one part that consists of the Plan, as in effect on October 3, 2004 (hereinafter
referred to as the “Frozen Terms”), which is hereby frozen and which shall not be modified except
as permitted under Section 409A so as to preserve the grandfathered status of deferrals and related
earnings thereunder, and the second part that shall consist of the post-2004 terms of the Plan, as
amended effective January 1, 2005, for compliance with Section 409A (hereinafter referred to as the
“Post-2004 Terms”); 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;



NOW, THEREFORE, effective January 1, 2005, the Post-2004 Terms of the Plan is hereinafter set
forth.


 


 









 





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 “Change in Control” shall mean a change in the ownership
or effective control of the Company or a change in the ownership of a
substantial portion of the assets of the Company that constitutes a “change
in control” under Section 409A.




(6) The term “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time. Reference to a section of the Code shall include
such section and any comparable section or sections of any future
legislation that amends, supplements, or supersedes such section.




(7) 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.


 


 









 






(8) The term “Common Shares” shall mean the common stock of the
Company.




(9) The term “Company” shall mean Applied Industrial Technologies,
Inc., its corporate successors, and any corporation into or with which it is
merged or consolidated.




(10) 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.)




(11) The term “Deferral” shall mean that portion of an Award which a
Participant elects to defer pursuant to the terms of the Post-2004 Terms.




(12) 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.




(13) The term “Election Form” shall mean the form which may be
electronic, telephonic or hard copy and on which a Director elects to defer
compensation under the Post-2004 Terms as provided in Section 2.1.




(14) 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.




(15) The term “ERISA” shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time. Reference to a section
of ERISA shall include such section and any comparable section or sections
of any future legislation that amends, supplements, or supersedes such
section.




(16) 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.


 


 









 






(17) 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.




(18) The term “Frozen Terms” shall mean the terms of the Plan, as in
effect on October 3, 2004.




(19) The term “Fund” shall mean any investment fund designated by the
Committee in which Deferrals are deemed to be invested; provided, however,
that one such Fund shall be deemed to be invested in Common Shares.




(20) The term “Incentive Plan” shall mean any incentive plan adopted by
the Board for key employees.




(21) 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.




(22) 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
consecutive months in which Participants perform services. Performance
criteria shall be established in writing not later than ninety 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.




(23) The term “Performance Plan” shall mean any long term performance
plan approved by Company shareholders for key employees.




(24) 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 Post-2004 Terms and which is part
of the Comprehensive Plan and listed on Exhibit A attached thereto.



(25) The term “Post-2004 Terms” shall mean the terms of the Plan with
respect to Deferrals earned or vested after December 31, 2004, which are set
forth herein, with all amendments, supplements, and modifications hereafter
made.




(26) The term “Section 409A” shall mean Section 409A of the Code, and
the regulations and rulings promulgated thereunder.


 


 









 






(27) 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 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.




(28) The term “Specified Employee” shall mean a “specified employee”
within the meaning of Section 409A and the Company’s Specified Employee
identification policy.




(29) The term “Trust” shall mean the trust maintained pursuant to the
terms of the Applied Industrial Technologies, Inc. Supplemental Executive
Retirement Benefits Trust Agreement with all amendments, supplements, and
modifications.




(30) The term “Unforeseeable Emergency” shall be defined and determined
in accordance with the provisions of Section 409A, which include a severe
financial hardship of a Participant resulting from an illness or accident of
the Participant, the Participant’s spouse, or the Participant’s dependent
(as defined in Section 152 of the Code (without regard to Sections
152(b)(1), (b)(2), and (d)(1)(B) of the Code); a 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 insurance);
or other similar or extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant.




(31) 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.


 


 









 





ARTICLE II




ELECTIONS BY ELIGIBLE EMPLOYEES




2.1 Participation and Elections to Defer. Each Eligible Employee who was
participating in the Plan under the Frozen Terms as of December 31, 2004, and who continues to be
an active Eligible Employee shall be eligible to continue to participate in the Plan under the
Post-2004 Terms as of January 1, 2005. Eligible Employees who were participating in the Plan under
the Frozen Terms and Eligible Employees who became Eligible Employees on or after January 1, 2005,
shall be eligible to participate in the Plan under the Post-2004 Terms with respect to services
performed after December 31, 2004 that give rise to Awards. 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 Post-2004 Terms unless the Award to be
deferred is “fiscal year compensation.” For purposes of the Post-2004 Terms, “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.



(b) Performance-Based Compensation. On or before each December 31 that is at least
six 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 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 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, 2007, and 2008, 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, it shall be applicable only with respect to
amounts that would not otherwise be payable in 2006 and shall not cause an
amount to be paid in 2006 that would not otherwise be payable in 2006; and







	 	(ii)	 	If made in 2007, it shall be applicable only with respect to
amounts that would not otherwise be payable in 2007 and shall not cause an
amount to be paid in 2007 that would not otherwise be payable in 2007; and







	 	(iii)	 	If made in 2008, it shall be applicable only with respect to amounts that
would not otherwise be payable in 2008 and shall not cause an amount to be paid in
2008 that would not otherwise be payable in 2008.






(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 deemed invested and shall
be distributed in the manner and at the time set forth on the applicable Election Form.


 


 









 





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 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.



3.2 Amount of Deferrals.



(a) Prior to July 1, 2007. Effective for Awards related to Fiscal Years beginning
prior to 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 prior to 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
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.


 


 









 





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 substantially equal annual installments over a period of not
more than ten years and commencing as of a date specified in such Participant’s Election Form.



4.2 Time of Payments. In accordance with the provisions of 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 60 days of the date specified for commencement in his applicable
Election Form; provided, however, that if such 60-day period begins in one calendar year and ends
in another, the Participant shall not have a right to designate the calendar year of payment.
Notwithstanding any other provision of the Plan to the contrary, a distribution payable to a
Specified Employee due to 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 months after the date on which the election is made; and







	 	(ii)	 	The payment with respect to which such election
is made is deferred for a period of not less than five 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 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.



4.6 Distribution Upon Death. In the event that a Participant dies prior to
commencement of payments or while receiving payments under the Post-2004 Terms, the Company shall
pay his Beneficiary the remainder of his Deferral Account under the Post-2004 Terms 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 Distribution in the Event of a Change of Control. Notwithstanding any other
provision of the Post-2004 Terms to the contrary, to the extent permitted under Section 409A, the
Deferral Account of a Participant under the Post-2004 Terms shall be distributed to such
Participant within ten days following the Change of Control or deferred for payment at a later
specified date pursuant to the election made by the Participant on his Election Form.



4.8 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.


 


 









 





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.



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.




(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 Post-2004 Terms, 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 Post-2004 Terms
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 Post-2004 Terms (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.


 


 









 





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 Section 502(a) of ERISA 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.



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 Section 502(a) of
ERISA, 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 Section 503 of
ERISA 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. Notwithstanding any provision to the contrary in the Post-2004
Terms, nothing shall restrict the Company’s right to amend the Plan, the Post-2004 Terms, the
Frozen Terms, any deferral agreement, and/or any deferral Election Form, without the consent of
Participants and without additional consideration to affected Participants, 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 Post-2004 Terms) is not warranted or guaranteed. 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.
Notwithstanding the foregoing, 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 Post-2004 Terms) or as a result of the
administration of amounts subject to the Plan (whether the Frozen Terms or the Post-2004 Terms).



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 11  day of December, 2008.



	 	 	 	 	 	 	 
	 	 	APPLIED INDUSTRIAL TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David L. Pugh
 

Title: Chairman & CEO