EX-10(B)



 








EXHIBIT 10(b)




Performance Grant Terms and Conditions




     Your Performance Grant (the “Award”) is made by Applied Industrial Technologies, Inc., an
Ohio corporation (“Applied”). The Award is governed by Applied’s 1997 Long-Term Performance Plan
(the “Plan”), including the policies adopted by the Executive Organization & Compensation Committee
of the Board of Directors (the “Committee”) under the Plan, and is subject to the following terms
and conditions:



     1. Eligibility. Only key senior officers that have broad policy-making functions that directly
contribute to Applied’s long-term success and profitability are eligible to receive Performance
Award grants.



     2. Vesting; Payment. Your Award will vest, in whole or in part, three years following the
effective grant date of your Award (the “Performance Period”) upon the achievement of the
performance goals set forth in the Performance Grant Summary enclosed with these Terms and
Conditions. Your Award will be payable, at the Committee’s discretion, in cash or shares
(“Shares”) of Applied’s common stock (or both). The Committee may determine the form of payment of
your Award at any time during or at the conclusion of the Performance Period. Shares used in
payment of the Award shall be valued at their Fair Market Value (as defined in the Plan) as of the
last day of the Performance Period. Applied shall make payment of any amount due to you under the
Award promptly following the availability of audited financial statements for the final year of the
Performance Period. Applied may withhold from the amount payable to you under your Award any
amounts it deems necessary pursuant to federal, state or local tax laws, including withholding
requirements.



     3. Termination of Employment or Executive Officer Status. If, during the Performance Period, your
employment with Applied is terminated due to death, permanent disability, or retirement in
accordance with an established retirement policy of Applied, then, at the end of the Performance
Period, you (or your beneficiary whom you have designated to Applied in writing) shall be entitled
to receive a pro rata payment under the Award equal to (i) a fraction the numerator of which is the
number of fiscal quarters (including a portion of a quarter) elapsed in the Performance Period
prior to the date of your termination and the denominator of which is twelve, multiplied by (ii)
what would have been your actual Award based on the achievement of the performance goals set forth
in the Performance Grant Summary. If, during the Performance Period, you cease to be an employee
of Applied for any reason other than those specifically set forth above or in section 4 hereof,
then your Award will be forfeited and no amount shall be due or payable to you pursuant to the
Award. Also, if, during the Performance Period, you cease to be a Board-elected executive officer
of Applied (but remain an employee), then your Award will be forfeited and no amount shall be due
or payable to you pursuant to the Award.



     Notwithstanding anything in these terms and conditions, the Committee may terminate the Award
and no amount shall be due or payable to you pursuant to the Award, if the Committee determines, in
its sole discretion, that you have committed an act inimical to Applied’s interests, including,
without limitation, your unauthorized disclosure of proprietary or confidential information of
Applied, your competition with Applied, or your solicitation of Applied associates. The
Committee’s determination shall be effective as of the time of your act.



 









 





     4. Change in Control. Upon a Change in Control (as defined in the Plan), your Award shall vest and
you shall be entitled to receive in full satisfaction of all amounts due or which may become due
under the Award, a pro rata payment under the Award equal to (i) a fraction the numerator of which
is the number of fiscal quarters (including a portion of a quarter) elapsed in the Performance
Period prior to the date of the Change in Control and the denominator of which is twelve,
multiplied by (ii) your target award amount.



     5. Limitation on Rights. The Award shall not confer upon you any rights whatsoever other than
those expressly set forth herein, in the Plan or in policies adopted by the Committee, including
without limitation any right to continued employment with Applied (or its affiliates) or any rights
as a shareholder in respect of any of the Shares that may become issuable pursuant to the Award
until and unless Applied has issued a certificate or certificates for the Shares.



     6. Restrictions on Shares. Applied may require, as a condition to its issuance and delivery of
certificates for Shares issuable under the Award, the delivery to Applied of a commitment in
writing by you that (i) at the time of issuance, it is your intention to acquire the Shares for
your own account for investment only and not with a view to, or for resale in connection with, the
distribution thereof; (ii) you understand that the Shares may be “restricted securities” as defined
in Rule 144 issued under the Securities Act of 1933, as amended (the “Act”); and (iii) any resale,
transfer or other disposition of the Shares will be accomplished only in compliance with Rule 144,
the Act, or other or subsequent rules and regulations thereunder. Applied may place on the
certificates a legend reflecting that commitment and Applied may refuse to permit transfer of the
certificates until it has been furnished evidence satisfactory to it that no violation of the Act
or the rules and regulations thereunder would be involved in the transfer.



     7. Discretionary Adjustment Following Merger, Sale of Assets; Stock Issuance, Etc. In the event
that, during the Performance Period, Applied merges, consolidates, sells or acquires a substantial
amount of assets, issues a substantial amount of its capital stock, reorganizes, or engages in any
other transaction or series of transactions, the Committee, in its sole discretion, may change the
performance goals upon which the vesting of your Award is conditioned, in order to prevent
diminution or enlargement of the benefits intended to be conferred by the Award in such manner as
the Committee may determine is equitably required by the changes or events.



     8. Nonassignability. The Award and the rights granted thereunder are not assignable or
transferable, in whole or in part, and may not be otherwise disposed of by you, other than by will
or by the laws of descent and distribution.



     9. Committee Authority. The Committee shall have authority, subject to the Plan’s express
provisions, to construe these terms and conditions and the Plan, to establish, amend and rescind
rules and regulations relating to the Plan, and to make all other determinations in the Committee’s
judgment necessary or desirable for the Plan’s administration. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or these terms and
conditions in the manner and to the extent it shall deem expedient to carry the Plan into effect.
All Committee action under this Section’s provisions shall be conclusive for all purposes.



     10. Relationship to the Plan. In the event of any inconsistency between these terms and conditions
and the Plan or the Committee’s policies, the Plan or the policies shall govern. Terms not
otherwise defined in these terms and conditions have the meaning ascribed them in the Plan.



 









 





Notwithstanding any provisions hereof, these terms and conditions and the Award shall be subject to
all of the Plan’s provisions in effect from time to time, which are incorporated herein by
reference.



(January 2002)