Document:

Exhibit 10.1 KERP

EXHIBIT 10.1

APPLIED INDUSTRIAL TECHNOLOGIES, INC.
KEY EXECUTIVE RESTORATION PLAN
(Effective January 1, 2012; Amended and Restated as of August 13, 2013)

	
				
	 
	APPLIED INDUSTRIAL TECHNOLOGIES, INC.
KEY EXECUTIVE RESTORATION PLAN
(Effective January 1, 2012; Amended and Restated as of August 13, 2013)
	 

	Section
	 
	Page
	

	 
	 
	 

	 
	ARTICLE I
DEFINITIONS AND CONSTRUCTION
	 

	1.1
	Definitions
	2
	

	1.2
	Construction
	7
	

	 
	 
	 

	 
	ARTICLE II
SELECTION, ENROLLMENT AND ELIGIBILITY
	 

	2.1
	Selection by the Committee
	9
	

	2.2
	Enrollment and Eligibility Requirements; Commencement of Participation        
	9
	

	 
	 
	 

	 
	ARTICLE III
COMPANY CONTRIBUTION AMOUNTS, VESTING AND WITHHOLDING TAXES
	 

	3.1
	Company Contribution Amount
	10
	

	3.2
	Vesting
	10
	

	3.3
	Crediting and Debiting of Account Balances    
	11
	

	3.4
	Social Security and Other Taxes    
	12
	

	 
	 
	 

	 
	ARTICLE IV
UNFORESEEABLE EMERGENCIES
	 

	4.1
	Committee Determination
	13
	

	4.2
	Distribution Date    
	13
	

	4.3
	Cancellation of Deferrals    
	14
	

	 
	 
	 

	 
	ARTICLE V
RETIREMENT BENEFIT
	 

	5.1
	Retirement Benefit
	15
	

	5.2
	Payment of a Retirement Benefit
	15
	

	 
	 
	 

	 
	ARTICLE VI
TERMINATION BENEFIT
	 

	6.1
	Termination Benefit    
	17
	

	6.2
	Payment of a Termination Benefit    
	17
	

	 
	 
	 

	 
	ARTICLE VII
DISABILITY BENEFIT
	 

	7.1
	Disability Benefit
	17
	

	7.2
	Payment of a Disability Benefit
	17
	

	
				
	 
	ARTICLE VIII
DEATH BENEFIT
	 

	8.1
	Death Benefit    
	20
	

	8.2
	Payment of a Death Benefit    
	20
	

	 
	 
	 

	 
	ARTICLE IX
BENEFICIARY DESIGNATION
	 

	9.1
	Beneficiary
	21
	

	9.2
	Beneficiary Designation
	21
	

	9.3
	Acknowledgment
	21
	

	9.4
	No Beneficiary Designation
	21
	

	9.5
	Doubt as to Beneficiary
	22
	

	9.6
	Discharge of Obligations
	22
	

	 
	 
	 

	 
	ARTICLE X
LEAVE OF ABSENCE
	 

	10.1
	Paid Leave of Absence
	23
	

	10.2
	Unpaid Leave of Absence
	23
	

	 
	 
	 

	 
	ARTICLE XI
TERMINATION AND AMENDMENT OF PLAN
	 

	11.1
	Termination of Plan
	24
	

	11.2
	Amendment
	24
	

	11.3
	Effect of Payment
	25
	

	 
	 
	 

	 
	ARTICLE XII
ADMINISTRATION
	 

	12.1
	Duties of the Company
	26
	

	12.2
	Agents
	26
	

	12.3
	Binding Effect of Decisions
	26
	

	 
	 
	 

	 
	ARTICLE XIII
OTHER BENEFITS AND AGREEMENTS
	 

	13.1
	Coordination with Other Benefits    
	27
	

	13.2
	Compliance with Code Section 409A    
	27
	

	 
	 
	 

	 
	ARTICLE XIV
CLAIMS PROCEDURES
	 

	14.1
	Maintenance of Claims Procedures    
	28
	

	14.2
	Disputes and Resolutions    
	28
	

	 
	 
	 

	 
	ARTICLE XV
TRUST
	 

	15.1
	Establishment of the Trust    
	29
	

	15.2
	Interrelationship of the Plan and the Trust    
	29
	

	15.3
	Distributions From the Trust    
	29
	

	
				
	 
	MISCELLANEOUS
	 

	16.1
	Status of Plan    
	30
	

	16.2
	Unsecured General Creditor    
	30
	

	16.3
	Employer's Liability    
	30
	

	16.4
	Nonassignability    
	30
	

	16.5
	Not a Contract of Employment
	31
	

	16.6
	Furnishing Information
	31
	

	16.7
	Notice    
	31
	

	16.8
	Incompetency    
	32
	

	16.9
	Domestic Relations Orders    
	32
	

	16.10
	Tax Treatment
	32
	

	16.11
	Validity    
	33
	

	16.12
	Deduction Limitation on Benefit Payments    
	33
	

	16.13
	Successors
	34
	

	16.14
	Captions    
	34
	

	16.15
	Governing Law    
	34
	

APPLIED INDUSTRIAL TECHNOLOGIES, INC.
KEY EXECUTIVE RESTORATION PLAN
(Effective January 1, 2012; Amended and Restated as of August 13, 2013)

Preamble
The Applied Industrial Technologies, Inc. Key Executive Restoration Plan, as amended (the “Plan”), was established, effective January 1, 2012, by Applied Industrial Technologies, Inc. (the “Company”) in order to provide certain benefits to a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Company and its affiliates.  The Plan shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  The Plan, therefore, is intended to be exempt from the participation, vesting, funding and fiduciary requirements of Title I of ERISA, but is intended to comply with all applicable law, including Section 409A of the Internal Revenue Code of 1986, as amended, and shall be operated and interpreted in accordance with such intention.

ARTICLE I

DEFINITIONS AND CONSTRUCTION
1.1    Definitions.  For the purposes of the Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

(1)The term “Account Balance” shall mean, with respect to a Participant, an entry on the records of the Company equal to the balance of the Participant's Company Contribution Account as of a specified date.  The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to the Plan.

(2)The term “Annual Installment Method” shall mean the method used to determine the amount of each payment due to a Participant who has elected to receive a benefit over a period of years in accordance with the applicable provisions of the Plan.  The amount of each annual payment due to the Participant shall be calculated by multiplying the balance of the Participant's benefit by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due the Participant.  The amount of the first annual payment shall be determined as of the close of business on the Participant's Benefit Distribution Date, (or, in the event such Benefit Distribution Date is not a business day, the first annual payment shall be valued as of the close of business of the next business day immediately following such Benefit Distribution Date), and the amount of each subsequent annual payment shall be calculated as of each anniversary of such Benefit Distribution Date.  For purposes of the Plan, the right to receive a benefit payment in annual installments shall be treated as the entitlement to a single payment.

(3)The term “Base Salary” shall mean the cash compensation relating to services performed during any Payment Period and designated as “base salary” by the Company, excluding, however, distributions from nonqualified plans, bonuses, commissions, overtime, fringe benefits, income from equity plans (including stock options, restricted stock, stock appreciation rights, and stock bonuses), relocation reimbursements, non-cash incentive payments, and non-monetary awards, as well as automobile and other allowances (whether or not such allowances are included in gross income) paid to a Participant for employment services rendered to the Employer.  Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by or on behalf of the Participant pursuant to all qualified or nonqualified plans of the Employer and shall include amounts not otherwise included in the Participant's gross income due to deferrals under Code Sections 125, 402(e)(3), 402(h), or 403(b) to plans established by an Employer; provided, however, that all such amounts shall be included in such compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Participant.

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(4)The term “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article IX, as entitled to receive benefits under the Plan upon the death of a Participant.

(5)The term “Beneficiary Designation Form” shall mean the form specified from time to time by the Company for a Participant to complete and return to the Company in order to designate one or more Beneficiaries.

(6)The term “Benefit Distribution Date” shall mean the date upon which all or an objectively determinable portion of a Participant's vested Account Balance will become eligible for distribution under the Plan.  Except as otherwise provided in the Plan, a Participant's Benefit Distribution Date shall be determined based on the earliest to occur of an event or scheduled date set forth in Articles IV through VIII, as applicable.

(7)The term “Board” shall mean the board of directors of the Company.

(8)The term “Bonus” shall mean, for any particular Payment Period, the amount of any cash compensation earned by a Participant under any annual cash incentive plan of the Employer. 

(9)The term “Cause” shall mean (i) the willful and continued failure by a Participant to perform substantially his or her duties with the Company or one of its affiliates (other than for disability or Good Reason), after a written demand for substantial performance is delivered to the Participant by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Participant has not substantially performed his or her duties, or (ii) the willful engagement by the Participant in illegal conduct or gross misconduct involving moral turpitude that is materially and demonstrably injurious to the Company; provided, however, that no act or failure to act shall be considered “willful” unless it is done, or omitted to be done, in bad faith or without his or her reasonable belief that such action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given the Participant pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of the Company. Termination of a Participant's employment with the Company shall not be deemed to be for Cause unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Participant and the Participant being given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Participant is guilty of the conduct described in clauses (i) or (ii) above, and specifying the particulars thereof in detail.

(10)The term “Change in Control” shall mean (i) the Company is merged, consolidated or reorganized into or with another corporation or other legal person, and immediately after such merger, consolidation or reorganization, less than a majority of the 

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combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of securities of the Company entitled to vote generally in the election of directors of the Company (“Voting Stock”) of the Company immediately prior to such transaction; (ii) the Company sells all or substantially all of its assets to any other corporation or other legal person, and, immediately after such sale, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale; (iii) there is a report filed or required to be filed on Schedule 13D or Schedule TO (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 30% or more of the Voting Stock; (iv) the Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) if during any period of two consecutive years, individuals who at the beginning of any such period are the directors of the Company cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this clause (v), each director who is first elected, or first nominated for election by the Company's shareholders, by a vote of at least two-thirds of the directors of the Company (or a committee thereof) then still in office who were directors of the Company at the beginning of any such period will be deemed to have been a director of the Company at the beginning of such period. Notwithstanding the events specified in clauses (iii) and (iv) above, unless otherwise determined in a specific case by majority vote of the Board, a “Change in Control” shall not be deemed to have occurred solely because (a) the Company, (b) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities or interest, or (c) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 30% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership.

(11)The term “Code” shall mean the Internal Revenue Code of 1986 as it may be amended from time to time and any applicable Treasury regulations and guidance.

(12)The term “Company” shall mean Applied Industrial Technologies, Inc. and any successor to all or substantially all of its assets or business.

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(13)The term “Company Compensation Percentage” shall mean the 6.25 percent of a Participant's Base Salary and Bonus, unless a different percentage is selected by the Committee and communicated to the Participant by the Committee or the Board.

(14)The term “Company Contribution Account” shall mean the bookkeeping account of a Participant to which Company Contribution Amounts are credited.

(15)The term “Company Contribution Amount” shall mean the amount with respect to a Payment Period that is determined in accordance with Section 3.1.

(16)The term “Committee” shall mean the Executive Organization and Committee of the Board.

(17)The term “Disability” or “Disabled” shall mean that a Participant is: (i) determined to be disabled by the Social Security Administration; or (ii) determined to be disabled for purposes of the group disability program maintained by the Employer, provided that the definition of disability under such program means that the Participant is (a) unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 12 months, or (b) receiving income replacement benefits for a period of not less than three months under an accident and health plan of the Employer by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 12 months.

(18)The term “Early Retirement Age” shall mean the age at which a Participant completes 10 years of Service; provided, however, that such age shall not be less than 55.

(19)The term “Election Form” shall mean the form which may be in electronic format or other form specified from time to time by the Company for a Participant to complete and return to the Company in order to make an election under the Plan.

(20)The term “Employer” shall be defined as follows:

		
	a)
	Except as otherwise provided in paragraph (b) of this Paragraph (20), the term “Employer” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that are set forth on a listing of participating subsidiaries with respect to the Plan as adopted by the Committee from time to time.

		
	b)
	For the purpose of determining whether a Participant has experienced a Separation from Service, the term “Employer” shall mean:

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	i)
	The entity for which the Participant performs services and with respect to which the legally binding right to compensation deferred or contributed under the Plan arises; and

		
	ii)
	All other entities with which the entity described above would be aggregated and treated as a single employer under Code Section 414(b) and Code Section 414(c), as applicable.  In order to identify the group of entities described in the preceding sentence, the Company shall use an ownership threshold of at least 50% as a substitute for the 80% minimum ownership threshold that appears in, and otherwise must be used when applying, the applicable provisions of (A) Code Section 1563 for determining a controlled group of corporations under Code Section 414(b), and (B) Treas. Reg. §1.414(c)-2 for determining the trades or businesses that are under common control under Code Section 414(c).

(21)The term “Entry Date” shall mean the date designated by the Committee or Board as of which an Executive shall become a Participant in the Plan.

(22)The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

(23)The term “Executive” shall mean a person who is a full-time, common law key employee of an Employer.

(24)The term “Good Reason” shall mean “409A Good Reason” and “Other Good Reason” as hereinafter defined. “409A Good Reason” shall mean (i) a material diminution in a Participant's authority, duties, or responsibilities following a Change in Control; (ii) a material diminution in the authority, duties, or responsibilities of the person to whom a Participant reported immediately prior to a Change in Control; (iii) a material diminution of a Participant's annual base salary that was in effect immediately prior to a Change in Control; or a material change in the geographic location where a Participant provides service to the Company; provided that 409A Good Reason shall not exist unless the Participant gives the Company notice in accordance with Section 16.7 within 90 days of the initial existence of the condition claimed by the Participant in good faith to constitute 409A Good Reason and the Participant affords the Company at least 30 days in which to remedy the specified condition. “Other Good Reason” shall mean (i) the assignment of any duties inconsistent in any respect with Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities following a Change in Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (ii) any failure by the Company following a Change in Control to continue to provide a Participant with an annual base salary, employee benefits and an opportunity to earn incentive and bonus compensation equal or greater to that which was provided to the 

6

Participant by the Company immediately prior to the Change in Control, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after the receipt of notice thereof given by the Participant; or (iii) the Company's requiring a Participant to be based at or generally work from any location other than the location that the Participant was based at or generally worked from prior to the Change in Control or the Company's requiring a Participant to travel on Company business to a substantially greater extent than required immediately prior to the Change in Control.

(25)The term “Normal Retirement Age” shall mean age 65.

(26)The term “Participant” shall mean any Executive (a) who is selected to participate in the Plan, (b) who has filed an Election Form and Beneficiary Designation Form with the Company, and (c) whose Account Balance has not been completely distributed.

(27)The term “Payment Period” shall mean the period of time utilized by the Company to determine the Company Contribution Amount under Section 3.1.

(28)The term “Plan” shall mean the Applied Industrial Technologies, Inc. Key Executive Restoration Plan, which shall be evidenced by this instrument, as it may be amended from time to time, and by any other documents that together with this instrument define a Participant's rights to amounts credited to his or her Account Balance.

(29)The term “Plan Year” shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year.

(30)The term “Retirement,” “Retire(s)” or “Retired” shall mean a Separation from Service by a Participant on or after such Participant's Early Retirement Age or Normal Retirement Age, as the case may be.

(31)The term “RSP” shall mean the Applied Industrial Technologies, Inc. Retirement Savings Plan as it may be amended from time to time.

(32)The term “Separation from Service” shall mean a termination of services provided by a Participant to the Employer, whether voluntarily or involuntarily, other than by reason of death or Disability, as determined by the Company in accordance with Code Section 409A.

(33)The term “Service” shall mean the aggregate period of time that a Participant is employed as a common law employee by the Employer.

(34)The term “Specified Employee” shall mean any Participant who is determined to be a key employee of the Employer and who is deemed to be a specified employee in accordance with the provisions of Code Section 409A and the Company's Specified Employee Identification Policy.

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(35)The term “Trust” shall mean one or more grantor trusts that may be established by the Company in accordance with the provisions of Article XV.

(36)The term “Unforeseeable Emergency” shall mean a severe financial hardship of the Participant resulting from (a) an illness or accident of the Participant, the Participant's spouse, the Participant's Beneficiary or the Participant's dependent (as defined in Code Section 152 without regard to paragraphs (b)(1), (b)(2) and (d)(1)(b) thereof), (b) a loss of the Participant's property due to casualty, or (c) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Company based on the relevant facts and circumstances in accordance with the provisions of Code Section 409A.
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

SELECTION, ENROLLMENT AND ELIGIBILITY
2.1    Selection by the Committee.  The Committee or the Board may select certain Executives to become Participants in the Plan as of a specified Entry Date.
2.2    Enrollment and Eligibility Requirements; Commencement of Participation.  Upon being so designated under Section 2.1, each such Executive shall comply with the following provisions:

(a)As a condition to participation, each selected Executive shall agree to be bound by the terms of the Plan and shall complete and return to the Company, an Election Form and a Beneficiary Designation Form by the deadline(s) established by the Company in accordance with the applicable provisions of the Plan.  In addition, the Company may establish from time to time such other enrollment requirements as it determines, in its sole discretion, are necessary.

(b)Each selected Executive who is eligible to participate in the Plan shall commence participation in the Plan as of the Entry Date that the Committee determines that the Executive has met all enrollment requirements set forth in the Plan and required by the Company, including returning all required documents to the Company within the specified time period; provided, however, that such participation shall be subject to any applicable provisions of Code Section 409A.

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ARTICLE III

COMPANY CONTRIBUTION AMOUNTS,
VESTING AND WITHHOLDING TAXES
3.1    Company Contribution Amount.  Within the 30-day period following each Payment Period, the Company shall credit the Company Contribution Account of each Participant (i) who was employed as an Executive on the last business day of such Payment Period or who Retired, died or became Disabled during such Payment Period, and (ii) who elected to have 401(k) Contributions of (a) at least 6 percent of his compensation, or (b) the Code Section 402(g)(1) limit made on his behalf to the RSP for the Plan Year in which such Payment Period occurs, with a Company Contribution Amount equal to such Participant's aggregate Base Salary and Bonus paid during such Payment Period multiplied by his or her Company Contribution Percentage, minus the aggregate amount of the Profit-Sharing Contribution and Company Matching Contributions, as defined in the RSP, credited to such Participant under the RSP during such Payment Period.  Notwithstanding the foregoing, such amounts shall only be credited under the Plan if such crediting will not cause the Plan to fail to comply with Code Section 409A.
3.2    Vesting.

(a)Unless otherwise specified by the Company, a Participant shall be vested in his or her Company Contribution Account, plus amounts credited or debited on such amounts pursuant to Section 3.3, in accordance with the vesting schedule set forth below:

	
		
	Years of Service
	Vested Percentage

	Less than 1 years
	0%

	1 years or more, but less than 2 years
	25%

	2 years or more, but less than 3 years
	50%

	3 years or more, but less than 4 years
	75%

	4 years or more
	100%

(b)Notwithstanding anything to the contrary contained in this Section 3.2, in the event of a Participant's Disability, death prior to Separation from Service, attainment of Normal Retirement Age, or a Separation from Service due to termination of employment by the Employer other than for Cause or by a Participant for Good Reason, within one year following a Change in 

10

Control, any amounts that are not vested in accordance with Section 3.2(a) above, shall immediately become 100% vested.  

(c)For purposes of Section 3.2(b), Good Reason shall not exist if the Participant has given his or her prior written consent to any of the events that would otherwise constitute Good Reason.  Otherwise, a Participant's good faith determination of Other Good Reason shall be conclusive. In order for a Participant's determination of Good Reason to constitute a determination of 409A Good Reason, the Participant must have (i) specified in a notice to the Company given in accordance with Section 16.7, that the Participant's Separation from Service with the Company is for 409A Good Reason and (ii) satisfied the notice and cure period provided for in the definition of 409A Good Reason.  If a Participant's notice fails to specify that notice is for 409A Good Reason or the Participant does not satisfy the notice and cure periods provided for in the definition of 409A Good Reason, the Company will be entitled to irrebutably presume that the notice is given for Other Good Reason.
3.3    Crediting and Debiting of Account Balances.  In accordance with, and subject to, the rules and procedures that are established from time to time by the Company, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following provisions:

(a)    Measurement Funds.  The Participant may elect one or more of the measurement funds selected by the Company, in its sole discretion, which are based on certain mutual funds (the “Measurement Funds”), for the purpose of crediting or debiting additional amounts to his or her Account Balance.  The Company may, in its sole discretion, discontinue, substitute or add a Measurement Fund.  

(b)    Election of Measurement Funds.  A Participant shall elect on the Election Form, one or more Measurement Fund(s) (as described in Section 3.3(a) above) to be used to determine the value of his Account Balance.  If a Participant does not elect any of the Measurement Funds as described in the previous sentence, the Participant's Account Balance shall automatically be allocated into the lowest-risk Measurement Fund as of such allocation date, as determined by the Company, in its sole discretion.  The Participant may (but is not required to) elect, in the manner prescribed by the Company, to add or delete one or more Measurement Fund(s) to be used to determine the value of his or her Account Balance, and/or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund.  If an election is made in accordance with the previous sentence, it shall apply as of the day specified in accordance with procedures adopted by the Company and shall continue thereafter, unless changed in accordance with the previous sentence, so long as the Participant has an Account Balance under the Plan.  Notwithstanding the foregoing, the Company, in its sole discretion, may impose limitations on the frequency with which one or more of the Measurement Funds elected in accordance with this Section 3.3(b) may be added or deleted by such Participant; furthermore, the Company, in its sole discretion, may impose limitations on the frequency with which the Participant may change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund.

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(c)    Proportionate Allocation.  In making any election described in Section 3.3(b) above, the Participant shall specify on the Election Form, in integral increments, the percentage of his or her Account Balance or Measurement Fund, as applicable, to be allocated/reallocated.

(d)Crediting or Debiting Method.  The performance of each Measurement Fund (either positive or negative) shall be determined on a daily basis based on the manner in which such Participant's Account Balance has been hypothetically allocated among the Measurement Funds by the Participant pursuant to Section 3.3(a).

(e)No Actual Investment.  Notwithstanding any other provision of the Plan that may be interpreted to the contrary, the Measurement Funds shall be used for measurement purposes only.  Elections of any such Measurement Fund by Participants, and the crediting or debiting of such amounts to a Participant's Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund.  In the event that the Company, in its own discretion, decides to invest funds in any or all of the investments on which the Measurement Funds are based, no Participant shall have any rights in or to such investments themselves.  Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company.  Participants shall at all times remain unsecured creditors of the Company.
3.4    Social Security and Other Taxes.

(a)    Company Contribution Amounts.  When a Participant becomes vested in a portion of his or her Account Balance, the Participant's Employer shall withhold from the Participant's Base Salary and Bonus, in a manner determined solely by the Employer, the Participant's share of social security and other required taxes on such amounts.  If necessary, the Company may reduce, in accordance with Code Section 409A, the vested portion of the Participant's Company Contribution Account in order to comply with this Section 3.4.

(b)    Distributions.  The Participant's Employer shall withhold from any payments made to a Participant under the Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer.

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ARTICLE IV

UNFORESEEABLE EMERGENCIES
4.1    Committee Determination.  Upon the written request of a Participant and the showing of an Unforeseeable Emergency prior to the occurrence of a distribution event described in Articles V through VIII, as applicable, the Committee may, upon determining that such an emergency exists, cause an amount of such Participant's Account Balance to be paid to him.  Such amount shall not exceed the lesser of (i) the Participant's vested Account Balance, calculated as of the close of business on the Benefit Distribution Date for such distribution, as determined by the Committee in accordance with provisions set forth below, or (ii) the amount necessary to satisfy the Unforeseeable Emergency (plus amounts necessary to pay federal, state, or local income taxes or penalties reasonably anticipated as a result of the distribution) after taking into account the extent to which the Unforeseeable Emergency is or may be relieved (A) through reimbursement or compensation by insurance or otherwise, (B) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (C) by cessation of deferrals under any Employer-sponsored deferred compensation plan.
4.2    Distribution Date.  If the Committee, in its sole discretion, approves a Participant's request for a distribution under the Plan due to Unforeseeable Emergency, the Participant's Benefit Distribution Date shall be the date on which such approval occurs and such distribution shall be made to the Participant in a lump sum no later than 60 days after such Benefit Distribution Date; provided, however, that if the 60-day period begins in one taxable year and ends in another, the Participant shall not have a right to designate the taxable year of payment.  In addition, in the event of such approval, the Participant's outstanding deferral elections under the Plan shall be cancelled.

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4.3    Cancellation of Deferrals.  A Participant's deferral elections under any Employer-sponsored deferred compensation plan shall also be cancelled to the extent the Committee determines that such action is required for the Participant to obtain a hardship distribution from the RSP pursuant to Code Section 401(k).

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ARTICLE V

RETIREMENT BENEFIT
5.1    Retirement Benefit.  If a Participant experiences a Separation from Service that qualifies as a Retirement, the Participant shall be eligible to receive his or her vested Account Balance in either a lump sum or annual installment payments, as elected by the Participant in accordance with Section 5.2 (the “Retirement Benefit”).  A Participant's Retirement Benefit shall be valued as of the close of business on the applicable Benefit Distribution Date for such benefit (or, in the event such Benefit Distribution Date is not a business day, the Retirement Benefit shall be valued as of the close of business of the next business day immediately following such Benefit Distribution Date), which shall be (i) the first day after the end of the 6-month period immediately following the date on which the Participant experiences such Separation from Service, if the Participant is a Specified Employee, and (ii) for all other Participants, the date on which the Participant experiences a Separation from Service; provided, however, that if a Participant changes the form of distribution for his Account Balance in accordance with Section 5.2(b), the Benefit Distribution Date for such Account Balance subject to such change shall be determined in accordance with Section 5.2(b).
5.2    Payment of a Retirement Benefit.

(a)The Participant shall elect the form in which his or her Company Contribution Account shall be paid.  The Participant may elect to receive such Company Contribution Account in the form of a lump sum or an Annual Installment Method of two or three years.  If a Participant does not make any election with respect to the payment of his or her Company Contribution Account, then the Participant shall be deemed to have elected to receive such Company Contribution Account as a lump sum.

(b)Changes to Distribution Elections.  Subject to the Company's consent, a Participant may elect to delay payment or to change the form of payment of his Company Contribution Account if all the following conditions are met:

(i)Such election will not take effect until at least 12 months after the date on which the election is made; and

15

(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;

(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 12 months prior to the date of the first scheduled payment; and

(iv)Any change in the form and/or timing of an election must provide for a consistent time and form of payment with respect to the Participant's entire Company Contribution Account.

To the extent permitted under Section 409A, installment payments shall be treated as a single payment.
(c)No Acceleration.  Except as permitted under Section 409A, no acceleration of the time or form of payment of a Participant's Company Contribution Account shall be permitted.

16

ARTICLE VI

TERMINATION BENEFIT
6.1    Termination Benefit.  If a Participant experiences a Separation from Service that does not qualify as a Retirement, the Participant shall receive his or her vested Account Balance in the form of a lump sum payment (a “Termination Benefit”).  A Participant's Termination Benefit shall be valued as of the close of business on the Benefit Distribution Date for such benefit (or, in the event such Benefit Distribution Date is not a business day, the Termination Benefit shall be valued as of the close of business of the next business day immediately following such Benefit Distribution Date), which shall be (i) the first day after the end of the 6-month period immediately following the date on which the Participant experiences such Separation from Service, if the Participant is a Specified Employee, and (ii) for all other Participants, the date on which the Participant experiences a Separation from Service.
6.2    Payment of a Termination Benefit.  The Termination Benefit of a Participant shall be paid to the Participant no later than 60 days after the Participant's Benefit Distribution Date; provided, however, that if the 60-day period begins in one taxable year and ends in another, the Participant shall not have a right to designate the taxable year of payment.

17

ARTICLE VII

DISABILITY BENEFIT
7.1    Disability Benefit.  If a Participant becomes Disabled prior to the occurrence of a distribution event described in Articles V or VI, as applicable, the Participant shall receive his or her vested Account Balance in either a lump sum or annual installment payments, as elected by the Participant in accordance with Section 7.2(b) (a “Disability Benefit”).  The Disability Benefit of a Participant shall be valued as of the close of business on the Participant's Benefit Distribution Date for such benefit (or, in the event such Benefit Distribution Date is not a business day, the Disability Benefit shall be valued as of the close of business of the next business day immediately following such Benefit Distribution Date), which shall be the date on which the Participant becomes Disabled.
7.2    Payment of a Disability Benefit.

(a)Any Participant, in connection with his or her commencement of participation in the Plan, shall have elected on an Election Form to receive the Disability Benefit in a lump sum or pursuant to an Annual Installment Method of three years.  If a Participant did not make any election with respect to the payment of this Disability Benefit, then such Participant shall be deemed to have elected to receive the Disability Benefit as a lump sum.

(b)A Participant may change the form of payment for the Disability Benefit by submitting an Election Form to the Company in accordance with the following criteria:

(i)The election shall not take effect until at least 12 months after the date on which the election is made; and

(ii)The election must be made at least 12 months prior to the Benefit Distribution Date that would otherwise have been applicable to the Disability Benefit.

For purposes of applying the requirements of this Section 7.2(b), a Participant's election to change the form of payment for the Disability Benefit shall not be considered to be made until the date on which the election becomes irrevocable.  Such an election shall become irrevocable no later than the date that is 12 months prior to the Benefit Distribution Date that would otherwise have been applicable to the Participant's Disability Benefit.  Subject to the requirements of this Section 7.2(b), the Election Form most recently accepted by the Company that has become effective shall govern the form of payout of the Participant's Disability Benefit.

18

(c)The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the Participant's Benefit Distribution Date and remaining installments, if any, shall be paid no later than 60 days after the first day of each Plan Year following the Plan Year in which the Participant's Benefit Distribution Date occurs; provided, however, that if the 60-day period begins in one taxable year and ends in another, the Participant shall not have a right to designate the taxable year of payment.

19

ARTICLE VIII

DEATH BENEFIT
8.1    Death Benefit.  In the event of a Participant's death prior to the complete distribution of his or her vested Account Balance, the Participant's Beneficiary shall receive the Participant's unpaid vested Account Balance in a lump sum payment (the “Death Benefit”).  The Death Benefit shall be valued as of the close of business on the Benefit Distribution Date for such benefit (or, in the event such Benefit Distribution Date is not a business day, the Retirement Benefit shall be valued as of the close of business of the next business day immediately following such Benefit Distribution Date), which shall be the date of the Participant's death.
8.2    Payment of a Death Benefit.  Any Death Benefit shall be paid to the Participant's Beneficiary no later than 60 days after the applicable Benefit Distribution Date; provided, however, that if the 60-day period begins in one taxable year and ends in another, the Participant's Beneficiary shall not have a right to designate the taxable year of payment. 

20

ARTICLE IX

BENEFICIARY DESIGNATION
9.1    Beneficiary.  Each Participant shall have the right, at any time, to designate his or her Beneficiary (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant.  The Beneficiary designated under the Plan may be the same as or different from the Beneficiary designation under any other plan of the Company in which the Participant participates.
9.2    Beneficiary Designation.  A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Company.  A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Company's rules and procedures, as in effect from time to time.  The Company shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Company prior to his or her death.
9.3    Acknowledgment.  No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Company or its designated agent.
9.4    No Beneficiary Designation.  If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse.  If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate.

21

9.5    Doubt as to Beneficiary.  If the Company has any doubt as to the proper Beneficiary to receive payments pursuant to the Plan, the Company shall have the right, exercisable in its discretion, to withhold such payments until this matter is resolved to the Company's satisfaction.
9.6    Discharge of Obligations.  The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge the Company from all further obligations under the Plan with respect to the Participant.

22

ARTICLE X

LEAVE OF ABSENCE
10.1    Paid Leave of Absence.  If a Participant is authorized by the Participant's Employer to take a paid leave of absence from the employment of the Employer, and such leave of absence does not constitute a Separation from Service, the Participant shall continue to be considered eligible for the benefits provided under the Plan.
10.2    Unpaid Leave of Absence.  If a Participant is authorized by the Participant's Employer to take an unpaid leave of absence from the employment of the Employer for any reason, and such leave of absence does not constitute a Separation from Service, such Participant shall continue to be eligible for the benefits provided under the Plan.  

23

ARTICLE XI

TERMINATION AND AMENDMENT OF PLAN
11.1    Termination of Plan.  Although Company anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that the Company will continue the Plan or will not terminate the Plan at any time in the future.  In the event of a Plan termination no new deferral elections shall be permitted for the affected Participants and such Participants shall no longer be eligible to receive new Company Contribution Amounts.  The Measurement Funds available to Participants following the termination of the Plan shall be comparable in number and type to those Measurement Funds available to Participants in the Plan Year preceding the Plan Year in which the Plan termination is effective.  In addition, following a Plan termination, Account Balances of Participants shall remain in the Plan and shall not be distributed until such amounts become eligible for distribution in accordance with the other applicable provisions of the Plan.  Notwithstanding the preceding sentence, to the extent permitted by Code Section 409A, the Company may provide that upon termination of the Plan, all Account Balances of the Participants shall be distributed, subject to and in accordance with any rules established by the Company deemed necessary to comply with the applicable requirements and limitations of Code Section 409A.
11.2    Amendment.  The Company may, at any time, amend or modify the Plan in whole or in part.  Notwithstanding the foregoing, (i) no amendment or modification shall be effective to decrease the value of a Participant's vested Account Balance in existence at the time the amendment or modification is made, and (ii) no amendment or modification of this Section 11.2 or Section 12.2 of the Plan shall be effective.

24

11.3    Effect of Payment.  The full payment of the Participant's vested Account Balance in accordance with the applicable provisions of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under the Plan.

25

ARTICLE XII

ADMINISTRATION
12.1    Duties of the Company.  In general, unless specifically provided otherwise in the Plan or by the Committee, the Company shall have the discretion and authority to: (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of the Plan; and (b) decide or resolve any and all questions, including benefit entitlement determinations and interpretations of the Plan, as may arise in connection with the Plan.  
12.2    Agents.  In the administration of the Plan, the Company may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel.
12.3    Binding Effect of Decisions.  The decision or action of the Company with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

26

ARTICLE XIII

OTHER BENEFITS AND AGREEMENTS
13.1    Coordination with Other Benefits.  The benefits provided for or with respect to a Participant under the Plan are in addition to any other benefits available to such Participant under any other plan, program or agreement of or with the Company or the Participant's Employer.  The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.
13.2    Compliance with Code Section 409A.  Notwithstanding any other provision of the Plan to the contrary, any amounts, including deferrals and Employer contributions, to be credited under the Plan with respect to a Participant shall only be credited under the Plan if such crediting will not cause the Plan to fail to comply with Code Section 409A.

27

ARTICLE XIV

CLAIMS PROCEDURES
14.1    Maintenance of Claims Procedures.  The Company shall establish and maintain reasonable procedures governing the filing of benefit claims, notification of benefit determinations, and appeal of benefit determinations under the Plan (collectively, the “Claims Procedures”) that comply with the requirements of ERISA Section 503 and regulations issued thereunder.  Participants shall be notified of the existence of the Claims Procedures in conjunction with enrollment in the Plan and how to obtain a copy of the Claim Procedures upon request.  Compliance with the Claims Procedures is a mandatory prerequisite to any claimant's right to commence action under Section 14.2.
14.2    Disputes and Resolutions.  In the event that a claim or dispute is not resolved to the satisfaction of the claimant through the Claims Procedure, such claimant may, within 60 days of the final decision on review under the Claims Procedure, give written notice to the Company to have such claim dispute settled by application for arbitration in Cleveland, Ohio, in accordance with the rules then prevailing of The American Arbitration Association pursuant to the Federal Arbitration Act.  Such arbitration shall apply to all disputes and claims arising from or relating to the Plan and ERISA, and the arbitrator's review shall be limited to a review of the information submitted to the Plan administrator.  Judgment upon any award rendered by the arbitrator may be entered in any court of U.S. competent jurisdiction.  The cost of any arbitration proceeding shall be shared equally by the claimant and the Company, unless the arbitrator finds it more equitable for the Company to bear the costs.

28

ARTICLE XV

TRUST
15.1    Establishment of the Trust.  In order to provide assets from which to fulfill its obligations to the Participants and their Beneficiaries under the Plan, the Company may establish a Trust pursuant to a trust agreement with a third party, the trustee, to which each Employer may, in its discretion, contribute cash or other property, including securities issued by the Company, to provide for the benefit payments under the Plan.
15.2    Interrelationship of the Plan and the Trust.  The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan.  The provisions of the Trust shall govern the rights of the Company, Employers, Participants and the creditors of the Employers to the assets transferred to the Trust.  
15.3    Distributions From the Trust.  The Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under the Plan.

29

ARTICLE XVI

MISCELLANEOUS
16.1    Status of Plan.  The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1).  The Plan is intended to comply with Code Section 409A.  The Plan shall be administered and interpreted to the extent possible in a manner consistent with such intent.
16.2    Unsecured General Creditor.  Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer.  For purposes of the payment of benefits under the Plan, any and all assets of an Employer shall be, and remain, the general, unpledged unrestricted assets of the Employer.  The obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.
16.3    Employer's Liability.  The liability of an Employer for the payment of benefits shall be defined only by the Plan.  An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan.
16.4    Nonassignability.  Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the 

30

event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.
16.5    Not a Contract of Employment.  The terms and conditions of the Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant.  Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement.  Nothing in the Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, or to interfere with the right of any Employer to discipline or discharge the Participant at any time.
16.6    Furnishing Information.  A Participant or his or her Beneficiary will cooperate with the Company by furnishing any and all information requested by the Company and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Company may deem necessary.
16.7    Notice.  Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

	
	
	Applied Industrial Technologies, Inc.
Attn:  General Counsel
One Applied Plaza
East 36th Street & Euclid
Cleveland, OH  44115-5056

31

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.  Any notice or filing required or permitted to be given to a Participant under the Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.
16.8    Incompetency.  If the Company determines in its discretion that a benefit under the Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Company may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person.  The Company may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit.  Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.
16.9    Domestic Relations Orders.  The Company is authorized to make any payments directed by court order in any action in which the Plan or the Company has been named as a party.  In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant's benefits under the Plan in connection with a domestic relations order (as defined in Code Section 414(p)(1)(B)), the Company shall have the right, notwithstanding any election made by the Participant to immediately distribute the spouse's or former spouse's interest in the Participant's benefits under the Plan to such spouse or former spouse, to the extent necessary to fulfill such domestic relations order.
16.10    Tax Treatment.  Notwithstanding any other provision of the Plan to the contrary, although the Board and the Company shall use their commercially reasonable efforts to avoid the imposition of taxation, penalties, and interest under Code Section 409A and other Code provisions, the tax treatment of Company Contribution Amounts as well as credits and earnings under the Plan shall not be, and are not, warranted or guaranteed.  Neither the Board, the Company, any 

32

Employer nor any of their designees shall be held liable for any taxes, penalties, or other amounts owed by a Participant or Beneficiary as a result of any deferral or payment under the Plan or the administration of the Plan.
16.11    Validity.  In case any provision of the Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but the Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
16.12    Deduction Limitation on Benefit Payments.  If the Company reasonably anticipates that if a payment under the Plan were made as scheduled, the deduction with respect to such payment would not be permitted solely due to the application of Code Section 162(m), the Company may defer that payment to the extent deemed necessary to ensure deductibility; provided, however, that (i) such deduction limitation shall be applied to all similarly situated Participants on a reasonably consistent basis; (ii) the payment must be made by the earliest of (x) during the Company's first taxable year in which the Company reasonably anticipates, or should reasonably anticipate, that if the payment is made during such year, the deduction of such payment will not be barred by application of Code Section 162(m) or (y) during the period beginning with the date of the Participant's Separation from Service and ending on the later of the last day of the taxable year of the Company in which the Participant incurs a Separation from Service of the 15th day of the third month following the Participant's Separation from Service; (iii) where any scheduled payment to a particular Participant in the Company's taxable year is delayed because of Code Section 162(m), the delay in payment will be treated as a subsequent deferral election unless all scheduled payments to such Participant that could be delayed are also delayed; (iv) where a payment is delayed to a date on or after the Participant's Separation from Service, the payment will be considered a payment upon a Separation from Service for purposes of the 6-month delay for Specified Employees; and (v) no election may be provided to a Participant with respect to the timing of payment hereunder.  Any amounts deferred pursuant to the 

33

provisions of this Section 16.12 shall continue to be credited/debited with additional amounts, even if such amount is being paid out of installments.
16.13    Successors.  The provisions of the Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries.
16.14    Captions.  The captions of the articles, sections and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
16.15    Governing Law.  Subject to ERISA, the provisions of the Plan shall be construed and interpreted according to the internal laws of the State of Ohio without regard to its conflicts of laws principles.

Executed at Cleveland, Ohio, on this 13th day of  August, 2013.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.

By:   /s/ Neil A. Schrimsher            
Title:  Chief Executive Officer

34

Schedule of KERP Participants 

Current executive officer
Neil A. Schrimsher 
Thomas E. Armold 
Todd A. Barlett 
Fred D. Bauer 
Mark O. Eisele 
Carl E. Will
The Executive Organization & Compensation Committee has set:
		
	•
	the Company Contribution Percentage for Mr. Schrimsher at 10%, and for Mr. Will at 8%, and 

		
	•
	Mr. Schrimsher and Mr. Will each will vest in 50% of his account after three years of service, 75% after four years of service and 100% after five years of service. 

35CONSULTING AGREEMENT

 

This AGREEMENT shall
be effective on this August 1st, 2013 and is made between VR Holdings Inc., of 1615 Chester Road, Chester, MD 21619.,
U.S.A. [“VRHD”], and Schneider Mitigation Group of 4002 University Dr., Fairfax, VA 22030 [“Consultant”].

 

In this Agreement, the
party who is contracting to receive services shall be referred to as "VRHD", and the party who will be providing the
services shall be referred to as "Consultant".

 

Consultant has a background
in business development and is willing to provide services to VRHD based on this background.

 

VRHD desires to have services provided by
Consultant. Therefore, the parties agree as follows:

 

	1.		DESCRIPTION OF SERVICES. Beginning on August 1st, 2013 Consultant
will provide the following services (collectively, the "Services"): Business Development of VRHD and corporate management
services along with consulting for capital structure, finance, and mitigation. Specifically Consultant agrees to use best efforts
to accomplish VRHD’s primary objectives as follows:

	-		Providing for the maintaining of reporting status and filings in whatever manner may
be deemed necessary which includes satisfying a perceived short term capital need of up to $25,000 which may need to be paid in
the next few days;

	-		Providing for VRHD working capital which includes
a target of $1,500,000;

	-		Providing an operating strategy and business
for VRHD.

 

	2.		PERFORMANCE OF SERVICES. Consultant shall determine the manner in which the
Services are to be performed and the specific hours to be worked by Consultant. Primary management duties will be fulfilled by
Mr. Gregory Gennace and VRHD will rely on Consultant to work as many hours as may be reasonably necessary to fulfill Consultant's
obligations under this Agreement.

 

	3.		FEES & COMMISSION PAYMENTS. VRHD agrees to pay consultant fifty million
(50,000,000) shares of VRHD common stock upon signing this agreement. Additionally, as the plaintiff and beneficiary of a potential
award resulting from a civil complaint filed in the Circuit Court of Cook County, Illinois filed against Cerberus Capital Management,
LP, et al (“The Lawsuit”) VRHD agrees to pay consultant the first five million dollars ($5,000,000) of any proceeds
recovered through settlement or garnishment action(s) from The Lawsuit. Additionally VRHD will make commission payments to Consultant
based on 5% of the gross profit or selling price of all merchandise and products and contemplated services of VRHD created through
consultant’s business development efforts.

 

Statement of Sales. If requested, VRHD shall furnish Consultant a periodic statement showing sales made
to customers and all payments and other items credited to consultant during such period.

 

    	 	 	 

    	 

    

	4.		EXPENSE REIMBURSEMENT. Consultant shall pay all "out-of-pocket" expenses,
and shall not be entitled to reimbursement from VRHD, unless prior approval is granted by VRHD.

	5.		RENEWAL/TERM/TERMINATION. This agreement shall become effective on the date
stated above and shall remain in effect for a period of one (1) year(s) unless terminated for breach or as provided in this agreement.

This agreement may
be renewed or terminated through mutual agreement of Consultant and VRHD.

 

	6.		RELATIONSHIP OF PARTIES. It is understood by the parties that Consultant is
an independent contractor with respect to VRHD, and not an employee of VRHD. VRHD will not provide fringe benefits, including
health insurance benefits, paid vacation, or any other employee benefit, for the benefit of Consultant.

 

	7.		EMPLOYEES. Consultant's employees, if any, who perform services for VRHD under
this Agreement shall also be bound by the provisions of this Agreement.

 

	8.		INDEMNIFICATION. Consultant agrees to indemnify and hold VRHD harmless from
all claims, losses, expenses, fees including attorney fees, costs, and judgments that may be asserted against VRHD that result
from the acts or omissions of Consultant, Consultant's employees, if any, and Consultant's agents, with the exception of any executives
hired by VRHD on Consultant’s recommendation.

 

	9.		ASSIGNMENT. Consultant's obligations under this Agreement may not be assigned
or transferred to any other person, firm, or corporation without the prior written consent of VRHD.

 

	10.		CONFIDENTIALITY. VRHD recognizes that Consultant
may have access to trade secrets and other proprietary information (collectively, "Information"), which are valuable,
special and unique assets of VRHD Incorporated and need to be protected from improper disclosure. In consideration for the disclosure
of the Information, Consultant agrees that Consultant will not at any time or in any manner, either directly or indirectly, use
any Information for Consultant's own benefit, or divulge, disclose, or communicate in any manner any Information to any third
party without the prior written consent of VRHD. Consultant will protect the Information and treat it as strictly confidential.
A violation of this paragraph shall be a material violation of this Agreement.

 

	11.		UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Consultant has disclosed
(or has threatened to disclose) Information in violation of this Agreement, VRHD shall be entitled to an injunction to restrain
Consultant from disclosing, in whole or in part, such Information, or from providing any services to any party to whom such Information
has been disclosed or may be disclosed. VRHD shall not be prohibited by this provision from pursuing other remedies, including
a claim for losses and damages.

 

	12.		CONFIDENTIALITY AFTER TERMINATION. The confidentiality provisions of this Agreement
shall remain in full force and effect after the termination of this Agreement.

 

    	 	 	 

    	 

    

	13.		NON-COMPETE AGREEMENT. Recognizing that
the various items of information are special and unique assets of VRHD that need to be protected from disclosure, and in consideration
of the disclosure of the Information, Consultant agrees and covenants that for a period of 18 months following the termination
of this Agreement, whether such termination is voluntary or involuntary, Consultant will not directly or indirectly engage in
any business competitive with VRHD. This covenant shall apply to the geographical area that includes United States of America
and Canada. Directly or indirectly engaging in any competitive business includes, but is not limited to, (i) engaging in a business
as owner, partner, or agent, (ii) becoming an employee of any third party that is engaged in such business, or (iii) becoming
interested directly or indirectly in any such business, or (iv) soliciting any customer of VRHD for the benefit of a third party
that is engaged in such business. Consultant and VRHD agrees that this non-compete provision will not adversely affect the livelihood
of Consultant.

 

	14.		NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be deemed delivered when delivered in person or deposited in the United States mail, postage prepaid, addressed
as follows:

IF for VRHD:John E. Baker

1615
Chester Road

Chester Maryland 21619

IF for Consultant:Gregory Gennace

Schneider Mitigation Group 4002 University
Drive Fairfax, VA 22030

 

Either party may change
such address from time to time by providing written notice to the other in the manner set forth above.

 

	15.		ENTIRE AGREEMENT. This Agreement contains the
entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written.
This Agreement supersedes any prior written or oral agreements between the parties.

 

	16.		AMENDMENT. This Agreement may be modified or
amended if the amendment is made in writing and is signed by both parties.

 

	17.		SEVERABILITY. If any provision of this Agreement
shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable.
If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would
become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.

 

	18.		WAIVER OF CONTRACTUAL RIGHT. The failure of either
party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently
enforce and compel strict compliance with every provision of this Agreement.

Notarized signatures on the following
pages

    	 	 	 

    	 

    

 

Party receiving services: VR Holdings, Inc.

By:_____________________________________________

Controlling Shareholder: Morten M. Lapides,
Sr.

STATE
OF, CITY/COUNTY OF, ss.:

On this day, personally appeared before
me Morten M. Lapides, Sr., to me known to be the person(s) described in and who executed the within and foregoing instrument, and
acknowledged that he/she signed the same as his/her voluntary act and deed, for the uses and purposes therein mentioned.

Witness my hand and official seal hereto
affixed this

________day
of,.

Notary
Public in and for the State of_________________.

My commission
expires________________.

By:___________________

Chairman: John E. Baker

    	 	 	 

    	 

    

STATE
OF, CITY/COUNTY OF, ss.:

On this day, personally appeared before
me John E. Baker, to me known to be the person(s) described in and who executed the within and foregoing instrument, and acknowledged
that he/she signed the same as his/her voluntary act and deed, for the uses and purposes therein mentioned.

Witness my hand and official seal hereto
affixed this

______day
of,.

Notary
Public in and for the State of_________________.

My commission
expires________________.

Party
providing services:

SMGVA, LLC dba Schneider Mitigation Group

By:__________________________________________________

Consultant: William E. Schneider, Managing
Member

STATE
OF, CITY/COUNTY OF, ss:

On
this day, personally appeared before me William E. Schneider to me known to be the person(s) described in and who executed the
within and foregoing instrument, and acknowledged that he/she signed the same as his/her voluntary act and deed, for the uses and
purposes therein mentioned.

Witness my hand and official seal hereto
affixed this

______day
of, ________.

Notary
Public in and for the State of_________________.

My
commission expires________________.

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