Document:

EX-10(A)

 

EXHIBIT 10(a)

The provisions of the 2005 Restatement of the Applied Industrial Technologies, Inc. Deferred
Compensation Plan are subject to further amendment pursuant to expected guidance from the Internal
Revenue Service and the reserved amendment rights of the Company.

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

DEFERRED COMPENSATION PLAN

(2005 Restatement)

 

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

DEFERRED COMPENSATION PLAN

(2005 Restatement)

TABLE OF CONTENTS

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

i

 

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

ii

 

APPLIED INDUSTRIAL TECHNOLOGIES, INC.

DEFERRED COMPENSATION PLAN

(2005 Restatement)

     WHEREAS, effective as of July 1, 1993, Bearings, Inc., the predecessor plan sponsor of
Applied Industrial Technologies, Inc. (hereinafter referred to as the “Company”), established the
Bearings, Inc. Deferred Compensation Plan which is now known as the Applied Industrial
Technologies, Inc. Deferred Compensation Plan (hereinafter referred to as the “Plan”), to provide
key employees of the Company and its Affiliates with a means by which to defer receipt of all or a
portion of their incentive compensation received from the Company; and

     WHEREAS, in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended
(hereinafter referred to as “Section 409A”) and to facilitate administration of certain
nonqualified deferrals thereunder, the Plan is hereby bifurcated effective January 1, 2005; and

     WHEREAS, the Plan, as in effect on October 3, 2004 (hereinafter referred to as the “Frozen
Terms”), is hereby frozen and shall not be modified except as permitted under Section 409A so as to
preserve the grandfathered status of deferrals and related earnings thereunder; and

     WHEREAS, deferrals retained under the Frozen Terms shall be those employee deferrals earned
and vested as of December 31, 2004, as well as income attributable to such grandfathered deferrals;
and

     WHEREAS, the Plan, as amended and restated effective January 1, 2005, for compliance with
Section 409A shall constitute the “2005 Restatement”; and

     WHEREAS, deferrals earned or vested after December 31, 2004, and before the Plan was
bifurcated and amended have been made and administered in good faith in accordance with the
requirements of Section 409A; and

     WHEREAS, such non-grandfathered deferrals and related earnings have been transferred to, and
have become part of, accounts under the 2005 Restatement; and

     WHEREAS, deferrals of Participants for the Fiscal Year beginning July 1, 2007, and subsequent
Fiscal Years shall be made under the 2005 Restatement;

     NOW THEREFORE, effective January 1, 2005, the 2005 Restatement of the Plan is hereinafter set
forth.

 

 

ARTICLE I

DEFINITIONS

     1.1 Definitions. As used herein, the following words shall have the meanings
hereinafter set forth unless otherwise specifically provided.

     (1) The term “Affiliate” shall mean any member of a controlled group of
corporations (as determined under Section 414(b) of the Code) of which the
Company is a member and any member of a group of trades or business under
common control (as determined under Section 414(c) of the Code) with the
Company; any member of an affiliated service group (as determined under
Section 414(m) of the code) of which the Company is a member; and any other
entity which is required to be aggregated with the Company pursuant to the
provisions of Section 414(o) of the Code.

     (2) The term “Award” shall mean the aggregate benefit payable to a Plan
Participant under an Incentive Plan or a Performance Plan for a Fiscal Year.

     (3) The term “Beneficiary” shall mean the person or persons who, in
accordance with the provisions of Article V, is entitled to distribution
hereunder in the event a Participant dies before his interest under the Plan
has been distributed to him in full.

     (4) The term “Board” shall mean the Board of Directors of the Company.

     (5) The term “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time.

     (6) The term “Committee” shall mean the Executive Organization and
Compensation Committee of the Board, or such other committee of the Board
that is designated by the Board to administer the Plan. The Committee shall
be constituted so as to satisfy any applicable legal requirements including
the requirements of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 or any similar rule which may subsequently be in effect. The
members shall be appointed by, and serve at the pleasure of, the Board and
any vacancy on the Committee shall be filled by the Board.

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

 

 

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

     (9) The term “Comprehensive Plan” shall mean the Applied Industrial
Technologies, Inc. Comprehensive Deferred Compensation and Supplemental
Benefit Plan (formerly known as the Bearings, Inc. Comprehensive Deferred
Compensation and Supplemental Benefit Plan.)

     (10) The term “Deferral” shall mean that portion of an Award which a
Participant elects to defer pursuant to the terms of the Plan.

     (11) The term “Deferral Account” shall mean the bookkeeping account
established under the Plan in the name of each Participant to reflect the
Deferrals of such Participant.

     (12) The term “Eligible Employee” shall mean any highly compensated or
select management employee of the Company or an Affiliate who is designated
by the Committee to participate in an Incentive Plan or Performance Plan
with respect to a particular Fiscal Year.

     (13) The term “Fair Market Value” shall mean the average of the high
and low prices of a Common Share as reported on the composite tape for
securities listed on the New York Stock Exchange for the date in question,
provided that if no sales of Common Shares were made on said exchange on
that date, the average of the high and low prices of a Common Share as
reported on said composite tape for the nearest preceding day on which sales
of Common Shares were made on said Exchange.

     (14) The term “Fiscal Year” shall mean the fiscal year of the Company,
which begins on each July 1 and ends on the subsequent June 30.

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

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

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

 

 

     (18) The term “Participant” shall mean an Eligible Employee who elects
to defer all or any portion of an Award under the Plan pursuant to the
provisions of Article II.

     (19) The term “Performance-Based Compensation” shall mean compensation
that is not equity-based compensation and that is contingent on the
satisfaction of pre-established organizational or individual performance
criteria relating to a Fiscal Year performance period of at least twelve
(12) consecutive months in which Participants perform services. Performance
criteria shall be established in writing not later than ninety (90) days
after the commencement of the period of service to which the criteria
relate. Compensation shall not be Performance-Based Compensation if any
amount or portion will be paid regardless of performance or is based upon a
level of performance that is substantially certain to be met at the time the
criteria are established.

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

     (21) The term “Plan” shall mean The Applied Industrial Technologies,
Inc. Deferred Compensation Plan which, effective as of January 1, 2005,
shall consist of the Frozen Terms and the 2005 Restatement and which is part
of the Comprehensive Plan and listed on Exhibit A attached thereto.

     (22) The term “Section 409A” shall mean Section 409A of the Internal
Revenue Code of 1986, as amended, and the regulations and rulings
promulgated thereunder.

     (23) The term “Separation from Service” shall mean the termination of
employment of a Participant with the Company and all Affiliates for any
reason other than death; provided, however, that a Company-approved leave of
absence shall not be considered a termination of employment if the leave
does not exceed six (6) months or, if longer, so long as the Participant’s
right to reemployment is provided either by statute or by contract.
Notwithstanding the foregoing, whether or not a Participant has incurred a
Separation from Service shall be determined in accordance with Section 409A.

     (24) The term “Specified Employee” shall mean a “specified employee”
within the meaning of Section 409A.

     (25) The term “Trust” shall mean the trust maintained pursuant to the
terms of the Applied Industrial Technologies, Inc. Supplemental Executive
Retirement Benefits Trust Agreement.

 

 

     (26) The term “2005 Restatement” shall mean Applied Industrial
Technologies, Inc. Deferred Compensation Plan, as amended and restated
herein with respect to Deferrals earned or vested after December 31, 2004,
with all amendments, supplements, and modifications hereafter made.

     (27) The term “Valuation Date” shall mean the last day of each Fiscal
Year quarter and any other date as may be designated as such by the
Committee.

     1.2 Construction. Where necessary or appropriate to the meaning herein, the singular
shall be deemed to include the plural and the masculine pronoun to include the feminine.

 

 

ARTICLE II

ELECTIONS BY ELIGIBLE EMPLOYEES

     2.1 Election to Defer. As a condition of participation in the Plan, an Eligible
Employee must complete, sign, and return to the Committee a Deferral Election Form (including a
form in electronic, telephonic, or other format) (an “Election Form”) within the times permitted
hereunder for making elections. A Participant’s Election Form shall specify the amount or
percentage of an Award being deferred and the time and form of payment in accordance with Article
IV. The election to defer, including the election of the time and form of payment, shall be
irrevocable as of the dates specified in Section 2.2. Pursuant to Article IV, a Participant may
make a subsequent election to delay payment and change the form of payment of a Deferral. Under no
circumstances may any election to defer be made under the 2005 Restatement unless the Award to be
deferred is “fiscal year compensation.” For purposes of the 2005 Restatement, “fiscal year
compensation” means compensation relating to a period of service coextensive with one or more
Fiscal Years of the Company, of which no amount is paid or payable during the service period.

2.2 Time of Elections.

          (a) Non-Performance-Based Compensation. On or before each June 30 immediately
preceding the first Fiscal Year during which services giving rise to an Award that is not
Performance-Based Compensation will be performed, an Eligible Employee may elect to defer receipt
of all or a portion of such an Award that he may receive under an Incentive Plan or a Performance
Plan as a Deferral under the Plan. Such election shall be irrevocable, upon delivery of the
Election Form to the Committee, as of the end of such June 30 with respect to the Award for which
an election has been made.

 

 

          (b) Performance-Based Compensation. On or before each December 31 that is at least
six (6) months before the end of the performance period for an Award that is Performance-Based
Compensation, an Eligible Employee may elect to defer receipt of all or a portion of an Award of
Performance-Based Compensation that he may receive under an Incentive Plan or a Performance Plan as
a Deferral under the Plan; (i) provided that the Eligible Employee has continuously performed
services from a date no later than ninety (90) days after the commencement of the performance
period through a date no earlier than the date on which the deferral election is made, and (ii)
provided further that in no event shall such election be made after such Award has become both
substantially certain to be paid and readily ascertainable. Such election shall be irrevocable as
of the end of each December 31 with respect to the Award for which an election has been made.

          (c) New Hires and Promotions. In the first Fiscal Year in which an Eligible Employee
becomes eligible to participate in the Plan (taking into consideration eligibility under all other
nonqualified account balance plans of the Company and any Affiliate that are required to be
aggregated with the Plan under Section 409A in determining whether such Fiscal Year is in fact the
first year of eligibility), such Eligible Employee may make an initial deferral election within
thirty (30) days of becoming first eligible with respect to that portion of an Award that relates
to services to be performed subsequent to the election. Such an election shall be irrevocable.

     2.3 Special Transition Elections.

          (a) Changes in Payment Elections. During 2005, 2006, and 2007, a Participant may make
elections to receive payment of his Deferrals without complying with the requirements of Section
4.3; provided that such election(s) shall only be effective:

(i) If made in 2006, if it applies only to amounts that would not otherwise be
payable in 2006 and does not cause an amount to be paid in 2006 that would not
otherwise be payable in 2006; and

 

 

(ii) If made in 2007, if it applies only to amounts that would not otherwise be
payable in 2007 and does not cause an amount to be paid in 2007 that would not
otherwise be payable in 2007.

          (b) 2005 Deferral Elections. In accordance with Q&A-21 of Notice 2005 — 1 and Section
3.06 of Notice 2006-79, initial deferral elections for calendar year 2005 were permitted to be made
on or before March 15, 2005, with respect to amounts that were not paid or payable at the time of
such election.

     2.4 Other Election Provisions. Each deferral election shall indicate the allocation
of the Deferral to be deemed invested in the Funds. Subject to the provisions of Article IV and
Section 5.7, amounts deferred pursuant to any election hereunder shall be invested and distributed
in the manner and at the time set forth in such election.

 

 

ARTICLE III

ACCOUNTS AND INVESTMENTS

     3.1 Establishment and Crediting of Accounts. The Deferral Account of each
Participant shall have subaccounts, which shall reflect the Funds into which Deferrals are deemed
invested and credited pursuant to the applicable Election Form filed by the Participant with the
Committee. The crediting of any Deferral or portion thereof deemed to be invested in a Fund shall
be made to a Participant’s Deferral Account within thirty (30) days after the date on which the
Deferral would otherwise have been payable to the Participant under the applicable Incentive Plan
or Performance Plan, and Common Shares of a Fund so credited to a Deferral Account shall be valued
at Fair Market Value. Notwithstanding any other provision to the contrary, the number of Common
Shares comprising a Fund in which Deferrals made on and after October 21, 2003 under Section 3.2
are deemed invested shall be limited to 1,800,000 (adjusted accordingly, however, for stock splits
occurring after said date), until subsequent approval by shareholders.

     3.2 Amount of Deferrals.

          (a) Prior to July 1, 2007. Effective for Awards related to Fiscal Years beginning
before July 1, 2007, if a Participant (i) elects to have less than 50% of any Award from an
Incentive Plan deferred under the Plan as a Deferral, or (ii) elects to have any stock portion of
an Award from a Performance Plan deferred under the Plan as a Deferral, 100% of the amount of such
Deferral shall be credited to his Deferral Account and subaccounts in accordance with his duly
filed Election Form. Effective for Awards related to Fiscal Years beginning before July 1, 2007,
if a Participant (i) elects to have at least 50% of an Award from an Incentive Plan deferred under
the Plan as a Deferral and further elects to have at least 50% of such Award deemed to be invested
in a Fund comprised of Common Shares, or (ii) elects to have any cash portion of an Award from a
Performance Plan deferred under the Plan as a Deferral and further elects to have any portion of
such Award deemed to be invested in a Fund comprised of Common Shares, 110% of the amount of such

 

 

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 equal annual installments over a period of not more
than ten (10) years as specified in such Participant’s Election Form.

     4.2 Time of Payments. As permitted by the Committee in accordance with Section 409A,
a Participant shall specify on his Election Form an objectively determinable payment date, which
may include attainment of a specific age or Separation from Service, at the time he defers an
Award. Except as otherwise provided in this Article IV, distribution of the value of a Deferral
(and related earnings and losses) from a Participant’s Deferral Account with respect to a
particular Award shall commence within sixty (60) days of the date specified for commencement in
his applicable Election Form. Notwithstanding any other provision of the Plan to the contrary, a
distribution payable, as determined by the Committee in accordance with Section 409A, to a
Specified Employee upon a Separation from Service shall not be distributed, or begin to be
distributed, until the first day of the seventh month following his Separation from Service. The
amount of the first payment shall include the accumulated amount of the payments, if any, that
would otherwise have been made during the first six months but for the fact that the Participant is
a Specified Employee.

     4.3 Changing Time or Form of Payments. A Participant may elect to delay payment or to
change the form of payment if all the following conditions are met:

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

 

 

     (ii) The payment with respect to which such election is made is deferred for a
period of not less than five (5) years from the date such payment would otherwise be
made; and

     (iii) Any election for a “specified time (or pursuant to a fixed schedule)”
within the meaning of Section 409A(a)(2)(A)(iv) of the Code, may not be made less
than twelve (12) months prior to the date of the first scheduled payment.

To the extent permitted under Section 409A, installment payments shall be treated as a single
payment.

     4.4 No Acceleration. Except as permitted under Section 409A, no acceleration of the
time or form of payment of a Participant’s Deferral Account shall be permitted.

     4.5 Emergency Distribution. Upon the written request of a Participant and the showing
of an Unforeseeable Emergency, the Committee may, upon its determination that such an emergency
exists, direct that an amount of such Participant’s Deferral Account be paid to him. The amount
that can be paid shall not exceed the amount necessary to satisfy the Unforeseeable Emergency, plus
an amount necessary to pay taxes reasonably anticipated because of such distribution, after taking
into account the extent to which such emergency is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent
the liquidation would not itself cause severe financial hardship). Payment shall be made within 30
days of the Committee’s determination that an Unforeseeable Emergency exists. For purposes of this
Section 4.5, an Unforeseeable Emergency shall mean a severe financial hardship of the Participant
resulting from an illness or accident of the Participant, the Participant’s spouse, or the
Participant’s dependent (as defined in Section 152(a) of the Code); loss of the Participant’s
property due to casualty (including the need to rebuild a home following damage to the home by
natural disaster not otherwise covered by

 

 

insurance), or other similar or extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of the Participant.

     4.6 Distribution Upon Death. In the event that a Participant dies prior to
commencement of payments or while receiving payments under the 2005 Restatement, the Company shall
pay his
Beneficiary the remainder of his Deferral Account under the 2005 Restatement in a single sum within
60 days of the Participant’s death. The Company shall provide Participants with the form for
designating his Beneficiary. A Participant may change his Beneficiary designation at any time
(without the prior consent of any prior beneficiary) by executing a revised Beneficiary designation
form and delivering it to the Company before his death. If no Beneficiary is designated or if the
Beneficiary predeceases the Participant or cannot be located, the Participant’s Deferral Account
shall be paid to the Participant’s estate.

     4.7 Taxes. In the event any taxes are required by law to be withheld or paid from any
Deferrals or payments under the Plan, the Committee shall cause such amounts to be withheld from
other income or from such payments and shall transmit the withheld amounts to the appropriate
taxing authority.

 

 

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 2005 Restatement, and the interpretation and
construction thereof and actions thereunder by the Board or the Committee, including any valuation
of a Participant’s Deferral Account and the amount or recipient of the payments to be made from
such Deferral Account, shall be binding and conclusive on all persons for all purposes. No member
of the Board and no designee shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of the Plan.

     5.9 Claims Procedures. Generally benefits shall be paid under the 2005 Restatement
without the necessity of filing a claim. An Eligible Employee, Participant, Beneficiary, or other
person who believes he is entitled to a benefit under the 2005 Restatement (hereinafter referred to
as the “Claimant”) may file a written claim with the Company. A claim must state with specificity
the determination desired by the Claimant.

     The Company shall consider the Claimant’s claim within a reasonable time, but no later than 90
days of receipt of the claim. If the Company determines that special circumstances require an
extension of time for processing the claim, the Company shall notify the Claimant in writing of the
extension before the end of the initial 90-day period and the written notice shall indicate the
special circumstances requiring an extension of time and the date by which the Company expects to
make a decision. The extension of time shall not exceed 90 days from the end of the initial 90-day
period.

 

 

     The Company shall notify the Claimant (in writing or electronically) that a determination has
been made and that the claim is either allowed in full or denied in whole or in part. If the claim
is denied in whole or in part, the Company shall notify (in writing or electronically) such
Claimant or an authorized representative of the Claimant, as applicable, of any adverse benefit
determination within 90 days of
receipt of the claim. Any adverse benefit determination notice shall describe the specific reason
or reasons for the denial, refer to the specific Plan provisions on which the determination was
based, describe any additional material or information necessary for the Claimant to perfect his
claim and explain why that material or information is necessary, describe the Plan’s review
procedures and the time limits applicable to those procedures, including a statement of the
Claimant’s right to bring a civil action under ERISA Section 502(a) following a denial upon review.
If the notification is made electronically, it must comply with applicable Department of Labor
Regulations.

     Upon receipt of an adverse benefit determination, a Claimant may, within 60 days after
receiving notification of that determination, submit a written request asking the Board to review
the Claimant’s claim. Each Claimant, when making his request for review of his adverse benefit
determination, shall have the opportunity to submit written comments, documents, records, and any
other information relating to the claim for benefits. Each Claimant shall also be provided, upon
request and free of charge, reasonable access to, and copies of, all documents, records, and other
information relevant to such Claimant’s claim for benefits. The review shall take into account all
comments, documents, records, and other information submitted by the Claimant relating to the
claim, regardless of whether the information was submitted or considered in the initial benefit
determination. If a Claimant does not submit his request for review in writing within the 60-day
period described above, his claim shall be deemed to have been conclusively determined for all
purposes of the Plan and the adverse benefit determination will be deemed to be correct.

 

 

     If the Claimant submits in writing a request for review of the adverse benefit determination
within the 60-day period described above, the Board (or its designee) shall notify (in writing or
electronically) him of its determination on review within a reasonable period of time but not later
than 60 days from the date of receipt of his request for review, unless the Board (or its designee)
determines that special circumstances require an extension of time. If the Board (or its designee)
determines that an extension of time for processing a Claimant’s request for review is required,
the Board (or its designee) shall notify him in writing before the end of the initial 60-day period
and inform him of the special circumstances
requiring an extension of time and the date by which the Board (or its designee) expects to render
its determination on review. The extension of time will not exceed 60 days from the end of the
initial 60-day period.

     If the Board (or its designee) confirms the adverse benefit determination upon review, the
notification will describe the specific reason or reasons for the adverse determination, refer to
the specific Plan provisions on which the benefit determination is based, include a statement that
the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records, and other information relevant to the Claimant’s claim and
include a statement describing the Claimant’s right to bring an action under ERISA Section 502(a),
and any other required information under applicable Department of Labor Regulations. The claims
procedure described above shall be administered in a manner not inconsistent with ERISA Section 503
and applicable Department of Labor Regulations.

     A Claimant’s compliance with the foregoing claims procedures shall be a mandatory prerequisite
to the Claimant’s right to commence any legal action with respect to any claim for benefits under
the Plan.

     5.10 Section 409A Amendments. Notwithstanding any provision to the contrary in the
2005 Restatement, nothing shall restrict the Company’s right to amend the Plan, the 2005
Restatement, the Frozen Terms, any deferral agreement, and/or any deferral Election Form, without
the consent of Participants and without additional consideration to affected Participants,

 

 

to the
extent necessary to avoid taxation, penalties, and/or interest arising under Section 409A, even if
such amendments reduce, restrict, or eliminate rights granted thereunder before such amendments.
Although the Company shall use its best efforts to avoid the imposition of taxation, penalties,
and/or interest under Section 409A, tax treatment of deferrals and other credits under the Plan
(whether the Frozen Terms or the 2005 Restatement) is not warranted or guaranteed. The Company,
the Board, any Affiliate, or any delegatee shall not be held liable for any taxes, penalties,
interest, or other monetary amounts owed by any Participant, Eligible Employee, Beneficiary, or
other person as a result of the deferral or payment of any
amounts under the Plan (whether the Frozen Terms or the 2005 Restatement) or as a result of the
administration of amounts subject to the Plan (whether the Frozen Terms or the 2005 Restatement).

     5.11 Severability. The invalidity or unenforceability of any particular provision of
the Plan shall not affect any other provision hereof, and the Plan shall be construed in all
respects as if such invalid or unenforceable provision were omitted herefrom.

     5.12 Governing Law. The provisions of the Plan shall be governed and construed in
accordance with the laws of the State of Ohio, without regard to its conflict or choice of law
principles.

     Executed at Cleveland, Ohio, this 5th day of April, 2007.

	 	 	 	 	 
	 	APPLIED INDUSTRIAL TECHNOLOGIES, INC. 

 	 
	 	By:  	D. L. Pugh
 	 
	 	 	Title:  Chairman & CEOEX-10(B)

 

	 	 	 	 	 

EXHIBIT 10(b)

RESTRICTED STOCK AWARD TERMS

          1. Award of Restricted Stock. The Executive Organization & Compensation Committee (the
“Committee”) of the Board of Directors of Applied Industrial Technologies, Inc. (“Applied”) has
awarded you shares of Applied common stock, which shares are subject to the restrictions, terms,
and conditions and to the risk of forfeiture set forth in the 1997 Long-Term Performance Plan (the
“Plan”), in these terms, and in policies that may be adopted from time to time by the Committee.

          2. Rights During Restriction Period. Until the expiration of the corresponding Restriction
Period (as defined in Section 3 hereof), the shares shall be subject to forfeiture and Applied’s
Treasurer or his designee will hold the certificate representing the shares. During the
Restriction Period, you will not have the right to sell, exchange, transfer, pledge, hypothecate,
or otherwise dispose of forfeitable shares. Notwithstanding any restrictions or risks of
forfeiture, during the Restriction Period and so long as no forfeiture has occurred, you shall be
entitled to receive dividends attributable to the shares and to exercise all voting rights.

          3. Restriction Period. The term “Restriction Period” means the period during which shares
are subject to forfeiture. In each case assuming that you have remained continuously a member of
Applied’s Board of Directors since the grant date, the Restriction Period will expire with respect
to the shares on the earlier of (a) the first anniversary of the grant date, and (b) the expiration
of your term as a director if you do not thereafter remain in office.

          Subject to the terms hereof, after the Restriction Period expires, the corresponding shares
will no longer be subject to forfeiture and Applied shall release to you the certificate
representing the non-forfeitable shares.

          4. Payment of Taxes. Upon vesting of the shares, you must take such actions (if any),
including the payment of cash and/or stock, as Applied deems necessary pursuant to federal, state
or local tax laws, including withholding requirements.

          5. Change in Control. Notwithstanding Section 3, upon the occurrence of any Change in
Control (as defined from time to time in the Plan), the Restriction Period shall be deemed to have
expired with respect to all of the remaining forfeitable shares and those shares shall no longer be
subject to forfeiture.

          6. Death or Disability. If you cease to be a director of Applied due to death or disability
prior to the expiration of the Restriction Period, the Restriction Period shall be deemed to have
expired with respect to all of the remaining forfeitable shares and those shares shall no longer be
subject to forfeiture.

 

 

          7. Other Terminations. If you cease to be a director of Applied during the Restriction
Period for any reason other than those specifically set forth in Sections 5 and 6 above, you shall,
for no consideration, forfeit to Applied, and have no further interest in, all of the remaining
forfeitable shares.

          8. Adjustment of Shares for Certain Events. In the event of a stock split, stock dividend,
combination, reclassification, recapitalization, merger, consolidation, exchange, spin-off,
spin-out, or other distribution of assets to shareholders, or other similar event or change in
capitalization such that shares of Applied common stock are changed into or become exchangeable for
a different number of shares, thereafter the number of shares shall be increased or decreased, as
the case may be, in direct proportion to the increase or decrease in the number of shares of common
stock by reason of such change in corporate structure; provided, however, that the number of shares
shall always be a whole number. If there occurs any other change in the number or kind of
outstanding shares of common stock or other Applied securities, or of any shares of stock or other
securities into which such shares of common stock shall have been changed or for which they shall
have been exchanged, then Applied may adjust the number or kind of shares of stock or other
securities granted hereunder, as the Committee, in its sole discretion, may determine is equitable,
and such adjustment so made shall be effective and binding for all purposes.

          9. Securities Laws Requirements. The Restriction Period shall not be deemed to expire if
such lapse of restrictions would violate:

	 	(a)	 	any applicable state securities law;
	 
	 	(b)	 	any applicable registration or other requirements under the
Securities Act of 1933, as amended (the “Securities Act”), the Securities
Exchange Act of 1934, as amended, or the listing requirements of any exchange
on which the shares are traded; or
	 
	 	(c)	 	any similar legal requirement of any governmental authority
regulating the Applied’s issuance of shares.

     Applied may require you to represent and warrant to Applied that at the grant date and at the
expiration of the Restriction Period, it is your intention to acquire the common stock for your own
account for investment only and not with a view to, or for resale in connection with, the
distribution thereof other than in a transaction that does not require registration under the
Securities Act (which may, but will not be required to, be conclusively determined for the purposes
of these terms based on written advice of counsel for Applied or you); that you understand the
shares may be “restricted securities” as defined in Rule 144 of the Securities and Exchange
Commission; and that any resale, transfer or other disposition of the shares will be accomplished
only in compliance with Rule 144, the Securities Act, or other or subsequent rules and regulations
thereunder. In such circumstances except as otherwise
provided herein, Applied may place on the stock certificate(s) a legend reflecting such
commitment and Applied may refuse to permit transfer of such certificates until it has been
furnished evidence satisfactory to it that no violation of the Securities Act or the rules and
regulations thereunder would be involved in such transfer.

 

 

          10. Administration of the Plan. The Committee shall have conclusive authority, subject to
the express provisions of the Plan as in effect from time to time and these terms, to construe
these terms and the Plan, and to establish, amend, and rescind rules and regulations for the Plan’s
administration. The Committee may correct any defect or supply any omission or reconcile any
inconsistency in these terms in the manner and to the extent it shall deem expedient to carry the
Plan into effect, and it shall be the sole and final judge of such expediency. Applied’s Board of
Directors may from time to time grant to the Committee such further powers and authority as the
Board shall determine to be necessary or desirable. Notwithstanding any other provision of these
terms, any amendment, construction, establishment, rescission or correction of the type referred to
above which is made or adopted following a Change in Control, and which amendment, construction,
establishment or correction adversely affects your rights hereunder, shall be in writing and shall
be effective only with your express and prior written consent.

          11. Relationship to the Plan. This Agreement is subject to the terms of the Plan and any
administrative policies adopted by the Committee. If there is any inconsistency between these
terms and the Plan or such policies, the Plan and the policies, in that order, shall govern.
References in these terms to Applied shall include Applied’s subsidiaries.

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