APPLIED INDUSTRIAL TECHNOLOGIES,
INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS PLAN
(Restated Post-2004 Terms)
WHEREAS , the Applied Industrial Technologies, Inc.
Supplemental Executive Retirement Benefits Plan (formerly known as
the Bearings, Inc. Supplemental Executive Retirement Benefits Plan
and hereinafter referred to as the “Plan”) was
established on January 21, 1988, by Bearings, Inc., the
predecessor to Applied Industrial Technologies, Inc. (hereinafter
referred to as the “Company”) for the benefit of
certain officers and key executives; and
WHEREAS , the Plan was most recently restated as of
January 1, 2002 and amended subsequently on August 6,
2004; 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 the
administration of certain nonqualified deferrals thereunder, the
Plan is hereby bifurcated effective January 1, 2005, into two
parts; namely, one part that consists of the Plan, as in effect on
October 3, 2004, which is hereby frozen and shall not be
modified except as permitted under Section 409A so as to
preserve the grandfathered status of vested benefits thereunder
(hereinafter referred to as the “Frozen Terms”), and
the second part that consists of the post-2004 terms of the Plan,
as amended effective January 1, 2005, for compliance with
Section 409A (hereinafter referred to as the “Post-2004
Terms”); and
WHEREAS, Plan benefits accrued or vested after
December 31, 2004, and prior to the Plan bifurcation, have
been administered in good faith in accordance with the requirements
of Section 409A; and
WHEREAS, the Post-2004 Terms were adopted effective as of
January 1, 2005; and
WHEREAS, it has been deemed appropriate to make certain
revisions to such Post-2004 Terms;
NOW THEREFORE, effective as of January 1, 2005, the
Post-2004 Terms of the Plan are hereby restated as hereinafter set
forth.
1.1 Definitions . For purposes of the Plan, each of the following
words and phrases shall have the meaning hereinafter set forth
unless a different meaning is clearly required by the
context:
(1) The term “Accrued
Portion” of a Participant’s supplemental normal
retirement benefit determined as of any given date occurring prior
to his Normal Retirement Date shall mean the amount of such
Participant’s supplemental normal retirement benefit
determined pursuant to the provisions of Section 3.2, based
upon his Highest Monthly Final Average Compensation and years of
Service on such date.
(2) 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; any member of a group of trades or businesses 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.
(3) The term “Affiliated
Group” shall mean the group of entities which are
Affiliates.
(4) The term
“Beneficiary” shall mean the person or persons
designated by a Participant to receive a death benefit under the
Plan pursuant to the provisions of Article IX.
(5) The term “Board”
shall mean the Board of Directors of the Company.
(6) The term “Cause”
shall mean (i) the conviction of, or pleading guilty by, a
Participant to a felony or a misdemeanor involving moral turpitude;
(ii) the commission of an act of fraud, dishonesty or theft,
or (iii) the commission of any other intentional act (or
failure to act) which is not in the best interests of the Company,
specifically including, but not limited to, those actions (or
failures) which the Company has previously notified the Participant
in writing are contrary to the best interests of the
Company.
(7) The term “Change of
Control” shall mean a change in the ownership or
effective control of the Company or a change in the ownership of a
substantial portion of the assets of the Company that constitutes a
“change in control” under Section 409A.
(8) The term “Code”
shall mean the Internal Revenue Code of 1986, as amended from time
to time. Reference to a section of the Code shall include such
section and any comparable section or sections of any future
legislation that amends, supplements, or supersedes such
section.
(9) The term “Committee”
shall mean the Executive Organization & Compensation Committee
of the Board.
(10) The term “Company”
shall mean Applied Industrial Technologies, Inc., its corporate
successors, and the surviving corporation resulting from any merger
of Applied Industrial Technologies, Inc. with any other corporation
or corporations.
(11) The term
“Compensation” shall mean the total wages which
are paid to or on behalf of a Participant during a calendar year by
an Affiliate for services rendered as a common law employee,
including base salary, annual incentive compensation, commissions,
bonuses, any base salary and annual incentive amounts deferred
under any non-qualified deferred compensation program of an
Affiliate, and any elective contributions that are made on behalf
of such Participant under any plan maintained by an Affiliate and
that are not includible in gross income under Section 125,
129, or 402(e)(3) of the Code, but excluding moving or educational
reimbursement expenses, amounts realized from the exercise of stock
options, any long term incentive compensation including, but not
limited to, restricted stock, performance grants and stock
appreciation rights, severance benefits, and imputed income
attributable to any fringe benefit.
(12) The term “Comprehensive
Plan” shall mean the Applied Industrial Technologies,
Inc. Deferred Compensation and Supplemental Benefit Plan (formerly
known as the Bearings, Inc. Comprehensive Deferred Compensation and
Supplemental Benefit Plan).
(13) The term
“Disability” or “Disabled”
shall mean a condition of a Participant that meets the requirements
of Section 409A Disability or Own Occ Disability.
(14) The term “Election
Form” shall mean the form which may be electronic,
telephonic or hard copy and on which a Participant elects the time
and manner of payment of his Plan benefits in accordance with the
provisions of the Post-2004 Terms and Section 409A.
(15) The term “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to a section of ERISA shall
include such section and any comparable section or sections of any
future legislation that amends, supplements, or supersedes such
action.
(16) The term “Executive
Officer” shall mean an officer of the Company as defined
by Rule 3b-7 of the Securities Exchange Act of 1934, as
amended.
(17) The term “ Former Employer
Plan ” shall mean any defined benefit plan, program or
arrangement (qualified or non-qualified) maintained by a former
employer of a Participant and pursuant to which a Participant is,
or ever was, eligible to receive retirement income.
(18) The term “Frozen
Benefit” shall mean the Accrued Portion of the
supplemental normal retirement benefit of a Participant who had
attained age 55 and was credited with at least ten years of Service
as of December 31, 2004, determined under the provisions of
the Frozen Terms on such date.
(19) The term “Frozen
Terms” shall mean the terms of the Plan as in effect on
October 3, 2004.
(20) The term “Highest Monthly
Final Average Compensation” shall mean 1/12th of the
average of the Compensation of a Participant for any three calendar
years during the last ten calendar years of his employment with the
Affiliated Group in which the Participant had the greatest
Compensation; provided, however, that if a Participant did not
receive Compensation for at least three calendar years, his Highest
Monthly Final Average Compensation shall be determined by dividing
his average Compensation for the calendar years in which he was
employed by the Affiliated Group by 12.
(21) The term “Normal Retirement
Date” shall mean the date on which a Participant attains
65 years of age.
(22) The term “Own Occ
Disability” shall mean the incapacity of a Participant
due to any physical or mental condition that is incurred while an
Executive Officer and that results in the Participant being unable
to perform the duties of his most recent position with the
Affiliated Group and thereafter shall mean such continued
incapacity so that the Participant is prevented from resuming the
duties and responsibilities of his most recent position with the
Affiliated Group or from obtaining a comparable position with
another employer.
(23) The term
“Participant” shall mean, for purposes of the
Post-2004 Terms, an Executive Officer who is designated to
participate in the Plan pursuant to the provisions of
Article II of the Plan.
(24) The term “Plan”
shall mean the Applied Industrial Technologies, Inc. Supplemental
Executive Retirement Benefits Plan which, effective as of
January 1, 2005, shall consist of the Frozen Terms and the
Post-2004 Terms, and which is part of the Comprehensive Plan and
listed on Exhibit A attached thereto. The Frozen Terms shall
be determinative solely with respect to Frozen Benefits and the
payment thereof. The Post-2004 Terms shall govern all other
provisions of the Plan, including Plan benefits accrued or vested
on and after January 1, 2005.
(25) The term “Post-2004
Terms” shall mean the part of the bifurcated Plan that
contains the provisions of the Plan effective as of January 1,
2005 to comply with Section 409A as set forth herein and as
may be amended after such date from time to time.
(26) The term “Primary Social
Security Benefit” shall mean the monthly benefit which a
Participant would be entitled to receive as a primary insurance
amount under the U.S. Social Security Act, as amended, and in
effect (and at the rate in effect) on the January 1 coincident with
or next preceding the date his Service under the Plan ceases
(regardless of any retroactive changes made by legislation enacted
after said January 1) under the assumptions described below
(whether he applies for such benefit or not, and even though he may
lose part or all of such benefit for any reason). The amount of
said Primary Social Security Benefit shall be estimated and
computed by the Company for the purposes of the Plan on the
assumption that such Participant shall have no further employment
or Compensation after the date his Service under the Plan ceases
and that his benefit commences at the later of his 62nd birthday or
the date his Service under the Plan ceases.
(27) The term
“Section 409A” shall mean Section 409A
of the Code and the Treasury regulations and rulings
thereunder.
(28) The term “Section 409A
Disability” shall mean a condition of a Participant that
constitutes a “disability” under Section 409A,
including a determination by the Social Security Administration
that such Participant is totally disabled.
(29) The term “Separation from
Service” shall mean the termination of the employment of
a Participant with the Company and all Affiliates for any reason
other than death; provided, however, that a Company-approved leave
of absence shall not be considered a termination of employment if
the leave does not exceed six months, or if longer, so long as the
Participant’s right to reemployment is provided either by
statute or by contract. Notwithstanding the foregoing, whether a
Participant has incurred a Separation from Service shall be
determined in accordance with the provisions of
Section 409A.
(30) The term “Service”
shall mean the aggregate period of time that a Participant is
employed as a common law employee by the Company and any Affiliate
or for which he is given credit pursuant to the provisions of
Section 2.2.
(31) The term “Specified
Employee” shall mean a key employee of the Company who is
a specified employee under Section 409A and the
Company’s Specified Employee identification
policy.
1.2 Construction .
Where necessary or appropriate to
the meaning hereof, the singular shall be deemed to include the
plural, the plural to include the singular, the masculine to
include the feminine, and the feminine to include the
masculine.
2.1 Participants .
Each Executive Officer of the
Company who was participating in the Plan under the Frozen Terms as
of December 31, 2004, and who continues to be an active
Executive Officer of the Company shall continue to be a Participant
in the Plan under the Post-2004 Terms as of January 1, 2005.
Any Executive Officer of the Company who was not participating in
the Plan under the Frozen Terms as of December 31, 2004, and
who becomes an Executive Officer of the Company on or after
January 1, 2005, and who is designated as a Participant
pursuant to the provisions of Section 2.2, shall become a
Participant in the Plan under the Post-2004 Terms as of the date of
such designation. Each Executive Officer shall be considered a
Specified Employee and shall be subject to the rules relating to
Specified Employees under Section 409A.
2.2 Designation of Participants
. The designation of an
Executive Officer of the Company as a Participant shall be made by
action of the Board or the Committee. In addition, the Board or the
Committee may award Service credit, not in excess of five years, to
any Executive Officer of the Company at the time of such
designation.
SUPPLEMENTAL NORMAL RETIREMENT
BENEFITS
3.1 Eligibility . Any Participant, who incurs a Separation from
Service on or after his Normal Retirement Date and who is credited
with at least five years of Service as an Executive Officer, shall
be eligible to receive a supplemental normal retirement benefit
determined in accordance with the provisions of
Section 3.2.
3.2 Amount . Subject to the provisions of Article VIII
and except as specifically provided otherwise in this
Section 3.2, the supplemental normal retirement benefit of an
eligible Participant shall be equal to 45 percent of his
Highest Monthly Final Average Compensation, reduced by 1/20th for
each full year that his years of Service are less than 20 and
further reduced by his Frozen Benefit, if any, as well as the
actuarial equivalency of any supplemental awards paid to a
Participant under the Applied Industrial Technologies, Inc. Vice
President Supplemental Incentive Plan, as may be amended, or any
successor thereto. Notwithstanding the foregoing, except as
provided in Article VIII, in the event that D. L. Pugh is
credited with at least 10 years of Service under the Plan,
including Service credited in the event of a Change of Control
under Article VIII, his supplemental normal retirement benefit
shall be equal to 60 percent of his Highest Monthly Final
Average Compensation reduced by the monthly benefit payable to him
at age 65 in a single life form under all Former Employer Plans and
then reduced further by 50 percent of his monthly Primary
Social Security Benefit.
3.3 Payment . Subject to the provisions of Article VIII,
the payment of the supplemental normal retirement benefit
determined under the provisions of Section 3.2 to an eligible
Participant shall be made pursuant to the provisions of
Article VII.
SUPPLEMENTAL EARLY RETIREMENT
BENEFITS
4.1 Eligibility . Any Participant, who incurs a Separation from
Service prior to his Normal Retirement Date, but after
(i) attaining age 55, (ii) being credited with at least
10 years of Service and (iii) being credited with at
least five years of Service as an Executive Officer, shall be
eligible to receive a supplemental early retirement benefit
determined in accordance with the provisions of
Section 4.2.
4.2 Amount . The supplemental early retirement benefit
payable to an eligible Participant shall be equal to the Accrued
Portion of his monthly supplemental normal retirement benefit
determined in accordance with the provisions of Section 3.2 on
the date of his Separation from Service, reduced by .4166% for each
full month that actual commencement of such benefit precedes his
Normal Retirement Date. Therefore, in the event that the payment of
any supplemental early retirement benefit is delayed in order to
comply with the six-month delay rule applicable to a Participant
who is a Specified Employee, the amount of such benefit shall be
determined hereunder using the date on which the delayed benefit
begins to be paid to such Participant.
4.3 Payment . Subject to the provisions of Article VIII,
the payment of a supplemental early retirement benefit determined
under the provisions of Section 4.2 shall be made to an
eligible Participant pursuant to the provisions of
Article VII.
SUPPLEMENTAL DISABILITY
BENEFITS
5.1 Eligibility . Any Participant who incurs a Separation from
Service due to Disability after being credited with at least five
years of Service as an Executive Officer, shall be eligible to
receive a monthly supplemental disability benefit determined in
accordance with the provisions of Section 5.2.
5.2 Amount . The monthly supplemental disability benefit of
an eligible Disabled Participant shall be an amount which when
added to any long term disability benefits payable to such
Participant under any other plan or program maintained by an
Affiliate (regardless of the source of contributions and converted,
if necessary, into a monthly benefit for purposes hereunder) equals
60% of such Disabled Participant’s Highest Monthly Final
Average Compensation.
5.3 Payment . Subject to the provisions of Section 5.4
and Article VIII, a monthly supplemental disability benefit
shall be paid to an eligible Disabled Participant who incurs a
Section 409A Disability commencing 180 days after the
onset of a Participant’s Disability and shall be payable
monthly thereafter until the earlier of (i) the
Participant’s Normal Retirement Date, or (ii) the
Participant’s death. Subject to the provisions of
Section 5.4 and Article VIII, a monthly supplemental
disability benefit shall be paid to an eligible Disabled
Participant who incurs an Own Occ Disability (but not a
Section 409A Disability) as of the first day of the seventh
month following such Participant’s Separation from Service
due to Disability; provided, however, that if any payments to which
the Participant would have been entitled during the first six
months following the date of his Separation from Service, if he had
a Section 409A Disability shall be accumulated and paid to
such Participant on the first day of the seventh month following
his Separation from Service. Upon attaining Normal Retirement Date,
any such Disabled Participant shall be entitled to receive a
supplemental normal retirement benefit determined in accordance
with the provisions of Section 3.2, based upon his years of
Service and Highest Monthly Final Average Compensation as of the
time of his Separation from Service due to his Disability, and
payable in accordance with the provisions of
Section 3.3.
5.4 Termination and Adjustment of
Supplemental Disability Benefits . Monthly supplemental disability benefits being
paid to a Participant shall terminate, if prior to the
Participant’s Normal Retirement Date, such Participant no
longer has an Own OCC Disability. In addition, monthly supplemental
disability benefits being paid to a Participant shall be reduced in
the manner set forth below, if prior to the Participant’s
Normal Retirement Date, such Participant engages in regular gainful
employment and earns income.
(a) Determine Loss of Income by subtracting
the monthly income earned by the Participant from the
Participant’s Highest Monthly Final Average Compensation used
under Section 5.2.
(b) Determine the percentage of such Loss
of Income by dividing the amount calculated in (a) above by the
Participant’s Highest Monthly Final Average
Compensation.
(c) Determine the amount of the reduced
supplemental disability benefit as follows:
|
|
|
|
|
Percentage of Loss of
Income
|
|
Supplemental Disability
Benefit
|
|
[(b) above]
|
|
[(c) above]
|
|
|
|
|
|
|
|
Section 5.2 Benefit
|
|
|
|
|
|
|
|
Section 5.2 Benefit times Percentage of
Loss of Income
|
|
|
|
|
|
|
|
— $0
&mda
|
|
