APPLIED INDUSTRIAL TECHNOLOGIES,
INC.
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(Post-2004 Terms)
WHEREAS, the Applied Industrial Technologies, Inc.
Deferred Compensation Plan for Non-Employee Directors (formerly
known as the Bearings, Inc. Deferred Compensation Plan for
Non-Employee Directors and hereinafter referred to as the
“Plan”) was established effective as of July 1,
1991, by Bearings, Inc., the predecessor to Applied Industrial
Technologies, Inc. (hereinafter referred to as the
“Company”) to provide non-employee members of the Board
of Directors of the Company (hereinafter referred to as
“Directors”) with a means by which to defer receipt of
all or a portion of the compensation payable to them for their
services as Directors; and
WHEREAS , the Plan was most recently restated as of
September 1, 2003; and
WHEREAS, in order to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (hereinafter referred to
as “Section 409A”) and to facilitate
administration of certain nonqualified deferrals thereunder, the
Plan is hereby bifurcated effective January 1, 2005, into two
parts; namely, one part consists of the Plan, as in effect on
October 3, 2004 (hereinafter referred to as the “Frozen
Terms”), and which is 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 the second part which 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, deferrals earned or vested after
December 31, 2004, and before the Plan was bifurcated and
amended have been made and administered in good faith in accordance
with the requirements of Section 409A;
NOW, THEREFORE, effective January 1, 2005, the Post-2004
Terms of the Plan are hereinafter set forth.
1.1 Definitions . As used herein, the following words shall have
the meanings hereinafter set forth unless otherwise specifically
provided.
(1) 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.
(2) The term “ Board ”
shall mean the Board of Directors of the Company.
(3) The term “Change in
Control” shall mean a change in the ownership or
effective control of the Company or a change in the ownership of a
substantial portion of the assets of the Company that constitutes a
“change in control” under Section 409A.
(4) 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.
(5) The term “ Committee
” shall mean the Corporate Governance 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.
(6) The term “ Common Shares
” shall mean the common stock of the Company.
(7) The term “ Company ”
shall mean Applied Industrial Technologies, Inc., its corporate
successors, and any corporation into or with which it is merged or
consolidated.
(8) The term
“Compensation” shall mean the retainer and fees
paid by the Company to a Director for his services as a
Director.
(9) The term “ Deferral
” shall mean that portion of the Compensation which a
Participant elects to defer pursuant to the terms of the Post-2004
Terms.
(10) 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.
(11) The term “Director”
shall mean any non-employee member of the Board of Directors of the
Company.
(12) The term “Election
Form” shall mean the form which may be electronic,
telephonic or hard copy and on which a Director elects to defer
compensation under the Post-2004 Terms as provided in
Section 2.1.
(13) The term “ ERISA ”
shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to a section of ERISA shall
include such section and any comparable section or sections of any
future legislation that amends, supplements, or supersedes such
section.
(14) 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.
(15) 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.
(16) The term “Frozen
Terms” shall mean the terms of the Plan, as in effect on
October 3, 2004.
(17) The term “ Fund ”
shall mean any investment fund designated by the Committee in which
Deferrals are deemed to be invested; provided, however, that one
such Fund shall be deemed to be invested in Common
Shares.
(18) The term “ Participant
” shall mean a Director who elects to defer all or any
portion of his Compensation under the Plan pursuant to the
provisions of Article II.
(19) The term “Plan”
shall mean the Applied Industrial Technologies, Inc. Deferred
Compensation Plan for Non-Employee Directors which, effective as of
January 1, 2005, shall consist of the Frozen Terms and the
Post-2004 Terms.
(20) The term “Post-2004
Terms” shall mean the portion of the Plan as set forth
herein with respect to Deferrals earned or vested after December
31, 2004, with all amendments, supplements, and modifications
hereafter made.
(21) The term
“Section 409A” shall mean Section 409A
of the Code, and the regulations and rulings promulgated
thereunder.
(22) The term “Separation from
Service” shall mean the termination of services for the
Company by a Participant for any reason other than death.
Notwithstanding the foregoing, whether or not a Participant has
incurred a Separation from Service shall be determined in
accordance with the provisions of Section 409A.
(23) The term “ Trust ”
shall mean the trust maintained pursuant to the terms of the
Applied Industrial Technologies, Inc. Non-Employee Directors
Deferred Compensation Grantor Trust Agreement, with all amendments,
supplements, and modifications.
(24) The term “Unforeseeable
Emergency” shall be defined and determined in accordance
with the provisions of Section 409A, which include a severe
financial hardship of a Participant resulting from an illness or
accident of the Participant, the Participant’s spouse, or the
Participant’s dependent (as defined in Section 152 of
the Code (without regard to Sections 152(b)(1), (b)(2), and
(d)(1)(B) of the Code); a loss of the Participant’s property
due to casualty (including the need to rebuild a home following
damage to the home by natural disaster not otherwise covered by
insurance); or other similar or extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
the Participant.
(25) 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.
2.1 Participation and Elections to Defer
. Each Director who was
participating in the Plan under the Frozen Terms as of
December 31, 2004, and who continues to serve as an active
Director shall be eligible to continue to participate in the Plan
under the Post-2004 Terms as of January 1, 2005. Directors who
were not participating in the Plan under the Frozen Terms and
Directors who were elected to the Board on or after January 1,
2005, shall be eligible to participate in the Plan under the
Post-2004 Terms for services performed after December 31,
2004. As a condition of participation in the Plan, a Director must
complete, sign, and return to the Committee an Election Form,
within the time permitted under Section 2.2 for making
elections. A Participant’s Election Form shall specify the
amount or percentage of the Compensation 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 date 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.
2.2 Time of Elections .
On or before each December 31
immediately preceding the first day of the calendar year during
which services giving rise to Compensation will be performed, a
Director may elect to defer receipt of all or a portion of such
Compensation that he is eligible to receive from the Company as a
Deferral under the Plan for such calendar year. Such election shall
be irrevocable, upon delivery of the Election Form to the
Committee, as of the end of such December 31 with respect to the
Compensation for which an election has been made. Notwithstanding
the foregoing, a Director who has not previously been eligible to
participate in the Plan or in any other nonqualified account
balance plan of the Company that is required to be aggregated with
the Plan pursuant to Section 409A, may file an Election Form
with the Committee prior to, or within 30 days of, the date on
which he first becomes a Director to participate in the Plan and to
defer all or a portion of his Compensation to be earned for
services to be performed subsequent to the filing of the Election
Form and ending on December 31 of the calendar year in which
such filing occurs.
2.3 Special Transition
Elections .
(a) Changes in Payment Elections
. During 2005, 2006,
2007, and 2008, a Participant may make elections to receive payment
of his Deferrals without complying with the requirements of
Section 4.3; provided that any such election shall only be
effective as follows:
(i) If made in 2006, it shall be applicable
only with respect to amounts that would not otherwise be payable in
2006 and shall not cause an amount to be paid in 2006 that would
not otherwise be payable in 2006; and
(ii) If made in 2007, it shall be
applicable only with respect to amounts that would not otherwise be
payable in 2007 and shall not cause an amount to be paid in 2007
that would not otherwise be payable in 2007; and
(iii) If made in 2008, it shall be
applicable only with respect to amounts that would not otherwise be
payable in 2008 and shall not cause an amount to be paid in 2008
that would not otherwise be payable in 2008.
(b) 2005 Deferral Elections
. In accordance with
Q&A-21 of Notice 2005 — 1 and Section 3.06 of Notice
2006-79, initial deferral elections for calendar year 2005 were
permitted to be made on or before March 15, 2005, with respect
to amounts that were not paid or payable at the time of such
election.
2.4 Other Election Provisions
. Each Participant shall
indicate on his Election Form 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
an election made under the Plan shall be deemed invested in the
Funds and shall be distributed in the manner and at the time set
forth on the applicable Election Form.
3.1 Establishment and Crediting of
Accounts . The
Deferral Account of each Participant shall have
subaccoun
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