STOCK APPRECIATION RIGHTS AWARD
TERMS AND CONDITIONS
Your Stock
Appreciation Rights Award (the “SARs” or the
“Award”) is made by Applied Industrial Technologies,
Inc., an Ohio corporation (“Applied”). For purposes of
these terms and conditions, employment by a parent, subsidiary, or
an affiliate of Applied shall be considered employment by
Applied.
1. Grant of SARs;
Exercisability. The Award
is governed by Applied’s 2007 Long-Term Performance Plan (the
“Plan”), including the policies adopted by the
Executive Organization & Compensation Committee of
Applied’s Board of Directors (the “Committee”)
under the Plan, and these terms and conditions. Upon valid
exercise, the Award entitles you to receive such number of shares
of Applied common stock (“Shares”) that have a fair
market value equal to the difference (if positive) between the fair
market value of (i) a Share on the date of exercise over
(ii) the Base Price, multiplied by (iii) the number of
Shares with respect to which the Award is exercised, subject to the
following conditions:
(a) Except
as otherwise provided in Sections 2 and 7, below, your Award
will be exercisable only if and after you have remained in
Applied’s continuous employ from the Award’s grant date
(the “Grant Date”) to the vesting date of all or the
specified portion of your Award. Your Award vests with respect to
only 25% of the aggregate number of Shares to which it relates
after one year of continuous employment from the Grant Date, which
percentage increases to 50% after two years, to 75% after three
years, and to 100% after four years of continuous employment from
the Grant Date.
(b) Your
Award shall expire at the end of the 10-year period commencing with
the Grant Date (the “Term”), or upon such earlier
expiration or separation from service date as may be provided by
Sections 2 and 7 below. The SARs shall not be exercisable
thereafter.
2. Termination of SARs.
If, during the Term, you incur a
separation from service from Applied for any reason, you may
exercise your SARs, to the extent you were entitled to exercise
them immediately prior to your separation from service, at any time
within three months after your separation from service (but only
during the Term); provided, however , that (i) if you
retire under an Applied retirement plan, then the SARs shall become
fully exercisable and, at any time within three years after your
retirement (but only during the Term), you may exercise the SARs;
(ii) if you incur a separation from service due to your
permanent and total disability, then the SARs shall become fully
exercisable and, at any time within one year after your separation
from service (but only during the Term), you may exercise the SARs;
and (iii) if you die while employed by Applied, then the SARs
shall become fully exercisable and, at any time within one year
after your death (but only during the Term), the person entitled by
will or applicable law to exercise the SARs may do so.
Awards are
intended to create an incentive for recipients to act in
Applied’s best interests. Notwithstanding anything in these
terms to the contrary,
(a) Your
Award may be terminated or rescinded, and if applicable, you may be
required to immediately repay all Shares (and any dividends and
distributions thereon) issued pursuant to the Award within the
previous six months (or any proceeds thereof), if the Committee
determines, in good faith, that during your employment with Applied
or during the period ending six months following your separation
from service, you have committed an act inimical to Applied’s
interests. Acts inimical to Applied’s interest shall include
willful inattention to duty; willful violation of Applied’s
published policies; acts of fraud or dishonesty involving
Applied’s business; solicitation of Applied’s
employees, customers or vendors to terminate or alter their
relationship with Applied to Applied’s detriment;
unauthorized use or disclosure of information regarding
Applied’s business, employees, customers, or vendors; and
competition with Applied. All determinations by the Committee shall
be effective at the time of your act.
(b) The
committee may, in its sole discretion, require you immediately to
repay Shares (and any dividends and distributions thereon) issued
pursuant to the Award within the previous 36 months (or any
proceeds thereof) if (I) Applied restates its historical
consolidated financial statements and (II) the Committee
determines, in good faith, that (x) the restatement is a
result of your, or another executive officer’s, willful
misconduct that is unethical or illegal, and (y) your earnings
pursuant to the Award were based on materially inaccurate financial
statements or materially inaccurate performance metrics that were
invalidated by the restatement.
The provisions
of this section are a fundamental term of the Award.
3. Method of Exercise; Rights of
Holder. During your life,
your Award may be exercised only by you, your guardian, or legal
representative. Upon your death, your Award may be exercised by the
person entitled by will or by the laws of descent and
distribution.
Your SARs may
be exercised by delivering to Applied at its principal executive
offices (directed to the attention of the Chief Financial Officer
or Corporate Secretary) a written notice (which may include
facsimile transmission or electronic mail), signed by y
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