APPLIED INDUSTRIAL TECHNOLOGIES,
INC.
DEFERRED COMPENSATION PLAN
(Post-2004 Terms)
WHEREAS, effective as of July 1, 1993, Bearings,
Inc., the predecessor plan sponsor to 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 into two
parts; namely, one part that consists of the Plan, as in effect on
October 3, 2004 (hereinafter referred to as the “Frozen
Terms”), which is hereby frozen and which 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 that shall consist 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 is 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 “ 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 “ 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.
(6) 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.
(7) 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.
(8) The term “ Common Shares
” shall mean the common stock of the Company.
(9) The term “ Company ”
shall mean Applied Industrial Technologies, Inc., its corporate
successors, and any corporation into or with which it is merged or
consolidated.
(10) 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.)
(11) The term “ Deferral
” shall mean that portion of an Award which a Participant
elects to defer pursuant to the terms of the Post-2004
Terms.
(12) 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.
(13) 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.
(14) 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.
(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
section.
(16) 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.
(17) 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.
(18) The term “Frozen
Terms” shall mean the terms of the Plan, as in effect on
October 3, 2004.
(19) 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.
(20) The term “ Incentive Plan
” shall mean any incentive plan adopted by the Board for key
employees.
(21) 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.
(22) 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 consecutive months in which Participants perform
services. Performance criteria shall be established in writing not
later than ninety 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.
(23) The term “ Performance
Plan ” shall mean any long term performance plan approved
by Company shareholders for key employees.
(24) 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 Post-2004 Terms and which
is part of the Comprehensive Plan and listed on Exhibit A
attached thereto.
(25) The term “Post-2004
Terms” shall mean the terms of the Plan with respect to
Deferrals earned or vested after December 31, 2004, which are
set forth herein, with all amendments, supplements, and
modifications hereafter made.
(26) The term
“Section 409A” shall mean Section 409A
of the Code, and the regulations and rulings promulgated
thereunder.
(27) 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 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.
(28) The term “Specified
Employee” shall mean a “specified employee”
within the meaning of Section 409A and the Company’s
Specified Employee identification policy.
(29) The term “ Trust ”
shall mean the trust maintained pursuant to the terms of the
Applied Industrial Technologies, Inc. Supplemental Executive
Retirement Benefits Trust Agreement with all amendments,
supplements, and modifications.
(30) 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.
(31) 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.
ELECTIONS BY ELIGIBLE
EMPLOYEES
2.1 Participation and Elections to Defer
. Each Eligible Employee
who was participating in the Plan under the Frozen Terms as of
December 31, 2004, and who continues to be an active Eligible
Employee shall be eligible to continue to participate in the Plan
under the Post-2004 Terms as of January 1, 2005. Eligible
Employees who were participating in the Plan under the Frozen Terms
and Eligible Employees who became Eligible Employees on or after
January 1, 2005, shall be eligible to participate in the Plan
under the Post-2004 Terms with respect to services performed after
December 31, 2004 that give rise to Awards. 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 Post-2004 Terms unless the Award to be
deferred is “fiscal year compensation.” For purposes of
the Post-2004 Terms, “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.
(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 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 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 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,
2007, and 2008, a Participant may make elections to
receive
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