PERFORMANCE SHARES TERMS AND
CONDITIONS
1. Award of Performance Shares
. The Executive Organization &
Compensation Committee (the “Committee”) of the Board
of Directors of Applied Industrial Technologies, Inc.
(“Applied”) may award Performance Shares (the
“Award”) to key senior officers of Applied who have
broad policy-making functions and who directly contribute to the
long-term success and profitability of Applied. The Committee has
awarded you an Award with an Effective Date. The terms and
conditions are set forth herein (the “Terms”) and
together with the Applied Industrial Technologies, Inc. 2007
Long-Term Performance Plan (the “Plan”) govern your
rights with respect to the Award. Notwithstanding the foregoing,
however, in the event of any conflict between the provisions of the
Plan and the Terms, the provisions of the Plan shall govern.
Moreover, it should be noted that unless otherwise provided herein,
capitalized words in the Terms shall have the same meanings as set
forth in the Plan.
2. Rights during Performance
Period . You shall not
have the right to sell, exchange, transfer, pledge, hypothecate, or
otherwise encumber your Award until all conditions with respect to
vesting and distribution have been met. Nevertheless, after the
first anniversary of the Effective Date and so long as no
forfeiture has occurred, you shall be entitled to receive cash
payments equal to the dividends and cash distributions paid on the
Shares underlying the Award (“Dividend Equivalents”) to
the same extent and on the same date as if the Shares, if any,
attributable to your Award had been payable to you; provided,
however, that no Dividend Equivalents shall be payable to you with
respect to dividends or distributions for which the record date
occurs on or after (i) the date on which forfeiture of the
Award has occurred; (ii) the date on which the Performance
Period has expired; or (iii) the date on which the issuance of
shares of Applied common stock (“Shares”) to you in
settlement of your Award has occurred. Until the issuance of Shares
in settlement of your Award has occurred, you shall not be treated
as a shareholder with respect to the Shares.
3. Performance Period
. The term “Performance
Period” shall mean, for purposes of the Terms, the period
from the Effective Date until the third year anniversary of the
Effective Date.
4. Vesting . Subject to the provisions of Section 6,
your Award will be 100% vested at the end of the Performance
Period, in whole or in part based upon the achievement of the
performance goals set by the Committee.
5. Separation from Service or Termination
of Executive Officer Status . If, during the Performance Period, you incur a
Separation from Service (as defined in Section 409A) from
Applied due to death or Disability (as defined in
Section 409A), then, promptly following the availability of
audited financial statements for the final year of the Performance
Period, you (or your beneficiary whom you have designated to
Applied in writing) shall be entitled to receive a pro rata payment
under the Award equal to (i) a fraction the numerator of which
is the number of fiscal quarters (including a portion of a quarter)
elapsed in the Performance Period prior to the date of your
Separation from Service and the denominator of which is twelve,
multiplied by (ii) what would have been your Award for the
Performance Period based on the actual achievement of the
performance goals, if you had not incurred a Separation from
Service during the Performance Period. In the event, however, that
during the Performance Period, you incur a Separation from Service
from Applied for any reason other than (i) those specifically
set forth above or in Section 6 hereof, or
(ii) termination after attaining age 55 and completing at
least ten years of service with Applied, then your Award will be
forfeited and no amount shall be due or payable to you pursuant to
the Award. In addition, if, during the Performance Period, you
cease to be a Board-elected executive officer of Applied (but
remain an employee of Applied), then your Award shall be forfeited
and no amount shall be due or payable to you pursuant to the Award.
Since Awards are intended to create an incentive for recipients to
act in Applied’s best interests, notwithstanding anything in
the Terms to the contrary:
(a) Your
Award may be terminated or rescinded, and if applicable, you may be
required immediately to 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, and vendors; and
competition with Applied. All determinations by the Committee shall
be effective at the time of your act.
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