<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[APPLIED INDUSTRIAL TECHNOLOGIES LOGO]
ONE APPLIED PLAZA
CLEVELAND, OHIO 44115
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of the Shareholders of
Applied Industrial Technologies, Inc. will be held at Applied's corporate
headquarters, One Applied Plaza, East 36th Street and Euclid Avenue, Cleveland,
Ohio, on Tuesday, October 20, 1998, at 10:00 a.m., local time, for the purpose
of considering and acting on the following:
1. Electing four persons to be directors of Class II for a term of three
years.
2. Ratifying the appointment by management of independent auditors for the
fiscal year ending June 30, 1999.
3. Transacting such other business as may properly come before the meeting
and all adjournments thereof.
The Board of Directors has fixed August 31, 1998 as the record date for the
determination of the shareholders entitled to notice of and to vote at the
meeting. The transfer books will not be closed. A list of the shareholders as of
the record date will be available for examination at the meeting.
By order of the Board of Directors.
ROBERT C. STINSON
Secretary
September 15, 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
EXECUTE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.
<PAGE> 3
(APPLIED INDUSTRIAL TECHNOLOGIES LOGO)
PROXY STATEMENT
------------------
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Applied Industrial Technologies, Inc. ("Applied") for use at
Applied's Annual Meeting of Shareholders to be held at 10:00 a.m., local time,
on Tuesday, October 20, 1998, at Applied's corporate headquarters, One Applied
Plaza, East 36th Street and Euclid Avenue, Cleveland, Ohio.
Applied will bear the cost of soliciting proxies. This statement and the
accompanying proxy will be sent to shareholders by mail on or about September
15, 1998. Applied will also pay the standard charges and expenses of brokerage
houses, or other nominees or fiduciaries, for forwarding these instruments to
and obtaining proxies from securities holders and beneficiaries for whose
account they hold registered title to shares of Applied Common Stock. In
addition to using the mail, directors, officers and other Applied employees,
acting on its behalf, may also solicit proxies, and Morrow & Co., Inc. has been
retained, at an estimated cost of $6,500 plus expenses, to aid in soliciting
proxies from brokers and institutional holders. Proxies may be solicited
personally, by telephone, facsimile and other means.
Any shareholder giving a proxy has the right to revoke it at any time
before it is voted by giving notice of revocation to Applied's Secretary in
writing or in open meeting. Presence at the meeting will not in and of itself
revoke a proxy.
VOTING AT THE MEETING
Only shareholders of record at the close of business on August 31, 1998
will be entitled to vote at the meeting. As of the record date there were
outstanding 22,107,433 shares of Applied Common Stock, without par value.
Each share is entitled to one vote. Abstentions and broker non-votes are
counted in determining the votes present at a meeting. An abstention or a broker
non-vote has the practical effect of a vote against a proposal, as each
abstention or broker non-vote is one less vote in favor of the proposal.
ITEM 1 -- ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. At the Annual
Meeting, directors of Class II are to be elected for a term of three years
expiring in 2001. The properly nominated candidates receiving the greatest
number of votes for the positions to be filled shall be elected to those
positions. The persons presently serving as directors of Class III for a term
expiring in 1999 and as directors of Class I for a term expiring in 2000 will
continue in office.
The nominees for directors of Class II are William G. Bares, Dr. Roger D.
Blackwell, Russel B. Every and John J. Kahl. Each presently serves as an Applied
director and, except for Dr. Blackwell, was elected to his position at an annual
meeting of the shareholders. The proxies named in the accompanying proxy intend
to vote for the election of the four nominees unless authority is withheld. If
any of the nominees should be unable or unwilling to serve as a director, the
proxies reserve full discretion to vote for such other person or persons as may
be nominated at the meeting and/or to vote to reduce the number of directors.
Management is not aware of any existing circumstances that would cause any of
the nominees to be unwilling or unable to serve as directors.
3
<PAGE> 4
Information concerning the nominees and the directors continuing in office
is given below. Unless otherwise stated, the nominees and directors have held
the positions indicated for the last five years.
<TABLE>
<CAPTION>
NAME AND YEAR INFORMATION ABOUT
FIRST ELECTED NOMINEES AND
A DIRECTOR DIRECTORS
------------- -----------------
<S> <C>
NOMINEES FOR ELECTION AS DIRECTORS OF CLASS II FOR A TERM EXPIRING IN 2001
William G. Bares(b)(c)(e) Mr. Bares is Chairman (since April 1996), President (since 1982) and
1986 Chief Executive Officer (since January 1996) of The Lubrizol
Corporation, a specialty chemical company. Lubrizol specializes in
products created through the application of advanced chemical,
mechanical and biological technologies for use in specialty additive
systems for gasoline and diesel engine oils, automatic transmission
fluids, gear oils, marine and tractor lubricants, and specialty
products for industrial fluids, fuel additives and process chemicals.
He was Chief Operating Officer (from 1987 to December 1995) and has
served as a director of Lubrizol since 1981. He is 57 years of age and
also serves as a director of Oglebay Norton Company and KeyCorp.
Dr. Roger D. Blackwell(f) Dr. Blackwell is a Professor of Marketing at The Ohio State University
1996 College of Business and President of Blackwell Associates, Inc., a
consulting firm in Columbus, Ohio. He also serves as a director of
Airnet Systems, Inc., Checkpoint Systems, Inc., Cheryl & Co., Inc.,
Intimate Brands, Inc., Max & Erma's Restaurants, Inc. and Worthington
Foods, Inc., and as a trustee of The Flex-funds. Dr. Blackwell is 58
years of age.
Russel B. Every(c)(d) Mr. Every has been a business consultant since his retirement as
1986 Chairman of The Lamson & Sessions Co. in 1989. He served as a director
of The Lamson & Sessions Co. from 1979 to April 1995. The Lamson &
Sessions Co. is a diversified manufacturer and distributor of a broad
line of thermoplastic electrical, consumer, telecommunications and
fluid drainage products for major domestic markets. He is 73 years of
age.
John J. Kahl(b)(d)(f) Mr. Kahl is Chairman and Chief Executive Officer of Manco, Inc., a
1992 subsidiary of Henkel Corporation, the North American operating company
of the Henkel Group. Manco is a manufacturer of pressure sensitive
tapes for household and automotive repair, including Duck(R) Brand
Tapes, mailing and shipping supplies for both home and office under
the CareMail(R) brand, weatherstripping and related home energy
products for the "do-it-yourselfer" and labels for both home and
office. He is 57 years of age and also serves as a director of Royal
Appliance Mfg. Co.
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND YEAR INFORMATION ABOUT
FIRST ELECTED NOMINEES AND
A DIRECTOR DIRECTORS
------------- -----------------
<S> <C>
PERSONS SERVING AS DIRECTORS OF CLASS III FOR A TERM EXPIRING IN 1999
William E. Butler(b)(c) Mr. Butler was Chairman, from 1992 until his retirement in December
1987 1995, of Eaton Corporation, a global manufacturer of highly engineered
products which serve vehicle, industrial, construction, commercial,
aerospace and marine markets. Principal products include truck
transmissions and axles, engine components, hydraulic products,
electrical power distribution and control equipment, ion implanters
and a wide variety of controls. He was Chief Executive Officer (from
1991 to September 1995), and served as a director of that company from
1989 until his retirement. He is 67 years of age and also serves as a
director of Borg Warner Automotive, Inc., Ferro Corporation, The
Goodyear Tire & Rubber Co., Pitney Bowes Inc. and U.S. Industries,
Inc.
Russell R. Gifford(a)(d)(e)(f) Mr. Gifford was appointed Chief Operating Officer for the City of
1992 Cleveland Public School District in June 1998. He was President of CNG
Energy Services Corp., a subsidiary of Consolidated Natural Gas
Company, from September 1994 until his retirement in January 1997. He
was also President and Chief Executive Officer (from 1989 to September
1994) of The East Ohio Gas Company, the largest distribution
subsidiary of Consolidated Natural Gas Company. Mr. Gifford is 59
years of age and serves as a trustee of First Union Real Estate Equity
and Mortgage Investments.
L. Thomas Hiltz(a)(b)(c)(e) Mr. Hiltz is an attorney in Covington, Kentucky and is one of five
1981 trustees of the H.C.S. Foundation, a charitable trust which has sole
voting and dispositive power with respect to 830,250 shares of Applied
Common Stock. He is 52 years of age.
PERSONS SERVING AS DIRECTORS OF CLASS I FOR A TERM EXPIRING IN 2000
John C. Dannemiller(a)(b) Mr. Dannemiller is Chairman (since 1992), Chief Executive Officer
1985 (since 1992) and President (since October 1996) of Applied. He is 60
years of age and also serves as a director of The Lamson & Sessions
Co. and Star Banc Corporation.
J. Michael Moore(d) Mr. Moore is President (since July 1997) of Oak Grove Consulting
1997 Group, Inc. He was Chairman (from 1989 to July 1997) and Chief
Executive Officer (from 1981 to July 1997) of INVETECH Company, a
distributor of bearings, mechanical and electrical drive system
products, industrial rubber products and specialty maintenance and
repair products manufactured by others. INVETECH Company was acquired
by Applied effective August 1, 1997. Mr. Moore is 55 years of age.
Dr. Jerry Sue Thornton(d)(e) Dr. Thornton is President of Cuyahoga Community College, the largest
1994 community college in Ohio with 20,000 students and 70 career and
technical programs. She is 51 years of age.
</TABLE>
- ---------------
(a) Member of the Executive Committee.
(b) Member of the Director Nominating Committee.
(c) Member of the Executive Organization & Compensation Committee.
(d) Member of the Audit Committee.
(e) Member of the Corporate Governance Committee.
(f) Member of the Futures Committee.
5
<PAGE> 6
BENEFICIAL OWNERSHIP OF CERTAIN APPLIED SHAREHOLDERS AND MANAGEMENT
The following table shows the beneficial ownership of Applied Common Stock,
as of June 30, 1998, by (i) each person known by Applied to own beneficially
more than 5% of the outstanding shares of Applied Common Stock, (ii) all
directors and nominees, (iii) each executive officer named in the Summary
Compensation Table on page 7 (except John C. Robinson, who died on February 2,
1998), and (iv) all current directors, nominees and executive officers as a
group.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY OWNED PERCENT OF
NAME OF BENEFICIAL OWNER ON JUNE 30, 1998(1) CLASS(2)
------------------------ ------------------- ----------
<S> <C> <C>
National Rural Electric
Cooperative Association
4301 Wilson Blvd.
Arlington, Virginia 22203........................... 1,552,206 7.0%
William G. Bares...................................... 23,353(3)
Dr. Roger D. Blackwell................................ 11,056(4)
William E. Butler..................................... 2,025
John C. Dannemiller................................... 382,810(5) 1.7%
Russel B. Every....................................... 23,865
Russell R. Gifford.................................... 14,643(6)
L. Thomas Hiltz....................................... 859,656(7) 3.9%
John J. Kahl.......................................... 24,122
Francis A. Martins.................................... 50,819(8)
J. Michael Moore...................................... 339,999(9) 1.5%
Bill L. Purser........................................ 22,374
Robert C. Stinson..................................... 93,445(5)
Dr. Jerry Sue Thornton................................ 3,543
John R. Whitten....................................... 93,000(5)
All current directors, nominees and executive officers
as a group (20 individuals)......................... 2,020,217(10) 9.1%
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934. Beneficial ownership may be disclaimed for
other purposes. Except as otherwise indicated, the beneficial owner has
sole voting and dispositive power over the number of shares indicated.
(2) Percent of class is not indicated if less than 1%.
(3) Includes 2,250 shares owned by Mr. Bares' wife, who has sole voting and
dispositive power.
(4) Includes 225 shares owned by Dr. Blackwell's wife, who has sole voting and
dispositive power.
(5) Includes shares that could be acquired within 60 days after June 30, 1998,
pursuant to the exercise of stock options as follows: Mr.
Dannemiller -- 123,075; Mr. Stinson -- 35,364; and Mr. Whitten -- 34,914.
(6) Includes 300 shares owned by Mr. Gifford's wife, who has sole voting and
dispositive power.
(7) Includes 830,250 shares held by the H.C.S. Foundation, a charitable trust
of which Mr. Hiltz is one of five trustees, with sole voting and
dispositive power. Pursuant to a Schedule 13D filed by the H.C.S.
Foundation dated December 20, 1989, the trustees, including Mr. Hiltz,
disclaimed beneficial ownership of those shares.
(8) Includes 562 shares owned by Mr. Martins' son, who has sole voting and
dispositive power.
(9) Includes 31,648 shares held by Mr. Moore's wife with sole voting and
dispositive power. Also includes 73,346 shares held in trusts for the
benefit of Mr. Moore's children. Mr. Moore's wife is trustee, with sole
voting and dispositive power.
(10) Includes 208,718 shares that could be acquired within 60 days after June
30, 1998, pursuant to the exercise of stock options. In determining the
percentage of share ownership, these stock option shares are added to both
the denominator and the numerator, pursuant to Instruction 1 to Item 403 of
Regulation S-K and Rule 13d-3(d)(1) under the Securities Exchange Act of
1934.
6
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes compensation earned during the fiscal years
ended June 30, 1998, 1997 and 1996, by those persons who were, for the fiscal
year ended June 30, 1998, Applied's Chief Executive Officer and the four other
most highly compensated executive officers serving in that capacity at the end
of fiscal 1998. The compensation of John C. Robinson, who died on February 2,
1998, is also disclosed in this table because he was among the most highly
compensated executive officers for fiscal 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------------------
------------------- RESTRICTED NUMBER ALL OTHER
NAME AND BONUS STOCK AWARD(S) OF COMPENSATION
PRINCIPAL POSITION YEAR SALARY (1) (2) OPTIONS (3)
------------------ ---- ------ ----- -------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
John C. Dannemiller 1998 $500,650 $ 0 $1,884,375 0 $ 6,065
Chairman, Chief Executive 1997 470,050 297,821 0 0 22,058
Officer & President 1996 439,167 435,960 0 0 42,057
John R. Whitten 1998 211,000 0 418,750 0 8,734
Vice President -- 1997 197,665 115,565 0 0 14,970
Chief Financial Officer & 1996 186,830 131,680 0 0 16,520
Treasurer
Francis A. Martins(4) 1998 205,667 0 418,750 0 7,966
Vice President -- 1997 189,653 74,642 0 0 8,570
Sales & Field Operations 1996 170,640 126,903 0 0 9,937
Robert C. Stinson 1998 201,667 0 418,750 0 8,961
Vice President -- 1997 191,200 113,069 0 0 15,129
Chief Administrative Officer, 1996 179,067 131,572 0 0 16,789
General Counsel &
Secretary
Bill L. Purser 1998 166,333 0 418,750 0 9,600
Vice President -- 1997 151,667 78,127 113,953 0 8,455
Marketing & National Accounts 1996 133,537 20,000 0 0 8,585
John C. Robinson 1998 192,148 0 628,125 0 746
Vice Chairman 1997 310,300 140,309 0 0 19,259
1996 303,533 241,444 0 0 27,308
</TABLE>
- ---------------
(1) Amounts reported in this column are earnings pursuant to the annual
Management Incentive Plan, described in the Executive Organization &
Compensation Committee Report on pages 9 and 10.
(2) Amounts reported in this column represent Performance-Accelerated Restricted
Stock awards ("PARS") under the Long-Term Performance Plan described in the
Executive Organization & Compensation Committee Report on page 10, valued at
the closing market price of Applied Common Stock on the dates of grant.
Dividends are paid on PARS at the same rate paid to all shareholders. New
PARS awards were made in fiscal 1998 following the vesting of previously
awarded PARS due to Applied's stock price performance. At June 30, 1998, the
persons listed above held the following number of unvested PARS, valued at
the closing market price of Applied Common Stock on that date: Mr.
Dannemiller, 84,191 shares, $1,731,177; Mr. Whitten, 15,000 shares,
$308,438; Mr. Martins, 15,000 shares, $308,438; Mr. Stinson, 15,000 shares,
$308,438; and Mr. Purser, 15,000 shares, $308,438.
(3) Amounts reported in this column for fiscal 1998 are contributions made by
Applied and credited to the individual accounts of the named executive
officers under Applied's Retirement Savings Plan.
(4) Mr. Martins resigned on August 13, 1998.
7
<PAGE> 8
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information concerning stock option exercises
in fiscal 1998 by the Chief Executive Officer and Applied's four other most
highly compensated executive officers serving in that capacity at the end of
fiscal 1998, and the values of in-the-money options held by those individuals on
June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
SECURITIES UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
UNDERLYING OPTIONS AT FISCAL YEAR END FISCAL YEAR END
OPTIONS VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Dannemiller....... 0 $ 0 123,075 0 $1,556,508 $ 0
John R. Whitten........... 0 0 34,914 0 448,706 0
Francis A. Martins........ 0 0 0 0 0 0
Robert C. Stinson......... 0 0 35,364 0 453,874 0
Bill L. Purser............ 0 0 0 0 0 0
</TABLE>
ESTIMATED RETIREMENT BENEFITS
UNDER SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS PLAN(1)
The following table shows estimated annual benefits payable at retirement
to certain executive officers under Applied's Supplemental Executive Retirement
Benefits Plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)
----------------------------------------
REMUNERATION(3) 5 10 15 20
- --------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
$150,000 16,875 33,750 50,625 67,500
200,000 22,500 45,000 67,500 90,000
250,000 28,125 56,250 84,375 112,500
300,000 33,750 67,500 101,250 135,000
350,000 39,375 78,750 118,125 157,500
400,000 45,000 90,000 135,000 180,000
450,000 50,625 101,250 151,875 202,500
500,000 56,250 112,500 168,750 225,000
600,000 67,500 135,000 202,500 270,000
700,000 78,750 157,500 236,250 315,000
800,000 90,000 180,000 270,000 360,000
900,000 101,250 202,500 303,750 405,000
1,000,000 112,500 225,000 337,500 450,000
1,100,000 123,750 247,500 371,250 495,000
</TABLE>
- ---------------
(1) Amounts shown in the table are computed on the basis of a straight life
annuity and are not subject to deduction for Social Security or other offset
amounts.
(2) Mr. Whitten has in excess of 15 years of service with Applied, Mr.
Dannemiller has in excess of 10 years, Mr. Stinson has in excess of five
years, and Mr. Purser has less than five years. Plan benefits are fully
accrued after 20 years of service and, in general, are fully vested after 10
years of service.
(3) Amounts in this column represent, and benefits are based on, average total
cash compensation for the highest three of the last 10 calendar years. The
cash compensation for the Chief Executive Officer and the four other most
highly compensated executive officers for the past three fiscal years is
found in the Summary Compensation Table.
8
<PAGE> 9
REPORT OF THE EXECUTIVE ORGANIZATION & COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
OVERVIEW
The Executive Organization & Compensation Committee (the "Committee") is
comprised entirely of independent outside directors. The Committee is
responsible for setting Applied's executive officer compensation policies. The
purposes of the executive officer compensation program are to attract and retain
qualified executives and to provide appropriate incentives, both monetary and
stock-based, to achieve Applied's business strategies and enhance shareholder
value over the long term.
The major components of Applied's executive officer compensation program
are:
(a) Annual base salary; and,
(b) The 1997 Long-Term Performance Plan.
ELEMENTS OF COMPENSATION PROGRAM
(a) ANNUAL BASE SALARY
The Committee uses an annual competitive pay analysis compiled by an
independent nationally recognized compensation and benefits consulting firm (the
"Independent Consultant") which provides data on similar positions. The analysis
provides the Committee with the market base salary and market total cash
compensation at the 25th, 50th and 75th percentiles for each executive officer
position. The competitive pay analysis is based on survey data primarily from
industrial distribution organizations and is more industry-specific to Applied
than the published industry index shown in the graph appearing on page 11. In
addition to the analysis, the Committee considers time and level of experience
in the position in setting the annual base salary. Generally, base salaries have
been set below the 50th percentile; however, the Committee would consider
setting them at higher levels coincident with sustained corporate earnings
improvement. The Committee's overall executive compensation philosophy is to
place greater weight on the performance-driven portions of the compensation
package -- namely the awards under Applied's 1997 Long-Term Performance Plan.
(b) 1997 LONG-TERM PERFORMANCE PLAN
(1) MANAGEMENT INCENTIVE PLAN
The annual Management Incentive Plan, adopted under the 1997 Long-Term
Performance Plan, is Applied's program for compensating executive officers for
the achievement of fiscal year goals. Each executive officer presents the
Committee with individual goals for the fiscal year. Corporate goals for the
fiscal year are also presented to the Committee. The Committee reviews and
discusses the goals with the executive officers and then sets the goals for the
year. Both the individual and the corporate goals are expressed in terms of
threshold, target (midpoint) and maximum levels of required performance.
In fiscal 1998, Mr. Dannemiller had the corporate goals as his individual
goals. The corporate goals for fiscal 1998 included objectives based on
Applied's pre-tax return on assets and pre-tax income. These goals were each
weighted 50%. The other executive officers, including Messrs. Whitten, Martins,
Stinson and Purser, had individual goals (in addition to the corporate goals)
relating specifically to their job responsibilities. These goals varied in
relative weight. The size of the Management Incentive Plan payment for any of
the executive officers depends on the level of performance achieved on both the
individual and the corporate goals.
Assuming that corporate and individual goals are met, the amount of the
individual award is based on a formula, the components of which are the assigned
market base salary and a responsibility percentage assigned to the executive
officer. The responsibility percentages are set by the Committee. For example,
the Chief Executive Officer target incentive payment set by the Committee in
fiscal 1998 was $343,000, being 70% (the responsibility percentage) multiplied
by the assigned market base salary.
9
<PAGE> 10
Responsibility percentages for the other executive officers during fiscal 1998,
including those named in the Summary Compensation Table, ranged from 36% to 50%.
For Mr. Dannemiller, the market total cash compensation at the 50th
percentile was $791,526 effective for the twelve-month period commencing
November 1, 1997, the date on which executive compensation changes are made each
year. Mr. Dannemiller's actual base salary for fiscal 1998 was $500,650, his
target incentive was $343,000, and total cash compensation assuming target
performance under the Management Incentive Plan was $843,650. Because
performance on the corporate goals did not achieve threshold levels in fiscal
1998, no incentive payments were made to Mr. Dannemiller or any of the other
executive officers.
The Deferred Compensation Plan (described on pages 13 and 14) was adopted
in part to encourage increased investment in Applied Common Stock by the
executive officers. All but two of the participants in the 1998 Management
Incentive Plan elected under the Deferred Compensation Plan to defer a portion
of their Management Incentive Plan awards, with deferral percentages ranging
from 20% to 85%. Because no awards were made under the Management Incentive
Plan, no deferrals were made into the Deferred Compensation Plan.
(2) STOCK-BASED AWARDS
Until fiscal 1993, the only awards under the Long-Term Performance Plan
were stock options. In order to align more closely the executive officers with
shareholder interests and to compensate the executive officers based on
performance measures that directly enhance shareholder value, the Committee has,
since 1993, made awards of Performance-Accelerated Restricted Stock ("PARS")
rather than stock options. The PARS are awards of restricted shares of Applied
Common Stock, which shares vest six years from the date of grant; however, the
PARS can vest automatically at an earlier date if performance hurdles based on
stock price and pre-tax return on assets ("ROA") are met. No new stock option or
PARS awards can be made to the executive officers until 100% of the outstanding
PARS vest, either by meeting the performance hurdles or by passage of the
six-year term, and in no event can a new award be made during the two-year
period immediately following the previous grant date.
New PARS awards were made in August 1997. Fifty percent of the PARS will
vest on the achievement of either an ROA of 13.5%, or a stock price of $33.33
per share for 20 consecutive trading days. The remaining 50% will vest on the
achievement of either an ROA of 17.5%, or a stock price of $37.33 per share for
20 consecutive trading days. According to the Independent Consultant's survey of
other companies, if the PARS vest within the first two years, the resulting
total compensation would equal approximately the 75th percentile of competitive
compensation. If, however, the performance hurdles are not achieved and the PARS
instead vest after six years, the resulting compensation would be considerably
below the 50th percentile.
The total amount of stock-based awards is limited by the annual limitation
set forth in the Long-Term Performance Plan of 2% of shares outstanding on the
first day of the fiscal year in which the awards are made.
(c) BENEFITS
Benefits provided to the executive officers are those generally provided to
Applied's other associates with variations consistent with executive benefits in
the competitive marketplace.
FEDERAL INCOME TAX DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code limits the amount of
compensation a publicly-held corporation may deduct as a business expense for
federal income tax purposes. That limit, which applies to the Chief Executive
Officer and the four other most highly compensated executive officers, is $1
million per individual per year, subject to certain exceptions. One of the
exceptions is for compensation that is performance-based.
10
<PAGE> 11
The Committee has taken steps to qualify awards made to the executive
officers under the Management Incentive Plan as performance-based under Internal
Revenue Service regulations. In the future, the Committee will continue to seek
ways to preserve the full deductibility of compensation paid to Applied's
executive officers without compromising the Committee's flexibility in designing
an effective and competitive compensation program.
EXECUTIVE ORGANIZATION &
COMPENSATION COMMITTEE
William E. Butler
William G. Bares
Russel B. Every
L. Thomas Hiltz
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
OF APPLIED INDUSTRIAL TECHNOLOGIES, INC., S&P 500 INDEX AND PEER INDUSTRY GROUP
The graph below compares the five-year cumulative total return from
investing $100 on June 30, 1993 in each of Applied Common Stock, the Standard
and Poor's 500 Index and the Value Line Machinery Industry Index, assuming
dividend reinvestment.
<TABLE>
<CAPTION>
Measurement Period Machinery
(Fiscal Year Covered) Applied S&P 500 Industry
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 151.04 101.60 112.64
1995 149.09 128.14 152.71
1996 201.32 161.61 187.98
1997 273.94 217.77 291.22
1998 238.80 282.62 341.76
</TABLE>
Source: Value Line, Inc.
11
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
J. Michael Moore, an Applied director, was Chairman and Chief Executive
Officer of INVETECH Company ("Invetech"), which Applied acquired effective
August 1, 1997. In connection with the acquisition, Applied entered into a
Consulting, Non-competition and Confidentiality Agreement dated July 31, 1997,
with Mr. Moore and Oak Grove Consulting Group, Inc. ("Oak Grove"), which Mr.
Moore owns and of which he is president.
Under this agreement, (i) Oak Grove agreed to perform certain business
consulting services for Applied for a period of five years in exchange for an
annual fee of $70,000; (ii) Mr. Moore agreed not to compete with Applied until
the later of (x) July 31, 2002 and (y) the end of the one-year period following
the date of termination of all of Mr. Moore's relationships with Applied (other
than as a shareholder) in exchange for $2,550,000 payable in five equal annual
installments of $510,000 beginning on July 31, 1997; (iii) Mr. Moore and Oak
Grove agreed to maintain the confidentiality of all non-public information
pertaining to Applied during the five-year period following the date of
termination of any of Mr. Moore's and Oak Grove's relationships with Applied
(other than as a shareholder); (iv) Mr. Moore and Applied agreed to amend the
Salary Continuation Agreement between Mr. Moore and Invetech as described below;
and (v) Applied agreed to pay to Oak Grove, during the term of Mr. Moore's and
his spouse's lives, $700 per month for the cost of health insurance to be
obtained and maintained by Oak Grove for Mr. Moore, his spouse and eligible
children.
Mr. Moore was a party to a Salary Continuation Agreement with Invetech
dated as of March 28, 1991. Under this agreement, Mr. Moore (presently 55 years
of age) was to be paid $200,000 per year, in equal monthly installments, for a
period of 15 years following his 65th birthday. If, however, Mr. Moore suffered
a permanent disability or died before age 65, then the payments would be made to
Mr. Moore (or his designated beneficiary in the event of death) beginning at
that earlier date. As a result of Applied's acquisition of Invetech, Mr. Moore
became vested in his rights, and Applied assumed Invetech's obligations, under
the agreement. As required by the Consulting, Non-competition and
Confidentiality Agreement, Applied also amended the Salary Continuation
Agreement in fiscal 1998 to (i) provide that the benefits would be payable to
Mr. Moore beginning at age 60, and (ii) increase the aggregate benefits payable
thereunder by $500,000.
Under the Plan and Agreement of Merger dated April 29, 1997, whereby
Applied acquired Invetech, Applied agreed, at the request of any Invetech
shareholder who was the insured under a life insurance policy acquired by
Applied in the transaction, to sell and transfer that policy to the shareholder
at a cash price equal to the value of the policy as reflected on Invetech's June
30, 1997 balance sheet. A policy with a cash value of $461,938 was sold to Mr.
Moore in September 1997.
On September 26, 1997, Applied repurchased 95,641 shares of Applied Common
Stock beneficially owned by Mr. Moore in a negotiated transaction for
$3,223,387. The repurchases were made by Applied at a price below the
then-prevailing market price of Applied Common Stock.
COMPENSATION OF DIRECTORS
Corporate officers do not receive additional compensation for service as a
director. Non-employee directors receive a quarterly retainer of $4,500, a fee
of $1,500 for the first Board or committee meeting attended on a given day, and
$500 for each additional meeting attended on the same day, up to a maximum of
$2,500 per day. Directors may be similarly compensated if they attend other
meetings or conferences at the request of the Chairman. In addition, directors
receive $500 for any action taken by unanimous written consent or via telephone
conference of less than 30 minutes in duration, and directors who serve as
committee chairmen receive an additional quarterly retainer of $400. All non-
employee directors are eligible to participate in the Deferred Compensation Plan
for Non-employee Directors described below. If participants in the plan elect to
receive their director compensation in the form of Applied Common Stock, they
receive an additional amount equal to 25% of the compensation so deferred.
12
<PAGE> 13
The compensation received by non-employee directors is reviewed from time
to time by Applied's management. If management believes that a change in the
amount of compensation is appropriate to make the level of compensation
competitive relative to the size and nature of Applied's business, management
recommends the change to the Board and approval of any such change requires the
affirmative vote of a majority of the directors then serving in office. The
directors participate in Applied's travel accident plan and may also elect to
participate in Applied's contributory health insurance plan.
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
The purposes of Applied's Deferred Compensation Plan for Non-employee
Directors (the "Plan") are to allow non-employee directors to defer the receipt
of compensation payable for director services and to promote loyalty to Applied
through increased investment in Applied Common Stock.
Pursuant to the Plan, a non-employee director may elect, prior to any
calendar quarter, to defer payment of his or her compensation for future
services as a director. Once an election is made, it is irrevocable with respect
to compensation earned. Directors may change their election to receive or defer
receipt of compensation for future services commencing with the calendar quarter
following the election. Amendments that only change a director's beneficiary are
permitted at any time and as often as necessary.
As directors' compensation would otherwise become due and payable, Applied
transfers an amount equal to the compensation deferred pursuant to the Plan to a
trust maintained by Key Trust Company of Ohio, N.A., as Trustee. Deferred fees
are invested by the Trustee, at a director's option, in a money market fund
and/or Applied Common Stock. If a director elects to have his compensation
invested in Common Stock, then Applied contributes to the trust an additional
amount equal to 25% of the amount so deferred.
The Plan is administered by a committee consisting of not less than three
members, not necessarily members of the Board of Directors, which is authorized
to interpret and administer the Plan, but has no discretion with respect to Plan
contributions, investment direction or distributions.
Distribution of a director's account commences as designated by the
director in his or her election on a date that is not more than thirty days
after (i) the director's termination as a director due to resignation,
retirement, death or otherwise, or (ii) the director's attainment of the age
(not younger than age 55) specified in his or her deferral election form; or
upon a change in control (as defined in the Plan) of Applied.
Applied presently has nine non-employee directors. All but one presently
defer all of their retainer and meeting fees and invest those fees in Applied
Common Stock.
DEFERRED COMPENSATION PLAN
The Applied Industrial Technologies Deferred Compensation Plan (the "Plan")
permits participants in an annual Management Incentive Plan to defer a portion
or all of the awards payable under the Management Incentive Plan. The Plan's
purpose is to promote increased efforts on behalf of Applied through increased
investment in Applied Common Stock.
The Plan gives each Management Incentive Plan participant the opportunity
to defer payment of his or her cash award. Any participant who elects to make
such a deferral may have such amounts invested in Applied Common Stock and/or in
a money market fund. In the event a participant elects to have an amount equal
to at least 50% of a Management Incentive Plan award invested in Applied Common
Stock, an additional 10% of that amount will be credited to the participant.
These deferral and investment opportunities and the incentive for investment in
Applied Common Stock are similar to the opportunities and incentives available
to directors under the Deferred Compensation Plan for Non-employee Directors and
are part of an overall effort to align management with the interests of
Applied's shareholders.
13
<PAGE> 14
The Plan is administered by the Board's Executive Organization &
Compensation Committee, which is authorized to interpret and administer the
Plan, but has no discretion with respect to participant-elected deferrals or
investments.
Distribution of a participant's deferrals will be made in a lump sum or in
installments over a period not in excess of ten years, as specified in the
participant's deferral election form. Other than dates specified in the deferral
election forms, a withdrawal is permitted while employed only due to a severe
financial and unexpected hardship.
All but two of the executive officers elected to participate in the Plan in
1998. Because no awards were payable under the 1998 Management Incentive Plan,
no deferrals were made into the Deferred Compensation Plan.
CHANGE IN CONTROL AGREEMENTS
AND OTHER RELATED ARRANGEMENTS
Applied has change in control agreements (the "Agreements") with its
executive officers. The Agreements, which were amended in fiscal 1998, obligate
Applied to provide severance benefits to any executive officer whose employment
is terminated either by the officer for "good reason" or by Applied "without
cause" (each as defined in the Agreements) if such termination occurs within
three years after a change in control, as defined in the Agreements. The
officer, in turn, is obliged not to compete with Applied for one year following
the termination. The principal benefits to be provided to the named officers
under the Agreements are as follows:
(a) a lump sum severance payment equal to three times annual base
salary plus incentive pay (each as calculated pursuant to the Agreements),
reduced proportionately if the officer would reach age 65 within the three
year period after termination;
(b) a cash payment, in lieu of exercising any stock options held by
the officer on the date of termination, equal to the difference between the
exercise price and the higher of (i) the mean of the high and low trading
prices on the New York Stock Exchange on the date of termination, and (ii)
the highest price paid for Applied Common Stock in connection with the
change in control;
(c) continued participation in Applied's employee benefit plans,
programs and arrangements, or equivalent benefits for three years after the
termination at the levels in effect immediately prior to termination; and,
(d) outplacement services.
Under the terms of the Agreements, escrow funds have been established with
Key Trust Company of Ohio, N.A., to secure payment of the benefits. Applied has
deposited in the escrow funds a percentage of the amounts that would be payable
to each of the officers under the Agreements. Additional deposits may be made in
future years. No officer has any right to make a claim on the escrow funds
unless Applied is in default of its obligations under the Agreements. All
earnings on the escrow funds are payable to Applied. The Agreements also provide
that in the event any covered executive is required to pay the excise tax
imposed by Section 4999 of the Internal Revenue Code, Applied shall make an
additional payment to the executive in an amount sufficient (after payment of
any taxes on the additional payment) to pay the excise tax.
The Agreements are intended to reinforce and encourage the continued
attention and dedication of Applied's officers to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control. The Agreements may make it more
expensive to accomplish a change in control and could under certain
circumstances adversely affect the ability of shareholders to benefit from a
change in control. The Board of Directors approved the Agreements, however,
because it believes that the continued attention and dedication of the officers
to their duties under adverse circumstances are ultimately in the best interests
of Applied and its shareholders, and can under some circumstances result in a
higher price being paid to shareholders in connection with a change in control.
14
<PAGE> 15
In addition to the benefits provided by the Agreements, the 1997 Long-Term
Performance Plan provides the following benefits to executive officers in the
event of a change in control, except as otherwise provided by the Board: (a) all
stock options outstanding will become fully exercisable as of the date of the
change in control, whether or not otherwise exercisable; (b) all restrictions
and conditions of stock awards will be deemed satisfied as of the date of the
change in control; and (c) all cash awards (including payments made under a
Management Incentive Plan) will be deemed to have been fully earned as of the
date of the change in control.
Also, pursuant to the Supplemental Executive Retirement Benefits Plan, a
participant may elect to receive, if the participant is terminated for any
reason, other than death, within three years after a change in control or is
receiving or is eligible to receive a retirement benefit at the time of the
change in control, the actuarial equivalent of the participant's retirement
benefit (or remaining portion thereof) in a lump sum. In addition, upon a change
in control, actively employed participants will be credited with additional
years of service and age (up to a maximum of 10 years) for benefit calculation
purposes, equal to one half of the difference between the participant's age at
the time of the change in control and age 65.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1998, the Board of Directors had seven meetings, four of
which were regularly scheduled quarterly meetings. Each of the directors
attended at least 75% of the aggregate number of meetings of the Board and all
committees of the Board on which he or she served. Among the standing committees
of the Board are the Audit, Executive Organization & Compensation, and Director
Nominating Committees.
The AUDIT COMMITTEE recommends the appointment of independent auditors,
reviews with the independent auditors the scope of the examination to be made,
reviews the scope of non-audit services performed by the independent auditors
and considers the effect of such non-audit services upon the independence of the
independent auditors, reviews with management and the independent auditors the
results of the audit after completion, reviews with management the adequacy of
Applied's internal accounting controls and reviews with management and the
independent auditors the auditors' report on internal accounting control and
other recommendations. The committee also monitors Applied's Year 2000
compliance efforts. Russel B. Every, Russell R. Gifford, John J. Kahl, J.
Michael Moore and Dr. Jerry Sue Thornton serve on the committee. The Audit
Committee met four times during fiscal 1998.
The EXECUTIVE ORGANIZATION & COMPENSATION COMMITTEE reviews and makes
recommendations to the Board regarding both compensation of executives and
planning for executive organization and succession. The committee also
administers the 1997 Long-Term Performance Plan, including the Management
Incentive Plan. William E. Butler, William G. Bares, Russel B. Every and L.
Thomas Hiltz, all of whom are non-employee directors, serve on the committee.
The Executive Organization & Compensation Committee met five times during fiscal
1998.
The DIRECTOR NOMINATING COMMITTEE considers and reviews possible nominees
for the Board to fill vacancies and makes appropriate recommendations to the
Board. L. Thomas Hiltz, William G. Bares, William E. Butler, John C. Dannemiller
and John J. Kahl serve on the committee. There are no procedures established for
submissions by shareholders; the committee would, however, consider a qualified
nominee submitted by shareholders. The Director Nominating Committee met once
during fiscal 1998.
The Board of Directors also has standing Corporate Governance, Executive,
and Futures Committees.
ITEM 2 -- RATIFICATION OF AUDITORS
The firm of Deloitte & Touche LLP, certified public accountants, has been
Applied's independent auditor since 1966 and has been appointed by management,
subject to ratification by the shareholders,
15
<PAGE> 16
to serve Applied as independent auditor for fiscal 1999. Applied has been
advised by Deloitte & Touche LLP that no partner of the firm has had any direct
financial interest or any material indirect financial interest in Applied or its
subsidiaries or any connection during the past three years with Applied or its
subsidiaries in the capacity of promoter, underwriter, voting trustee, director,
officer or employee.
Unless otherwise indicated, the accompanying proxy will be voted in favor
of ratifying the appointment of Deloitte & Touche LLP. The affirmative vote of a
majority of the shares represented at the meeting is sufficient to constitute
ratification. If Deloitte & Touche LLP withdraws or otherwise becomes
unavailable for reasons not presently known, the persons named as proxies will
vote for such other independent auditors as they deem appropriate.
One or more representatives of Deloitte & Touche LLP are expected to be
present at the meeting. They will have the opportunity to make a statement if
they desire, and will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Applied's
executive officers and directors, and persons who beneficially own more than 10%
of Applied Common Stock, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Executive officers, directors and greater than 10%
beneficial owners are required by SEC regulations to furnish Applied with copies
of all Section 16(a) forms they file.
Based solely on a review of the copies of forms furnished to Applied and
written representations from Applied's executive officers and directors, Applied
believes that during fiscal 1998 all applicable Section 16(a) filing
requirements were complied with on a timely basis.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals by shareholders for inclusion in the 1999 Annual Meeting Proxy
Statement must be received by Applied's Secretary at One Applied Plaza,
Cleveland, Ohio 44115, no later than May 18, 1999. Under Ohio law, only matters
included in the notice of meeting may be raised at a meeting of shareholders.
Any shareholder who wishes to nominate a candidate for director or bring any
other business from the floor of the 1999 annual meeting must notify Applied's
Secretary in writing by August 17, 1999.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
meeting other than those set forth in Items 1 and 2 of the attached Notice, but
should any other matters requiring a shareholder vote arise, including the
question of adjourning the meeting, the persons named in the accompanying proxy
will vote according to their best judgment in the interests of Applied.
By order of the Board of Directors.
ROBERT C. STINSON
Secretary
Dated: September 15, 1998
16
<PAGE> 17
PROXY PROXY
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. C. DANNEMILLER, J. R. WHITTEN AND R. C.
STINSON and each of them, as Proxies, with full power of substitution, to attend
the Annual Meeting of Shareholders of Applied Industrial Technologies, Inc., an
Ohio corporation, on October 20, 1998, and any adjournments, and to represent
and vote the shares which the undersigned is entitled to vote thereat on the
following matters as directed on the reverse side:
(The Board of Directors recommends a vote FOR Items 1 and 2.)
1. Election of Directors of Class II (for a term of
3 years). The nominees are:
William G. Bares, Dr. Roger D. Blackwell, Russel
B. Every and John J. Kahl.
2. Ratification of the appointment of Deloitte &
Touche LLP as independent auditors for the
current fiscal year.
3. In their discretion, the Proxies are authorized
to vote on such other business as may properly
come before the meeting.
(change of address)
---------------------------
---------------------------
---------------------------
---------------------------
(If you have written in the
above space, please mark
the corresponding box on
the reverse side of this
card.)
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEMS 1 AND 2.
-----------
SEE REVERSE
SIDE
-----------
...............................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 18
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
<TABLE>
<CAPTION>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C>
1. Election of Directors of Class II [ ] [ ] [ ]
(see reverse)
For, except vote withheld from the following
nominee(s):
- ------------------------------------------------
<CAPTION>
FOR AGAINST ABSTAIN
<C> <C> <C> <C>
2. Ratification of appointment of independent [ ] [ ] [ ]
auditors.
Change of Address [ ]
</TABLE>
Date: _________________, 1998
------------------------------
Signature(s)
------------------------------
Signature(s)
Note: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee, or
guardian, please give full
title as such.
................................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 19
CONFIDENTIAL VOTING INSTRUCTIONS
TO: KEY TRUST COMPANY OF OHIO, N.A., TRUSTEE (THE "TRUSTEE") FOR
APPLIED INDUSTRIAL TECHNOLOGIES, INC. RETIREMENT SAVINGS PLAN (THE "PLAN")
I, the undersigned, as a Participant in the Plan hereby instruct the Trustee to
vote (in person or by proxy) all shares of Common Stock of Applied Industrial
Technologies, Inc. allocated to my account and any shares not otherwise directed
under the Plan on the record date for the Annual Meeting of Shareholders to be
held on October 20, 1998.
(The Board of Directors recommends a vote FOR Items 1 and 2.)
1. Election of Directors of Class II (for a term of
3 years). The nominees are:
William G. Bares, Dr. Roger D. Blackwell, Russel
B. Every and John J. Kahl.
2. Ratification of the appointment of Deloitte &
Touche LLP as independent auditors for the
current fiscal year.
3. In their discretion, the Proxies are authorized
to vote on such other business as may properly
come before the meeting.
(change of address)
---------------------------
---------------------------
---------------------------
---------------------------
(If you have written in the
above space, please mark
the corresponding box on
the reverse side of this
card.)
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF NO DIRECTION IS MADE, THIS CARD WILL BE
VOTED FOR ITEMS 1 AND 2.
-----------
SEE REVERSE
SIDE
-----------
...............................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 20
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
<TABLE>
<CAPTION>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C>
1. Election of Directors of Class II [ ] [ ] [ ]
(see reverse)
For, except vote withheld from the following
nominee(s):
- ------------------------------------------------
<CAPTION>
FOR AGAINST ABSTAIN
<C> <C> <C> <C>
2. Ratification of appointment of independent [ ] [ ] [ ]
auditors.
Change of Address [ ]
</TABLE>
Date: __________________, 1998
------------------------------
Signature(s)
------------------------------
Signature(s)
Note: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee, or
guardian, please give full
title as such.
................................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 21
CONFIDENTIAL VOTING INSTRUCTIONS
TO: KEY TRUST COMPANY OF OHIO, N.A., TRUSTEE (THE "TRUSTEE") FOR
APPLIED INDUSTRIAL TECHNOLOGIES, INC. SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
(THE "PLAN")
I, the undersigned, as a Participant in the Plan hereby instruct the Trustee to
vote (in person or by proxy) all shares of Common Stock of Applied Industrial
Technologies, Inc. allocated to my account under the Plan on the record date for
the Annual Meeting of Shareholders to be held on October 20, 1998.
(The Board of Directors recommends a vote FOR Items 1 and 2.)
1. Election of Directors of Class II (for a term of
3 years). The nominees are:
William G. Bares, Dr. Roger D. Blackwell, Russel
B. Every and John J. Kahl.
2. Ratification of the appointment of Deloitte &
Touche LLP as independent auditors for the
current fiscal year.
3. In their discretion, the Proxies are authorized
to vote on such other business as may properly
come before the meeting.
(change of address)
---------------------------
---------------------------
---------------------------
---------------------------
(If you have written in the
above space, please mark
the corresponding box on
the reverse side of this
card.)
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF NO DIRECTION IS MADE, THIS CARD WILL BE
VOTED FOR ITEMS 1 AND 2.
-----------
SEE REVERSE
SIDE
-----------
...............................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 22
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
<TABLE>
<CAPTION>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C>
1. Election of Directors of Class II [ ] [ ] [ ]
(see reverse)
For, except vote withheld from the following
nominee(s):
------------------------------------------------
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Ratification of appointment of independent [ ] [ ] [ ]
auditors.
</TABLE>
Date: _________________, 1998
------------------------------
Signature(s)
------------------------------
Signature(s)
Note: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee, or
guardian, please give full
title as such.
................................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
