<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>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] 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
We are pleased to invite you to the 1999 Annual Meeting of the Shareholders
of Applied Industrial Technologies, Inc. The meeting will be held at our
corporate headquarters, One Applied Plaza, East 36th Street and Euclid Avenue,
Cleveland, Ohio, on Tuesday, October 19, 1999, at 10:00 a.m., local time, for
the purposes of:
1. Electing three persons to be directors for a term of three years.
2. Amending Applied's Code of Regulations to increase the maximum number of
directors from 12 to 14.
3. Ratifying the appointment by management of independent auditors for the
fiscal year ending June 30, 2000.
If you were a shareholder of record at the close of business on August 31,
1999, you are 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, 1999
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 OF PROXIES
The Board of Directors of Applied Industrial Technologies, Inc. is
soliciting your proxy to vote at our Annual Meeting of Shareholders. The meeting
will be held at 10:00 a.m., local time, on Tuesday, October 19, 1999, at
Applied's corporate headquarters, One Applied Plaza, East 36th Street and Euclid
Avenue, Cleveland, Ohio. This proxy statement summarizes information you need to
know to vote at the meeting. In this statement, "we," "our," "us," and "Applied"
all refer to Applied Industrial Technologies, Inc.
We will pay the cost of soliciting proxies. This statement and the
accompanying proxy card will be sent to shareholders by mail on or about
September 15, 1999. We will also pay the standard charges and expenses of
brokerage houses, or other nominees or fiduciaries, for forwarding these
materials to and obtaining proxies from registered holders of Applied Common
Stock and beneficial owners for whose accounts they hold shares. Directors,
officers, and other Applied employees, acting on our behalf, may also solicit
proxies, and Morrow & Co., Inc. has been retained, at an estimated fee of $6,500
plus expenses, to aid in soliciting proxies from brokers and institutional
holders. In addition to using the mail, proxies may be solicited personally, by
telephone, facsimile, and electronic means.
VOTING AT THE MEETING
Only shareholders of record at the close of business on August 31, 1999 may
vote at the meeting. As of the record date there were outstanding
shares of Applied Common Stock, without par value. The holders of
the majority of those shares will constitute a quorum to hold the meeting.
Each share is entitled to one vote. Abstentions and broker non-votes are
counted in determining the votes present at a meeting. A broker non-vote occurs
when a broker votes on some matters on the proxy card but not on others because
the broker does not have the authority to do so. 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.
Whether or not you expect to attend the meeting, WE URGE YOU TO VOTE. You
may vote by mailing your signed proxy card in the envelope provided. The card
indicates the number of shares that you own. Voting instructions are also
indicated on the card.
You may revoke your proxy before it is voted at the meeting by giving
notice of revocation to Applied's Secretary in writing, in open meeting, or by
other verifiable communication. Your presence at the meeting will not in and of
itself revoke your proxy.
If you plan to attend the meeting and vote in person, a ballot will be
available when you arrive. If, however, your shares are held in the name of your
broker, bank, or other nominee, you must bring an account statement or letter
from the nominee indicating that you were the beneficial owner of the shares on
August 31, 1999.
3
<PAGE> 4
ITEM 1 -- ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes. At the Annual
Meeting, directors of Class III, which has three positions, are to be elected
for a term of three years expiring in 2002. The properly nominated candidates
receiving the greatest number of votes will be elected. The persons serving as
directors of Class I for a term expiring in 2000 and as directors of Class II
for a term expiring in 2001 will continue in office.
The nominees for directors of Class III are William E. Butler, Russell R.
Gifford, and L. Thomas Hiltz. Each nominee currently serves as an Applied
director and was elected to his position at an annual meeting of shareholders.
The proxies named in the accompanying proxy card intend to vote for the election
of the three nominees unless authority is withheld. If any of the nominees
becomes unavailable to serve as a director, the proxies reserve full discretion
to vote for any other person or persons that may be nominated at the meeting
and/or to vote to reduce the number of directors. We are not aware of any
existing circumstances that would cause a nominee to be unavailable to serve.
Information concerning the nominees and the directors continuing in office
is shown below. Unless otherwise stated, the nominees and directors have held
the positions indicated for the last five years.
NOMINEES FOR ELECTION AS DIRECTORS OF CLASS III FOR A TERM EXPIRING IN 2002
WILLIAM E. BUTLER
Director since 1987, member of Director Nominating and Executive Organization &
Compensation Committees
BUSINESS EXPERIENCE: Mr. Butler, age 68, was Chairman, from 1992 until his
retirement in December 1995, of Eaton Corporation, a global manufacturer of
highly engineered products which serve vehicle, industrial, construction,
commercial, aerospace, and marine markets. Eaton's principal products include
truck transmissions, 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 Eaton from 1989 until his retirement.
OTHER DIRECTORSHIPS: Borg-Warner Automotive, Inc., Ferro Corporation, The
Goodyear Tire & Rubber Co., Pitney Bowes, Inc., U. S. Industries, Inc.
RUSSELL R. GIFFORD
Director since 1992, member of Audit, Corporate Governance, Executive, and
Futures Committees
BUSINESS EXPERIENCE: Mr. Gifford, age 60, is a partner with The Gifford Group, a
corporate and customer relations consulting company. He was Chief Operating
Officer of the City of Cleveland Public School District from June 1998 to March
1999. He was also President of CNG Energy Services Corp., a subsidiary of
Consolidated Natural Gas Company, from September 1994 until his retirement in
January 1997.
L. THOMAS HILTZ
Director since 1981, member of Corporate Governance, Director Nominating,
Executive, and Executive Organization & Compensation Committees
BUSINESS EXPERIENCE: Mr. Hiltz, age 53, is an attorney in Covington, Kentucky
and is one of five 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.
4
<PAGE> 5
PERSONS SERVING AS DIRECTORS OF CLASS I FOR A TERM EXPIRING IN 2000
THOMAS A. COMMES
Director since 1999, member of Audit Committee
BUSINESS EXPERIENCE: Mr. Commes, age 57, was President and Chief Operating
Officer of The Sherwin-Williams Company, a manufacturer, distributor, and
retailer of paints and painting supplies, from 1986 until his retirement in
March 1999. He was a Sherwin-Williams director from 1980 to March 1999. His
career also includes service as that company's Chief Financial Officer.
OTHER DIRECTORSHIPS: Generac Portable Products, Inc., KeyCorp, Pioneer-Standard
Electronics, Inc.
JOHN C. DANNEMILLER
Director since 1985, member of Director Nominating and Executive Committees
BUSINESS EXPERIENCE: Mr. Dannemiller, age 61, is Applied's Chairman and Chief
Executive Officer (since 1992). He was also Applied's President from October
1996 to January 1999.
OTHER DIRECTORSHIPS: Firstar Corporation, The Lamson & Sessions Co.
J. MICHAEL MOORE
Director since 1997, member of Futures Committee
BUSINESS EXPERIENCE: Mr. Moore, age 56, is President (since July 1997) of Oak
Grove Consulting 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. Applied acquired
Invetech in August 1997.
DR. JERRY SUE THORNTON
Director since 1994, member of Audit and Corporate Governance Committees
BUSINESS EXPERIENCE: Dr. Thornton, age 52, is President of Cuyahoga Community
College, the largest community college in Ohio with 20,000 students and 70
career and technical programs.
PERSONS SERVING AS DIRECTORS OF CLASS II FOR A TERM EXPIRING IN 2001
WILLIAM G. BARES
Director since 1986, member of Corporate Governance, Director Nominating, and
Executive Organization & Compensation Committees
BUSINESS EXPERIENCE: Mr. Bares, age 58, is Chairman (since April 1996),
President (since 1982), and 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 Lubrizol's Chief Operating Officer from 1987 to
December 1995.
OTHER DIRECTORSHIPS: KeyCorp, The Lubrizol Corporation, Oglebay Norton Company
5
<PAGE> 6
DR. ROGER D. BLACKWELL
Director since 1996, member of Futures Committee
BUSINESS EXPERIENCE: Dr. Blackwell, age 59, is a Professor of Marketing at The
Ohio State University College of Business and President of Blackwell Associates,
Inc., a marketing consulting firm.
OTHER DIRECTORSHIPS: Airnet Systems, Inc., The Banc Stock Group, Inc.,
Checkpoint Systems, Inc., Cheryl & Co., Inc., The Flex-funds, Intimate Brands,
Inc., Max & Erma's Restaurants, Inc., Worthington Foods, Inc.
RUSSEL B. EVERY
Director since 1986, member of Audit and Executive Organization & Compensation
Committees
BUSINESS EXPERIENCE: Mr. Every, age 74, has been a business consultant since his
retirement as Chairman of The Lamson & Sessions Co. in 1989. He served as a
director of Lamson & Sessions from 1979 to April 1995. Lamson & Sessions is a
diversified manufacturer and distributor of a broad line of thermoplastic
electrical, consumer, telecommunications, and fluid drainage products for major
domestic markets.
JOHN J. KAHL
Director since 1992, member of Audit, Director Nominating, and Futures
Committees
BUSINESS EXPERIENCE: Mr. Kahl, age 58, is Chief Executive Officer of Manco,
Inc., a 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, weather-
stripping and related home energy products for the "do-it-yourselfer," and
labels for both home and office.
OTHER DIRECTORSHIPS: Royal Appliance Mfg. Co.
6
<PAGE> 7
BENEFICIAL OWNERSHIP OF CERTAIN APPLIED SHAREHOLDERS AND MANAGEMENT
The following table shows the beneficial ownership of Applied Common Stock,
as of June 30, 1999, by: (a) each person known by us to own beneficially more
than 5% of Applied's outstanding shares; (b) all directors and nominees; (c)
each executive officer named in the Summary Compensation Table on page 8; and
(d) all directors, nominees, and executive officers as a group.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY OWNED PERCENT OF
NAME OF BENEFICIAL OWNER ON JUNE 30, 1999(1) CLASS(2)
------------------------ ------------------- ----------
<S> <C> <C>
National Rural Electric
Cooperative Association
4301 Wilson Blvd.
Arlington, Virginia 22203........................... 1,705,855(3) 8.1%
Applied Industrial Technologies, Inc.
Retirement Savings Plan
c/o Key Trust Company of Ohio, N.A., Trustee
127 Public Square
Cleveland, Ohio 44114............................... 1,632,532(4) 7.7%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, California 90401...................... 1,375,567(5) 6.5%
William G. Bares...................................... 29,105(6)
Dr. Roger D. Blackwell................................ 15,794(7)
William E. Butler..................................... 4,025
Thomas A. Commes...................................... 12,000
John C. Dannemiller................................... 378,866 1.8%
Russel B. Every....................................... 29,452
Russell R. Gifford.................................... 20,098(8)
L. Thomas Hiltz....................................... 865,720(9) 4.1%
John J. Kahl.......................................... 29,120
J. Michael Moore...................................... 344,584(10) 1.6%
David L. Pugh......................................... 80,000
Bill L. Purser........................................ 22,648
Robert C. Stinson..................................... 94,539
Dr. Jerry Sue Thornton................................ 8,183
John R. Whitten....................................... 93,799
All directors, nominees, and executive officers as a
group (22 individuals).............................. 2,181,624(11) 10.3%
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC"). Beneficial ownership may be
disclaimed for other purposes. Except as otherwise indicated, the
beneficial owner has sole voting and dispositive power over the shares. The
directors' and named executive officers' totals include shares that could
be acquired within 60 days after June 30, 1999, by exercising stock options
as follows: Mr. Dannemiller -- 123,075; Mr. Stinson -- 17,775; Mr.
Whitten -- 19,914; and the directors other than Mr. Dannemiller -- 2,000
per director.
(2) Percent of class is not indicated if less than 1%.
(3) National Rural Electric Cooperative Association reported its share
ownership in a Form 13F filed with the SEC on August 13, 1999.
(4) The Applied Industrial Technologies, Inc. Retirement Savings Plan holds
these shares for the benefit of Plan participants. The shares are held in
custody by Key Trust Company of Ohio, N.A., the Plan's trustee. The Plan's
participants and the trustee possess shared voting power with respect to
the shares. Participants may vote all shares allocated to their accounts
and act as named fiduciaries with respect to unallocated shares. If no
voting direction is received from participants or if legally required, the
trustee has authority to vote the allocated and unallocated shares.
(5) Dimensional Fund Advisors, Inc. reported its share ownership in a Form 13F
filed with the SEC on August 6, 1999.
7
<PAGE> 8
(6) Includes 2,250 shares owned by Mr. Bares' wife, who has sole voting and
dispositive power.
(7) Includes 225 shares owned by Dr. Blackwell's wife, who has sole voting and
dispositive power.
(8) Includes 300 shares owned by Mr. Gifford's wife, who has sole voting and
dispositive power.
(9) 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.
(10) 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.
(11) Includes 198,839 shares that could be acquired within 60 days after June
30, 1999, by exercising stock options. In determining the percentage of
share ownership, these stock option shares are added to both the
denominator and the numerator.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes compensation earned during the fiscal years
ended June 30, 1999, 1998, and 1997, by those persons who were, for the fiscal
year ended June 30, 1999, Applied's Chief Executive Officer and the four other
most highly compensated executive officers.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL AWARDS
COMPENSATION ---------------------------
------------------- RESTRICTED SECURITIES ALL OTHER
NAME AND BONUS STOCK AWARD(S) UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY (1) (2) OPTIONS (3)
------------------ ---- ------ ----- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
John C. Dannemiller 1999 $532,500 $ 0 $ 0 125,000 $10,018
Chairman & Chief Executive 1998 500,650 0 1,884,375 0 6,065
Officer 1997 470,050 297,821 0 0 22,058
David L. Pugh(4) 1999 174,519 100,000 1,150,000 60,000 28,846
President & Chief Operating
Officer
John R. Whitten 1999 224,500 0 0 20,000 22,527
Vice President -- 1998 211,000 0 418,750 0 8,734
Chief Financial Officer & 1997 197,665 115,565 0 0 14,970
Treasurer
Robert C. Stinson 1999 208,462 0 0 16,333 4,542
Vice President -- 1998 201,667 0 418,750 0 8,961
Chief Administrative Officer, 1997 191,200 113,069 0 0 15,129
General Counsel & Secretary
Bill L. Purser 1999 173,462 0 0 11,333 4,373
Vice President -- 1998 166,333 0 418,750 0 9,600
Chief Marketing Officer 1997 151,667 78,127 113,953 0 8,455
</TABLE>
- ---------------
(1) Amounts in this column are earnings under the annual Management Incentive
Plan, described in the Executive Organization & Compensation Committee
Report on pages 11 and 12.
(2) Amounts in this column represent restricted stock awards under the Long-Term
Performance Plan described in the Executive Organization & Compensation
Committee Report on page 12, valued at the closing market price of Applied
Common Stock on the dates of grant. Dividends are paid on restricted stock
at the same rate paid to all shareholders. At June 30, 1999, the persons
listed above held the following number of unvested shares of restricted
stock, valued at $19.00 per share, the closing market price of Applied
Common Stock on that date: Mr. Dannemiller, 67,500 shares, $1,282,500; Mr.
Pugh, 80,000 shares, $1,520,000; Mr. Whitten, 15,000 shares, $285,000; Mr.
Stinson, 15,000 shares, $285,000; and Mr. Purser, 15,000 shares, $285,000.
All of the shares of restricted stock are Performance-Accelerated Restricted
Stock Awards (described on page 12), except for 40,000 shares awarded to Mr.
Pugh, which shares vest 25% on each of the first through fourth
anniversaries of the grant date, subject to his continuous employment with
Applied.
(3) Amounts in this column for fiscal 1999 are (a) contributions made by Applied
and credited to the accounts of the named executive officers under Applied's
Retirement Savings Plan; (b) with respect to Messrs. Dannemiller and
Whitten, payments in lieu of vacation in the amounts of $6,116 and $18,038,
respectively; and (c) with respect to Mr. Pugh, a relocation allowance of
$28,846.
(4) Mr. Pugh joined Applied in January 1999.
8
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES
NUMBER OF % OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR (PER SHARE) DATE 5% 10%
---- ---------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John C. Dannemiller...... 125,000 21.3% $13.1563 2/15/09 $1,034,238 $2,620,975
David L. Pugh............ 60,000 10.2 14.2185 1/4/09 536,514 1,359,636
John R. Whitten.......... 20,000 3.4 13.1563 2/15/09 165,478 419,356
Robert C. Stinson........ 16,333 2.8 13.1563 2/15/09 135,138 342,467
Bill L. Purser........... 11,333 1.9 13.1563 2/15/09 93,768 237,628
</TABLE>
- ---------------
(1) The options' exercise price is the market price of Applied Common Stock on
the date the options were granted. The options vest 25% on each of the first
through fourth anniversaries of the grant date, subject to continuous
employment with Applied.
(2) The assumed rates of appreciation were selected by the SEC for illustrative
purposes and are not intended to predict or forecast future stock prices.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table shows information concerning stock option exercises in
fiscal 1999 by the Chief Executive Officer and Applied's four other most highly
compensated executive officers, and the values of in-the-money options held by
those individuals on June 30, 1999.
<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 $ 0 123,075 125,000 $1,364,203 $730,463
David L. Pugh............ 0 0 0 60,000 0 286,890
John R. Whitten.......... 15,000 90,583 19,914 20,000 203,727 116,874
Robert C. Stinson........ 17,589 106,217 17,775 16,333 175,297 95,445
Bill L. Purser........... 0 0 0 11,333 0 66,227
</TABLE>
9
<PAGE> 10
ESTIMATED RETIREMENT BENEFITS
UNDER SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS PLAN(1)
The following table shows estimated annual benefits payable upon retirement
at age 65 to participating 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 more than 15 years of service with Applied, Messrs.
Dannemiller and Stinson have more than 10 years, and Messrs. Pugh and Purser
have less than five years. Plan benefits are fully accrued after 20 years of
service. Under Mr. Pugh's employment agreement, described on page 16, his
annual straight life benefit at age 65 is guaranteed to be at least $50,000.
Also, if, while employed by Applied, he dies prior to the end of his fifth
year of service with Applied, he will be deemed to have five 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.
REPORT OF THE EXECUTIVE ORGANIZATION & COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
OVERVIEW
The Executive Organization & Compensation Committee (the "Committee")
consists 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.
10
<PAGE> 11
ELEMENTS OF COMPENSATION PROGRAM
(a) ANNUAL BASE SALARY
In setting base salaries, the Committee uses an annual competitive pay
analysis compiled by an independent, nationally recognized compensation and
benefits consulting firm (the "Independent Consultant"). This analysis shows the
market base salary and market total cash compensation at the average, median
(50th percentile), and 75th percentile levels for each executive officer
position. The analysis is based on data from a variety of published surveys. The
analysis also presents data from certain publicly held industrial distribution
companies, which group is more industry-specific to Applied than the published
industry index shown in the graph on page 13. In addition to the analysis, the
Committee considers an officer's time and level of experience in the position in
setting the base salary.
Generally, the Committee has set base salaries below the 50th percentile
levels. Due to Applied's performance, however, the executive officers did not
receive incentive payments in 1998 and 1999, and the consideration of annual
salary adjustments was deferred in the autumn of 1998. In light of these
circumstances, and recognizing the need to maintain a competitive executive
compensation program, the Committee in April 1999 adjusted the base salaries, in
general, to levels at or around the 50th percentile.
(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. The Committee reviews and discusses
proposed corporate and individual officer goals and then sets the goals for the
year. Both the individual and the corporate goals for fiscal 1999 were expressed
in terms of threshold, target (midpoint), and maximum levels of required
performance.
In fiscal 1999, Messrs. Dannemiller and Pugh had the corporate goals as
their individual goals. The corporate goals included objectives based on
Applied's pre-tax return on assets and pre-tax income. Each goal was weighted
50%. The other executive officers, including Messrs. Whitten, 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
individual and corporate goals. If, however, Applied does not achieve threshold
levels of performance on the corporate goals, no incentive payments are made to
the executive officers (even if individual goals are attained).
Assuming that corporate and individual goals are met, the amount of the
individual incentive payment is based on a formula, the components of which are
the market base salary and responsibility percentage assigned to the executive
officer by the Committee. For example, the Chief Executive Officer's target
incentive payment in fiscal 1999 was $357,700, being 70% (the responsibility
percentage) multiplied by the assigned market base salary. Responsibility
percentages for the other executive officers during fiscal 1999 varied based on
position.
For Mr. Dannemiller, the annual market total cash compensation at the 50th
percentile was $951,800 effective for calendar year 1999. Mr. Dannemiller's
actual base salary for fiscal 1999 was $532,500, his target incentive was
$357,700, and total cash compensation assuming target performance under the
Management Incentive Plan was $890,200. Because Applied did not achieve
threshold performance levels on the corporate goals in fiscal 1999, no incentive
payments were made to Mr. Dannemiller or any of the other executive officers
(except Mr. Pugh, pursuant to the agreement described on page 16).
The Deferred Compensation Plan (described on page 15) was adopted in part
to encourage increased investment in Applied Common Stock by the executive
officers. Because no awards were
11
<PAGE> 12
made under the Management Incentive Plan, no deferrals were made into the
Deferred Compensation Plan in 1999.
(2) STOCK-BASED AWARDS
In order to align more closely the executive officers with shareholder
interests and to compensate the officers based on performance measures that
directly enhance shareholder value, the Committee has, since 1993, awarded
Performance-Accelerated Restricted Stock ("PARS") to the officers. 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.
The Committee last made PARS awards to the executive officer team in August
1997. Fifty percent of those PARS will vest if Applied achieves either a fiscal
year ROA of 13.5%, or a stock price of $33.33 per share for 20 consecutive 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 had vested
within the first two years (assuming cash compensation was maintained at median
levels), the resulting total compensation would have equaled 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.
In fiscal 1999, the Committee made non-qualified stock option awards to the
executive officers for the first time since 1991. The grant was made based on an
analysis and recommendation by the Independent Consultant in order to be
competitive in the marketplace and as a means to retain officers. However,
because of the grant limitations in the Long-Term Performance Plan (noted below)
and the fact that options had been awarded during the year to other key
employees, the numbers of options available for grant to the executive officers
were below the levels shown by the Independent Consultant to be fully
competitive. The options' exercise price is the market price of Applied Common
Stock on the date the options were granted. The options vest 25% on each of the
first through fourth anniversaries of the grant date, subject to continuous
employment with Applied, and expire on the tenth anniversary.
The total number of stock-based awards that may be made under the Long-Term
Performance Plan in a fiscal year is 2% of the shares outstanding on the first
day of the year. In addition, available shares not awarded in a fiscal year may
be carried forward into future years.
(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
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.
12
<PAGE> 13
The Committee has taken steps to qualify awards made to the executive
officers under the Management Incentive Plan as performance-based. 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, S&P 500 INDEX, AND PEER INDUSTRY GROUP
The graph below compares the five-year cumulative total return from
investing $100 on June 30, 1994 in each of Applied Common Stock, the Standard
and Poor's 500 Index, and the Value Line Machinery Industry Index, with
dividends assumed to be reinvested when received.
<TABLE>
<CAPTION>
APPLIED S&P 500 MACHINERY INDUSTRY
------- ------- ------------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 98.71 126.12 135.57
1996 133.29 159.06 166.88
1997 180.49 214.34 258.54
1998 157.34 278.51 303.41
1998 150.14 342.24 324.93
</TABLE>
Source: Value Line, Inc.
13
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
J. Michael Moore, an Applied director, was Chairman and Chief Executive
Officer of Invetech Company ("Invetech"), which we acquired in August 1997. In
connection with the acquisition, Applied entered into a Consulting,
Non-competition and Confidentiality Agreement with Mr. Moore and Oak Grove
Consulting Group, Inc., which Mr. Moore owns and of which he is president.
Under this agreement, (a) 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; (b) Mr. Moore agreed not to compete with Applied until
the later of (1) July 31, 2002 and (2) 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; (c) 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); (d) Mr. Moore and Applied agreed to amend the Salary Continuation
Agreement between Mr. Moore and Invetech as described below; and (e) 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.
Under this agreement, Mr. Moore (currently 56 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 him (or his
beneficiary if he died) 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 that agreement. As required by the
Consulting, Non-competition and Confidentiality Agreement, Applied also amended
the Salary Continuation Agreement to provide that the benefits would be payable
to Mr. Moore beginning at age 60 and to increase the total benefits by $500,000.
COMPENSATION OF DIRECTORS
Mr. Dannemiller, an executive officer, does not receive additional
compensation for his 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 per 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 Chairman's
request. In addition, Applied pays directors $500 for any action taken by
unanimous written consent or via telephone conference of less than 30 minutes,
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 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.
In 1999, stock option awards under the 1997 Long-Term Performance Plan were
made to the non-employee directors for the first time, based on a recommendation
by Applied's independent executive compensation consultant. The awards improve
the competitiveness of our director compensation program and are expected to
assist in recruiting and retaining directors. Each non-employee director was
awarded 2,000 options with an exercise price of $14.406, the market price for
Applied Common Stock on the date of grant. The options are exercisable
immediately and expire on the tenth anniversary of the grant date.
The compensation received by non-employee directors is reviewed from time
to time by Applied's management. If management believes that a change is
appropriate to make the level of compensation competitive relative to the size
and nature of our business, management makes a
14
<PAGE> 15
recommendation to the Board. Approval of the change requires the affirmative
vote of a majority of the directors. The directors participate in our travel
accident plan and may also elect to participate in our contributory health
insurance plan.
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
The purposes of Applied's Deferred Compensation Plan for Non-employee
Directors 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.
As directors' compensation would otherwise become due and payable, Applied
transfers the amount deferred 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 or her compensation invested in Common Stock, then
Applied contributes to the trust an additional amount equal to 25% of the amount
so deferred.
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 30 days after
(a) the director's termination due to resignation, retirement, death, or
otherwise, or (b) the director's attainment of the age (not younger than 55)
specified in his or her deferral election form; or upon a change in control (as
defined in the plan) of Applied.
We have ten non-employee directors. All but one currently 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 executives to defer a portion or all of the awards payable under the
annual 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 a
deferral may have the amounts invested in Applied Common Stock and/or in a money
market fund. If 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 investing in Applied
Common Stock, like those available to directors under the Deferred Compensation
Plan for Non-employee Directors, are part of an overall effort to align
management with the interests of Applied's shareholders.
Distribution of 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.
Five of the eligible executive officers elected to participate in the Plan
in 1999. Because no awards were payable under the 1999 Management Incentive
Plan, no deferrals were made into the Deferred Compensation Plan.
15
<PAGE> 16
EMPLOYMENT AGREEMENT
In fiscal 1999, Applied entered into an employment agreement with Mr. Pugh
in connection with his hiring as President & Chief Operating Officer. The
agreement provided for an initial base salary of $375,000 and guaranteed him an
incentive payment of at least $100,000 for fiscal 1999. Stock option and
restricted stock grants made in 1999 pursuant to the agreement are disclosed in
the Summary Compensation Table. Mr. Pugh was named a participant in Applied's
Supplemental Executive Retirement Benefits Plan and guaranteed an annual
straight life retirement benefit at age 65 of at least $50,000. In addition, if,
while employed by Applied, he dies before the end of his fifth year of service,
he will be deemed to have five years of service for purposes of that plan. Under
the agreement, Mr. Pugh also agreed, following the termination of any of his
relationships with Applied (other than as a shareholder), not to compete with
Applied for two years and to maintain the confidentiality of all non-public
information pertaining to Applied for five years.
CHANGE IN CONTROL AGREEMENTS
AND OTHER RELATED ARRANGEMENTS
Applied has change in control agreements with its executive officers. The
agreements 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 the
termination occurs within three years after a change in control, as defined in
the agreements. The officer, in turn, is obligated not to compete with Applied
for one year following the termination. The principal benefits to be provided
under the agreements to the executive officers 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 reaches age 65
within three years after termination;
(b) a cash payment, instead 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 termination at the levels in effect immediately before
termination; and
(d) outplacement services.
An escrow account has been established with Key Trust Company of Ohio,
N.A., to secure payment of the benefits. Applied has deposited a percentage of
the amounts that would be payable to the officers under the agreements.
Additional deposits may be made in future years. No officer may make a claim on
the escrow assets unless Applied is in default under the agreement. All earnings
on the escrow assets are payable to Applied. The agreements also provide that if
any covered executive is required to pay a "parachute" excise tax, Applied will
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 shareholders' ability 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
16
<PAGE> 17
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.
In addition to the benefits provided by the agreements, the Long-Term
Performance Plan provides the following benefits to executive officers if a
change in control occurs: (a) all stock options outstanding will become fully
exercisable; (b) all restrictions and conditions of stock awards will be deemed
satisfied; and (c) all cash awards (including payments made under a Management
Incentive Plan) will be deemed to have been fully earned.
Also, under the Supplemental Executive Retirement Benefits Plan, if a
participant is terminated following a change in control or is receiving or is
eligible to receive a retirement benefit at the time of the change in control,
the participant is entitled to receive the actuarial equivalent of the
participant's retirement benefit 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 10 years) for benefit calculation purposes, equal to
half of the difference between the participant's age and age 65.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1999, the Board of Directors had eight meetings, six of which
were regularly scheduled. Except for Thomas A. Commes, each director attended at
least 75% of the total number of meetings of the Board and all committees on
which he or she served. Due to a prior scheduling conflict, Mr. Commes was
unable to attend the only meeting held in fiscal 1999 following his April
election to the Board. Among the Board's standing committees 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 their examination, reviews
the scope of non-audit services performed by the independent auditors and
considers the effect of those services on the auditors' independence, reviews
with management and the independent auditors the results of the audit, reviews
with management the adequacy of our internal accounting controls, and reviews
with management and the independent auditors the auditors' report on internal
accounting controls and other recommendations. The committee also monitors our
Year 2000 compliance efforts. Russell R. Gifford, Thomas A. Commes, Russel B.
Every, John J. Kahl, and Dr. Jerry Sue Thornton serve on the committee. The
Audit Committee met three times during fiscal 1999.
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 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 three times during fiscal 1999.
The DIRECTOR NOMINATING COMMITTEE considers and reviews possible nominees
for the Board to fill vacancies and makes 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 twice
during fiscal 1999.
The Board of Directors also has standing Corporate Governance, Executive,
and Futures Committees.
17
<PAGE> 18
ITEM 2 -- AMENDMENT OF CODE OF REGULATIONS
TO INCREASE MAXIMUM NUMBER OF DIRECTORS
Section 8 of our Code of Regulations provides that the number of directors
shall not be fewer than 9 nor more than 12. We currently have 11 directors. We
have proposed that the Code of Regulations be amended to increase the maximum
number of directors from 12 to 14. The amendment would permit the Board greater
flexibility in electing additional talented individuals with diverse skills to
its membership when they become available, rather than possibly having to wait
until an incumbent director's term ends.
The amendment requires the affirmative vote of a majority of the
outstanding shares of Applied Common Stock. If the amendment were approved,
Section 8 of the Code of Regulations would be amended to read as follows:
Section 8. Number.
The number of directors of the Corporation may be determined by the
vote of the holders of a majority of the shares represented at any annual
meeting or special meeting called for the purpose of electing directors or
by resolution adopted by affirmative vote of a majority of the directors
then in office, provided that the number of directors shall in no event be
fewer than nine (9) nor more than fourteen (14). When so fixed, such number
shall continue to be the authorized number of directors until changed by
the shareholders or directors by vote as aforesaid. No decrease in the
number of directors shall have the effect of removing any director prior to
the expiration of the term for which he was elected.
The Board of Directors recommends that you vote FOR the amendment.
ITEM 3 -- RATIFICATION OF AUDITORS
Deloitte & Touche LLP, certified public accountants, has served as our
independent auditor for many years and has been appointed by management, subject
to ratification by the shareholders, to serve again in fiscal 2000. 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 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.
18
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Applied's executive officers and directors, and persons who beneficially
own more than 10% of Applied Common Stock, must file initial reports of
ownership and reports of changes in ownership with the SEC and the New York
Stock Exchange. Copies of the reports must be furnished to Applied.
Based solely on a review of copies of forms furnished to us and written
representations from Applied's executive officers and directors, we believe that
during fiscal 1999 all filing requirements were complied with on a timely basis.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals by shareholders for inclusion in our 2000 Annual Meeting Proxy
Statement must be received by Applied's Secretary at One Applied Plaza,
Cleveland, Ohio 44115, no later than May 18, 2000. Under Ohio law, only
proposals included in the notice of meeting may be raised at a meeting of
shareholders. If you wish to nominate a candidate for director or bring any
other business from the floor of the 2000 annual meeting, you must notify
Applied's Secretary in writing by August 19, 2000.
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented
at the meeting. If any other matters requiring a shareholder vote arise,
including the question of adjourning the meeting, the persons named in the
accompanying proxy will vote your shares according to their judgment in the
interests of Applied.
By order of the Board of Directors.
ROBERT C. STINSON
Secretary
Dated: September 15, 1999
19
<PAGE> 20
PROXY PROXY
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned 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., on October 19,
1999, and any adjournments, and to represent and vote the shares which the
undersigned is entitled to vote on the following matters as directed on the
reverse side:
(The Board of Directors recommends a vote FOR Items 1, 2, and 3.)
(change of address)
1. Election of Directors of Class III (for a term
of 3 years). The nominees are: ---------------------------
William E. Butler, Russell R. Gifford, and L. ---------------------------
Thomas Hiltz. ---------------------------
---------------------------
2. Amendment of the Code of Regulations to increase (If you have written in the
the maximum size of the Board of Directors to 14 above space, please mark
Directors. the corresponding box on
the reverse side of this
3. Ratification of the appointment of Deloitte & card.)
Touche LLP as independent auditors for the
current fiscal year.
4. In their discretion, the Proxies are authorized
to vote on such other business as may properly
come before the meeting.
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF YOU DO NOT PROVIDE DIRECTION, THIS PROXY
WILL BE VOTED FOR ITEMS 1, 2, AND 3.
--------------
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> 21
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 FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. Election of Directors of Class III 2. Amendment of Code of Regulations to [ ] [ ] [ ]
(see reverse) [ ] [ ] [ ] increase maximum size of Board of Directors.
For, except vote withheld from the
following nominee(s): 3. Ratification of appointment of independent
auditors. [ ] [ ] [ ]
- -----------------------------------------------
Change of Address [ ]
Date: __________________, 1999
------------------------------
Signature(s)
------------------------------
Signature(s)
Note: Please sign exactly as
name appears on this card.
Joint owners should each sign.
When signing as attorney,
executor, administrator,
trustee, or guardian, please
give full title as such.
</TABLE>
................................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 22
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, 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 19, 1999.
(The Board of Directors recommends a vote FOR Items 1, 2, and 3.)
(change of address)
1. Election of Directors of Class III (for a term
of 3 years). The nominees are: ---------------------------
William E. Butler, Russell R. Gifford, and L. ---------------------------
Thomas Hiltz. ---------------------------
---------------------------
2. Amendment of the Code of Regulations to increase (If you have written in the
the maximum size of the Board of Directors to 14 above space, please mark
Directors. the corresponding box on
the reverse side of this
3. Ratification of the appointment of Deloitte & card.)
Touche LLP as independent auditors for the
current fiscal year.
4. In their discretion, the Proxies are authorized
to vote on such other business as may properly
come before the meeting.
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF YOU DO NOT PROVIDE DIRECTION, THIS CARD
WILL BE VOTED FOR ITEMS 1, 2, AND 3.
-------------
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> 23
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 FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. Election of Directors of Class III [ ] [ ] [ ] 2. Amendment of Code of Regulations to [ ] [ ] [ ]
(see reverse) increase maximum size of Board of Directors.
For, except vote withheld from the
following nominee(s): 3. Ratification of appointment of independent
auditors. [ ] [ ] [ ]
- ----------------------------------------
Change of Address [ ]
Date: __________________, 1999
------------------------------
Signature(s)
------------------------------
Signature(s)
Note: Please sign exactly as
name appears on this card.
Joint owners should each sign.
When signing as attorney,
executor, administrator,
trustee, or guardian, please
give full title as such.
</TABLE>
................................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 24
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, 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 19, 1999.
(The Board of Directors recommends a vote FOR Items 1, 2, and 3.)
(change of address)
1. Election of Directors of Class III (for a term
of 3 years). The nominees are: ---------------------------
William E. Butler, Russell R. Gifford, and L. ---------------------------
Thomas Hiltz. ---------------------------
---------------------------
2. Amendment of the Code of Regulations to increase (If you have written in the
the maximum size of the Board of Directors to 14 above space, please mark
Directors. the corresponding box on
the reverse side of this
3. Ratification of the appointment of Deloitte & card.)
Touche LLP as independent auditors for the
current fiscal year.
4. In their discretion, the Proxies are authorized
to vote on such other business as may properly
come before the meeting.
WHEN PROPERLY EXECUTED, THESE INSTRUCTIONS WILL BE VOTED IN THE MANNER DIRECTED
ON THE REVERSE SIDE OF THIS CARD; IF YOU DO NOT PROVIDE DIRECTION, THIS CARD
WILL BE VOTED FOR ITEMS 1, 2, AND 3.
-------------
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> 25
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 FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. Election of Directors of Class III [ ] [ ] [ ] 2. Amendment of Code of Regulations to [ ] [ ] [ ]
(see reverse) increase maximum size of Board of Directors.
For, except vote withheld from the
following nominee(s): 3. Ratification of appointment of independent
auditors. [ ] [ ] [ ]
- ----------------------------------------
Change of Address [ ]
Date: __________________, 1999
------------------------------
Signature(s)
------------------------------
Signature(s)
Note: Please sign exactly as
name appears on this card.
Joint owners should each sign.
When signing as attorney,
executor, administrator,
trustee, or guardian, please
give full title as such.
</TABLE>
................................................................................
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
