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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:
[ ] 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
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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[APPLIED INDUSTRIAL TECHNOLOGIES LOGO]
ONE APPLIED PLAZA
CLEVELAND, OHIO 44115
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
We are pleased to invite you to the 2001 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 16, 2001, at 10:00 a.m., local time, for
the purposes of:
1. Electing three persons to be directors for a term of three years; and
2. Ratifying the appointment of independent auditors for the fiscal year
ending June 30, 2002.
If you were a shareholder of record at the close of business on August 28,
2001, 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 12, 2001
YOUR VOTE IS IMPORTANT! WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
PROMPTLY VOTE BY TELEPHONE, VIA THE INTERNET, OR BY EXECUTING AND RETURNING THE
ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. VOTING EARLY WILL
HELP AVOID ADDITIONAL SOLICITATION COSTS.
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[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 16, 2001, at our
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 mailed to shareholders on or about September 12,
2001. We will also pay the standard charges and expenses of brokers, or other
nominees or fiduciaries, for forwarding these materials to and obtaining proxies
from registered shareholders 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 and by telephone, facsimile, and electronic means.
VOTING AT THE MEETING
Only shareholders of record at the close of business on August 28, 2001,
may vote at the meeting. As of the record date, there were outstanding
19,641,952 shares of Applied Common Stock, without par value. The holders of a
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, because 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 telephone, via the Internet, or by mailing your signed proxy card in
the envelope provided. The card indicates the number of shares that you own.
Instructions for each voting method are also indicated on the card. Votes
submitted by telephone or via the Internet must be received by Sunday, October
14, 2001.
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 by 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 other
evidence that you were the beneficial owner of the shares on August 28, 2001.
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ITEM 1 -- ELECTION OF DIRECTORS
Our 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 2004. The properly nominated candidates receiving the greatest
number of votes will be elected. The persons serving as directors of Class III
for a term expiring in 2002 and as directors of Class I for a term expiring in
2003 will continue in office.
The nominees for directors of Class II are William G. Bares, Dr. Roger D.
Blackwell, and Stephen E. Yates. Mr. Bares and Dr. Blackwell currently serve as
Applied directors and were elected to their positions at an annual meeting of
shareholders. Mr. Yates is also a current director, having been elected by the
Board in January 2001. Russel B. Every, a Class II director since 1986, is
retiring from the Board. Consequently, the Board has reduced its size to ten
directors and the size of Class II to three directors.
The proxies named in the accompanying proxy card intend to vote for 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 II FOR A TERM EXPIRING IN 2004
WILLIAM G. BARES
Director since 1986, member of Corporate Governance, Director Nominating, and
Executive Organization & Compensation Committees
BUSINESS EXPERIENCE: Mr. Bares, age 60, is Chairman, President, and Chief
Executive Officer of The Lubrizol Corporation. Lubrizol is a $1.7 billion fluid
technology company concentrating on high performance chemicals, systems, and
services for industry and transportation.
OTHER DIRECTORSHIPS: KeyCorp, The Lubrizol Corporation, Oglebay Norton Company
DR. ROGER D. BLACKWELL
Director since 1996, member of Futures Committee
BUSINESS EXPERIENCE: Dr. Blackwell, age 61, 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., Anthony & Sylvan Pools Corporation,
Cheryl & Co., Inc., Diamond Hill Investment Group, Inc., The Flex-funds,
Frontstep, Inc., Intimate Brands, Inc., Max & Erma's Restaurants, Inc.
STEPHEN E. YATES
Director since January 2001, member of Futures Committee
BUSINESS EXPERIENCE: Mr. Yates, age 53, is President (since 1999) of USAA
Information Technology Company, which provides information technology and
telecommunications services to all USAA activities. USAA is a leading financial
services company, offering its 4.5 million members a comprehensive range of
insurance, banking, and investment products and services. From 1997 to 1999, Mr.
Yates was Vice President-Information Technology & Logistics of Rockwell
Automation, a
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division of Rockwell International Corporation. From 1989 to 1997, he was Vice
President-Information Technology for Brown & Root, Inc., a global engineering
and construction firm.
PERSONS SERVING 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: Until his retirement in 1995, Mr. Butler, age 70, was
Chairman and Chief Executive Officer of Eaton Corporation. Eaton is a global
diversified industrial manufacturer which is a leader in fluid power systems;
electrical power quality, distribution, and control; automotive engine air
management and fuel economy; and intelligent truck systems for fuel economy and
safety.
OTHER DIRECTORSHIPS: Borg-Warner Automotive, Inc., Ferro Corporation, The
Goodyear Tire & Rubber Co., U. S. Industries, Inc.
RUSSELL R. GIFFORD
Director since 1992, member of Audit, Corporate Governance, Executive, and
Futures Committees
BUSINESS EXPERIENCE: Mr. Gifford, age 62, 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 1998 to 1999. He
was also President of CNG Energy Services Corp., a subsidiary of Consolidated
Natural Gas Company, from 1994 until his retirement in 1997.
L. THOMAS HILTZ
Director since 1981, member of Corporate Governance, Director Nominating,
Executive, and Executive Organization & Compensation Committees
BUSINESS EXPERIENCE: Mr. Hiltz, age 55, 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.
DAVID L. PUGH
Director since 2000, member of Director Nominating and Executive Committees
BUSINESS EXPERIENCE: Mr. Pugh, age 52, is Applied's Chairman (since October
2000) and Chief Executive Officer (since January 2000). He was Applied's
President from January 1999 to October 2000 and Chief Operating Officer from
January 1999 to January 2000. From 1996 to 1998, he was Senior Vice President of
the Industrial Control Group of Rockwell Automation, a division of Rockwell
International Corporation.
PERSONS SERVING AS DIRECTORS OF CLASS I FOR A TERM EXPIRING IN 2003
THOMAS A. COMMES
Director since 1999, member of Audit and Director Nominating Committees
BUSINESS EXPERIENCE: From 1986 until his retirement in 1999, Mr. Commes, age 59,
was President and Chief Operating Officer of The Sherwin-Williams Company, a
manufacturer, distributor, and retailer of paints and painting supplies. He was
a Sherwin-Williams director from 1980 to 1999. His career also includes service
as that company's Chief Financial Officer.
OTHER DIRECTORSHIPS: Pioneer-Standard Electronics, Inc.
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J. MICHAEL MOORE
Director since 1997, member of Futures Committee
BUSINESS EXPERIENCE: Mr. Moore, age 58, is President (since 1997) of Oak Grove
Consulting Group, Inc. He was Chairman (from 1989 to 1997) and Chief Executive
Officer (from 1981 to 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 1997.
DR. JERRY SUE THORNTON
Director since 1994, member of Audit and Corporate Governance Committees
BUSINESS EXPERIENCE: Dr. Thornton, age 54, is President of Cuyahoga Community
College, the largest community college in Ohio, serving 21,000 students annually
with 70 career and technical programs.
OTHER DIRECTORSHIPS: American Greetings Corporation, National City Corporation,
OfficeMax, Inc., RPM, Inc.
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BENEFICIAL OWNERSHIP OF CERTAIN APPLIED SHAREHOLDERS AND MANAGEMENT
The following table shows the beneficial ownership of Applied Common Stock,
as of June 30, 2001, 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.
COMMON SHARES
BENEFICIALLY OWNED PERCENT OF
NAME OF BENEFICIAL OWNER ON JUNE 30, 2001(1) CLASS(2)
------------------------ ------------------- ----------
Applied Industrial Technologies, Inc.
Retirement Savings Plan
c/o Key Trust Company of Ohio, N.A., Trustee
127 Public Square
Cleveland, Ohio 44114.................................. 1,756,262(3) 8.9%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, California 90401......................... 1,555,842(4) 7.9%
Thomson Horstmann & Bryant, Inc.
Park 80 West/Plaza One
Saddle Brook, New Jersey 07663......................... 1,004,725(5) 5.1%
William G. Bares......................................... 40,316(6)
Dr. Roger D. Blackwell................................... 25,038(7)
William E. Butler........................................ 8,025
Donald L. Chargin........................................ 41,092
Thomas A. Commes......................................... 20,385
Russel B. Every.......................................... 40,396
Russell R. Gifford....................................... 29,328(8)
L. Thomas Hiltz.......................................... 877,325(9) 4.5%
J. Michael Moore......................................... 318,970(10) 1.6%
David L. Pugh............................................ 115,445
Bill L. Purser........................................... 36,689
Robert C. Stinson........................................ 119,866
Dr. Jerry Sue Thornton................................... 17,724
John R. Whitten.......................................... 121,466
Stephen E. Yates......................................... 2,491
All directors, nominees, and executive officers as a
group (21 individuals)................................. 1,979,125(11) 9.8%
---------------
(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, 2001, by exercising stock options
as follows: Mr. Chargin -- 18,966; Mr. Pugh -- 45,000; Mr.
Purser -- 13,166; Mr. Stinson -- 33,941; Mr. Whitten -- 36,325; Mr.
Yates -- 2,000; and the directors other than Messrs. Pugh and
Yates -- 6,000 per director.
(2) Percent of class is not indicated if less than 1%.
(3) 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.
(4) Dimensional Fund Advisors, Inc. reported its share ownership in a Form 13F
filed with the SEC on August 2, 2001.
(5) Thomson Horstmann & Bryant, Inc. filed a Form 13F with the SEC on July 11,
2001, indicating it has sole voting power for 518,225 shares and shared
voting power for 26,100 shares.
(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 313 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 38,773 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 251,853 shares that could be acquired within 60 days after June
30, 2001, by exercising stock options. In determining the percentage of
share ownership, these stock option shares are added to both the
denominator and the numerator. Also includes 32,451 shares held by
Applied's Retirement Savings Plan for the benefit of executive officers;
these shares are included as well in the figure shown for the plan's
holdings.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes compensation earned during the fiscal years
ended June 30, 2001, 2000, and 1999, by those persons who were, for the fiscal
year ended June 30, 2001, Applied's Chief Executive Officer and the four other
most highly compensated executive officers.
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ ---------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND BONUS COMPENSATION STOCK AWARD(S) UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY (1) (2) (3) OPTIONS (4)
------------------ ---- ------ ----- ------------ -------------- ---------- ------------
David L. Pugh 2001 $500,481 $ 0 $ 206 $ 0 130,000 $ 6,979
Chairman & Chief 2000 403,845 474,000 40,205 0 60,000 19,808
Executive Officer 1999(5) 174,519 100,000 0 1,150,000 60,000 28,846
Bill L. Purser 2001 266,539 0 531 0 60,000 10,352
President & Chief 2000 190,769 167,400 820 0 30,000 4,517
Operating Officer 1999 173,462 0 0 0 11,333 4,373
John R. Whitten 2001 270,577 0 0 0 25,000 6,998
Vice President -- 2000 254,807 243,900 350 0 36,000 17,870
Chief Financial 1999 224,500 0 0 0 20,000 22,527
Officer & Treasurer
Robert C. Stinson 2001 238,308 0 0 0 20,000 9,192
Vice President -- 2000 224,231 208,800 327 0 32,000 16,450
Chief 1999 208,462 0 0 0 16,333 4,542
Administrative
Officer, General
Counsel & Secretary
Donald L. Chargin 2001 206,154 0 116 0 20,000 9,754
Vice President -- 2000 187,692 179,960 7,273 0 40,000 25,738
Unit President, 1999 169,422 0 3,624 217,500 11,333 26,201
Industrial Products
---------------
(1) Amounts in this column are earnings under the annual Management Incentive
Plan, described in the Executive Organization & Compensation Committee
Report on page 11.
(2) Amounts in this column for fiscal 2001 reflect gross-up payments to cover
taxes related to spousal travel. Previous years' amounts included relocation
expense reimbursements and club initiation fees as well.
(3) Amounts in this column represent restricted stock awards under the Long-Term
Performance Plan, described in the Executive Organization & Compensation
Committee Report on pages 11 and 12, valued at the closing market price of
Applied Common Stock on the grant dates. Dividends are paid on restricted
stock at the same rate paid to all shareholders. At June 30, 2001, the
persons listed above held the following number of unvested shares of
restricted stock, valued at $18.95 per share, the closing market price on
that date: Mr. Pugh, 60,000 shares, $1,137,000; Mr. Purser, 15,000 shares,
$284,250; Mr. Whitten, 15,000 shares, $284,250; Mr. Stinson, 15,000 shares,
$284,250; and Mr. Chargin, 15,000 shares, $284,250. All of the shares are
performance-accelerated restricted stock (described on page 11), except for
20,000 shares awarded to Mr. Pugh, one-half of which shares will vest on
each of the third and fourth anniversaries of the grant date, subject to his
continuous employment with Applied.
(4) Amounts in this column for fiscal 2001 are contributions made by Applied and
credited to the officers' accounts in Applied's Retirement Savings Plan.
(5) Mr. Pugh joined Applied midway through fiscal 1999.
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OPTION GRANTS IN LAST FISCAL YEAR
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%
---- ---------- ------------- ----------- ---------- ---------- ----------
David L. Pugh............ 130,000 29.7% $19.344 1/18/11 $1,581,450 $4,007,770
Bill L. Purser........... 60,000 13.7 19.344 1/18/11 729,900 1,849,740
John R. Whitten.......... 25,000 5.7 19.344 1/18/11 304,125 770,725
Robert C. Stinson........ 20,000 4.6 19.344 1/18/11 243,300 616,580
Donald L. Chargin........ 20,000 4.6 19.344 1/18/11 243,300 616,580
---------------
(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 2001 by Applied's Chief Executive Officer and four other most highly
compensated executive officers, and the values of in-the-money options held by
those individuals on June 30, 2001.
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
---- ---------- -------- ----------- ------------- ----------- -------------
David L. Pugh............. 0 $ 0 45,000 205,000 $175,425 $242,355
Bill L. Purser............ 0 0 13,166 88,167 49,562 83,033
John R. Whitten........... 2,589 29,309 36,325 62,000 248,012 118,177
Robert C. Stinson......... 0 0 33,941 52,167 239,570 100,864
Donald L. Chargin......... 0 0 18,966 55,667 72,801 99,765
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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 (the "SERP").
YEARS OF SERVICE(2)
-----------------------------------------
REMUNERATION(3) 5 10 15 20
--------------- -------- -------- -------- --------
$ 200,000 $ 22,500 $ 45,000 $ 67,500 $ 90,000
300,000 33,750 67,500 101,250 135,000
400,000 45,000 90,000 135,000 180,000
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
1,200,000 135,000 270,000 405,000 540,000
---------------
(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) The named executive officers have the following number of years of service
with Applied for purposes of the SERP: Messrs. Chargin and Whitten, more
than 20; Mr. Purser, more than 15; Mr. Stinson, more than 10; and Mr. Pugh,
less than five. Plan benefits are fully accrued after 20 years of service.
Mr. Pugh's annual straight life SERP 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 most recent three fiscal years
is found in the Summary Compensation table on page 8.
REPORT OF THE EXECUTIVE ORGANIZATION & COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
OVERVIEW
The Executive Organization & Compensation 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 elements 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
In setting annual base salaries and target incentives, the committee uses a
competitive pay analysis compiled by an independent, nationally recognized
compensation and benefits consulting firm (the "Independent Consultant"). This
analysis shows the median (50(th) percentile) market base salary and total cash
compensation for each executive officer position. The analysis is based on data
from a number of published and private surveys, both broadbased and for
comparable industries,
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with all data adjusted to reflect comparable company size. The companies
surveyed may include some of the members of the peer group identified in the
performance graph on page 13 if those companies participated in one or more of
the surveys.
In addition to the analysis, the committee considers an officer's
performance and levels of experience and responsibility in the position in
setting the base salary. In general, the committee has set base salaries at or
below median market levels.
(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.
In fiscal 2001, the committee assigned certain executive officers,
including Messrs. Pugh, Purser, Whitten, and Stinson, the corporate goals
(achievement of sales growth and earnings per share objectives) as their
individual goals. Other executive officers, including Mr. Chargin, had
individual goals (in addition to the corporate goals) relating specifically to
the business unit or function for which the officer is responsible. These goals
varied in relative weight. The size of the Management Incentive Plan payments
depends on the level of performance achieved on both individual and corporate
goals. If 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).
If corporate and individual goals are met, the individual incentive payment
is based on a formula, the components of which are the market median base salary
and responsibility percentage. The committee assigns these figures to each
executive officer after considering the Independent Consultant's analysis. For
example, Mr. Pugh's target incentive as Chairman & Chief Executive Officer in
fiscal 2001 would have been $498,750, being his responsibility percentage of 75%
multiplied by the market median base salary of $665,000. Mr. Pugh's actual
target incentive in 2001 was somewhat less due to his assuming his current
position in October, resulting in a prorated target for the year.
Payments range from 0% to 200% (for outstanding achievement levels) of the
target incentive, depending on performance in relation to the goals. Due to the
economic downturn, Applied did not achieve threshold levels of performance on
its corporate goals in fiscal 2001 and, consequently, the executive officers did
not earn incentive awards. Accordingly, total cash compensation was
substantially below median market levels.
(2) STOCK-BASED AWARDS
In order to align more closely the executive officers with shareholder
interests and to compensate the officers based on long-term performance measures
that directly enhance shareholder value, the committee in 1997 awarded
performance-accelerated restricted stock ("PARS") to the officers. PARS are
awards of restricted shares of Applied Common Stock that vest six years from the
date of grant; however, PARS can vest earlier if performance goals based on
stock price or pre-tax return on assets ("ROA") are met.
Fifty percent of the PARS awarded in 1997 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 days.
Based on the Independent Consultant's recommendation and to be competitive
in the marketplace with respect to the long-term component of executive
compensation, the committee
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also makes annual non-qualified stock option grants to the executive officers.
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 specific number of options
granted to an executive officer is based on the officer's position and level of
responsibility. Option grants have also been limited by the number of shares
available for grant under the Long-Term Performance Plan -- 2% of the shares
outstanding on the first day of the fiscal year, plus shares not awarded, if
any, that are carried forward from prior 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.
The committee has taken steps to qualify Management Incentive Plan awards
as performance-based. In general, the committee seeks to preserve the
deductibility of compensation paid to Applied's executive officers, but 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
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN OF APPLIED,
S&P 500 INDEX, AND PEER COMPANY GROUP
The graph below compares the five-year cumulative total return from
investing $100 on June 30, 1996 in each of Applied Common Stock, the Standard
and Poor's 500 Index, and a group of eight peer companies selected on a
line-of-business basis: Airgas, Inc., Federal-Mogul Corporation, Genuine Parts
Company, W.W. Grainger, Inc., Kaman Corporation, Lawson Products, Inc., MSC
Industrial Direct Co., Inc., and The Timken Company.
Cumulative total return assumes that all dividends are reinvested when
received. The returns of the companies in the peer group are weighted based on
the companies' relative stock market capitalization.
LINE GRAPH
APPLIED S&P 500 PEER GROUP
------- ------- ----------
1996 $ 100 $ 100 $ 100
1997 $135.41 $134.61 $121.47
1998 $118.04 $ 175.1 $140.52
1999 $112.64 $214.94 $125.24
2000 $ 99.98 $227.76 $ 70.7
2001 $112.86 $191.72 4 89.94
--------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------
Applied 100.00 135.41 118.04 112.64 99.98 112.86
S&P 500 100.00 134.61 175.10 214.94 227.76 191.72
Peer Group 100.00 121.47 140.52 125.24 70.70 89.94
Source: Value Line, Inc.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
J. Michael Moore, an Applied director, was Chairman and Chief Executive
Officer of Invetech Company, which we acquired in 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.
Oak Grove and Mr. Moore received payments from Applied during fiscal 2001
as a consequence of the following provisions of the 1997 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; and (c) Applied agreed to pay to Oak Grove, during Mr. Moore's
and his spouse's lives, $700 per month for health insurance to be obtained by
Oak Grove for Mr. Moore, his spouse, and eligible children.
COMPENSATION OF DIRECTORS
Mr. Pugh, Applied's Chairman & Chief Executive Officer, does 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 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.
Annual stock option awards are made to the non-employee directors based on
recommendations by an outside compensation consultant. The awards improve the
competitiveness of our director compensation program and assist in recruiting
and retaining directors. In fiscal 2001, each non-employee director was awarded
2,000 options with an exercise price equal to the market price for Applied
Common Stock on the grant date. 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 the Board's Corporate Governance Committee. If the committee believes
that a change is necessary to make the level of compensation competitive
relative to the size and nature of our business, then the committee will present
its recommendation to the Board. Approval of the change requires the affirmative
vote of a majority of the directors. The directors also participate in our
travel accident plan and may elect to participate in our contributory health
insurance plan.
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
The purposes of our 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.
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15
Deferred fees are invested, at a director's option, in a money market fund
and/or Applied Common Stock. As directors' compensation would otherwise become
due and payable, Applied transfers the amount deferred, in either cash or
treasury shares (depending on which option the director chooses), to a trust
maintained by Key Trust Company of Ohio, N.A., as trustee. If a director elects
to have his or her compensation invested in Common Stock, then Applied
contributes an additional amount equal to 25% of the amount so invested.
Distribution of a director's account commences as designated by the
director in his or her election on a date 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 election form; or upon a change in control (as defined in the plan) of
Applied.
Of our ten non-employee directors, eight 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 Common Stock, then Applied
contributes an additional amount equal to 10% of the amount so invested. 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 are 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.
Four of the executive officers named in the Summary Compensation table on
page 8 elected to participate in the Plan in 2001. Because no awards were
payable under the 2001 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 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
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16
(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 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 2001, the Board of Directors had six meetings. Each director
attended at least 75% of the total number of meetings of the Board and all
committees on which he or she served. Among the Board's 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. Russell R. Gifford, Thomas A.
Commes, Russel B. Every, and Dr. Jerry Sue Thornton, all of whom are independent
directors, serve on the committee. The Audit Committee met three times during
fiscal 2001.
16
17
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 independent directors, serve on the committee. The Executive
Organization & Compensation Committee met seven times during fiscal 2001.
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, Thomas A. Commes, and David
L. Pugh 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 three
times during fiscal 2001.
The Board of Directors also has standing Corporate Governance, Executive,
and Futures Committees.
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
The Audit Committee is composed solely of independent directors, as defined
in the New York Stock Exchange listing standards, and operates under a written
charter, which was last amended by the Board in 2000.
In performing its responsibilities relating to the audit of Applied's
consolidated financial statements for fiscal 2001, the committee reviewed and
discussed the financial statements with management and Applied's independent
auditors, Deloitte & Touche LLP. The committee also discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, "Communication with Audit Committees."
The independent auditors provided the letter and written disclosures
required by Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees," and the committee discussed with the
independent auditors their independence. The committee also considered whether
the provision of non-audit services to Applied by the independent auditors is
compatible with maintaining their independence.
Based on the reviews and discussions described above, the committee
recommended to the Board of Directors that the audited financial statements be
included in Applied's fiscal 2001 Annual Report on Form 10-K for filing with the
SEC.
AUDIT COMMITTEE
Russell R. Gifford
Thomas A. Commes
Russel B. Every
Dr. Jerry Sue Thornton
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ITEM 2 -- RATIFICATION OF AUDITORS
Deloitte & Touche LLP has served as our independent auditors for many years
and has been appointed by the Board of Directors, upon the Audit Committee's and
management's recommendations and subject to shareholder ratification, to serve
again in fiscal 2002. 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.
Aggregate fees billed to Applied for fiscal 2001 by Deloitte & Touche LLP,
the member firms of Deloitte Touche Tohmatsu, and their respective affiliates,
were as follow:
Audit fees: $320,250
Financial information systems
design and implementation fees: $ 0
All other fees: $584,680
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 and
will be available to respond to appropriate questions.
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 2001 all filing requirements were complied with on a timely basis
except in two instances. An April stock option exercise by Richard C. Shaw, Vice
President - Communications & Learning, was inadvertently reported one month
late. Also, we determined that a retention program provided to James T. Hopper,
Vice President - Chief Information Officer, might be deemed a reportable
derivative security because the program's cash payment will be calculated in
part by reference to Applied's stock price. We originally filed the program,
which was approved by the Board's Executive Organization & Compensation
Committee, as an exhibit to our fiscal 2000 Form 10-K. After the Section 16(a)
implications were identified, the program was also reported on an "Annual
Statement of Changes in Beneficial Ownership" form in August 2001.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Proposals by shareholders for inclusion in our 2002 Annual Meeting Proxy
Statement must be received by Applied's Secretary at One Applied Plaza,
Cleveland, Ohio 44115, no later than May 15, 2002. 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 2002 annual meeting, you must notify the
Secretary in writing by August 23, 2002.
18
19
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 12, 2001
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20
PROXY PROXY
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints DAVID L. PUGH, BILL L. PURSER, and JOHN R. WHITTEN, 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 16,
2001, 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 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, and
Stephen E. Yates.
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 YOU DO NOT PROVIDE DIRECTION, 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 OR VOTE BY TELEPHONE OR INTERNET PURSUANT TO THE INSTRUCTIONS
ON THE REVERSE SIDE.
21
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
FOR WITHHELD FOR ALL FOR AGAINST ABSTAIN
ALL ALL EXCEPT
1. Election of Directors [ ] [ ] [ ] 2. Ratification of [ ] [ ] [ ]
01 - William G. Bares appointment of
02 - Dr. Roger D. Blackwell independent auditors.
03 - Stephen E. Yates
For all, except vote withheld from the following
nominee(s):
__________________________________________________
Change of Address [ ]
Date: __________________, 2001
______________________________
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.
..................................................................................................................................
CONTROL NUMBER * FOLD AND DETACH HERE * [APPLIED LOGO]
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
We encourage you to take advantage of the new and convenient ways to
vote your shares. If voting by proxy, this year you may vote by
mail, or choose one of the two methods described below. Your
telephone or Internet vote has the same effect as if you marked,
signed, and returned your proxy card. Votes by telephone or the
Internet must be received by Sunday, October 14, 2001. To vote by
telephone or the Internet, read the accompanying proxy statement and
then follow these easy steps:
TO VOTE BY PHONE
Call toll-free 1-877-210-3552 in the United
States or Canada any time on a touch tone
telephone. There is NO CHARGE to you for
the call.
Enter the 6-digit CONTROL NUMBER located
above.
Option #1: To vote as the Board of
Directors recommends on
ALL Proposals: Press 1
When asked, please confirm
your vote by pressing 1.
Option #2: If you choose to vote on
each proposal separately,
press 0 and follow the
simple recorded
instructions.
TO VOTE BY INTERNET
Go to the following website:
WWW.COMPUTERSHARE.COM/US/PROXY
Enter the information requested on your
computer screen, including your 6-digit CONTROL
NUMBER located above.
Follow the simple instructions on the
screen.
If you vote by telephone or the Internet, DO NOT mail back the proxy card.
THANK YOU FOR VOTING!
22
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 16, 2001.
(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, and
Stephen E. Yates.
2. Ratification of the appointment of Deloitte &
Touche LLP as independent auditors for the
current fiscal year.
3. In its discretion, the Trustee is 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 YOU DO NOT PROVIDE DIRECTION, 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 OR VOTE BY TELEPHONE OR INTERNET PURSUANT TO THE INSTRUCTIONS
ON THE REVERSE SIDE.
23
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
FOR WITHHELD FOR ALL
ALL ALL EXCEPT FOR AGAINST ABSTAIN
1. Election of Directors [ ] [ ] [ ] 2. Ratification of [ ] [ ] [ ]
01 - William G. Bares appointment of
02 - Dr. Roger D. Blackwell independent auditors.
03 - Stephen E. Yates
For all, except vote withheld from the following
nominee(s):
__________________________________________________
Change of Address [ ]
Date: __________________, 2001
______________________________
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.
.................................................................................................................................
CONTROL NUMBER * FOLD AND DETACH HERE * [APPLIED LOGO]
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
We encourage you to take advantage of the new and convenient ways to
vote your shares. This year you may vote by mail, or choose one of
the two methods described below. Your telephone or Internet vote has
the same effect as if you marked, signed, and returned your voting
instructions card. Votes by telephone or the Internet must be
received by Sunday, October 14, 2001. To vote by telephone or the
Internet, read the accompanying proxy statement and then follow
these easy steps:
TO VOTE BY PHONE
Call toll-free 1-877-210-1416 in the United
States or Canada any time on a touch tone
telephone. There is NO CHARGE to you for
the call.
Enter the 6-digit CONTROL NUMBER located
above.
Option #1: To vote as the Board of
Directors recommends on
ALL Proposals: Press 1
When asked, please confirm
your vote by pressing 1.
Option #2: If you choose to vote on
each proposal separately,
press 0 and follow the
simple recorded
instructions.
TO VOTE BY INTERNET
Go to the following website:
WWW.COMPUTERSHARE.COM/US/PROXY
Enter the information requested on your
computer screen, including your 6-digit CONTROL
NUMBER located above.
Follow the simple instructions on the
screen.
If you vote by telephone or the Internet, DO NOT mail back the voting
instructions card.
THANK YOU FOR VOTING!
24
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 16, 2001.
(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, and
Stephen E. Yates.
2. Ratification of the appointment of Deloitte &
Touche LLP as independent auditors for the
current fiscal year.
3. In its discretion, the Trustee is 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 YOU DO NOT PROVIDE DIRECTION, 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 OR VOTE BY TELEPHONE OR INTERNET PURSUANT TO THE INSTRUCTIONS
ON THE REVERSE SIDE.
25
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
FOR WITHHELD FOR ALL
ALL ALL EXCEPT FOR AGAINST ABSTAIN
1. Election of Directors [ ] [ ] [ ] 2. Ratification of [ ] [ ] [ ]
01 - William G. Bares appointment of
02 - Dr. Roger D. Blackwell independent auditors.
03 - Stephen E. Yates
For all, except vote withheld from the following
nominee(s):
__________________________________________________
Change of Address [ ]
Date: __________________, 2001
______________________________
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.
.................................................................................................................................
CONTROL NUMBER * FOLD AND DETACH HERE * [APPLIED LOGO]
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
We encourage you to take advantage of the new and convenient ways to
vote your shares. This year you may vote by mail, or choose one of
the two methods described below. Your telephone or Internet vote has
the same effect as if you marked, signed, and returned your voting
instructions card. Votes by telephone or the Internet must be
received by Sunday, October 14, 2001. To vote by telephone or the
Internet, read the accompanying proxy statement and then follow
these easy steps:
TO VOTE BY PHONE
Call toll-free 1-877-210-2638 in the United
States or Canada any time on a touch tone
telephone. There is NO CHARGE to you for
the call.
Enter the 6-digit CONTROL NUMBER located
above.
Option #1: To vote as the Board of
Directors recommends on
ALL Proposals: Press 1
When asked, please confirm
your vote by pressing 1.
Option #2: If you choose to vote on
each proposal separately,
press 0 and follow the
simple recorded
instructions.
TO VOTE BY INTERNET
Go to the following website:
WWW.COMPUTERSHARE.COM/US/PROXY
Enter the information requested on your
computer screen, including your 6-digit CONTROL
NUMBER located above.
Follow the simple instructions on the
screen.
If you vote by telephone or the Internet, DO NOT mail back the voting
instructions card.
THANK YOU FOR VOTING!