LONG-TERM DISABILITY INSURANCE

Applied’s long-term disability insurance plan provides for long-term disability coverage to U.S. employees who become eligible after a 30-day waiting period based on plan requirements. Under the plan, eligible employees who become totally disabled as defined in the plan receive 60% of monthly base earnings, subject to a maximum schedule amount of $5,000 per month, without evidence of insurability. Applied’s executive officers are covered under the plan, subject to a maximum schedule amount of $18,000 per month.

In addition, executive officers are covered by a supplemental long-term disability program. Under this program, participants are provided additional disability insurance with respect to 60% of their total compensation (base salary plus average of their most recent three years' incentive awards) minus the basic benefit (60% of base salary), up to a benefit of $3,000 per month, and are charged for the cost of any supplemental insurance relating to incentive awards.