Exhibit 10.05

LOGO [g220994image001.jpg]

Performance Shares Terms and Conditions

1. Award of Performance Shares. The Executive Organization & Compensation
Committee (the “Committee”) of the Board of Directors of Applied Industrial
Technologies, Inc. (“Applied”) may award Performance Shares (the “Award”) to key
senior officers of Applied who have broad policy-making functions and who
directly contribute to the long-term success and profitability of Applied. The
Committee has awarded you an Award with an Effective Date. The terms and
conditions are set forth herein (the “Terms”) and together with the Applied
Industrial Technologies, Inc. 2007 Long-Term Performance Plan (the “Plan”)
govern your rights with respect to the Award. Notwithstanding the foregoing,
however, in the event of any conflict between the provisions of the Plan and the
Terms, the provisions of the Plan shall govern. Moreover, it should be noted
that unless otherwise provided herein, capitalized words in the Terms shall have
the same meanings as set forth in the Plan.

2. Rights during Performance Period. You shall not have the right to sell,
exchange, transfer, pledge, hypothecate, or otherwise encumber your Award until
all conditions with respect to vesting and distribution have been met. Until the
issuance of shares of Applied common stock (“Shares”) to you in settlement of
your Award has occurred, you shall not be treated as a shareholder with respect
to the Shares.

3. Performance Period. The term “Performance Period” shall mean, for purposes of
the Terms, the period from the Effective Date until the third year anniversary
of the Effective Date.

4. Vesting. Subject to the provisions of Section 6, your Award will be 100%
vested at the end of the Performance Period, in whole or in part based upon the
achievement of the performance goals set by the Committee.

5. Separation from Service or Termination of Executive Officer Status. If,
during the Performance Period, you incur a Separation from Service (as defined
in Section 409A) from Applied due to death or Disability (as defined in
Section 409A) or termination after attaining age 55 and completing at least ten
years of service with Applied, then, promptly following the availability of
audited financial statements for the final year of the Performance Period, you
(or your beneficiary whom you have designated to Applied in writing) shall be
entitled to vesting of a portion of the Award based on Applied’s actual
performance relative to the performance goals for the individual years (partial
years shall be prorated by quarter, including a portion of a quarter) in the
Performance Period that elapsed prior to your Separation from Service. In the
event, however, that during the Performance Period, you incur a Separation from
Service from Applied for any reason other than those specifically set forth
above or in Section 6 hereof, then your Award will be forfeited and no amount
shall be due or payable to you pursuant to the Award. In addition, if, during
the Performance Period, you cease to be a Board-elected executive officer of
Applied (but remain an employee of Applied), then your Award shall be forfeited
and no amount shall be due or payable to you pursuant to the Award.

Because Awards are intended to create an incentive for recipients to act in
Applied’s best interests, notwithstanding anything in the Terms to the contrary:

--------------------------------------------------------------------------------

(a) Your Award may be terminated or rescinded, and if applicable, you may be
required immediately to repay all Shares (and any dividends and distributions
thereon) issued pursuant to the Award within the previous six months (or any
proceeds thereof), if the Committee determines, in good faith, that during your
employment with Applied or during the period ending six months following your
Separation from Service, you have committed an act inimical to Applied’s
interests. Acts inimical to Applied’s interest shall include willful inattention
to duty; willful violation of Applied’s published policies; acts of fraud or
dishonesty involving Applied’s business; solicitation of Applied’s employees,
customers or vendors to terminate or alter their relationship with Applied to
Applied’s detriment; unauthorized use or disclosure of information regarding
Applied’s business, employees, customers, and vendors; and competition with
Applied. All determinations by the Committee shall be effective at the time of
your act.

(b) The Committee may, in its sole discretion, require you immediately to repay
Shares (and any dividends and distributions thereon) issued pursuant to the
Award within the previous 36 months (or any proceeds thereof) if (I) Applied
restates its historical consolidated financial statements and (II) the Committee
determines, in good faith, that (x) the restatement is a result of your, or
another executive officer’s, willful misconduct that is unethical or illegal,
and (y) your earnings pursuant to the Award were based on materially inaccurate
financial statements or materially inaccurate performance metrics that were
invalidated by the restatement.

6. Change in Control. Notwithstanding the provisions of Section 4, in the event
your employment with Applied is terminated during the Performance Period and
following any Change in Control of Applied either by you for “Good Reason” or by
Applied “Without Cause,” then you shall be 100% vested and entitled to receive a
pro rata amount of Shares under the Award equal to (i) a fraction the numerator
of which is the number of fiscal quarters (including a portion of a quarter)
elapsed in the Performance Period prior to the date of the Change in Control and
the denominator of which is twelve, multiplied by (ii) your target award amount.

For purposes of this Award, “Cause” shall mean (i) the willful and continued
failure by you to perform substantially your duties with Applied or one of its
affiliates (other than for disability or Good Reason), after a written demand
for substantial performance is delivered to you by the Board or the Chief
Executive Officer of Applied which specifically identifies the manner in which
the Board or Chief Executive Officer believes that you have not substantially
performed your duties, or (ii) the willful engagement by you in illegal conduct
or gross misconduct involving moral turpitude that is materially and
demonstrably injurious to Applied; provided, however, that no act or failure to
act shall be considered “willful” unless it is done, or omitted to be done, in
bad faith or without your reasonable belief that such action or omission was in
the best interests of Applied. Any act, or failure to act, based upon authority
given you pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer or a senior officer of Applied or
based upon the advice of counsel for Applied shall be conclusively presumed to
be done, or omitted to be done, in good faith and in the best interests of
Applied. Termination of your employment with Applied shall not be deemed to be
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to you and you are given
an opportunity, together with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, you are guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.

For purposes of this Award, “Good Reason” shall mean a separation from service
that occurs no later than two years after (i) a material diminution in your
authority, duties, or responsibilities, (ii) a material diminution in the
authority, duties, or responsibilities of the person to whom you reported
immediately prior to a Change in Control, (iii) a material diminution by Applied
of your annual base

--------------------------------------------------------------------------------

salary that was provided to you by Applied immediately prior to the Change in
Control, (iv) a material change in the geographic location where you provide
service to Applied, or (v) any failure of any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Applied, by agreement in form
and substance satisfactory to you, to expressly assume and agree to comply with
the terms of this award in the same manner and to the same extent that Applied
would be required to perform it if no such succession had taken place; provided
further, that, Good Reason shall not have occurred unless you give Applied
notice within 90 days of the initial existence of the condition claimed by you
in good faith to constitute Good Reason and Applied has at least 30 days in
which to remedy the condition.

Notwithstanding the definition in the Plan, a “Change in Control” of Applied
shall have occurred for purposes of this Award when any of the following events
shall occur:

(i) Applied is merged, consolidated or reorganized into or with another
corporation or other legal person, and immediately after such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
Voting Stock (as that term is hereafter defined) of Applied immediately prior to
such transaction;

(ii) Applied sells all or substantially all of its assets to any other
corporation or other legal person, less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such sale are held in the aggregate by the holders of Voting
Stock of Applied immediately prior to such sale;

(iii) There is a report filed or required to be filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), disclosing that any person (as the term “person” is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing 30% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors of Applied (“Voting Stock”);

(iv) Applied files a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) that a
change in control of Applied has occurred pursuant to any then-existing contract
or transaction; or

(v) If during any period of two consecutive years, individuals who at the
beginning of any such period constitute the directors of Applied cease for any
reason to constitute at least a majority thereof, provided, however, that for
purposes of this clause (v), each director who is first elected, or first
nominated for election by Applied’s stockholders by a vote of at least
two-thirds of the directors of Applied (or a committee thereof) then still in
office who were directors of Applied at the beginning of any such period will be
deemed to have been a director of Applied at the beginning of such period.

Notwithstanding the foregoing provisions of Section (iii) or (iv) hereof, unless
otherwise determined in a specific case by majority vote of the Board, a “Change
in Control” shall not be deemed to have occurred for purposes of this Award
solely because (i) Applied, (ii) an entity in which Applied directly or
indirectly beneficially owns 50% or more of the voting securities or interest,
or (iii) any Applied-sponsored employee stock ownership plan or any other
employee benefit plan of Applied, either files or becomes obligated to file a
report or a proxy statement

--------------------------------------------------------------------------------

under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A
(or any successor schedule, form or report or item therein) under the Exchange
Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in
excess of 30% or otherwise, or because Applied reports that a change in control
of Applied has occurred or will occur in the future by reason of such beneficial
ownership.

In addition, following a Change in Control of Applied, no provision hereof shall
operate to reduce any time frame or to limit any economic benefit to which you
are entitled under this Award or the Plan.

To the extent this Award constitutes nonqualified deferred compensation within
the meaning of Section 409A, a “Change in Control” of Applied shall mean a
change in the ownership or effective control of Applied or a change in the
ownership of a substantial portion of the assets of Applied that constitutes a
“change in control” under Section 409A. In addition, to the extent this Award is
subject to Section 409A, if you are a Specified Employee, a distribution due to
a Separation from Service may not be made until the 30-day period commencing
with the first day of the seventh month following such Separation from Service
or, if earlier, the date of your death, except in each case as may be otherwise
permitted under Section 409A.

7. Settlement of Award. Your Award shall be settled, based upon achieved
performance goals, in Shares. Except as specifically provided otherwise in this
Section 7, any Shares payable with respect to your Award shall be settled within
the 75-day period after the end of the Performance Period. Notwithstanding the
foregoing, in the event that your Award becomes vested due to a Change in
Control, your Award shall be settled in Shares within the 75-day period after
such vesting. In the event that any such 75-day period begins in one calendar
year and ends in another, you shall not have the right to designate the calendar
year of payment. Moreover, notwithstanding the foregoing, if you are a Specified
Employee, a distribution of Shares, but only to the extent that such
distribution is deemed to be deferred compensation under Section 409A, may not
be made until within the 30-day period commencing with the first day of the
seventh month following the month of any Separation from Service for reasons
other than Change in Control, or if earlier, your death, except as may be
otherwise permitted under Section 409A.

8. Payments of Taxes. Upon the vesting of the Award, Applied shall withhold
Shares from your award for any federal, state or local taxes of any kind
required by law to be withheld by Applied attributable to the Award.

9. Discretionary Adjustment Following Certain Events. In the event that, during
the Performance Period, Applied merges, consolidates, sells or acquires a
substantial amount of assets, issues a substantial amount of its capital stock,
reorganizes, or engages in any other transaction or series of transactions, the
Committee, in its sole discretion, may change the performance goals upon which
the vesting of your Award is conditioned, in order to prevent diminution or
enlargement of the benefits intended to be conferred by the Award in such manner
as the Committee may determine is equitably required by the changes or events.
In the event (a) of a stock dividend or stock split or (b) Shares are changed
into or exchanged for a different number or kind of securities of Applied or
another entity, then the target Award opportunity shall be equitably adjusted.
In the event other changes or events relating to the Shares fundamentally change
the value of the Shares, then the Committee may make, in its sole discretion,
such adjustments in the terms of the Award as the Committee may determine is
equitably required by the change or event.

10. Limitation on Rights. The Award shall not confer upon you any rights
whatsoever other than those expressly set forth herein, in the Plan or in
policies adopted by the Committee, including without limitation any rights as a
shareholder in respect of Shares that may become issuable pursuant to the Award
until and unless Applied has issued a certificate or certificates for the
Shares. Nothing in the Terms shall (i) interfere with or limit in any way
Applied’s right to terminate your employment at any

--------------------------------------------------------------------------------

time, (ii) confer upon you any right to continued employment with Applied, or
(iii) create any contractual or other right to receive additional awards or
other Plan benefits in the future.

11. Nonassignability. The Award and the rights granted thereunder are not
assignable or transferable, in whole or in part, and may not be otherwise
disposed of by you, other than by will or by the laws of descent and
distribution.

12. Section 409A Compliance. It is intended that payments under the Award are
“short-term deferrals” (as is defined under Section 409A) and, therefore,
exempted from coverage under Section 409A, and any interpretations of these
Terms shall be consistent with this intent. Notwithstanding such intention, in
the event that the Terms, or any portion thereof, and the Award, or any portion
thereof, shall be deemed to be governed by Section 409A, such Terms and Award,
or portion thereof, shall be interpreted, to the extent applicable, as complying
with the provisions of Section 409A.

13. Committee Authority. The Committee shall have conclusive authority, subject
to the express provisions of the Plan as in effect from time to time and the
Terms, to construe the Terms and the Plan, to establish, amend and rescind rules
and regulations relating to the Plan, and to make all other determinations in
the Committee’s judgment necessary or desirable for the Plan’s administration.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or the Terms in the manner and to the extent it deems
expedient to carry the Plan into effect. Notwithstanding any provisions hereof,
the Terms and the Award shall be subject to all of the Plan’s provisions in
effect from time to time, which are incorporated herein by reference.

14. Relationship to the Plan. The Terms are subject to the provisions of the
Plan and any administrative policies adopted by the Committee. If there is any
inconsistency between the Terms and the Plan or such policies, the Plan and the
policies, in that order, shall govern. Reference in the Terms to Applied shall
include Applied’s subsidiaries.

15. Severability. The provisions of the Terms are severable and if any one or
more provisions are determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions shall nevertheless be binding and
enforceable.

16. Requirements of Law. The granting of the Award hereunder shall be subject to
all applicable laws, rules and regulations, and to such approvals by any
governmental agency, national securities exchange, or automated quotation system
as may be required. Notwithstanding any other provision of the Plan or the
Terms, Applied shall not be obligated to issue, deliver or transfer any Shares,
make any distribution of benefits under the Plan or the Terms, or take any other
action, unless such delivery, distribution, or action, unless such delivery,
distribution, or action is in compliance with all applicable laws, rules and
regulations (including, but not limited to, the requirements of the Securities
Act and Section 409A).

17. Successors. All obligations of Applied under the Terms with respect to the
Award shall be binding upon any successor to Applied, whether the existence of
such successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all, or substantially all, of the business
and/or assets of Applied. Notwithstanding the provisions of Section 4, in the
event any such successor does not agree to be bound by the Terms, the Award
granted hereunder shall immediately become vested.

18. Applicable Law. The validity, construction, interpretation and
enforceability of these terms and conditions shall be determined and governed by
the laws of the State of Ohio without giving effect to the principles of
conflicts of law.

19. Tax Matters. Applied has made no warranties or representations to you with
respect to the tax consequences (including but not limited to income tax
consequences) related to the Award or the

--------------------------------------------------------------------------------

issuance, transfer or disposition of Shares pursuant to the Award, and you have
been advised to consult with your attorney, accountant and/or tax advisor
regarding this Award. Moreover, you acknowledge that Applied has no
responsibility to take or refrain from taking any actions in order to achieve a
certain tax result for you.

(August 2011)