EXHIBIT 10.1

APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS PLAN
(Restated Post-2004 Terms)

WHEREAS , the Applied Industrial Technologies, Inc. Supplemental Executive Retirement Benefits Plan (formerly known as the Bearings, Inc. Supplemental Executive Retirement Benefits Plan and hereinafter referred to as the “Plan”) was established on January 21, 1988, by Bearings, Inc., the predecessor to Applied Industrial Technologies, Inc. (hereinafter referred to as the “Company”) for the benefit of certain officers and key executives; and

WHEREAS , the Plan was most recently restated as of January 1, 2002 and amended subsequently on August 6, 2004; and

WHEREAS, in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (hereinafter referred to as “Section 409A”) and to facilitate the administration of certain nonqualified deferrals thereunder, the Plan is hereby bifurcated effective January 1, 2005, into two parts; namely, one part that consists of the Plan, as in effect on October 3, 2004, which is hereby frozen and shall not be modified except as permitted under Section 409A so as to preserve the grandfathered status of vested benefits thereunder (hereinafter referred to as the “Frozen Terms”), and the second part that consists of the post-2004 terms of the Plan, as amended effective January 1, 2005, for compliance with Section 409A (hereinafter referred to as the “Post-2004 Terms”); and

WHEREAS, Plan benefits accrued or vested after December 31, 2004, and prior to the Plan bifurcation, have been administered in good faith in accordance with the requirements of Section 409A; and

WHEREAS, the Post-2004 Terms were adopted effective as of January 1, 2005; and

WHEREAS, it has been deemed appropriate to make certain revisions to such Post-2004 Terms;

NOW THEREFORE, effective as of January 1, 2005, the Post-2004 Terms of the Plan are hereby restated as hereinafter set forth.

ARTICLE I

DEFINITIONS

1.1 Definitions . For purposes of the Plan, each of the following words and phrases shall have the meaning hereinafter set forth unless a different meaning is clearly required by the context:

(1) The term “Accrued Portion” of a Participant’s supplemental normal retirement benefit determined as of any given date occurring prior to his Normal Retirement Date shall mean the amount of such Participant’s supplemental normal retirement benefit determined pursuant to the provisions of Section 3.2, based upon his Highest Monthly Final Average Compensation and years of Service on such date.

(2) The term “Affiliate” shall mean any member of a controlled group of corporations (as determined under Section 414(b) of the Code) of which the Company is a member; any member of a group of trades or businesses under common control (as determined under Section 414(c) of the Code) with the Company; any member of an affiliated service group (as determined under Section 414(m) of the Code) of which the Company is a member; and any other entity which is required to be aggregated with the Company pursuant to the provisions of Section 414(o) of the Code.

(3) The term “Affiliated Group” shall mean the group of entities which are Affiliates.

(4) The term “Beneficiary” shall mean the person or persons designated by a Participant to receive a death benefit under the Plan pursuant to the provisions of Article IX.

(5) The term “Board” shall mean the Board of Directors of the Company.

(6) The term “Cause” shall mean (i) the conviction of, or pleading guilty by, a Participant to a felony or a misdemeanor involving moral turpitude; (ii) the commission of an act of fraud, dishonesty or theft, or (iii) the commission of any other intentional act (or failure to act) which is not in the best interests of the Company, specifically including, but not limited to, those actions (or failures) which the Company has previously notified the Participant in writing are contrary to the best interests of the Company.

(7) The term “Change of Control” shall mean a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company that constitutes a “change in control” under Section 409A.

(8) The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.

(9) The term “Committee” shall mean the Executive Organization & Compensation Committee of the Board.

(10) The term “Company” shall mean Applied Industrial Technologies, Inc., its corporate successors, and the surviving corporation resulting from any merger of Applied Industrial Technologies, Inc. with any other corporation or corporations.

(11) The term “Compensation” shall mean the total wages which are paid to or on behalf of a Participant during a calendar year by an Affiliate for services rendered as a common law employee, including base salary, annual incentive compensation, commissions, bonuses, any base salary and annual incentive amounts deferred under any non-qualified deferred compensation program of an Affiliate, and any elective contributions that are made on behalf of such Participant under any plan maintained by an Affiliate and that are not includible in gross income under Section 125, 129, or 402(e)(3) of the Code, but excluding moving or educational reimbursement expenses, amounts realized from the exercise of stock options, any long term incentive compensation including, but not limited to, restricted stock, performance grants and stock appreciation rights, severance benefits, and imputed income attributable to any fringe benefit.

(12) The term “Comprehensive Plan” shall mean the Applied Industrial Technologies, Inc. Deferred Compensation and Supplemental Benefit Plan (formerly known as the Bearings, Inc. Comprehensive Deferred Compensation and Supplemental Benefit Plan).

(13) The term “Disability” or “Disabled” shall mean a condition of a Participant that meets the requirements of Section 409A Disability or Own Occ Disability.

(14) The term “Election Form” shall mean the form which may be electronic, telephonic or hard copy and on which a Participant elects the time and manner of payment of his Plan benefits in accordance with the provisions of the Post-2004 Terms and Section 409A.

(15) The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a section of ERISA shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such action.

(16) The term “Executive Officer” shall mean an officer of the Company as defined by Rule 3b-7 of the Securities Exchange Act of 1934, as amended.

(17) The term “ Former Employer Plan ” shall mean any defined benefit plan, program or arrangement (qualified or non-qualified) maintained by a former employer of a Participant and pursuant to which a Participant is, or ever was, eligible to receive retirement income.

(18) The term “Frozen Benefit” shall mean the Accrued Portion of the supplemental normal retirement benefit of a Participant who had attained age 55 and was credited with at least ten years of Service as of December 31, 2004, determined under the provisions of the Frozen Terms on such date.

(19) The term “Frozen Terms” shall mean the terms of the Plan as in effect on October 3, 2004.

(20) The term “Highest Monthly Final Average Compensation” shall mean 1/12th of the average of the Compensation of a Participant for any three calendar years during the last ten calendar years of his employment with the Affiliated Group in which the Participant had the greatest Compensation; provided, however, that if a Participant did not receive Compensation for at least three calendar years, his Highest Monthly Final Average Compensation shall be determined by dividing his average Compensation for the calendar years in which he was employed by the Affiliated Group by 12.

(21) The term “Normal Retirement Date” shall mean the date on which a Participant attains 65 years of age.

(22) The term “Own Occ Disability” shall mean the incapacity of a Participant due to any physical or mental condition that is incurred while an Executive Officer and that results in the Participant being unable to perform the duties of his most recent position with the Affiliated Group and thereafter shall mean such continued incapacity so that the Participant is prevented from resuming the duties and responsibilities of his most recent position with the Affiliated Group or from obtaining a comparable position with another employer.

(23) The term “Participant” shall mean, for purposes of the Post-2004 Terms, an Executive Officer who is designated to participate in the Plan pursuant to the provisions of Article II of the Plan.

(24) The term “Plan” shall mean the Applied Industrial Technologies, Inc. Supplemental Executive Retirement Benefits Plan which, effective as of January 1, 2005, shall consist of the Frozen Terms and the Post-2004 Terms, and which is part of the Comprehensive Plan and listed on Exhibit A attached thereto. The Frozen Terms shall be determinative solely with respect to Frozen Benefits and the payment thereof. The Post-2004 Terms shall govern all other provisions of the Plan, including Plan benefits accrued or vested on and after January 1, 2005.

(25) The term “Post-2004 Terms” shall mean the part of the bifurcated Plan that contains the provisions of the Plan effective as of January 1, 2005 to comply with Section 409A as set forth herein and as may be amended after such date from time to time.

(26) The term “Primary Social Security Benefit” shall mean the monthly benefit which a Participant would be entitled to receive as a primary insurance amount under the U.S. Social Security Act, as amended, and in effect (and at the rate in effect) on the January 1 coincident with or next preceding the date his Service under the Plan ceases (regardless of any retroactive changes made by legislation enacted after said January 1) under the assumptions described below (whether he applies for such benefit or not, and even though he may lose part or all of such benefit for any reason). The amount of said Primary Social Security Benefit shall be estimated and computed by the Company for the purposes of the Plan on the assumption that such Participant shall have no further employment or Compensation after the date his Service under the Plan ceases and that his benefit commences at the later of his 62nd birthday or the date his Service under the Plan ceases.

(27) The term “Section 409A” shall mean Section 409A of the Code and the Treasury regulations and rulings thereunder.

(28) The term “Section 409A Disability” shall mean a condition of a Participant that constitutes a “disability” under Section 409A, including a determination by the Social Security Administration that such Participant is totally disabled.

(29) The term “Separation from Service” shall mean the termination of the employment of a Participant with the Company and all Affiliates for any reason other than death; provided, however, that a Company-approved leave of absence shall not be considered a termination of employment if the leave does not exceed six months, or if longer, so long as the Participant’s right to reemployment is provided either by statute or by contract. Notwithstanding the foregoing, whether a Participant has incurred a Separation from Service shall be determined in accordance with the provisions of Section 409A.

(30) The term “Service” shall mean the aggregate period of time that a Participant is employed as a common law employee by the Company and any Affiliate or for which he is given credit pursuant to the provisions of Section 2.2.

(31) The term “Specified Employee” shall mean a key employee of the Company who is a specified employee under Section 409A and the Company’s Specified Employee identification policy.

1.2 Construction . Where necessary or appropriate to the meaning hereof, the singular shall be deemed to include the plural, the plural to include the singular, the masculine to include the feminine, and the feminine to include the masculine.

ARTICLE II

PARTICIPATION

2.1 Participants . Each Executive Officer of the Company who was participating in the Plan under the Frozen Terms as of December 31, 2004, and who continues to be an active Executive Officer of the Company shall continue to be a Participant in the Plan under the Post-2004 Terms as of January 1, 2005. Any Executive Officer of the Company who was not participating in the Plan under the Frozen Terms as of December 31, 2004, and who becomes an Executive Officer of the Company on or after January 1, 2005, and who is designated as a Participant pursuant to the provisions of Section 2.2, shall become a Participant in the Plan under the Post-2004 Terms as of the date of such designation. Each Executive Officer shall be considered a Specified Employee and shall be subject to the rules relating to Specified Employees under Section 409A.

2.2 Designation of Participants . The designation of an Executive Officer of the Company as a Participant shall be made by action of the Board or the Committee. In addition, the Board or the Committee may award Service credit, not in excess of five years, to any Executive Officer of the Company at the time of such designation.

ARTICLE III

SUPPLEMENTAL NORMAL RETIREMENT BENEFITS

3.1 Eligibility . Any Participant, who incurs a Separation from Service on or after his Normal Retirement Date and who is credited with at least five years of Service as an Executive Officer, shall be eligible to receive a supplemental normal retirement benefit determined in accordance with the provisions of Section 3.2.

3.2 Amount . Subject to the provisions of Article VIII and except as specifically provided otherwise in this Section 3.2, the supplemental normal retirement benefit of an eligible Participant shall be equal to 45 percent of his Highest Monthly Final Average Compensation, reduced by 1/20th for each full year that his years of Service are less than 20 and further reduced by his Frozen Benefit, if any, as well as the actuarial equivalency of any supplemental awards paid to a Participant under the Applied Industrial Technologies, Inc. Vice President Supplemental Incentive Plan, as may be amended, or any successor thereto. Notwithstanding the foregoing, except as provided in Article VIII, in the event that D. L. Pugh is credited with at least 10 years of Service under the Plan, including Service credited in the event of a Change of Control under Article VIII, his supplemental normal retirement benefit shall be equal to 60 percent of his Highest Monthly Final Average Compensation reduced by the monthly benefit payable to him at age 65 in a single life form under all Former Employer Plans and then reduced further by 50 percent of his monthly Primary Social Security Benefit.

3.3 Payment . Subject to the provisions of Article VIII, the payment of the supplemental normal retirement benefit determined under the provisions of Section 3.2 to an eligible Participant shall be made pursuant to the provisions of Article VII.

ARTICLE IV

SUPPLEMENTAL EARLY RETIREMENT BENEFITS

4.1 Eligibility . Any Participant, who incurs a Separation from Service prior to his Normal Retirement Date, but after (i) attaining age 55, (ii) being credited with at least 10 years of Service and (iii) being credited with at least five years of Service as an Executive Officer, shall be eligible to receive a supplemental early retirement benefit determined in accordance with the provisions of Section 4.2.

4.2 Amount . The supplemental early retirement benefit payable to an eligible Participant shall be equal to the Accrued Portion of his monthly supplemental normal retirement benefit determined in accordance with the provisions of Section 3.2 on the date of his Separation from Service, reduced by .4166% for each full month that actual commencement of such benefit precedes his Normal Retirement Date. Therefore, in the event that the payment of any supplemental early retirement benefit is delayed in order to comply with the six-month delay rule applicable to a Participant who is a Specified Employee, the amount of such benefit shall be determined hereunder using the date on which the delayed benefit begins to be paid to such Participant.

4.3 Payment . Subject to the provisions of Article VIII, the payment of a supplemental early retirement benefit determined under the provisions of Section 4.2 shall be made to an eligible Participant pursuant to the provisions of Article VII.

ARTICLE V

SUPPLEMENTAL DISABILITY BENEFITS

5.1 Eligibility . Any Participant who incurs a Separation from Service due to Disability after being credited with at least five years of Service as an Executive Officer, shall be eligible to receive a monthly supplemental disability benefit determined in accordance with the provisions of Section 5.2.

5.2 Amount . The monthly supplemental disability benefit of an eligible Disabled Participant shall be an amount which when added to any long term disability benefits payable to such Participant under any other plan or program maintained by an Affiliate (regardless of the source of contributions and converted, if necessary, into a monthly benefit for purposes hereunder) equals 60% of such Disabled Participant’s Highest Monthly Final Average Compensation.

5.3 Payment . Subject to the provisions of Section 5.4 and Article VIII, a monthly supplemental disability benefit shall be paid to an eligible Disabled Participant who incurs a Section 409A Disability commencing 180 days after the onset of a Participant’s Disability and shall be payable monthly thereafter until the earlier of (i) the Participant’s Normal Retirement Date, or (ii) the Participant’s death. Subject to the provisions of Section 5.4 and Article VIII, a monthly supplemental disability benefit shall be paid to an eligible Disabled Participant who incurs an Own Occ Disability (but not a Section 409A Disability) as of the first day of the seventh month following such Participant’s Separation from Service due to Disability; provided, however, that if any payments to which the Participant would have been entitled during the first six months following the date of his Separation from Service, if he had a Section 409A Disability shall be accumulated and paid to such Participant on the first day of the seventh month following his Separation from Service. Upon attaining Normal Retirement Date, any such Disabled Participant shall be entitled to receive a supplemental normal retirement benefit determined in accordance with the provisions of Section 3.2, based upon his years of Service and Highest Monthly Final Average Compensation as of the time of his Separation from Service due to his Disability, and payable in accordance with the provisions of Section 3.3.

5.4 Termination and Adjustment of Supplemental Disability Benefits . Monthly supplemental disability benefits being paid to a Participant shall terminate, if prior to the Participant’s Normal Retirement Date, such Participant no longer has an Own OCC Disability. In addition, monthly supplemental disability benefits being paid to a Participant shall be reduced in the manner set forth below, if prior to the Participant’s Normal Retirement Date, such Participant engages in regular gainful employment and earns income.

(a) Determine Loss of Income by subtracting the monthly income earned by the Participant from the Participant’s Highest Monthly Final Average Compensation used under Section 5.2.

(b) Determine the percentage of such Loss of Income by dividing the amount calculated in (a) above by the Participant’s Highest Monthly Final Average Compensation.

(c) Determine the amount of the reduced supplemental disability benefit as follows:

5.5 Medical Examinations . The Company may, in its discretion, require a Participant who is applying for a monthly supplemental disability benefit or who is receiving a monthly supplemental disability benefit to submit to such medical examinations as it may deem reasonably necessary; provided, however, that no Participant shall be required to undergo such examinations more than once a year. In the event a Participant refuses to submit to any such examination, his monthly supplemental disability benefit shall be suspended by the Company.

ARTICLE VI

SUPPLEMENTAL DEFERRED RETIREMENT BENEFITS

6.1 Eligibility . Any Participant who incurs a Separation from Service prior to attainment of age 55 for reasons other than Cause or Disability, but after being credited with at least ten years of Service, five of which were credited while an Executive Officer, shall be eligible to receive upon attainment of age 65 (or a Change in Control, if earlier) a supplemental deferred retirement benefit determined in accordance with the provisions of Section 6.2.

6.2 Amount . The supplemental deferred retirement benefit of an eligible Participant shall be equal to 25% of the Accrued Portion of his supplemental normal retirement benefit determined in accordance with the provisions of Section 3.2 on the date of his Separation from Service.

6.3 Payment . Subject to the provisions of Article VIII, the payment of the supplemental deferred retirement benefit determined under the provisions of Section 6.2 shall be made to an eligible Participant pursuant to the provisions of Section 7.2.

ARTICLE VII

PAYMENT OF BENEFITS

7.1 Payment of Supplemental Normal and Early Retirement Benefits . The supplemental normal or early retirement benefit payable to an eligible Participant pursuant to the provisions of Section 3.3 or 4.3, respectively, shall be determined pursuant to Section 3.2 or 4.2, respectively, and paid to such eligible Participant pursuant to Option A, B, C or D as set forth below and indicated on the Election Form of such Participant; provided, however, if a Participant has elected to receive his supplemental normal or early retirement benefit pursuant to Option E, the present value of his supplemental normal or early retirement benefit shall be determined under the provisions of Section 7.6 and shall be paid under the provisions of Option E.

Option A . A single life annuity for the life of the Participant. Due to the six-month delay rule applicable to Specified Employees under Section 409A, the first annuity payment shall be made on the first day of the seventh month following the date that the Participant incurs a Separation from Service. The amount of such first payment shall include the accumulated amount of the payments that would otherwise have been made during the first six months after the Participant’s Separation from Service but for the fact that the Participant is a Specified Employee.

Option B . A reduced monthly supplemental retirement benefit payable to such Participant for his lifetime following his Separation from Service with the continuance of a monthly benefit equal to one-half of such reduced amount after his death to his Contingent Annuitant during the lifetime of the Contingent Annuitant, provided that such Contingent Annuitant is living at the time such Participant’s benefit commences. Due to the six-month delay rule applicable to Specified Employees under Section 409A, the first annuity payment shall be made on the first day of the seventh month following the date that the Participant incurs a Separation from Service. The amount of such first payment shall include the accumulated amount of the payments that would otherwise have been made during the first six months after the Participant’s Separation from Service but for the fact that the Participant is a Specified Employee.

Option C . A reduced monthly supplemental retirement benefit payable to such Participant for his lifetime following his Separation from Service with the continuance of a monthly benefit equal to three-quarters of such reduced amount after his death to his Contingent Annuitant during the lifetime of the Contingent Annuitant, provided such Contingent Annuitant is living at the time such Participant’s benefit commences. Due to the six-month delay rule applicable to Specified Employees under Section 409A, the first annuity payment shall be made on the first day of the seventh month following the date that the Participant incurs a Separation from Service. The amount of such first payment shall include the accumulated amount of the payments that would otherwise have been made during the first six months after the Participant’s Separation from Service but for the fact that the Participant is a Specified Employee.

Option D . A reduced monthly supplemental retirement benefit payable to such Participant for his lifetime following his Separation from Service with the continuance of a monthly benefit equal to such reduced amount after his death to his Contingent Annuitant during the lifetime of the Contingent Annuitant, provided such Contingent Annuitant is living at the time such Participant’s benefit commences. Due to the six-month delay rule applicable to Specified Employees under Section 409A, the first annuity payment shall be made on the first day of the seventh month following the date that the Participant incurs a Separation from Service. The amount of such first payment shall include the accumulated amount of the payments that would otherwise have been made during the first six months after the Participant’s Separation from Service but for the fact that the Participant is a Specified Employee.

Option E . Substantially equal annual installment payments for a specified number of years on his Election Form, not to exceed ten, but in no event less than a minimum of three years (five years for any Participant who at the time of his Separation from Service is or was the Chairman or the Chief Executive Officer of the Company). Due to the six-month delay rule applicable to Specified Employees under Section 409A, the initial installment payment shall be made on the first day of the seventh month following the date that the Participant incurs a Separation from Service. The remaining installment payments shall be made on the first day of the succeeding fiscal years of the Company after the fiscal year in which the first installment payment is made to the Participant. In addition, the portion of a benefit which is payable after the initial installment payment is made to a Participant shall accrue interest until paid in accordance with the foregoing provisions at the applicable interest rate under Section 417(e)(3) of the Code utilized by the actuary to calculate the present value of such Participant’s supplemental normal or early retirement benefit pursuant to the provisions of Section 7.6.

7.2 Payment of Supplemental Deferred Retirement Benefits . The present value of the supplemental deferred retirement benefits payable to an eligible Participant pursuant to the provisions of Section 6.3 shall be determined pursuant to Sections 6.2 and 7.6 and paid to such eligible Participant in three substantially equal payments with the first payment being made on the first day of the fiscal year of the Company following the Participant’s attainment of age 65. The remaining two payments shall be made on the first of the next two succeeding fiscal years of the Company after the fiscal year in which the first payment is made to such Participant. In addition, the portion of a benefit which is payable after the initial installment payment is made to a Participant shall accrue interest until paid in accordance with the foregoing provisions of this Section 7.2 at the applicable interest rate under Section 417(e)(3) of the Code utilized by the actuary to calculate the present value of such Participant’s supplemental deferred retirement benefits under Section 7.6.

7.3 Changing Time or Form of Payment . A Participant may elect to delay payment or to change the form of payment if all the following conditions are met:

(i) Such election will not take effect until at least twelve months after the date on which the election is made; and

(ii) The payment with respect to which such election is made is deferred for a period of not less than five years from the date such payment would otherwise be made; and

(iii) Any election for a “specified time (or pursuant to a fixed schedule)” within the meaning of Section 409A(a)(2)(A)(iv) of the Code, may not be made less than twelve months prior to the date of the first scheduled payment.

To the extent permitted under Section 409A, installment payments shall be treated as a single payment.

7.4 Acceleration of Distributions . Except as provided in Articles VIII or IX or in Section 7.3 and as permitted under Section 409A, no acceleration of the time or form of payment of any supplemental retirement benefit under the Plan shall be permitted.

7.5 Deduction Limitation . To the extent allowed under Section 409A, the following described limitation on a distribution that is otherwise payable pursuant to the provisions of the Post-2004 Terms shall be applicable. If the Company determines in good faith that there is a reasonable likelihood that a distribution under the Post-2004 Terms would not be deductible by the Company when paid solely by reason of the limitation under Section 162(m) of the Code (“Section 162”), the Company may defer that amount of the distribution to the extent deemed necessary to ensure deductibility; provided, however, that (i) such deduction limitation shall be applied to all payments to similarly situated Participants on a reasonably consistent basis; (ii) the payment must be made by the earliest of (x) during the Company’s first taxable year in which the Company reasonably anticipates, or should reasonably anticipate, that if the payment is made during such year, the deduction of such payment will not be barred by application of Section 162(m) of the Code or (y) during the period beginning with the date of the Participant’s Separation from Service and ending on the later of the last day of the taxable year of the Company in which the Participant incurs a Separation from Service or the 15 ^th day of the third month following the Participant’s Separation from Service; (iii) where any scheduled payment to a particular Participant in the Company’s taxable year is delayed because of Section 162(m), the delay in payment will be treated as a subsequent deferral election unless all scheduled payments to such Participant that could be delayed are also delayed; (iv) where a payment is delayed to a date on or after the Participant’s Separation from Service, the payment will be considered a payment upon a Separation from Service for purposes of the six-month delay for Specified Employees; and (v) no election may be provided to a Participant with respect to the timing of payment hereunder; provided, further, that such deduction limitation shall not be applied to any distribution made after a Change in Control; and provided further, that the amounts deferred (and amounts credited thereon) because of Section 162(m) shall be distributed to the Participant (or Beneficiary in the event of the Participant’s death) at the earlier of (i) the earliest possible date that it is deductible as set forth above, or (ii) a Change in Control. Any amounts deferred pursuant to such deduction limitation shall continue to be credited with interest at the rate under Section 417(e)(3) of the Code for the January immediately preceding the month in which the supplemental retirement benefit of the Participant was to (or actually did) commence.

7.6 Actuarial Factors . The present value of the supplemental normal or early retirement benefits of a Participant that are payable under the Plan pursuant to the provisions of Section 7.1 shall be determined by using the applicable interest rate and applicable mortality table specified under Section 417(e)(3) of the Code for the January immediately preceding the month in which the Participant incurs a Separation from Service. The present value of the supplemental deferred retirement benefits of a Participant that are payable under the Plan pursuant to the provisions of Section 7.2 shall be determined by using the applicable interest rate and applicable mortality table specified under Section 417(e)(3) of the Code for the January immediately preceding the month in which such supplemental deferred retirement benefit of the Participant is to commence to be paid. The present value of supplemental normal, early and deferred retirement benefits of Participants that are payable under Section 8.2 shall be determined by using the applicable interest rate and applicable mortality table specified under Section 417(e)(3) of the Code for the January immediately preceding the month in which such present value is to be paid. Actuarial equivalency under the Plan (except for the calculation of the present value of benefits for purposes of Sections 7.1, 7.2 and 8.2) shall be determined using the actuarial factors utilized to determine the Company’s projected benefit obligations under FAS 87 for the fiscal year in which such benefit is to commence to be paid.

7.7 Cessation of Payments Due to Competition . Except in the event of a Change of Control, each payment of supplemental retirement benefits under the Plan to a Participant shall be subject to the condition that the Participant has not engaged in Competition with the Affiliated Group, as defined in Section 7.8 below, at any time prior to the date of such payment.

7.8 Competition . Competition for purposes of the Plan shall mean assuming an ownership position or a position as an employee, consultant, agent, or director with a business engaged in the manufacture, processing, purchase, sale, design, or distribution of the same products manufactured, sold, designed, or distributed by an Affiliate during the calendar year prior to the date of termination of the Participant’s employment; provided, however, that in no event shall ownership of less than two percent of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons in itself be deemed Competition; and provided further, that all of the following events shall have taken place:

(i) The Board shall have given written notice to the Participant that, in the opinion of the Board, the Participant is engaged in Competition within the meaning of the foregoing provisions of this Section 7.8, specifying the details thereof;

(ii) The Participant shall have been given a reasonable opportunity, upon receipt of such notice, to appear before and to be heard by the Board with respect to his views regarding the opinion of the Board that the Participant engaged in competition;

(iii) The Board shall have given written notice to the Participant that the Board determined that the Participant is engaged in Competition; and

(iv) The Participant neither shall have ceased to engage in such Competition within 30 days from his receipt of notice of such determination nor shall have taken all reasonable steps to that end during such 30-day period and thereafter.

7.9 Taxes . In the event any taxes are required by law to be withheld or paid from any payments under the Plan, the Committee shall cause such amounts to be withheld from other income or from such payments and shall transmit the withheld amounts to the appropriate taxing authority.

ARTICLE VIII

CHANGE IN CONTROL

8.1 Eligibility for Supplemental Retirement Benefit . In the event of a Change of Control and regardless of any Service or age requirement otherwise applicable under the Plan as well as the provisions of Article VII, each Participant who is employed by an Affiliate or who is Disabled, or who has separated from service with the Affiliated Group and is eligible for a supplemental deferred retirement benefit, shall be eligible to receive a supplemental retirement benefit determined in accordance with the provisions of Section 8.2 and paid pursuant to the provisions of Section 8.3 in lieu of any other benefit under the Plan.

8.2 Computation of Benefits Upon a Change of Control . In the event of a Change of Control, the supplemental retirement benefit of an eligible Participant who is employed by an Affiliate or who is Disabled shall be equal to the Accrued Portion of his supplemental normal retirement benefit determined in accordance with the provisions of Section 3.2; provided, however, that for purposes of calculating such supplemental retirement benefit, each Participant who has not yet attained age 65 shall be credited with additional years of Service and age equal to one-half of the difference between 65 and his age on the date of such Change of Control, but not in excess of 10; and provided further, that notwithstanding the foregoing, in no event shall D. L. Pugh be credited with less than 10 years of Service for purposes of Section 3.2 or be deemed to be less than age 60 for purposes of Section 4.2. In addition, in the event of a Change of Control, the supplemental retirement benefit of a Participant who has separated from service with the Affiliated Group and who is eligible for a supplemental deferred retirement benefit shall be to his benefit determined under Section 6.2.

8.3 Payment of Benefits Upon a Change of Control . Except as otherwise provided in this Section 8.3, any supplemental retirement benefit which is calculated under Section 8.2 shall be paid in a single sum determined using the actuarial factors and interest rate set forth in Section 7.6. Moreover, in the event of a Change of Control, each Participant and each Contingent Annuitant of a deceased Participant, who is receiving supplemental retirement benefits under the Plan, shall receive the actuarial present value of future payments of such benefits in a single sum determined pursuant to the provisions of Section 7.6. Any such single sum payment payable under this Section 8.3 shall be made to an eligible Participant or an eligible Contingent Annuitant as soon as reasonably practicable but in no event later than 30 days after such Change of Control.

ARTICLE IX

DEATH BENEFITS

9.1 Designation of Beneficiary . Each Participant may designate a Beneficiary to whom death benefits determined in accordance with the provisions of Section 9.2 shall be payable. In the event a Participant does not designate a Beneficiary or the designated Beneficiary of a Participant does not survive the Participant, then the Beneficiary of such Participant shall be the estate of such Participant. If any Beneficiary designated hereunder dies after becoming entitled to receive a distribution from the Plan and before such distribution is made to him in full, and if no other person or persons have been designated to receive such distribution upon the happening of such contingency, the estate of such deceased Beneficiary shall become the Beneficiary as to such distribution.

9.2 Death Benefit . Upon the death of a Participant to whom supplemental normal, early, or deferred retirement benefits under the Plan have not yet commenced to be paid or upon the death of a Participant to whom supplemental normal, early, or deferred retirement benefits under the Plan have commenced to be paid, the Beneficiary of such Participant shall receive the present actuarial equivalent of the Accrued Portion of the Participant’s supplemental normal, early, or deferred retirement benefit as of the earlier of the date benefits under the Plan commenced to be paid to the Participant or his death minus the aggregate benefit payments, if any, made to such Participant under the Plan. Any such death benefit shall be determined pursuant to the provisions of Section 7.6 and paid in a single sum as soon as reasonably possible. Notwithstanding the foregoing provisions of this Article IX, no death benefit shall be reduced due to the payment of supplemental disability benefits under the Plan.

ARTICLE X

ADMINISTRATION

10.1 Authority of the Company . The Company shall be responsible for the general administration of the Plan, for carrying out the provisions hereof, and for making, or causing a grantor trust to make, any required supplemental benefit payments under the Plan. The Company shall have all such powers as may be necessary to carry out the provisions of the Plan, including the power to determine all questions relating to eligibility for and the amount of any supplemental retirement benefit and all questions pertaining to claims for benefits and procedures for claim review; to resolve all other questions arising under the Plan, including any questions of construction; and to take such further action as the Company shall deem advisable in the administration of the Plan. The Company may delegate any of its powers, authorities, or responsibilities for the operation and administration of the Plan to any person or committee so designated in writing by it and may employ such attorneys, agents, and accountants as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The actions taken and the decisions made by the Company hereunder shall be final and binding upon all interested parties.

10.2 Claims Procedure . Generally benefits shall be paid under the Post-2004 Terms without the necessity of filing a claim. A Participant, Beneficiary, or other person who believes he is entitled to a benefit under the Post-2004 Terms (hereinafter referred to as the “Claimant”) may file a written claim with the Company. A claim must state with specificity the determination desired by the Claimant.

The Company shall consider the Claimant’s claim within a reasonable time, but no later than 90 days of receipt of the claim. If the Company determines that special circumstances require an extension of time for processing the claim, the Company shall notify the Claimant in writing of the extension before the end of the initial 90-day period and the written notice shall indicate the special circumstances requiring an extension of time and the date by which the Company expects to make a decision. The extension of time shall not exceed 90 days from the end of the initial 90-day period.

The Company shall notify the Claimant (in writing or electronically) that a determination has been made and that the claim is either allowed in full or denied in whole or in part. If the claim is denied in whole or in part, the Company shall notify (in writing or electronically) such Claimant or an authorized representative of the Claimant, as applicable, of any adverse benefit determination within 90 days of receipt of the claim. Any adverse benefit determination notice shall describe the specific reason or reasons for the denial, refer to the specific Plan provisions on which the determination was based, describe any additional material or information necessary for the Claimant to perfect his claim and explain why that material or information is necessary, describe the Plan’s review procedures and the time limits applicable to those procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial upon review. If the notification is made electronically, it must comply with applicable Department of Labor Regulations.

Upon receipt of an adverse benefit determination, a Claimant may, within 60 days after receiving notification of that determination, submit a written request asking the Board to review the Claimant’s claim. Each Claimant, when making his request for review of his adverse benefit determination, shall have the opportunity to submit written comments, documents, records, and any other information relating to the claim for benefits. Each Claimant shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to such Claimant’s claim for benefits. The review shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, regardless of whether the information was submitted or considered in the initial benefit determination. If a Claimant does not submit his request for review in writing within the 60-day period described above, his claim shall be deemed to have been conclusively determined for all purposes of the Plan and the adverse benefit determination will be deemed to be correct.

If the Claimant submits in writing a request for review of the adverse benefit determination within the 60-day period described above, the Board (or its designee) shall notify (in writing or electronically) him of its determination on review within a reasonable period of time but not later than 60 days from the date of receipt of his request for review, unless the Board (or its designee) determines that special circumstances require an extension of time. If the Board (or its designee) determines that an extension of time for processing a Claimant’s request for review is required, the Board (or its designee) shall notify him in writing before the end of the initial 60-day period and inform him of the special circumstances requiring an extension of time and the date by which the Board (or its designee) expects to render its determination on review. The extension of time will not exceed 60 days from the end of the initial 60-day period.

If the Board (or its designee) confirms the adverse benefit determination upon review, the notification will describe the specific reason or reasons for the adverse determination, refer to the specific Plan provisions on which the benefit determination is based, include a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim and include a statement describing the Claimant’s right to bring an action under Section 502(a) of ERISA, and any other required information under applicable Department of Labor Regulations. The claims procedure described above shall be administered in a manner not inconsistent with Section 503 of ERISA and applicable Department of Labor Regulations.

A Claimant’s compliance with the foregoing claims procedures shall be a mandatory prerequisite to the Claimant’s right to commence any legal action with respect to any claim for benefits under the Plan.

ARTICLE XI

AMENDMENT AND TERMINATION

The Company reserves the right to amend or terminate the Plan at any time by action of the Committee; provided, however, that no such action shall adversely affect any Participant who is receiving supplemental retirement benefits or supplemental disability benefits under the Plan or who has accrued a supplemental retirement benefit under the Plan, unless an equivalent benefit is provided under another plan sponsored by the Company.

ARTICLE XII

MISCELLANEOUS

12.1 Non-Alienation of Benefits . No benefit under the Plan shall at any time be subject in any manner to alienation or encumbrance. If any Participant shall attempt to, or shall, alienate or in any way encumber his rights or benefits under the Plan, or any part thereof, or if by reason of his bankruptcy or other event happening at any time any such benefits would otherwise be received by anyone else or would not be enjoyed by him, his interest in all such benefits shall automatically terminate and the same shall be held or applied to or for the benefit of such person, his spouse, children, or other dependents as the Company may select.

12.2 Payment of Benefits to Others . If any Participant to whom a benefit is payable under the Plan is unable to care for his affairs because of illness or accident, any payment due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative) may be paid to the spouse, parent, brother, sister, adult child, or any other individual deemed by the Company to be maintaining or responsible for the maintenance of such person. Any payment made in accordance with the provisions of this Section 12.2 shall be a complete discharge of any liability of the Plan with respect to the benefit so paid.

12.3 Plan Non-Contractual . Nothing herein contained shall be construed as a commitment or agreement on the part of any Participant to continue his employment with the Company, and nothing herein contained shall be construed as a commitment on the part of the Company to continue the employment or the annual rate of compensation of any Participant for any period, and all Participants shall remain subject to discharge to the same extent as if the Plan had never been established.

12.4 Trust . In order to provide a source of payment for its obligations under the Plan, the Company may establish a grantor trust.

12.5 Interest of a Participant . The obligation of the Company under the Plan to provide a Participant with supplemental retirement benefits or supplemental disability benefits constitutes the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company.

12.6 Claims of Other Persons . The provisions of the Plan shall in no event be construed as giving any person, firm or corporation any legal or equitable right against the Company, its officers, employees, or directors, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan.

12.7 Section 409A . Although the Company shall use its best efforts to avoid the imposition of taxation, penalties and/or interest under Section 409A, tax treatment of benefits under the Plan is not warranted or guaranteed. No liability shall attach to the Company, any Affiliate, the Board, or any delegate thereof, for any tax, penalty, interest or other monetary amounts owed by any Participant, Beneficiary or other person as a result of the accrual or payment of a benefit under the Plan (whether the Frozen Terms or the Post-2004 Terms) or as a result of the administration of amounts subject to the Plan (whether the Frozen Terms or the Post-2004 Terms).

12.8 Severability . The invalidity or unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted herefrom.

12.9 Governing Law . The provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio.

Executed at Cleveland, Ohio, this 11 day of December, 2008.

EXHIBIT 10.2

APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
(Post-2004 Terms)

WHEREAS, the Applied Industrial Technologies, Inc. Deferred Compensation Plan for Non-Employee Directors (formerly known as the Bearings, Inc. Deferred Compensation Plan for Non-Employee Directors and hereinafter referred to as the “Plan”) was established effective as of July 1, 1991, by Bearings, Inc., the predecessor to Applied Industrial Technologies, Inc. (hereinafter referred to as the “Company”) to provide non-employee members of the Board of Directors of the Company (hereinafter referred to as “Directors”) with a means by which to defer receipt of all or a portion of the compensation payable to them for their services as Directors; and

WHEREAS , the Plan was most recently restated as of September 1, 2003; and

WHEREAS, in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (hereinafter referred to as “Section 409A”) and to facilitate administration of certain nonqualified deferrals thereunder, the Plan is hereby bifurcated effective January 1, 2005, into two parts; namely, one part consists of the Plan, as in effect on October 3, 2004 (hereinafter referred to as the “Frozen Terms”), and which is frozen and shall not be modified except as permitted under Section 409A so as to preserve the grandfathered status of deferrals and related earnings thereunder, and the second part which consists of the post-2004 terms of the Plan, as amended effective January 1, 2005, for compliance with Section 409A (hereinafter referred to as the “Post-2004 Terms”); and

WHEREAS, deferrals earned or vested after December 31, 2004, and before the Plan was bifurcated and amended have been made and administered in good faith in accordance with the requirements of Section 409A;

NOW, THEREFORE, effective January 1, 2005, the Post-2004 Terms of the Plan are hereinafter set forth.

ARTICLE I

DEFINITIONS

1.1 Definitions . As used herein, the following words shall have the meanings hereinafter set forth unless otherwise specifically provided.

(1) The term “ Beneficiary ” shall mean the person or persons who, in accordance with the provisions of Article V, is entitled to distribution hereunder in the event a Participant dies before his interest under the Plan has been distributed to him in full.

(2) The term “ Board ” shall mean the Board of Directors of the Company.

(3) The term “Change in Control” shall mean a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company that constitutes a “change in control” under Section 409A.

(4) The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.

(5) The term “ Committee ” shall mean the Corporate Governance Committee of the Board, or such other committee of the Board that is designated by the Board to administer the Plan. The Committee shall be constituted so as to satisfy any applicable legal requirements including the requirements of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 or any similar rule which may subsequently be in effect. The members shall be appointed by, and serve at the pleasure of, the Board and any vacancy on the Committee shall be filled by the Board.

(6) The term “ Common Shares ” shall mean the common stock of the Company.

(7) The term “ Company ” shall mean Applied Industrial Technologies, Inc., its corporate successors, and any corporation into or with which it is merged or consolidated.

(8) The term “Compensation” shall mean the retainer and fees paid by the Company to a Director for his services as a Director.

(9) The term “ Deferral ” shall mean that portion of the Compensation which a Participant elects to defer pursuant to the terms of the Post-2004 Terms.

(10) The term “ Deferral Account ” shall mean the bookkeeping account established under the Plan in the name of each Participant to reflect the Deferrals of such Participant.

(11) The term “Director” shall mean any non-employee member of the Board of Directors of the Company.

(12) The term “Election Form” shall mean the form which may be electronic, telephonic or hard copy and on which a Director elects to defer compensation under the Post-2004 Terms as provided in Section 2.1.

(13) The term “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a section of ERISA shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.

(14) The term “ Fair Market Value ” shall mean the average of the high and low prices of a Common Share as reported on the composite tape for securities listed on the New York Stock Exchange for the date in question, provided that if no sales of Common Shares were made on said exchange on that date, the average of the high and low prices of a Common Share as reported on said composite tape for the nearest preceding day on which sales of Common Shares were made on said Exchange.

(15) The term “Fiscal Year” shall mean the fiscal year of the Company, which begins on each July 1 and ends on the subsequent June 30.

(16) The term “Frozen Terms” shall mean the terms of the Plan, as in effect on October 3, 2004.

(17) The term “ Fund ” shall mean any investment fund designated by the Committee in which Deferrals are deemed to be invested; provided, however, that one such Fund shall be deemed to be invested in Common Shares.

(18) The term “ Participant ” shall mean a Director who elects to defer all or any portion of his Compensation under the Plan pursuant to the provisions of Article II.

(19) The term “Plan” shall mean the Applied Industrial Technologies, Inc. Deferred Compensation Plan for Non-Employee Directors which, effective as of January 1, 2005, shall consist of the Frozen Terms and the Post-2004 Terms.

(20) The term “Post-2004 Terms” shall mean the portion of the Plan as set forth herein with respect to Deferrals earned or vested after December 31, 2004, with all amendments, supplements, and modifications hereafter made.

(21) The term “Section 409A” shall mean Section 409A of the Code, and the regulations and rulings promulgated thereunder.

(22) The term “Separation from Service” shall mean the termination of services for the Company by a Participant for any reason other than death. Notwithstanding the foregoing, whether or not a Participant has incurred a Separation from Service shall be determined in accordance with the provisions of Section 409A.

(23) The term “ Trust ” shall mean the trust maintained pursuant to the terms of the Applied Industrial Technologies, Inc. Non-Employee Directors Deferred Compensation Grantor Trust Agreement, with all amendments, supplements, and modifications.

(24) The term “Unforeseeable Emergency” shall be defined and determined in accordance with the provisions of Section 409A, which include a severe financial hardship of a Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Section 152 of the Code (without regard to Sections 152(b)(1), (b)(2), and (d)(1)(B) of the Code); a loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to the home by natural disaster not otherwise covered by insurance); or other similar or extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

(25) The term “ Valuation Date ” shall mean the last day of each Fiscal Year quarter and any other date as may be designated as such by the Committee.

1.2 Construction . Where necessary or appropriate to the meaning herein, the singular shall be deemed to include the plural and the masculine pronoun to include the feminine.

ARTICLE II

DEFERRAL ELECTIONS

2.1 Participation and Elections to Defer . Each Director who was participating in the Plan under the Frozen Terms as of December 31, 2004, and who continues to serve as an active Director shall be eligible to continue to participate in the Plan under the Post-2004 Terms as of January 1, 2005. Directors who were not participating in the Plan under the Frozen Terms and Directors who were elected to the Board on or after January 1, 2005, shall be eligible to participate in the Plan under the Post-2004 Terms for services performed after December 31, 2004. As a condition of participation in the Plan, a Director must complete, sign, and return to the Committee an Election Form, within the time permitted under Section 2.2 for making elections. A Participant’s Election Form shall specify the amount or percentage of the Compensation being deferred and the time and form of payment in accordance with Article IV. The election to defer, including the election of the time and form of payment, shall be irrevocable as of the date specified in Section 2.2. Pursuant to Article IV, a Participant may make a subsequent election to delay payment and change the form of payment of a Deferral.

2.2 Time of Elections . On or before each December 31 immediately preceding the first day of the calendar year during which services giving rise to Compensation will be performed, a Director may elect to defer receipt of all or a portion of such Compensation that he is eligible to receive from the Company as a Deferral under the Plan for such calendar year. Such election shall be irrevocable, upon delivery of the Election Form to the Committee, as of the end of such December 31 with respect to the Compensation for which an election has been made. Notwithstanding the foregoing, a Director who has not previously been eligible to participate in the Plan or in any other nonqualified account balance plan of the Company that is required to be aggregated with the Plan pursuant to Section 409A, may file an Election Form with the Committee prior to, or within 30 days of, the date on which he first becomes a Director to participate in the Plan and to defer all or a portion of his Compensation to be earned for services to be performed subsequent to the filing of the Election Form and ending on December 31 of the calendar year in which such filing occurs.

2.3 Special Transition Elections .

(a)  Changes in Payment Elections . During 2005, 2006, 2007, and 2008, a Participant may make elections to receive payment of his Deferrals without complying with the requirements of Section 4.3; provided that any such election shall only be effective as follows:

(i) If made in 2006, it shall be applicable only with respect to amounts that would not otherwise be payable in 2006 and shall not cause an amount to be paid in 2006 that would not otherwise be payable in 2006; and

(ii) If made in 2007, it shall be applicable only with respect to amounts that would not otherwise be payable in 2007 and shall not cause an amount to be paid in 2007 that would not otherwise be payable in 2007; and

(iii) If made in 2008, it shall be applicable only with respect to amounts that would not otherwise be payable in 2008 and shall not cause an amount to be paid in 2008 that would not otherwise be payable in 2008.

(b)  2005 Deferral Elections . In accordance with Q&A-21 of Notice 2005 — 1 and Section 3.06 of Notice 2006-79, initial deferral elections for calendar year 2005 were permitted to be made on or before March 15, 2005, with respect to amounts that were not paid or payable at the time of such election.

2.4 Other Election Provisions . Each Participant shall indicate on his Election Form the allocation of the Deferral to be deemed invested in the Funds. Subject to the provisions of Article IV and Section 5.7, amounts deferred pursuant to an election made under the Plan shall be deemed invested in the Funds and shall be distributed in the manner and at the time set forth on the applicable Election Form.

ARTICLE III

ACCOUNTS AND INVESTMENTS

3.1 Establishment and Crediting of Accounts . The Deferral Account of each Participant shall have subaccounts that shall reflect the Funds into which Deferrals are deemed invested and credited pursuant to the applicable Election Form filed by the Participant with the Committee.

3.2 Amount of Deferrals . If a Participant elects to have Compensation deferred under the Plan as a Deferral and invested in a Fund, other than a Fund comprised of Common Shares, 100% of the amount of such Deferral deemed so invested in such Fund shall be credited to his Deferral Account and subaccounts in accordance with his duly filed Election Form. If the Participant elects to have some or all of his compensation deferred under the Plan as a Deferral and invested in a Fund comprised of Common Shares, prior to January 1, 2009, 125% of the amount of such Deferral, and on and after January 1, 2009, 100% of the amount of such Deferral, deemed so invested in such Fund shall be credited to his Deferral Account and subaccounts in accordance with the terms of his duly filed Election Form. Any such Deferral shall be credited to the Deferral Account of a Participant as of the last day of the Fiscal Year quarter during which the Deferral would have otherwise been payable to such Participant.

3.3 Adjustment of Accounts . As of each Valuation Date, the value of each Deferral Account shall be adjusted to reflect deemed earnings, losses, dividends, distributions, and credits in accordance with procedures adopted by the Committee or the Board. Common Shares of a Fund credited to any Deferral Account shall be valued at Fair Market Value.

ARTICLE IV

DISTRIBUTION OF ACCOUNTS

4.1 Form of Payments . The value of a Participant’s Deferral deemed invested in a Fund comprised of Common Shares shall be distributed in Common Shares and the value of a Participant’s Deferral deemed otherwise invested shall be distributed in cash. Such value shall be determined as of the most recent Valuation Date. Subject to the provisions of Section 4.2, a distribution of the value of a Deferral from a Participant’s Deferral Account shall be made either in a lump sum or in substantially equal annual installments over a period of not more than ten years and commencing as of a date specified in such Participant’s Election Form with respect to such Deferral.

4.2 Time of Payments . In accordance with the provisions of Section 409A, a Participant shall specify on his Election Form, at the time he defers Compensation, an objectively determinable payment date, which may include attainment of a specific age, a date certain, or Separation from Service. Except as otherwise provided in this Article IV, distribution of the value of a Deferral (and related earnings and losses) from a Participant’s Deferral Account shall commence within 60 days of the date specified for commencement on his applicable Election Form; provided, however, that if such 60-day period begins in one calendar year and ends in another, the Participant shall not have a right to designate the calendar year of payment.

4.3 Changing Time or Form of Payments . A Participant may elect to delay payment or to change the form of payment of the value of a Deferral, if all the following conditions are met:

(i) Such election will not take effect until at least twelve months after the date on which the election is made; and

(ii) The payment with respect to which such election is made is deferred for a period of not less than five years from the date such payment would otherwise be made; and

(iii) Any election for a “specified time (or pursuant to a fixed schedule)” within the meaning of Section 409A(a)(2)(A)(iv) of the Code, may not be made less than twelve (12) months prior to the date of the first scheduled payment.

To the extent permitted under Section 409A, installment payments shall be treated as a single payment.

4.4 No Acceleration . Except as permitted under Section 409A, no acceleration of the time or form of payment of a Participant’s Deferral from his Deferral Account shall be permitted.

4.5 Emergency Distribution . Upon the written request of a Participant and the showing of an Unforeseeable Emergency, the Committee may, upon its determination that such an emergency exists, direct that an amount of such Participant’s Deferral Account be paid to him. The amount that can be paid shall not exceed the amount necessary to satisfy the Unforeseeable Emergency plus an amount necessary to pay taxes reasonably anticipated because of such distribution, after taking into account the extent to which such emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation would not itself cause severe financial hardship). Payment shall be made within 30 days of the Committee’s determination that an Unforeseeable Emergency exists.

4.6 Distribution Upon Death . In the event that a Participant dies prior to commencement of payments or while receiving payments under the Post-2004 Terms, the Company shall pay his Beneficiary the remainder of his Deferral Account under the Post-2004 Terms in a single sum within 60 days of the Participant’s death. The Company shall provide each Participant with the form for designating his Beneficiary. A Participant may change his Beneficiary designation at any time (without the prior consent of any prior Beneficiary) by executing a revised Beneficiary designation form and delivering it to the Company before his death. If no Beneficiary is designated or if the Beneficiary predeceases the Participant or cannot be located, the Participant’s Deferral Account shall be paid to the Participant’s estate.

4.7 Distribution in the Event of a Change in Control . Notwithstanding any other provision of the Post-2004 Terms to the contrary, to the extent permitted under Section 409A, the Deferral Account of a Participant under the Post-2004 Terms shall be distributed to such Participant within ten days following the Change of Control or deferred for payment at a later specified date pursuant to the election made by the Participant on his Election Form.

4.8 Taxes . In the event any taxes are required by law to be withheld or paid from any Deferrals or payments under the Plan, the Committee shall cause such amounts to be withheld from other income or from such payments and shall transmit the withheld amounts to the appropriate taxing authority.

ARTICLE V

MISCELLANEOUS

5.1 Amendment and Termination of Plan . The Company reserves the right to amend or terminate the Plan at any time; provided, however, that no amendment or termination shall affect the rights of Participants to amounts previously credited to their Deferral Accounts pursuant to Section 3.2.

5.2 Non-Alienation . No benefit under the Plan shall at any time be subject in any manner to alienation or encumbrance. If any Participant or Beneficiary shall attempt to, or shall, alienate or in any way encumber his rights or benefits under the Plan, or any part thereof, or if by reason of his bankruptcy or other event happening at any time any such benefits would otherwise be received by anyone else or would not be enjoyed by him, his interest in all such benefits shall automatically terminate and the same shall be held or applied to or for the benefit of such person, his spouse, children, or other dependents as the Committee may select.

5.3 Payment of Benefits to Others . If any Participant or Beneficiary to whom a benefit is payable under the Plan is unable to care for his affairs because of illness or accident, any payment due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative) may be paid to the spouse, parent, brother, sister, adult child, or any other individual deemed by the Company to be maintaining or responsible for the maintenance of such person. Any payment made in accordance with the provisions of this Section 5.3 shall be a complete discharge of any liability of the Plan with respect to the benefit so paid.

5.4 Taxability of Plan Benefits . The Plan is intended to be treated as an unfunded deferred compensation plan under the Code. If, at any time, it is determined that amounts deferred pursuant to the Plan are currently taxable to a Participant or his Beneficiary under Section 409A, the amounts credited to such Participant’s Deferral Account which become so taxable shall be distributed immediately to him; provided, however, that in no event shall amounts so payable under the Plan to a Participant exceed the value of his Deferral Account.

5.5 Funding . The Company may cause Plan benefits to be paid from the Trust which is a grantor trust that may provide full funding of the Plan benefits in the event of a potential Change in Control or Change in Control. Subject to the provisions of the Trust, the obligation of the Company under the Plan to provide a Participant or Beneficiary with a benefit constitutes the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company. Notwithstanding any other provision of the Plan, Plan benefits shall be limited to the balance of a Participant’s Deferral Account.

5.6 Section 16b Procedures . In conjunction with rules promulgated by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as amended, the Company has established Section 16b Procedures which affect certain transactions under the Plan involving Employer Securities held for the benefit of a Director. Such Procedures, which are hereby incorporated into the Plan shall constitute for all purposes a part of the Plan. In the event that the Procedures conflict with any other provision of the Plan, the Procedures shall override such other provision and shall be controlling. For purposes of this Section, the following terms shall have the meaning hereinafter set forth.

(a) The term “Employer Security” shall mean any qualifying employer security as defined in Section 407(d)(5) of ERISA which is also an equity security as defined under the Securities Exchange Act of 1934, as amended.

(b) The term “Officer” shall mean any person who is designated as an “Officer” of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, as amended.

(c) The term “Section 16b Procedures” or “Procedures” shall mean the Administrative Procedures Applicable to Officers and Directors Under Employee Benefit Plans Maintained by Applied Industrial Technologies, Inc., effective as of January 1, 1997, with all amendments, supplements, and modifications thereafter made.

5.7 Interpretation . The Board and the Committee shall have full power and authority to interpret, construe, and administer the Post-2004 Terms, and the interpretation and construction thereof and actions thereunder by the Board or the Committee, including any valuation of a Participant’s Deferral Account and the amount or recipient of the payments to be made from such Deferral Account, shall be binding and conclusive on all persons for all purposes. No member of the Board and no designee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan.

5.8 Claims Procedures . Generally, benefits shall be paid under the Post-2004 Terms without the necessity of filing a claim. Any Director, Participant, Beneficiary, or other person who believes he is entitled to a benefit under the Post-2004 Terms (hereinafter referred to as the “Claimant”) may file a written claim with the Company. A claim must state with specificity the determination desired by the Claimant.

The Company shall consider the Claimant’s claim within a reasonable time, but no later than 90 days of receipt of the claim. If the Company determines that special circumstances require an extension of time for processing the claim, the Company shall notify the Claimant in writing of the extension before the end of the initial 90-day period and the written notice shall indicate the special circumstances requiring an extension of time and the date by which the Company expects to make a decision. The extension of time shall not exceed 90 days from the end of the initial 90-day period.

The Company shall notify the Claimant (in writing or electronically) that a determination has been made and that the claim is either allowed in full or denied in whole or in part. If the claim is denied in whole or in part, the Company shall notify (in writing or electronically) such Claimant or an authorized representative of the Claimant, as applicable, of any adverse benefit determination within 90 days of receipt of the claim. Any adverse benefit determination notice shall describe the specific reason or reasons for the denial, refer to the specific Plan provisions on which the determination was based, describe any additional material or information necessary for the Claimant to perfect his claim and explain why that material or information is necessary, describe the Plan’s review procedures and the time limits applicable to those procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial upon review. If the notification is made electronically, it must comply with applicable Department of Labor Regulations.

Upon receipt of an adverse benefit determination, a Claimant may, within 60 days after receiving notification of that determination, submit a written request asking the Board to review the Claimant’s claim. Each Claimant, when making his request for review of his adverse benefit determination, shall have the opportunity to submit written comments, documents, records, and any other information relating to the claim for benefits. Each Claimant shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to such Claimant’s claim for benefits. The review shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, regardless of whether the information was submitted or considered in the initial benefit determination. If a Claimant does not submit his request for review in writing within the 60-day period described above, his claim shall be deemed to have been conclusively determined for all purposes of the Plan and the adverse benefit determination will be deemed to be correct.

If the Claimant submits in writing a request for review of the adverse benefit determination within the 60-day period described above, the Company (or its designee) shall notify (in writing or electronically) him of its determination on review within a reasonable period of time but not later than 60 days from the date of receipt of his request for review, unless the Company (or its designee) determines that special circumstances require an extension of time. If the Company (or its designee) determines that an extension of time for processing a Claimant’s request for review is required, the Company (or its designee) shall notify him in writing before the end of the initial 60-day period and inform him of the special circumstances requiring an extension of time and the date by which the Company (or its designee) expects to render its determination on review. The extension of time will not exceed 60 days from the end of the initial 60-day period.

If the Company (or its designee) confirms the adverse benefit determination upon review, the notification will describe the specific reason or reasons for the adverse determination, refer to the specific Plan provisions on which the benefit determination is based, include a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim and include a statement describing the Claimant’s right to bring an action under Section 502(a) of ERISA, and any other required information under applicable Department of Labor Regulations. The claims procedure described above shall be administered in a manner not inconsistent with Section 503 of ERISA and applicable Department of Labor Regulations.

A Claimant’s compliance with the foregoing claims procedures shall be a mandatory prerequisite to the Claimant’s right to commence any legal action with respect to any claim for benefits under the Plan.

5.9 Section 409A . Notwithstanding any provision to the contrary in the Plan, nothing shall restrict the Company’s right to amend the Plan, the Post-2004 Terms, the Frozen Terms, any deferral agreement, and/or any deferral Election Form, without the consent of Participants and without additional consideration to affected Participants, to the extent necessary to avoid taxation, penalties, and/or interest arising under Section 409A, even if such amendments reduce, restrict, or eliminate rights granted thereunder before such amendments. Although the Company shall use its best efforts to avoid the imposition of taxation, penalties, and/or interest under Section 409A, tax treatment of deferrals and other credits under the Plan (whether the Frozen

Terms or the Post-2004 Terms) is not warranted or guaranteed. If, at any time, it is determined that amounts deferred pursuant to the Plan are currently taxable to a Participant or his Beneficiary under Section 409A, the amounts credited to such Participant’s Deferral Account which become so taxable shall be distributed immediately to him; provided, however, that in no event shall amounts so payable under the Plan to a Participant exceed the value of his Deferral Account. Notwithstanding the foregoing, the Company, the Board, any Affiliate, or any delegatee shall not be held liable for any taxes, penalties, interest, or other monetary amounts owed by any Participant, Director, Beneficiary, or other person as a result of the deferral or payment of any amounts under the Plan (whether the Frozen Terms or the Post-2004 Terms) or as a result of the administration of amounts subject to the Plan (whether the Frozen Terms or the Post-2004 Terms).

5.10 Severability . The invalidity or unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted herefrom.

5.11 Governing Law . The provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio, without regard to its conflict or choice of law principles.

Executed at Cleveland, Ohio, this 11 day of December, 2008.

EXHIBIT 10.3

APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(Post-2004 Terms)

WHEREAS, effective as of July 1, 1993, Bearings, Inc., the predecessor plan sponsor to Applied Industrial Technologies, Inc. (hereinafter referred to as the “Company”), established the Bearings, Inc. Deferred Compensation Plan which is now known as the Applied Industrial Technologies, Inc. Deferred Compensation Plan (hereinafter referred to as the “Plan”), to provide key employees of the Company and its Affiliates with a means by which to defer receipt of all or a portion of their incentive compensation received from the Company; and

WHEREAS, in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (hereinafter referred to as “Section 409A”) and to facilitate administration of certain nonqualified deferrals thereunder, the Plan is hereby bifurcated effective January 1, 2005 into two parts; namely, one part that consists of the Plan, as in effect on October 3, 2004 (hereinafter referred to as the “Frozen Terms”), which is hereby frozen and which shall not be modified except as permitted under Section 409A so as to preserve the grandfathered status of deferrals and related earnings thereunder, and the second part that shall consist of the post-2004 terms of the Plan, as amended effective January 1, 2005, for compliance with Section 409A (hereinafter referred to as the “Post-2004 Terms”); and

WHEREAS, deferrals earned or vested after December 31, 2004, and before the Plan was bifurcated and amended have been made and administered in good faith in accordance with the requirements of Section 409A;

NOW, THEREFORE, effective January 1, 2005, the Post-2004 Terms of the Plan is hereinafter set forth.

ARTICLE I

DEFINITIONS

1.1 Definitions . As used herein, the following words shall have the meanings hereinafter set forth unless otherwise specifically provided.

(1) The term “ Affiliate ” shall mean any member of a controlled group of corporations (as determined under Section 414(b) of the Code) of which the Company is a member and any member of a group of trades or business under common control (as determined under Section 414(c) of the Code) with the Company; any member of an affiliated service group (as determined under Section 414(m) of the Code) of which the Company is a member; and any other entity which is required to be aggregated with the Company pursuant to the provisions of Section 414(o) of the Code.

(2) The term “ Award ” shall mean the aggregate benefit payable to a Plan Participant under an Incentive Plan or a Performance Plan for a Fiscal Year.

(3) The term “ Beneficiary ” shall mean the person or persons who, in accordance with the provisions of Article V, is entitled to distribution hereunder in the event a Participant dies before his interest under the Plan has been distributed to him in full.

(4) The term “ Board ” shall mean the Board of Directors of the Company.

(5) The term “ Change in Control ” shall mean a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company that constitutes a “change in control” under Section 409A.

(6) The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.

(7) The term “ Committee ” shall mean the Executive Organization and Compensation Committee of the Board, or such other committee of the Board that is designated by the Board to administer the Plan. The Committee shall be constituted so as to satisfy any applicable legal requirements including the requirements of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 or any similar rule which may subsequently be in effect. The members shall be appointed by, and serve at the pleasure of, the Board and any vacancy on the Committee shall be filled by the Board.

(8) The term “ Common Shares ” shall mean the common stock of the Company.

(9) The term “ Company ” shall mean Applied Industrial Technologies, Inc., its corporate successors, and any corporation into or with which it is merged or consolidated.

(10) The term “ Comprehensive Plan ” shall mean the Applied Industrial Technologies, Inc. Comprehensive Deferred Compensation and Supplemental Benefit Plan (formerly known as the Bearings, Inc. Comprehensive Deferred Compensation and Supplemental Benefit Plan.)

(11) The term “ Deferral ” shall mean that portion of an Award which a Participant elects to defer pursuant to the terms of the Post-2004 Terms.

(12) The term “ Deferral Account ” shall mean the bookkeeping account established under the Plan in the name of each Participant to reflect the Deferrals of such Participant.

(13) The term “Election Form” shall mean the form which may be electronic, telephonic or hard copy and on which a Director elects to defer compensation under the Post-2004 Terms as provided in Section 2.1.

(14) The term “ Eligible Employee ” shall mean any highly compensated or select management employee of the Company or an Affiliate who is designated by the Committee to participate in an Incentive Plan or Performance Plan with respect to a particular Fiscal Year.

(15) The term “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a section of ERISA shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.

(16) The term “ Fair Market Value ” shall mean the average of the high and low prices of a Common Share as reported on the composite tape for securities listed on the New York Stock Exchange for the date in question, provided that if no sales of Common Shares were made on said exchange on that date, the average of the high and low prices of a Common Share as reported on said composite tape for the nearest preceding day on which sales of Common Shares were made on said Exchange.

(17) The term “ Fiscal Year ” shall mean the fiscal year of the Company, which begins on each July 1 and ends on the subsequent June 30.

(18) The term “Frozen Terms” shall mean the terms of the Plan, as in effect on October 3, 2004.

(19) The term “ Fund ” shall mean any investment fund designated by the Committee in which Deferrals are deemed to be invested; provided, however, that one such Fund shall be deemed to be invested in Common Shares.

(20) The term “ Incentive Plan ” shall mean any incentive plan adopted by the Board for key employees.

(21) The term “ Participant ” shall mean an Eligible Employee who elects to defer all or any portion of an Award under the Plan pursuant to the provisions of Article II.

(22) The term “Performance-Based Compensation” shall mean compensation that is not equity-based compensation and that is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a Fiscal Year performance period of at least twelve consecutive months in which Participants perform services. Performance criteria shall be established in writing not later than ninety days after the commencement of the period of service to which the criteria relate. Compensation shall not be Performance-Based Compensation if any amount or portion will be paid regardless of performance or is based upon a level of performance that is substantially certain to be met at the time the criteria are established.

(23) The term “ Performance Plan ” shall mean any long term performance plan approved by Company shareholders for key employees.

(24) The term “Plan” shall mean the Applied Industrial Technologies, Inc. Deferred Compensation Plan which, effective as of January 1, 2005, shall consist of the Frozen Terms and the Post-2004 Terms and which is part of the Comprehensive Plan and listed on Exhibit A attached thereto.

(25) The term “Post-2004 Terms” shall mean the terms of the Plan with respect to Deferrals earned or vested after December 31, 2004, which are set forth herein, with all amendments, supplements, and modifications hereafter made.

(26) The term “Section 409A” shall mean Section 409A of the Code, and the regulations and rulings promulgated thereunder.

(27) The term “Separation from Service” shall mean the termination of employment of a Participant with the Company and all Affiliates for any reason other than death; provided, however, that a Company-approved leave of absence shall not be considered a termination of employment if the leave does not exceed six months or, if longer, so long as the Participant’s right to reemployment is provided either by statute or by contract. Notwithstanding the foregoing, whether or not a Participant has incurred a Separation from Service shall be determined in accordance with Section 409A.

(28) The term “Specified Employee” shall mean a “specified employee” within the meaning of Section 409A and the Company’s Specified Employee identification policy.

(29) The term “ Trust ” shall mean the trust maintained pursuant to the terms of the Applied Industrial Technologies, Inc. Supplemental Executive Retirement Benefits Trust Agreement with all amendments, supplements, and modifications.

(30) The term “Unforeseeable Emergency” shall be defined and determined in accordance with the provisions of Section 409A, which include a severe financial hardship of a Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Section 152 of the Code (without regard to Sections 152(b)(1), (b)(2), and (d)(1)(B) of the Code); a loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to the home by natural disaster not otherwise covered by insurance); or other similar or extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

(31) The term “ Valuation Date ” shall mean the last day of each Fiscal Year quarter and any other date as may be designated as such by the Committee.

1.2 Construction . Where necessary or appropriate to the meaning herein, the singular shall be deemed to include the plural and the masculine pronoun to include the feminine.

ARTICLE II

ELECTIONS BY ELIGIBLE EMPLOYEES

2.1 Participation and Elections to Defer . Each Eligible Employee who was participating in the Plan under the Frozen Terms as of December 31, 2004, and who continues to be an active Eligible Employee shall be eligible to continue to participate in the Plan under the Post-2004 Terms as of January 1, 2005. Eligible Employees who were participating in the Plan under the Frozen Terms and Eligible Employees who became Eligible Employees on or after January 1, 2005, shall be eligible to participate in the Plan under the Post-2004 Terms with respect to services performed after December 31, 2004 that give rise to Awards. As a condition of participation in the Plan, an Eligible Employee must complete, sign, and return to the Committee a Deferral Election Form (including a form in electronic, telephonic, or other format) (an “Election Form”) within the times permitted hereunder for making elections. A Participant’s Election Form shall specify the amount or percentage of an Award being deferred and the time and form of payment in accordance with Article IV. The election to defer, including the election of the time and form of payment, shall be irrevocable as of the dates specified in Section 2.2. Pursuant to Article IV, a Participant may make a subsequent election to delay payment and change the form of payment of a Deferral. Under no circumstances may any election to defer be made under the Post-2004 Terms unless the Award to be deferred is “fiscal year compensation.” For purposes of the Post-2004 Terms, “fiscal year compensation” means compensation relating to a period of service coextensive with one or more Fiscal Years of the Company, of which no amount is paid or payable during the service period.

2.2 Time of Elections .

(a)  Non-Performance-Based Compensation . On or before each June 30 immediately preceding the first Fiscal Year during which services giving rise to an Award that is not Performance-Based Compensation will be performed, an Eligible Employee may elect to defer receipt of all or a portion of such an Award that he may receive under an Incentive Plan or a Performance Plan as a Deferral under the Plan. Such election shall be irrevocable, upon delivery of the Election Form to the Committee, as of the end of such June 30 with respect to the Award for which an election has been made.

(b)  Performance-Based Compensation . On or before each December 31 that is at least six months before the end of the performance period for an Award that is Performance-Based Compensation, an Eligible Employee may elect to defer receipt of all or a portion of an Award of Performance-Based Compensation that he may receive under an Incentive Plan or a Performance Plan as a Deferral under the Plan; (i) provided that the Eligible Employee has continuously performed services from a date no later than 90 days after the commencement of the performance period through a date no earlier than the date on which the deferral election is made, and (ii) provided further that in no event shall such election be made after such Award has become both substantially certain to be paid and readily ascertainable. Such election shall be irrevocable as of the end of each December 31 with respect to the Award for which an election has been made.

(c)  New Hires and Promotions . In the first Fiscal Year in which an Eligible Employee becomes eligible to participate in the Plan (taking into consideration eligibility under all other nonqualified account balance plans of the Company and any Affiliate that are required to be aggregated with the Plan under Section 409A in determining whether such Fiscal Year is in fact the first year of eligibility), such Eligible Employee may make an initial deferral election within 30 days of becoming first eligible with respect to that portion of an Award that relates to services to be performed subsequent to the election. Such an election shall be irrevocable.

2.3 Special Transition Elections .

(a)  Changes in Payment Elections . During 2005, 2006, 2007, and 2008, a Participant may make elections to receive payment of his Deferrals without complying with the requirements of Section 4.3; provided that such election(s) shall only be effective:

(i)

If made in 2006, it shall be applicable only with respect to amounts that would not otherwise be payable in 2006 and shall not cause an amount to be paid in 2006 that would not otherwise be payable in 2006; and

(ii)

If made in 2007, it shall be applicable only with respect to amounts that would not otherwise be payable in 2007 and shall not cause an amount to be paid in 2007 that would not otherwise be payable in 2007; and

(iii)

If made in 2008, it shall be applicable only with respect to amounts that would not otherwise be payable in 2008 and shall not cause an amount to be paid in 2008 that would not otherwise be payable in 2008.

(b)  2005 Deferral Elections . In accordance with Q&A-21 of Notice 2005 — 1 and Section 3.06 of Notice 2006-79, initial deferral elections for calendar year 2005 were permitted to be made on or before March 15, 2005, with respect to amounts that were not paid or payable at the time of such election.

2.4 Other Election Provisions . Each deferral election shall indicate the allocation of the Deferral to be deemed invested in the Funds. Subject to the provisions of Article IV and Section 5.7, amounts deferred pursuant to any election hereunder shall be deemed invested and shall be distributed in the manner and at the time set forth on the applicable Election Form.

ARTICLE III

ACCOUNTS AND INVESTMENTS

3.1 Establishment and Crediting of Accounts . The Deferral Account of each Participant shall have subaccounts, which shall reflect the Funds into which Deferrals are deemed invested and credited pursuant to the applicable Election Form filed by the Participant with the Committee. The crediting of any Deferral or portion thereof deemed to be invested in a Fund shall be made to a Participant’s Deferral Account within 30 days after the date on which the Deferral would otherwise have been payable to the Participant under the applicable Incentive Plan or Performance Plan, and Common Shares of a Fund so credited to a Deferral Account shall be valued at Fair Market Value.

3.2 Amount of Deferrals .

(a)  Prior to July 1, 2007 . Effective for Awards related to Fiscal Years beginning prior to July 1, 2007, if a Participant (i) elects to have less than 50% of any Award from an Incentive Plan deferred under the Plan as a Deferral, or (ii) elects to have any stock portion of an Award from a Performance Plan deferred under the Plan as a Deferral, 100% of the amount of such Deferral shall be credited to his Deferral Account and subaccounts in accordance with his duly filed Election Form. Effective for Awards related to Fiscal Years beginning prior to July 1, 2007, if a Participant (i) elects to have at least 50% of an Award from an Incentive Plan deferred under the Plan as a Deferral and further elects to have at least 50% of such Award deemed to be invested in a Fund comprised of Common Shares, or (ii) elects to have any cash portion of an Award from a Performance Plan deferred under the Plan as a Deferral and further elects to have any portion of such Award deemed to be invested in a Fund comprised of Common Shares, 110% of the amount of such Deferral deemed so invested in Common Shares shall be credited to his Deferral Account and subaccounts in accordance with the terms of his duly filed Election Form.

(b)  After June 30, 2007 . Effective for Awards related to Fiscal Years beginning after June 30, 2007, 100% of the amount of an Eligible Employee’s Deferral shall be credited to his Deferral Account and subaccounts in accordance with his duly filed Election Form.

3.3 Adjustment of Accounts . As of each Valuation Date, the value of each Deferral Account shall be adjusted to reflect deemed earnings, losses, and dividends determined by the Committee. Common Shares of a Fund credited to any Deferral Account shall be valued at Fair Market Value. Records shall relate such adjustments to Deferrals based upon common distribution dates elected by the Participant.

ARTICLE IV

DISTRIBUTION OF ACCOUNTS

4.1 Form of Payments . The value of a Participant’s Deferral Account deemed invested in a Fund comprised of Common Shares shall be distributed in Common Shares and the value of a Participant’s Deferral Account deemed otherwise invested shall be distributed in cash. Such value shall be determined as of the most recent Valuation Date. Subject to the provisions of Section 4.2, a distribution from a Participant’s Deferral Account with respect to a particular Award shall be made either in a lump sum or in substantially equal annual installments over a period of not more than ten years and commencing as of a date specified in such Participant’s Election Form.

4.2 Time of Payments . In accordance with the provisions of Section 409A, a Participant shall specify on his Election Form an objectively determinable payment date, which may include attainment of a specific age or Separation from Service, at the time he defers an Award. Except as otherwise provided in this Article IV, distribution of the value of a Deferral (and related earnings and losses) from a Participant’s Deferral Account with respect to a particular Award shall commence within 60 days of the date specified for commencement in his applicable Election Form; provided, however, that if such 60-day period begins in one calendar year and ends in another, the Participant shall not have a right to designate the calendar year of payment. Notwithstanding any other provision of the Plan to the contrary, a distribution payable to a Specified Employee due to a Separation from Service shall not be distributed, or begin to be distributed, until the first day of the seventh month following his Separation from Service. The amount of the first payment shall include the accumulated amount of the payments, if any, that would otherwise have been made during the first six months but for the fact that the Participant is a Specified Employee.

4.3 Changing Time or Form of Payments . A Participant may elect to delay payment or to change the form of payment if all the following conditions are met:

(i)

Such election will not take effect until at least twelve months after the date on which the election is made; and

(ii)

The payment with respect to which such election is made is deferred for a period of not less than five years from the date such payment would otherwise be made; and

(iii)

Any election for a “specified time (or pursuant to a fixed schedule)” within the meaning of Section 409A(a)(2)(A)(iv) of the Code, may not be made less than twelve months prior to the date of the first scheduled payment.

To the extent permitted under Section 409A, installment payments shall be treated as a single payment.

4.4 No Acceleration . Except as permitted under Section 409A, no acceleration of the time or form of payment of a Participant’s Deferral Account shall be permitted.

4.5 Emergency Distribution . Upon the written request of a Participant and the showing of an Unforeseeable Emergency, the Committee may, upon its determination that such an emergency exists, direct that an amount of such Participant’s Deferral Account be paid to him. The amount that can be paid shall not exceed the amount necessary to satisfy the Unforeseeable Emergency, plus an amount necessary to pay taxes reasonably anticipated because of such distribution, after taking into account the extent to which such emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation would not itself cause severe financial hardship). Payment shall be made within 30 days of the Committee’s determination that an Unforeseeable Emergency exists.

4.6 Distribution Upon Death . In the event that a Participant dies prior to commencement of payments or while receiving payments under the Post-2004 Terms, the Company shall pay his Beneficiary the remainder of his Deferral Account under the Post-2004 Terms in a single sum within 60 days of the Participant’s death. The Company shall provide Participants with the form for designating his Beneficiary. A Participant may change his Beneficiary designation at any time (without the prior consent of any prior Beneficiary) by executing a revised Beneficiary designation form and delivering it to the Company before his death. If no Beneficiary is designated or if the Beneficiary predeceases the Participant or cannot be located, the Participant’s Deferral Account shall be paid to the Participant’s estate.

4.7 Distribution in the Event of a Change of Control . Notwithstanding any other provision of the Post-2004 Terms to the contrary, to the extent permitted under Section 409A, the Deferral Account of a Participant under the Post-2004 Terms shall be distributed to such Participant within ten days following the Change of Control or deferred for payment at a later specified date pursuant to the election made by the Participant on his Election Form.

4.8 Taxes . In the event any taxes are required by law to be withheld or paid from any Deferrals or payments under the Plan, the Committee shall cause such amounts to be withheld from other income or from such payments and shall transmit the withheld amounts to the appropriate taxing authority.

ARTICLE V

MISCELLANEOUS

5.1 Amendment and Termination of Plan . The Company reserves the right to amend or terminate the Plan at any time; provided, however, that no amendment or termination shall affect the rights of Participants to amounts previously credited to their Deferral Accounts.

5.2 Non-Alienation . No benefit under the Plan shall at any time be subject in any manner to alienation or encumbrance. If any Participant or Beneficiary shall attempt to, or shall, alienate or in any way encumber his rights or benefits under the Plan, or any part thereof, or if by reason of his bankruptcy or other event happening at any time any such benefits would otherwise be received by anyone else or would not be enjoyed by him, his interest in all such benefits shall automatically terminate and the same shall be held or applied to or for the benefit of such person, his spouse, children, or other dependents as the Committee may select.

5.3 Payment of Benefits to Others . If any Participant or Beneficiary to whom a benefit is payable under the Plan is unable to care for his affairs because of illness or accident, any payment due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative) may be paid to the spouse, parent, brother, sister, adult child, or any other individual deemed by the Company to be maintaining or responsible for the maintenance of such person. Any payment made in accordance with the provisions of this Section 5.3 shall be a complete discharge of any liability of the Plan with respect to the benefit so paid.

5.4 Plan Non-Contractual . Nothing contained herein shall be construed as a commitment or agreement on the part of any person employed by the Company or an Affiliate to continue his employment with the Company or Affiliate, and nothing herein contained shall be construed as a commitment on the part of the Company or Affiliate to continue the employment or the annual rate of compensation of any such person for any period, and all Participants shall remain subject to discharge to the same extent as if the Plan had never been established.

5.5 Taxability of Plan Benefits . This Plan is intended to be treated as an unfunded deferred compensation plan under the Code. If, at any time, it is determined that amounts deferred pursuant to the Plan are currently taxable to a Participant or his Beneficiary under Section 409A, the amounts credited to such Participant’s Deferral Account which become so taxable shall be distributed immediately to him; provided, however, that in no event shall amounts so payable under the Plan to a Participant exceed the value of his Deferral Account.

5.6 Funding . The Company may cause Plan benefits to be paid from the Trust which is a grantor trust that provides full funding of the Plan benefits in the event of a potential Change in Control or Change in Control. Subject to the provisions of the Trust, the obligation of the Company under the Plan to provide a Participant or Beneficiary with a benefit constitutes the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company. Notwithstanding any other provision of the Plan, Plan benefits shall be limited to the balance of a Participant’s Deferral Account.

5.7 Section 16b Procedures . In conjunction with rules promulgated by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as amended, the Company has established Section 16b Procedures which affect certain transactions under the Plan involving Employer Securities held for the benefit of an Officer. Such Procedures, which are hereby incorporated into the Plan shall constitute for all purposes a part of the Plan. In the event that the Procedures conflict with any other provision of the Plan, the Procedures shall override such other provision and shall be controlling. For purposes of this Section, the following terms shall have the meaning hereinafter set forth.

(a) The term “Employer Security” shall mean any qualifying employer security as defined in Section 407(d)(5) of ERISA which is also an equity security as defined under the Securities Exchange Act of 1934, as amended.

(b) The term “Officer” shall mean any person who is designated as an “Officer” of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, as amended.

(c) The term “Section 16b Procedures” or “Procedures” shall mean the Administrative Procedures Applicable to Officers and Directors Under Employee Benefit Plans Maintained by Applied Industrial Technologies, Inc., effective as of January 1, 1997, with all amendments, supplements, and modifications thereafter made.

5.8 Interpretation . The Board and the Committee shall have full power and authority to interpret, construe, and administer the Post-2004 Terms, and the interpretation and construction thereof and actions thereunder by the Board or the Committee, including any valuation of a Participant’s Deferral Account and the amount or recipient of the payments to be made from such Deferral Account, shall be binding and conclusive on all persons for all purposes. No member of the Board and no designee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan.

5.9 Claims Procedures . Generally benefits shall be paid under the Post-2004 Terms without the necessity of filing a claim. An Eligible Employee, Participant, Beneficiary, or other person who believes he is entitled to a benefit under the Post-2004 Terms (hereinafter referred to as the “Claimant”) may file a written claim with the Company. A claim must state with specificity the determination desired by the Claimant.

The Company shall consider the Claimant’s claim within a reasonable time, but no later than 90 days of receipt of the claim. If the Company determines that special circumstances require an extension of time for processing the claim, the Company shall notify the Claimant in writing of the extension before the end of the initial 90-day period and the written notice shall indicate the special circumstances requiring an extension of time and the date by which the Company expects to make a decision. The extension of time shall not exceed 90 days from the end of the initial 90-day period.

The Company shall notify the Claimant (in writing or electronically) that a determination has been made and that the claim is either allowed in full or denied in whole or in part. If the claim is denied in whole or in part, the Company shall notify (in writing or electronically) such Claimant or an authorized representative of the Claimant, as applicable, of any adverse benefit determination within 90 days of receipt of the claim. Any adverse benefit determination notice shall describe the specific reason or reasons for the denial, refer to the specific Plan provisions on which the determination was based, describe any additional material or information necessary for the Claimant to perfect his claim and explain why that material or information is necessary, describe the Plan’s review procedures and the time limits applicable to those procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial upon review. If the notification is made electronically, it must comply with applicable Department of Labor Regulations.

Upon receipt of an adverse benefit determination, a Claimant may, within 60 days after receiving notification of that determination, submit a written request asking the Board to review the Claimant’s claim. Each Claimant, when making his request for review of his adverse benefit determination, shall have the opportunity to submit written comments, documents, records, and any other information relating to the claim for benefits. Each Claimant shall also be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to such Claimant’s claim for benefits. The review shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, regardless of whether the information was submitted or considered in the initial benefit determination. If a Claimant does not submit his request for review in writing within the 60-day period described above, his claim shall be deemed to have been conclusively determined for all purposes of the Plan and the adverse benefit determination will be deemed to be correct.

If the Claimant submits in writing a request for review of the adverse benefit determination within the 60-day period described above, the Board (or its designee) shall notify (in writing or electronically) him of its determination on review within a reasonable period of time but not later than 60 days from the date of receipt of his request for review, unless the Board (or its designee) determines that special circumstances require an extension of time. If the Board (or its designee) determines that an extension of time for processing a Claimant’s request for review is required, the Board (or its designee) shall notify him in writing before the end of the initial 60-day period and inform him of the special circumstances requiring an extension of time and the date by which the Board (or its designee) expects to render its determination on review. The extension of time will not exceed 60 days from the end of the initial 60-day period.

If the Board (or its designee) confirms the adverse benefit determination upon review, the notification will describe the specific reason or reasons for the adverse determination, refer to the specific Plan provisions on which the benefit determination is based, include a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim and include a statement describing the Claimant’s right to bring an action under Section 502(a) of ERISA, and any other required information under applicable Department of Labor Regulations. The claims procedure described above shall be administered in a manner not inconsistent with Section 503 of ERISA and applicable Department of Labor Regulations.

A Claimant’s compliance with the foregoing claims procedures shall be a mandatory prerequisite to the Claimant’s right to commence any legal action with respect to any claim for benefits under the Plan.

5.10 Section 409A . Notwithstanding any provision to the contrary in the Post-2004 Terms, nothing shall restrict the Company’s right to amend the Plan, the Post-2004 Terms, the Frozen Terms, any deferral agreement, and/or any deferral Election Form, without the consent of Participants and without additional consideration to affected Participants, to the extent necessary to avoid taxation, penalties, and/or interest arising under Section 409A, even if such amendments reduce, restrict, or eliminate rights granted thereunder before such amendments. Although the Company shall use its best efforts to avoid the imposition of taxation, penalties, and/or interest under Section 409A, tax treatment of deferrals and other credits under the Plan (whether the Frozen Terms or the Post-2004 Terms) is not warranted or guaranteed. If, at any time, it is determined that amounts deferred pursuant to the Plan are currently taxable to a Participant or his Beneficiary under Section 409A, the amounts credited to such Participant’s Deferral Account which become so taxable shall be distributed immediately to him; provided, however, that in no event shall amounts so payable under the Plan to a Participant exceed the value of his Deferral Account. Notwithstanding the foregoing, the Company, the Board, any Affiliate, or any delegatee shall not be held liable for any taxes, penalties, interest, or other monetary amounts owed by any Participant, Eligible Employee, Beneficiary, or other person as a result of the deferral or payment of any amounts under the Plan (whether the Frozen Terms or the Post-2004 Terms) or as a result of the administration of amounts subject to the Plan (whether the Frozen Terms or the Post-2004 Terms).

5.11 Severability . The invalidity or unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted herefrom.

5.12 Governing Law . The provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio, without regard to its conflict or choice of law principles.

Executed at Cleveland, Ohio, this 11 day of December, 2008.

		APPLIED INDUSTRIAL TECHNOLOGIES, INC.
		By:		/s/ David L. Pugh   Title: Chairman & CEO