
<PAGE>   1
                                                                   Exhibit 10(c)

                      APPLIED INDUSTRIAL TECHNOLOGIES, INC.
                           DEFERRED COMPENSATION PLAN
                           FOR NON-EMPLOYEE DIRECTORS
                          (JANUARY 1, 1997 RESTATEMENT)



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                      APPLIED INDUSTRIAL TECHNOLOGIES, INC.
                           DEFERRED COMPENSATION PLAN
                           FOR NON-EMPLOYEE DIRECTORS
                          (JANUARY 1, 1997 RESTATEMENT)


                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<CAPTION>

        Section                                                       Page
        -------                                                       ----
                                    ARTICLE I
                                   DEFINITIONS

       <S>      <C>                                                 <C>
         1.1      Definitions............................................2
         1.2      Construction...........................................3

                                   ARTICLE II
                             ELECTIONS BY DIRECTORS

         2.1      Election to Defer......................................4
         2.2      Effectiveness of Elections.............................4
         2.3      Amendment and Termination of Elections.................4

                                   ARTICLE III
                            ACCOUNTS AND INVESTMENTS

         3.1      Establishment of Accounts..............................6
         3.2      Amount of Deferrals....................................6
         3.3      Adjustment of Accounts.................................6

                                   ARTICLE IV
                            DISTRIBUTION OF ACCOUNTS

         4.1      Method of Distribution.................................7
         4.2      Time of Payments.......................................7
         4.3      Hardship Distribution..................................7
         4.4      Distributions Upon Death...............................8
         4.5      Taxes..................................................8

                                    ARTICLE V
                                  BENEFICIARIES                          9

                                   ARTICLE VI
                                  MISCELLANEOUS

         6.1      Amendment and Termination of the Plan.................10
         6.2      Non-Alienation........................................10
         6.3      Payment of Benefits to Others.........................10
         6.4      Plan Non-Contractual..................................10
         6.5      Taxability of Plan Benefits...........................11
</TABLE>

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<TABLE>

        <S>      <C>                                                 <C>
         6.6      Funding.............................................11
         6.7      Section 16b Procedures..............................11
         6.8      Severability........................................12
         6.9      Governing Law.......................................12

</TABLE>

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                      APPLIED INDUSTRIAL TECHNOLOGIES, INC.
                           DEFERRED COMPENSATION PLAN
                           FOR NON-EMPLOYEE DIRECTORS
                          (JANUARY 1, 1997 RESTATEMENT)


         WHEREAS, the Bearings, Inc. Deferred Compensation Plan for Non-Employee
Directors was established, effective as of July 1, 1991, by Bearings, Inc. to
provide non-employee members of the Board of Directors of Bearings, Inc. the
option to defer receipt of all or a portion of the compensation payable to them
for services as Directors; and

         WHEREAS, the Bearings, Inc. Deferred Compensation Plan for Non-
Employee Directors was amended subsequently on two occasions; and

         WHEREAS, effective as of January 1, 1997, Bearings, Inc. changed its
name to Applied Industrial Technologies, Inc.; and

         WHEREAS, it is desired to amend and restate the Bearings, Inc. Deferred
Compensation Plan for Non-Employee Directors to reflect such plan name sponsor
change;

         NOW, THEREFORE, effective as of January 1, 1997, the Bearings, Inc.
Deferred Compensation Plan for Non-Employee Directors is hereby renamed the
Applied Industrial Technologies, Inc. Deferred Compensation Plan for
Non-Employee Directors and is amended and restated in the manner hereinafter set
forth.


<PAGE>   5



                                    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 receive a 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 "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.

                           (4) The term "COMMON SHARES" shall mean the common
                  stock of the Company.

                           (5) The term "COMPANY" shall mean, for any period
                  prior to January 1, 1997, Bearings, Inc., and for any period
                  after December 31, 1996, Applied Industrial Technologies,
                  Inc., its corporate successors, and any corporation into or
                  with which it is merged or consolidated.

                           (6) The term "DEFERRAL" shall mean that portion of
                  the compensation a Participant elects to defer pursuant to the
                  terms of the Plan.

                           (7) 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.

                           (8) The term "DIRECTOR" shall mean any non-employee
                  director of the Company.


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                           (9) 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
                  preceding day on which sales of Common Shares were made on
                  said Exchange.

                           (10) The term "FISCAL YEAR" shall mean the fiscal
                  year of the Company, which as of January 1, 1997, begins on
                  each July 1 and ends on the subsequent June 30.

                           (11) The term "FUND" shall mean any investment fund
                  designated by the Committee in which Deferrals can be deemed
                  to be invested; provided, however, that one such Fund shall be
                  deemed to be invested in Common Shares.

                           (12) 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.

                           (13) The term "PLAN" shall mean Applied Industrial
                  Technologies, Inc. Deferred Compensation Plan For Non-Employee
                  Directors (formerly known as the Bearings, Inc. Deferred
                  Compensation Plan For Non-Employee Directors), as amended and
                  restated herein, effective as of January 1, 1997, with all
                  amendments, supplements, and modifications hereafter made.

                           (14) The term "TRUST" shall mean the trust maintained
                  pursuant to the terms of the Applied Industrial Technologies, 
                  Inc. Supplemental Executive Retirement Benefits Trust
                  Agreement (formerly known as the Bearings, Inc. Supplemental
                  Executive Retirement Benefits Trust Agreement).

                           (15) The term "VALUATION DATE" shall mean June 30 of
                  each Fiscal Year 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.


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                                   ARTICLE II

                             ELECTIONS BY DIRECTORS
                             ----------------------

         2.1 ELECTION TO DEFER. Prior to the first day of any Fiscal Year
quarter (July 1, October 1, January 1, and April 1) a Director may elect to
defer receipt of all or a portion of the compensation payable to him for future
services as a Director as a Deferral under the Plan. If a Director becomes a
Director after the beginning of any Fiscal Year quarter, the Director may elect
to defer receipt of all or a portion of the compensation payable to him for
future services as a Director as a Deferral under the Plan. Any election under
this Section 2.1 shall be made on in the form (an "Election Form") and manner
specified by the Committee and acceptable to the Company. In addition, such
election shall indicate the allocation of the Deferral to be deemed invested in
the Funds.

         2.2 EFFECTIVENESS OF ELECTIONS. Subject to the provisions of Sections
2.3 and 4.3, elections shall be effective and irrevocable upon the delivery of
an Election Form to the Committee. Subject to the provisions of Article IV and
Section 6.7, amounts deferred pursuant to any election hereunder shall be
invested and distributed in the manner and at the time set forth in such
election.

         2.3 AMENDMENT AND TERMINATION OF ELECTIONS. A Director may terminate or
amend his election to defer receipt of compensation as a Deferral under the Plan
with respect to subsequent Fiscal Year quarters in a written notice delivered to
the Committee prior to commencement of the Fiscal Year quarter with respect to
which such compensation will be earned and such notice will be effective.
Amendments which serve only to change the designation of a Beneficiary shall be
permitted at any time and as often as necessary. Amounts credited to a
Participant's Deferral Account pursuant to Section 3.1 prior to the

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effective date of any termination or amendment shall not be affected thereby and
shall be paid at a time and in the manner specified in the Election Form in
effect when the Deferral occurred.


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                                   ARTICLE III

                            ACCOUNTS AND INVESTMENTS
                            ------------------------

         3.1 ESTABLISHMENT 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.

         3.2 AMOUNT OF DEFERRALS. If a Participant elects to have compensation
deferred under the Plan as a Deferral invested in a Fund, other than a Fund
comprised of Common Shares, 100% of the amount of such Deferral deemed so
invested in Fund shall be credited to his Deferred 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 invested
in a Fund comprised of Common Shares, 125% of the amount of such Deferral deemed
so invested in such a Fund shall be credited to his Deferred Account and
subaccounts in accordance with the terms of his duly filed Election Form. In the
event any Deferral or portion thereof is deemed to be invested in a Fund, such
crediting shall be made within 30 days after the date on which the Deferral
would otherwise have been payable to the Participant. Common Shares of a Fund so
credited to a Deferral Account shall be valued at Fair Market Value.

         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.


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                                   ARTICLE IV

                            DISTRIBUTION OF ACCOUNTS
                            ------------------------

         4.1 METHOD OF DISTRIBUTION. 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, distribution of a Participant's Deferral Account shall be made
either in a lump sum or in equal annual installments over a period of not more
than ten years as specified in such Participant's Election Form.

         4.2 TIME OF PAYMENTS. Except as otherwise provided in this Section 4.2
or Section 4.3, distribution of the value of a Participant's Deferral Account
shall commence on the date specified in his Election Form. Notwithstanding any
other provision of the Plan to the contrary, a Participant may elect to change
the manner and the time of distribution of the value of his Deferral Account
during the period which commences no earlier than 90 days prior to his
termination as a Director and ends no later than 30 days prior to his
termination as a Director; provided, however, that in the event a Participant is
terminated as a Director with less than 30 days notice, such Participant may
elect to change the manner and time of distribution of the value of his Deferral
Account during the period which commences as of the day he receives notice of
his termination as a Director and ends ten days thereafter.

         4.3 HARDSHIP DISTRIBUTION. Prior to the time the Deferral Account of a
Participant becomes payable under Section 4.2, the Committee, in its sole
discretion, may elect to distribute all or a portion of the a Participant's
Deferral Account on account of severe financial hardship of the Participant. For
purposes of the Plan, severe financial

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hardship shall be deemed to exist in the event the Committee determines that the
Participant requires a distribution to meet immediate and heavy financial needs
resulting from a sudden or unexpected illness or accident of the Participant or
a member of his or her family, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Participant. A distribution
based on financial hardship shall not exceed the amount required to meet the
immediate financial need created by the hardship and the income taxes resulting
from such distribution.

         4.4 DISTRIBUTIONS UPON DEATH. Upon the death of a Participant, the
balance of his or her Deferral Account shall be paid to his Beneficiary pursuant
to the provisions of Article V. 

         4.5 TAXES. In the event any taxes are required by law to be withheld 
or paid from any payments made pursuant to the Plan, the Committee shall cause 
such amounts from such payments and shall transmit the withheld amounts to the 
appropriate taxing authority.


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                                    ARTICLE V

                                  BENEFICIARIES
                                  -------------

         In the event a Participant dies before his interest under the Plan in
his or her Deferral Account has been distributed in full, any remaining interest
shall be distributed pursuant to Article IV to his Beneficiary, who shall be the
person designated as such in writing by the Participant in the form and manner
specified by the Company. In the event a Participant does not designate a
Beneficiary or his designated Beneficiary does not survive him, his beneficiary
shall be his estate.

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                                   ARTICLE VI

                                  MISCELLANEOUS
                                  -------------

         6.1 AMENDMENT AND TERMINATION OF THE 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.

         6.2 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.

         6.3 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.

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         6.4 PLAN NON-CONTRACTUAL. Nothing contained herein shall be construed
as a commitment or agreement on the part of any person employed by the Company
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 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.

         6.5 TAXABILITY OF PLAN BENEFITS. This Plan is intended to be treated as
an unfunded deferred compensation plan under the Internal Revenue Code of 1986,
as amended. It is the intention of the Company that the amounts deferred
pursuant to the Plan shall not be included in the gross income of the
Participants or their Beneficiaries until such time as the deferred amounts are
distributed from the Plan. If, at any time, it is determined that amounts
deferred pursuant to the Plan are currently taxable to a Participant or his
Beneficiary, 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.

         6.6 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.

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         6.7 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 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

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                  Employee Benefit Plans Maintained by Applied Industrial
                  Technologies, Inc., effective as of January 1, 1997, with all
                  amendments and thereafter made.

         6.8 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.

         6.9 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 11th day of February, 1997.


                                      APPLIED INDUSTRIAL TECHNOLOGIES, INC.


                                      By:    /S/ John C. Robinson
                                         ----------------------------------
                                             Title:  Vice Chairman

                                      And: /S/ Fred D. Bauer
                                         ----------------------------------
                                             Title:  Assistant Secretary


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