<PAGE>   1
EXHIBIT 10(ii)


                           CHANGE IN CONTROL AGREEMENT
                           ---------------------------


                  AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and KURT WIEDENHAUPT (the "Executive"), an individual
residing at 280 CARNOUSTIE ROAD, EAST AURORA, NEW YORK 14052, dated as of the
1st day of JULY, 1996.

                  WHEREAS, the Company recognizes that the current business
environment makes it difficult to attract and retain highly qualified executives
unless a certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and

                  WHEREAS, even rumors of acquisitions or mergers may cause
executives to consider major career changes in an effort to assure financial
security for themselves and their families; and

                  WHEREAS, the Company desires to assure fair treatment of its
executives in the event of a Change in Control (as defined below) and to allow
them to make critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the Company
notwithstanding the outcome of a possible Change in Control transaction; and

                  WHEREAS, the Company recognizes that its executives will be
involved in evaluating or negotiating any offers, proposals or other
transactions which could result in Changes in Control of the Company and
believes that it is in the best interest of the Company and its stockholders for
such executives to be in a position, free from personal financial and employment
considerations, to be able to assess objectively and pursue aggressively the
interests of the Company's stockholders in making these evaluations and carrying
on such negotiations; and

                  WHEREAS, the Board of Directors (the "Board") of the Company
believes it is essential to provide the Executive with compensation arrangements
upon a Change in Control which provide the Executive with individual financial
security and which are competitive with those of other corporations, and in
order to accomplish these objectives, the Board has caused the Company to enter
into this Agreement.

                  NOW THEREFORE, the parties, for good and valuable
consideration and intending to be legally bound, agree as follows:

                  1. OPERATION AND TERM OF AGREEMENT. This Agreement shall be
effective immediately upon its execution. This Agreement may be terminated by
the Company upon twenty-four (24) months' advance written notice to the
Executive; PROVIDED, HOWEVER, that after a Change in Control of the Company
during the term of this Agreement, this Agreement shall remain in effect until
all of the obligations of the parties hereunder are



                                      - 1 -

<PAGE>   2



satisfied and the Protection Period has expired. Prior to a Change in Control
this Agreement shall immediately terminate upon termination of the Executive's
employment or upon the Executive's ceasing to be an elected officer of the
Company, except in the case of such termination under circumstances set forth in
Section 2(e) below.

                  2. CERTAIN DEFINITIONS.  For purposes of this Agreement, the 
following words and phrases shall have the following meanings:

                           (a) "Cause" shall mean (i) the continued failure by 
the Executive to perform his material responsibilities and duties hereunder
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness), (ii) the engaging by the Executive in willful or
reckless conduct which is demonstrably injurious to the Company monetarily or
otherwise, (iii) the conviction of the Executive of a felony, or (iv) the
commission or omission of any act by the Executive that is materially inimical
to the best interests of the Company and that constitutes on the part of the
Executive common law fraud or malfeasance, misfeasance or nonfeasance of duty;
provided, however, that "cause" shall not include the Executive's lack of
professional qualifications. For purposes of this Agreement, an act, or failure
to act, on the Executive's part shall be considered "willful" or "reckless" only
if done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company. The
Executive's employment shall not be deemed to have been terminated for "cause"
unless the Company shall have given or delivered to the Executive (A) reasonable
notice setting forth the reasons for the Company's intention to terminate the
Executive's employment for "cause," (B) a reasonable opportunity, at any time
during the thirty-day period after the Executive's receipt of such notice, for
the Executive, together with his counsel, to be heard before the Board, and (C)
a Notice of Termination (as defined in Section 9 below) stating that, in the
good faith opinion of not less than a majority of the entire membership of the
Board, the Executive was guilty of the conduct set forth in clauses (i), (ii),
(iii) or (iv) of the first sentence of this Section 2(a).

                           (b) "Change in Control" shall mean:

                                    (i) on or after the date of execution of 
this Agreement, any person (which, for all purposes hereof, shall include,
without limitation, an individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate and a trustee, executor, administrator or
other legal representative) (a "Person") or any group of two or more Persons
acting in concert who or which becomes the beneficial owner, directly or
indirectly, of securities of the Company representing, or acquires the right to
control or direct, or to acquire through the conversion of securities or the
exercise of warrants or other rights to acquire securities, 25% or more of the
combined voting power of the Company's then outstanding securities; provided
that for the purposes of this Agreement, (A) "voting power" means the right to
vote for the election of directors, and (B) any determination of percentage
combined voting power shall be made on the basis that (x) all securities
beneficially owned by the Person or group or over which control or direction is
exercised by the Person or group which are convertible



                                      - 2 -

<PAGE>   3



into securities carrying voting rights have been converted (whether or not then
convertible) and all options, warrants or other rights which may be exercised to
acquire securities beneficially owned by the Person or group or over which
control or direction is exercised by the Person or group have been exercised
(whether or not then exercisable), and (y) no such convertible securities have
been converted by any other Person and no such options, warrants or other rights
have been exercised by any other Person; or

                                    (ii) at any time subsequent to the date of 
execution of this Agreement there shall be elected or appointed to the Board any
director or directors whose appointment or election to the Board or nomination
for election by the Company's stockholders was not approved by a vote of at
least a majority of the directors then in office who were either directors on
the date of execution of this Agreement or whose election or appointment or
nomination for election was previously so approved; or

                                    (iii) a reorganization, merger, 
consolidation, combination, corporate restructuring or similar transaction (an
"Event"), in each case, in respect of which the beneficial owners of the
outstanding Company voting securities immediately prior to such Event do not,
following such Event, beneficially own, directly or indirectly, more than 50% of
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors of the Company and any resulting
Parent in substantially the same proportions as their ownership, immediately
prior to such Event, of the outstanding Company voting securities; or

                                    (iv) an Event involving the Company as a 
result of which 33% or more of the members of the board of directors of the
Parent or the Company are not persons who were members of the Board immediately
prior to the earlier of (x) the Event, (y) execution of an agreement the
consummation of which would result in the Event, or (z) announcement by the
Company of an intention to effect the Event.

                           (c) "Code" shall mean the Internal Revenue Code of
1986, as amended.

                           (d) "Disability," for purposes of this Agreement, 
shall mean total disability as defined in any long-term disability plan
sponsored by the Company in which the Executive participates, or, if there is no
such plan or it does not define such term, then it shall mean the physical or
mental incapacity of the Executive which prevents him from substantially
performing the duties of the office or position to which he was elected or
appointed by the Board for a period of at least 180 days and the incapacity is
expected to be permanent and continuous through the Executive's 65th birthday.

                           (e) The "Change in Control Date" shall be any date 
during the term of this Agreement on which a Change in Control occurs. Anything
in this Agreement to the contrary notwithstanding, if the Executive's employment
or status as an elected officer with the Company is terminated within six months
prior to the date on which a Change in Control occurs, and it is reasonably
demonstrated that such termination (i) was at the request of a



                                      - 3 -

<PAGE>   4



third party who has taken steps reasonably calculated or intended to effect a
Change in Control or (ii) otherwise arose in connection with or anticipation of
a Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination.

               (f) "Good Reason" means:

                         (i) the assignment to the Executive within the
Protection Period of any duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties or responsibilities), or any other action which results in a
diminution in such position, authority, duties or responsibilities excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;

                         (ii) a reduction by the Company in the Executive's base
salary in effect immediately before the beginning of the Protection Period or as
increased from time to time thereafter;

                         (iii) a failure by the Company to maintain plans
providing benefits at least as beneficial as those provided by any benefit or
compensation plan (including, without limitation, any incentive compensation
plan, bonus plan or program, retirement, pension or savings plan, life insurance
plan, health and dental plan or disability plan) in which the Executive is
participating immediately before the beginning of the Protection Period, or any
action taken by the Company which would adversely affect the Executive's
participation in or reduce the Executive's opportunity to benefit under any of
such plans or deprive the Executive of any material fringe benefit enjoyed by
him immediately before the beginning of the Protection Period; PROVIDED,
HOWEVER, that a reduction in benefits under the Company's tax-qualified
retirement, pension or savings plans or its life insurance plan, health and
dental plan, disability plans or other insurance plans which reduction applies
equally to all participants in the plans and has a DE MINIMIS effect on the
Executive shall not constitute "Good Reason" for termination by the Executive;

                         (iv) the Company's requiring the Executive, without the
Executive's written consent, to be based at any office or location in excess of
50 miles from his office location immediately before the beginning of the
Protection Period, except for travel reasonably required in the performance of
the Executive's responsibilities;

                         (v) any purported termination by the Company of the
Executive's employment for Cause otherwise than as referred to in Section 9 of
this Agreement; or

                         (vi) any failure by the Company to obtain the
assumption of the obligations contained in this Agreement by any successor as
contemplated in Section 8(c) of this Agreement.



                                      - 4 -

<PAGE>   5




                    (g) "Parent" means any entity which directly or indirectly
through one or more other entities owns or controls more than 50% of the voting
stock or common stock of the Company.

                    (h) "Protection Period" means the period beginning on the
Change in Control Date and ending on the last day of the thirty-sixth (36th)
calendar month following the Change in Control Date.

                    (i) "Subsidiary" means a company 50% or more of the voting
securities of which are owned, directly or indirectly, by the Company.

               3. BENEFITS UPON TERMINATION WITHIN A PROTECTION PERIOD. If,
during a Protection Period, the Executive's employment is terminated by the
Company other than for Cause or Disability or other than as a result of the
Executive's death or the Executive terminates his employment for Good Reason,
the Company shall pay to the Executive in a lump sum in cash within 10 days
after the date of termination the aggregate of the following amounts and shall
provide the following benefits:

                    (a) The Executive's full base salary and vacation pay (for
vacation not taken) accrued but unpaid through the date of termination at the
rate in effect at the time of the termination plus an amount equal to the
product of the Executive's normative bonus under the applicable bonus plan for
the fiscal year including the date of termination and a fraction, the numerator
of which is the number of days in such fiscal year through the date of
termination and the denominator of which is 365; and

                    (b) The amount in the "bonus bank" for the Executive under
all bonus plans in which the Executive participates; and

                    (c) A lump sum severance payment in an amount equal to 350%
of the Executive's "Annual Compensation." For purposes of this Agreement,
"Annual Compensation" shall be an amount equal to the aggregate of the
Executive's annual base salary from the Company and its Subsidiaries as set by
the Board and in effect immediately prior to the date of termination or Change
in Control (whichever is greater) plus the highest bonus accrued by the Company
for the Executive in any of the Company's three fiscal years preceding the date
of termination or Change in Control (whichever is greater); and

                    (d) Within 30 days of the date of termination, upon
surrender by the Executive of his outstanding options to purchase common shares
of the Company ("Common Shares") granted to the Executive by the Company (the
"Outstanding Options") and any stock appreciation rights ("SARs"), an amount in
respect of each Outstanding Option and SAR (whether vested or not) equal to the
difference between the exercise price of such Outstanding Options and SARs and
the higher of (x) the fair market value of the Common Shares at the time of such
termination (but not less than the closing price for the Common Shares on the
New York Stock Exchange, or such other national stock exchange on which such
shares may be listed, on the last trading day such shares traded prior to the
date of



                                      - 5 -

<PAGE>   6



termination), and (y) the highest price paid for Common Shares or, in the cases
of securities convertible into Common Shares or carrying a right to acquire
Common Shares, the highest effective price (based on the prices paid for such
securities) at which such securities are convertible into Common Shares or at
which Common Shares may be acquired, by any person or group whose acquisition of
voting securities has resulted in a Change in Control of the Company; PROVIDED,
HOWEVER, that this Section 3(d) shall not apply to the surrender of any
Outstanding Option that is an incentive stock option (within the meaning of
Section 422 of the Code); and

          (e) A lump sum payment equal to 50% of the Executive's Annual
Compensation, such payment representing an agreed substitute for three years'
additional entitlement to (A) benefits and service credit for benefits (or
similar payments) under any pension, savings, defined contribution and other
deferred compensation plans maintained by the Company and (B) any medical
insurance, life insurance, health and accident, disability and other employee
benefit plans, programs and arrangements with the Company (including, without
limitation, provision of, or payment in lieu of, an automobile); and

          (f) All of the Executive's benefits accrued under the supplemental
retirement plans, excess retirement plans and deferred compensation plans
maintained by the Company or any of its Subsidiaries shall become immediately
vested in full; and

          (g) All of the Executive's Outstanding Options shall become
immediately vested and exercisable in full.

     4. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, practices, policies or programs provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
Subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its Subsidiaries at or subsequent to the date of termination
shall be payable in accordance with such plan, practice, policy or program;
PROVIDED, HOWEVER, that the Executive shall not be entitled to severance pay, or
benefits similar to severance pay, under any plan, practice, policy, or program
generally applicable to employees of the Company or any of its Subsidiaries.

     5. FULL SETTLEMENT; NO OBLIGATION TO SEEK OTHER EMPLOYMENT; LEGAL EXPENSES.
The Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement. The Company agrees to pay, upon written demand
therefor by the Executive, all legal fees and expenses which the



                                      - 6 -

<PAGE>   7



Executive may reasonably incur as a result of any dispute or contest (regardless
of the outcome thereof) by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement. In
any such action brought by the Executive for damages or to enforce any
provisions of this Agreement, he shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Company's obligations hereunder, in his sole discretion.

     6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

          (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or benefit
provided (including, without limitation, the acceleration of any payment,
distribution or benefit and the acceleration of exercisability of any stock
option or stock appreciation right), by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code (or any similar
excise tax) or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any Excise Tax, income tax or payroll tax) imposed upon the Gross-Up
Payment and any interest or penalties imposed with respect to such taxes, the
Executive retains from the Gross-Up Payment an amount equal to the Excise Tax
imposed upon the Payments.

          (b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including determination of whether a
Gross-Up Payment is required and of the amount of any such Gross-Up Payment,
shall be made by the independent public accounting firm which is then retained
by the Company to audit its financial statements (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the date of termination, if applicable, or
such earlier time as is requested by the Company, provided that any
determination that an Excise Tax is payable by the Executive shall be made on
the basis of substantial authority. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 6(b), shall be paid to the Executive within
five business days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
6(b) shall be binding upon the Company and the Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments, including any interest and penalties, are referred to herein as the
"Gross-Up Underpayment"). In the event that the Company exhausts its remedies
pursuant to Section 6(c) and the Executive thereafter is required to make a
payment of any Excise



                                      - 7 -

<PAGE>   8



Tax, the Accounting Firm shall determine the amount of the Gross-Up Underpayment
that has occurred and any such Gross-Up Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive. The fees and disbursements
of the Accounting Firm shall be paid by the Company.

          (c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the Executive receives
written notice of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim and that it will bear the costs and
provide the indemnification as required by this sentence, the Executive shall:

               (i) give the Company any information reasonably requested by the
Company relating to such claim,

               (ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company and reasonably satisfactory to
the Executive,

               (iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

               (iv) permit the Company to participate in any proceedings
relating to such claim;

PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or payroll tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; PROVIDED, HOWEVER, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the



                                      - 8 -

<PAGE>   9



Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax, income tax or payroll tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
AND FURTHER PROVIDED that any extension of the statute of limitations relating
to the payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due shall be limited solely to such
contested amount, unless the Executive agrees otherwise. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

          (d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 6(c) a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then any obligation of the Executive to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

     7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its Subsidiaries, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its Subsidiaries and which
shall not be or become public knowledge (other than by acts of the Executive or
his representatives in violation of this Agreement). After the date of
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company, communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 7 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.

     8. SUCCESSORS.

          (a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives or successor(s) in interest. The Executive may designate a
successor (or successors) in interest to receive any and all



                                      - 9 -

<PAGE>   10



amounts due the Executive in accordance with this Agreement should the Executive
be deceased at any time of payment. Such designation of successor(s) in interest
shall be made in writing and signed by the Executive, and delivered to the
Company pursuant to Section 12(b) hereof. Any such designation may be made to
any legal person, persons, trust or the Executive's estate as he shall determine
in his sole discretion. In the event any designation shall be incomplete, or in
the event the Executive shall fail to designate a successor in interest, his
estate shall be deemed to be his successor in interest to receive such portion
of all of the payments due hereunder. The Executive may amend, change or revoke
any such designation at any time and from time to time, in the same manner. This
Section 8(a) shall not supersede any designation of beneficiary or successor in
interest made by the Executive, or separately covered, under any other plan,
practice, policy or program of the Company.

          (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

          (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company and any Parent of
the Company or any successor and without regard to the form of transaction
utilized to acquire the business or assets of the Company, to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession or
parentage had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid (and any Parent of the Company or any successor) which is required
by this clause to assume and agree to perform this Agreement or which otherwise
assumes and agrees to perform this Agreement.

     9. NOTICE OF TERMINATION. Any termination of the Executive's employment by
the Company for Cause or by the Executive for Good Reason shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the date of
termination is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days after the giving of
such notice). The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.

     10. REQUIREMENTS AND BENEFITS IF EXECUTIVE IS EMPLOYEE OF SUBSIDIARY OF
COMPANY. If the Executive is an employee of any Subsidiary of the Company, he
shall be entitled to all of the rights and benefits of this Agreement as though
he were an employee of the Company and the term "Company" as used herein shall
be deemed to include the



                                     - 10 -

<PAGE>   11



Subsidiary by whom the Executive is employed. The Company hereby unconditionally
and irrevocably guarantees the performance of its Subsidiary hereunder.

     11. ARBITRATION. The Company and the Executive shall attempt to resolve
between them any dispute which arises hereunder. If they cannot agree within ten
(10) days after either party submits a demand for arbitration to the other
party, then the issue shall be submitted to arbitration with each party having
the right to appoint one (1) arbitrator and those two (2) arbitrators mutually
selecting a third arbitrator. The rules of the American Arbitration Association
for the arbitration of commercial disputes shall apply and the decision of 2 of
the 3 arbitrators shall be final. The arbitrators must reach a decision within
sixty (60) days after the selection of the third arbitrator. The arbitration
shall take place in Buffalo, New York. The arbitrators shall apply Delaware law.

     12. MISCELLANEOUS.

          (a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.

          (b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, to the addresses for
each party as first written above or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's Corporate Secretary. Notice and communications shall be effective when
actually received by the addressee.

          (c) Whenever reference is made herein to any specific plan or program
of the Company, to the extent that the Executive is not a participant therein or
has no benefit accrued thereunder, whether vested or contingent, as of the
Change in Control Date, then such reference herein shall be null and void and of
no effect, and the Executive shall acquire no additional benefit as a result of
such reference.

          (d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

          (e) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.




                                     - 11 -

<PAGE>   12


          (f) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.

          (g) Except in the case of termination of employment or elected officer
status under the circumstances set forth in Section 2(e) above, upon a
termination of the Executive's employment or upon the Executive's ceasing to be
an elected officer of the Company, in each case, prior to the Change in Control
Date, there shall be no further rights under this Agreement.


     IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from the Board, the Company has caused this Agreement to be
executed as of the day and year first above written.


                            AMERICAN PRECISION INDUSTRIES INC.



                            By /s/ John M. Murray
                              ------------------------------------
                                John M. Murray, Vice President
                                   - Finance and Treasurer

                              /s/ James J. Tanous
                              -------------------------------------
                                James J. Tanous, Secretary


                            EXECUTIVE

                              /s/ Kurt Wiedenhaupt
                              -------------------------------------
                                Kurt Wiedenhaupt
                               


                                     - 12 -