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                                                                     EXHIBIT 4-D

Warrant Certificate No. 1                                    Warrant to Purchase
                                                                    3,077 Shares

                                WARRANT AGREEMENT

                           Dated as of January 1, 1998

                  To Subscribe for and Purchase Common Stock of

                       AMERICAN PRECISION INDUSTRIES INC.

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



         THIS CERTIFIES THAT, for value received, DECISION PROCESSES
INTERNATIONAL (CONNECTICUT, LTD.) (herein called "DPI"), or its permitted
assigns, is entitled to subscribe for and purchase from AMERICAN PRECISION
INDUSTRIES INC., a Delaware corporation (herein called the "Company"), at the
price of Nineteen Dollars and 50 Cents ($19.50) per share (subject to
adjustments as provided herein) at any time after the date hereof to and
including December 31, 2007, THREE THOUSAND SEVENTY-SEVEN (3,077) fully paid and
non-assessable shares of the Company's Common Stock, $.66-2/3 par value.

         This Warrant was originally issued in connection with execution by the
Company and DPI of a Retainer Agreement dated as of January 1, 1998 (herein
called the "Retainer Agreement"). As used herein, "this Warrant" and "the
Warrants" shall mean the Warrant originally issued to DPI pursuant to the
Retainer Agreement and any Warrants that may be issued in substitution or
exchange therefor. All Warrants shall be dated said original issue date.

         This Warrant is subject to the following terms and conditions:


         1.       EXERCISE OF WARRANT.

                  (a) Exercise. The rights represented by this Warrant may be
         exercised by the holder hereof, in whole or in part (but not as to a
         fractional share of Common Stock), by written notice of exercise
         delivered to the Company and by the surrender of this Warrant (properly
         endorsed if required) at the principal business office of the Company
         and upon payment to it of the purchase price for such shares. The
         Company agrees that the shares so purchased shall be, and shall be
         deemed to be, issued to the holder hereof as the record owner of such
         shares as of the close of business on the date on which this Warrant
         shall have been surrendered and payment made for such shares.
         Certificates for the shares of stock so purchased shall be delivered to
         the holder hereof within a reasonable time, not exceeding ten (10)
         days, after the rights represented by this Warrant shall have been so
         exercised, and, unless this Warrant has expired, a new Warrant
         representing the number of shares, if any, with respect to which this
         Warrant shall not then have been exercised shall also be delivered to
         the holder hereof within such time.

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                  (b) Payment of Exercise Price. Payment of the exercise price
         for the shares to be issued upon the exercise of this Warrant shall be
         made by certified or official bank check; provided, however, the holder
         hereof shall also have the right, at its election, in lieu of paying
         the exercise price by certified or official bank check, to instruct the
         Company in the Form For Exercise of Warrant to retain, in payment of
         the exercise price, a number of shares of Common Stock (the "Payment
         Shares") equal to the quotient of (i) the aggregate exercise price of
         the shares as to which this Warrant is then being exercised divided by
         (ii) the "Average Closing Price" as of the date of exercise and to
         deduct the number of Payment Shares from the shares to be delivered to
         the holder hereof. "Average Closing Price" means, as of any date, (x)
         if shares of Common Stock are listed on a national securities exchange,
         the average of the closing sales prices therefor on the largest
         securities exchange on which such shares are traded on the last ten
         trading days before such date, (y) if such shares are listed on the
         NASDAQ National Market System but not on any national securities
         exchange, the average of the closing sales prices therefor on the
         NASDAQ National Market System on the last ten trading days before such
         date or (z) if such shares are not listed on either a national
         securities exchange or the NASDAQ National Market System, the average
         of the sales prices therefor on the last twenty trading days before
         such date.

         2. VALIDITY OF ISSUANCE AND RESERVATION OF SHARES. The Company
         covenants and agrees that all shares which may be issued upon the
         exercise of the rights represented by this Warrant will, upon issuance,
         be duly authorized and issued, fully paid, nonassessable, and free from
         all taxes, liens, charges and pre-emptive rights with respect to the
         issue thereof, and, without limiting the generality of the foregoing,
         the Company covenants and agrees that it will from time to time take
         all such action as may be requisite to assure that the par value per
         share of the Common Stock is at all times equal to or less than the
         then effective purchase price per share of the Common Stock issuable
         pursuant to this Warrant. The Company further covenants and agrees that
         during the period within which the rights represented by this Warrant
         may be exercised, the Company will at all times have authorized, and
         reserved for the purpose of issue or transfer upon exercise of the
         subscription rights evidenced by this Warrant, a sufficient number of
         shares of its Common Stock to provide for the exercise of the rights
         represented by this Warrant.

         3. WARRANT ADJUSTMENTS. The above provisions are, however, subject to
         the following:

                  (a) Adjustment of Shares. The warrant purchase price and the
         number of shares purchasable pursuant hereto shall be subject to
         adjustment from time to time as hereinafter provided.

                  (b) Adjustment of Price for Stock Sales. Except as provided in
         paragraph (h) below, if and whenever the Company shall issue or sell
         any shares of its Common Stock for a consideration per share less than
         the warrant purchase price in effect immediately prior to the time of
         such issue or sale, and/or the Company shall issue or sell any shares
         of its Common Stock for a consideration per share less than the market
         price on the date of such issue or sale, then, forthwith upon such
         issue or sale, the warrant purchase price shall be reduced to the lower
         of the prices (calculated to the nearest cent) determined as follows:



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                           (i) by dividing (1) an amount equal to the sum of
                  (aa) the number of shares of Common Stock outstanding
                  immediately prior to such issue or sale multiplied by the then
                  existing warrant purchase price, and (bb) the consideration,
                  if any, received by the Company upon such issue or sale, by
                  (2) the total number of shares of Common Stock outstanding
                  immediately after such issue or sale; or

                           (ii) by multiplying the warrant purchase price in
                  effect immediately prior to the time of such issue or sale by
                  a fraction, the numerator of which shall be the sum of (1) the
                  number of shares of Common Stock outstanding immediately prior
                  to such issue or sale multiplied by the market price
                  immediately prior to such issue or sale, plus (2) the
                  consideration received by the Company upon such issue or sale,
                  and the denominator of which shall be the product of (3) the
                  total number of shares of Common Stock outstanding immediately
                  after such issue or sale, multiplied by (4) the market price
                  immediately prior to such issue or sale.

         No adjustment of the warrant purchase price, however, shall be made in
         an amount less than $.01 per share, but any such lesser adjustment
         shall be carried forward and shall be made at the time and together
         with the next subsequent adjustment which together with any adjustments
         so carried forward shall amount to $.01 per share or more.

                  (c) Further Provisions with respect to Stock Sales. For the
         purposes of paragraph (b), the following provisions (i) to (vii),
         inclusive, shall also be applicable:

                           (i) In case at any time the Company shall grant
                  (whether directly or by assumption in a merger or otherwise)
                  any rights to subscribe for or to purchase, or any options for
                  the purchase of, Common Stock or any stock or securities
                  convertible into or exchangeable for Common Stock (such
                  convertible or exchangeable stock or securities being herein
                  called "Convertible Securities") whether or not such rights or
                  options or the right to convert or exchange any such
                  Convertible Securities are immediately exercisable, and the
                  price per share at which Common Stock is issuable upon the
                  exercise of such rights or options or upon conversion or
                  exchange of such Convertible Securities (determined by
                  dividing (aa) the total amount if any, received or receivable
                  by the Company as consideration for the granting of such
                  rights or options, plus the minimum aggregate amount of
                  additional consideration payable to the Company upon the
                  exercise of such rights or options, plus, in the case of such
                  rights or options which relate to Convertible Securities, the
                  minimum aggregate amount of additional consideration, if any,
                  payable upon the issue or sale of such Convertible Securities
                  and upon the conversion or exchange thereof, by (bb) the total
                  maximum number of shares of Common Stock issuable upon the
                  exercise of such rights or options or upon the conversion or
                  exchange of all such Convertible Securities issuable upon the
                  exercise of such rights or options) shall be less than the
                  warrant purchase price in effect immediately prior to the time
                  of the granting of such rights or options (or less than the
                  market price determined as of the date of granting such rights
                  or options, as the case may be), then the total maximum number
                  of shares of Common Stock issuable upon the exercise of rights
                  or options or upon conversion or exchange of the total maximum
                  amount of such Convertible Securities issuable upon the
                  exercise of such rights or options shall (as of the date of
                  granting of such rights or options) be deemed to have been
                  issued for such price per share. Except 



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                  as provided in paragraph (f) below, no further adjustments of
                  the warrant purchase price shall be made upon the actual issue
                  of such Common Stock or of such Convertible Securities upon
                  exercise of such rights or options or upon the actual issue of
                  such Common Stock upon conversion or exchange of such
                  Convertible Securities.

                           (ii) In case the Company shall issue (whether
                  directly or by assumption in a merger or otherwise) or sell
                  any Convertible Securities, whether or not the rights to
                  exchange or convert thereunder are immediately exercisable,
                  and the price per share for which Common Stock is issuable
                  upon such conversion or exchange (determined by dividing (aa)
                  the total amount received or receivable by the Company as
                  consideration for the issue or sale of such Convertible
                  Securities, plus the minimum aggregate amount of additional
                  consideration, if any, payable to the Company upon the
                  conversion or exchange thereof, by (bb) the total maximum
                  number of shares of Common Stock issuable upon the conversion
                  or exchange of all such Convertible Securities) shall be less
                  than the warrant purchase price in effect immediately prior to
                  the time of such issue or sale (or less than the market price,
                  determined as of the date of such issue or sale of such
                  Convertible Securities, as the case may be), then the total
                  maximum number of shares of Common Stock issuable upon
                  conversion or exchange of all such Convertible Securities
                  shall (as of the date of the issue or sale of such Convertible
                  Securities) be deemed to be outstanding and to have been
                  issued for such price per share, provided that (x) except as
                  provided in paragraph (f) below, no further adjustments of the
                  warrant purchase price shall be made upon the actual issue of
                  such Common Stock upon conversion or exchange of such
                  Convertible Securities, and (y) if any such issue or sale of
                  such Convertible Securities is made upon exercise of any
                  rights to subscribe for or to purchase or any option to
                  purchase any such Convertible Securities for which adjustments
                  of the warrant purchase price have been or are to be made
                  pursuant to other provisions of this paragraph (c), no further
                  adjustment of the warrant purchase price shall be made by
                  reason of such issue or sale.

                           (iii) In case the Company shall declare a dividend or
                  make any other distribution upon any stock of the Company
                  payable in Common Stock or Convertible Securities, any Common
                  Stock or Convertible Securities, as the case may be, issuable
                  in payment of such dividend or distribution shall be deemed to
                  have been issued or sold without consideration.

                           (iv) In case any shares of Common Stock or
                  Convertible Securities or any rights or options to purchase
                  any such Common Stock or Convertible Securities shall be
                  issued or sold for cash, the consideration received therefor
                  shall be deemed to be the amount received by the Company
                  therefor, without deduction therefrom of any expenses incurred
                  or any underwriting commissions or concessions paid or allowed
                  by the Company in connection therewith. In case any shares of
                  Common Stock or Convertible Securities or any rights or
                  options to purchase any such Common Stock or Convertible
                  Securities shall be issued or sold for a consideration other
                  than cash, the amount of the consideration other than cash
                  received by the Company shall be deemed to be the fair market
                  value of such consideration as determined by the Board of
                  Directors of the Company, 



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                  without deduction of any expenses incurred or any underwriting
                  commissions or concessions paid or allowed by the Company in
                  connection therewith. In case any shares of Common Stock or
                  Convertible Securities or any rights or options to purchase
                  such Common Stock or Convertible Securities shall be issued in
                  connection with any merger or consolidation in which the
                  Company is the surviving corporation, the amount of
                  consideration therefor shall be deemed to be the fair market
                  value as determined by the Board of Directors of the Company
                  of such portion of the assets and business of the
                  non-surviving corporation or corporations as such Board shall
                  determine to be attributable to such Common Stock, Convertible
                  Securities, rights or options, as the case may be. In the
                  event of any consolidation or merger of the Company in which
                  the Company is not the surviving corporation or in the event
                  of any sale of all or substantially all of the assets of the
                  Company for stock or other securities of any corporation, the
                  Company shall be deemed to have issued a number of shares of
                  its Common Stock for stock or securities of the other
                  corporation computed on the basis of the actual exchange ratio
                  on which the transaction was predicated and for a
                  consideration equal to the fair market value on the date of
                  such transaction of such stock or securities of the other
                  corporation, and if any such calculation results in adjustment
                  of the warrant purchase price, the determination of the number
                  of shares of Common Stock issuable upon exercise of this
                  Warrant immediately prior to such merger, conversion or sale,
                  for purposes of paragraph 3(h) shall be made after giving
                  effect to such adjustment of the warrant purchase price.

                           (v) In case the Company shall take a record of the
                  holders of its Common Stock for the purpose of entitling them
                  (aa) to receive a dividend or other distribution payable in
                  Common Stock or in Convertible Securities, or (bb) to
                  subscribe for or purchase Common Stock or Convertible
                  Securities, then such record date shall be deemed to be the
                  date of the issue or sale of the shares of Common Stock deemed
                  to have been issued or sold upon the declaration of such
                  dividend or the making of such other distribution or the date
                  of the granting of such right of subscription or purchase, as
                  the case may be.

                           (vi) The number of shares of Common Stock outstanding
                  at any given time shall not include shares owned or held by or
                  for the account of the Company, and the disposition of any
                  such shares shall be considered an issue or sale of Common
                  Stock for the purposes of this paragraph (3).

                           (vii) "Market price" shall mean the average of the
                  high and low prices of the Common Stock sales on all exchanges
                  on which the Common Stock may at the time be admitted to
                  trading, or, if there shall have been no sales on any such
                  exchange on any such day, the average of the bid and asked
                  prices at the end of such day, or, if the Common Stock shall
                  not be so admitted to trading, the average of the bid and
                  asked prices at the end of the day in the over-the-counter
                  market, in each case averaged over a period of 20 consecutive
                  business days prior to the date as of which "market price" is
                  being determined. If at any time the Common Stock is not
                  admitted to trading on any exchange or quoted in the
                  over-the-counter market, the "market price" shall be deemed to
                  be the fair market value thereof determined in good faith by
                  the Board of Directors of the Company as of a date which is
                  within 15 days of the date as of which the determination is to
                  be made.



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                  (d) Adjustment of Price for Corporate Distributions. In case
         the Company shall declare a dividend upon the Common Stock payable
         otherwise than out of consolidated earnings or consolidated earned
         surplus, determined in accordance with generally accepted accounting
         principles, including the making of appropriate deductions for minority
         interests, if any, in subsidiaries (except in Common Stock or
         Convertible Securities, but including other securities), the warrant
         purchase price in effect immediately prior to the declaration of such
         dividend shall be reduced by an amount equal, in the case of a dividend
         in cash, to the amount thereof payable per share of the Common Stock
         or, in the case of any other dividend, to the fair market value thereof
         per share of the Common Stock as determined by the Board of Directors
         of the Company. For the purposes of the foregoing, a dividend other
         than in cash shall be considered payable out of earnings or surplus
         (other than revaluation or paid-in-surplus) only to the extent that
         such earnings or surplus are charged an amount equal to the fair market
         value of such dividend as determined by the Board of Directors of the
         Company. Such reductions shall take effect as of the date on which a
         record is taken for the purpose of such dividend, or, if a record is
         not taken, the date as of which the holders of Common Stock of record
         entitled to such dividend are to be determined.

                  (e) Adjustment of Price for Subdivisions and Combinations of
         Shares. In case the Company shall at any time subdivide its outstanding
         shares of Common Stock into a greater number of shares, the warrant
         purchase price in effect immediately prior to such subdivision shall be
         proportionately reduced, and conversely, in case the outstanding shares
         of Common Stock of the Company shall be combined into a smaller number
         of shares, the warrant purchase price in effect immediately prior to
         such combination shall be proportionately increased.

                  (f) Readjustments. Upon the happening of any of the following
         events, namely, if the purchase price provided for in any rights or
         options referred to in clause (i) of paragraph (c), the additional
         consideration, if any, payable upon the conversion or exchange of
         Convertible Securities referred to in clause (i) or (ii) of paragraph
         (c), or the rate at which any Convertible Securities referred to in
         clause (i) or clause (ii) of paragraph (c) are convertible into or
         exchangeable for Common Stock shall change (other than under or by
         reason of provisions designed to protect against dilution), the warrant
         purchase price in effect at the time of such event shall forthwith be
         readjusted to the warrant purchase price which would have been in
         effect at such time had such rights, options or Convertible Securities
         still outstanding provided for such changed purchase price, additional
         consideration or conversion rate, as the case may be, at the time
         initially granted, issued or sold; and on the expiration of any such
         option or right or the termination of any such right to convert or
         exchange such Convertible Securities, the warrant purchase price then
         in effect hereunder shall forthwith be increased to the warrant
         purchase price which would have been in effect at the time of such
         expiration or termination had such right, option or Convertible
         Securities, to the extent outstanding immediately prior to such
         expiration or termination, never been issued, and the Common Stock
         issuable thereunder shall no longer be deemed to be outstanding. If the
         purchase price provided for in any such right or option referred to in
         clause (i) of paragraph (c) or the rate at which any Convertible
         Securities referred to in clause (i) or clause (ii) of paragraph (c)
         are convertible into or exchangeable for Common Stock, shall decrease
         at any time under or by reason of provisions with respect thereto
         designed to protect against 



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         dilution, then in case of the delivery of Common Stock upon the
         exercise of any such right or option or upon conversion or exchange of
         any such Convertible Securities, the warrant purchase price then in
         effect hereunder shall forthwith be decreased to such lower price, if
         any, as would have been obtained had such right, option or Convertible
         Securities never been issued as to such Common Stock and had
         adjustments been made upon the issuance of the shares of Common Stock
         delivered as aforesaid.

                  (g) Adjustment of Number of Shares Purchasable. Except as
         provided in paragraph (h) below, upon each adjustment of the warrant
         purchase price (or upon the happening of any event described herein
         which would have required an adjustment in the warrant purchase price
         but for the fact that the consideration paid or payable to the Company
         by reason of such event is not less than the warrant purchase price in
         effect immediately prior thereto or the market price of the shares of
         Common Stock issued or issuable by reason thereof), the holder of this
         Warrant shall thereafter be entitled to purchase, at the warrant
         purchase price resulting from such adjustment (or, if there has not
         been any adjustment in such price, at the then existing warrant
         purchase price), the number of shares (calculated to the nearest share)
         determined as follows:

                           (i) In all cases other than adjustments in the
                  warrant purchase price arising under paragraph (d):

                                    (1) by dividing (aa) the number of shares of
                           Common Stock purchasable pursuant to this Warrant
                           immediately prior thereto by (bb) the total number of
                           shares of Common Stock outstanding immediately prior
                           thereto; and

                                    (2) multiplying the result by the total
                           number of shares of Common Stock outstanding
                           immediately thereafter.

                           (ii) In the case of an adjustment in the warrant
                  purchase price arising under paragraph (d):

                                    (1) by multiplying the warrant purchase
                           price in effect immediately prior to such adjustment
                           by the number of shares purchasable pursuant to this
                           Warrant immediately prior to such adjustment; and

                                    (2) dividing the product thereof by the
                           warrant purchase price resulting from such
                           adjustment.

         For purposes of the foregoing computation, the total number of shares
         of Common Stock outstanding at any time shall be deemed to include the
         total number of shares of Common Stock issuable upon (x) the exercise
         of all then outstanding rights to subscribe for or to purchase, and
         options for the purchase of, Common Stock or Convertible Securities,
         and (y) the conversion or exchange of such Convertible Securities and
         all other outstanding Convertible Securities, but shall not be deemed
         to include any shares of Common Stock issuable upon the exercise of any
         unexercised portion of this Warrant.

                  (h) Exclusions. Anything herein to the contrary
         notwithstanding, the Company shall not be required to make any
         adjustment of the warrant purchase price in connection 



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         with any shares of Common Stock reserved for issuance (x) upon the
         exercise of stock options granted to the Directors, officers and
         employees of the Company which have been granted or are available for
         grant pursuant to stock option plans in effect on the date hereof or at
         the time of the holder's exercise of this Warrant, or (y) upon the
         exercise of any conversion rights held by the holder or holders of the
         Company's Series B Seven Percent (7%) Cumulative Convertible Preferred
         Stock, Fifty Dollars ($50.00) par value per share, or any securities
         issued in exchange or in payment or redemption of said Series B Seven
         Percent (7%) Cumulative Convertible Preferred Stock, or (z) upon the
         exercise of any rights to purchase 50,000 shares of Common Stock set
         forth in the Warrant Agreement dated July 8, 1997, granted by the
         Company to Patricof & Co. Capital Corp.

                  (i) Reorganizations. If any capital reorganization or
         reclassification of the capital stock of the Company, or consolidation
         or merger of the Company with another corporation, or the sale of all
         or substantially all of its assets or outstanding capital stock to
         another corporation shall be effected in such a way that holders of
         Common Stock shall be entitled to receive stock, securities or assets
         with respect to or in exchange for Common Stock, then, as a condition
         of such reorganization, reclassification, consolidation, merger or
         sale, lawful and adequate provision shall be made whereby the holder
         hereof shall thereafter have the right to purchase and receive upon the
         basis and upon the terms and conditions specified in this Warrant and
         in lieu of the shares of the Common Stock of the Company immediately
         theretofore purchasable and receivable upon the exercise of the rights
         represented hereby, such shares of stock, securities or assets as may
         be issued or payable with respect to or in exchange for a number of
         outstanding shares of such Common Stock equal to the number of shares
         of such stock immediately theretofore purchasable and receivable upon
         the exercise of the rights represented hereby had such reorganization,
         reclassification, consolidation, merger or sale not taken place, and in
         any such case appropriate provisions shall be made with respect to the
         rights and interests of the holder of this Warrant to the end that the
         provisions hereof (including, without limitation, provisions fore
         adjustments of the warrant purchase price and of the number of shares
         purchasable upon the exercise of this Warrant) shall thereafter be
         applicable, as nearly as may be, in relation to any shares of stock,
         securities or assets thereafter deliverable upon the exercise hereof.




                  (j) Notice of Adjustments. Upon any adjustment of the warrant
         purchase price or the number of shares purchasable pursuant hereto,
         then and in each such case the Company shall give written notice
         thereof to the registered holder of this Warrant, which notice shall
         state the warrant purchase price resulting from such adjustment and the
         increase or decrease, if any, in the number of shares purchasable upon
         the exercise of this Warrant, setting forth in reasonable detail the
         method of calculation and the facts upon which such calculation is
         based.

         4. COMMON STOCK. As used herein, the term "Common Stock" shall mean and
         include the Company's presently authorized shares of capital stock and
         shall also include any capital stock of any class of the Company
         hereafter authorized which shall not be limited to a fixed sum or
         percentage of par value in respect of the rights of the holders thereof
         to participate in dividends or in the distribution of assets upon the
         voluntary or 



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         involuntary liquidation, dissolution or winding up of the Company;
         provided that the shares purchasable pursuant to this Warrant shall
         include shares designated as Common Stock of the Company on the date of
         original issue of this Warrant or, in the case of any reclassification
         of the outstanding shares thereof, the stock, securities or assets
         provided for in paragraph 3(i) above.

         5. NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle the holder
         hereof to any voting rights or other rights as a stockholder of the
         Company.

         6. NOTICE OF PROPOSED TRANSFERS. The holder of this Warrant, by
         acceptance hereof, agrees to give written notice to the Company before
         transferring this Warrant or transferring any Common Stock issuable or
         issued upon the exercise hereof, of such holder's intention to do so,
         describing briefly the manner of any such proposed transfer. Promptly
         after such written notice is received by the Company, copies thereof
         shall be presented to counsel for the Company and to counsel for such
         holder. If in the opinion of each such counsel the proposed transfer
         may be effected without registration or qualification (under any
         Federal or State law) of this Warrant or the shares of Common Stock
         issuable or issued on the exercise hereof, the Company, as promptly as
         practicable, shall notify such holder of such opinion, whereupon such
         holder shall be entitled to effect such transfer in accordance with the
         terms of the notice delivered by such holder to the Company, provided
         that an appropriate legend may be endorsed on this Warrant or the
         certificates for such shares respecting restrictions upon transfer
         thereof necessary or advisable in the opinion of counsel for the
         Company to prevent transfers which would be in violation of Section 5
         of the Securities Act of 1933, as amended (herein called the "1933
         Act").

         7. INVESTMENT REPRESENTATION; RESALE LIMITATIONS; REGISTRATION RIGHTS.

                  (a) Investment Representation. The holder of this Warrant, by
         acceptance hereof, represents and warrants that this Warrant and shares
         of Common Stock purchased by the holder pursuant to the exercise of
         this Warrant, are and will be acquired by the holder for investment and
         not with a view to, or for sale in connection with, any distribution
         thereof, nor with any present intention, of selling, transferring or
         disposing of the same.


                  (b) Resale Limitations. The shares of Common Stock which may
         be purchased hereunder may not be offered for sale, sold or otherwise
         transferred, unless:

                           (i) A registration statement with respect to such
                  securities shall be effective under the 1933 Act, together
                  with proof satisfactory to counsel for the Company that the
                  holder of this Warrant shall have complied with applicable
                  state securities laws, or

                           (ii) The Company shall have received an opinion of
                  counsel satisfactory to the Company that no violation of the
                  1933 Act, or such other applicable law, will be involved in
                  such transfer, or

                           (iii) The Company shall receive a "no action" letter
                  from the Securities and 


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<PAGE>   10



                  Exchange Commission (herein called the "SEC") and the
                  equivalent ruling or letter pursuant to applicable state law
                  in form satisfactory to the Company covering such transfer,

         and the Company may withhold transfer, registration and delivery of
         such securities until one of the three conditions set forth in this
         paragraph 7(b) shall have been met.

                  (c) Legend. All certificates representing the shares of Common
         Stock issued upon the exercise of this Warrant shall contain an
         appropriate legend indicating the fact that the shares have not been
         registered under the 1933 Act and the conditions affecting the
         transferability of such shares. A similar notation will be placed in
         the Company's stock transfer ledger.

         8. NOTICES. Any notice or other thing required or desired to be served,
         given or delivered hereunder shall be in writing, and shall be deemed
         to have been validly served, given or delivered upon deposit in the
         United States registered or certified mail with proper postage prepaid
         and addressed to the party to be notified as follows:

                  (a)      If to the Company at:

                                    American Precision Industries Inc.
                                    2777 Walden Avenue
                                    Buffalo, New York  14225

                                            Attention:  President

                  (b)      If to the holder of this Warrant at:

                                    Decision Processes International
                                      (Connecticut, Ltd.)
                                    10 Bay Street, Suite 116
                                    Westport, Connecticut  06880

                                            Attention:  President

         or to such other address as either party may hereafter designate for
         itself by written notice to the other party in the manner herein
         prescribed.

         9. GENERAL. This Warrant shall be construed in accordance with the laws
         of the State of Delaware. Whenever possible, each provision of this
         Warrant shall be interpreted in such manner as to be effective and
         valid under the applicable law, but, if any provision of this Warrant
         shall be held to be prohibited by or invalid under applicable law, such
         provision shall be ineffective only to the extent of such prohibition
         or invalidity, without invalidating the remainder of such provision or
         the remaining provisions of this Warrant. The paragraph headings herein
         are for convenience only and shall not affect the interpretation of any
         of the provisions hereof.


                                      -10-
<PAGE>   11


         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed at
Buffalo, New York by its duly authorized officers under its corporate seal, and
this Warrant is dated July 1, 1998.



                                     AMERICAN PRECISION INDUSTRIES INC.



                                     By
                                       -----------------------------------------
                                           Kurt Wiedenhaupt, Chairman,
                                           President and Chief Executive Officer

(CORPORATE SEAL)


ATTEST:



-------------------------------
James J. Tanous, Secretary




                                      -11-
<PAGE>   12


                                      FORM
                                       FOR
                               EXERCISE OF WARRANT


         The undersigned hereby elects to purchase _________ shares of Common
Stock, $.66-2/3 par value, of AMERICAN PRECISION INDUSTRIES INC. (the "Company")
in accordance with the WARRANT AGREEMENT dated ___________, 19__. The
undersigned hereby delivers the following to the Company in full payment for the
shares purchased hereby:

         Exercise Price ($______ per share) x ______ shares purchased =

                               Aggregate Exercise Price $

         Paid by:              certified or official bank check payable
                               to "American Precision Industries Inc."

                                       OR
                                       --

                               By the retention by the Company of ______ shares
                               per paragraph 1(b) of the WARRANT AGREEMENT.

                              (Aggregate Exercise Price  Average Closing Price =
                              Payment Shares)
                              (Total shares purchased - Payment Shares = Shares 
                              to be issued to undersigned)

     Please register these shares as follows:

         Name of record owner:

         Address:



         Social Security No.:

Please mail shares to [above address] or



Dated:
       ----------------


                                              ---------------------------------
                                              Signature of Warrant Holder



<PAGE>   13
                                                                     Exhibit 4-D

Warrant Certificate No. 2                                    Warrant to Purchase
                                                                    6,154 Shares

                                WARRANT AGREEMENT

                           Dated as of January 1, 1998

                  To Subscribe for and Purchase Common Stock of

                       AMERICAN PRECISION INDUSTRIES INC.

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



         THIS CERTIFIES THAT, for value received, DECISION PROCESSES
INTERNATIONAL (CONNECTICUT, LTD.) (herein called "DPI"), or its permitted
assigns, is entitled to subscribe for and purchase from AMERICAN PRECISION
INDUSTRIES INC., a Delaware corporation (herein called the "Company"), at the
price of Nineteen Dollars and 50 Cents ($19.50) per share (subject to
adjustments as provided herein) at any time after the date hereof to and
including December 31, 2007, SIX THOUSAND ONE HUNDRED FIFTY-FOUR (6,154) fully
paid and non-assessable shares of the Company's Common Stock, $.66-2/3 par
value.

         This Warrant was originally issued in connection with execution by the
Company and DPI of a Retainer Agreement dated as of January 1, 1998 (herein
called the "Retainer Agreement"). As used herein, "this Warrant" and "the
Warrants" shall mean the Warrant originally issued to DPI pursuant to the
Retainer Agreement and any Warrants that may be issued in substitution or
exchange therefor. All Warrants shall be dated said original issue date.

         This Warrant is subject to the following terms and conditions:


         1. EXERCISE OF WARRANT.

                  (a) Exercise. The rights represented by this Warrant may be
         exercised by the holder hereof, in whole or in part (but not as to a
         fractional share of Common Stock), by written notice of exercise
         delivered to the Company and by the surrender of this Warrant (properly
         endorsed if required) at the principal business office of the Company
         and upon payment to it of the purchase price for such shares. The
         Company agrees that the shares so purchased shall be, and shall be
         deemed to be, issued to the holder hereof as the record owner of such
         shares as of the close of business on the date on which this Warrant
         shall have been surrendered and payment made for such shares.
         Certificates for the shares of stock so purchased shall be delivered to
         the holder hereof within a reasonable time, not exceeding ten (10)
         days, after the rights represented by this Warrant shall have been so
         exercised, and, unless this Warrant has expired, a new Warrant
         representing the number of shares, if any, with respect to which this
         Warrant shall not then have been exercised shall also be delivered to
         the holder hereof within such time.



                  (b) Payment of Exercise Price. Payment of the exercise price
         for the shares to be issued upon the exercise of this Warrant shall be
         made by certified or official bank 


<PAGE>   14


         check; provided, however, the holder hereof shall also have the right,
         at its election, in lieu of paying the exercise price by certified or
         official bank check, to instruct the Company in the Form For Exercise
         of Warrant to retain, in payment of the exercise price, a number of
         shares of Common Stock (the "Payment Shares") equal to the quotient of
         (i) the aggregate exercise price of the shares as to which this Warrant
         is then being exercised divided by (ii) the "Average Closing Price" as
         of the date of exercise and to deduct the number of Payment Shares from
         the shares to be delivered to the holder hereof. "Average Closing
         Price" means, as of any date, (x) if shares of Common Stock are listed
         on a national securities exchange, the average of the closing sales
         prices therefor on the largest securities exchange on which such shares
         are traded on the last ten trading days before such date, (y) if such
         shares are listed on the NASDAQ National Market System but not on any
         national securities exchange, the average of the closing sales prices
         therefor on the NASDAQ National Market System on the last ten trading
         days before such date or (z) if such shares are not listed on either a
         national securities exchange or the NASDAQ National Market System, the
         average of the sales prices therefor on the last twenty trading days
         before such date.

         2. VALIDITY OF ISSUANCE AND RESERVATION OF SHARES. The Company
         covenants and agrees that all shares which may be issued upon the
         exercise of the rights represented by this Warrant will, upon issuance,
         be duly authorized and issued, fully paid, nonassessable, and free from
         all taxes, liens, charges and pre-emptive rights with respect to the
         issue thereof, and, without limiting the generality of the foregoing,
         the Company covenants and agrees that it will from time to time take
         all such action as may be requisite to assure that the par value per
         share of the Common Stock is at all times equal to or less than the
         then effective purchase price per share of the Common Stock issuable
         pursuant to this Warrant. The Company further covenants and agrees that
         during the period within which the rights represented by this Warrant
         may be exercised, the Company will at all times have authorized, and
         reserved for the purpose of issue or transfer upon exercise of the
         subscription rights evidenced by this Warrant, a sufficient number of
         shares of its Common Stock to provide for the exercise of the rights
         represented by this Warrant.

         3. WARRANT ADJUSTMENTS. The above provisions are, however, subject to
         the following:

                  (a) Adjustment of Shares. The warrant purchase price and the
         number of shares purchasable pursuant hereto shall be subject to
         adjustment from time to time as hereinafter provided.

                  (b) Adjustment of Price for Stock Sales. Except as provided in
         paragraph (h) below, if and whenever the Company shall issue or sell
         any shares of its Common Stock for a consideration per share less than
         the warrant purchase price in effect immediately prior to the time of
         such issue or sale, and/or the Company shall issue or sell any shares
         of its Common Stock for a consideration per share less than the market
         price on the date of such issue or sale, then, forthwith upon such
         issue or sale, the warrant purchase price shall be reduced to the lower
         of the prices (calculated to the nearest cent) determined as follows:

                           (i) by dividing (1) an amount equal to the sum of
                  (aa) the number of shares of Common Stock outstanding
                  immediately prior to such issue or sale multiplied by 


                                      -2-
<PAGE>   15



                  the then existing warrant purchase price, and (bb) the
                  consideration, if any, received by the Company upon such issue
                  or sale, by (2) the total number of shares of Common Stock
                  outstanding immediately after such issue or sale; or

                           (ii) by multiplying the warrant purchase price in
                  effect immediately prior to the time of such issue or sale by
                  a fraction, the numerator of which shall be the sum of (1) the
                  number of shares of Common Stock outstanding immediately prior
                  to such issue or sale multiplied by the market price
                  immediately prior to such issue or sale, plus (2) the
                  consideration received by the Company upon such issue or sale,
                  and the denominator of which shall be the product of (3) the
                  total number of shares of Common Stock outstanding immediately
                  after such issue or sale, multiplied by (4) the market price
                  immediately prior to such issue or sale.

         No adjustment of the warrant purchase price, however, shall be made in
         an amount less than $.01 per share, but any such lesser adjustment
         shall be carried forward and shall be made at the time and together
         with the next subsequent adjustment which together with any adjustments
         so carried forward shall amount to $.01 per share or more.

                  (c) Further Provisions with respect to Stock Sales. For the
         purposes of paragraph (b), the following provisions (i) to (vii),
         inclusive, shall also be applicable:

                           (i) In case at any time the Company shall grant
                  (whether directly or by assumption in a merger or otherwise)
                  any rights to subscribe for or to purchase, or any options for
                  the purchase of, Common Stock or any stock or securities
                  convertible into or exchangeable for Common Stock (such
                  convertible or exchangeable stock or securities being herein
                  called "Convertible Securities") whether or not such rights or
                  options or the right to convert or exchange any such
                  Convertible Securities are immediately exercisable, and the
                  price per share at which Common Stock is issuable upon the
                  exercise of such rights or options or upon conversion or
                  exchange of such Convertible Securities (determined by
                  dividing (aa) the total amount if any, received or receivable
                  by the Company as consideration for the granting of such
                  rights or options, plus the minimum aggregate amount of
                  additional consideration payable to the Company upon the
                  exercise of such rights or options, plus, in the case of such
                  rights or options which relate to Convertible Securities, the
                  minimum aggregate amount of additional consideration, if any,
                  payable upon the issue or sale of such Convertible Securities
                  and upon the conversion or exchange thereof, by (bb) the total
                  maximum number of shares of Common Stock issuable upon the
                  exercise of such rights or options or upon the conversion or
                  exchange of all such Convertible Securities issuable upon the
                  exercise of such rights or options) shall be less than the
                  warrant purchase price in effect immediately prior to the time
                  of the granting of such rights or options (or less than the
                  market price determined as of the date of granting such rights
                  or options, as the case may be), then the total maximum number
                  of shares of Common Stock issuable upon the exercise of rights
                  or options or upon conversion or exchange of the total maximum
                  amount of such Convertible Securities issuable upon the
                  exercise of such rights or options shall (as of the date of
                  granting of such rights or options) be deemed to have been
                  issued for such price per share. Except as provided in
                  paragraph (f) below, no further adjustments of the warrant
                  purchase price shall be made upon the actual issue of such
                  Common Stock or of such 


                                      -3-
<PAGE>   16


                  Convertible Securities upon exercise of such rights or options
                  or upon the actual issue of such Common Stock upon conversion
                  or exchange of such Convertible Securities.

                           (ii) In case the Company shall issue (whether
                  directly or by assumption in a merger or otherwise) or sell
                  any Convertible Securities, whether or not the rights to
                  exchange or convert thereunder are immediately exercisable,
                  and the price per share for which Common Stock is issuable
                  upon such conversion or exchange (determined by dividing (aa)
                  the total amount received or receivable by the Company as
                  consideration for the issue or sale of such Convertible
                  Securities, plus the minimum aggregate amount of additional
                  consideration, if any, payable to the Company upon the
                  conversion or exchange thereof, by (bb) the total maximum
                  number of shares of Common Stock issuable upon the conversion
                  or exchange of all such Convertible Securities) shall be less
                  than the warrant purchase price in effect immediately prior to
                  the time of such issue or sale (or less than the market price,
                  determined as of the date of such issue or sale of such
                  Convertible Securities, as the case may be), then the total
                  maximum number of shares of Common Stock issuable upon
                  conversion or exchange of all such Convertible Securities
                  shall (as of the date of the issue or sale of such Convertible
                  Securities) be deemed to be outstanding and to have been
                  issued for such price per share, provided that (x) except as
                  provided in paragraph (f) below, no further adjustments of the
                  warrant purchase price shall be made upon the actual issue of
                  such Common Stock upon conversion or exchange of such
                  Convertible Securities, and (y) if any such issue or sale of
                  such Convertible Securities is made upon exercise of any
                  rights to subscribe for or to purchase or any option to
                  purchase any such Convertible Securities for which adjustments
                  of the warrant purchase price have been or are to be made
                  pursuant to other provisions of this paragraph (c), no further
                  adjustment of the warrant purchase price shall be made by
                  reason of such issue or sale.

                           (iii) In case the Company shall declare a dividend or
                  make any other distribution upon any stock of the Company
                  payable in Common Stock or Convertible Securities, any Common
                  Stock or Convertible Securities, as the case may be, issuable
                  in payment of such dividend or distribution shall be deemed to
                  have been issued or sold without consideration.

                           (iv) In case any shares of Common Stock or
                  Convertible Securities or any rights or options to purchase
                  any such Common Stock or Convertible Securities shall be
                  issued or sold for cash, the consideration received therefor
                  shall be deemed to be the amount received by the Company
                  therefor, without deduction therefrom of any expenses incurred
                  or any underwriting commissions or concessions paid or allowed
                  by the Company in connection therewith. In case any shares of
                  Common Stock or Convertible Securities or any rights or
                  options to purchase any such Common Stock or Convertible
                  Securities shall be issued or sold for a consideration other
                  than cash, the amount of the consideration other than cash
                  received by the Company shall be deemed to be the fair market
                  value of such consideration as determined by the Board of
                  Directors of the Company, without deduction of any expenses
                  incurred or any underwriting commissions or concessions paid
                  or allowed by the Company in connection therewith. In case any



                                      -4-
<PAGE>   17


                  shares of Common Stock or Convertible Securities or any rights
                  or options to purchase such Common Stock or Convertible
                  Securities shall be issued in connection with any merger or
                  consolidation in which the Company is the surviving
                  corporation, the amount of consideration therefor shall be
                  deemed to be the fair market value as determined by the Board
                  of Directors of the Company of such portion of the assets and
                  business of the non-surviving corporation or corporations as
                  such Board shall determine to be attributable to such Common
                  Stock, Convertible Securities, rights or options, as the case
                  may be. In the event of any consolidation or merger of the
                  Company in which the Company is not the surviving corporation
                  or in the event of any sale of all or substantially all of the
                  assets of the Company for stock or other securities of any
                  corporation, the Company shall be deemed to have issued a
                  number of shares of its Common Stock for stock or securities
                  of the other corporation computed on the basis of the actual
                  exchange ratio on which the transaction was predicated and for
                  a consideration equal to the fair market value on the date of
                  such transaction of such stock or securities of the other
                  corporation, and if any such calculation results in adjustment
                  of the warrant purchase price, the determination of the number
                  of shares of Common Stock issuable upon exercise of this
                  Warrant immediately prior to such merger, conversion or sale,
                  for purposes of paragraph 3(h) shall be made after giving
                  effect to such adjustment of the warrant purchase price.

                           (v) In case the Company shall take a record of the
                  holders of its Common Stock for the purpose of entitling them
                  (aa) to receive a dividend or other distribution payable in
                  Common Stock or in Convertible Securities, or (bb) to
                  subscribe for or purchase Common Stock or Convertible
                  Securities, then such record date shall be deemed to be the
                  date of the issue or sale of the shares of Common Stock deemed
                  to have been issued or sold upon the declaration of such
                  dividend or the making of such other distribution or the date
                  of the granting of such right of subscription or purchase, as
                  the case may be.

                           (vi) The number of shares of Common Stock outstanding
                  at any given time shall not include shares owned or held by or
                  for the account of the Company, and the disposition of any
                  such shares shall be considered an issue or sale of Common
                  Stock for the purposes of this paragraph (3).

                           (vii) "Market price" shall mean the average of the
                  high and low prices of the Common Stock sales on all exchanges
                  on which the Common Stock may at the time be admitted to
                  trading, or, if there shall have been no sales on any such
                  exchange on any such day, the average of the bid and asked
                  prices at the end of such day, or, if the Common Stock shall
                  not be so admitted to trading, the average of the bid and
                  asked prices at the end of the day in the over-the-counter
                  market, in each case averaged over a period of 20 consecutive
                  business days prior to the date as of which "market price" is
                  being determined. If at any time the Common Stock is not
                  admitted to trading on any exchange or quoted in the
                  over-the-counter market, the "market price" shall be deemed to
                  be the fair market value thereof determined in good faith by
                  the Board of Directors of the Company as of a date which is
                  within 15 days of the date as of which the determination is to
                  be made.

                  (d) Adjustment of Price for Corporate Distributions. In case
         the Company shall 



                                      -5-
<PAGE>   18


         declare a dividend upon the Common Stock payable otherwise than out of
         consolidated earnings or consolidated earned surplus, determined in
         accordance with generally accepted accounting principles, including the
         making of appropriate deductions for minority interests, if any, in
         subsidiaries (except in Common Stock or Convertible Securities, but
         including other securities), the warrant purchase price in effect
         immediately prior to the declaration of such dividend shall be reduced
         by an amount equal, in the case of a dividend in cash, to the amount
         thereof payable per share of the Common Stock or, in the case of any
         other dividend, to the fair market value thereof per share of the
         Common Stock as determined by the Board of Directors of the Company.
         For the purposes of the foregoing, a dividend other than in cash shall
         be considered payable out of earnings or surplus (other than
         revaluation or paid-in-surplus) only to the extent that such earnings
         or surplus are charged an amount equal to the fair market value of such
         dividend as determined by the Board of Directors of the Company. Such
         reductions shall take effect as of the date on which a record is taken
         for the purpose of such dividend, or, if a record is not taken, the
         date as of which the holders of Common Stock of record entitled to such
         dividend are to be determined.

                  (e) Adjustment of Price for Subdivisions and Combinations of
         Shares. In case the Company shall at any time subdivide its outstanding
         shares of Common Stock into a greater number of shares, the warrant
         purchase price in effect immediately prior to such subdivision shall be
         proportionately reduced, and conversely, in case the outstanding shares
         of Common Stock of the Company shall be combined into a smaller number
         of shares, the warrant purchase price in effect immediately prior to
         such combination shall be proportionately increased.

                  (f) Readjustments. Upon the happening of any of the following
         events, namely, if the purchase price provided for in any rights or
         options referred to in clause (i) of paragraph (c), the additional
         consideration, if any, payable upon the conversion or exchange of
         Convertible Securities referred to in clause (i) or (ii) of paragraph
         (c), or the rate at which any Convertible Securities referred to in
         clause (i) or clause (ii) of paragraph (c) are convertible into or
         exchangeable for Common Stock shall change (other than under or by
         reason of provisions designed to protect against dilution), the warrant
         purchase price in effect at the time of such event shall forthwith be
         readjusted to the warrant purchase price which would have been in
         effect at such time had such rights, options or Convertible Securities
         still outstanding provided for such changed purchase price, additional
         consideration or conversion rate, as the case may be, at the time
         initially granted, issued or sold; and on the expiration of any such
         option or right or the termination of any such right to convert or
         exchange such Convertible Securities, the warrant purchase price then
         in effect hereunder shall forthwith be increased to the warrant
         purchase price which would have been in effect at the time of such
         expiration or termination had such right, option or Convertible
         Securities, to the extent outstanding immediately prior to such
         expiration or termination, never been issued, and the Common Stock
         issuable thereunder shall no longer be deemed to be outstanding. If the
         purchase price provided for in any such right or option referred to in
         clause (i) of paragraph (c) or the rate at which any Convertible
         Securities referred to in clause (i) or clause (ii) of paragraph (c)
         are convertible into or exchangeable for Common Stock, shall decrease
         at any time under or by reason of provisions with respect thereto
         designed to protect against dilution, then in case of the delivery of
         Common Stock upon the exercise of any such right or option or upon
         conversion or exchange of any such Convertible Securities, the warrant



                                      -6-
<PAGE>   19


         purchase price then in effect hereunder shall forthwith be decreased to
         such lower price, if any, as would have been obtained had such right,
         option or Convertible Securities never been issued as to such Common
         Stock and had adjustments been made upon the issuance of the shares of
         Common Stock delivered as aforesaid.

                  (g) Adjustment of Number of Shares Purchasable. Except as
         provided in paragraph (h) below, upon each adjustment of the warrant
         purchase price (or upon the happening of any event described herein
         which would have required an adjustment in the warrant purchase price
         but for the fact that the consideration paid or payable to the Company
         by reason of such event is not less than the warrant purchase price in
         effect immediately prior thereto or the market price of the shares of
         Common Stock issued or issuable by reason thereof), the holder of this
         Warrant shall thereafter be entitled to purchase, at the warrant
         purchase price resulting from such adjustment (or, if there has not
         been any adjustment in such price, at the then existing warrant
         purchase price), the number of shares (calculated to the nearest share)
         determined as follows:

                           (i) In all cases other than adjustments in the
                  warrant purchase price arising under paragraph (d):

                                    (1) by dividing (aa) the number of shares of
                           Common Stock purchasable pursuant to this Warrant
                           immediately prior thereto by (bb) the total number of
                           shares of Common Stock outstanding immediately prior
                           thereto; and

                                    (2) multiplying the result by the total
                           number of shares of Common Stock outstanding
                           immediately thereafter.

                           (ii) In the case of an adjustment in the warrant
                  purchase price arising under paragraph (d):

                                    (1) by multiplying the warrant purchase
                           price in effect immediately prior to such adjustment
                           by the number of shares purchasable pursuant to this
                           Warrant immediately prior to such adjustment; and

                                    (2) dividing the product thereof by the
                           warrant purchase price resulting from such
                           adjustment.

         For purposes of the foregoing computation, the total number of shares
         of Common Stock outstanding at any time shall be deemed to include the
         total number of shares of Common Stock issuable upon (x) the exercise
         of all then outstanding rights to subscribe for or to purchase, and
         options for the purchase of, Common Stock or Convertible Securities,
         and (y) the conversion or exchange of such Convertible Securities and
         all other outstanding Convertible Securities, but shall not be deemed
         to include any shares of Common Stock issuable upon the exercise of any
         unexercised portion of this Warrant.

                  (h) Exclusions. Anything herein to the contrary
         notwithstanding, the Company shall not be required to make any
         adjustment of the warrant purchase price in connection with any shares
         of Common Stock reserved for issuance (x) upon the exercise of stock
         options granted to the Directors, officers and employees of the Company
         which have been 



                                      -7-
<PAGE>   20


         granted or are available for grant pursuant to stock option plans in
         effect on the date hereof or at the time of the holder's exercise of
         this Warrant, or (y) upon the exercise of any conversion rights held by
         the holder or holders of the Company's Series B Seven Percent (7%)
         Cumulative Convertible Preferred Stock, Fifty Dollars ($50.00) par
         value per share, or any securities issued in exchange or in payment or
         redemption of said Series B Seven Percent (7%) Cumulative Convertible
         Preferred Stock, or (z) upon the exercise of any rights to purchase
         50,000 shares of Common Stock set forth in the Warrant Agreement dated
         July 8, 1997, granted by the Company to Patricof & Co. Capital Corp.

                  (i) Reorganizations. If any capital reorganization or
         reclassification of the capital stock of the Company, or consolidation
         or merger of the Company with another corporation, or the sale of all
         or substantially all of its assets or outstanding capital stock to
         another corporation shall be effected in such a way that holders of
         Common Stock shall be entitled to receive stock, securities or assets
         with respect to or in exchange for Common Stock, then, as a condition
         of such reorganization, reclassification, consolidation, merger or
         sale, lawful and adequate provision shall be made whereby the holder
         hereof shall thereafter have the right to purchase and receive upon the
         basis and upon the terms and conditions specified in this Warrant and
         in lieu of the shares of the Common Stock of the Company immediately
         theretofore purchasable and receivable upon the exercise of the rights
         represented hereby, such shares of stock, securities or assets as may
         be issued or payable with respect to or in exchange for a number of
         outstanding shares of such Common Stock equal to the number of shares
         of such stock immediately theretofore purchasable and receivable upon
         the exercise of the rights represented hereby had such reorganization,
         reclassification, consolidation, merger or sale not taken place, and in
         any such case appropriate provisions shall be made with respect to the
         rights and interests of the holder of this Warrant to the end that the
         provisions hereof (including, without limitation, provisions fore
         adjustments of the warrant purchase price and of the number of shares
         purchasable upon the exercise of this Warrant) shall thereafter be
         applicable, as nearly as may be, in relation to any shares of stock,
         securities or assets thereafter deliverable upon the exercise hereof.




                  (j) Notice of Adjustments. Upon any adjustment of the warrant
         purchase price or the number of shares purchasable pursuant hereto,
         then and in each such case the Company shall give written notice
         thereof to the registered holder of this Warrant, which notice shall
         state the warrant purchase price resulting from such adjustment and the
         increase or decrease, if any, in the number of shares purchasable upon
         the exercise of this Warrant, setting forth in reasonable detail the
         method of calculation and the facts upon which such calculation is
         based.

         4. COMMON STOCK. As used herein, the term "Common Stock" shall mean and
         include the Company's presently authorized shares of capital stock and
         shall also include any capital stock of any class of the Company
         hereafter authorized which shall not be limited to a fixed sum or
         percentage of par value in respect of the rights of the holders thereof
         to participate in dividends or in the distribution of assets upon the
         voluntary or involuntary liquidation, dissolution or winding up of the
         Company; provided that the shares purchasable pursuant to this Warrant
         shall include shares designated as Common Stock 



                                      -8-
<PAGE>   21


         of the Company on the date of original issue of this Warrant or, in the
         case of any reclassification of the outstanding shares thereof, the
         stock, securities or assets provided for in paragraph 3(i) above.

         5. NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle the holder
         hereof to any voting rights or other rights as a stockholder of the
         Company.

         6. NOTICE OF PROPOSED TRANSFERS. The holder of this Warrant, by
         acceptance hereof, agrees to give written notice to the Company before
         transferring this Warrant or transferring any Common Stock issuable or
         issued upon the exercise hereof, of such holder's intention to do so,
         describing briefly the manner of any such proposed transfer. Promptly
         after such written notice is received by the Company, copies thereof
         shall be presented to counsel for the Company and to counsel for such
         holder. If in the opinion of each such counsel the proposed transfer
         may be effected without registration or qualification (under any
         Federal or State law) of this Warrant or the shares of Common Stock
         issuable or issued on the exercise hereof, the Company, as promptly as
         practicable, shall notify such holder of such opinion, whereupon such
         holder shall be entitled to effect such transfer in accordance with the
         terms of the notice delivered by such holder to the Company, provided
         that an appropriate legend may be endorsed on this Warrant or the
         certificates for such shares respecting restrictions upon transfer
         thereof necessary or advisable in the opinion of counsel for the
         Company to prevent transfers which would be in violation of Section 5
         of the Securities Act of 1933, as amended (herein called the "1933
         Act").

         7. INVESTMENT REPRESENTATION; RESALE LIMITATIONS; REGISTRATION RIGHTS.

                  (a) Investment Representation. The holder of this Warrant, by
         acceptance hereof, represents and warrants that this Warrant and shares
         of Common Stock purchased by the holder pursuant to the exercise of
         this Warrant, are and will be acquired by the holder for investment and
         not with a view to, or for sale in connection with, any distribution
         thereof, nor with any present intention, of selling, transferring or
         disposing of the same.


                  (b) Resale Limitations. The shares of Common Stock which may
         be purchased hereunder may not be offered for sale, sold or otherwise
         transferred, unless:

                           (i) A registration statement with respect to such
                  securities shall be effective under the 1933 Act, together
                  with proof satisfactory to counsel for the Company that the
                  holder of this Warrant shall have complied with applicable
                  state securities laws, or

                           (ii) The Company shall have received an opinion of
                  counsel satisfactory to the Company that no violation of the
                  1933 Act, or such other applicable law, will be involved in
                  such transfer, or

                           (iii) The Company shall receive a "no action" letter
                  from the Securities and Exchange Commission (herein called the
                  "SEC") and the equivalent ruling or letter pursuant to
                  applicable state law in form satisfactory to the Company
                  covering such 


                                      -9-
<PAGE>   22


                  transfer,

         and the Company may withhold transfer, registration and delivery of
         such securities until one of the three conditions set forth in this
         paragraph 7(b) shall have been met.

                  (c) Legend. All certificates representing the shares of Common
         Stock issued upon the exercise of this Warrant shall contain an
         appropriate legend indicating the fact that the shares have not been
         registered under the 1933 Act and the conditions affecting the
         transferability of such shares. A similar notation will be placed in
         the Company's stock transfer ledger.

         8. NOTICES. Any notice or other thing required or desired to be served,
         given or delivered hereunder shall be in writing, and shall be deemed
         to have been validly served, given or delivered upon deposit in the
         United States registered or certified mail with proper postage prepaid
         and addressed to the party to be notified as follows:

                  (a)      If to the Company at:

                                    American Precision Industries Inc.
                                    2777 Walden Avenue
                                    Buffalo, New York  14225

                                            Attention:  President

                  (b)      If to the holder of this Warrant at:

                                    Decision Processes International
                                      (Connecticut, Ltd.)
                                    10 Bay Street, Suite 116
                                    Westport, Connecticut  06880

                                            Attention:  President

         or to such other address as either party may hereafter designate for
         itself by written notice to the other party in the manner herein
         prescribed.

         9. GENERAL. This Warrant shall be construed in accordance with the laws
         of the State of Delaware. Whenever possible, each provision of this
         Warrant shall be interpreted in such manner as to be effective and
         valid under the applicable law, but, if any provision of this Warrant
         shall be held to be prohibited by or invalid under applicable law, such
         provision shall be ineffective only to the extent of such prohibition
         or invalidity, without invalidating the remainder of such provision or
         the remaining provisions of this Warrant. The paragraph headings herein
         are for convenience only and shall not affect the interpretation of any
         of the provisions hereof.

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed at
Buffalo, New York by its duly authorized officers under its corporate seal, and
this Warrant is dated December 31, 1998.


                                      -10-
<PAGE>   23


                                   AMERICAN PRECISION INDUSTRIES INC.



                                   By
                                      ------------------------------------------
                                         Kurt Wiedenhaupt, Chairman,
                                         President and Chief Executive Officer

(CORPORATE SEAL)


ATTEST:



-------------------------------
James J. Tanous, Secretary




                                      -11-
<PAGE>   24


                                      FORM
                                       FOR
                               EXERCISE OF WARRANT


         The undersigned hereby elects to purchase _________ shares of Common
Stock, $.66-2/3 par value, of AMERICAN PRECISION INDUSTRIES INC. (the "Company")
in accordance with the WARRANT AGREEMENT dated ___________, 19__. The
undersigned hereby delivers the following to the Company in full payment for the
shares purchased hereby:

         Exercise Price ($______ per share) x ______ shares purchased =

                             Aggregate Exercise Price $

         Paid by:            certified or official bank check payable
                             to "American Precision Industries Inc."

                                       OR
                                       --

                             By the retention by the Company of ______ shares 
                             per paragraph 1(b) of the WARRANT AGREEMENT.
                             (Aggregate Exercise Price  Average Closing Price = 
                             Payment Shares)
                             (Total shares purchased - Payment Shares = Shares 
                             to be issued to undersigned)

     Please register these shares as follows:

         Name of record owner:

         Address:



         Social Security No.:

Please mail shares to [above address] or



Dated:
      --------------



                                              ----------------------------------
                                              Signature of Warrant Holder