FIRST AMENDMENT TO CREDIT AGREEMENT

1
Exhibit 4(B)

FIRST AMENDMENT
TO
CREDIT AGREEMENT

This First Amendment ("Amendment") dated as of January 29,
1999, is made by and among AMERICAN PRECISION INDUSTRIES INC., a Delaware
corporation ("Company") and MARINE MIDLAND BANK, a bank organized under the laws
of the State of New York, as Agent ("Agent"), MARINE MIDLAND BANK as a Lender
("Marine") and FLEET NATIONAL BANK, a bank organized under the laws of the
United States of America, as a Lender ("Fleet").

RECITALS
--------

1. The Company, Agent, Marine and Fleet are parties to a Credit
Agreement dated August 31, 1998 ("Original Agreement"). Pursuant to the Original
Agreement, the Company executed and delivered to Marine and Fleet the Revolving
Notes and Foreign Currency Notes described in the Original Agreement and dated
August 31, 1998. All capitalized terms used herein and not otherwise defined are
used with their defined meanings as set forth in the Original Agreement.

2. In December 1998, the Company advised the Agent, Marine and Fleet of
certain proposed mergers involving various U.S. Subsidiaries of the Company
which were also Guarantors under the Original Agreement, and requested the
consent of the Agent and the Lenders thereto to the extent required under the
Original Agreement.

3. The Company also informed the Agent, Marine and Fleet of its
intention to form a new Swedish limited liability company named API ELMO AB as a
wholly-owned subsidiary of API Motion Inc. to acquire the assets of ELMO
Industrier AB for a cash purchase price of approximately 193 Million Swedish
Krona plus the assumption of liabilities owed to affiliates, financial
institutions and trade creditors ("ELMO Acquisition"); requested the consent of
the Agent and the Lenders thereto; and also requested the ability to borrow
Swedish Krona from the Lenders as a Foreign Currency under the Original
Agreement.

4. The Company has also requested, and the Lenders desire to make
available to the Company, the ability to add the Euro as a Foreign Currency
under the Original Agreement now that the Euro has become a currency of the
European Monetary Union, and to provide for borrowings in Euros as a substitute
for any particular Foreign Currency after the date such Foreign Currency is
replaced by the Euro as the lawful currency of a participating member state of
the European Monetary Union.

NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

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A. CONDITIONS.

This Amendment shall be conditioned upon the following:

1. Delivery to the Agent and the Lenders of satisfactory
evidence of the completion of the Mergers (as defined in Part B below).

2. Execution by the Company, the Agent, and the Lenders of
this Amendment, and delivery of duplicate originals thereof to each of the
foregoing parties.

3. Delivery to the Agent and the Lenders of satisfactory
evidence of the completion of the ELMO Acquisition within fourteen (14) days
after the date hereof.

4. Execution by each of the Post-Mergers Guarantors of this
Amendment in order to make the reaffirmations set forth in Part E below, and
delivery of duplicate originals thereof to each of the Agent and the Lenders.

B. CONSENTS.

1. The Agent and the Lenders hereby consent to the following
mergers and name changes which occurred on or about December 30, 1998:

a. The merger of API Heat Transfer Inc. into
API Airtech Inc., and the name change of API Airtech Inc. to API Heat Transfer
Inc.

b. The merger of API Portescap U.S. Inc. into
its parent API Portescap Inc.

2. The Agent and the Lenders hereby consent to the following
mergers and name changes which occurred on or about December 31, 1998:

a. The mergers of API Xxxxx Inc., API Ketema
Inc. and API Xxxxxxx-Bretten Inc. into API Heat Transfer Inc. formerly known as
API Airtech Inc.

b. The mergers of API Electronic Components
Inc. and API Delevan Inc. into API SMD Inc., and the change of name of API SMD
Inc. to API Delevan Inc.

c. The mergers of API Controls Inc., API
Deltran Inc., API Harowe Inc. and API Portescap Inc. into API Motion Inc.

d. The merger of API AF Corporation into API
Development Corporation.

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All of the foregoing mergers are hereby referred to collectively as the
"Mergers".

3. Based on the documentation received from the Company with
respect to the terms of the ELMO Acquisition, the Agent and the Lenders hereby
consent to the ELMO Acquisition in accordance with the provisions of Section 6.5
of the Original Agreement.

C. AMENDMENTS.

The Original Agreement is hereby amended as follows:

1. The following definitions are added to Section 1.1 of the
Original Agreement in the appropriate places in alphabetic sequence:

"EURO" - the legal currency of the European participating
member states which participate in the European Monetary Union.

"EUROPEAN CURRENCY" - a currency (other than the Euro) of a
"participating member state" as described in the legislative measures of the
European Council for the introduction of, changeover to or operation of the
European Monetary Union, including but not limited to the Treaty of Rome of
March 25, 1957, as amended by the Single Xxxxxxxx Xxx 0000 and the Maastricht
Treaty which was signed on February 7, 1992 and came into force on November 1,
1993, all as amended, modified or supplemented from time to time.

"SWEDISH KRONA" - the lawful currency of Sweden.

2. The existing definition of "FOREIGN CURRENCY" and "FOREIGN
CURRENCIES" is deleted in its entirety and replaced by the following:

"FOREIGN CURRENCY" or "FOREIGN CURRENCIES" - any or all
of: French Francs, Swiss Francs, Deutsche Marks, Japanese Yen,
Pounds Sterling, Swedish Krona, Canadian Dollars, and the Euro.

3. The following Sections 10.12 and 10.13 are hereby added to
the Original Agreement:

Section 10.12. EUROPEAN MONETARY UNION. If, in the reasonable
judgment of the Agent, as a result of the implementation of the European
Monetary Union, (A) any European Currency ceases to be lawful currency of the
nation issuing the same and is replaced by the Euro, or (B) any European
Currency and the Euro are at the same time recognized by any governmental
authority of the nation issuing such European Currency as lawful currency of
such nation, such European Currency shall cease to be a Foreign Currency
hereunder and the Agent shall give prompt

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notice to the Company and each Lender that, on the date any Foreign Currency
Advance denominated in such European Currency would become due under the terms
of this Agreement the Company shall repay such Foreign Currency Advance by
paying to each Lender an amount in the Euro equal to the amount determined in
good faith by such Lender (which determination shall be conclusive absent
manifest error) necessary to compensate such Lender for the principal of and
accrued interest on such Foreign Currency Advance being repaid in the Euro
(rather than in the denominated Foreign Currency) as determined by converting
the amount payable in such European Currency to the Euro at the exchange rate
recognized by the European Central Bank for the purpose of implementing European
Monetary Union. Prior to the occurrence of the event or events described in
paragraphs (A) and (B) of the first sentence of this section, each amount
payable under this Agreement in any European Currency shall, except as otherwise
provided herein, continue to be payable only in such European Currency. The
Company affirms and agrees that neither the fixation of the exchange rate of any
European Currency against the Euro as recognized by the European Central Bank
for the purpose of implementing European Monetary Union, nor the conversion of
any Foreign Currency Advance denominated in any European Currency to a Foreign
Currency Advance denominated in the Euro will be (A) a reason for the early
termination or the revision or reformation, in whole or in part, of this
Agreement or any other Loan Document, or (B) create any liability of any Lender
toward the Company or any other Lender for any direct, consequential, or other
loss arising from the occurrence of the event or events described in paragraphs
(A) and (B) of the first sentence of this section.

Section 10.13. EURO AMENDMENTS. Upon the implementation of the
Euro resulting in a change in any European Currency in which the Company is
permitted to request a Foreign Currency Advance under this Agreement, this
Agreement, including without limitation, the definition of LIBOR contained
herein, will be amended to the extent determined by the Agent and the Lenders,
acting reasonably and in consultation with the Company, to be necessary to
reflect the change in currency and to put the Agent, each Lender and the Company
in the same position, so far as possible that they would have been in if no
change in currency had occurred. The Company hereby agrees to execute and
deliver to the Agent and each Lender such amendments to this Agreement as the
Agent and each Lender may reasonably request in order to carry out the intent of
this Section 10.13.

4. Existing Schedules 4.11 and 4.15 to the Original Agreement
are deleted and Schedules 4.11 (1999) and 4.15 (1999) attached hereto as
Exhibits A and B are hereby substituted in their place.

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5. The existing form of Schedule to the Foreign Currency Notes
is hereby replaced by the form of Schedule attached hereto as Exhibit C.

D. REPRESENTATIONS AND WARRANTIES.

1. The Company hereby represents and warrants to the Agent and
the Lenders that:

a. No default or Event of Default exists under
the Original Agreement.

b. The Mergers all occurred on the dates and as
described in Part B hereof.

c. The Original Agreement, except as
specifically modified by this Amendment, remains in full force
and effect.

d. The Mergers, the ELMO Acquisition, and the
making and performance of this Amendment by the Company and the Post-Mergers
Guarantors, have been duly authorized by all required corporate and shareholder
action.

E. REAFFIRMATIONS. By their execution of this Amendment, each of the
Post-Mergers Guarantors hereby reaffirms the granting, and continuing
effectiveness, of their respective Guaranty and further agrees that the Net
Worth amounts set forth in the last sentence of their respective Guaranty is
replaced by the amount set forth below next to such Guarantor's name:

Guarantor Net Worth*
--------- ----------

API Motion Inc. $46,000,000
API Heat Transfer Inc.
(formerly API Airtech Inc.) 19,500,000
API Xxxxxx Inc. greater than 460,000 less than
API Delevan Inc.
(formerly API SMD Inc.) 5,800,000
API Development Corporation 3,500,000

*Calculated based on November 30, 1998 figures, but
reflecting the effect of the Mergers.

F. OTHER PROVISIONS.

1. This Amendment may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same Amendment.

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2. This Amendment shall be governed by and construed under the
internal laws of the State of New York, as the same may from time to time be in
effect, without regard to principles of conflicts of laws.

IN WITNESS WHEREOF, this Amendment has been duly executed as
of the date first above written.

AMERICAN PRECISION INDUSTRIES INC.

By /S/ Xxxxx Mch. Xxxxxxxx
------------------------------
Xxxxx McH. Xxxxxxxx
Vice President and Chief
Financial Officer

MARINE MIDLAND BANK, as Agent

By /S/ Xxxxxx X. Xxxxxxxx
------------------------------
Xxxxxx X. XxXxxxxx
Vice President

MARINE MIDLAND BANK, as a Lender

By /S/ Xxxxxx X. Xxxxxxxx
------------------------------
Xxxxxx X. XxXxxxxx
Vice President

FLEET NATIONAL BANK, as a Lender

By /S/ Xxxx X. Xxxxxxx
------------------------------
Xxxx X. Xxxxxxx
Vice President
Agreed as of this 29th day of
January, 1999:

API MOTION INC. API XXXXXX INC.

BY /S/ XXXXXXX X. XXXXXXXXX BY /S/ XXXXXXX X. XXXXXXXXX
------------------------ ---------------------------
XXXXXXX X. XXXXXXXXX XXXXXXX X. XXXXXXXXX
SECRETARY SECRETARY

API HEAT TRANSFER INC. API DELEVAN INC.

BY /S/ XXXXXXX X. XXXXXXXXX BY /S/ XXXXXXX X. XXXXXXXXX
------------------------ ---------------------------
XXXXXXX X. XXXXXXXXX XXXXXXX X. XXXXXXXXX
SECRETARY SECRETARY

API DEVELOPMENT CORPORATION

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BY /S/ XXXXXXX X. XXXXXXXXX
------------------------
XXXXXXX X. XXXXXXXXX
SECRETARY

EXHIBIT A
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SCHEDULE 4.11 (1999)

SUBSIDIARIES - OTHER THAN GUARANTORS

American Precision Industries (U.K.) Ltd.
API-FS Corporation
API of Canada Inc.
Nitta-Apitron Co. Ltd.
API Harowe (St. Kitts) Ltd.
API Deltran (St. Kitts) Ltd.
API Xxxxxxx Xxxxxxx Beteiligungs GmbH
API Xxxxxxx Xxxxxxx Verwaltung GmbH
API Xxxxxxx-Bretten GmbH & Co. KG
Xxxxxxx-Bretten Nederland B.V.
API ELMO AB
Portescap U.S. Inc.
Portescap S.A.
Portescap International S.A.
API Portescap (U.K.) Ltd.
API Portescap Deutschland GmbH
API Portescap Scandinavia AB
API Portescap Polska SP.zo.o.
API Portescap France S.A.
API Portescap Japan Ltd.
API Positran Ltd.

EXHIBIT B
---------

SCHEDULE 4.15 (1999)

INDEBTEDNESS FOR BORROWED MONEY

I. INDEBTEDNESS OF AMERICAN PRECISION INDUSTRIES INC.

1. All agreements and other documents to which the Company is a
party listed on the Index to the Wyoming County Industrial
Development Agency $2,800,000 Marine Midland Adjustable Rate
Service (MMars) 1988 Industrial Development Revenue Bonds,
Series A (American Precision Industries Inc. Facility) Closing
Binder.

2. All agreements and other documents to which the Company is a
party listed on the Index to the Wyoming County Industrial
Development Agency $6,600,000 Marine Midland Adjustable Rate
Service (MMars) 1995 Industrial Development Revenue Bonds,
Series A (American Precision Industries Inc. Facility) Closing
Binder.

3. All agreements and other documents to which the Company is a
party listed in the Table of Contents in the Grand Prairie
Industrial Development Authority $6,000,000 Marine Midland
Adjustable Rate Service (MMars) Industrial Development Revenue
Bonds, Series 1996 (Precision/API Ketema Project) Closing
Binder.

II. INDEBTEDNESS OF SUBSIDIARIES OF AMERICAN PRECISION
INDUSTRIES INC.

1. All agreements and other documents to which API
Xxxxxxx-Bretten Beteiligungs GmbH and Landesgirokasse are
parties on a DM 13,000,000 credit facility, of which DM
9,086,792 was in use as of November 30, 1998.

2. All agreements and other documents to which API
Xxxxxxx-Bretten GmbH & Co. KG and Landesgirokasse are parties
for a DM 2,000,000 line of credit.

3. All agreements and other documents to which API
Xxxxxxx-Bretten GmbH & Co. KG and Sparkasse Bruchsal- Bretten
are parties for a DM 3,000,000 line of credit.

4. As of November 30, 1998, DM 836,664 of the lines of credit
described in paragraphs 2 and 3 above was in use.

5. All agreements and other documents to which Portescap and
certain of its subsidiaries are parties with several banks in
Switzerland, the United Kingdom, Germany and France. At
November 30, 1998, total borrowing under these arrangements
was approximately CHF 19,487,000.

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6. A credit facility between API ELMO AB and Skandinaviska
Enskilda Banken, effective upon the acquisition of the
assets of ELMO Industrier AB by API ELMO AB. The
credit facility is for a total of 46,000,000 Swedish
Krona ("SEK"), of which, effective at the closing of
the acquisition of ELMO Industrier AB, 44,200,000 SEK
will be outstanding, of which 33,000,000 SEK will be
secured by real estate; in addition, the facility will
be guaranteed by API Motion Inc.

EXHIBIT C
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SCHEDULE

FOREIGN CURRENCY ADVANCES AND PAYMENTS OF PRINCIPAL

====================================================================================================================================
AMOUNT OF
DATE LOAN LOAN MADE, AMOUNT OF AGGREGATE
MADE, CON- CONTINUED LIBOR RATE PRINCIPAL UNPAID NOTATION
APPLICABLE TINUED OR OR PERIOD DUE PAID OR PRINCIPAL MADE BY
CURRENCY* CONVERTED CONVERTED DATES, DATE PREPAID BALANCE AND DATE
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*Specify: French Francs, Swiss Francs, Deutsche Marks, Swedish Krona,
Euro, Japanese Yen, Pounds Sterling or Canadian Dollars

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Table of Contents

FIRST AMENDMENT TO CREDIT AGREEMENT

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