<PAGE>

                                                                    Exhibit 10.3


                                   AGREEMENT



                                    Between







                  KREISLER INDUSTRIAL CORPORATION, A DIVISION
                     OF KREISLER MANUFACTURING CORPORATION




                                    - AND -




                   LOCAL 377, RWDSU, AFFILIATED WITH AFL-CIO








                      December 5, 2000 - December 4, 2003
<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                              Article               Page
                                              -------               ----
<S>                                           <C>                   <C>
DEPARTMENTAL SUPERVISORS                         XII                 14

DISCHARGE                                         XI                 13

GRIEVANCE PROCEDURE                              XIV                 15

HOLIDAY PAY                                        V                  6

HOSPITALIZATION AND INSURANCE                   XIII                 14

HOURS OF WORK                                    III                  3

INTERFERENCE, DISCRIMINATION, COERCION            XV                 16

LAYOFFS                                         VIII                 10

LEAVE OF ABSENCE                                   X                 11

MANAGEMENT RIGHTS                                                     1

MISCELLANEOUS                                   XVII                 16

NO STRIKES, LOCKOUTS                             XVI                 16

RATE OF PAY                                       IV                  4

RECOGNITION                                        I                  2

SECURITY                                        XVIII                17

SENIORITY                                         VII                 8

TERM OF AGREEMENT                                 XIX                17

TRANSFERS                                          IX                10

UNION MEMBERSHIP DUES DEDUCTION                    II                 2

VACATION PAY                                       VI                 7

WAGE RATES                                                          19-27
</TABLE>

                                      -i-
<PAGE>

                                UNION AGREEMENT
                                ---------------


     AGREEMENT entered into this ____ day of __________, 2001, as of December 5,
2000, between KREISLER INDUSTRIAL CORPORATION, A Division of KREISLER
MANUFACTURING CORPORATION, for the plant located at 180 Van Riper Avenue,
Elmwood Park, State of New Jersey, hereinafter known as the "Employer," and
LOCAL 377, RWDSU, affiliated with AFL-CIO, located at 29-27 41st Avenue, Long
Island City, New York 11101, hereinafter known as the "Union," and on behalf of
said Union and on behalf of the covered employees of the Union now employed and
hereafter to be employed by the Company at its Elmwood Park, New Jersey plant.


                                   PREAMBLE
                                   --------

     PART I:  WHEREAS, the parties hereto have mutually agreed on the terms and
conditions governing employment of employees in the bargaining unit, the parties
agree to perform in good faith all the provisions of this Agreement and avoid
work interruptions during the term thereof.

     NOW, THEREFORE, it is agreed:


                               MANAGEMENT RIGHTS
                               -----------------

     PART II: Except as delegated, modified or abridged by this Agreement, all
rights, powers and authorities management had prior to this execution of this
Agreement remain and reside in management. The listing of specific rights,
hereafter in this Agreement is not intended to be, nor shall be considered,
restrictive of, or a waiver of any right of management not listed and not
specifically surrendered herein, whether or not such rights have been exercised
by the Company in the past. Included in the rights of management, but not
limited thereto, is the right of the Company to manage the plant; to direct the
working force; to determine the working force; to plan, direct or control
operations; to determine the work to be done in the plant; to determine the
products to be manufactured in the plant; to transfer or discharge employees; to
maintain efficiency of production and/or operations; to introduce new or
improved methods, to introduce new equipment; to decide the nature of equipment
or machinery to be used in the plant and the manning of the same; to automate;
to determine the methods and processes of manufacturing or operations; to
subcontract for such work or service as the Company deems necessary; to schedule
production, to determine the methods of training employees; to determine all
matters concerned with the designing and engineering of products; to determine
the control of raw materials; to determine the methods of material handling and
shipping; to move or transfer any equipment, operation, processes, methods or
products that the Company determines is required.

                                      -1-
<PAGE>

                                   ARTICLE I
                                   ---------

                                  RECOGNITION
                                  -----------

     Section 1. The Employer recognizes LOCAL 377, RWDSU, affiliated with AFL-
CIO, as the sole collective bargaining agent for all of its leadmen, production,
inspection, shipping, maintenance and machine shop employees. Excluding all non-
production employees, e.g. engineering, professional, administrative, designing,
sample-making, clerical (a term including clerks, material control clerks, and
any other factory office clerical positions), foremen, assistant foremen, and
all supervisory employees who have the authority to hire, promote, discharge,
discipline or otherwise affect changes in the status of employees or who may
effectively recommend such action.

     Section 2. Part-time employees may perform bargaining unit work. All
part-time employees who normally work twenty-five (25) hours or more in their
normal work week must make application to join the Union and must pay Union dues
as provided in Article II. A part-time employee working less than twenty-five
(25) hours a week shall not be covered by this Agreement and shall not be
entitled to the benefits hereunder, with the exception of the wage rate provided
in Schedule I, annexed hereto.

                                  ARTICLE II
                                  ----------

                      UNION MEMBERSHIP AND DUES DEDUCTION
                      -----------------------------------

     Section 1. All employees covered by this Agreement shall be or become
members of the Union on or after the thirtieth (30th) calendar day following the
date of this Agreement or the date of their employment, whichever is later, in
accordance with Article VII, "Seniority," "Section "1," and all such employees
shall thereafter maintain their Union membership in good standing with respect
to Union membership dues and initiation fees for the duration of this Agreement
as a condition of their continued employment. Employees whose probationary
period ends after the fifteenth (15th) day of the month will be enrolled in the
Union the following month.

     Section 2. (a) The Employer agrees to deduct from the wages earned during
the second (2nd) or third (3rd) week of each month or from the last wages of an
employee leaving the employ of the Company, monthly Union dues for each employee
who has given the Company proper written authorization to make a deduction.

                (b) The Employer agrees to deduct the Union initiation fee from
the wages of any employee who becomes a member of the Union provided written
authorization to do so is given by the employee to the Company.

                                      -2-
<PAGE>

     Section 3.  All monies deducted by the Employer shall be paid to the Union
on or before the fifteenth (15th) day of the month following that for which
deductions are made.

     Section 4.  In the event there is a dispute between the Company and the
Union or any member thereof with respect to dues deduction, such dispute shall
be resolved in accordance with the "Grievance Procedure" herein set forth.

                                  ARTICLE III
                                  -----------

                                 HOURS OF WORK
                                 -------------

     Section 1.  Eight (8) hours per day, five (5) days per week, and forty (40)
hours per week shall normally constitute the work week. However, this may be
increased or decreased by the Company, as herein set forth after discussion with
the Union representatives, when in the Company's opinion, it is necessary to do
so in order to maintain an efficient operation.

     Section 2.  (a) The number of shifts and the starting time and the hours
of work per day or per week in each shift shall be fixed from time to time
solely by the Employer after discussion with the Union with respect thereto, and
hours per day or per week so fixed shall be considered as the normal hours of
work per day or per week. However, no reduction of the work week by more than
one (1) hour per day or, in the alternative, to less than four (4) days per
week, shall be made without the mutual consent of the Company and the Union.
Furthermore, there shall be no reduction of the work week until all part-time
employees have been laid off and while there are employees with less than
eighteen (18) months seniority working in the plant, unless agreed to by the
Company and the Union.

                 (b) However, not withstanding, the above provisions of Section
2 (a), a temporary reduction of the work week may made by the Company when, in
its opinion, it is necessary to do so because of special or unusual
circumstances, such as inventory periods or layoffs of less than one week.

     Section 3.  The Employer shall have the right to employ part-time employees
and the hours per day or per week at which the part-time employee is employed
shall be considered as the normal hours of work per day or per week of the said
employee.

     4.  For the purpose of computing the pay of employees, the work week
shall begin at the starting time of the shift which starts immediately prior to
or following midnight Sunday, and shall end at the same time before or after
midnight of the following Sunday

                                      -3-
<PAGE>

     Section 5.  Employees shall receive three (3) minutes wash-up time before
lunch and three (3) minutes wash-up time before quitting time. Those jobs where
actual wash-up exceeds said amount, such employees shall receive additional
wash-up time as agreed upon between the Employer and the Union.

     Section 6.  The Employer agrees that overtime work will be distributed
fairly and as equally as possible among the permanent employees within the
respective classifications and departments provided the individual employee has
the necessary qualifications and the ability to perform the required overtime
work, irrespective of the shift in which such individual employees work. With
respect to "grievances" under this paragraph, in the event of proven unfair
assignment, the redress shall be limited to the granting of opportunity for the
next available overtime assignment for which the employee is qualified.

     Section 7.  (a) In the event that an employee reports for work on their
regular shift without having been previously notified not to report to work,
they shall be given a minimum of four (4) hours work; or, if no work is
available, they shall be given four (4) hours pay, except where such
notification is not given by reason of circumstances wholly beyond the control
of the Employer.

                 (b) In the event that the plant will be closed because of
reasons beyond the control of the Company, the Employer agrees, wherever
possible, to notify the employees of such closing approximately two (2) hours
before the beginning of the shift or shifts affected through the use of local
telephone answering service which the employee must call. Such notification
shall be deemed compliance with the requirement of notification set forth in
Section (7) (a) above and the Company shall have no liability to provide any
hours of work or pay as heretofore provided in this section.

                 (c) The Company shall have no liability to provide any
guaranteed work or pay as heretofore required in Section 7 (a) in the event the
lack of work is caused by fire, flood, power or boiler failure, labor dispute,
acts of God, or circumstances beyond the control of the Employer.

                                  ARTICLE IV
                                  ----------

                                  RATE OF PAY
                                  -----------

     Section 1.  The Employer agrees to grant an increase of $0.50 per hour
effective 5 December 2000, to all regular employees, members of the bargaining
unit in its employ and on the payroll as of 5 December 2000; and an additional
increase of $0.45 per hour effective 5 December 2001 to all Union employees in
its employ and on the payroll on 5 December 2001; and an additional increase of
$0.45 per hour effective on 5 December, 2002 to all Union employees in its
employ and on the payroll on 5 December 2002.

                                      -4-
<PAGE>

     Section 2.  (a) All occupations are classified into seven (7) labor grades,
the rates of these classifications will remain in effect as listed on Schedule
I, annexed hereto.

                 (b) New employees shall be hired at not less than the minimum
rates specified in Schedule I for their respective labor grade and will receive
an automatic increase every four (4) months until they reach the maximum of the
labor grade as shown in Schedule I.

                 (c) An employee to be eligible for an increase must have worked
at least seventy (75%) percent of the scheduled working days for the six (6)
month period immediately preceding the date of the automatic increase. In the
event the employee does not meet this requirement due to a leave of absence or
layoff, the due date of the automatic increase will be advanced by the total
number of scheduled work days absent.

                 (d) For the purpose of arriving at the date on which the first
automatic increase is due, an employee hired during the first three (3) days of
the work week shall be considered to have been hired on the first day of the
work week; and an employee hired during the last two (2) days of the work week
shall be considered to have been hired on the first day of the following week.
For the purpose of arriving at the date of subsequent automatic increases, the
last automatic or merit increase granted will be used to determine the date of
eligibility and according to the day of the week on which this falls, the guide
outlined in the previous sentence will be used.

                 (e) The Union will be furnished with the job title and labor
grade of all Union employees. Any question regarding an individual's job title
will be resolved between the individual and the foreman. If it is not resolved
on this level, it will then follow the Grievance Procedure.

                 (f) An employee assigned to perform more than one job will be
in the higher classification provided they are required to spend at least forty
(40%) percent of their time in such classification.

                 (g) An employee who is given a new job shall be given
instruction and training on any higher classification, and while receiving such
training in the higher classification shall be given the going rate for that
classification. Senior person to be given first choice in any promotion provided
they are qualified to do the job.

                 (h) When a new job is created, the Union will be immediately
informed regarding the job title and starting rate.

                                      -5-
<PAGE>

                 (i) In the event the content of the job changes over a period
of time and the hiring rate is changed, the change shall become effective on the
date the Company and the Union agree the job content has been changed
sufficiently to warrant a change in rate.

                 (j) No changes shall be made in the minimum or maximum hiring
rate of the labor grades during the term of this Agreement. This does not limit
nor prohibit the Company from hiring individual employees at a higher rate than
the minimum, if, in the Company's opinion, it feels it is necessary in order to
secure qualified personnel.

                 (k) The Union agrees not to interfere with the work assignment
of any employees but will seek redress through proper channels.

     Section 3.  (a) An employee who works on the second shift shall receive a
ten (10%) percent night shift premium on the base rate for working this shift.

                 (b) An employee who works on the third shift shall receive a
fifteen (15%) percent night shift premium on the base rate for working this
shift.

     Section 4.  Any work performed in excess of eight (8) hours per day shall
constitute overtime and shall be paid for at time and one-half the regular
straight time rate. Work performed by the second shift shall be construed as
being worked in the day in which the immediately preceding first shift worked
even though the hours of the later shift run into the calendar Saturdays,
Sundays, or holidays. Work performed on Saturday shall be paid for at time and
one-half the regular straight time rate. Work performed on Sunday and/or legal
holidays enumerated herein shall be paid for at double the regular straight time
rates.

     Section 5.  Should the Employer move the factory outside the Elmwood Park
area, where transportation creates a hardship upon the employees, any employee
deciding to terminate his employment after the Employer had given formal notice
of its intention to move, would receive as severance whatever vacation pay he
had accumulated on a pro-rated basis.

                                   ARTICLE V
                                   ---------

                                  HOLIDAY PAY
                                  -----------

     Section 1.  The following shall be deemed legal holidays:

     New Year's Eve                                Labor Day
     New Year's Day                                Thanksgiving Day
     Washington's Birthday                         Friday after Thanksgiving
     Memorial Day                                  Christmas Eve
     Fourth of July                                Christmas Day

                                      -6-
<PAGE>

     Section 2.  (a)  Union members shall be paid for the above holidays on
which no work shall have been performed at their regular straight time hourly
rates, for their normal work day or fraction thereof, where indicated, provided,
however, that the employee is on the payroll and actually worked the full
working day preceding and the first full working day following such holiday.
Employees who are absent may qualify for such pay upon presentation of valid
reason for absence from work, such as a doctor's note for illness. Determination
of qualification shall be at the Employer's discretion.

                 (b)  Union members to be notified in advance of a close-down by
the Company two (2) days before a said holiday.

     Section 3.  Union members who are on leave of absence or on layoff on any
of the aforementioned holidays are not entitled to receive pay for said holiday,
except that an employee who is laid off due to lack of work or is recalled from
layoff shall be entitled to receive pay for any of the aforementioned holidays
which fall within the week during which the employee is laid off or recalled.

     Section 4.  Employees will be entitled to two (2) floating holidays. After
six (6) months continuous employment employees will be entitled to an additional
floating holiday. Employees with two (2) years of service as of their
anniversary date of hire will be entitled to an additional floating holiday.
Floating holidays may be taken at the individual employee's option on three (3)
days notice to the Company except in case of an emergency. The Employer may deny
an employee request to take a specific day off if too many employees request the
same day off and production would be affected in which case requests for the day
off will be granted by seniority up to the maximum number of employees the
Company may excuse. Floating holidays may be used for sickness without prior
notice. Employees entitled to floating holidays shall be granted these holidays
as of 5 December for each year of the contract. The floating holidays available
for each eligible employee in the one (1) year period beginning 5 December will
be granted in accordance with Article V, Section 4. Any unused floating holidays
for the one (1) year period starting 5 December and ending 4 December of the
following year will be paid by the Company by 31 December of the same year as
the 4 December date.

                                  ARTICLE VI
                                  ----------
                                 VACATION PAY
                                 ------------

     Section 1.  (a)  Vacation pay shall be computed at two (2%) percent of the
employee's earnings for the fiscal year ending at July lst, provided, however,
that he shall have worked for at least three (3) months during the aforesaid
year. In the event that an employee shall have worked at least forty-three (43)
weeks in the year, the minimum vacation pay shall be forty (40) hours at his
base rate.

                 (b)  In addition, an employee who was hired three (3) years
prior to June 30th, of the vacation year, will receive an additional amount
equal to the amount computed in paragraph (a) above, but not less than forty
(40) hours pay at his base rate in effect at July 1st.

                                      -7-
<PAGE>

                 (c)  An employee hired five (5) years or more prior to June
30th of the vacation year will receive a third week's vacation pay computed as
in paragraph (a) above.

                 (d)  An employee hired fifteen (15) years or more prior to June
30th of the vacation year will receive a fourth week's vacation pay computed as
in paragraph (a) above.

                 (e)  An employee terminated for just cause within six (6)
months of a vacation year will not be paid any vacation (see Article XI, Section
4).

     Section 2.  Employees who have been continuously employed by the Company
for three (3) months or more and who are on layoff as of July 1st of any
calendar year, shall receive a pro-rata vacation pay based upon the time
actually worked in the fiscal year ending July lst, which payment shall be made
to the employees at the normal vacation time.

     Section 3.  Vacation shall be scheduled at the convenience of the Employer
some time during June, July or August. Vacation pay shall be distributed in
advance. Employees entitled to three (3) or four (4) weeks vacation pay may take
their third and/or fourth week of vacation at any time during the calendar year
provided, however, such scheduling shall be done at the discretion of management
in order not to interfere with the efficient operation of the plant. If two (2)
employees select the came vacation time and if management is willing to permit
only one (1) employee to take vacation at that time, seniority shall prevail.
Vacation shut-down dates will be posted on the bulletin board by June 15th of
each year.

                                  ARTICLE VII
                                  -----------

                                   SENIORITY
                                   ---------

     Section 1.  (a)  An employee hired on or after the date of this Agreement
shall be a probationary employee until they have been employed for ninety (90)
calendar days. During their probationary period they shall be entitled to no
seniority and the discharge of a probationary employee during such period shall
not constitute a cause for grievance. Not more than five (5) working days
absence for any reason shall be credited for the purpose of computing the
probationary period while absent. At the end of their probationary period, or on
any rehiring, the date of their most recent hiring shall become their seniority
date. For purposes of seniority, this paragraph shall apply to an employee who
quits or is discharged or otherwise loses their seniority and is subsequently
rehired. Employees successfully completing their probationary period will be
required to pay Union dues for the last thirty (30) days of their probationary
period.

                                      -8-
<PAGE>

                 (b)  The Employer shall have the right to extend the
probationary period of any employee for thirty (30) calendar days with the
agreement of the Union Chairperson.

     Section 2.  (a)  Employees working less than eight (8) hours per day, forty
(40) hours per week, regardless of their seniority, will be the first to be laid
off when reduction of force occurs.

                 (b)  In case of layoff, seniority shall be on a plantwide
basis, irrespective of shift, with the exception of part-time workers, provided
only that the employees retained shall have the skill and ability to do work to
the satisfaction of the Company.

                 (c)  No new employees shall be hired for any job until a laid-
off person having the ability to perform the work has been offered the
opportunity.

                 (d)  No new employees shall be hired in any department unless
all employees entitled to seniority hereunder are working a full forty (40) hour
week.

     Section 3.  Seniority rights shall be broken when an employee:

                 (a)  Quits voluntarily,

                 (b)  is discharged,

                 (c)  after a layoff, fails to report to work within three (3)
days after the mailing of the notice to return to work to last address furnished
by the employee,

                 (d)  fails to return to work after a leave of absence is up,

                 (e)  is laid off for a period of nine (9) months or more.

     Section 4.  (a)  The number of Union representatives, in addition to the
Union Chairperson, shall not exceed three (3%) percent of the Union employees on
the payroll.

                 (b)  The Shop Chairperson shall have top seniority in the
plant.
                 (c)  The Union Steward shall have top seniority in the section
in which the Steward is employed.

                 (d)  There shall be at least one (1) Union Steward in the plant
at all times when eight (8) or more Union workers are working, excluding the
Maintenance Department.

                                      -9-
<PAGE>

                                 ARTICLE VIII
                                 ------------

                                    LAYOFFS
                                    -------

     Section 1.  The Employer agrees to notify the Shop Chairperson twenty-four
(24) hours in advance when a layoff for a period of more than one (1) week is
contemplated by the Employer; failing which the employee concerned shall be
given one (1) day's pay at his straight time hourly rate.

     Section 2.  It is expressly understood and agreed that the Employer has the
right in its discretion to lay off any employee or number of employees when
business conditions make such layoff necessary, subject to provisions in this
Agreement. In the operation of seniority, it is agreed that the Employer will
apply seniority rights with respect to layoffs and rehiring within the plant as
provided in the immediately preceding article. The Employer shall have no
obligation to permit an employee to bump into a job where the employee does not
have the qualifications to perform said job, subject to an employee's right to
grieve on the issue of his qualifications. In the event of a layoff there can be
only one (1) "bump." The employee bumped will be the least senior employee in
the classification in which the bump occurs and said employee being bumped will
himself have no bumping rights.

     Section 3.  Seniority as to recall will operate in the same manner as
layoff.

     Section 4.  The Shop Chairperson shall be notified on all recalls.

     Section 5.  An employee who is recalled after a layoff and accepts a job in
a lower classification will automatically be transferred back with the same rate
of pay in his own classification whenever his job becomes available.

     Section 6.  The Employer will provide the Union with a seniority list on a
quarterly basis (wage rates will not be set forth on the list.)

                                  ARTICLE IX
                                  ----------

                                   TRANSFERS
                                   ---------

     Section 1.  The Employer shall at all times have the right to transfer any
employee from one department to another department and an employee so
transferred shall carry his accumulated seniority with him into the department
to which he has been transferred and no employee's seniority rights shall be
reduced because of any such transfer and no discharge shall result solely
because of such transfer.

                                     -10-
<PAGE>

     Section 2.  The moving of employees within a classification in a department
shall not be considered a transfer and will be made whenever necessary for the
efficient operation of the department. Any employee who refuses to accept an
assignment to another job in the same classification in a department offered to
them shall be deemed to have quit.

     Section 3.  It is agreed that due to special conditions prevailing in the
shop in the closing down of/or disbanding of any department, the Employer may
transfer an employee from a higher skilled department to a lower skilled one at
the rate prevailing in the department to which they are transferred. Such
transfer, however, shall take place by agreement with the Union representative,
and also by agreement with the employee or employees in question.

     Section 4.  It is agreed that such employee whose wages have been reduced
because of a transfer shall have first preference to return to his original
department from which he was transferred when there is sufficient work in such
department.

     Section 5.  Union job openings will be posted on the bulletin board. Union
employees who have the necessary qualifications will be interviewed and if found
acceptable, will be given the job on a thirty (30) day trial basis.

                                   ARTICLE X
                                   ---------

                               LEAVE OF ABSENCE
                               ----------------

     Section 1.  There shall be no loss of seniority as a result of an approved
leave of absence. The following will govern the granting of leaves of absence:

                 (a)  Leave of absence will be granted without pay.

                 (b)  Maximum leave of absence will be six (6) weeks.

                 (c)  In order to qualify for a leave of absence, an employee
must have had one (1) year of service with the Company.

                 (d)  At least one (1) year must elapse between successive
leaves of absence, except if the leave is due to medical reasons.

                 (e)  An employee who fails to return to work after the
stipulated time of his leave of absence shall be subject to discharge.

                                     -11-
<PAGE>

                 (f)  An employee who is ill or injured and presents
satisfactory proof of such illness or injury to the Employer will be granted a
leave of absence as provided in the terms set forth in the preceding paragraphs
for a period not to exceed sixty (60) days. Such leave of absence may be
extended by the Employer for additional periods of time not to exceed sixty (60)
days in any instance, if at the expiration of such leave or extension thereof,
the employee continues to be unable to return to work but under normal
circumstances should be able to do so within a reasonable period, and provided
further that he notifies the Employer in writing by registered mail to that
effect at least five (5) calendar days prior to expiration of such leave of
absence.

                 (g)  An employee who sustains a compensable injury or who
acquired an occupational disease which originates in the Employer's plant will
be granted a leave of absence automatically for the full period of legal
temporary disability.

                 (h)  An employee who engages in gainful employment during a
leave of absence, except when such leave is expressly granted for such purpose,
shall be deemed to have quit.

                 (i)  An employee shall be subject to immediate dismissal for
falsifying any reason given to the Company for leave of absence.

                 (j)  Anything herein to the contrary notwithstanding, employees
will be entitled to the benefits of the Sate of New Jersey Family Leave Act or
the Federal Family and Medical Leave Act, whichever Act provides the greater
benefit.

     Section 2.  The Employer agrees that in the event an employee is elected to
full time office in the Union, such employee shall be granted a leave of absence
for the duration of their term of office and shall be reinstated without loss of
seniority upon the expiration of their term of office.

     Section 3.  In the event that any regular employee shall enter into or be
drafted into the armed forces of the United States, it is agreed that they shall
be granted a leave of absence for the duration of their service, and it is
further agreed that such employee shall, at the conclusion of the period of
service, provided they are physically equipped to perform their duties, and
provided that they apply within sixty (60) days after their discharge, be re-
employed without loss of seniority or other rights and be reinstated to their
former position or one equivalent to it as a regular employee at the then
prevailing rate of wages for such position. It is further understood and agreed
that any new employee who is engaged to take the place of an employee who
entered the armed forces of the United States may be discharged upon the
rehiring of the former employee.

                                     -12-
<PAGE>

     Section 4.  (a)  In the event of the death of an employee's husband, wife,
parent, brother, sister, or child, they will be granted a maximum of a three (3)
day leave of absence starting from time of death; with pay at their normal
straight time earnings, for any regularly scheduled work days lost, to take care
of the funeral arrangements and attend the funeral of the deceased, upon
delivery of proof satisfactory to the Company of such death, provided they shall
have had at least one (1) year's service with the Company.

                 (b)  In the event of the death of an employee's grandparent,
mother-in-law, father-in-law, brother-in-law, sister-in-law, stepmother,
stepfather, stepchild, stepbrother, stepsister, they will be granted a one (1)
day leave of absence with pay at their normal straight time earnings for actual
time lost for a scheduled work day, to attend the funeral upon delivery of proof
satisfactory to the Company of such death, provided they shall have had at least
one (1) year's service with the Company.

                 (c)  Employees on vacation, leave of absence, or on layoff,
will not be paid for the above sections 4(a) or 4(b).

     Section 5.  (a)  In the event an employee is summoned for jury duty, they
will be granted a two (2) week leave of absence and will be paid, up to a
maximum of two (2) weeks, the difference between jury pay and their regular
straight time pay for their normal work week, provided they have had at least
one (1) year's service with the Company.

                 (b)  Employees on vacation, leave of absence, or on layoff,
will not be paid for the above section 5(a).

                                  ARTICLE XI
                                  ----------

                                   DISCHARGE
                                   ---------

     Section 1.  Any employee absent from work for three (3) consecutive working
days without notification of such absence to the Personnel Department will
automatically be removed from the payroll of the Employer and lose all seniority
rights. An employee must have a satisfactory reason for any day of absence.

     Section 2.  Any employee requesting relief from a work assignment, due to
physical conditions, must upon the Employer's request, submit to a physical
examination by a physician. If, on the basis of the doctor's report, the Company
determines that the employee is physically able to perform the work assignment,
the employee will be so informed. Refusal to perform the work assigned will
result in the automatic termination of the employee.

     Section 3.  Excessive absenteeism or lateness will result in dismissal,
after at least one (1) warning slip has been issued to the employee, and notice
been given to the Union Chairperson.

                                     -13-
<PAGE>

     Section 4.  The Employer reserves the right to discharge an employee for
any just cause or reason. Included in the right to discharge, but not limited to
the foregoing authority, the parties agree that inefficiency, loitering after
warning, drinking, gambling or bookmaking on the Company premises, or crimes
committed off the Company premises shall be cause for discharge under this
provision. It is understood that in the event a person is accused of a crime
committed off Company premises, the party will be suspended without pay or
benefits until the disposition of the criminmal proceedings when the final
disciplinary action will be determined, provided, however, that if the Union
claims that the discharge was unjust or not for reasonable cause, the matter
shall be submitted for arbitration in the manner provided for in this Agreement.

                                  ARTICLE XII
                                  -----------

                           DEPARTMENTAL SUPERVISORS
                           ------------------------

     Section 1.  The Employer reserves the right to have Assistant Foremen
perform whatever type work it deems necessary for the efficient operation of the
department.

     Section 2.  An employee upgraded to a position, Assistant Foreman or
Foreman, outside the bargaining unit, and for any reason returned to a position
within the bargaining unit within a period of one (1) year from the date they
were upgraded, shall be reinstated in the Union with full seniority rights from
their original date of hire.

                                 ARTICLE XIII
                                 ------------

                         HOSPITALIZATION AND INSURANCE
                         -----------------------------

     Section 1.  (a)  The Employer agrees to provide, at its expense, (as
specified in Section 1(b) ), a benefit plan (Local 377 Group Health Plan) for
each employee, provided said employee meets the eligibility requirements as
specified in the subject plan.

                 (b)  The Employer agrees to pay $260.00 per month beginning 5
December 2000 for each employee for the entire term of this Agreement, i.e.,
three (3) years, December 5, 2000 to December 4, 2003.

     Section 2.  The Employer agrees to provide, at its expense, a group life
insurance plan providing a Three Thousand Dollar ($3,000.00) coverage for each
employee, provided said employee shall have six (6) months service with the
Company.

                                     -14-
<PAGE>

                                  ARTICLE XIV
                                  -----------

                              GRIEVANCE PROCEDURE
                              -------------------

     Any dispute, difference, or grievance which may arise concerning any of the
provisions, terms or interpretations of this Agreement shall be submitted within
two (2) working days of its occurrence by the Union or employee affected to the
Company for settlement between the Union Steward and the Foreman, or be forever
barred. If no agreement is reached within two (2) additional working days, it
shall be referred to the Union representatives and the representative of
Management. If the Union is not satisfied with the answer given by the Company,
it must serve written notice to appeal within ten (10) working days. If timely
notice of appeal to arbitration is not given, the matter is closed and the
Company's answer is final. If timely notice of appeal to arbitration is served,
the parties shall endeavor to select an arbitrator mutually satisfactory to
them. In the event the parties cannot agree on a mutually satisfactory
arbitrator within five (5) working days, either party may request the New Jersey
State Board of mediation to submit a panel of arbitrators in accordance with its
rules and practices. The arbitrator shall then be selected in accordance with
the rules and regulations of the New Jersey State Board of Mediation and the
issue in dispute shall be submitted to him for final determination.

     The arbitrator may provide for reinstatement of any discharged employee,
either with or without pay as the arbitrator may determine, or may sustain a
discharge, or may otherwise determine any other question referred to him. In the
event of any back pay award, there shall be deducted from the same any employee
earnings elsewhere, as determined in accordance with National Labor Relations
Board standards.

     The arbitrator shall not have the authority to alter, modify, add to or
subtract from, any of the terms or provisions of the Agreement.

     The fee of the arbitrator shall be shared equally by the Company and the
Union. All other expenses of the arbitration shall be paid by the party
incurring the same.

     No individual employee or employees shall have the right to request
arbitration under this Agreement.

     In the event there were two (2) Stewards or one (1) Steward and one (1)
Chairperson in the same department, only one (1) will be released at any one
time to process grievances.

                                     -15-
<PAGE>

                                  ARTICLE XV
                                  ----------

                    INTERFERENCE, DISCRIMINATION, COERCION
                    --------------------------------------

     This contract is the full agreement and the Employer shall not enter into
any private agreement with any of its employees whereby any of the provisions of
this Agreement may or shall be violated, waived or modified. Any and all such
agreements shall be null and void and of no effect.

                                  ARTICLE XVI
                                  -----------

                             NO STRIKES, LOCKOUTS
                             --------------------

     During the term of this Agreement, the Employer shall not lock out and the
Union agrees that neither it nor any of its representatives, stewards, covered
employees or members will sanction, authorize or engage in any strike, slowdown,
stoppage or interference with work; but should such unauthorized suspension or
stoppage or interference with work take place, the Union and its agents shall
make every effort to restore and resume normal operations forthwith. The
Employer agrees that it will not sue or claim money damages from the Union by
reason of any unsanctioned or unauthorized strike or suspension of work,
provided the Union has reasonably endeavored to have work resumed.

                                 ARTICLE XVII
                                 ------------

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

     Section 1.  Any provisions of this Agreement which are in conflict with any
law, executive or governmental, city or state regulations: order or directive,
now or hereafter in existence, shall be suspended as long as such conflict
exists.

     Section 2.  No payroll deduction shall be made for any purpose whatsoever
except as specifically required by federal, state and/or municipal law, or as
hereinabove specified, or unless authorized in writing by the employee in
question and agreed to by the Employer. Nothing herein contained, however, shall
be construed to prevent reasonable regulations for deductions in case an
employee is late in reporting for work.

                                     -16-
<PAGE>

     Section 3.  Unless an employee is hospitalized, employees absent from work
must call in by 8:30 A.M. on a daily basis or they will be subject to the
progressive discipline set forth in Article XI, Section 3.

     Section 4.  The Employer will provide two (2) First Aid Kits for the
production area of the plant, one to be placed at each end of the production
area.

                                 ARTICLE XVIII
                                 -------------

                                   SECURITY
                                   --------

     Section 1.  In the event that a government agency concerned with security
regulations applicable to the Employer advises the Employer to restrict any
member of the Union from work on or access to classified information or
material, the Union will not hold the Employer responsible for such action as
the Employer may reasonably take to comply with its contractual obligations to
the customer working on contracts for the government.

     Section 2.  The Union recognizes that the Employer has certain obligations
under the law pertaining to security and in its contracts with vendors doing
government work as required by the security regulations of the armed forces, and
agrees that nothing contained in this Agreement is intended to place the
Employer in violation of such law pertaining to security or its security
agreements with the government.

                                  ARTICLE XIX
                                  -----------

                               TERM OF AGREEMENT
                               ------------------

     THIS AGREEMENT shall remain in full force and effect and shall be binding
 upon the parties and successors until midnight, 4 December 2003, and shall be
 considered automatically renewed from year to year thereafter unless at least
 sixty (60) days prior to the end of any effective period either party shall
 serve written notice upon the other by registered mail that it desires to
 modify or terminate this Agreement.

                                     -17-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto set their hands and seals the day
and year first above written.



KREISLER INDUSTRIAL CORPORATION               LOCAL 377, RWDSU, AFL-CIO


    /s/ Ned Stern                               /s/ Daniel Gough
-------------------------------               --------------------------
                                              Sec. Treasurer


                                              --------------------------
                                              Recording Secretary



                                              COMMITTEE:


                                                 /s/ Alan Cruz
                                              --------------------------
                                                 /s/ Jozsef Cseuscsik
                                              --------------------------
                                                 /s/ James L. Gray
                                              --------------------------

                                              __________________________

                                              __________________________


                                     -18-
<PAGE>

                           EFFECTIVE 5 DECEMBER 2000
                           -------------------------

                                  SCHEDULE I
                                  ----------


                                LABOR GRADE "B"
                                ---------------

     Minimum $5.15 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.00 per hour.

          The following jobs are in "B" Classification:

          General Machine Operator - (including chamfering, swedging, drill
                                      press, tube cutter)

          Solder Remover
          Pressure & Flow Tester
          Induction Brazer
          Identification
          Moveman
          Shipping/Receiving Clerk
          Porter
          Furnace Assembler
          Cap and Wrap

                                LABOR GRADE "C"
                                ---------------

     Minimum $5.25 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.10 per hour.

          The following jobs are in "C" Classification:

          Chemical Cleaner
          DeBurrer
          Tube Bender
          Final Assembly Inspector

                                LABOR GRADE "D"
                                ---------------

     Minimum $5.40 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.25 per hour.

     The following jobs are in "D" Classification:

          Adjustor
          Torch Brazer
          Fluorescent Penetrant Operate & Set-up
          Plater

                                     -19-
<PAGE>

                                LABOR GRADE "E"
                                ---------------

     Minimum $5.65 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.50 per hour.

          The following jobs are in "E" Classification:

          Machinist - 2nd Class
          Vendor's Inspector
          Leadman
          Truck Driver
          X-Ray Technician
          Process Inspector
          Ultrasonic Technician

                                LABOR GRADE "F"
                                ---------------

     Minimum $5.90 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.00 per hour.

          The following jobs are in "F" Classification:

          Furnace Operator
          General Maintenance Man
          X-Ray Reader
          Set-Up Man

                                LABOR GRADE "G"
                                ---------------

     Minimum $6.15 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.25 per hour.

          The following jobs are in "G" Classification:

          CNC Machine Set-Up
          Machinist 1st Class
          Experimental Machinist
          Turret Lathe Set-Up and Operator

                                     -20-
<PAGE>

                                LABOR GRADE "H"
                                ---------------

     Minimum $6.40 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.75 per hour.

          The following jobs are in "H" Classification:

          Tool and Die Maker
          Toolmaker
          Layout Inspector
          Welder

          LEADMAN: In the event the Company establishes a Leadman in any
classification in any labor grade, it is agreed the rate of the Leadman should
be ten (10%) percent above their then current hourly rate, said payment to
commence upon the completion of a thirty (30) day trial period in the Leadman
classification.

                                     -21-
<PAGE>

                           EFFECTIVE 5 DECEMBER 2001
                           -------------------------

                                  SCHEDULE I
                                  ----------

                                LABOR GRADE "B"
                                ---------------

     Minimum $5.15 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.45 per hour.

          The following jobs are in "B" Classification:

          General Machine Operator - (including chamfering, swedging, drill
                                      press, tube cutter)

          Solder Remover
          Pressure & Flow Tester
          Induction Brazer
          Identification
          Moveman
          Shipping/Receiving Clerk
          Porter
          Furnace Assembler
          Cap and Wrap

                                LABOR GRADE "C"
                                ---------------

     Minimum $5.25 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.55 per hour.

          The following jobs are in "C" Classification:

          Chemical Cleaner
          DeBurrer
          Tube Bender
          Final Assembly Inspector

                                LABOR GRADE "D"
                                ---------------

     Minimum $5.40 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.70 per hour.

     The following jobs are in "D" Classification:

          Adjustor
          Torch Brazer
          Fluorescent Penetrant Operate & Set-up
          Plater

                                     -22-
<PAGE>

                                LABOR GRADE "E"
                                ---------------

     Minimum $5.65 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.95 per hour.

          The following jobs are in "E" Classification:

          Machinist - 2nd Class
          Vendor's Inspector
          Leadman
          Truck Driver
          X-Ray Technician
          Process Inspector
          Ultrasonic Technician

                                LABOR GRADE "F"
                                ---------------

     Minimum $5.90 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.45 per hour.

          The following jobs are in "F" Classification:

          Furnace Operator
          General Maintenance Man
          X-Ray Reader
          Set-Up Man

                                LABOR GRADE "G"
                                ---------------

     Minimum $6.15 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.70 per hour.

          The following jobs are in "G" Classification:

          CNC Machine Set-Up
          Machinist 1st Class
          Experimental Machinist
          Turret Lathe Set-Up and Operator

                                     -23-
<PAGE>

                               LABOR GRADE "H"
                               ---------------

     Minimum $6.40 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $15.20 per hour.

          The following jobs are in "H" Classification:

          Tool and Die Maker
          Toolmaker
          Layout Inspector
          Welder

          LEADMAN: In the event the Company establishes a Leadman in any
classification in any labor grade, it is agreed the rate of the Leadman should
be ten (10%) percent above their then current hourly rate, said payment to
commence upon the completion of a thirty (30) day trial period in the Leadman
classification.

                                     -24-
<PAGE>

                           EFFECTIVE 5 DECEMBER 2002
                           -------------------------


                                  SCHEDULE I
                                  ----------


                                LABOR GRADE "B"
                                ---------------

     Minimum $5.15 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $13.90 per hour.

          The following jobs are in "B" Classification:

          General Machine Operator - (including chamfering, swedging, drill
                                      press, tube cutter)

          Solder Remover
          Pressure & Flow Tester
          Induction Brazer
          Identification
          Moveman
          Shipping/Receiving Clerk
          Porter
          Furnace Assembler
          Cap and Wrap

                               LABOR GRADE "C"
                               ---------------

     Minimum $5.25 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.00 per hour.

          The following jobs are in "C" Classification:

          Chemical Cleaner
          DeBurrer
          Tube Bender
          Final Assembly Inspector

                                LABOR GRADE "D"
                                ---------------

     Minimum $5.40 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.15 per hour.

          The following jobs are in "D" Classification:

          Adjustor
          Torch Brazer
          Fluorescent Penetrant Operate & Set-up
          Plater

                                     -25-
<PAGE>

                                LABOR GRADE "E"
                                ---------------

     Minimum $5.65 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.40 per hour.

          The following jobs are in "E" Classification:

          Machinist - 2nd Class
          Vendor's Inspector
          Leadman
          Truck Driver
          X-Ray Technician
          Process Inspector
          Ultrasonic Technician

                                LABOR GRADE "F"
                                ---------------

     Minimum $5.90 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $14.90 per hour.

          The following jobs are in "F" Classification:

          Furnace Operator
          General Maintenance Man
          X-Ray Reader
          Set-Up Man

                                LABOR GRADE "G"
                                ---------------

     Minimum $6.15 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $15.15 per hour.

          The following jobs are in "G" Classification:

          CNC Machine Set-Up
          Machinist 1st Class
          Experimental Machinist
          Turret Lathe Set-Up and Operator

                                     -26-
<PAGE>

                                LABOR GRADE "H"
                                ---------------

     Minimum $6.46 per hour with an increase of $.05 per hour after thirty (30)
days and automatic increases of $.10 per hour every four (4) months until
reaching maximum rate of $15.65 per hour.

          The following jobs are in "H" Classification:

          Tool and Die Maker
          Toolmaker
          Layout Inspector
          Welder

          LEADMAN: In the event the Company establishes a Leadman in any
classification in any labor grade, it is agreed the rate of the Leadman should
be ten (10%) percent above their then current hourly rate, said payment to
commence upon the completion of a thirty (30) day trial period in the Leadman
classification.

                                     -27-
<PAGE>

Local 377, RWDSU
29-27 41st Avenue
Long Island City, New York 11101

          Re:  Local 377, RWDSU -and- Kreisler Industrial Corp.
               Labor Agreement:  12/5/2000 - 12/4/2003
               ------------------------------------------------

Dear Sir/Madam:

     In connection with the negotiation of the above-captioned agreement, it is
our understanding we have agreed that the retroactive payment between 12/5/2000
and the actual date of implementation of the first wage increase, will be made
within sixty (60) days of the date of ratification of the contract, i.e.,
1/16/2001. If you are in agreement with this understanding, we would appreciate
your signing a copy of the within letter indicating such agreement.

                                    Very truly yours,

                                    KREISLER INDUSTRIAL CORP.



                                    By: /s/ Ned Stern
                                       --------------------------------



The foregoing arrangement
is hereby agreed to:

_____________________________           DATE:  ________________________
LOCAL 377 RWDSU