SUPPLEMENTAL COMPENSATION AGREEMENT

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     THIS AGREEMENT ("Agreement") is made and entered into as of the 1/st/ day

of January, 2001, between KREISLER MANUFACTURING CORPORATION, a Delaware

corporation ("Parent"), KREISLER INDUSTRIAL CORPORATION, Parent's wholly owned

subsidiary (collectively, the "Company"), and WALLACE KELLY ("Kelly").



                                  BACKGROUND



     Company and Kelly desire to enter into this Agreement to establish the

terms and conditions upon which Kelly shall be entitled to a bonus payment upon

the occurrence of certain events.



     1.   Definitions

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          1.1    "Affiliate" means a Person directly or indirectly controlled

by, controlling or under common control with Company.



          1.2    "Average Market Price" means the average of the Market Price of

the Stock for the ten (10) Business Days ending with the business day

immediately preceding the applicable calculation date specified in Section 2.

For purposes of this Section 1.2, the term "Business Day" shall mean a date on

which the NASDAQ System is open for trading during regular business hours.



          1.3    "Board" means the board of directors of the Company.



          1.4    "Bonus Payment" means the payment to be made by the Company to

Kelly pursuant to Section 2 of this Agreement.



          1.5    "Cause" means the following grounds for Company's termination

of Kelly's employment: (i) material violation of any Company policy, procedure

or guideline; (ii) conviction of or plea of guilty or nolo contendre to any

felony or any misdemeanor involving moral turpitude; (iii) theft or misuse of

the Company's property; (iv) use of alcohol or controlled substances on the

Company's premises or appearing on such premises while intoxicated or under the

influence of drugs not lawfully prescribed by a physician, or after having

abused prescribed medications; (v) illegal use of any controlled substance; (vi)

illegal gambling on the Company's premises; (vii) discriminatory or harassing

behavior, whether or not illegal under federal, state or local law; (viii)

willful misconduct; (ix) falsifying any document or making any materially

misleading statement relating to Kelly's work for the Company; or (x) causing

material injuries to the Company by misconduct or inattention to duties and

responsibilities.

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          1.6    "Change of Control Transaction" means any of the following: (A)

Company sells all or substantially all of its assets, (ii) Company merges,

combines or consolidates with and into another entity and is not the survivor of

such merger, combination or consolidation and either Company's shareholders

cease to hold a majority of the outstanding common stock of survivor or

Company's shareholder's do not control, or have the power to control, the

survivor's Board of Directors, (iii) all or substantially all of Company's Stock

is sold to a third party.



          1.7    "Code" means the Internal Revenue Code of 1986, as amended and

the Treasury Regulations promulgated thereunder.



          1.8    "Compensation Period" means the period beginning on January 1,

2001 and ending on December 31, 2003.



          1.9    "Disability" shall have the meaning as set forth in Section

22(e)(3) of the Code.



          1.10   "Forfeiture Cause" means the following grounds for Company's

termination of Kelly's employment: (i) conviction of or plea of guilty or nolo

contendre to any felony that materially and adversely affects the Company or its

business reputation; (ii) theft of the Company's property; (iii) discriminatory

or harassing behavior which is illegal under federal, state or local law and

which materially and adversely affects the Company; (iv) intentional and willful

misconduct which materially injures the Company; or (v) falsifying any material

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