SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

| |  | 
| |  | 

FORM 10-Q



(Mark One)

|[X]                    | Quarterly report under Section 13 or 15(d) of the Securities Exchange
      Act of 1934.       
|---------------------- | -----------------------------------------------------------------------------------------------
|                       | For the quarterly period ended                                                                 
|                       |                                                                                                
|[ ]                    | Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934.
|                       | For the transition period from                                                                 
|                       |                                                                                                
|Commission File Number | 0-4791                                                                                         



|PAUL MUELLER COMPANY                                        
|------------------------------------------------------------
|(Exact name of registrant as specified in its
      charter)



|Missouri                                                             |  | 44-0520907                          
|-------------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) |  | (I.R.S. Employer Identification No.)
|                                                                     |  |                                     
|1600 West Phelps Street, P.O. Box 828, Springfield,
      Missouri   |  | 65801-0828                          
|(Address of principal executive offices)                             |  | (Zip Code)                          



|Registrant's telephone number, including area code | (417) 831-3000
|-------------------------------------------------- | --------------



|                                                                                        
|----------------------------------------------------------------------------------------
|(Former name, former address and former fiscal year, if
      changed since last report)



Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]



Indicate the number of shares outstanding of the issuer's
Common Stock as of May 7, 2001: 1,179,721





PART I -

The condensed financial statements included herein have been
prepared by the Registrant without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in the financial statements, prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted pursuant to such rules and regulations, although the Registrant believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements be read in
connection with the financial statements and the notes thereto included in the
Registrant's latest annual report on Form 10-K. This report reflects all
adjustments of a normal recurring nature that are, in the opinion
of management, necessary for a fair statement of the results for the
interim period.



PAUL MUELLER COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)



|                                         |                                                                                                                                                                    | March 31   |          | Dec. 31   
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------- | -------- | ----------
|                                         |                                                                                                                                                                    | 2001   |          | 2000  
|ASSETS                                   |                                                                                                                                                                    |            |          |           
|Current Assets:                          |                                                                                                                                                                    |            |          |           
|                                         | Cash                                                                                                                                                               |            | $      - |           
|                                         | Available-for-sale investments, at market                                                                                                                          |            | -        |           
|                                         | Accounts and notes receivable, less reserve of $720 at March
      31, 2001, and $690 at December 31, 2000, for doubtful
accounts                                  |            | 18,001   |           
|                                         | Inventories -                                                                                                                                                      |            |          |           
|                                         | Raw materials and components                                                                                                                                       |            | $ 7,048  |           
|                                         | Work-in-process                                                                                                                                                    |            | 7,822    |           
|                                         | Finished goods                                                                                                                                                     |            | 2,602    |           
|                                         |                                                                                                                                                                    |            | $ 17,472 |           
|                                         | Prepayments                                                                                                                                                        |            | 1,149    |           
|                                         | Total Current Assets                                                                                                                                               |            | $ 36,622 |           
|Other Assets                             |                                                                                                                                                                    | 3,904      |          | 3,884     
|Property, Plant & Equipment, at cost     |                                                                                                                                                                    | $ 65,666   |          | $ 62,814  
|                                         | Less - Accumulated depreciation                                                                                                                                    |            | 44,262   |           
|                                         |                                                                                                                                                                    |            | $21,404  |           
|                                         |                                                                                                                                                                    |            | $ 61,930 |           
|                                         |                                                                                                                                                                    |            | =======  |           
|                                         |                                                                                                                                                                    |            |          |           
|LIABILITIES AND SHAREHOLDERS' INVESTMENT |                                                                                                                                                                    |            |          |           
|Current Liabilities:                     |                                                                                                                                                                    |            |          |           
|                                         | Short-term bank borrowings                                                                                                                                         |            | $    900 |           
|                                         | Accounts payable                                                                                                                                                   |            | 6,122    |           
|                                         | Accrued expenses                                                                                                                                                   |            | 6,355    |           
|                                         | Advance billings                                                                                                                                                   |            | 8,530    |           
|                                         | Total Current Liabilities                                                                                                                                          |            | $ 21,907 |           
|Other Long-Term Liabilities              |                                                                                                                                                                    | 2,030      |          | 1,166     
|Contingencies                            |                                                                                                                                                                    |            |          |           
|Shareholders' Investment:                |                                                                                                                                                                    |            |          |           
|                                         | Common stock, par value $1 per share - Authorized
    20,000,000 shares - Issued 1,354,325 shares at March 31, 2001 - Issued 1,348,325 shares at December 31, 2000 |            | $  1,354 |           
|                                         | Preferred stock, par value $1 per share - Authorized 1,000,000 shares - No shares issued                                                                           |            | -        |           
|                                         | Paid-in surplus                                                                                                                                                    |            | 4,662    |           
|                                         | Retained earnings                                                                                                                                                  |            | 34,845   |           
|                                         |                                                                                                                                                                    |            | $ 40,861 |           
|                                         | Less -                                                                                                                                                             |            |          |           
|                                         | Treasury stock, 174,604 shares at March 31, 2001, and December 31, 2000, at cost                                                                                   |            | 2,562    |           
|                                         | Deferred compensation                                                                                                                                              |            | 288      |           
|                                         | Accumulated other comprehensive loss                                                                                                                               |            | 18       |           
|                                         |                                                                                                                                                                    |            | $37,993  |           
|                                         |                                                                                                                                                                    |            | $ 61,930 |           
|                                         |                                                                                                                                                                    |            | ======== |           



The accompanying notes are an integral part of these balance
sheets.







PAUL MUELLER COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Dollars in Thousands Except Per Share Amounts)

(Unaudited)



|                                                                          |                         | Three Months Ended
      March 31
|------------------------------------------------------------------------- | ----------------------- | ---------------------------------
|                                                                          |                         | 2001                             
|Net Sales                                                                 |                         | $16,090                          
|Cost of Sales                                                             |                         | 13,752                           
|                                                                          | Gross Profit            |                                  
|Selling, General & Administrative Expenses                                |                         | 4,709                            
|                                                                          | Operating Income (Loss) |                                  
|Other Income (Expense):                                                   |                         |                                  
|                                                                          | Interest income         |                                  
|                                                                          | Interest expense        |                                  
|                                                                          | Other, net              |                                  
|                                                                          |                         |                                  
|Income (Loss) from Operations before Provision (Benefit) for Income Taxes |                         | $(2,244)                         
|Provision (Benefit) for Income Taxes                                      |                         | (822)                            
|Income (Loss) before Equity in Earnings (Loss) of Joint
      Venture     |                         | $(1,422)                         
|Equity in Earnings (Loss) of Joint Venture                                |                         | (28)                             
|                                                                          | Net Income (Loss)       |                                  
|                                                                          |                         |                                  
|Basic and Diluted Earnings (Loss) per Common Share                        |                         | $ (1.24)                         
|                                                                          |                         | ========                         





The accompanying notes are an integral part of these
statements.









PAUL MUELLER COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)



|                                      |                                                                                                    | Three Months Ended
      March 31
|------------------------------------- | -------------------------------------------------------------------------------------------------- | ---------------------------------
|                                      |                                                                                                    | 2001                             
|Cash Flows from Operating Activities: |                                                                                                    |                                  
|                                      | Net income (loss)                                                                                  |                                  
|                                      | Adjustments to reconcile net income to net cash provided (required) by
      operating activities: |                                  
|                                      | Equity in loss (income) of joint venture                                                           |                                  
|                                      | Bad debt expense                                                                                   |                                  
|                                      | Depreciation and amortization                                                                      |                                  
|                                      | Loss on sales of fixed assets                                                                      |                                  
|                                      | Changes in assets and liabilities -                                                                |                                  
|                                      | Decrease in interest receivable                                                                    |                                  
|                                      | Decrease (increase) in accounts and   notes receivable                                             |                                  
|                                      | (Increase) in inventories                                                                          |                                  
|                                      | (Increase) decrease in prepayments                                                                 |                                  
|                                      | (Increase) in other assets                                                                         |                                  
|                                      | Increase in accounts payable                                                                       |                                  
|                                      | Increase in accrued expenses                                                                       |                                  
|                                      | Increase in advance billings                                                                       |                                  
|                                      | Increase (decrease) in long-term   liabilities                                                     |                                  
|                                      | Net Cash Provided by Operations                                                                    |                                  

|Cash Flows (Requirements) from Investing Activities: |                                                 |  |          | 
|---------------------------------------------------- | ----------------------------------------------- |  | -------- | 
|                                                     | Proceeds from maturities of investments         |  | $   607  | 
|                                                     | Purchases of investments                        |  | -        | 
|                                                     | Additions to property, plant, and equipment     |  | (2,878)  | 
|                                                     | Net Cash (Required) by Investing     Activities |  | $(2,271) | 

|Cash Flows Provided (Requirements) from Financing Activities: |                                                          |  |          | 
|------------------------------------------------------------- | -------------------------------------------------------- |  | -------- | 
|                                                              | Short-term bank borrowings                               |  | $    900 | 
|                                                              | Dividends paid                                           |  | (704)    | 
|                                                              | Net Cash Provided (Required) by     Financing Activities |  | $196     | 

|Net (Decrease) Increase in Cash                    |                                   | $   (667) |          | $    419
|-------------------------------------------------- | --------------------------------- | --------- | -------- | --------
|Cash at Beginning of Period                        |                                   | 667       |          | 700     
|                                                   | Cash at End of Period             |           | $     -  |         
|                                                   |                                   |           | ======== |         
|Supplemental Disclosures of Cash Flow Information: |                                   |           |          |         
|                                                   | Cash paid during the period for - |           |          |         
|                                                   | Income taxes                      |           | $   25   |         



The accompanying notes are an integral part of these
statements.









PAUL MUELLER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2001 AND 2000, AND DECEMBER 31, 2000

(Unaudited)



|1. | The condensed financial statements include the accounts
      of Paul Mueller Company (Registrant) and its wholly owned subsidiaries,
      Mueller International Sales Corporation, Mueller Transportation, Inc., and
      Mueller Field Operations, Inc. A summary of the significant accounting
      policies is included in Note 1 to the consolidated financial statements
      included in the Registrant's annual report on Form 10K for the year ended
      December 31, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Inventory is recorded at the lower of cost on a last-in,
      first-out (LIFO) basis or market.
      
      Because the inventory determination under the LIFO method
      can only be made at the end of each fiscal year based on the inventory
      levels and costs at that time, interim LIFO determinations, including
      those at March 31, 2001, must necessarily be based on management's
      estimate of expected year-end inventory levels and costs. Since estimates
      of future inventory levels and prices are subject to many factors beyond
      the control of management, interim financial results are subject to final
      year-end LIFO inventory amounts. Accordingly, inventory components
      reported for the period ending March 31, 2001, are estimates based on
      management's knowledge of the Registrant's production cycle, the costs
      associated with this cycle, and the sales and purchasing volume of the
      Registrant.                                          
|3. | On May 13, 1999, 6,000 shares of restricted common stock
      and nonqualified stock options for 20,400 shares of common stock, at a
      grant price of $36.00 per share, were awarded to key members of management
      with vesting periods of five years. The market value of the restricted
      stock was $32.50 per share on the date of award. On March 1, 2001, an
      additional 6,000 shares of restricted common stock and nonqualified stock
      options for 20,400 shares of common stock, at a grant price of $36.00 per
      share, were awarded to key members of management, with both having vesting
      periods of five years. The market value of the restricted stock was $29.00
      per share on the date of the award, and the unamortized balance of
      deferred compensation is included under Shareholders' Investment on the
      accompanying consolidated balance sheets.
      The following table sets forth the computation of basic
      and diluted earnings per common share:

| | Three Months Ended                                                                         
| | -------------------------------------------------------------------------------------------
| |                                                                                            
| | Net income (loss)                                                                          
| |                                                                                            
| | Shares for basic earnings per common share - Weighted average shares outstanding           
| | Effect of restricted stock granted                                                         
| | Shares for diluted earnings per common share - Adjusted weighted average shares outstanding
| |                                                                                            
| | Basic earnings (loss) per common share                                                     
| |                                                                                            
| | Diluted earnings (loss) per common share                                                   
| |                                                                                            



|4. | The Registrant has two reportable segments: Industrial
      Equipment and Dairy Farm Equipment. There were no intersegment sales.
|-- | ----------------------------------------------------------------------------------------------------------------------------------



|   | Revenues and profitability for each segment for the three
      months ended March 31, 2001 and 2000, were as follows:                                                                                                                                      
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Three Months Ended March 31                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                             
|   | Revenues from external customers                                                                                                                                                                                                                            
|   | Income (loss) before income tax                                                                                                                                                                                                                             
|5. | The Registrant reports comprehensive income (loss) and its components in accordance with Statement of Financial Accounting Standards No.  130, "Reporting Comprehensive Income."  Comprehensive income and its components, net of tax,
are summarized below:

| | Three Months Ended                                 
| | ---------------------------------------------------
| |                                                    
| |                                                    
| | Net income (loss)                                  
| | Gain on investment, net of tax                     
| | Foreign currency translation adjustment, net of tax
| | Total comprehensive income (loss)                  
| |                                                    

|6. | The Registrant has a $6,000,000 bank-borrowing facility
      that expires on May 31, 2002. As of March 31, 2001, the amount
      borrowed was $900,000. The weighted average interest rate during the
      period was 5.99%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7. | The results for the three months ended March 31, 2001 and
      2000, reflect the adoption of Financial Accounting Standards Board's
      Emerging Issues Task Force (EITF) Pronouncement No. 00-10, "Accounting for
      Shipping and Handling Fees and Costs." This pronouncement requires that
      shipping and handling costs (freight) be included within net sales. The
      effect of adopting this pronouncement increased net sales by $531,000 and
      $659,000 for the three months ended March 31, 2001 and 2000, respectively.
      The same amounts for each period were included as freight expense within
      cost of sales.                                                                                                              
|8. | The Registrant and its subsidiaries are involved in legal
      proceedings incident to the conduct of their business. It is
      management's opinion that none of these matters will have a materially
      adverse effect on the consolidated financial position, results of
      operations, or cash flows.
      The Registrant and the Sheet Metal Workers Union, Local
      208, agreed to a new three-year labor contract effective April 7, 2001.
      However, two cases involving minor issues remain before the National Labor
      Relations Board, and the final determination of these cases may take a
      year. Management believes, based on evaluations by counsel, that there is
      no material financial exposure to the
Registrant.





PAUL MUELLER COMPANY AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING RESULTS

AND FINANCIAL CONDITION



The following is Management's discussion and analysis of the significant
factors that have affected the Companies' earnings during the periods included
in the accompanying Consolidated Condensed Statements of Income.

The information discussed below in Management's Discussion and
Analysis of Operating Results and Financial Condition contains statements
regarding matters that are not historical facts, but rather are forward-looking
statements. These statements are based on current financial and economic
conditions and current expectations and involve risk and uncertainties. Actual
future results may differ materially depending on a variety of factors. These
factors, some of which are identified in the discussion accompanying such
forward-looking statements, include, but are not limited to, milk prices paid to
dairy farmers, feed prices, weather conditions, dairy farm consolidation and
other factors affecting the profitability of dairy farmers, the price of
stainless steel, actions of competitors, the Registrant's execution of internal
performance plans, economic conditions in key export markets, the level of
capital expenditures in the U.S. economy, and other changes to business
conditions.

OPERATING RESULTS

Consolidated net sales for the quarter ended March 31, 2001,
were $7,078,000 lower than the quarter ended March 31, 2000. The major variation
between quarters was the result of reduced sales for the Industrial
Equipment and the Dairy Farm Equipment segments. Net sales for the
Industrial Equipment segment were $12,423,000 and $17,042,000 for the three
months ended March 31, 2001 and 2000, respectively. Although the backlog for the
Industrial Equipment segment was $29,944,000 at the beginning of 2001 compared
to $28,242,000 at the beginning of 2000, field-fabrication projects (which
involved both shop and field work) made up a major portion of the backlog. These
projects extend over several months and revenue is recognized only when the
customer has accepted vessels completed in the field. During the first quarter
of 2001, little revenue was recognized from the field-fabrication activities.
Additionally, the current economic slump has adversely affected the Industrial
Equipment segment, as businesses are aggressively cutting capital spending. As a
result, order entry for the Industrial Equipment segment declined 14% when
comparing the first quarter of 2001 to the first quarter of 2000. Additionally,
conditions were very competitive for all product lines within the Industrial
Equipment segment. Net sales for Dairy Farm Equipment were $3,049,000 for the
first quarter of 2001 compared to $5,431,000 for the first quarter of 2000. A
major factor contributing to the decline in net sales was a 72% reduction in the
Dairy Farm Equipment backlog when comparing the backlog as of December 31, 2000,
to December 31, 1999. Additionally, sales of Dairy Farm Equipment during the
first quarter of 2001 were adversely affected, as new orders were approximately
40% lower for the first quarter of 2001 compared to the first quarter of 2000.
Domestically, the milk price paid to dairy farmers was extremely low during all
of 2000 and continued during the first part of 2001. Export sales of Dairy Farm
Equipment were also lower when comparing the first quarter of 2001 with the
first quarter of 2000 due to the strength of the dollar and the outbreak of
foot-and-mouth disease in Europe in the markets that the Registrant serves.

The gross profit rate for the three months ended March 31,
2001, was 14.5% compared to 24.1% for the same period of a year ago. Gross
margins were lower in the first quarter of 2001 compared to the first quarter of
2000 as pricing has been very competitive and plant efficiency has been
adversely affected by the significant reduction in volume. Another significant
contributor to the lower gross profit rate was the impact of manufacturing
burden, as it was a higher percentage of sales in the first quarter of 2001
compared to the first quarter of 2000. Expenditures for manufacturing burden
were higher due to higher costs for utilities, personnel, depreciation, and
repairs and maintenance. Additionally, the reduced volume in both the Industrial
Equipment and Dairy Farm Equipment segments led to under-absorption
of manufacturing burden.



Selling, general, and administrative expenses were higher for
the first quarter of 2001 versus the first quarter of 2000 due to increased
expenditures for personnel, advertising, travel, product development, and tax
and legal fees.



Other income for the three months ended March 31, 2001,
compared to the three months ended March 1, 2000, was higher due to interest
income, improved results for the microbrewery/brewpub, and increased royalties.

The effective tax rate for the three months ended March 31,
2001, varied from the statutory rate (34%) primarily due to tax credits. The
effective tax rate for the three months ended March 31, 2000, varied from the
statutory tax rate (34%) due to tax credits, the lower effective tax rate of the
Foreign Sales Corporation (FSC), and tax-exempt interest.

The Registrant and the Sheet Metal Workers Union, Local 208,
reached agreement on a new labor contract effective April 7, 2001. The new
contract covers three years and includes all of the provisions of the
Registrant's last and final offer. However, two cases involving minor issues
remain pending before the National Labor Relations Board; but management
believes, based on an evaluation by counsel, that there is no material
financial exposure to the Registrant.

Market risks relating to the Registrant's operations result
primarily from changes in foreign exchange rates and interest rates, as
well as stainless-steel prices. The Registrant periodically enters into
foreign-exchange forward or spot contracts to hedge the exposure to
foreign-currency-denominated purchase transactions. Forward contracts generally
have maturities of less than three months. Foreign-currency-denominated
purchases were $362,000 and $356,000 for the three months ended March 31, 2001
and 2000, respectively. There were no foreign-exchange forward contracts
outstanding at March 31, 2001 and 2000. There were foreign currencies held
at March 31, 2001 and 2000, amounting to approximately $2,000 and $11,000,
respectively, for payment of foreign-currency-denominated vendor invoices. The
Registrant's financial instruments at March 31, 2000, that were exposed to
interest-rate risks, consisted of available-for-sale investments that were
recorded at market value. Available-for-sale investments were maintained in
high-quality securities that consisted of tax-exempt bonds and a taxable bond
fund. Unrealized holding gains and losses were not material as of March 31, 2001
and 2000; and there were no significant realized gains or losses during the
periods. The Registrant does not use financial instruments for trading purposes.
The risk of increases in stainless-steel prices for significant Industrial
Equipment segment projects that extend over several months is managed by
contracting for the stainless steel at the time the project is obtained.

Concentration of credit risk, with respect to receivables, is
limited due to the large number of customers and their dispersion across a wide
geographic area. The Registrant performs credit evaluations on all new customers
and periodically reviews the financial condition of existing customers. For
Industrial Equipment orders, down payments and/or progress payments are
generally required based on the dollar value of the order and customer
creditworthiness. Foreign receivables are generally secured by irrevocable
letters of credit confirmed by a major U.S. bank.

Looking to the balance of 2001, there are factors that could
affect the results of operations. The presence of foot-and-mouth disease in
Europe may continue to have an adverse effect on sales of Dairy Farm Equipment
in that market. Additionally, if outbreaks occur in other areas of the world,
particularly in North and South America and in Asia, it will have a significant
adverse effect on sales of Dairy Farm Equipment in those markets. The average
price of milk paid to farmers in the domestic market year-to-date for 2001 is 8%
above the average price paid for the same period of 2000. However, the current
milk price remains low considering historical levels; and this could have an
adverse effect on order entry, sales, and profitability of the Dairy Farm
Equipment segment.

The current economic slump and the related decrease in capital
expenditures is having an adverse effect on he Industrial Equipment segment, and
order entry is 14% lower for the first quarter of 2001 compared to the first
quarter of 2000. Additionally, market conditions have been very competitive, and these factors
may adversely affect the profitability of Industrial Equipment segment for the
balance of the year.

In general, the Registrant's business is not subject to
seasonal variation and demand for its products. However, because orders for
certain products can be large, a small number of large orders can have a
significant impact on the Registrant's revenue in any one quarterly period. As a
result, a relatively small reduction or delay in the number of orders shipped or
completed and accepted by the customer can have a material impact on the
Registrant's revenues for any particular quarter. Gross margins may vary from
quarter-to-quarter as a result of the variations in profitability of large
orders, as well as the mix of various products manufactured by the Registrant.
Accordingly, results of operations for the Registrant for any particular quarter
are not necessarily indicative of the results that may be expected for any
subsequent quarter of the calendar year.

The backlog of sales at March 31, 2001, was $33,400,000
compared to $31,700,000 at December 31, 2000, and $37,400,000 at March 31, 2000.
The level of backlog, at any particular point in time, is not necessarily
indicative of the future operating performance of the Registrant in the
following quarter due to the long manufacturing or fabrication cycle for some
projects. Orders in the backlog are subject to delays in completion and/or holds
at the request of the customer, and this could have a significant impact on
quarterly results. The March 31, 2001, backlog represents orders that will be
completed and shipped over the next twelve months.

FINANCIAL CONDITION

The consolidated financial condition and the liquidity of the
Registrant at March 31, 2001, have not changed significantly since December 31,
2000. There are no significant commitments for capital expenditures at March 31,
2001.

The Registrant has a $6,000,000 bank-borrowing facility that
expires on May 31, 2002. As of March 31, 2001, the outstanding amount borrowed
was $900,000. The weighted average interest rate during the period was 5.99%.
There are no commitment fees for the facility.







PART II - OTHER INFORMATION



|Item 4. | Submission of matters to a vote of security holders.
|------- | ----------------------------------------------------
|        | a.                                                  
|        |                                                     
|        | Name                                                
|        |                                                     
|        | Donald E. Golik                                     
|        | David T. Moore                                      
|        | Jay E. Sushelsky                                    
|        |                                                     
|        | Totals                                              
|        |                                                     
|        |                                                     
|        |                                                     
|        |                                                     
|        |                                                     
|Item 6. | Exhibits and report on Form 8-K.                    
|        | a.                                                  
|        |                                                     
|        |                                                     
|        | b                                                   





SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





|     |             |  | PAUL MUELLER COMPANY                                                    
|---- | ----------- |  | ------------------------------------------------------------------------
|DATE | May 7, 2001 |  | /S/ DONALD E. GOLIK                                                     
|     |             |  | Donald E. Golik, Senior Vice President and
      Chief Financial Officer





AGREEMENT



This Agreement is made and entered into effective (date of
ratification) by and between Paul Mueller Company (hereinafter referred to as
the "Company") and Local Union No. 208 of the Sheet Metal Workers' International
Association (hereinafter referred to as the "Union").



ARTICLE I



Recognition

Section 1. The Company recognizes the Union as the
representative for all employees in the classifications of Craftsman, Fabricator
and Production Worker at the Company's production plants at 1600 W. Phelps and
Warren Street, Springfield, Missouri 65802.

Specifically excluded from this Agreement are all executive,
managerial, supervisory, professional, technical, office, clerical, and
administrative employees, and employees in the machine shop, maintenance areas
and other machinist work areas.



ARTICLE II



Management Prerogatives

The Company shall retain all of the rights and function of
management not specifically and expressly limited by this Agreement, including,
but not limited to, the right to:



|- | manage the Company's operations and direct the work
      force;                                                                                                                        
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | schedule and reschedule work, hours and work assignments;
      In accordance with Article V of thisagreement.                                                                          
|- | assign employees to shifts, particular types of
      equipment, machines or jobs;                                                                                                      
|- | require employees to work overtime;                                                                                                                                                     
|- | determine the work to be subcontracted or done by
      employees; In accordance with this agreement.                                                                                   
|- | determine the number of employees to be employed in any
      classification at any time;                                                                                               
|- | supervise and exercise control over its employees;                                                                                                                                      
|- | introduce new, improved or different production, quality
      standards, or maintenance, service or distribution methods or facilities,
      or change existing methods or facilities;
|- | maintain and improve efficiency;                                                                                                                                                        
|- | extend, maintain, curtail, sell, relocate or terminate
      all of any part of the operations of the Company; In accordance with
      applicable state and federal laws.              
|- | open, operate and maintain other production facilities
      without application of this Agreement thereto;                                                                             
|- | prepare job qualifications and establish appropriate job
      titles;                                                                                                                  
|- | determine the operations or services to be performed by
      employees at the Company's Springfield, Missouri facilities; In accordance
      with applicable state and federal laws.  
|- | assign and reassign the work to be performed by employees
      or qualified groups of employees as the Company may deem necessary; In
      accordance with this agreement.            
|- | transfer, promote, demote, layoff, discharge or
      discipline for just cause; and                                                                                                    
|- | make or revise reasonable work rules.                                                                                                                                                   





ARTICLE III



Probationary Period

New employees shall be regarded as probationary employees for
the first three (3) calendar months of employment. If probationary employees are
laid off, or if they are discharged during this three (3) calendar month period,
there will be no responsibility on the part of the Company to rehire. Layoffs or
discharges during this three (3) calendar month period may not be subject of a
grievance.



ARTICLE IV



Classifications and Rates of Pay

Section 1. The following classifications and rates of
pay shall be in effect during the term of this Agreement:

|         | Rates of Pay     
|-------- | -----------------
|         |                  
|         |                  
|1ST YEAR | Craftsman        
|         | Fabricator       
|         | Production Worker
|         |                  
|2ND YEAR | Craftsman        
|         | Fabricator       
|         | Production Worker
|         |                  
|3RD YEAR | Craftsman        
|         | Fabricator       
|         | Production Worker



|1. | The time periods above the rate columns pertain to an
      employee's length of service within the classification.                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The Company may assign and reassign tasks between
      classifications based on the Company's evaluation of the skills required
      for the efficient operation of the plant.
|3. | Job descriptions for each classification are attached.
      Changes in descriptions will be negotiated with the Union.                                                         



Section 2. The skills, abilities and qualifications of
all employees hired will be determined by the Company. New employees will
receive a rate of pay applicable to the classification in which they are placed.
Current employees possessing the same skills and abilities shall be given first
opportunity to fill these positions.



Section 3. Employees may be temporarily transferred for
up to one (1) calendar month from one classification to another. This Section is
generally applicable due to occasional circumstances such as disabilities of a
short duration, vacations, etc. Transferred employees shall receive the rate of
pay of their regular classification or the applicable (i.e., trainee or full
scale) rate of pay or the classification to which they are transferred,
whichever is higher.

Section 4. The Company may, at its discretion,
designate one or more employees to a Master level within any job classification.
Master level employees will be paid the following amounts above the pay rate of
their current classification:

| | Craftsman         | $ 0.75/hour | 
| | ----------------- | ----------- | 
| | Fabricator        | $ 0.60/hour | 
| | Production Worker | $ 0.40/hour | 

Employees assigned to the Master level will have demonstrated
the highest degree of skill, ability, performance and dependability within their
classification. Each assignment will be reviewed and approved by the appropriate
Supervisor and a Superintendent prior to implementation.



In addition to their normal duties, Master level employees are
responsible for:



|- | directing employees in job procedures and other phases of
      work to perpetuate the trade;                          
|- | -----------------------------------------------------------------------------------------------------------------------
|- | conferring with the Supervisor regarding quality and
      quantity requirements and the solution of specific problems;
|- | planning and performing work from schedules,
      specifications and verbal or written instructions; and              
|- | completing appropriate reports and records as required.                                                                



Master level employees are not required to hire, discharge,
discipline or recommend such actions.



The Company may return any employee from their Master level
designation back to their regular job classification and pay scale at any
time.



Master level pay will be given to employees who are assigned to
train other employees in company training schools (i.e.; welding, grinding,
layout, etc.).



ARTICLE V



Hours of Work, Overtime and Holidays

Section 1. Eight (8) consecutive hours exclusive of a
one-half (1/2) hour lunch period shall constitute a normal day's work. Forty
(40) hours consisting of five (5) consecutive days of eight (8) hours each shall
constitute a normal week's work.



Present practices with respect to starting times of shifts and
work schedules shall remain in effect for the duration of this contract, subject
to change by mutual consent, for good and sufficient cause.

WORK SCHEDULE

| | Shift | Starting Time  | Lunch Period | Ending Time      | Work Days  | 
| | ----- | -------------- | ------------ | ---------------- | ---------- | 
| |       |                |              |                  |            | 
| | 1st   | 7:00 a.m.      | 30 min.      | 3:30 p.m.        | Mon.-Fri.  | 
| | 2nd   | 3:30-4:00 p.m. | 30 min.      | 12:00-12:30 a.m. | Mon.-Fri.  | 
| | 3rd   | 10:30 p.m.     | 30 min.      | 7:00 a.m.        | Sun.-Thur. | 

Notice of agreed to changes in the starting times would be posted on the
Company bulletin boards at least one (1) month in advance.

Employees may be assigned work during their normal lunch
periods in case of emergency, but shall be allowed a full-length lunch period
immediately upon completion of the emergency work.



Section 2. Time and one-half will be paid for all time
worked by an employee in excess of forty (40) hours per week.



In order to receive time and one-half for Saturday, an employee
must have worked forty (40) hours during the normal work week unless excused by
the Human Resources Department.



Time and one-half shall be paid for work on Sundays and
holidays, except for third shift employees, who would receive overtime for their
Sunday work shift, which begins on Saturday.

When an employee is excused for a part of his work shift, with
prior permission from his Supervisor, he will be allowed to make up the lost
time at straight-time rate of pay if work is available during the same week in
the employee's classification.



Scheduled overtime will not exceed two (2) hours per day during
the regular work week and will not exceed eight (8) hours on weekends. Third
shift will be notified by 5 p.m. on the proceeding Wednesday; first and second
shift employees will be notified by 12 p.m. on the proceeding Thursday for
weekend work.

Employees who are scheduled for vacation on the Friday before
or Monday after scheduled overtime are not required to work the overtime.



Employees will be credited for eight (8) hours as time worked
toward the forty (40) hours in any work week for vacation days scheduled in
advance and scheduled holidays.



Section 3. A shift premium of Fifty Cents ($0.50) will
be added to the pay rate of those employees regularly assigned to work on the
second (2nd) shift or third (3rd) shift.



Section 4. Employees covered by this Agreement shall be
entitled to eight (8) hours straight-time pay for each of the following
holidays, when not worked:

| | New Year's Day | Labor Day                  | Christmas Eve Day  | 
| | -------------- | -------------------------- | ------------------ | 
| | Memorial Day   | Thanksgiving Day           | Christmas Day      | 
| | July Fourth    | Day after Thanksgiving Day | New Year's Eve Day | 

In addition to the holidays listed above, employees shall
receive two (2) floating holiday in each contract year for which employees
covered by this Agreement shall be entitled to eight (8) hours of straight-time
pay. Employees may schedule this day off on a work day of their choice by
submitting a written request as is done for days of vacation.



In order to receive pay for any holidays when not worked, the
employee must have been employed by the Company for three (3) calendar months
and must have worked as scheduled on the last scheduled work day preceding the
holiday and the first scheduled work day following the holiday, unless off on
disability due to an on-the-job injury or excused by the Personnel and Human
Resource Department.



Employees who are laid off within seven (7) calendar days prior
to a holiday named in this Agreement shall be paid for the holiday.



Holidays falling on Sunday will be observed on the following
Monday. Holidays falling on Saturday will be observed on the preceding
Friday.



Section 5. Any employee who reports for work on his
regular shift and is sent home because of lack of work, or is given less than
four (4) hours of work, shall be guaranteed a minimum of four (4) hours pay at
his regular straight-time base rate. The provision shall not be applicable if
work is unavailable because of reasons beyond the control of the Company.



Section 6. After one (1) year of permanent, full-time
employment, an employee will be eligible for paid funeral leave of three (3)
working days due to a death in their immediate family. The immediate family is
defined as follows:



|- | Spouse,                                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------
|- | Parent of the employee or spouse (or relatives that have
      assumed the role of parenthood of either employee or spouse),
|- | Children (including step-children),                                                                                         
|- | Brothers and sisters of the employee                                                                                        



You will be eligible for one (1) day funeral leave upon the
death of:



|- | Brothers-in-law and sisters-in-law, and
|- | ---------------------------------------
|- | Grandparents and
  grandchildren       



One (1) day funeral pay will be computed as eight (8) times an
employee's current base hourly rate, including any applicable shift premiums.
Eight (8) hours will count as hours worked toward computation of overtime.



Employees must complete a "Request for Leave of Absence" form
and submit the form to the applicable Supervisor and Department Head. If
necessary, additional unpaid time may be arranged through you supervisor.





ARTICLE VI



Vacations

Employees covered by this Agreement who have been in continuous
service or the Company over one (1) year, and who have worked at least one
thousand three hundred eighty-six (1,386) straight-time hours during the twelve
(12) calendar months immediately preceding their anniversary date of employment,
will become eligible for vacation benefits as of their anniversary date in
accordance with the following schedule:

| | Length of Continuous Service |                        | No. of Vacation Hours |    
| | ---------------------------- | ---------------------- | --------------------- | ---
| |                              |                        |                       |    
| | 1                            | but less than 3 years  |                       | 40 
| | 3                            | but less than 8 years  |                       | 80 
| | 8                            | but less than 15 years |                       | 120
| | 15                           | but less than 25 years |                       | 160
| | 25                           | or more years          |                       | 200

Employees who have not completed one thousand three hundred
eighty-six (1,386) straight-time hours will be eligible for pro-rata vacation
pay according to the following schedule:

| | Straight-Time Hours of Work |                | % of Vacation Hours |    
| | --------------------------- | -------------- | ------------------- | ---
| |                             |                |                     |    
| | 1,300                       | to 1,385 hours |                     | 90%
| | 1,200                       | to 1,299 hours |                     | 80%
| | 1,100                       | to 1,199 hours |                     | 70%
| | 1,000                       | to 1,099 hours |                     | 60%
| | 900                         | to 999 hours   |                     | 50%
| | 800                         | to 899 hours   |                     | 40%
| | 700                         | to 799 hours   |                     | 30%
| | 600                         | to 699 hours   |                     | 20%
| | 500                         | to 599 hours   |                     | 10%

Employees are encouraged to use vacation time. However, if an
employee is eligible for more than ten (10) days of vacation, the employee may
accumulate unused time as indicated below. There is no maximum amount of
vacation which may be accumulated:

| | Vacation Days Earned |  | Days Eligible to AccumulatePer Vacation Year | 
| | -------------------- |  | -------------------------------------------- | 
| |                      |  |                                              | 
| | 5                    |  | -                                            | 
| | 10                   |  | -                                            | 
| | 15                   |  | 5                                            | 
| | 20                   |  | 10                                           | 
| | 25                   |  | 15                                           | 

Employees will be paid vacation pay at the time the vacation is
taken at their regular pay rate with the following exception:

| | If an employee has worked eight (8) calendar months or
      more of the twelve (12) calendar months immediately preceding his
      anniversary date of hire in a higher paying classification, the rate for
      such higher paying classification will be used to compute vacation
      pay. | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

Any employee who earns ten (10) days or less will be paid for
any unused vacation on their next anniversary date.



Vacations are to be paid at the time the employee takes his
vacation.



The plant may shut down for vacations not to exceed two (2)
weeks each year. Notice of such shutdown periods will be posted one (1) calendar
month in advance of the plant shutdown.



If an employee's service is terminated for any reason, he will
receive any vacation benefits he has earned.



ARTICLE VII



Grievance and Arbitration Procedure

All grievances that arise out of the application of this
Agreement must be handled in the following manner:

| | If an employee has a complaint or desires to grieve a
      specific occurrence of the application of this agreement. The employee may
      discuss their complaint verbally with the appropriate Supervisor within
      three (3) working days after the date of the occurrence giving rise to the
      complaint. The supervisor shall respond to the employees' complaint within
      three (3) working days. The employee need not have a Union Steward during
      this meeting, but may request one if desired.
      
      Should the complaint not be resolved in discussion with
      the Supervisor, the employee or union may reduce the grievance to writing
      on a Union Grievance form and present the grievance to the appropriate
      Plant Superintendent. The Superintendent, Supervisor, Steward and Employee
      shall meet within five (5) working days to resolve the grievance.
      
      The matter shall then be submitted to an Arbitrator to be
      selected from lists provided by the Federal Mediation and Conciliation
      Service. A request for such list must be made within ten (10) working days
      following this grievance meeting.
      
      Any unresolved grievance for which arbitration is not
      requested in writing within sixty (60) days following the initial filing
      shall be considered as dropped and time barred.
      
      The Arbitrator shall be limited in his consideration to
      the grievance as it was originally presented in writing on the Union
      Grievance form. The Arbitrator shall have no power to add to, subtract
      from, or modify any of the terms of this Agreement, or to arbitrate any
      matter not specifically provided for in this Agreement.
      
      It is agreed that any and all time limits expressed
      herein can be waived at any step by mutual agreement, in writing, by the
      parties.
      
      The fees and expenses of the Arbitrator shall be paid by
      the party to whom the award is adverse. If the award is not entirely
      adverse to a single party, the Arbitrator shall determine the proportion
      of the fees to be paid by each party in correct proportion to his
      evaluation of the merits of each party's position. The Arbitrator's
      decision will be final and binding on both parties.
      
      Any Steward or employee involved in the grievance
      procedure will be granted time off without pay as may reasonably be
      required to: |                                                                                                                                                                       
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Investigate and endeavor to settle the grievance at
      reasonable times and with prior permission of the Supervisor.                                               
| | B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Attend any meeting with Management pertaining to matters
      related to the grievance which cannot reasonably be deferred until a
      scheduled grievance meeting.
| | C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Attend scheduled grievance meetings or
      arbitration's.                                                                                                           



ARTICLE VIII



No Strike - No Lockout Clause

During the life of this Agreement, there shall be no picketing,
strikes of any nature, work stoppages, slowdowns or concerted refusal to work
engaged in by the Union, its officers, agents, members or the employees covered
by this Agreement for any cause whatsoever.



Any employee who participates in any action prohibited by this
Article shall be subject to disciplinary action.



There shall be no lockout by the Company during the term of
this Agreement.





ARTICLE IX



Seniority

Seniority, wherever application to the provisions of this
Agreement, shall be defined as the latest uninterrupted period of regular
employment with the Company.



Section 1. The Company shall prepare and post on the
shop bulletin boards a list of all employees by the date of which their last
period of continuous employment with the Company commenced.



This list shall be posted once each six months.



Where more than one (1) employee has the same date of hire, the
order of placement shall be determined on the basis of alphabetical order of the
surname first, then given name. Employees whose surnames have been changed by
reason of marriage will not have their name repositioned.



Section 2. When new jobs are created or permanent
vacancies occur, bids shall be requested from employees by posting notices on
the shop bulletin boards, and applications shall be made thereafter in writing
through the Human Resource Department. In order for an employee to
be eligible to bid, he must have worked six (6) months or more in his
current classification (this time period will be waived by the Company if no
employees meet this requirement) and meet the standard bidding requirements
for the position posted. The Company shall have the right to temporarily fill
the job vacancy until the job is filled.

Jobs will be posted for three (3) working days prior to being
removed. The Human Resource Department will prepare a list of those employees
eligible to bid and who possess the required skills, abilities and dependability
to bid.

Three (3) working days shall elapse before the Company will
permanently fill the jobs so posted. The Human Resource Department will compile
a list of those employees eligible to bid and who meet the minimum
qualifications to bid. A copy of this list will be provided to the Chief Union
Steward.



This Section will not apply to vacancies resulting from
layoffs, recalls or temporary transfers.



The Company shall fill the job posted in accordance with
Section 5 of this Article.



Employees selected shall be given three (3) calendar months'
trial starting at the start rate. Should the start rate be lower than the
employee's current rate, the employee will receive their current rate. However,
the employee will have to progress through the twenty-four (24) month period to
receive the top rate. Those employees bidding laterally or to a classification
with a lower rate of pay will

Any employee returned to his original job under the provision
of this Section, or at his own request, shall not be eligible to bid on or be
upgraded to the higher classification for a period of twelve (12) calendar
months.

Section 3. An employee on layoff must keep the Company
and the Union advised of his current address and telephone number. Re-employment
privilege shall not extended beyond ten (10) calendar days from the date a
letter is posted to a laid-off employee by Certified Mail notifying the employee
to return to work. Employees are obligated to notify the Company within two (2)
working days following notification to return of their intention to return or
not to return to work. Employees who do not notify the Company of their intent
to return to work within the three (3) working days will be subject to
disciplinary action in accordance with the plant rules.



Section 4. In the event of a reduction in forces or a
return from layoff, the Company shall recall or layoff in accordance with
Section 5 of this Article.



Employees will be provided three (3) working days of notice of
layoff. Re-employment privileges shall not extend beyond the ten (10) calendar
days as set forth in Section 3 of this Article.



Section 5. In all cases of promotion, demotion,
assignment of shifts, layoff or recall, the following factors shall be
considered:



|A. | Seniority;                                                                                                 
|-- | -----------------------------------------------------------------------------------------------------------
|B. | Skills required to perform the work;                                                                       
|C. | Ability, as it relates to work performance, productivity,
      scrap and rework; and                      
|D. | Dependability, as it relates to absenteeism for reasons
      other than disability or work-related
injury.



Seniority shall govern when it is determined that B, C and D
are substantially equal based on the Company's sole and exclusive judgment.



The principle of giving preference to the most senior employee
shall prevail, after applying the above considerations.



For purposes of layoff or recall, senior employees will remain
working provided they can meet the B, C and D considerations listed above.



Section 6. An employee's service will be terminated:



|A. | After they have been off work because of sickness or
      physical disability for a period exceeding twelve (12) consecutive
      calendar months;
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|B. | If they have been laid off in excess of twelve (12)
      consecutive months for employees with less than five (5) years seniority;
      or        
|C. | If they have been laid off in excess of twenty-four (24)
      consecutive months for employees with more than five (5) years
      seniority.      



Section 7. A bargaining unit employee may accept a
nonbargaining unit position offered by the Company. The employee may return to
the appropriate bargaining unit classification within one (1) calendar month
after request to their Supervisor.

The Company may transfer employees to their former bargaining
unit classification when reductions in the nonbargaining unit work force are
necessary or management determines that the employee's performance is not
satisfactory. Employees terminated while working in a nonbargaining unit
position will not be allowed to return to their former bargaining unit
position. Employees who request transfer back to their former bargaining unit
position will not be permitted to transfer to a nonbargaining unit position for
a period of twelve (12) calendar months. Employees working in nonbargaining unit
positions will not have access to the grievance and arbitration procedure of
this Agreement.



Vacation and pension rights shall be based upon length of
continuous service with the Company.



Employees affected by this section shall have their seniority
for layoff and recall privileges pro-rated to reflect their time out of the
bargaining unit.



Section 8. Whenever the efficient operation of the
Company's business might otherwise be impaired, the Company and the Union may
agree to depart from the layoff procedure as set forth in this Article.



ARTICLE X



Plant Rules

The Company shall have the right to establish, change, add to
and enforce reasonable plant rules not inconsistent with the provisions of this
Agreement. A violation of plant rules shall be just cause for disciplinary
action. When changes or additions are made to existing plant rules, a copy will
be sent to the Chief Steward and to the Business Representative five (5)
days before they are posted on Company bulletin boards. No plant rule will be
effective unless posted. The Union may challenge any disciplinary action
resulting from the enforcement of plant rules through the grievance
procedure.



ARTICLE XI



Severability

Any clauses of this Agreement which conflict with applicable
State or Federal law shall be considered void without affecting any of the other
provisions of this Agreement. In the event of any clause in this Agreement being
held void, the Company and the Union will negotiate an acceptable legal
substitute.



ARTICLE XII



Harmony Board - Stewards

There shall be a Harmony Board composed of four (4) Company
representatives and four (4) bargaining unit representative. The Human Resource
Manager or his designee shall serve as the chairperson. Committee members will
serve a rotating basis.



The purpose of this Board is to provide a regular avenue of
communication between the company and the Bargaining Unit.



General items to be considered by the Harmony board
include:



|- | Hardship cases concerning assignment of overtime,
      assignment to shifts or working hours.
|- | ----------------------------------------------------------------------------------------------
|- | Problems of noncontractural nature.                                                           
|- | Prevention of foreseeable problems.                                                           
|- | Improvements of
communications.                                                               



It is understood that this committee shall not entertain
anything that could be construed as contractual in nature or have any authority
to alter the agreement, solve grievances, etc.



Any requests or recommended changes to Company policy by the
Harmony Board will be forwarded to the Human Resources Steering Team or the
Human Resource Department.



This Board shall meet on the first Tuesday each month at 10:00
a.m. The Board may schedule additional meetings. An agenda of items to be
discussed will be exchanged 3 days prior to each meeting.



The Human Resource Manager and the Business Manager of the
Union will serve as members of the Harmony Board.



There shall be accurate minutes kept and distributed on a
timely basis.



The Harmony Board members understand and agree that they will
do everything possible to be productive, to promote continuous improvement and
do all thing necessary to promote the best interest of the Company and it's
Bargaining Unit employees.



The members shall be compensated at their regular rate of pay
for said meetings, with the understanding that the meetings should be kept to
one (1) hour in duration if at all possible.



The Union shall have the right to appoint up to eight (8)
Stewards.





ARTICLE XIII



Visitation Privilege

Authorized Union Business Representatives must seek permission
from the Director of Human Resources or Manufacturing Operations Manager, which
permission will be granted so long as such privilege is not abused, before
entering upon the Company premises. The Business Representative will not be
allowed to conduct Union business which may be completed away from the Company
premises.



Should the duly authorized Union Business Representative be
employed by the Company he/she must have permission, which permission will be
granted so long as such privilege is not abused, before entering upon Company
premises on other than their assigned shift.



ARTICLE XIV



Nonbargaining Unit Employees Working

Section 1. In addition to their normal duties,
Supervisors or other persons excluded from the bargaining unit may perform
production work for the purpose of instructing employees, demonstrating proper
methods and procedures of performing work operations, in cases of employee
absences, emergency, product or process development work and, as necessary, to
maintain production schedules. These employees will not replace or displace
employees represented by the bargaining unit.



Section 2. Cooperative Engineering students will be
allowed to operate machinery and other equipment during their training period.
No more than three (3) students at any one time will operate machinery and other
equipment in the shop. These students will not replace or displace employees
represented by the bargaining unit.





ARTICLE XV



Retirement

The Company provides employee retirement benefits as specified
in the Paul Mueller Company Contract Employees Retirement Plan. The Company pays
the entire cost of this employee benefit.



An employee's normal retirement date is the first day of the
month after the employee reaches age 65. An employee may choose early retirement
upon reaching age 55.



The accrued pension formula shall be Twenty-Five Dollars ($25)
times an employee's years of credited service, provided that no more than
thirty-five (35) years of credited service shall be used.



PROPOSED CHANGES TO THE

PAUL MUELLER COMPANY

CONTRACT EMPLOYEES RETIREMENT PLAN



Amendment Number five to the Paul Mueller Company Contract
Employees Retirement Plan would make a number of technical changes required to
preserve the Plan's tax-qualified status. Only the following few changes could
have any material effect on a Plan participant's benefits:



|- | The Plan's current, 5-year "break-in-service" rule would
      apply to all years of service for any participant who is actively employed
      during 1998 or any later year. The effect of this change would be to
      restore years of service lost by certain participants under the
      break-in-service rules that applied before 1985.                                                                                                                                                                                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Retirees who return to employment on a part-time basis
      (i.e., who are scheduled to work fewer than 20 hours per week) would no
      longer have their pensions suspended during their period of
      reemployment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- | A participant's surviving spouse could elect a lump-sum
      payment of any death benefit having a present value of $10,000 of less.
      (Currently, such an election may be made only if the benefit is $1,750 or
      less.)                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | The acturial assumptions used by the Plan's actuary in
      converting an annuity benefit to a lump-sum payment amount would be
      revised to reflect changes in the Tax Code. Depending on a number of
      factors, this change could either increase or decrease the amount of a
      lump-sum payment. It would have no effect whatsoever, however, on the
      amount of any monthly annuity.                                                                                                                                                                                                                                                                                   
|- | In a related change (but not required by the Tax Code),
      the method used in determining the proper interest rate assumption for
      converting an annuity form of payment into a lump-sum would be slightly
      modified. Rather than determining this interest rate on a quarterly basis,
      the rate would be determined only once a year. By simplifying the
      procedure followed by the Plan's actuary in converting annuity benefits
      into lump-sum amounts, this change should lower the Plan's administrative
      expenses. As with the prior change, it is impossible to predict how this
      change might affect any particular lump-sum payment
  amount.





ARTICLE XVI



Group Medical and Life Insurance Program

During the term of this contract, the Company will provide a
group insurance program for the benefit of the employees covered by this
contract and their dependents.



The program will provide the same benefits as those provided
nonbargaining unit employees.



Group Health insurance benefits will not be reduced during the
term of the agreement.



PROPOSED COMPANY CHANGES - GROUP HEALTH INSURANCE



|1. | We propose the following deductibles and out of pocket
      maximums:
      PPO Providers
      $200.00 calendar year deductible
      10% of the next $5,000; 100% thereafter
      $700.00 total out of pocket maximum per year, per covered
      individualNon-PPO Providers
      $300.00 calendar year deductible
      30% of the next $5,000; 100% thereafter
      $1,800.00 total out of pocket maximum per year, per
      covered individual                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Require employees who wish medical/dental coverage for
      their dependents to pay 12.5% of the cost of dependent coverage. Based on
      the plan's claim experience for the year ended 2000, that would result in
      the following contribution rates. Arranging for employee contributions to
      be made with pre-tax dollars through a Section 125 plan would be
      beneficial to both employees and the Company. We propose that the rates be
      adjusted each year based on the preceding year's claim experience.                                                                                                                                           
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|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | Encourage spouses of Paul Mueller Company employees to
      enroll in group health coverage available through their employers by
      applying a $1,000 deductible to medical claims of spouses who have
      other group health coverage available through their employer but do not
      enroll for that coverage.                                                                                                                                                                                                                                                                                                                                                          
|4. | In addition, we propose a change in the coverage of
      prescription drugs. Presently, prescription drugs are covered under the
      medical plan, subject to the deductible and coinsurance. Participants must
      pay for their prescriptions (at discounts if the NPA card is used) and
      submit them to BCI for reimbursement. We propose that this arrangement is
      replaced by a traditional pharmacy card program with no deductible and a
      20% co-pay. Participants would present their pharmacy card to the
      pharmacist, pay 20% of the discounted price of the medication and have no
      further involvement in the processing of the
  claim.



ARTICLE XVII



Equal Employment Opportunity



The Company and the Union each agree to the principle of equal
employment opportunity to ensure that all employees are afforded an equal
opportunity for employment, promotion, training, placement, transfer and
compensation under the provisions of the Agreement regardless of race, sex,
color, age, religion, handicap, veteran status or national origin.



Any reference to gender in this Agreement will be construed to
refer to both male and female.





ARTICLE XVIII



Termination, Duration and Negotiation

This Agreement shall become effective on (date of ratification), and remain
in full force until midnight (3 years from date of ratification).

The parties acknowledge that, during the negotiations of this
Agreement, each had the unlimited right and opportunity to make demands and
proposals with respect to any subject or matter, and that the understandings and
agreements arrived at by the parties are set forth in this Agreement. The
Company and the Union each agrees that the other shall not be obligated to
bargain with respect to any subject or matter referred to or not specifically
referred to in this Agreement. Unless specifically provided otherwise, all
rights occurring under this Agreement shall expire at its termination.

This Agreement constitutes the entire Agreement of the parties.
It supersedes and cancels prior collective bargaining agreements.



IN WITNESS WHEREOF, the parties hereto have affixed their
signatures this 2nd day of MAY 2001

|PAUL MUELLER COMPANY   |  | SHEET METAL WORKERS'
      INTERNATIONAL ASSOCIATION
      LOCAL UNION #208
|---------------------- |  | ---------------------------------------------------------------------------
|                       |  |                                                                            
|/S/ MICHAEL W. YOUNG   |  | /S/ JAMES R. HULSE                                                         
|/S/ CHRISTINA A. FROST |  | /S/ RICHARD DYRDAHL                                                        
|/S/ DUANE L. SHAW      |  | /S/ STEVE W. SLONE                                                         
|/S/ ALFRED ODOM, JR.   |  |                                                                            
|/S/ JERRY MILLER       |  |