Exhibit 10(s)
PEERLESS MFG. CO.
INDEMNIFICATION AGREEMENT
     This Indemnification Agreement (this “Agreement”) is made and entered into
as of the                      day of                      2006, by and between
Peerless Mfg. Co., a Texas corporation (the "Corporation”), and
                     (“Indemnitee”).
RECITALS
     A. It is critically important to the Corporation and its shareholders that
the Corporation be able to attract and retain the most capable persons
reasonably available to serve as directors and officers of the Corporation.
     B. In recognition of the need for corporations to be able to induce capable
and responsible persons to accept positions in corporate management, Texas law
authorizes (and in some instances requires) corporations to indemnify their
directors and officers, and further authorizes corporations to purchase and
maintain insurance for the benefit of their directors and officers.
     C. Recent federal legislation and rules adopted by the Securities and
Exchange Commission and the national securities exchanges have imposed
additional disclosure and corporate governance obligations on directors and
officers of public companies and have exposed such directors and officers to new
and substantially broadened civil liabilities.
     D. These legislative and regulatory initiatives have also exposed directors
and officers of public companies to a significantly greater risk of criminal
proceedings, with attendant defense costs and potential criminal fines and
penalties.
     E. Indemnitee is a director and/or officer of the Corporation and his/her
willingness to serve in such capacity is predicated, in substantial part, upon
the Corporation’s willingness to indemnify him/her in accordance with the
principles reflected above, to the full extent permitted by the laws of the
State of Texas, and upon the other undertakings set forth in this Agreement.
     F. Therefore, in recognition of the need to provide Indemnitee with
substantial protection against personal liability, in order to procure
Indemnitee’s continued service as a director and/or officer of the Corporation
and to enhance Indemnitee’s ability to serve the Corporation in an effective
manner, and in order to provide such protection pursuant to express contract
rights (intended to be enforceable irrespective of, among other things, any
amendment to the Corporation’s Second Amended and Restated Articles of
Incorporation (the “Articles”) or Second Amended and Restated Bylaws (the
“Bylaws”) or any change in the composition of the Corporation’s Board of
Directors (the “Board”)), the Corporation wishes to provide in this Agreement
for the indemnification of and the advancement of Expenses (as defined in
Article I) to Indemnitee as set forth in this Agreement and for the continued
coverage of Indemnitee under the Corporation’s directors’ and officers’
liability insurance policies.

 

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     G. In light of the considerations referred to in the preceding recitals, it
is the Corporation’s intention and desire that the provisions of this Agreement
be construed liberally, subject to their express terms, to maximize the
protections to be provided to Indemnitee hereunder.
     NOW, THEREFORE, in order to induce Indemnitee to continue to serve in
his/her present capacity, the Corporation and Indemnitee hereby agree as
follows:
ARTICLE I
Certain Definitions
     As used herein, the following words and terms shall have the following
respective meanings (whether singular or plural):
     “Claim” means an actual or threatened claim or request for relief.
     “Corporate Status” means the status of a person as a current or former
director or officer of the Corporation or, at the request of the Corporation, as
a current or former director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, employee benefit plan, other enterprise or other entity.
     “Disinterested Director” means a director of the Corporation who is not and
was not a party to the Proceeding or Claim in respect of which indemnification
is sought by Indemnitee.
     “Expenses” means all attorneys’ fees, retainers, court costs, transcript
costs, fees of experts, witness fees, travel expenses, duplicating costs,
printing costs, telephone charges, postage, delivery service fees and all other
disbursements or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating or being
or preparing to be a witness in a Proceeding.
     “Incumbent Directors” means the individuals who, as of the date hereof, are
directors of the Corporation and any individual becoming a director subsequent
to the date hereof whose election, nomination for election by the Corporation’s
shareholders, or appointment, was approved by a vote of at least two-thirds of
the then-Incumbent Directors (either by a specific vote or by approval of the
proxy statement of the Corporation in which such person is named as a nominee
for director, without objection to such nomination); provided, however, that an
individual shall not be an Incumbent Director if such individual’s election or
appointment to the Board occurs as a result of an actual or threatened election
contest (as described in Rule 14a-12(c) under the Securities Exchange Act of
1934, as amended) with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board.
     “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor in the
past five years has been, retained to represent: (i) the Corporation or
Indemnitee in any matter material to either such party (other than with respect
to matters concerning Indemnitee under this Agreement, or of other indemnitees
under similar indemnification agreements), or (ii) any other named (or, as to a
threatened matter, reasonably likely to be named) party in the Proceeding or
Claim giving rise to

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a claim for indemnification hereunder. Notwithstanding the foregoing,
Independent Counsel shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Corporation or Indemnitee in an action to
determine Indemnitee’s rights under this Agreement.
     “Official Capacity” means (a) when used with respect to a director, the
office of director in the Corporation, and (b) when used with respect to a
person other than a director, the elective or appointive office in the
Corporation held by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation, but neither
clause (a) nor (b) includes service for any other foreign or domestic
corporation or any employee benefit plan, other enterprise or other entity.
     “Proceeding” means any threatened, pending or completed action, suit or
other proceeding, whether civil, criminal, administrative, arbitrative or
investigative (except one initiated by Indemnitee pursuant to Article V of this
Agreement to enforce his/her rights under this Agreement), any appeal in such an
action, suit or proceeding, and any inquiry or investigation that could lead to
such an action, suit or proceeding.
ARTICLE II
Indemnification
     Section 2.1 General. The Corporation shall indemnify, and advance Expenses
to, Indemnitee to the full extent permitted by applicable law in effect on the
date hereof and to such greater extent as applicable law may thereafter from
time to time permit. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the right to be indemnified
and to have Expenses advanced in all Proceedings to the full extent permitted by
Article 2.02-1 of the Texas Business Corporation Act (the “TBCA”) (or any
successor provision). The provisions set forth in this Agreement are provided in
addition to and as a means of furtherance and implementation of, and not in
limitation of, the obligations expressed in this Article II.
     Section 2.2 Additional Indemnity of the Corporation. Indemnitee shall be
entitled to indemnification pursuant to this Section 2.2 if, by reason of
his/her Corporate Status, he/she is, or is threatened to be made, a party to any
Proceeding (except to the extent limited by Section 2.3). Pursuant to this
Section 2.2, Indemnitee shall be indemnified against judgments, penalties
(including excise and similar taxes), fines, settlements and reasonable Expenses
actually incurred by him/her or on his/her behalf in connection with such
Proceeding or any Claim therein, if (a) he/she conducted himself/herself in good
faith, (b) he/she reasonably believed: (i) in the case of conduct in his/her
Official Capacity, that his/her conduct was in the Corporation’s best interests;
and (ii) in all other cases, that his/her conduct was at least not opposed to
the Corporation’s best interests, and (c) in the case of any criminal
Proceeding, had no reasonable cause to believe his/her conduct was unlawful.
Nothing in this Section 2.2 shall limit the benefits of Section 2.1 or any other
Section hereunder.
     Section 2.3 Limitation on Indemnity. The indemnification otherwise
available to Indemnitee under Section 2.2 shall be limited to the extent set
forth in this Section 2.3. In the event that Indemnitee is found liable to the
Corporation or is found liable on the basis that

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personal benefit was improperly received by Indemnitee, whether or not the
benefit resulted from an action taken in Indemnitee’s Official Capacity,
Indemnitee shall, with respect to the Claim in the Proceeding in which such
finding is made, be indemnified only against reasonable Expenses actually
incurred by him/her in connection with that Claim. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in respect of
any Claim in such Proceeding as to which Indemnitee shall have been adjudged to
be liable for willful or intentional misconduct in the performance of his/her
duty to the Corporation; provided, however, that, if applicable law so permits,
indemnification against such Expenses shall nevertheless be made by the
Corporation in such event if and only to the extent that the court in which such
Proceeding shall have been brought or is pending, shall determine.
ARTICLE III
Expenses
     Section 3.1 Expenses of a Party Who Is Wholly or Partly Successful.
Indemnitee shall be indemnified against all reasonable Expenses incurred by
him/her in connection with any Proceeding to which Indemnitee is a party by
reason of his/her Corporate Status and in which Indemnitee is wholly successful,
on the merits or otherwise, in the defense of such Proceeding. In the event that
Indemnitee is not wholly successful, on the merits or otherwise, in a Proceeding
but is successful, on the merits or otherwise, as to any Claim in such
Proceeding, the Corporation shall indemnify Indemnitee against all reasonable
Expenses incurred by him/her or on his/her behalf relating to each such Claim.
For purposes of this Section 3.1 and without limitation, the termination of a
Claim in a Proceeding by dismissal, with or without prejudice, shall be deemed
to be a successful result as to such Claim.
     Section 3.2 Expenses of a Witness. To the extent that Indemnitee is, by
reason of his/her Corporate Status, a witness or otherwise participates in any
Proceeding at a time when he/she is not named a defendant or respondent in the
Proceeding, he/she shall be indemnified against all Expenses incurred by him/her
or on his/her behalf in connection therewith.
     Section 3.3 Advancement of Expenses. The Corporation shall pay all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding or Claim, whether brought by the Corporation or otherwise, in
advance of any determination respecting entitlement to indemnification pursuant
to Article IV hereof within ten business days after the receipt by the
Corporation of a written request from Indemnitee setting forth a written
affirmation of his/her good faith belief that he/she has met the standard of
conduct necessary for indemnification under applicable law, confirming his/her
obligation under the last sentence of this Section 3.3 and requesting such
payment or payments from time to time, whether prior to or after final
disposition of such Proceeding or Claim. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee. Indemnitee hereby
undertakes and agrees that he/she will repay the Corporation for any Expenses so
advanced to the extent that it shall ultimately be determined by a court in a
final adjudication from which there is no further right of appeal, that
Indemnitee is not entitled to be indemnified against such Expenses.

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ARTICLE IV
Procedure for Determination of Right to Indemnification
     Section 4.1 Request for Indemnification. To obtain indemnification under
this Agreement, Indemnitee shall submit to the Corporation a written request,
including therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification for a
Proceeding or Claim. The Secretary or an Assistant Secretary of the Corporation
shall, promptly upon receipt of such a request for indemnification, advise the
Board in writing that Indemnitee has requested indemnification. If, at the time
of the receipt of such request, the Corporation has directors’ and officers’
liability insurance in effect under which coverage for such Proceeding or Claim
is potentially available, the Corporation shall give prompt written notice of
such Proceeding or Claim to the applicable insurers in accordance with the
procedures set forth in the applicable policies. The Corporation shall provide
to Indemnitee a copy of such notice delivered to the applicable insurers, and
copies of all subsequent correspondence between the Corporation and such
insurers regarding the Proceeding or Claim, in each case substantially
concurrently with the delivery or receipt thereof by the Corporation. The
failure by Indemnitee to timely notify the Corporation of any Proceeding or
Claim shall not relieve the Corporation from any liability hereunder unless, and
only to the extent that, the Corporation did not otherwise learn of such
Proceeding or Claim and such failure results in forfeiture by the Corporation of
substantial defenses, rights or insurance coverage.
     Section 4.2 Determination of Right to Indemnification.
          (a) To the extent that Indemnitee shall have been wholly successful,
on the merits or otherwise, in defense of any Proceeding or Claim or in defense
of any issue or matter therein, including without limitation dismissal without
prejudice, Indemnitee shall be indemnified against judgments, penalties
(including excise and similar taxes), fines, settlements and reasonable Expenses
actually incurred by him/her or on his/her behalf in connection with any such
Proceeding or Claim or any issue or matter therein in accordance with Article II
and no Standard of Conduct Determination (as defined in Section 4.2(b)) shall be
required.
          (b) Upon written request by Indemnitee for indemnification pursuant to
Section 4.1 hereof, a determination of whether Indemnitee has satisfied any
applicable standard of conduct under Texas law that is a legally required
condition precedent to indemnification of Indemnitee hereunder with respect to
Indemnitee’s entitlement thereto (a “Standard of Conduct Determination”) shall
be made in the specific case in accordance with Article 2.02-1 of the TBCA (or
any successor provision). Indemnitee will cooperate with the person or persons
making such Standard of Conduct Determination, including providing to such
person or persons, upon reasonable advance request, any documentation or
information that is not privileged or otherwise protected from disclosure and
that is reasonably available to Indemnitee and reasonably necessary to such
determination. The Corporation shall indemnify and hold harmless Indemnitee
against and, if requested by Indemnitee, shall reimburse Indemnitee for, or
advance to Indemnitee, within five business days of such request, any and all
costs and expenses (including attorneys’ and experts’ fees and expenses)
incurred by Indemnitee in so cooperating with the person or persons making such
Standard of Conduct Determination.

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          (c) The Corporation shall use its reasonable best efforts to cause any
Standard of Conduct Determination required under Section 4.2(b) to be made as
promptly as practicable. If (i) the person or persons empowered or selected
under this Section 4.2 to make the Standard of Conduct Determination shall not
have made a determination within 30 days after the later of (A) receipt by the
Corporation of written notice from Indemnitee advising the Corporation of the
final disposition of the applicable Proceeding or Claim (the date of such
receipt being the “Notification Date”) and (B) the selection of special legal
counsel, if such determination is to be made by special legal counsel, that is
permitted under the provisions of Section 4.2(e) to make such determination, and
(ii) Indemnitee shall have fulfilled his/her obligations set forth in the second
sentence of Section 4.2(b), then Indemnitee shall be deemed to have satisfied
the applicable standard of conduct; provided that such 30-day period may be
extended for a reasonable time, not to exceed an additional 30 days, if the
person or persons making such determination in good faith requires such
additional time for obtaining or evaluating documentation and/or information
relating thereto; and provided, further, that the 30-day limitation set forth in
this Section 4.2(c) shall not apply and such period shall be extended as
necessary if within 30 days after receipt by the Corporation of the request for
indemnification under Section 4.1 the Board has resolved to submit such
determination to the shareholders for their consideration at an annual meeting
thereof to be held within 90 calendar days after such receipt and such
determination is made thereat, or a special meeting of shareholders is called
within 30 calendar days after such receipt for the purpose of making such
determination, such meeting is held for such purpose within 60 calendar days
after having been so called and such determination is made thereat.
          (d) If (i) Indemnitee shall be entitled to indemnification hereunder
pursuant to Section 4.2(a), (ii) no determination of whether Indemnitee has
satisfied any applicable standard of conduct under Texas law is a legally
required condition precedent to indemnification of Indemnitee hereunder, or
(iii) Indemnitee has been determined or deemed pursuant to Section 4.2(b) or (c)
to have satisfied any applicable standard of conduct under Texas law that is a
legally required condition precedent to indemnification of Indemnitee hereunder,
then the Corporation shall pay to Indemnitee, within five business days after
the later of (x) the Notification Date in respect of the applicable Proceeding
or Claim and (y) the earliest date on which the applicable criterion specified
in clause (i), (ii) or (iii) above shall have been satisfied, all reasonable
Expenses incurred by him/her in connection with the applicable Proceeding or
Claim.
          (e) If a Standard of Conduct Determination is to be made by special
legal counsel pursuant to Article 2.02-1 of the TBCA (or any successor
provision), such special legal counsel must be Independent Counsel (as defined
in Article I hereof) and the Corporation shall give written notice to Indemnitee
advising him/her of the identity of the special legal counsel so selected.
Indemnitee may, within five business days after receiving written notice of
selection from the Corporation, deliver to the Corporation a written objection
to such selection; provided, however, that such objection may be asserted only
on the ground that the special legal counsel so selected does not satisfy the
criteria set forth in the definition of “Independent Counsel” in Article 1, and
the objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person or firm so selected
shall act as special legal counsel. If such written objection is properly and
timely made and substantiated, (i) the special legal counsel so selected may not
serve as special legal counsel unless and until such objection is

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withdrawn or a court has determined that such objection is without merit, and
(ii) the Corporation may, at its option, select an alternative special legal
counsel and give written notice to Indemnitee advising him/her of the identity
of the alternative special legal counsel so selected, in which case the
provisions of the two immediately preceding sentences and clause (i) of this
sentence shall apply to such subsequent selection and notice. If applicable, the
provisions of clause (ii) of the immediately preceding sentence shall apply to
successive alternative selections. If no special legal counsel that is permitted
under the foregoing provisions of this Section 4.2(e) to make the Standard of
Conduct Determination shall have been selected within 30 days after the
Corporation gives its initial notice pursuant to the first sentence of this
Section 4.2(e), Indemnitee may petition the courts of the State of Texas for
resolution of any objection which shall have been made by Indemnitee to the
Corporation’s selection of special legal counsel and/or for the appointment as
special legal counsel of a person or firm selected by the Court or by such other
person as the Court shall designate, and the person or firm with respect to whom
all objections are so resolved or the person or firm so appointed will act as
special legal counsel. In all events, the Corporation shall pay all of the
reasonable fees and expenses of the special legal counsel incurred in connection
with the special legal counsel’s determination pursuant to Section 4.2(b).
     Section 4.3 No Other Presumption. The termination of any Proceeding or of
any Claim by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) by itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did meet the
requirements for indemnification under Section 2.2. Indemnitee shall be deemed
to have been found liable in respect of any Claim only after he/she shall have
been so adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom.
ARTICLE V
Certain Remedies of Indemnitee
     Section 5.1 Indemnitee Entitled to Adjudication in an Appropriate Court. In
the event (a) a determination is made pursuant to Article IV that Indemnitee is
not entitled to indemnification under this Agreement, or (b) there has been any
failure by the Corporation to make timely payment or advancement of any amounts
due hereunder, Indemnitee shall be entitled to commence an action seeking an
adjudication in an appropriate court of the State of Texas, or in any other
court of competent jurisdiction, of his/her entitlement to such indemnification
or advancement of Expenses. Indemnitee shall commence such action seeking an
adjudication within 180 days following the date on which Indemnitee first has
the right to commence such action pursuant to this Section 5.1, or such right
shall expire. The Corporation agrees not to oppose Indemnitee’s right to seek
any such adjudication.
     Section 5.2 Adverse Determination Not to Affect any Judicial Proceeding. In
the event that a determination shall have been made pursuant to Article IV that
Indemnitee is not entitled to indemnification, any judicial proceeding commenced
pursuant to this Article V shall be conducted in all respects as a de novo trial
on the merits, and Indemnitee shall not be prejudiced by reason of such initial
adverse determination. In any judicial proceeding commenced pursuant to this
Article V, the Corporation shall have the burden of proving, by clear

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and convincing evidence, that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
     Section 5.3 Corporation Bound by Determination Favorable to Indemnitee in
any Judicial Proceeding. If a determination shall have been made or deemed to
have been made pursuant to Article IV that Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to this Article V, absent a knowing
misstatement by Indemnitee of a material fact, or a knowing omission of a
material fact necessary to make a statement by Indemnitee not materially
misleading, in connection with the request for indemnification.
     Section 5.4 Corporation Bound by this Agreement. The Corporation shall be
precluded from asserting in any judicial proceeding commenced pursuant to this
Article V that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and shall stipulate in any such court that the
Corporation is bound by all the provisions of this Agreement.
     Section 5.5 Indemnitee Entitled to Expenses of Judicial Proceeding. In the
event that Indemnitee seeks a judicial adjudication of his/her rights under, or
to recover damages for breach of, this Agreement, Indemnitee shall be entitled
to recover from the Corporation, and shall be indemnified by the Corporation
against, any and all reasonable expenses (of the types described in the
definition of Expenses in Article I) incurred by him/her in such judicial
adjudication but only if he/she prevails therein. If it shall be determined in
said judicial adjudication that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses or other benefit sought,
the expenses incurred by Indemnitee in connection with such judicial
adjudication shall be reasonably prorated in good faith by counsel for
Indemnitee.
     Section 5.6 No Diminishment of Rights. The Corporation shall not adopt any
amendment to the Articles or Bylaws the effect of which would be to deny,
diminish or encumber Indemnitee’s rights to indemnity pursuant to the Articles,
Bylaws, the TBCA or any other applicable law as applied to any act or failure to
act occurring in whole or in part prior to the date (the "Effective Date”) upon
which the amendment was approved by the Board or the shareholders of the
Corporation, as the case may be. In the event that the Corporation shall adopt
any amendment to the Articles or Bylaws the effect of which is to so deny,
diminish or encumber Indemnitee’s rights to indemnity, such amendment shall
apply only to acts or failures to act occurring entirely after the Effective
Date thereof.
ARTICLE VI
Miscellaneous
     Section 6.1 Non-Exclusivity. The rights of Indemnitee to receive
indemnification and advancement of Expenses under this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Articles or Bylaws, any other agreement, vote
of shareholders or a resolution of directors of the Corporation, or otherwise.
No amendment or alteration of the Articles or Bylaws or any provision thereof
shall adversely affect Indemnitee’s rights hereunder and such rights shall be in
addition to any rights Indemnitee may have under the Articles, Bylaws, the TBCA
or otherwise.

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To the extent that there is a change in the TBCA (whether by statute or judicial
decision) which allows greater indemnification by agreement than would be
afforded currently under the Articles or Bylaws and this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by virtue of this
Agreement the greater benefit so afforded by such change.
     Section 6.2 Insurance and Subrogation.
          (a) For the duration of Indemnitee’s service as a director and/or
officer of the Corporation, and thereafter for so long as Indemnitee shall be
subject to any pending or possible Proceeding or Claim, the Corporation shall
use commercially reasonable efforts (taking into account the scope and amount of
coverage available relative to the cost thereof) to cause to be maintained in
effect policies of directors’ and officers’ liability insurance providing
coverage for directors and/or officers of the Corporation. The Corporation shall
provide Indemnitee with a copy of all directors’ and officers’ liability
insurance applications, binders, policies, declarations, endorsements and other
related materials. Without limiting the generality or effect of the two
immediately preceding sentences, the Corporation shall not discontinue or
significantly reduce the scope or amount of coverage from one policy period to
the next (i) without the prior approval thereof by a majority vote of the
Incumbent Directors, even if less than a quorum, or (ii) if at the time that any
such discontinuation or significant reduction in the scope or amount of coverage
is proposed there are no Incumbent Directors, without the prior written consent
of Indemnitee (which consent shall not be unreasonably withheld or delayed). In
all policies of directors’ and officers’ liability insurance obtained by the
Corporation, Indemnitee shall be named as an insured in such a manner as to
provide Indemnitee the same rights and benefits, subject to the same
limitations, as are accorded to the Corporation’s directors and officers most
favorably insured by such policy. The Corporation may, but shall not be required
to, create a trust fund, grant a security interest or use other means, including
without limitation a letter of credit, to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance Expenses
pursuant to this Agreement.
          (b) In the event of any payment by the Corporation under this
Agreement, the Corporation shall be subrogated to the extent of such payment to
all of the related rights of recovery of Indemnitee against other persons or
entities (other than Indemnitee’s successors). Indemnitee shall execute all
papers reasonably required to evidence such rights (all of Indemnitee’s
reasonable Expenses related thereto to be reimbursed by or, at the option of
Indemnitee, advanced by the Corporation.
          (c) The Corporation shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
     Section 6.3 Defense of Claims. The Corporation shall be entitled to
participate in the defense of any Proceeding or Claim or to assume the defense
thereof, with counsel reasonably satisfactory to Indemnitee; provided that if
Indemnitee believes, after consultation with counsel selected by Indemnitee,
that (a) the use of counsel chosen by the Corporation to represent Indemnitee
would present such counsel with an actual or potential conflict, (b) the named
parties in any such Proceeding or Claim (including any impleaded parties)
include both the Corporation

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and Indemnitee and Indemnitee shall conclude, based on the advice of counsel,
that there may be one or more legal defenses available to him/her that are
different from or in addition to those available to the Corporation, or (c) any
such representation by such counsel would be precluded under the applicable
standards of professional conduct then prevailing, then Indemnitee shall be
entitled to retain separate counsel (but not more than one law firm plus, if
applicable, local counsel in respect of any particular Proceeding or Claim) at
the Corporation’s expense. The Corporation shall not be liable to Indemnitee
under this Agreement for any amounts paid in settlement of any Proceeding or
Claim effected without the Corporation’s prior written consent. The Corporation
shall not, without the prior written consent of Indemnitee, effect any
settlement of any Proceeding or Claim to which Indemnitee is, or could have
been, a party unless such settlement solely involves the payment of money and
includes a complete and unconditional release of Indemnitee from all liability
on any claims that are the subject matter of such Proceeding or Claim. Neither
the Corporation nor Indemnitee shall unreasonably withhold its consent to any
proposed settlement; provided, that Indemnitee may withhold consent to any
settlement that does not provide a complete and unconditional release of
Indemnitee.
     Section 6.4 Exculpation of Directors. If Indemnitee is or was a director of
the Corporation, he/she shall not in that capacity be liable to the Corporation
or its shareholders for monetary damages for an act or omission in Indemnitee’s
capacity as a director, except that Indemnitee’s liability shall not be
eliminated or limited for: (a) a breach of Indemnitee’s duty of loyalty to the
Corporation or its shareholders, (b) an act or omission not in good faith that
constitutes a breach of duty of Indemnitee to the Corporation or an act or
omission that involves intentional misconduct or a knowing violation of the law,
(c) a transaction from which Indemnitee received an improper benefit, whether or
not the benefit resulted from an action taken within the scope of Indemnitee’s
office, or (d) an act or omission for which the liability of Indemnitee is
expressly provided for by statute.
     Section 6.5 Duration of Agreement. This Agreement shall continue for so
long as Indemnitee serves as a director or officer of the Corporation or, at the
request of the Corporation, as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, employee benefit plan, other enterprise or other
entity, and thereafter shall survive until and terminate upon the later to occur
of (a) the final termination of all pending Proceedings in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Article V
relating thereto, and (b) the expiration of all statutes of limitation
applicable to possible Claims arising out of Indemnitee’s Corporate Status.
     Section 6.6 Successors and Binding Agreement.
          (a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Corporation, by
agreement in form and substance reasonably satisfactory to Indemnitee and
his/her counsel, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Corporation would be required to perform
if no such succession had taken place. This Agreement shall be binding upon and
inure to the benefit of the Corporation and any successor to the Corporation,
including without limitation any person acquiring directly or indirectly all or
substantially all of the business or

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assets of the Corporation whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
“Corporation” for purposes of this Agreement), but shall not otherwise be
assignable or delegatable by the Corporation.
          (b) This Agreement shall inure to the benefit of and be enforceable by
Indemnitee’s personal or legal representatives, executors, administrators,
heirs, distributees, legatees and other successors.
          (c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 6.6(a) and 6.6(b). Without limiting the generality or effect of the
foregoing, Indemnitee’s right to receive payments hereunder shall not be
assignable, whether by pledge, creation of a security interest or otherwise,
other than by a transfer by Indemnitee’s will or by the laws of descent and
distribution, and, in the event of any attempted assignment or transfer contrary
to this Section 6.6(c), the Corporation shall have no liability to pay any
amount so attempted to be assigned or transferred.
     Section 6.7 Legal Fees and Expenses. It is the intent of the Corporation
that Indemnitee not be required to incur legal fees or other Expenses associated
with the interpretation, enforcement or defense of Indemnitee’s rights under
this Agreement by litigation or otherwise because the cost and expense thereof
would substantially detract from the benefits intended to be extended to
Indemnitee hereunder. Accordingly, without limiting the generality or effect of
any other provision hereof, if it should appear to Indemnitee that the
Corporation has failed to comply with any of its obligations under this
Agreement or in the event that the Corporation or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, Indemnitee the benefits provided or intended to be provided to
Indemnitee hereunder, the Corporation irrevocably authorizes Indemnitee from
time to time to retain counsel of Indemnitee’s choice, at the expense of the
Corporation as hereafter provided, to advise and represent Indemnitee in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Corporation or any director, officer,
shareholder or other person affiliated with the Corporation, in any
jurisdiction. Notwithstanding any existing or prior attorney-client relationship
between the Corporation and such counsel, the Corporation irrevocably consents
to Indemnitee’s entering into an attorney-client relationship with such counsel,
and in that connection the Corporation and Indemnitee agree that a confidential
relationship shall exist between Indemnitee and such counsel. Without respect to
whether Indemnitee prevails, in whole or in part, in connection with any of the
foregoing, the Corporation will pay and be solely financially responsible for
any and all attorneys’ and related fees and expenses incurred by Indemnitee in
connection with any of the foregoing.
     Section 6.8 Notice by Each Party. Indemnitee agrees to promptly notify the
Corporation in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document or communication relating
to any Proceeding or Claim for which Indemnitee may be entitled to
indemnification or advancement of Expenses hereunder. The Corporation agrees to
promptly notify Indemnitee in writing, as to the pendency

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of any Proceeding or Claim which may involve a claim against Indemnitee for
which Indemnitee may be entitled to indemnification or advancement of Expenses
hereunder.
     Section 6.9 Amendment. This Agreement may not be modified or amended except
by a written instrument executed by or on behalf of each of the parties hereto.
     Section 6.10 Waivers. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term only by a writing
signed by the party against which such waiver is to be asserted. Unless
otherwise expressly provided herein, no delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
     Section 6.11 Entire Agreement. This Agreement and the documents expressly
referred to herein constitute the entire agreement between the parties hereto
with respect to matters covered hereby, and any other prior or contemporaneous
oral or written understandings or agreements with respect to the matters covered
hereby are expressly superseded by this Agreement.
     Section 6.12 Severability. If any provision of this Agreement or the
application of such provision to any person or circumstance, shall be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other persons or circumstances, and the parties
hereto agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom and the
remainder of this Agreement will have the same force and effectiveness as if
such part or parts had never been included herein; provided, however, that the
parties shall negotiate in good faith with respect to an equitable modification
of the provision or application thereof declared to be invalid, unenforceable or
void. Any such finding of invalidity or unenforceability shall not prevent the
enforcement of such provision in any other jurisdiction to the maximum extent
permitted by applicable law.
     Section 6.13 Notices. Unless otherwise expressly provided herein, all
notices, requests, demands, consents, waivers, instructions, approvals and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered to or mailed, certified mail return receipt
requested, first-class postage paid, addressed as follows: (i) if to the
Corporation, Peerless Mfg. Co., 2819 Walnut Hill Lane, Dallas, Texas 75229,
Attn: Secretary, and (ii) if to Indemnitee, at the address specified on the
signature page of this Agreement, or to such other address or to such other
individuals as any party shall have last designated by notice to the other
parties. All notices and other communications given to any party in accordance
with the provisions of this Agreement shall be deemed to have been given when
delivered or sent to the intended recipient thereof in accordance with the
provisions of this Section 6.13.

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     Section 6.14 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Texas without regard to the
principles of conflict of laws.
     Section 6.15 Headings. The Article and Section headings in this Agreement
are for convenience of reference only, and shall not be deemed to alter or
affect the meaning or interpretation of any provisions hereof.
     Section 6.16 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.

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     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to
be effective as of the date first above written.

                  PEERLESS MFG. CO.    
 
           
 
  By:        
 
     
 
Name:
Title:    
 
                INDEMNITEE    
 
                          [Name]    
 
                Indemnitee Notice Address: