**EXHIBIT 10(b)**October 18, 2005**PERSONAL & CONFIDENTIAL**Mr. Henry G. SchopferDear Hank:I have enjoyed our discussions and getting to know you better. I believe that youpossess the experience and personal attributes necessary to successfully help directour corporation over the next six (6) months. During this period, we will addressmany business and financial challenges requiring the expertise of an accomplishedChief Financial Officer. Therefore, I am pleased to formally extend to you an offerof employment to join Peerless Mfg. Co. as its next Vice Presidentand Chief Financial Officer. You will report directly to me and function as a member of ourManagement Team.Employment with Peerless is at will and this letter does not constitute a contractof employment for any specific term and may be modified by the-company, at anytime. Specific terms of this offer encompass:**•** Base salary: Paid bi-weekly at the rate of $8,000 per pay period. Thisequates to $208,000 on an annualized basis.**•** Success Bonus: A bonus to be paid equal to one times Compensationearned as Chief Financial Officer only upon closing of the “proposed”transaction. Bonus will be capped at $100,000.**•** Benefits: Eligibility begins for medical, dental, life, AD&D, etc., on the firstday of the month following 30 days of continuous employment (details tofollow).**•** Salary Continuation/Severance: A provision for four (4) months salary,paid, bi-weekly, if your employment is terminated without cause (as will bedefined in the formal employment agreement) after successful conclusionof the “proposed” transaction.**•** Continuity Provision: If requested to do so by the new entity, you agreeto remain an employee for an additional four (4) months to address anyclosing, adjustment, legal or other requirements, post closing.Additionally, it is the intent of the Corporation to announce yourelection as Chief Financial Officer on or before October 21, 2005, andfile the appropriate 8K documentation. Also, we will initiate thepreparation of an
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** ** employment agreement formalizing the above and including appropriate provisionsdealing with the protections of Peerless’ confidential information andcompetitive interests. **•** Start date: October 19, 2005Although I am empowered to extend this offer of employment, it is subject to ratification by theBoard of Directors at the next regularly scheduled Board meeting.In the event the “proposed” transaction is not consummated, we agree to the following process:**•** Enter into negotiations to modify your employment agreement withPeerless Mfg. Co. This process will begin prior to July 1, 2006 or, at atime, consistent with the date the “proposed” transaction is terminated.**•** Modifications will encompass alternate bonus compensation basedupon company financial goals, other entitlements, salary continuation andchange of control provisions consistent with other officers.**•** Terms of the revised employment agreement will be effective beginningthe first day of the new business year — July 1, 2006.Hank, I believe you will bring immediate credibility to our financial team and, also, enjoy yourassociation with our corporation. Please verify your acceptance of these terms by signing belowand bringing this letter with you on Tuesday, October 18, 2005.If you have questions, feel free to call me at (214) 353-5590 or after normal business hours, athome.     Cordially,         /s/ Sherrill Stone     Sherrill Stone