**EXHIBIT 10(a)****EMPLOYMENT AGREEMENT**     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into to be effectiveas of October 31, 2005 (the “Effective Date”), between PEERLESS MFG. CO.(“Employer”), and PETER J. BURLAGE (“Employee”).**Section 1. Employment.**     1.1 Employment and Term. Subject to the terms and conditions of thisAgreement, Employer agrees to employ Employee pursuant to this Agreement for aterm beginning on the Effective Date and ending on the third anniversary date ofthe Effective Date, unless Employee’s employment is terminated earlier asprovided in Section 4 below. Notwithstanding the foregoing, in no eventwill the term of Employee’s employment hereunder be less than 90 days from theEffective Date. Sections 2, 3, and 5 of this Agreementshall survive any termination of Employee’s employment with Employer.     1.2 Duties. At all times during the course of Employee’s employmentwith Employer, Employee agrees to perform the duties associated with his positiondiligently and to devote all of his business time, attention and efforts to thebusiness of Employer. Employee agrees to comply with the policies, procedures andguidelines established by Employer from time to time. Employee agrees to performhis duties faithfully and loyally and to the best of his abilities, and shall usehis best efforts to promote the business of Employer. Employee understands andagrees that both the business and personal standards and ethics of Employer’semployees must at all times be above reproach. Employee agrees to act at alltimes so as to reflect this high standard. Employee further agrees to abide byall rules, policies, or procedures established by Employer from time to time.**Section 2. Non-Competition.**     2.1 Non Competition.     (a) Employee agrees that during the term of his employment and for aperiod of one (1) year following termination of his employment (regardless ofwhether Employee is terminated without Cause (as defined in Section 4.l(c) below), for Cause, voluntarily resigns or otherwise), neitherEmployee nor any person or entity directly or indirectly controlling,controlled by or under common control with Employee, shall directly orindirectly, on his own behalf or as an employee or other agent of or aninvestor in another person:     (i) engage in any business conducted by Employer during Employee’sterm of employment with Employer (collectively, the “Business”);     (ii) influence or attempt to influence any customer or supplier ofEmployer or any affiliate of Employer to purchase goods or servicesrelated to the Business from any person other than Employer or suchaffiliate; or     (iii) employ or attempt to employ any individuals who are then orhave been employees of Employer or any affiliate of Employer during thepreceding 12
 

 
months, or influence or seek to influence any such employees to leaveEmployer’s or such affiliate’s employment.     (b) Employee specifically acknowledges that Employer’s products are soldin a world market and that Employee has been engaged with regard toEmployer’s products and Employer’s customers throughout the world withoutgeographic limitation, and accordingly that the restrictive covenantregarding competition contained in this Section 2.1 shall applywithout geographic limitation.     (c) Employee acknowledges that his obligations under this Section2.1 are a material inducement and condition to Employer’s entering intothis Agreement and a material inducement and condition to Employee receivingor having access to Confidential Information (as defined in Section3.1). Employee acknowledges and agrees that the terms and provisions ofthis Agreement (including the severance provisions of Section 4.1)and Employee’s receipt and access to Confidential Information are sufficientconsideration for the restrictions set forth in this Section 2.1.Employee acknowledges and agrees further that such restrictions arereasonable as to time, geographic area and scope of activity and do notimpose a greater restraint than is necessary to protect the goodwill andother business interests of Employer, and Employee agrees that Employer isjustified in believing the foregoing.     (d) If any provision of this Section 2.1 should be found by anycourt of competent jurisdiction to be unenforceable by reason of its beingtoo broad as to the period of time, territory, and/or scope, then, and inthat event, such provision shall nevertheless remain valid and fullyeffective, but shall be considered to be amended so that the period of time,territory, and/or scope set forth shall be changed to be the maximum periodof time, the largest territory, and/or the broadest scope, as the case maybe, which would be found enforceable by such court.     (e) Employee acknowledges that Employee’s violation or attemptedviolation of this Section 2.1 will cause irreparable damage toEmployer or its affiliates, and Employee therefore agrees that Employer shallbe entitled as a matter of right to an injunction, out of any court ofcompetent jurisdiction, restraining any violation or further violation ofsuch agreements by Employee or others acting on his behalf. Employer’s rightto injunctive relief will be cumulative and in addition to any other remediesprovided by law or equity.**Section 3. Confidentiality; Nondisparagement; Conflict of Interest.**     3.1Confidentiality.     (a) In the course of his employment with Employer, Employee will receiveand have access to commercially valuable, confidential or proprietaryinformation (“Confidential Information”). Confidential Information means allinformation, whether oral or written, previously or hereafter developed,acquired or used by Employer and relating to the business of Employer that isnot generally known to others in Employer’s area of business, includingwithout limitation (i) any trade secrets, work product,
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processes, analyses or know-how of Employer; (ii) Employer’sadvertising, product development, strategic and business plans andinformation, including customer and prospect lists; (iii) the prices at whichEmployer has sold or offered to sell its products or services; and (iv)Employer’s financial statements and other financial information.     (b) Employee acknowledges and agrees that the Confidential Informationis and shall be the sole and exclusive property of Employer. Employee shallnot use any Confidential Information for his own benefit or disclose anyConfidential Information to any third party (except in the course ofperforming his authorized duties for Employer under this Agreement), eitherduring or subsequent to his employment with Employer.     (c) Specifically, Employee agrees that, except as expressly authorizedin writing by Employer, or as may be required by law or court order, Employeeshall (i) not disclose Confidential Information to any third party, (ii) notcopy Confidential Information for any reason, and (iii) not removeConfidential Information from Employer’s premises. Upon termination of hisemployment with Employer, Employee shall promptly deliver to the Employer allConfidential Information, including documents, computer disks and othercomputer storage devices and other papers and materials (including all copiesthereof in whatever form) containing or incorporating any ConfidentialInformation or otherwise relating in any way to the Employer’s business thatare in his possession or under his control.     (d) Employee acknowledges that Employee’s violation or attemptedviolation of this Section 3.1 will cause irreparable damage toEmployer or its affiliates, and Employee therefore agrees that Employer shallbe entitled as a matter of right to an injunction, out of any court ofcompetent jurisdiction, restraining any violation or further violation ofsuch agreements by Employee or others acting on his behalf. Employer’s rightto injunctive relief will be cumulative and in addition to any other remediesprovided by law or equity.     (e) Employee acknowledges that on the Effective Date, Employer providedEmployee with selected financial data that constituted ConfidentialInformation that was not known to Employee prior to his receipt thereof.     3.2. Covenant of Nondisparagement. In consideration of this Agreement,Employee agrees and promises that, during the term of and at all times after thetermination of this Agreement (regardless of whether Employee is terminated withoutCause, for Cause, voluntarily resigns or otherwise), not to make any libelous,disparaging or otherwise injurious statements about or concerning Employer or any of itsaffiliates, their officers, employees or representatives. Such prohibited statementsinclude any statement that is injurious to the business or business reputation of any ofEmployer, its affiliates or their employees or representatives, but does not includereasonable statements of disagreement that Employee makes for the purpose of protectingor enforcing any of his rights or interests hereunder or defending against any claim orclaims of Employer, so long as such statements are not slanderous or libelous and aredelivered in terms as would ordinarily be considered customary and appropriate.
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     3.3. Conflict of Interest. Employee agrees that during the term of thisAgreement without the prior approval of the Board of Directors of Employer, Employeeshall not engage, either directly or indirectly, in any activity which may involve aconflict of interest with Employer or its affiliates (a “Conflict of Interest”),including ownership in any supplier, contractor, subcontractor, customer or other entitywith which Employer does business (other than as a shareholder of less than one percentof a publicly traded class of securities) or accept any material payment, service, loan,gift, trip, entertainment or other favor from a supplier, contractor, subcontractor,customer or other entity with which Employer does business and that Employee shallpromptly inform the Chief Executive Officer or the Board of Directors of Employer as toeach offer received by Employee to engage in any such activity. Employee further agreesto disclose to Employer any other facts of which Employee becomes aware which mightinvolve or give rise to a Conflict of Interest or potential Conflict of Interest.**Section 4. Termination.**     4.1 Termination by Employer.     (a) Employer may terminate Employee’s employment without Cause upon no less than 30days prior notice of termination to Employee. In the event of any such terminationwithout Cause, on the effective date of such termination Employer shall pay Employee asseverance compensation, a lump sum payment in an amount equal to the difference of (i)100% of Employee’s then current base salary annualized less (ii) the amount of basesalary paid to Employee from the date of Employer’s notice of termination to theeffective date of such termination. In the event of any such termination without Cause,except as aforesaid, Employer shall have no other obligations to pay any base salary,incentive compensation or bonus or provide for any benefits to Employee after theeffective date of such termination. As used herein, “base salary” excludes any bonus orincentive compensation.     (b) Employer may discharge Employee for Cause at any time without prior notice. Inthe event of any such termination for Cause, Employer’s obligations to pay any basesalary, incentive compensation or bonus or provide for any benefits to Employee shallterminate immediately upon the effective date of such termination.     (c) As used herein, “Cause” shall mean any of the following:     (i) the conviction of Employee by a court of competent jurisdiction of anyfelony or crime involving moral turpitude;     (ii) commission by Employee of an act of fraud or other act reflectingunfavorably upon the public image of Employer as reasonably determined byEmployer’s Board of Directors;     (iii) the continued failure by Employee to substantially perform hisduties hereunder, or the intentional wrongdoing by Employee resulting inmaterial injury to Employer, in each case as reasonably determined byEmployer’s Board of Directors;
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     iv) the failure by Employee to follow a reasonable directive of the Boardof Directors or the Chief Executive Officer of Employer; or     (v) violation of any policies or procedures of Employer, including withoutlimitation, any human relations policy, resulting in material injury toEmployer, in each case as reasonably determined by Employer’s Board ofDirectors.     4.2 Termination by Employee.     (a) Employee may resign from Employee’s employment hereunder (whetherfor voluntary retirement or otherwise) upon no less than 30 days priornotice of resignation to Employer, unless such prior notice is otherwisewaived by Employer in its absolute and sole discretion. The effective dateof Employee’s resignation shall be as stated in Employee’s notice ofresignation or at the sole option of Employer, such earlier date asdetermined by Employer in its sole discretion. If Employee voluntarilyresigns from his employment with Employer during the term hereof (whetherfor voluntary retirement or otherwise), except as expressly set forth inSection 4.2(b) below, Employer’s obligations to pay any base salary,incentive compensation or bonus or provide for any benefits shall terminateimmediately upon the effective date of such resignation. Upon retirement,Employee shall be entitled to all benefits (if any) provided by Employer inthe ordinary course to other Employee officers of Employer at comparableretirement age.     (b) If Employee resigns from Employee’s employment hereunder inaccordance with Section 4.2(a) above and at the time of suchresignation at least one of the following events has continued for at least30 consecutive days after Employee has notified Employer in writing of theoccurrence of such event, Employer shall pay Employee an amount equal to alump sum payment in the amount of 50% of Employee’s then current base salaryannualized, less the amount of base salary paid to Employee from the date ofnotice of resignation to the effective date of such resignation. Suchpayment to be made on the effective date of resignation. In addition, theEmployer will pay the pro rata portion of the annual bonus Employee wouldhave earned pursuant to Employer’s written bonus incentive plan (if any) ifEmployee had remained employed by Employer for the remainder of theapplicable calendar year, with such pro rata amount being determined inequal amounts over the course of the calendar year (for example, 1/12 of thebonus for each month Employee was employed during the applicable bonus year)and such amount being paid in the ordinary course consistent with Employer’spractice. Such events include:     (i) a material adverse change in the nature or scope of theauthorities, functions or duties that Employee had as of the EffectiveDate;
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     (ii) a material adverse change in the calculation (but not theamount) of any annual bonus or a significant reduction in scope orvalue in the aggregate of other monetary or nonmonetary benefits towhich Employee was entitled as of the Effective Date;     (iii) a determination by Employee made in good faith that as aresult of a change in circumstances significantly affecting hisposition, changes in the composition or policies of Employer’s Boardof Directors, or of other events of material effect, he has beenrendered substantially unable to carry out, or has been substantiallyhindered in the performance of, the authorities, functions or dutiesattached to his position as of the Effective Date, or     (iv) the requirement by Employer that Employee have as hisprincipal location of work any location not within the greater Dallas– Fort Worth, Texas metropolitan area.     4.3 Termination on Death of Employee. This Agreement shall terminateautomatically upon the death of Employee and all rights of Employee, his heirs, executorsand administrators to base salary shall terminate immediately; provided, however, Employershall pay to Employee’s duly authorized representative all incentive compensation, bonusand benefits earned or accrued but unpaid as of the date of death, with payment ofEmployee’s benefits to be made as provided in Employer’s benefit plan(s) in effect on thedate of death.     4.4 Termination by Disability. Employer may terminate Employee’s employmenthereunder upon Employee becoming Disabled (as defined below). Upon such termination,Employer shall pay Employee an amount equal to his then current monthly base salary for aperiod of six months, which payment amounts will be reduced by any disability paymentsEmployee receives during such period from the disability insurance provided throughEmployer, if any. Employee shall be entitled to all other disability benefits then ineffect (if any) provided by Employer to all other executive officers of Employer. In theevent of termination due to Employee being Disabled, except as aforesaid, Employer shallhave no other obligation to pay any base salary, incentive compensation or bonus or providefor any benefits to Employee after the effective date of termination. For purposes of thisAgreement, “Disabled” means any mental or physical Impairment lasting (or that will last)more than 180 consecutive or non-consecutive calendar days that prevents Employee fromperforming the essential functions of his position with or without reasonable accommodationas determined by a competent physician chosen by Employer and consented to by Employee orhis legal representatives, which consent will not be unreasonably withheld or delayed.Employee agrees to submit to appropriate medical examinations and authorize his physiciansto release medical information necessary to determine whether Employee is Disabled forpurposes of this Agreement.**Section 5. Miscellaneous.**     5.1 Notice. Except as set forth below in this Section 5.1, any noticeunder this Agreement must be in writing and shall be deemed to have been given whendelivered personally or by overnight courier service or three days after being sent bymail, postage prepaid, at the address indicated below or to such changed address as suchperson may subsequently give such notice of:
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       if to Employer:      Peerless Mfg. Co.    2819 Walnut Hill Lane    Dallas, Texas 75229    Attn: Chairman, Board of Directors       if to Employee:      Peter J. Burlage    5704 Danmire Court    Plano, Texas 75093     Notwithstanding the foregoing, the party receiving notice may waive anyprovisions of this Section 5.1 in its sole and absolute discretion.     5.2 Assignment. This Agreement shall inure to the benefit of and bebinding upon the parties hereto and their respective heirs, personalrepresentatives, successors, and assigns. Except as otherwise provided herein,this Agreement may not be assigned by any party hereto without the prior writtenconsent of the other party hereto. Employer shall require any successor, and anycorporation or other person which is in control of such successor, to all orsubstantially all of the business and/or assets of Employer (by purchase, merger,consolidation or otherwise), by agreement in form and substance reasonablysatisfactory to Employee, to expressly assume and agree to perform this Agreementin the same manner and to the same extent that Employer would be required toperform it if no such succession had taken place. Failure of Employer to obtainsuch agreement prior to the effectiveness of any such succession shall be amaterial breach of this Agreement by Employer. As used in this Agreement,“Employer” shall mean Employer as herein before defined and any successor to itsbusiness and/or all or part of its assets as aforesaid which executes and deliversthe assumption agreement provided for in this Section 5.2 or whichotherwise becomes bound by all the terms and provisions of this Agreement byoperation of law.     5.3 Headings. The section headings used herein are for reference andconvenience only and shall not enter into the interpretation hereof.     5.4 Counterparts. This Agreement may be executed in one or morecounterparts for the convenience of the parties hereto, all of which togethershall constitute one and the same instrument.     5.5 Amendment and Waiver. The provisions of this Agreement may beamended or waived only by written agreement of Employer and Employee, and nocourse of conduct, failure or delay in enforcing the provisions of this Agreementshall effect the validity, binding effect or enforceability of this Agreement.     5.6 Severability. Any provision or portion of a provision of thisAgreement that is held to be invalid or unenforceable will be severable, and thisAgreement will be construed and enforced as if such provision, or portion thereof,did not comprise a part hereof, and the remaining provisions or portions ofprovisions will remain in full force and effect. In lieu of each invalid orunenforceable provision there will be added automatically as part of thisAgreement a provision as
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similar in terms to such invalid or unenforceable provision as may bepossible and be legal, valid, and enforceable.     5.7 Governing Law. This Agreement shall be governed by and construedin accordance with the laws of the State of Texas, without giving effect to anyconflicts of law rule or principle that might require the application of the lawsof another jurisdiction.     5.8 Disputes. The parties to this Agreement agree that in the eventthere is a dispute or controversy between them that cannot be settled throughdirect discussions, it is in the best interests of all for such dispute orcontroversy to be resolved in the shortest time and with the lowest cost ofresolution as practicable. Consequently, any such dispute, controversy or claimbetween the parties to this Agreement will not be litigated, but instead will beresolved by arbitration in accordance with Title 9 of the U.S. Code (United StatesArbitration Act) and the Commercial Arbitration Rules of the American ArbitrationAssociation (the “Rules”), and judgment upon the award rendered by the arbitratormay be entered in any court having jurisdiction thereof. The arbitration will bebefore one neutral arbitrator and will proceed under the Expedited Procedures ofsaid Rules. The arbitration will be held in Dallas, Texas, or such other place asmay be selected by mutual agreement. The arbitrator will have the discretion toorder a prehearing exchange of information by the parties, and to set limits forboth the scope and time period of such exchange. All issues regarding exchangerequests will be decided by the arbitrator. Neither party nor the arbitrator maydisclose the existence, content or results of any arbitration hereunder, unlessrequired to do so by court or regulatory order, without the prior written consentof both parties. Administrative fees and expenses of the arbitration itself willbe borne by the parties equally unless otherwise required by law, a court ofcompetent jurisdiction or the Rules; provided, that, in no event will Employee berequired to pay in excess of $1,000 of such fees and expenses. The arbitrator willalso be authorized to award to the prevailing party all or that fraction of itsreasonable costs and fees as is deemed equitable. Costs of a party’srepresentation by counsel or preparation costs for hearing are not consideredadministrative fees and expenses for purposes hereof. This provision will notapply to any injunctive relief sought by the Company or any of its affiliate underSection 2 or 3 of this Agreement.     5.9 Entire Agreement. This Agreement embodies the complete agreementbetween Employer and Employee regarding the subject matter hereof and the samesupersede all prior agreements or understandings, whether oral, written orotherwise, between the parties hereto that may have related in any way to thesubject matter hereof.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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      **EMPLOYER:**