EXHIBIT 10(k)

                                 AGREEMENT


     THIS AGREEMENT (the "Agreement") is made and entered into as of  the
  23rd day  of  July,  1999,  by  and  between  PEERLESS  MFG.  CO.  (the
  "Company"), and GILBERT DARWYN CORNWELL (the "Executive").

     WHEREAS, the Executive serves as a senior executive of the Company;

     WHEREAS,  the  Executive possesses  knowledge  of the  business  and
  affairs of the Company, its policies, methods, personnel and plans  for
  the future; and

     WHEREAS,  the  Board  of Directors  of  the  Company  (the  "Board")
  recognizes that the Executive's contribution to the growth and  success
  of the Company has been substantial  and wishes to offer an  inducement
  to the Executive to remain in the employ of the Company;

     NOW,  THEREFORE,  in  consideration of  the  foregoing  and  of  the
  respective covenants and  agreements of the  parties herein  contained,
  this Agreement  sets  forth benefits  which  the Company  will  pay  to
  Executive in the event of termination of Executive's employment, except
  as a  result of  death, disability,  retirement or  termination by  the
  Company for Cause, following a "Change  in Control" of the Company  (in
  each case as such terms or events are defined or discussed herein):

     1.  Term.   The term  of  this Agreement  shall continue  until  the
  earlier  of  (i)  the  expiration  of  the  third  anniversary  of  the
  occurrence of a Change in Control, (ii) the Executive's death, or (iii)
  the Executive's earlier voluntary  retirement (except for those  events
  described  in  Section  3(a)(2));  provided,  however,  that  on   each
  anniversary of the Change in Control, the period referenced in  Section
  (i) above  shall  automatically  be extended  for  an  additional  year
  unless, not later than 90 calendar days prior to such anniversay  date,
  the Company shall have  given written notice to  the Executive that  it
  does not wish to have the term extended.

     2.  Definitions.

         (a) Affiliate and Associate.  "Affiliate" and "Associate"  shall
  have the respective meanings  ascribed to such terms  in Rule 12b-2  of
  the General Rules and Regulations under the Securities Exchange Act  of
  1934, as amended  (the "Exchange Act")  in effect on  the date of  this
  Agreement.

         (b) Cause.   For  "Cause" shall  mean that  the Executive  shall
  have committed:

             (i) The conviction  of Executive,  by a  court of  competent
  jurisdiction, of any felony;

             (ii)     Commission by Executive of an intentional  material
  act of fraud to his pecuniary benefit in connection with his duties  or
  in the  course  of  his employment  with  the  Company,  as  reasonably
  determined by the Board;
<PAGE>
             (iii)    The intentional and continued failure by  Executive
  to substantially  perform  his  duties hereunder,  or  the  intentional
  wrongdoing  by  Executive resulting in material  injury to the Company.
  No act, or failure  to act, on  the part of  Executive shall be  deemed
  "intentional" unless done, or omitted to  be done, by Executive not  in
  good faith and  without  reasonable  belief that his action or omission
  was in the best interests of the Company.

         (c) Change  in Control.   A "Change in  Control" of the  Company
  shall have occurred if  at any time during  the term of this  Agreement
  any of the following events shall occur:

             (i) The Company is merged, consolidated or reorganized  into
  or with another corporation  or other legal person  and as a result  of
  such merger, consolidation  or reorganization  less than  50.1% of  the
  combined voting  power  to  elect Directors  of  the  then  outstanding
  securities of the remaining corporation or legal person or its ultimate
  parent immediately after such transaction  is available to be  received
  by all stockholders  on a pro  rata basis and  is actually received  in
  respect of or exchange for voting securities of the Company pursuant to
  such transaction;

             (ii)     The Company sells all  or substantially all of  its
  assets to any other corporation or other legal person not controlled by
  or under common control with the Company;

             (iii)    Any person or group (including any "person" as such
  term is used in  Section 13(d)(3) or Section  14(d)(2) of the  Exchange
  Act has become the beneficial owner (as the term "beneficial owner"  is
  defined  under  Rule  13d-3  or   any  successor  rule  or   regulation
  promulgated under the Exchange Act) of  securities which when added  to
  any securities  already owned  by such  person would  represent in  the
  aggregate 50% or more of the then outstanding securities of the Company
  which are entitled to vote to elect Directors;

             (iv)     If at  any  time,  the  Continuing  Directors  then
  serving on the  Board cease  for any reason  to constitute  at least  a
  majority thereof;

             (v) Any occurrence that would be required to be reported  in
  response to  Item  6(e)  of  Schedule 14A  of  Regulation  14A  or  any
  successor rule or regulation promulgated under the Exchange Act; or

             (vi)     Such other events that cause a change in control of
  the Company,  as  determined  by the  Board  in  its  sole  discretion;
  provided, however, that a Change in Control of the Company shall not be
  deemed to have occurred as the result of any transaction having one  or
  more of the foregoing effects if  such transaction is proposed by,  and
  includes a significant equity  participation of, executive officers  of
  the Company as constituted immediately prior to the occurrence of  such
  transaction or any  Company employee  stock ownership  plan or  pension
  plan.

         (d) Code.   The "Code" shall mean  the Internal Revenue Code  of
  1986, as amended.
<PAGE>
         (e) Continuing Director.   A "Continuing Director" shall mean  a
  Director of  the  Company  who  (i) is  not  an  Acquiring  Person,  an
  Affiliate or  Associate, a  representative of  an Acquiring  Person  or
  nominated for election by  an Acquiring Person, and  (ii) was either  a
  member of the Board  of Directors of  the Company on  the date of  this
  Agreement or subsequently became  a Director of  the Company and  whose
  initial election or  initial nomination for  election by the  Company's
  stockholders was approved  by a  majority of  the Continuing  Directors
  then on the Board of Directors of the Company.

         (f)     Acquiring Person: An  "Acquiring Person" shall mean  any
  person (as  defined  in  Section 2(d)(iii)  of  this  Agreement)  that,
  together with  all Affiliates  and Associates  of such  person, is  the
  beneficial owner of 15% or more  of the outstanding Common Stock.   The
  term "Acquiring Person" shall not  include the Company, any  subsidiary
  of the Company, any employee benefit plan of the Company or  subsidiary
  of the Company, any person holding Common Stock for or pursuant to  the
  terms of any such  plan, or Donald  A. Sillers, Jr.  or members of  his
  immediate family.

         (g) Employment Term.  The "Employment Term" shall be the  period
  of employment under  this Agreement commencing  on the day  prior to  a
  Change  in  Control  and  continuing  until  the  expiration  of   this
  Agreement.

         (h)     Severance Compensation.   The  "Severance  Compensation"
  shall be:

             (i) A lump sum amount equal  to 299% of Executive's  average
  annual compensation  reported  on his  Form  W-2 paid  by  the  Company
  includable in gross income  during the five  most recent full  calendar
  years prior to  the Change in  Control; provided, however,  that in  no
  event shall the Company pay or be obligated to pay that portion of  the
  amount due which would result in any  payment to or for the benefit  of
  Executive being an  "excess parachute  payment" within  the meaning  of
  Section 280G of  the Internal  Revenue Code  of 1986,  as amended  (the
  "Code"), in  the  opinion of  tax  counsel selected  by  the  Company's
  independent accountants and  acceptable to Executive,  and which  would
  result in the  imposition of an  excise tax under  Section 4999 of  the
  Code ("Excess Parachute Payment").  Any  payment made pursuant to  this
  Section shall  be  reduced  only  in  the  amount  necessary  to  avoid
  characterization of such  payment as  an Excess  Parachute Payment  and
  only after reduction, to  the extent necessary,  of any other  payments
  (other than payments made under  this Agreement) which when  aggregated
  with the payments hereunder result in the imposition of such excise tax
  under Section 4999 of the Code; and

             (ii)     For a period of three years, provide Executive with
  benefits substantially similar to those which Executive was entitled to
  receive immediately prior to the date  of termination under all of  the
  Company's "employee  welfare  benefit  plans"  within  the  meaning  of
  Section 3(1) of The Employee Retirement Income Security Act of 1974, as
  amended.  Notwithstanding the foregoing provisions of this Section,  no
  benefits shall be provided or payments made pursuant to this subsection
  to the extent that  the effect thereof would  result in a reduction  of
  the Severance Payment under subsection (h)(i).
<PAGE>
         (i) Termination Date.  The "Termination Date" shall be the  date
  upon which  the Executive  or the  Company effectively  terminates  the
  employment of the Executive.

     3.  Rights of Executive Upon Change in Control Termination

         (a) The Company  shall provide  the Executive,  within ten  days
  following the  Termination  Date,  Severance Compensation  in  lieu  of
  compensation to the Executive for periods subsequent to the Termination
  Date, but without affecting  the rights of the  Executive at law or  in
  equity, if, following the occurrence of a Change in Control, any of the
  following events shall occur:

         (1) the  Company terminates  the Executive's  employment  during
  the Employment Term other than for any of the following reasons:

             (i)  the Executive dies:

             (ii) the  Executive  becomes  permanently  disabled  and  is
                  unable to work for a period of 180 consecutive days; or

             (iii) for Cause.

         (2) the Executive  terminates his employment  after such  Change
  in Control and the occurrence of at least one of the following events:

             (i) a  change in  the  positions  held by  Executive  or  an
  adverse change in the nature or scope of the authorities, functions  or
  duties attached to the  positions with the  Company that the  Executive
  had immediately prior to  the Change in Control,  any reduction in  the
  Executive's salary during the Employment Term or any reduction in bonus
  or incentive compensation  (based upon the  dollar amount  of bonus  or
  incentive compensation that the Executive received from the Company for
  the fiscal  year preceding  the year  in which  the Change  in  Control
  occurred or  for  the fiscal  year  preceding  the year  in  which  the
  Termination  Date  occurs,  whichever  is  the  larger  amount)  or   a
  significant reduction in scope or value of the aggregate other monetary
  or nonmonetary benefits to  which the Executive  was entitled from  the
  Company immediately prior to the Change in Control, any of which is not
  remedied within  ten calendar  days after  receipt  by the  Company  of
  written notice from the Executive of such change, reduction, alteration
  or termination, as the case may be;

             (ii)     a determination by the Executive made in good faith
  that as a result of a Change  in Control and a change in  circumstances
  thereafter  significantly  affecting  his  position,  changes  in   the
  composition or policies of  the Board, or of  other events of  material
  effect, he has been rendered substantially unable to carry out, or  has
  been substantially  hindered in  the performance  of, the  authorities,
  functions or duties attached to his  position immediately prior to  the
  Change in Control, which situation is not remedied within ten  calendar
  days after receipt by the Company of written notice from the  Executive
  of such determination;
<PAGE>
             (iii)    a change in the positions held by Executive or  the
  occurrence, as determined  by Executive in  good faith,  of an  adverse
  change in the nature  or scope of  his authorities, powers,  functions,
  responsibilities or duties as the Chairman of the Board, President  and
  Chief Executive Officer of  the Company; any  reduction in Salary;  any
  reduction in Executive's  bonus or incentive  compensation (based  upon
  the  greater  of  the  dollar  amount  of  bonus  and  other  incentive
  compensation that Executive received for the year preceding the  Change
  in Control  or  the  average  yearly  amount  of  bonus  and  incentive
  compensation that Executive  received during the  five years  preceding
  the Change in Control); a termination,  reduction or alteration of  the
  disability policies or life or disability insurance benefits maintained
  for Executive, any  alteration or  reduction of  expense allowances  or
  reimbursement policies;  or  a  reduction in  scope  or  value  of  the
  aggregate other benefits to which Executive  was entitled prior to  the
  Change in Control;

             (iv)     the liquidation, dissolution, merger, consolidation
  or reorganization of the  Company or transfer  of all or  substantially
  all of its business and/or assets,  unless the successor or  successors
  (by liquidation, merger, consolidation, reorganization or otherwise) to
  which all or substantially all of its business and/or assets have  been
  transferred (directly or by operation  of law) shall have  specifically
  assumed all duties and obligations of the Company under this  Agreement
  pursuant to Section 16;

             (v) the  relocation of  the  Company's  principal  executive
  offices, or the requirement by the  Company that Executive have as  his
  principal location of work any location not within the greater  Dallas,
  Texas metropolitan area or that he  travel away from his office in  the
  course of discharging his duties hereunder significantly more (in terms
  of either consecutive days or aggregate days in any calendar year) than
  required of him prior to the Change in Control; or

             (vi)     the Company commits any breach of this Agreement.
<PAGE>
         (b) Notwithstanding the above section or any other provision  of
  this Agreement, in no  event shall the Company  pay or be obligated  to
  pay the Executive an amount which would be an Excess Parachute Payment.
   For purposes of  this Agreement, the  term "Excess Parachute  Payment"
  shall mean any payment or any portion thereof which would be an "excess
  parachute payment" within the meaning of Section 280G of the Code,  and
  would result in the imposition of  an excise tax under Section 4999  of
  the Code,  in the  opinion of  tax counsel  selected by  the  Company's
  independent accountants  and acceptable  to the  Executive.   If it  is
  established pursuant to a final determination of a court or an Internal
  Revenue Service administrative appeals proceeding that, notwithstanding
  the good faith of the Executive  and the Company in applying the  terms
  of this Agreement,  a payment (or  portion thereof) made  is an  Excess
  Parachute Payment, then,  except as hereafter  provided, the  Executive
  shall have an  obligation to repay  the Company upon  demand an  amount
  equal to the minimum amount (but without interest) necessary to  ensure
  that no payment  made or to  be made by  the Company  pursuant to  this
  Agreement is an Excess Parachute  Payment; provided, however, that  if,
  in the opinion  of tax counsel  selected by  the Company's  independent
  accountants and acceptable  to the Executive,  such repayment will  not
  ensure that no Excess Parachute Payment  would be made hereunder,  then
  (1) no such repayment obligation will  exist and (2) the Company  shall
  pay to the Executive an additional  amount in cash equal to the  amount
  necessary  to  cause  the  amount  of  the  aggregate  after-tax   cash
  compensation and benefits otherwise receivable  by the Executive to  be
  equal to  the aggregate  after-tax cash  compensation and  benefits  he
  would have received as if  Sections 280G and 4999  of the Code had  not
  been enacted.

         (c) Upon written  notice given by the  Executive to the  Company
  prior to the receipt of Severance  Compensation, the Executive, at  his
  sole option, may elect to have all or any part of any such amount  paid
  to him, without interest, on an installment basis selected by him.

         (d) The payment of Severance Compensation by the Company to  the
  Executive shall not affect any rights and benefits which the  Executive
  may have  pursuant to  any other  agreement, policy,  plan, program  or
  arrangement of the Company providing benefits to the Executive prior to
  the Termination  Date, which  rights shall  be  governed by  the  terms
  thereof, except that payments hereunder after termination shall  reduce
  by an  equal  amount  any sums  payable  after  termination  under  the
  Employment Agreement, dated the date hereof, by and between the Company
  and the  Executive.    The  Company  shall  provide  to  the  Executive
  throughout the Employment Term benefits substantially similar to  those
  which the Executive  was receiving or  entitled to receive  immediately
  prior to  the Termination  Date.   Such  benefits  as provided  by  the
  Company, however, shall  be reduced to  the extent comparable  benefits
  are actually received by the Executive during the Employment Term as  a
  result of employment other than with the Company.

         (e) The Company shall  have no right of set-off or  counterclaim
  in respect of  any claim,  debt or  obligation against  any payment  or
  benefit to or  for the benefit  of the Executive  provided for in  this
  Agreement.
<PAGE>
         (f) Without limiting  the rights of the  Executive at law or  in
  equity, if the Company  fails to make any  payment required to be  made
  hereunder on a  timely basis,  the Company  shall pay  interest on  the
  amount thereof on  demand at an  annualized rate of  interest equal  to
  120% of  the  then applicable  Federal  rate determined  under  Section
  1274(d) of the Code,  compounded semi-annually (but  in no event  shall
  such interest exceed the highest lawful rate).

          (g)    Any termination of Executive's employment or removal  of
  Executive  as  an  elected  officer   of  the  Company  following   the
  commencement of any  discussion authorized by  the Board  with a  third
  person that ultimately results  in a Change  in Control involving  that
  person or a different third party  shall be deemed to be a  termination
  or removal of Executive after a Change in Control for purposes of  this
  Agreement and  shall  entitle  Executive to  all  benefits  under  this
  Agreement.

     4.  No Mitigation  Required.  In  the event that  this Agreement  or
  the employment of the Executive hereunder is terminated, the  Executive
  shall not be obligated  to mitigate his damages  nor the amount of  any
  payment provided for in this Agreement  by seeking other employment  or
  otherwise, and  except  for the  termination  of benefits  pursuant  to
  Section 3(d), the acceptance of employment elsewhere after  termination
  shall in no  way reduce the  amount of  Severance Compensation  payable
  hereunder.

     5.  Successors; Binding Agreement.

         (a) The Company will  require any successor and any  corporation
  or other legal  person (including any  "person" as  defined in  Section
  2(d)(iii) of this Agreement) which is in control of such successor  (as
  "control" is defined  in Regulation 230.405  or any  successor rule  or
  regulation promulgated under the Securities Act of 1933, as amended) to
  all or substantially all of the  business and/or assets of the  Company
  (by purchase, merger, consolidation or otherwise), by agreement in form
  and substance satisfactory  to the Executive,  to expressly assume  and
  agree to perform  this Agreement  in the same  manner and  to the  same
  extent that the  Company would  be required to  perform it  if no  such
  succession had taken  place.   Failure of  the Company  to obtain  such
  agreement prior to the effectiveness of any such succession shall be  a
  material breach of this Agreement by the Company.  Notwithstanding  the
  foregoing, any such assumption shall not,  in any way, affect or  limit
  the liability  of the  Company under  the terms  of this  Agreement  or
  release the Company  from any obligation  hereunder.  As  used in  this
  Agreement, "Company" shall  mean the Company  as herein before  defined
  and any succcssor to its business and/or  all or part of its assets  as
  aforesaid which executes  and delivers  the agreement  provided for  in
  this Section 5 or  which otherwise becomes bound  by all the terms  and
  provisions of this Agreement by operation of law.

         (b) This Agreement  and all  rights of  the Executive  hereunder
  shall inure to  the benefit of  and be enforceable  by the  Executive's
  personal   or   legal   representatives,   executors,   administrators,
  successors, heirs, distributees, devisees and legatees.
<PAGE>
     6.  Notice.   The Company  shall give  written notice  to  Executive
  within ten days  after any  Change in Control.   Failure  to give  such
  notice shall  constitute a  material breach  of  this Agreement.    For
  purposes of  this  Agreement,  notices  and  all  other  communications
  provided for in the Agreement shall  be in writing and shall be  deemed
  to have been duly given when  delivered or received after being  mailed
  by United  States registered  mail, return  receipt requested,  postage
  prepaid, addressed as follows:

         If to the Executive:

                 Gilbert Darwyn Cornwell
                 2202 Greenbriar Court
                 Grand Prairie, TX 75050


         If to the Company:

                 Peerless Mfg. Co.
                 Attn:  Secretary
                 2819 Walnut Hill Lane
                 Dallas, TX 75229


  or to such other address as any  party may have furnished to the  other
  in writing in  accordance herewith, except  that notices  of change  of
  address shall be effective only upon receipt.

     7.  Miscellaneous.    No  provisions   of  this  Agreement  may   be
  modified, waived  or discharged  unless  such waiver,  modification  or
  discharge is agreed  to in  writing signed  by the  Executive and  such
  officer as may be specifically designated  by the Board.  No waiver  by
  either party hereto of, or compliance with, any condition or  provision
  of this Agreement to be performed by such other party shall be deemed a
  waiver of similar or dissimilar provisions or conditions at the same or
  at any prior  or subsequent time.   No  agreements or  representations,
  oral or otherwise, express or implied, unless specifically referred  to
  herein, with respect  to the subject  matter hereof have  been made  by
  either party which are not set forth expressly in this agreement.   The
  validity,  interpretation,   construction  and   performance  of   this
  Agreement shall be  governed by the  substantive laws of  the State  of
  Texas, without regard to principles of conflicts of law.

     8.  Validity.  The invalidity  or unenforceability of any  provision
  or provisions  of  this Agreement  shall  not affect  the  validity  or
  enforceability of any  other provision of  this Agreement, which  shall
  remain in full force and effect.

     9.  Counterparts.    This  Agreement  may  be  executed  in  several
  counterparts, each of which shall be  deemed to be an original but  all
  of which together will constitute one and the same instrument.
<PAGE>
     10. Employment  Rights.    Nothing  expressed  or  implied  in  this
  Agreement shall create any right or duty on the part of the Company  or
  the Executive to  have the Executive  remain in the  employment of  the
  Company prior to  any Change in  Control; provided,  however, that  any
  termination of employment of the Executive or removal of the  Executive
  as Chairman  of  the  Board  and an  elected  officer  of  the  Company
  following the commencement of any discussion authorized by the Board of
  Directors of the Company with a third person that ultimately results in
  a Change in Control shall be deemed  to be a termination or removal  of
  the Executive after a Change in Control for purposes of this  Agreement
  and  shall  entitle  the   Executive  to  all  Severance  Compensation.
  Notwithstanding  any  other  provision  hereof  to  the  contrary,  the
  Executive may, at any time during the Employment Term, upon the  giving
  of 30  days prior  written notice,  terminate his  employment with  the
  Company.   If this  Agreement or  the employment  of the  Executive  is
  terminated under circumstances in which  the Executive is not  entitled
  to any  Severance Compensation,  the Executive  shall have  no  further
  obligation or  liability to  the Company  hereunder or  otherwise  with
  respect to his prior or any future employment by the Company.

     11. Withholding  of  Taxes.   The  Company  may  withhold  from  any
  amounts payable under this Agreement all federal, state, city or  other
  taxes as shall be required pursuant to any law or government regulation
  or ruling; provided, however, that  no withholding pursuant to  Section
  4999 of the Code shall  be made unless, in  the opinion of tax  counsel
  selected by the Company's independent accountant and acceptable to  the
  Executive, such withholding  relates to  payments which  result in  the
  imposition of an excise tax pursuant to Section 4999 of the Code.

     12. Enforcement  Fees.    All  costs  of  litigation  necessary  for
  Executive to defend the  validity of this Agreement  are to be paid  by
  Employer or its successors  or assigns.  The  Company shall pay and  be
  solely responsible  for any  and all  attorneys' and  related fees  and
  expenses incurred by the Executive as a result of the Company's failure
  to perform this Agreement  or any provision thereof  or as a result  of
  the Company or any person contesting the validity or enforceability  of
  this Agreement or any provision thereof as aforesaid.
<PAGE>
     13. Rights  and Remedies  Cumulative.   No  right or  remedy  herein
  conferred upon or reserved to the Executive is intended to be exclusive
  of any other right or remedy, and every right and remedy shall, to  the
  extent permitted by law, be cumulative  and in addition to every  other
  right and remedy given hereunder or now or hereafter existing at law or
  in equity or otherwise.   The assertion or  employment of any right  or
  remedy hereunder, or otherwise,  including with respect to  Executive's
  rights under that certain Employment  Agreement of even date  herewith,
  shall not prevent the concurrent assertion  or employment of any  other
  appropriate right or remedy.

     IN  WITNESS  WHEREOF,  the  parties  have  executed  this  Agreement
  effective on the date and year first above written.


                                     PEERLESS MFG. CO.

                                     ____________________________________
                                     Sherrill Stone
                                     Chairman of the Board
                                     By Order of the Board of Directors


                                     EXECUTIVE

                                     ____________________________________
                                     Gilbert Darwyn Cornwell