Document:

exv10w1

 

Exhibit 10.1

 

 

    PEERLESS
    MFG. CO.

    

 

    2007
    STOCK INCENTIVE PLAN

 

 

    TABLE OF
    CONTENTS

 

	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	 

	
	

    1.

	
	
 
	
    Purpose
	
 
	
	
    1
	

	
	

    2.

	
	
 
	
    Definitions
	
 
	
	
    1
	

	
	

    3.

	
	
 
	
    Shares Subject To This Plan
	
 
	
	
    3
	

	
	

    4.

	
	
 
	
    Option Rights
	
 
	
	
    4
	

	
	

    5.

	
	
 
	
    Restricted Stock
	
 
	
	
    5
	

	
	

    6.

	
	
 
	
    Restricted Stock Units
	
 
	
	
    6
	

	
	

    7.

	
	
 
	
    Performance Shares And Performance Units
	
 
	
	
    6
	

	
	

    8.

	
	
 
	
    Administration Of This Plan
	
 
	
	
    7
	

	
	

    9.

	
	
 
	
    Adjustments
	
 
	
	
    7
	

	
	

    10.

	
	
 
	
    Change Of Control
	
 
	
	
    8
	

	
	

    11.

	
	
 
	
    Non U.S. Participants
	
 
	
	
    8
	

	
	

    12.

	
	
 
	
    Transferability
	
 
	
	
    8
	

	
	

    13.

	
	
 
	
    Withholding Taxes
	
 
	
	
    9
	

	
	

    14.

	
	
 
	
    Compliance With Section 409a Of The Code
	
 
	
	
    9
	

	
	

    15.

	
	
 
	
    Effective Date
	
 
	
	
    10
	

	
	

    16.

	
	
 
	
    Amendments
	
 
	
	
    10
	

	
	

    17.

	
	
 
	
    Termination
	
 
	
	
    11
	

	
	

    18.

	
	
 
	
    Governing Law
	
 
	
	
    11
	

	
	

    19.

	
	
 
	
    Miscellaneous Provisions
	
 
	
	
    11
	

    

    

 

    PEERLESS
    MFG. CO.

    

 

    2007
    Stock Incentive Plan

 

    1. Purpose.  The purpose of this
    2007 Stock Incentive Plan is to attract and retain directors,
    officers and other key employees of Peerless Mfg. Co. and its
    Subsidiaries and to provide to such persons incentives and
    rewards for performance.

 

    2. Definitions.  As used in this
    Plan,

 

    (a) “Board” means the Board of Directors
    of the Company and, to the extent of any delegation by the Board
    to a committee (or subcommittee thereof) pursuant to
    Section 8 of this Plan, such committee (or subcommittee).

 

    (b) “Change of Control” has the meaning
    provided in Section 10 of this Plan.

 

    (c) “Code” means the Internal Revenue Code
    of 1986, as amended from time to time.

 

    (d) “Common Stock” means Common Stock, par
    value $1.00 per share, of the Company or any security into which
    such shares of Common Stock may be changed by reason of any
    transaction or event of the type referred to in Section 9
    of this Plan.

 

    (e) “Company” means Peerless Mfg. Co., a
    Texas corporation, and its successors.

 

    (f) “Covered Employee” means a Participant
    who is, or is determined by the Board to be likely to become, a
    “covered employee” within the meaning of
    Section 162(m) of the Code (or any successor provision).

 

    (g) “Date of Grant” means the date
    specified by the Board on which a grant of Option Rights,
    Performance Shares, Performance Units, or a grant or sale of
    Restricted Stock or Restricted Stock Units, will become
    effective (which date will not be earlier than the date on which
    the Board takes action with respect thereto).

 

    (h) “Director” means a member of the Board.

 

    (i) “Effective Date” means the date
    immediately following the date that this Plan is approved by the
    shareholders of the Company.

 

    (j) “Evidence of Award” means an
    agreement, certificate, resolution or other type or form of
    writing or other evidence that sets forth the terms and
    conditions of Option Rights, Performance Shares or Performance
    Units granted, or a grant or sale of Restricted Stock or
    Restricted Stock Units. An Evidence of Award may be in an
    electronic medium, may be limited to notation on the books and
    records of the Company and need not be signed by a
    representative of the Company or a Participant.

 

    (k) “Exchange Act” means the Securities
    Exchange Act of 1934, as amended, and the rules and regulations
    thereunder, as such law, rules and regulations may be amended
    from time to time.

 

    (l) “Incentive Stock Options” means Option
    Rights that are intended to qualify as “incentive stock
    options” under Section 422 of the Code or any
    successor provision.

 

    (m) “Incumbent Directors” means the
    individuals who, as of the Effective Date, are Directors of the
    Company and any individual becoming a Director subsequent to the
    date thereof whose election, nomination for election by the
    Company’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 Company 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)
    of the Exchange Act) 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.

 

    (n) “Management Objectives” means the
    measurable performance objective or objectives established
    pursuant to this Plan for Participants who have received grants
    of Performance Shares or Performance Units or, when so
    determined by the Board, Option Rights, Restricted Stock,
    Restricted Stock Units or dividend credits pursuant to this
    Plan. Management Objectives may be described in terms of
    Company-wide objectives or objectives that are

    
1

 

    related to the performance of the individual Participant or of
    the Subsidiary, division, department, region or function within
    the Company or Subsidiary in which the Participant is employed.
    The Management Objectives may be made relative to the
    performance of other companies. The Management Objectives
    applicable to any award to a Covered Employee will be based on
    specified levels of or growth in one or more of the following
    criteria:

 

    (i) Appreciation in value of shares;

 

    (ii) Total shareholder return;

 

    (iii) Earnings per share;

 

    (iv) Operating income;

 

    (v) Net income;

 

    (vi) Pretax earnings;

 

    (vii) Earnings before interest, taxes, depreciation and
    amortization;

 

    (viii) Pro forma net income;

 

    (ix) Return on equity;

 

    (x) Return on designated assets;

 

    (xi) Return on capital;

 

    (xii) Economic value added;

 

    (xiii) Revenues;

 

    (xiv) Expenses;

 

    (xv) Operating profit margin;

 

    (xvi) Operating cash flow;

 

    (xvii) Free cash flow;

 

    (xviii) Cash flow return on investment;

 

    (xix) Operating margin or net profit margin; or

 

    (xx) Any of the above criteria as compared to the
    performance of a published or a special index deemed applicable
    by the Board, including, but not limited to, the
    Standard & Poor’s 500 Stock Index.

 

    If the Board determines that a change in the business,
    operations, corporate structure or capital structure of the
    Company, or the manner in which it conducts its business, or
    other events or circumstances render the Management Objectives
    unsuitable, the Board may in its discretion modify such
    Management Objectives or the related level or levels of
    achievement, in whole or in part, as the Board deems appropriate
    and equitable, except in the case of a Covered Employee where
    such action would result in the loss of the otherwise available
    exemption of the award under Section 162(m) of the Code. In
    such case, the Board will not make any modification of the
    Management Objectives or the level or levels of achievement with
    respect to such Covered Employee.

 

    (o) “Market Value Per Share” means, as of
    any particular date, the average of the highest and lowest
    reported sales prices of the Common Stock during normal trading
    hours on the Nasdaq Global Market System or, if not listed on
    such exchange, on any other national securities exchange on
    which the Common Stock is listed. If there is no regular public
    trading market for such Common Stock, the Market Value Per Share
    of the Common Stock shall be determined by the Board.

 

    (p) “Optionee” means the optionee named in
    an Evidence of Award evidencing an outstanding Option Right.

 

    (q) “Option Price” means the purchase
    price payable on exercise of an Option Right.

    
2

 

    (r) “Option Right” means the right to
    purchase shares of Common Stock upon exercise of an option
    granted pursuant to Section 4 of this Plan.

 

    (s) “Participant” means a person who is
    selected by the Board to receive benefits under this Plan and
    who is at the time a Director, officer or other employee of the
    Company or any one or more of its Subsidiaries, or who has
    agreed to commence serving in any of such capacities within
    90 days of the Date of Grant.

 

    (t) “Performance Period” means, in respect
    of a Performance Share or Performance Unit, a period of time
    established pursuant to Section 7 of this Plan within which
    the Management Objectives relating to such Performance Share or
    Performance Unit are to be achieved.

 

    (u) “Performance Share” means a
    bookkeeping entry that records the equivalent of one share of
    Common Stock awarded pursuant to Section 7 of this Plan.

 

    (v) “Performance Unit” means a bookkeeping
    entry awarded pursuant to Section 7 of this Plan that
    records a unit equivalent to $1.00 or such other value as is
    determined by the Board.

 

    (w) “Person” means any individual, entity
    or group (within the meaning of Section 13(d)(3) or
    14(d)(2) of the Exchange Act).

 

    (x) “Plan” means The Peerless Mfg. Co.
    2007 Stock Incentive Plan, as may be amended from time to time.

 

    (y) “Restricted Stock” means shares of
    Common Stock granted or sold pursuant to Section 5 of this
    Plan as to which neither the substantial risk of forfeiture nor
    the prohibition on transfer has expired.

 

    (z) “Restriction Period” means the period
    of time during which Restricted Stock Units are subject to
    restrictions, as provided in Section 6 of this Plan.

 

    (aa) “Restricted Stock Unit” means an
    award made pursuant to Section 6 of this Plan of the right
    to receive shares of Common Stock or cash at the end of a
    specified period.

 

    (bb) “Subsidiary” means a corporation,
    company or other entity (i) at least 50 percent of
    whose outstanding shares or securities (representing the right
    to vote for the election of directors or other managing
    authority) are, or (ii) which does not have outstanding
    shares or securities (as may be the case in a partnership, joint
    venture or unincorporated association), but at least
    50 percent of whose ownership interest representing the
    right generally to make decisions for such other entity is, now
    or hereafter, owned or controlled, directly or indirectly, by
    the Company except that (A) for purposes of determining
    whether a Participant may receive a grant of Incentive Stock
    Options, “Subsidiary” means any corporation in which
    at the time the Company owns or controls, directly or
    indirectly, at least 50 percent of the total combined
    voting power represented by all classes of stock issued by such
    corporation, and (B) for purposes of determining whether a
    Participant may receive a grant of any other Option Rights,
    “Subsidiary” means any member of the Company’s
    controlled group described in Section 14(b).

 

    (cc) “Voting Securities” means, at any
    time, (i) the securities entitled to vote generally in the
    election of Directors in the case of the Company, or
    (ii) the securities entitled to vote generally in the
    election of members of the board of directors or similar body in
    the case of another legal entity.

 

    3. Shares Subject to this Plan.

 

    (a) Maximum Shares Available Under Plan.

 

    (i) Subject to adjustment as provided in Section 9 of
    this Plan, the number of shares of Common Stock that may be
    issued or transferred (A) upon the exercise of Option
    Rights; (B) as Restricted Stock and released from
    substantial risks of forfeiture thereof; (C) in payment of
    Restricted Stock Units; (D) in payment of Performance
    Shares or Performance Units that have been earned; or
    (E) in payment of dividend equivalents paid with respect to
    awards made under this Plan will not exceed in the aggregate
    900,000 shares of Common Stock, plus any shares of Common
    Stock relating to awards that expire or are forfeited or are
    cancelled under this Plan. Such shares may be shares of original
    issuance or treasury shares or a combination of the foregoing.

 

    (ii) Shares of Common Stock covered by an award granted
    under this Plan shall not be counted as used unless and until
    they are actually issued and delivered to a Participant. Without
    limiting the generality of the foregoing,

    
3

 

    upon payment in cash of the benefit provided by any award
    granted under this Plan, any shares of Common Stock that were
    covered by that award will be available for issue or transfer
    hereunder. Notwithstanding anything to the contrary contained
    herein: (A) shares of Common Stock tendered in payment of
    the Option Price of a Option Right shall not be added to the
    aggregate plan limit described above; (B) shares of Common
    Stock withheld by the Company to satisfy the tax withholding
    obligation shall not be added to the aggregate plan limit
    described above; and (C) shares of Common Stock that are
    repurchased by the Company with Option Right proceeds shall not
    be added to the aggregate plan limit described above.

 

    (b) Life-of-Plan
    Limits.  Notwithstanding anything in this
    Section 3, or elsewhere in this Plan, to the contrary and
    subject to adjustment pursuant to Section 9 of this Plan:

 

    (i) The aggregate number of shares of Common Stock actually
    issued or transferred by the Company upon the exercise of
    Incentive Stock Options shall not exceed 900,000.

 

    (ii) The aggregate number of shares of Common Stock issued
    as Restricted Stock (and released from substantial risks of
    forfeiture), Restricted Stock Units, Performance Shares or
    Performance Units shall not exceed 900,000.

 

    (c) Individual Participant
    Limits.  Notwithstanding anything in this
    Section 3, or elsewhere in this Plan, to the contrary and
    subject to adjustment pursuant to Section 9 of this Plan:

 

    (i) No Participant shall be granted Option Rights, in the
    aggregate, for more than 100,000 shares of Common Stock
    during any calendar year.

 

    (ii) No Participant will be granted Restricted Stock or
    Restricted Stock Units that specify Management Objectives or
    Performance Shares, in the aggregate, for more than
    100,000 shares of Common Stock during any calendar year.

 

    (iii) Notwithstanding any other provision of this Plan to
    the contrary, in no event will any Participant in any calendar
    year receive an award of Performance Units having an aggregate
    maximum value as of their respective Dates of Grant in excess of
    $2,000,000.

 

    4. Option Rights.  The Board may,
    from time to time and upon such terms and conditions as it may
    determine, authorize the granting to Participants of options to
    purchase shares of Common Stock. Each such grant will be subject
    to all of the requirements contained in the following provisions:

 

    (a) Each grant will specify the number of shares of Common
    Stock to which it pertains subject to the limitations set forth
    in Section 3 of this Plan.

 

    (b) Each grant will specify an Option Price per share,
    which may not be less than the Market Value Per Share on the
    Date of Grant.

 

    (c) Each grant will specify whether the Option Price will
    be payable (i) in cash or by check acceptable to the
    Company or by wire transfer of immediately available funds,
    (ii) by the actual or constructive transfer to the Company
    of shares of Common Stock owned by the Optionee having a value
    at the time of exercise equal to the total Option Price,
    (iii) by a combination of such methods of payment, or
    (iv) by such other methods as may be approved by the Board.

 

    (d) To the extent permitted by law, any grant may provide
    for deferred payment of the Option Price from the proceeds of
    sale through a bank or broker on a date satisfactory to the
    Company of some or all of the shares to which such exercise
    relates.

 

    (e) Successive grants may be made to the same Participant
    whether or not any Option Rights previously granted to such
    Participant remain unexercised.

 

    (f) Each grant will specify the period or periods of
    continuous service by the Optionee with the Company or any
    Subsidiary that is necessary before the Option Rights or
    installments thereof will become exercisable. A grant of Option
    Rights may provide for the earlier exercise of such Option
    Rights in the event of retirement, death or disability of the
    Participant or a Change of Control.

    
4

 

    (g) Any grant of Option Rights may specify Management
    Objectives that must be achieved as a condition to the exercise
    of such rights. The grant of such Option Rights will specify
    that, before the exercise of such rights, the Board must
    determine that the Management Objectives have been satisfied.

 

    (h) Option Rights granted under this Plan may be
    (i) options, including, without limitation, Incentive Stock
    Options, that are intended to qualify under particular
    provisions of the Code, (ii) options that are not intended
    so to qualify, or (iii) combinations of the foregoing.

 

    (i) No Option Right will be exercisable more than
    10 years from the Date of Grant.

 

    (j) Each grant of Option Rights will be evidenced by an
    Evidence of Award. Each Evidence of Award shall be subject to
    this Plan and shall contain such terms and provisions,
    consistent with this Plan, as the Board may approve.

 

    5. Restricted Stock.  The Board may
    also authorize the grant or sale of Restricted Stock to
    Participants. Each such grant or sale will be subject to all of
    the requirements contained in the following provisions:

 

    (a) Each such grant or sale will constitute an immediate
    transfer of the ownership of shares of Common Stock to the
    Participant in consideration of the performance of services,
    entitling such Participant to voting, dividend and other
    ownership rights, but subject to the substantial risk of
    forfeiture and restrictions on transfer hereinafter referred to.

 

    (b) Each such grant or sale may be made without additional
    consideration or in consideration of a payment by such
    Participant that is less than the Market Value Per Share at the
    Date of Grant.

 

    (c) Each such grant or sale will provide that the
    Restricted Stock covered by such grant or sale that vests upon
    the passage of time will be subject to a “substantial risk
    of forfeiture” within the meaning of Section 83 of the
    Code for a period of not less than one year to be determined by
    the Board at the Date of Grant and may provide for the earlier
    lapse of such substantial risk of forfeiture as provided in
    Section 5(e) below or (i) with respect to shares of
    Restricted Stock granted to non-employee Directors, (ii) in
    the event of retirement, death or disability of the Participant
    or (iii) in the event of a Change of Control.

 

    (d) Each such grant or sale will provide that during the
    period for which such substantial risk of forfeiture is to
    continue, the transferability of the Restricted Stock will be
    prohibited or restricted in the manner and to the extent
    prescribed by the Board at the Date of Grant (which restrictions
    may include, without limitation, rights of repurchase or first
    refusal in the Company or provisions subjecting the Restricted
    Stock to a continuing substantial risk of forfeiture in the
    hands of any transferee).

 

    (e) Any grant of Restricted Stock may specify Management
    Objectives that, if achieved, will result in termination or
    early termination of the restrictions applicable to such
    Restricted Stock and in addition, may provide for the earlier
    termination of these restrictions in the event of (i) the
    retirement, death or disability of the Participant or
    (ii) a Change of Control; provided, however,
    that restrictions relating to Restricted Stock that vests upon
    the achievement of Management Objectives may not terminate
    sooner than one year from the Date of Grant. Each grant may
    specify in respect of such Management Objectives a minimum
    acceptable level of achievement and may set forth a formula for
    determining the number of shares of Restricted Stock on which
    restrictions will terminate if performance is at or above the
    minimum level, but falls short of full achievement of the
    specified Management Objectives. The grant of Restricted Stock
    will specify that, before the termination or early termination
    of the restrictions applicable to such Restricted Stock, the
    Board must determine that the Management Objectives have been
    satisfied.

 

    (f) Any such grant or sale of Restricted Stock may require
    that any or all dividends or other distributions paid thereon
    during the period of such restrictions be automatically deferred
    and reinvested in additional shares of Restricted Stock, which
    may be subject to the same restrictions as the underlying award.

 

    (g) Each grant or sale of Restricted Stock will be
    evidenced by an Evidence of Award and will contain such terms
    and provisions, consistent with this Plan, as the Board may
    approve. Unless otherwise directed by the Board, all
    certificates representing shares of Restricted Stock will be
    held in custody by the Company until

    
5

 

    all restrictions thereon will have lapsed, together with a stock
    power or powers executed by the Participant in whose name such
    certificates are registered, endorsed in blank and covering such
    Shares.

 

    6. Restricted Stock Units.  The
    Board may also authorize the granting or sale of Restricted
    Stock Units to Participants. Each such grant or sale will be
    subject to all of the requirements contained in the following
    provisions:

 

    (a) Each such grant or sale will constitute the agreement
    by the Company to deliver shares of Common Stock or cash to the
    Participant in the future in consideration of the performance of
    services, but subject to the fulfillment of such conditions
    (which may include the achievement of Management Objectives)
    during the Restriction Period as the Board may specify. If a
    grant of Restricted Stock Units specifies that the Restriction
    Period will terminate upon the achievement of Management
    Objectives, such Restriction Period may not terminate sooner
    than one year from the Date of Grant; provided,
    however the Board may provide for the earlier termination
    of these restrictions in the event of (i) the retirement,
    death or disability of the Participant or (ii) a Change of
    Control. Each grant may specify in respect of such Management
    Objectives a minimum acceptable level of achievement and may set
    forth a formula for determining the number of shares of
    Restricted Stock Units on which restrictions will terminate if
    performance is at or above the minimum level, but falls short of
    full achievement of the specified Management Objectives. The
    grant of such Restricted Stock Units will specify that, before
    the termination or early termination of the restrictions
    applicable to such Restricted Stock Units, the Board must
    determine that the Management Objectives have been satisfied.

 

    (b) Each such grant or sale may be made without additional
    consideration or in consideration of a payment by such
    Participant that is less than the Market Value Per Share at the
    Date of Grant.

 

    (c) If the Restriction Period lapses only by the passage of
    time, each such grant or sale will be subject to a Restriction
    Period of not less than one year, as determined by the Board at
    the Date of Grant, and may provide for the earlier lapse or
    other modification of such Restriction Period in the event of
    retirement, death or disability of the Participant or a Change
    of Control.

 

    (d) During the Restriction Period, the Participant will
    have no right to transfer any rights under his or her award and
    will have no rights of ownership in the Restricted Stock Units
    and will have no right to vote them, but the Board may at the
    Date of Grant, authorize the payment of dividend equivalents on
    such Restricted Stock Units on either a current, deferred or
    contingent basis, either in cash or in additional shares of
    Common Stock.

 

    (e) Each grant or sale will specify the time and manner of
    payment of Restricted Stock Units that have been earned. Any
    grant or sale may specify that the amount payable with respect
    thereto may be paid by the Company in cash, in shares of Common
    Stock or in any combination thereof and may either grant to the
    Participant or retain in the Board the right to elect among
    those alternatives.

 

    (f) Each grant or sale of Restricted Stock Units will be
    evidenced by an Evidence of Award and will contain such terms
    and provisions, consistent with this Plan, as the Board may
    approve.

 

    7. Performance Shares and Performance
    Units.  The Board may also authorize the
    granting of Performance Shares and Performance Units that will
    become payable to a Participant upon achievement of specified
    Management Objectives during the Performance Period. Each such
    grant will be subject to all of the requirements contained in
    the following provisions:

 

    (a) Each grant will specify the number of Performance
    Shares or Performance Units to which it pertains, which number
    may be subject to adjustment to reflect changes in compensation
    or other factors; provided, however, that no such
    adjustment will be made in the case of a Covered Employee where
    such action would result in the loss of the otherwise available
    exemption of the award under Section 162(m) of the Code.

 

    (b) The Performance Period with respect to each Performance
    Share or Performance Unit will be such period of time (not less
    than one year), commencing with the Date of Grant as will be
    determined by the Board at the time of grant which may be
    subject to earlier lapse or other modification in the event of
    retirement, death or disability of the Participant or a Change
    of Control.

    
6

 

    (c) Any grant of Performance Shares or Performance Units
    will specify Management Objectives which, if achieved, will
    result in payment or early payment of the award, and each grant
    may specify in respect of such specified Management Objectives
    level or levels of achievement and will set forth a formula for
    determining the number of Performance Shares or Performance
    Units that will be earned if performance is at or above the
    level(s), but falls short of full achievement of the specified
    Management Objectives. The grant of Performance Shares or
    Performance Units will specify that, before the Performance
    Shares or Performance Units will be earned and paid, the Board
    must determine that the Management Objectives have been
    satisfied; provided, however the Board may provide
    for the earlier termination of these restrictions in the event
    of (i) the retirement, death or disability of the
    Participant or (ii) a Change of Control.

 

    (d) Each grant will specify the time and manner of payment
    of Performance Shares or Performance Units that have been
    earned. Any grant may specify that the amount payable with
    respect thereto may be paid by the Company in cash, in shares of
    Common Stock or in any combination thereof and may either grant
    to the Participant or retain in the Board the right to elect
    among those alternatives.

 

    (e) Any grant of Performance Shares may specify that the
    amount payable with respect thereto may not exceed a maximum
    specified by the Board at the Date of Grant. Any grant of
    Performance Units may specify that the amount payable or the
    number of shares of Common Stock issued with respect thereto may
    not exceed maximums specified by the Board at the Date of Grant.

 

    (f) The Board may at the Date of Grant of Performance
    Shares, provide for the payment of dividend equivalents to the
    holder thereof on either a current, deferred or contingent
    basis, either in cash or in additional shares of Common Stock.

 

    (g) Each grant of Performance Shares or Performance Units
    will be evidenced by an Evidence of Award and will contain such
    other terms and provisions, consistent with this Plan, as the
    Board may approve.

 

    8. Administration of this Plan.

 

    (a) This Plan will be administered by the Board, which may
    from time to time delegate all or any part of its authority
    under this Plan to the Compensation Committee of the Board or
    any other committee of the Board (or a subcommittee thereof), as
    constituted from time to time. To the extent of any such
    delegation, references in this Plan to the Board will be deemed
    to be references to such committee or subcommittee.

 

    (b) The interpretation and construction by the Board of any
    provision of this Plan or of any agreement, notification or
    document evidencing the grant of Option Rights, Restricted
    Stock, Restricted Stock Units, Performance Shares or Performance
    Units and any determination by the Board pursuant to any
    provision of this Plan or of any such agreement, notification or
    document will be final and conclusive.

 

    (c) To the extent permitted by Texas law, the Board may,
    from time to time, delegate to one or more officers of the
    Company the authority of the Board to grant and determine the
    terms and conditions of awards granted under this Plan. In no
    event shall any such delegation of authority be permitted with
    respect to awards to any executive officer or any other person
    subject to Section 162(m) of the Code.

 

    9. Adjustments.  The Board shall
    make or provide for such adjustments in the numbers of shares of
    Common Stock covered by outstanding Option Rights, Restricted
    Stock Units, Performance Shares and Performance Units granted
    hereunder, in the Option Price, and in the kind of shares
    covered thereby, as the Board, in its sole discretion, may
    determine is equitably required to prevent dilution or
    enlargement of the rights of Participants or Optionees that
    otherwise would result from (a) any stock dividend, stock
    split, combination of shares, recapitalization or other change
    in the capital structure of the Company, or (b) any merger,
    consolidation, spin-off, split- off, spin-out,
    split-up,
    reorganization, partial or complete liquidation or other
    distribution of assets, issuance of rights or warrants to
    purchase securities, or (c) any other corporate transaction
    or event having an effect similar to any of the foregoing.
    Moreover, in the event of any such transaction or event, the
    Board, in its discretion, may provide in substitution for any or
    all outstanding awards under this Plan such alternative
    consideration (including cash), if any, as it may determine to
    be equitable in the circumstances and may require in connection
    therewith the surrender of all awards so replaced. The Board may
    also make or provide for such adjustments in the numbers of
    shares specified in Section 3 of this Plan as the Board in
    its sole discretion may determine is appropriate to reflect any
    transaction or

    
7

 

    event described in this Section 9; provided,
    however, that any such adjustment to the number specified
    in Section 3(b)(i) will be made only if and to the extent
    that such adjustment would not cause any option intended to
    qualify as an Incentive Stock Option to fail so to qualify.

 

    10. Change of Control.  For
    purposes of this Plan, except as may be otherwise defined in an
    individual Participant’s Evidence of Award, a “Change
    of Control” shall mean the occurrence of any of the
    following events:

 

    (a) the acquisition by any Person of beneficial ownership
    (within the meaning of
    Rule 13d-3
    promulgated under the Exchange Act) of 50% or more of the then
    outstanding Voting Securities of the Company; provided,
    however, that for purposes of this Section 10(a),
    the following acquisitions shall not constitute a Change of
    Control: (A) any acquisition by the Company or a Subsidiary
    of Voting Securities, (B) any acquisition of Voting
    Securities by any employee benefit plan (or related trust)
    sponsored or maintained by the Company or any Subsidiary or
    (C) any acquisition of Voting Securities by any Person
    pursuant to a Business Combination that complies with clauses
    (A), (B) and (C) of Section 10(c) below;

 

    (b) a majority of the Board ceases to be comprised of
    Incumbent Directors;

 

    (c) consummation of a reorganization, merger or
    consolidation, a sale or other disposition of all or
    substantially all of the assets of the Company or other
    transaction (each, a “Business Combination”), unless,
    in each case, immediately following the Business Combination,
    (A) all or substantially all of the individuals and
    entities who were the beneficial owners of Voting Securities
    immediately prior to the Business Combination beneficially own,
    directly or indirectly, more than 50% of the combined voting
    power of the then outstanding Voting Securities of the entity
    resulting from the Business Combination (including, without
    limitation, an entity which as a result of such transaction owns
    the Company or all or substantially all of the Company’s
    assets either directly or through one or more subsidiaries),
    (B) no Person (other than the Company, such entity
    resulting from the Business Combination, or any employee benefit
    plan (or related trust) sponsored or maintained by the Company,
    any Subsidiary or such entity resulting from the Business
    Combination) beneficially owns, directly or indirectly, 50% or
    more of the combined voting power of the then outstanding Voting
    Securities of the entity resulting from the Business
    Combination; provided, however, that no Person
    will be treated for purposes of this Section 10(c) as
    beneficially owning 50% or more of the Voting Securities of the
    entity resulting from the Business Combination solely as a
    result of the Voting Securities held in the Company prior to
    consummation of the Business Combination and (C) at least a
    majority of the members of the board of directors of the entity
    resulting from the Business Combination were Incumbent Directors
    at the time of the execution of the initial agreement or of the
    action of the Board providing for the Business
    Combination; or

 

    (d) approval by the shareholders of the Company of a
    complete liquidation or dissolution of the Company, except
    pursuant to a Business Combination that complies with clauses
    (A), (B) and (C) of Section 10(c) hereof.

 

    11. Non U.S. Participants.  In
    order to facilitate the making of any grant or combination of
    grants under this Plan, the Board may provide for such special
    terms for awards to Participants who are foreign nationals or
    who are employed by the Company or any Subsidiary outside of the
    United States of America or who provide services to the Company
    under an agreement with a foreign nation or agency, as the Board
    may consider necessary or appropriate to accommodate differences
    in local law, tax policy or custom. Moreover, the Board may
    approve such supplements to or amendments, restatements or
    alternative versions of this Plan (including, without
    limitation, sub-plans) as it may consider necessary or
    appropriate for such purposes, without thereby affecting the
    terms of this Plan as in effect for any other purpose, and the
    Secretary or other appropriate officer of the Company may
    certify any such document as having been approved and adopted in
    the same manner as this Plan. No such special terms,
    supplements, amendments or restatements, however, will include
    any provisions that are inconsistent with the terms of this Plan
    as then in effect unless this Plan could have been amended to
    eliminate such inconsistency without further approval by the
    shareholders of the Company.

 

    12. Transferability.

 

    (a) No Option Right granted under this Plan shall be
    transferable by the Participant except by will or the laws of
    descent and distribution. Except as otherwise determined by the
    Board, Option Rights will be exercisable during

    
8

 

    the Participant’s lifetime only by him or her or, in the
    event of the Participant’s legal incapacity to do so, by
    his or her guardian or legal representative acting on behalf of
    the Participant in a fiduciary capacity under state law
    and/or court
    supervision.

 

    (b) The Board may specify at the Date of Grant that part or
    all of the shares of Common Stock that are (i) to be issued
    or transferred by the Company upon the exercise of Option
    Rights, upon the termination of the Restriction Period
    applicable to Restricted Stock Units or upon payment under any
    grant of Performance Shares or Performance Units or (ii) no
    longer subject to the substantial risk of forfeiture and
    restrictions on transfer referred to in Section 5 of this
    Plan, will be subject to further restrictions on transfer.

 

    13. Withholding Taxes.  To the
    extent that the Company is required to withhold federal, state,
    local or foreign taxes in connection with any payment made or
    benefit realized by a Participant or other person under this
    Plan, and the amounts available to the Company for such
    withholding are insufficient, it will be a condition to the
    receipt of such payment or the realization of such benefit that
    the Participant or such other person make arrangements
    satisfactory to the Company for payment of the balance of such
    taxes required to be withheld, which arrangements (in the
    discretion of the Board) may include relinquishment of a portion
    of such benefit. If a Participant’s benefit is to be
    received in the form of Common Stock, and such Participant fails
    to make arrangements for the payment of tax, the Company shall
    withhold such shares of Common Stock having a value equal to the
    amount required to be withheld. Notwithstanding the foregoing,
    unless otherwise provided by the Board, when a Participant is
    required to pay the Company an amount required to be withheld
    under applicable income and employment tax laws, the Participant
    may elect to satisfy the obligation, in whole or in part, by
    electing to have withheld, from the shares required to be
    delivered to the Participant, shares of Common Stock having a
    value equal to the amount required to be withheld (except in the
    case of Restricted Stock where an election under
    Section 83(b) of the Code has been made), or by delivering
    to the Company other shares of Common Stock held by such
    Participant. The shares used for tax withholding will be valued
    at an amount equal to the Market Value Per Share of such Common
    Stock on the date the benefit is to be included in
    Participant’s income. In no event shall the Market Value
    Per Share of the shares of Common Stock to be withheld
    and/or
    delivered pursuant to this Section 13 to satisfy applicable
    withholding taxes in connection with the benefit exceed the
    minimum amount of taxes required to be withheld. Participants
    shall also make such arrangements as the Company may require for
    the payment of any withholding tax obligation that may arise in
    connection with the disposition of shares of Common Stock
    acquired upon the exercise of Option Rights.

 

    14. Compliance with Section 409A of the
    Code.

 

    (a) To the extent applicable, it is intended that this Plan
    and any grants made hereunder comply with the provisions of
    Section 409A of the Code. This Plan and any grants made
    hereunder shall be administrated in a manner consistent with
    this intent, and any provision that would cause this Plan or any
    grant made hereunder to fail to satisfy Section 409A of the
    Code shall have no force and effect until amended to comply with
    Section 409A of the Code (which amendment may be
    retroactive to the extent permitted by Section 409A of the
    Code and may be made by the Company without the consent of
    Participants). Any reference in this Plan to Section 409A
    of the Code will also include any regulations or any other
    guidance promulgated with respect to such Section by the
    U.S. Department of the Treasury or the Internal Revenue
    Service.

 

    (b) In order to determine for purposes of Section 409A
    of the Code whether a Participant is employed by a member of the
    Company’s controlled group of corporations under
    Section 414(b) of the Code (or by a member of a group of
    trades or businesses under common control with the Company under
    Section 414(c) of the Code) and, therefore, whether the
    shares of Common Stock that are or have been purchased by or
    awarded under this Plan to the Participant are shares of
    “service recipient” stock within the meaning of
    Section 409A of the Code:

 

    (i) In applying Code Section 1563(a)(1), (2) and
    (3) for purposes of determining the Company’s
    controlled group under Section 414(b) of the Code, the
    language “at least 50 percent” is to be used
    instead of “at least 80 percent” each place it
    appears in Code Section 1563(a)(1), (2) and
    (3); and

 

    (ii) In applying Treasury Regulation Section
    1.414(c)-2 for purposes of determining trades or businesses
    under common control with the Company for purposes of Section
    414(c) of the Code, the language “at least

    
9

 

    50 percent” is to be used instead of “at least
    80 percent” each place it appears in Treasury
    Regulation Section 1.414(c)-2.

 

    (c) Notwithstanding any provision of this Plan to the
    contrary, to the extent an award shall be deemed to be vested or
    restrictions lapse, expire or terminate upon the occurrence of a
    Change of Control and such Change of Control does not constitute
    a “change in the ownership or effective control” or a
    “change in the ownership or a substantial portion of the
    assets” of the Company within the meaning of
    Section 409A(a)(2)(A)(v) of the Code, then even though such
    award may be deemed to be vested or restrictions lapse, expire
    or terminate upon the occurrence of the Change of Control or any
    other provision of this Plan, payment will be made, to the
    extent necessary to comply with the provisions of
    Section 409A of the Code, to the Participant the earliest
    of (i) the Participant’s “separation from
    service” with the Company (determined in accordance with
    Section 409A of the Code); provided, however, that if the
    Participant is a “specified employee” (within the
    meaning of Section 409A of the Code), the payment date
    shall be the date that is six months after the date of the
    Participant’s separation from service with the Company,
    (ii) the date payment otherwise would have been made in the
    absence of any provisions in this Plan to the contrary (provided
    such date is permissible under Section 409A of the Code),
    or (iii) the Participant’s death.

 

    15. Effective Date.  This Plan will
    be effective as of the Effective Date. No grants will be made
    under the Peerless Mfg. Co. 1995 Stock Option and Restricted
    Stock Plan, as amended, and the 2001 Stock Option and Restricted
    Stock Plan, on or after the Effective Date.

 

    16. Amendments.

 

    (a) The Board may at any time and from time to time amend
    this Plan in whole or in part; provided, however,
    that if an amendment to this Plan (i) would materially
    increase the benefits accruing to Participants under this Plan,
    (ii) would materially increase the number of securities
    which may be issued under this Plan, (iii) would materially
    modify the requirements for participation in this Plan or
    (iv) must otherwise be approved by the shareholders of the
    Company in order to comply with applicable law or the rules of
    the Nasdaq Stock Market or, if the shares of Common Stock are
    not traded on the Nasdaq Global Market System, the principal
    national securities exchange upon which the shares of Common
    Stock are traded or quoted, then, such amendment will be subject
    to shareholder approval and will not be effective unless and
    until such approval has been obtained.

 

    (b) The Board will not, without the further approval of the
    shareholders of the Company, authorize the amendment of any
    outstanding Option Right to reduce the Option Price.
    Furthermore, no Option Right will be cancelled and replaced with
    awards having a lower Option Price without further approval of
    the shareholders of the Company. This Section 16(b) is
    intended to prohibit the repricing of “underwater”
    Option Rights and will not be construed to prohibit the
    adjustments provided for in Section 9 of this Plan.

 

    (c) If permitted by Section 409A of the Code, in case
    of termination of employment by reason of death, disability or
    normal or early retirement, or in the case of unforeseeable
    emergency or other special circumstances, of a Participant who
    holds an Option Right not immediately exercisable in full, or
    any shares of Restricted Stock as to which the substantial risk
    of forfeiture or the prohibition or restriction on transfer has
    not lapsed, or any Restricted Stock Units as to which the
    Restriction Period has not been completed, or any Performance
    Shares or Performance Units which have not been fully earned, or
    who holds shares of Common Stock subject to any transfer
    restriction imposed pursuant to Section 12 of this Plan,
    the Board may, in its sole discretion, accelerate the time at
    which such Option Right, or other award may be exercised or the
    time at which such substantial risk of forfeiture or prohibition
    or restriction on transfer will lapse or the time when such
    Restriction Period will end or the time at which such
    Performance Shares or Performance Units will be deemed to have
    been fully earned or the time when such transfer restriction
    will terminate or may waive any other limitation or requirement
    under any such award.

 

    (d) Subject to Section 16(b) hereof, the Board may
    amend the terms of any award theretofore granted under this Plan
    prospectively or retroactively, except in the case of a Covered
    Employee where such action would result in the loss of the
    otherwise available exemption of the award under
    Section 162(m) of the Code. In such case, the Board will
    not make any modification of the Management Objectives or the
    level or levels of achievement with respect to such Covered
    Employee. Subject to Section 9 above, no such amendment
    shall impair the rights of any Participant without his or her
    consent. The Board may, in its discretion, terminate this Plan
    at any time. Termination

    
10

 

    of this Plan will not affect the rights of Participants or their
    successors under any awards outstanding hereunder and not
    exercised in full on the date of termination.

 

    17. Termination.  No grant will be
    made under this Plan more than 10 years after the date on
    which this Plan is first approved by the shareholders of the
    Company, but all grants made on or prior to such date will
    continue in effect thereafter subject to the terms thereof and
    of this Plan.

 

    18. Governing Law.  This Plan and
    all grants and awards and actions taken thereunder shall be
    governed by and construed in accordance with the internal
    substantive laws of the State of Texas.

 

    19. Miscellaneous Provisions.

 

    (a) The Company will not be required to issue any
    fractional shares of Common Stock pursuant to this Plan. The
    Board may provide for the elimination of fractions or for the
    settlement of fractions in cash.

 

    (b) This Plan will not confer upon any Participant any
    right with respect to continuance of employment or other service
    with the Company or any Subsidiary, nor will it interfere in any
    way with any right the Company or any Subsidiary would otherwise
    have to terminate such Participant’s employment or other
    service at any time.

 

    (c) To the extent that any provision of this Plan would
    prevent any Option Right that was intended to qualify as an
    Incentive Stock Option from qualifying as such, that provision
    will be null and void with respect to such Option Right. Such
    provision, however, will remain in effect for other Option
    Rights and there will be no further effect on any provision of
    this Plan.

 

    (d) No award under this Plan may be exercised by the holder
    thereof if such exercise, and the receipt of cash or stock
    thereunder, would be, in the opinion of counsel selected by the
    Board, contrary to law or the regulations of any duly
    constituted authority having jurisdiction over this Plan.

 

    (e) Absence on leave approved by a duly constituted officer
    of the Company or any of its Subsidiaries shall not be
    considered interruption or termination of service of any
    employee for any purposes of this Plan or awards granted
    hereunder, except that no awards may be granted to an employee
    while he or she is absent on leave.

 

    (f) No Participant shall have any rights as a shareholder
    with respect to any shares subject to awards granted to him or
    her under this Plan prior to the date as of which he or she is
    actually recorded as the holder of such shares upon the stock
    records of the Company.

 

    (g) The Board may condition the grant of any award or
    combination of awards authorized under this Plan on the
    surrender or deferral by the Participant of his or her right to
    receive a cash bonus or other compensation otherwise payable by
    the Company or a Subsidiary to the Participant.

 

    (h) Participants shall provide the Company with a written
    election form setting forth the name and contact information of
    the person who will have beneficial ownership rights upon the
    death of the Participant.

 

    (i) If any provision of this Plan is or becomes invalid,
    illegal or unenforceable in any jurisdiction, or would
    disqualify this Plan or any award under any law deemed
    applicable by the Board, such provision shall be construed or
    deemed amended or limited in scope to conform to applicable laws
    or, in the discretion of the Board, it shall be stricken and the
    remainder of this Plan shall remain in full force and effect.

    
11exv10w2

 

Exhibit 10.2

PEERLESS MFG. CO.

2007 STOCK INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

     THIS OPTION AWARD AGREEMENT (this “Agreement”), dated as of                     , is entered
into between PEERLESS MFG. CO., a Texas corporation (the “Company”), and                      (“Optionee”).
Capitalized terms used herein but not defined shall have the meanings assigned to
those terms in the Peerless Mfg. Co. 2007 Stock Incentive Plan (the “Plan”).

     1. Grant of Option Right. Pursuant to the Plan, the Company hereby grants to
Optionee, as a Participant in the Plan and effective as of the Date of Grant (as defined in Section
3), an option right (“Option Right”) to purchase      shares (“Option Shares”) of the Company’s
common stock, par value $1.00 per share (“Common Shares”), at the price of $                     per share
(the “Option Price”).

     2. Type of Option Right. The Option Right is intended to be a nonqualified stock
option and shall not be treated as an “incentive stock option” within the meaning of Section 422 of
the Code or any successor provision.

     3. Date of Grant. The effective date of the grant of this Option
Right is                      (the “Date of Grant”).

     4. Date of Expiration. This Option Right shall expire on the [tenth] anniversary of
the Date of Grant (the “Date of Expiration”), unless earlier terminated under Section 7(a).

     5. Vesting of Option Right.

     (a) Except as otherwise provided in this Agreement, the Option Right shall become
vested and exercisable to the extent of      % of the Option Shares on each of the
first       anniversaries of the Date of Grant[; provided, however, that if the Board
determines that Optionee has satisfied the management objectives established by the Board
and attached as Appendix A hereto as of the       anniversary of the Date of Grant, the
Option Right shall become fully vested and exercisable on the       anniversary of the Date
of Grant].

     (b) Notwithstanding the provisions of Section 5(a) above, the Option Right shall become
immediately vested and exercisable in full upon the occurrence of a Change of Control, as
defined in the Plan.

     (c) Notwithstanding Section 5(a) above, the Board, in its sole discretion, may
determine within 60 days following one of the events described in clauses (i) through (iii)
below that the Option Right shall become immediately exercisable in full (i) if Optionee
becomes permanently disabled (as determined by the Board), (ii) if Optionee dies while an
employee of the Company or a Subsidiary, (iii) if Optionee retires at or after the earliest
voluntary retirement age permitted by his or her employer or with the consent of the Board,
or (iv) under other special circumstances.

 

 

     6. Manner of Exercise.

     (a) To the extent that the Option Right is exercisable in accordance with Section 5,
the Option Right may be exercised by Optionee at any time, or from time to time, in whole or
in part on or prior to the Termination Date; provided, however, that
Optionee must exercise the Option Right in multiples of 100 Option Shares unless fewer than
100 Option Shares are available for purchase by Optionee under this Agreement at the time of
exercise.

     (b) Optionee shall exercise the Option Right by delivering a signed written notice to
the Company, which notice shall specify the number of Option Shares to be purchased and be
accompanied by payment in full of the Option Price and any required taxes (as provided in
the Plan) for the number of Option Shares specified for purchase; provided,
however, that, with the prior approval of the Board, payment of the Option Price may
be deferred and paid from the proceeds of sale through a bank or broker of some or all of
the shares to which such exercise relates.

     (c) The Option Price shall be payable in cash or by check acceptable to the Company or
by wire transfer of immediately available funds; provided that, if approved by the Board,
the Option Price may be payable (i) by the actual or constructive transfer to the Company of
Common Shares owned by Optionee for at least six months having a Market Value Per Share at
the time of exercise equal to the total Option Price, or (ii) by a combination of cash,
check or wire transfer and the payment method described in clause (i).

     (d) The Company’s obligation to deliver Option Shares to Optionee is subject to and
conditioned upon Optionee satisfying all tax obligations associated with Optionee’s exercise
of the Option Right. Unless otherwise approved by the Board, all such tax obligations shall
be payable in cash or by check acceptable to the Company or by wire transfer of immediately
available funds. The Company and its Subsidiaries, as applicable, shall be entitled to
deduct from any payment otherwise due to Optionee the amount necessary to satisfy all such
taxes.

     (e) Upon full payment of the Option Price and satisfaction of all applicable tax
obligations, and subject to the applicable terms and conditions of the Plan and the terms
and conditions of this Agreement, the Company will cause certificates for the Option Shares
purchased hereunder to be delivered to Optionee.

     7. Termination.

     (a) The Option Right shall terminate on the earliest of the following dates (such date,
the “Termination Date”):

     (i) 90 days after Optionee’s employment with the Company or a Subsidiary is
terminated for any reason other than permanent disability (as determined by the
Board) or death; provided, however, that Optionee’s Option Right
shall terminate immediately if Optionee is terminated for cause. For purposes of
the foregoing, termination for cause shall mean the termination of Optionee’s
employment initiated by Optionee’s employer in accordance with

2

 

policies of Optionee’s employer in effect at the time of termination; provided
however, if at the time of the termination, the Optionee is a party to an effective
employment or similar agreement with the Company or a Subsidiary, cause shall have
the meaning defined in Optionee’s agreement with the Company or a Subsidiary;

     (ii) One year after Optionee becomes permanently disabled (as determined by the
Board) or dies, if Optionee dies or becomes permanently disabled while an employee
of the Company or Subsidiary; or

     (iii) The Date of Expiration.

     (b) Subject to Section 5(c), during the 90-day period referred to in Section 7(a)(i)
above and the one-year period referred to in Section 7(a)(ii) above, the Option Right may be
exercised only to the extent that, at the time that Optionee ceases to be an employee of the
Company or a Subsidiary, it is exercisable pursuant to Section 5 hereof.

     (c) For the purposes of this Agreement, the continuous employment of Optionee with the
Company or a Subsidiary shall not be deemed to have been interrupted, and Optionee shall not
be deemed to have ceased to be an employee of the Company or Subsidiary by reason of (i) the
transfer of Optionee’s employment among the Company and its Subsidiaries, (ii) an approved
leave of absence of not more than 90 days, or (iii) the period of any leave of absence
required to be granted by the Company under any law, rule, regulation or contract applicable
to Optionee’s employment with the Company or any Subsidiary.

     8. Share Certificates. All certificates evidencing Option Shares purchased pursuant
hereto, and any certificates for Common Shares issued as dividends on, in exchange of, or as
replacements for, certificates evidencing Option Shares which, in the opinion of counsel for the
Company, are subject to similar legal requirements, shall have endorsed thereon before issuance
such restrictive or other legends as the Company (upon advice of counsel) may deem necessary or
advisable. The Company and any transfer agent shall not be required to register or record the
transfer of any such shares unless and until the Company or its transfer agent shall have received
from Optionee’s counsel an opinion, in a form satisfactory to the Company, that any such transfer
will not be in violation of any applicable law, rule or regulation. Optionee agrees not to sell,
assign, pledge or otherwise dispose of any Option Shares or any Common Shares that are subject to
restrictions on transfer described in this Section 8 without the Company first receiving such an
opinion.

     9. Transfer. The Option Right may not be transferred by Optionee except by will or
the laws of descent and distribution and may not be exercised during the lifetime of Optionee
except by Optionee or Optionee’s guardian or legal representative acting on behalf of Optionee in a
fiduciary capacity under state law and court supervision.

     10. Compliance with Law. The Company shall make reasonable efforts to comply with all
applicable federal or state securities laws; provided, however, that
notwithstanding any other provision of this Agreement, the Option Right shall not be exercisable if
the exercise and issuance of the Option Shares would result in a violation of any such laws.

3

 

     11. Employment Rights. This Agreement shall not confer on Optionee any right with
respect to the continuance of employment or other service with the Company or any Subsidiary. No
provision of this Agreement shall limit in any way whatsoever any right that the Company or a
Subsidiary may otherwise have to terminate the employment of Optionee at any time.

     12. Communications. All notices, demands and other communications required or
permitted hereunder or designated to be given with respect to the rights or interests covered by
this Agreement shall be deemed to have been properly given or delivered when delivered personally
or sent by certified or registered mail, return receipt requested, U.S. mail or reputable overnight
carrier, with full postage prepaid and addressed to the parties as follows:

			
	     If to the Company, at:	 	the Company’s principal executive office, addressed to the attention of the Secretary

			
	     If to Optionee, at:	 	Optionee’s address provided by Optionee on the last page hereof

Either the Company or Optionee may change the above designated address by written notice to the
other specifying such new address.

     13. Interpretation. The interpretation and construction of this Agreement by the
Board shall be final and conclusive. No member of the Board shall be liable for any such action or
determination made in good faith.

     14. Amendments. The Plan or this Agreement may be amended, suspended or terminated in
accordance with the applicable provisions of the Plan.

     15. Integration. The Option Right is granted pursuant to the Plan. Notwithstanding
anything in this Agreement to the contrary, this Agreement is subject to all of the terms and
conditions of the Plan, a copy of which has been made available to the Optionee and is available
upon request to the Secretary at the address specified in Section 12 and which is incorporated
herein by reference. As such, this Agreement and the Plan embody the entire agreement and
understanding of the Company and Optionee and supersede any prior understandings or agreements,
whether written or oral, with respect to the Option Right.

     16. Severance. In the event that one or more of the provisions of this Agreement
shall be invalidated for any reason by a court of competent jurisdiction, any provision so
invalidated shall be deemed to be separable from the other provisions hereof and the remaining
provisions hereof shall continue to be valid and fully enforceable.

     17. Governing Law. This Agreement is made under, and shall be construed in accordance
with, the laws of the State of Texas, without regard to the conflict of laws principles thereof.

     18. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one and the same
instrument.

4

 

     IN WITNESS WHEREOF, this Agreement is executed by a duly authorized representative of the
Company on the day and year first above written.

	 	 	 	 	 
	 	 	PEERLESS MFG. CO.
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

The undersigned Optionee hereby acknowledges receipt of an executed original of this Agreement and
accepts the Option Right subject to the applicable terms and conditions of the Plan and the terms
and conditions hereinabove set forth.

	 	 	 	 	 	 	 
	Date:

	 	 
	 	 
	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	Optionee

OPTIONEE: Please complete/update the following information, as applicable.

	 	 	 
	Name:

	 	 
	 

	 	 
	 
	 	 
	Home Address:
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	Social Security Number:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}]]