Document:

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                                                                   EXHIBIT 10(m)

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into to be
effective as of February 4, 2002 (the "Effective Date"), between PEERLESS MFG.
CO. ("Employer"), and RICHARD L. TRAVIS, JR. ("Employee").

SECTION 1. EMPLOYMENT.

         1.1 Employment and Term. Subject to the terms and conditions of this
Agreement, Employer agrees to employ Employee as Chief Financial Officer and
Vice President-Administration pursuant to this Agreement. Employee will be
employed under this Agreement for a term beginning on the Effective Date and
ending on the third anniversary date of the Effective Date, unless Employee's
employment is terminated earlier as provided in Section 4 below. Sections 2, 3,
and 5 of this Agreement shall survive any termination of Employee's employment
with Employer.

         1.2 Duties. At all times during the course of Employee's employment
with Employer, Employee agrees to perform the duties associated with such
position diligently and to devote all of his business time, attention and
efforts to the business of Employer. Employee agrees to comply with the
policies, procedures and guidelines established by Employer from time to time.
Employee agrees to perform his duties faithfully and loyally and to the best of
his abilities, and shall use his best efforts to promote the business of
Employer.

         1.3 Supervision. Employee shall perform the duties of employment under
the direction and supervision of Employer's Chief Executive Officer.

SECTION 2. NON-COMPETITION.

         2.1 Non Competition.

                  (a) Employee agrees that during the term of his employment and
         for a period of one (1) year following termination of his employment
         (regardless of whether Employee is terminated without Cause (as defined
         in Section 4.1(c) below), for Cause, voluntarily resigns or otherwise),
         neither Employee nor any person or entity directly or indirectly
         controlling, controlled by or under common control with Employee, shall
         directly or indirectly, on his own behalf or as an employee or other
         agent of or an investor in another person:

                           (i) engage in any business currently conducted by
                  Employer (collectively, the "Business");

                           (ii) influence or attempt to influence any customer
                  or supplier of Employer or any affiliate of Employer to
                  purchase goods or services related to the Business from any
                  person other than Employer or such affiliate; or

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                           (iii) employ or attempt to employ any individuals who
                  are employees of Employer or any affiliate of Employer, or
                  influence or seek to influence any such employees to leave
                  Employer's or such affiliate's employment.

                  (b) Employee specifically acknowledges that Employer's
         products are sold in a world market and that Employee has been engaged
         with regard to Employer's products and Employer's customers throughout
         the world without geographic limitation, and accordingly that the
         restrictive covenant regarding competition contained in this Section
         2.1 shall apply without geographic limitation.

                  (c) Employee acknowledges that his obligations under this
         Section 2.1 are a material inducement and condition to Employer's
         entering into this Agreement and the Related Agreement (as defined in
         Section 5.10 below). Employee acknowledges and agrees that the
         restrictions set forth in this Section 2.1 are reasonable as to time,
         geographic area and scope of activity and do not impose a greater
         restraint than is necessary to protect the goodwill and other business
         interests of Employer, and Employee agrees that Employer is justified
         in believing the foregoing.

                  (d) If any provision of this Section 2.1 should be found by
         any court of competent jurisdiction to be unenforceable by reason of
         its being too broad as to the period of time, territory, and/or scope,
         then, and in that event, such provision shall nevertheless remain valid
         and fully effective, but shall be considered to be amended so that the
         period of time, territory, and/or scope set forth shall be changed to
         be the maximum period of time, the largest territory, and/or the
         broadest scope, as the case may be, which would be found enforceable by
         such court

                  (e) Employee acknowledges that Employee's violation or
         attempted violation of this Section 2.1 will cause irreparable damage
         to Employer or its affiliates, and Employee therefore agrees that
         Employer shall be entitled as a matter of right to an injunction, out
         of any court of competent jurisdiction, restraining any violation or
         further violation of such agreements by Employee or others acting on
         his behalf. Employer's right to injunctive relief will be cumulative
         and in addition to any other remedies provided by law or equity.

SECTION 3. CONFIDENTIALITY; NONDISPARAGEMENT; CONFLICT OF INTEREST.

         3.1 Confidentiality.

                  (a) In the course of his employment with Employer, Employee
         may receive or have access in the future to commercially valuable,
         confidential or proprietary information ("Confidential Information").
         Confidential Information means all information, whether oral or
         written, previously or hereafter developed, acquired or used by
         Employer and relating to the business of Employer that is not generally
         known to others in Employer's area of business, including without
         limitation (i) any trade secrets, work product, processes, analyses or
         know-how of Employer; (ii) Employer's advertising, product development,
         strategic and business plans and information, including customer and
         prospect

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         lists; (iii) the prices at which Employer has sold or offered to sell
         its products or services; and (iv) Employer's financial statements and
         other financial information.

                  (b) Employee acknowledges and agrees that the Confidential
         Information is and shall be the sole and exclusive property of
         Employer. Employee shall not use any Confidential Information for his
         own benefit or disclose any Confidential Information to any third party
         (except in the course of performing his authorized duties for Employer
         under this Agreement), either during or subsequent to his employment
         with Employer.

                  (c) Specifically, Employee agrees that, except as expressly
         authorized in writing by Employer, or as may be required by law or
         court order, Employee shall (i) not disclose Confidential Information
         to any third party, (ii) not copy Confidential Information for any
         reason, and (iii) not remove Confidential Information from Employer's
         premises. Upon termination of his employment with Employer, Employee
         shall promptly deliver to the Employer all Confidential Information,
         including documents, computer disks and other computer storage devices
         and other papers and materials (including all copies thereof in
         whatever form) containing or incorporating any Confidential Information
         or otherwise relating in any way to the Employer's business that are in
         his possession or under his control.

                  (d) Employee acknowledges that Employee's violation or
         attempted violation of this Section 3.1 will cause irreparable damage
         to Employer or its affiliates, and Employee therefore agrees that
         Employer shall be entitled as a matter of right to an injunction, out
         of any court of competent jurisdiction, restraining any violation or
         further violation of such agreements by Employee or others acting on
         his behalf. Employer's right to injunctive relief will be cumulative
         and in addition to any other remedies provided by law or equity.

         3.2. Covenant of Nondisparagement. In consideration of this Agreement
and the Related Agreement, both party agree and promise that, during the term of
and at all times after the termination of this Agreement (regardless of whether
Employee is terminated without Cause, for Cause, voluntarily resigns or
otherwise), not to make any libelous, disparaging or otherwise injurious
statements about or concerning each other or any of the employer's affiliates,
their officers, employees or representatives. Such prohibited statements include
any statement that is injurious to the business or business reputation of any of
Employer, its affiliates or their employees or representatives, but does not
include reasonable statements of disagreement that Employee makes for the
purpose of protecting or enforcing any of his rights or interests hereunder or
defending against any claim or claims of Employer, so long as such statements
are not slanderous or libelous and are delivered in terms as would ordinarily be
considered customary and appropriate.

         3.3. Conflict of Interest. Employee agrees that during the term of this
Agreement without the prior approval of the Board of Directors of Employer,
Employee shall not engage, either directly or indirectly, in any activity which
may involve a conflict of interest with Employer or its affiliates (a "Conflict
of Interest"), including ownership in any supplier, contractor, subcontractor,
customer or other entity with which Employer does business (other than as a
shareholder of less than one percent of a publicly traded class of securities)
or accept

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any material payment, service, loan, gift, trip, entertainment or other favor
from a supplier, contractor, subcontractor, customer or other entity with which
Employer does business and that Employee shall promptly inform the Chief
Executive Officer or the Board of Directors of Employer as to each offer
received by Employee to engage in any such activity. Employee further agrees to
disclose to Employer any other facts of which Employee becomes aware which might
involve or give rise to a Conflict of Interest or potential Conflict of
Interest.

SECTION 4. TERMINATION.

         4.1 Termination by Employer.

                  (a) Employer may terminate Employee's employment without Cause
         upon no less than sixty (60) days prior written notice of termination
         to Employee. In the event of any such termination without Cause,
         Employer shall pay Employee as severance compensation, a lump sum
         payment in an amount equal to one hundred percent (100%) of Employee's
         then current base salary annualized. In the event of any such
         termination without Cause, except as aforesaid, Employer shall have no
         other obligations to pay any base salary, incentive compensation or
         bonus or provide for any benefits to Employee after the effective date
         of such termination. As used herein, "base salary" excludes any bonus
         or incentive compensation.

                  (b) Employer may discharge Employee for Cause at any time
         without prior notice. In the event of any such termination for Cause,
         Employer's obligations to pay any base salary, incentive compensation
         or bonus or provide for any benefits to Employee shall terminate
         immediately upon the effective date of such termination.

                  (c) As used herein, "Cause" shall mean any of the following:

                           (i) the conviction of Employee by a court of
                  competent jurisdiction of any felony or crime involving moral
                  turpitude;

                           (ii) commission by Employee of an intentional
                  material act of fraud to his pecuniary benefit in connection
                  with his duties or in the course of his employment with
                  Employer, as reasonably determined by Employer's Board of
                  Directors; or

                           (iii) the intentional and continued failure by
                  Employee to substantially perform his duties hereunder, or the
                  intentional wrongdoing by Employee resulting in material
                  injury to Employer. No act, or failure to act, on the part of
                  Employee shall be deemed "intentional" unless done, or omitted
                  to be done, by Employee not in good faith and without
                  reasonable belief that his action or omission was in the best
                  interests of Employer.

         4.2 Termination by Employee. Employee may resign from Employee's
employment hereunder (whether for voluntary retirement or otherwise) upon no
less than sixty (60) days prior written notice of resignation to Employer. If
Employee voluntarily resigns from his employment with Employer during the term
hereof (whether for voluntary retirement or otherwise),

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Employer's obligations to pay any base salary, incentive compensation or bonus
or provide for any benefits shall terminate immediately upon the effective date
of such resignation. Upon retirement, Employee shall be entitled to all benefits
(if any) provided by Employer in the ordinary course to other executive officers
of Employer at comparable retirement age.

         4.3 Termination on Death of Employee. This Agreement shall terminate
automatically upon the death of Employee and all rights of Employee, his heirs,
executors and administrators to salary, bonus, incentive compensation or
benefits shall terminate immediately, except as otherwise provided in Employer's
benefits plans in effect at such time.

         4.4 Termination by Disability. Employer may terminate Employee's
employment hereunder upon Employee becoming Disabled (as defined below). Upon
such termination, Employer shall pay Employee a lump sum payment in an amount
equal to fifty percent (50%) of Employee's then current base salary annualized,
and Employee shall be entitled to all other disability benefits then in effect
(if any) provided by Employer to all other executive officers of Employer. For
purposes of this Agreement, "Disabled" means any mental or physical impairment
lasting more than 180 consecutive or non-consecutive calendar days that prevents
Employee from performing the essential functions of his position with or without
reasonable accommodation as determined by a physician mutually agreeable to
Employee and Employer. Employee agrees to submit to appropriate medical
examinations and authorize his physicians to release medical information
necessary to determine whether Employee is Disabled for purposes of this
Agreement.

SECTION 5. MISCELLANEOUS.

         5.1 Notice. Any notice required or permitted under this Agreement must
be in writing and shall be deemed to have been given when delivered personally
or by overnight courier service or three days after being sent by mail, postage
prepaid, at the address indicated below or to such changed address as such
person may subsequently give such notice of:

                  if to Employer:
                                       Peerless Mfg. Co.
                                       2819 Walnut Hill Lane
                                       Dallas, Texas  75229
                                       Attn:  Chairman, Board of Directors

                  if to Employee:
                                       Richard L. Travis, Jr.
                                       7067 Inwood Road
                                       Dallas, Texas 75209

         5.2 Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, personal
representatives, successors, and assigns. Except as otherwise provided herein,
this Agreement may not be assigned by any party hereto without the prior written
consent of the other party hereto. Employer shall require any successor, and any
corporation or other person which is in control of such successor, to all or
substantially all of the business and/or assets of Employer (by purchase,
merger, consolidation or otherwise),

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by agreement in form and substance reasonably satisfactory to Employee, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Employer would be required to perform it if no such
succession had taken place. Failure of Employer to obtain such agreement prior
to the effectiveness of any such succession shall be a material breach of this
Agreement by Employer. As used in this Agreement, "Employer" shall mean Employer
as herein before defined and any successor to its business and/or all or part of
its assets as aforesaid which executes and delivers the assumption agreement
provided for in this Section 5.2 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.

         5.3 Tax Treatment. In the event that the total compensation paid to
Employee, taking into account all cash payments under the Related Agreement or
otherwise, shares of stock, accelerated vesting of stock options, and bonuses,
if any, is found to constitute "an excess parachute payment" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended, then Employer
shall pay to Employee, in addition to the total compensation paid to Employee,
but without duplication, an additional amount which, after reduction for income
taxes and excise taxes on such additional amount, is sufficient to provide for
the payment of any excise tax that may be due by Employee on the total
compensation paid by Employer to Employee.

         5.4 Headings. The section headings used herein are for reference and
convenience only and shall not enter into the interpretation hereof.

         5.5 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
shall constitute one and the same instrument.

         5.6 Amendment and Waiver. The provisions of this Agreement may be
amended or waived only by written agreement of Employer and Employee, and no
course of conduct, failure or delay in enforcing the provisions of this
Agreement shall effect the validity, binding effect or enforceability of this
Agreement.

         5.7 Severability. Any provision or portion of a provision of this
Agreement that is held to be invalid or unenforceable will be severable, and
this Agreement will be construed and enforced as if such provision, or portion
thereof, did not comprise a part hereof, and the remaining provisions or
portions of provisions will remain in full force and effect. In lieu of each
invalid or unenforceable provision there will be added automatically as part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be legal, valid, and enforceable.

         5.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to any
conflicts of law rule or principle that might require the application of the
laws of another jurisdiction.

         5.9 Disputes. The parties to this Agreement agree that in the event
there is a dispute or controversy between them that cannot be settled through
direct discussions, it is in the best interests of all for such dispute or
controversy to be resolved in the shortest time and with the lowest cost of
resolution as practicable. Consequently, any such dispute, controversy or claim

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between the parties to this Agreement will not be litigated, but instead will be
resolved by arbitration in accordance with Title 9 of the U.S. Code (United
States Arbitration Act) and the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules"), and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration will be before one neutral arbitrator and will proceed under the
Expedited Procedures of said Rules. The arbitration will be held in Dallas,
Texas, or such other place as may be selected by mutual agreement. The
arbitrator will have the discretion to order a prehearing exchange of
information by the parties, and to set limits for both the scope and time period
of such exchange. All issues regarding exchange requests will be decided by the
arbitrator. Neither party nor the arbitrator may disclose the existence, content
or results of any arbitration hereunder, unless required to do so by court or
regulatory order, without the prior written consent of both parties. Fees and
expenses of the arbitration itself will be borne by the parties equally;
provided, however, the arbitrator will also be authorized to award to the
prevailing party all or that fraction of its reasonable costs and fees as is
deemed equitable. This provision will not apply to any injunctive relief sought
by the Company or any of its affiliate under Section 2 or 3 of this Agreement.

         5.10 Entire Agreement. This Agreement and that certain Agreement, of
even date herewith, between Employer and Employee regarding certain agreements
effective upon a "Change-in-Control" (the "Related Agreement") embody the
complete agreement between Employer and Employee regarding the subject matter
hereof and the same supersede all prior agreements or understandings, whether
oral, written or otherwise, between the parties hereto that may have related in
any way to the subject matter hereof.

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                                            EMPLOYER:

                                            PEERLESS MFG. CO.

                                            /s/ Sherrill Stone
                                            ------------------------------
                                            Sherrill Stone,
                                            Chairman of the Board and
                                            Chief Executive Officer

                                            EMPLOYEE:

                                            /s/ Richard L. Travis
                                            ------------------------------
                                            Richard L. Travis

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                                                                   EXHIBIT 10(n)

                                    AGREEMENT

         THIS AGREEMENT (this "Agreement") is made and entered into to be
effective as of the 4th day of February, 2002, by and between PEERLESS MFG. CO.
(the "Company"), and RICHARD L. TRAVIS, JR. ("Executive").

         WHEREAS, the Board of Directors of the Company (the "Board") believes
Executive can contribute substantially to the growth and success of the Company
and wishes to offer an inducement to Executive to accept employment with the
Company;

         WHEREAS, the parties desire to enter into this Agreement to set forth
the benefits which the Company will pay to Executive in the event of termination
of Executive's employment following a "Change in Control" of the Company, except
as a result of death, disability, voluntary resignation or termination by the
Company for Cause (in each case as such terms or events are defined or discussed
herein);

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained the parties agree as
follows:

         1. Term. The term of this Agreement shall continue until the earliest
of (i) subject to the proviso at the end of this sentence, the expiration of the
third anniversary of the occurrence of a Change in Control, (ii) Executive's
death, or (iii) Executive's earlier voluntary resignation (except for those
events described in Section 3(a)(2)); provided, however, that during the term of
this Agreement, on each anniversary of a Change in Control, the three year
period referenced in clause (i) above shall automatically be extended for an
additional 12 months unless, not later than 60 calendar days prior to such
anniversary date, the Company shall have given written notice to Executive that
it does not wish to have the term extended.

         2. Definitions.

         (a)      Acquiring Person. An "Acquiring Person" shall mean any person
                  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 trust with respect
                  thereto) or subsidiary of the Company, any person holding
                  Common Stock of the Company for or pursuant to the terms of
                  any such plan, or Donald A. Sillers, Jr. or members of his
                  immediate family.

         (b)      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.

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         (c)      Cause. For "Cause" shall mean any of the following shall have
                  occurred:

                  (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; or

                  (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.

         (d)      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;

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                  (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, 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 both (1) proposed by, and (2) 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.

         (e)      Code. The "Code" shall mean the Internal Revenue Code of 1986,
                  as amended.

         (f)      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.

         (g)      Disabled. "Disabled" means any mental or physical impairment
                  lasting more than 180 consecutive or non-consecutive calendar
                  days that prevents Executive from performing the essential
                  functions of his position with or without reasonable
                  accommodation, as determined by a physician mutually agreeable
                  to Executive and the Company. Executive agrees to submit to
                  appropriate medical examinations and authorize his physicians
                  to release medical information necessary to determine whether
                  Employee is "Disabled" for purposes of this Agreement.

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

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

                  (i)      A lump sum amount equal to one hundred-fifty percent
                           (150%) of Executive's average annual compensation
                           reported on his Form W-2 paid by the Company
                           includable in gross income for the five most recent
                           full calendar years that Executive has been an
                           employee of the Company (or such fewer full calendar
                           years if Executive has been an employee less than
                           five full calendar years) prior to the Change in
                           Control; provided,

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                           however, that if on the date of determination,
                           Executive has not been an employee of the Company for
                           a full calendar year, such lump sum amount will equal
                           one hundred-fifty percent (150%) of Executive's then
                           current base salary (excluding bonus and incentive
                           compensation) annualized; and

                  (ii)     For a period of 12 months, 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.

         (j)      Termination Date. The "Termination Date" shall be the
                  effective date upon which Executive or the Company terminates
                  the employment of Executive with the Company.

         3.       Rights of Executive Upon Change in Control and Subsequent
                  Termination.

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

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

                           (i)      Executive dies;

                           (ii)     Executive becomes Disabled; or

                           (iii)    for Cause; or

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

                           (i)      an adverse 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 Executive had immediately prior
                                    to the Change in Control, any reduction in
                                    Executive's base salary (excluding bonus and
                                    incentive compensation) during the
                                    Employment Term or any adverse change in the
                                    calculation of the annual bonus or incentive
                                    compensation or a significant reduction in
                                    scope or value of the aggregate other
                                    monetary or nonmonetary benefits to which
                                    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

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                                    Executive of such change, reduction,
                                    alteration or termination, as the case may
                                    be;

                           (ii)     a determination by 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 Executive of such
                                    determination;

                           (iii)    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

                           (iv)     the Company commits any breach (including
                                    under Section 5 below) of this Agreement
                                    which is not cured within ten calendar days
                                    after receipt by the Company of written
                                    notice from Executive of such breach.

         (b)      In the event that the total compensation paid to Employee as
                  severance in the event of a Change in Control, taking into
                  account all cash payments, shares of stock, accelerated
                  vesting of stock options, and bonuses, if any, is found to
                  constitute "an excess parachute payment" within the meaning of
                  Section 280G of the Code, then the Company will pay to
                  Executive, in addition to the Severance Compensation, an
                  additional amount which, after reduction for income taxes and
                  excise taxes on such additional amount, is sufficient to
                  provide for the payment of any excise tax that may be due by
                  Executive on the total compensation amount.

         (c)      Upon written notice given by Executive to the Company prior to
                  the receipt of Severance Compensation, 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
                  Executive shall not affect any rights and benefits which
                  Executive may have pursuant to any other agreement, policy,
                  plan, program or arrangement with the Company 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

                                       5
<PAGE>

                  payable after termination of employment under the Employment
                  Agreement, dated the date hereof, by and between the Company
                  and Executive, as may be amended, restated or modified.

         (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 Executive provided for in
                  this Agreement.

         (f)      Without limiting the rights of 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)      If any of the events set forth in Section 3(a)(1) or 3(a)(2)
                  occurs prior to a Change in Control but 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, such event
                  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 Executive hereunder is terminated, 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 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 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 reasonably satisfactory to 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 successor to its
                  business and/or all or a substantial part of its assets as
                  aforesaid which executes and delivers the agreement provided
                  for in this Section 5

                                       6
<PAGE>

                  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 Executive hereunder shall
                  inure to the benefit of and be enforceable by Executive's
                  personal or legal representatives, executors, administrators,
                  successors, heirs, distributees, devisees and legatees.

         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 Executive:

                  Richard L. Travis, Jr.
                  7067 Inwood Road
                  Dallas, Texas  75209

         If to the Company:

                  Peerless Mfg. Co.
                  2819 Walnut Hill Lane
                  Dallas, Texas  75229
                  Attn:  Chairman of the Board

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 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.

         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.

                                       7
<PAGE>

         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.

         10. Employment Rights. Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or Executive to have
Executive remain in the employment of the Company prior to any Change in
Control.

         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.

         12. Enforcement Fees. All costs of litigation necessary for Executive
to defend the validity of this Agreement are to be paid by the Company 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 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.

         13. Rights and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to 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.

         14. Governing Law. This Agreement will be governed by and construed in
accordance with the internal laws of the State of Texas, without giving effect
to any conflicts of law rule or principle that might require the application of
the laws of another jurisdiction.

         15. Disputes. The parties to this Agreement agree that in the event
there is a dispute or controversy between them that cannot be settled through
direct discussions, it is in the best interests of all for such dispute or
controversy to be resolved in the shortest time and with the lowest cost of
resolution as practicable. Consequently, any such dispute, controversy or claim
between the parties to this Agreement will not be litigated, but instead will be
resolved by arbitration in accordance with Title 9 of the U.S. Code (United
States Arbitration Act) and the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules"), and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration will be before one neutral arbitrator and will proceed under the
Expedited Procedures of said Rules. The arbitration will be held in Dallas,
Texas, or such other place as may be selected by mutual agreement. The
arbitrator will have the discretion to order a prehearing exchange of
information by the parties, and to set limits for both the scope and time period
of such exchange. All issues regarding exchange requests will be decided by the
arbitrator. Neither party nor the arbitrator may disclose the existence, content
or results of any

                                       8
<PAGE>

arbitration hereunder, unless required to do so by court or regulatory order,
without the prior written consent of both parties. Fees and expenses of the
arbitration itself will be borne by the parties equally; provided, however, the
arbitrator will also be authorized to award to the prevailing party all or that
fraction of its reasonable costs and fees as is deemed equitable.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       9
<PAGE>

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

                                          PEERLESS MFG. CO.

                                          /s/ Sherrill Stone
                                          ------------------------------------
                                          Sherrill Stone,
                                          Chairman of the Board and
                                          Chief Executive Officer

                                          EXECUTIVE

                                          /s/ Richard L. Travis, Jr.
                                          ------------------------------------
                                          Richard L. Travis, Jr.

                                       10

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