<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
PEERLESS MFG. CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PEERLESS MFG. CO.
2819 WALNUT HILL LANE
DALLAS, TEXAS 75229
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 20, 1997
To the Shareholders of
PEERLESS MFG. CO.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Peerless Mfg. Co. (the "Company") will be held at the Peerless Mfg. Co.
Corporate Offices, 2819 Walnut Hill Lane, Dallas, Texas, on Thursday, the 20th
day of November, 1997 at 10:00 o'clock a.m., local time, for the following
purposes:
1. To elect a Board of Directors to serve during their
remaining terms and until their successors are elected
and qualified;
2. To approve an amendment to the Company's Articles of
Incorporation, as amended to date, to authorize
1,000,000 shares of "blank check" preferred stock,
par value $.01 per share;
3. To approve an amendment to the Company's Articles of
Incorporation, as amended to date, to increase to
10,000,000 the number of shares of the Company's
Common Stock, par value $1.00, authorized for
issuance; and
4. To transact such other business as may properly come
before the meeting and any adjournment(s) thereof.
The Board of Directors fixed the close of business on September 29,
1997 as the record date ("Record Date") for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting and any adjournment(s)
thereof. Only shareholders of record at the close of business on the Record
Date are entitled to notice of and to vote at such meeting. The transfer books
will not be closed.
It is important that your stock be represented at the meeting
regardless of the number of shares you hold. You are invited to attend the
meeting in person, but whether or not you plan to attend, please complete,
date, sign and return the accompanying Proxy in the enclosed postage-paid
self-addressed envelope. If you do attend the meeting, you may, if you wish,
revoke your Proxy and vote your shares in person.
By Order of the Board of Directors,
KENT J. VAN HOUTEN
Secretary
Dated: October 20, 1997
<PAGE> 3
PEERLESS MFG. CO.
2819 WALNUT HILL LANE
DALLAS, TEXAS 75229
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 20, 1997
------------------
PROXY SOLICITATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Peerless Mfg. Co. (the "Company"), a
Texas corporation, to be used at the Annual Meeting of the Shareholders of the
Company (the "Annual Meeting"), to be held at the Company's corporate offices,
2819 Walnut Hill Lane, Dallas, Texas on Thursday, November 20, 1997, and at any
adjournment(s) thereof. The approximate date on which this Proxy Statement and
accompanying form of Proxy were first sent or given to shareholders is October
20, 1997.
The Company will bear the expense of preparing, printing and mailing
this Proxy Statement and accompanying material to shareholders. Solicitation
may be made by mail, personal contact, telephone and facsimile by officers and
other employees of the Company, who will not receive additional compensation
for such services. The Company may also request brokerage houses, nominees,
custodians, fiduciaries and other similar parties to forward soliciting
material to the Company's record shareholders and will reimburse such persons
for their reasonable associated charges and expenses.
VOTING AT THE ANNUAL MEETING
The record date for the determination of shareholders entitled to vote
at the Annual Meeting and to notice thereof was the close of business on
September 29, 1997 (the "Record Date"). On the Record Date, there were issued
and outstanding 1,451,992 shares of Common Stock of the Company, par value
$1.00 per share (the "Common Stock"). Each holder of Common Stock is entitled
to one vote for each share owned as of the Record Date on all matters presented
at the meeting. The presence at the Annual Meeting in person or by proxy of
the holders of a majority of the outstanding shares of Common Stock shall
constitute a quorum. The affirmative vote of a majority of the shares eligible
to vote and actually voted at the Annual Meeting, if a quorum is present, is
required for the election of directors and for action on such other matters as
may properly come before the Annual Meeting or any adjournment(s) thereof. The
affirmative vote of two-thirds of the outstanding Common Stock is required for
the amendments to the Company's Articles of Incorporation. The shareholders of
the Company have no appraisal rights under the corporation law statute of the
Company's
1
<PAGE> 4
place of incorporation, the Texas Business Corporation Act (the "TBCA"), or
any other statute or regulation with respect to the proposals specified in
the notice.
Shares represented by valid proxies will be voted in accordance with
instructions contained therein, or, in the absence of such instructions, in
accordance with the Board of Directors' recommendations. Any shareholder who
is present at the meeting but who abstains from voting shall be counted for
purposes of determining whether a quorum exists, but an abstention shall not be
counted as an affirmative vote with respect to any matter. With respect to all
matters other than the election of directors, an abstention would have the same
effect as a vote against the proposal. Any shareholder of the Company has the
unconditional right to revoke such shareholder's proxy at any time prior to the
voting thereof by written notice of revocation to Kent J. Van Houten,
Secretary, Peerless Mfg. Co., 2819 Walnut Hill Lane, Dallas, Texas 75229, by
executing a new proxy, or by attending the Annual Meeting and casting a
contrary vote; however, no revocation shall be effective until such notice of
revocation has been received by the Company at or prior to the Annual Meeting.
ELECTION OF DIRECTORS
PROPOSAL ONE - THE ELECTION OF DIRECTORS
One of the purposes of the Annual Meeting is the election of
directors. The number of directors expected to constitute the whole Board
following the Annual Meeting is five. Unless a shareholder indicates to the
contrary, the proxies named in the enclosed Proxy card will vote such
shareholder's shares for the election as directors of the nominees named below,
all of whom are currently directors of the Company. Each of the director
nominees has held the position listed below his name or a similar position with
the same organization for at least the past five years. The election of
directors requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock represented in person or by proxy at the
Annual Meeting, if a quorum is present at the Annual Meeting. Although it is
not contemplated that any nominee will decline or be unable to serve, the
proxies will be voted by the proxy holders, in their discretion, for another
person, or for a lesser number of persons, if such a contingency should arise.
On May 21, 1997, in accordance with the TBCA, the Board of Directors
amended the Company's bylaws to provide for a classified board. The Board of
Directors consists of three classes, with one director serving in Class I, and
two directors serving in each of Classes II and III. The Class I Directors'
term would expire at the 1998 Annual Meeting of Shareholders; Class II
Directors' terms would expire at the 1999 Annual Meeting of Shareholders; and
the Class III Directors' terms would expire at the 2000 Annual Meeting of the
Shareholders. Upon expiration of their respective terms, each class of
directors will thereafter be elected for three-year terms. The Board of
Directors' nominees and their respective classes are:
Class I:
David D. Battershell, 71 - Consulting Engineer, and a director of the
Company since Fiscal 1980.
Class II:
Bernard S. Lee, 62 - President, Institute of Gas Technology. Mr. Lee
is also a director of NUI Corporation and National Fuel Gas Company. Mr. Lee
has been a director of the Company since Fiscal 1982.
Joseph V. Mariner, Jr., 77 - Investments. Mr. Mariner is also a
director of El Chico Restaurants, Inc., Renters Choice, Inc. and Temtex
Industries, Inc. Mr. Mariner has been a director of the Company since
Fiscal 1980.
2
<PAGE> 5
Class III:
Sherrill Stone, 61 - Chairman of the Board, Chief Executive Officer,
and President of the Company. Mr. Stone has served as a director of the Company
since Fiscal 1985.
Donald A. Sillers, Jr., 71 - Investments. Mr. Sillers is the former
Chairman of the Board and Chief Executive Officer of the Company and has served
as a director of the Company since Fiscal 1970.
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee is responsible for reviewing the scope of the
audit by the independent auditors, reviewing the management letter received
from the auditors and recommending changes in the Company's internal accounting
controls. The Compensation Committee is responsible for recommending to the
full Board of Directors salaries and bonuses for the Company's key employees.
Both the Audit Committee and the Compensation Committee in Fiscal 1997 were
comprised of Messrs. Battershell, Lee, Sillers and Mariner. The Board of
Directors does not have a nominating committee.
During Fiscal 1997, the Board of Directors held eight meetings, the
Audit Committee held one meeting and the Compensation Committee held one
meeting. Each of the directors attended at least 75% of the aggregate number
of meetings of the Board of Directors and any meetings held by any committee on
which that director served. Directors who are not also employees of the
Company are paid $1,250 per quarter, plus $500 for each board or board
committee meeting attended.
THE BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE "FOR" EACH OF THE
NOMINEES FOR THE BOARD OF DIRECTORS SET FORTH ABOVE.
AUTHORIZE "BLANK CHECK" PREFERRED STOCK
PROPOSAL TWO - AUTHORIZE "BLANK CHECK" PREFERRED STOCK
The Board of Directors deems it advisable that the Articles of
Incorporation be amended, subject to approval by the shareholders, to authorize
1,000,000 shares of "blank check" preferred stock, par value $.01 ("Preferred
Stock"). Approval of the amendment to the Articles of Incorporation requires
the affirmative vote of two-thirds of the outstanding shares of Common Stock
entitled to vote at the annual meeting of shareholders. Abstention from voting
on the proposal will have the same effect as voting against the proposal.
The Board of Directors unanimously recommends a vote FOR approval of
the amendment of Article 6 of the Company's Articles of Incorporation.
In the event that both Proposal No. 2 and Proposal No. 3 are
approved, Article 6 of the Company's Articles of Incorporation will read as
follows:
"The aggregate number of shares of all classes of stock which the
Corporation shall have the authority to issue is eleven million
(11,000,000) consisting of ten million shares of Common Stock of the
par value of One Dollar ($1.00) and one million shares of Preferred
Stock of the par value of One Cent ($.01) per share. The Board of
Directors shall have authority to establish series of unissued shares
of any class by fixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the
shares of any series so established to the same extent that such
designations, preferences, limitations, and relative rights could be
stated if fully set forth in the articles of incorporation."
In the event Proposal No. 2 is approved and Proposal No. 3 is not
approved, Article 6 of the Company's Articles of Incorporation will read as
follows:
"The aggregate number of shares of all classes of stock which the
Corporation shall have the authority to issue is five million
(5,000,000) consisting of four million shares of Common Stock of the
par value of One Dollar ($1.00) and one million shares of Preferred
Stock of the par value of One Cent ($.01) per share. The Board of
Directors shall have authority to establish series of unissued shares
of any class by fixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the
shares of any series so established to the same extent that such
designations, preferences, limitations, and relative rights could be
stated if fully set forth in the articles of incorporation."
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<PAGE> 6
The proposed amendments would vest in the Board of Directors the
authority to designate one or more series of Preferred Stock. Such provisions
are often referred to as "blank check" provisions, as they give the Board of
Directors the flexibility, at any time or from time to time, without further
shareholder approval, to create one or more series of Preferred Stock and to
determine the designations, preferences and limitations of each such series,
including, but not limited to, (i) the number of shares, (ii) dividend rights,
(iii) voting rights, (iv) conversion privileges, (v) redemption provisions,
(vi) sinking fund provisions, (vii) rights upon liquidation, dissolution or
winding up of the Company and (viii) other relative rights, preferences and
limitations of such series. If the proposed amendment is approved by the
shareholders, it will become effective upon filing and recording a certificate
of amendment to the Articles of Incorporation or Restated Articles of
Incorporation as required by the TBCA.
The Board of Directors believes that amending the Articles of
Incorporation to permit the Board to authorize the issuance of up to 1,000,000
shares of "blank check" preferred stock provides the Company with the
flexibility to address potential future financing needs by creating a series of
Preferred Stock customized to meet the needs of any particular transaction and
to market conditions. The Company also could issue Preferred Stock for other
corporate purposes, such as to implement joint ventures or to make
acquisitions. In addition, while the proposed amendment to authorize "blank
check" preferred stock is not designed to deter or to prevent a change in
control, under certain circumstances, the Company could use the Preferred Stock
to create voting impediments or to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company and thereby to protect the
continuity of the Company's management. In addition, the issuance of additional
Common Stock or Preferred Stock at below market rates would dilute the value of
the outstanding securities of the Company. The Company could also privately
place such shares with purchasers who might favor the Board of Directors in
opposing a hostile takeover bid, although the Company has no present intention
to do so. The Company does not currently have any plans, agreements, commitments
or understandings with respect to the issuance of Preferred Stock. Although the
Company is not currently considering the issuance of Preferred Stock or any such
financing or transaction and has no present intention to issue any series of
Preferred Stock, the Board believes that the Company should have the flexibility
to issue Preferred Stock.
If any series of Preferred Stock authorized by the Board provides for
dividends, such dividends, when and as declared by the Board of Directors out
of any funds legally available therefor, may be cumulative and may have a
preference over the Common Stock as to the payment of such dividends. In
addition, if any series of Preferred Stock authorized by the Board so provides,
in the event of any dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, the holders of each such series of the then
outstanding Preferred Stock may be entitled to receive, prior to the
distribution of any assets or funds to the holders of Common Stock, a
liquidation preference established by the Board of Directors, together with all
accumulated and unpaid dividends. Depending upon the consideration paid for
Preferred Stock, the liquidation preference of Preferred Stock and other
matters, the issuance of Preferred Stock could therefore result in a reduction
in the assets available for distribution to the holders of Common Stock in the
event of liquidation of the Company. Holders of Common Stock do not have any
preemptive rights to acquire Preferred Stock or any other securities of the
Company.
THE BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE "FOR" ADOPTION OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION AUTHORIZING 1,000,000 SHARES OF
"BLANK CHECK" PREFERRED STOCK.
4
<PAGE> 7
INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
PROPOSAL THREE - INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
Article 6 of the Company's Articles of Incorporation as amended to
date (the "Articles of Incorporation") presently authorize the issuance of
4,000,000 shares of Common Stock. As of June 30, 1997, 1,451,992 shares of
Common Stock were issued and outstanding and no shares of Common Stock were held
in treasury. There are 98,750 shares reserved for issuance under the Company's
1995 Stock Option and Restricted Stock Plan (the "Plan"), leaving a balance of
2,449,258 authorized, unissued, and unreserved shares of Common Stock.
The Board of Directors deems it advisable that the Articles of
Incorporation be further amended, subject to approval by the shareholders, to
increase the number of shares of authorized Common Stock to 10,000,000. Approval
of the amendment to the Articles of Incorporation requires the affirmative vote
of two-thirds of the outstanding shares of Common Stock entitled to vote at the
annual meeting of shareholders. Abstention from voting on the proposal will have
the same effect as voting against the proposal.
The Board of Directors unanimously recommends a vote FOR approval of
the amendment of Article 6 of the Company's Articles of Incorporation.
In the event that both Proposal No. 2 and Proposal No. 3 are approved,
Article 6 of the Company's Articles of Incorporation will read as follows:
"The aggregate number of shares of all classes of stock which the
Corporation shall have the authority to issue is eleven million
(11,000,000) consisting of ten million shares of Common Stock of the
par value of One Dollar ($1.00) and one million shares of Preferred
Stock of the par value of One Cent ($.01) per share." The Board of
Directors shall have authority to establish series of unissued shares
of any class by fixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the
shares of any series so established to the same extent that such
designations, preferences, limitations, and relative rights could be
stated if fully set forth in the articles of incorporation."
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<PAGE> 8
In the event Proposal No. 2 is not approved and Proposal No. 3 is
approved, Article 6 of the Company's Articles of Incorporation will read as
follows:
"The aggregate number of shares of all classes of stock which the
Corporation shall have the authority to issue is ten million
(10,000,000) consisting of ten million shares of Common Stock of the
par value of One Dollar ($1.00) per share."
The additional shares of Common Stock would become part of the
existing class of Common Stock, and the additional shares, when issued, would
have the same rights and privileges as the Common Stock now issued. There are
no preemptive rights relating to the Common Stock. If the proposed amendment
is approved by the shareholders, it will become effective upon filing and
recording a certificate of amendment to the Articles of Incorporation or
Restated Articles of Incorporation as required by the TBCA.
Although the Company has no present plans, agreements, or
understandings regarding the issuance of the proposed additional authorized
shares of Common Stock, the Board of Directors believes that adoption of the
amendment is advisable because it will provide the Company with greater
flexibility in connection with possible future financing transactions,
acquisitions of other products or businesses, stock dividends or splits,
employee benefit plans, and other proper corporate purposes. Moreover, having
such additional authorized shares available will, subject to applicable law and
rules of any exchange or market on which the Common Stock is traded, give the
Company the ability to issue shares without the expense and delay of
shareholder action to approve an amendment to the Articles of Incorporation.
Such a delay could deprive the Company of the flexibility the Board views as
important in facilitating the effective use of the Company's shares. Except as
otherwise required by applicable law or the rules of any exchange or market on
which the Common Stock is traded, authorized but unissued shares of Common
Stock may be issued at such time, for such purposes, and for such consideration
as the Board of Directors may determine to be appropriate, without further
authorization by shareholders.
Since the issuance of additional shares of Common Stock, other than on
a pro rata basis to all current stockholders, would dilute the ownership
interest of a person seeking to obtain control of the Company, such issuance
could be used as an anti-takeover device to discourage a change in control of
the Company by making it more difficult or costly. The Company could also
privately place such shares with purchasers who might favor the Board of
Directors in opposing a hostile takeover bid, although the Company has no
present intention to do so. The Company is not aware of anyone seeking to
accumulate Common Stock or obtain control of the Company, and has no present
intention to use the additional authorized shares to deter a change in control
or otherwise as an anti-takeover device.
THE BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE "FOR" ADOPTION OF
THE AMENDMENT TO THE ARTICLES OF INCORPORATION AUTHORIZING THE INCREASED NUMBER
OF SHARES OF COMMON STOCK.
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<PAGE> 9
COMMON STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of the Record
Date, concerning each nominee for director, the named executive officers, and
certain beneficial owners regarding beneficial ownership of the Company's
Common Stock. Mr. Sillers, Quest Advisory Corp. and Cannell Capital Management
are the only persons or entities known by the Company to beneficially own more
than 5% of the Common Stock as of such date.
<TABLE>
<CAPTION>
Shares of Common Percent of
Stock Beneficially Common
Name Owned Stock
---- -------------------- -----------
<S> <C> <C>
Sherrill Stone 23,358 (1) 1.60%
Donald A. Sillers, Jr. 109,688 (2) 7.60%
David D. Battershell 6,600 *
Bernard S. Lee 3,600 (3) *
Joseph V. Mariner, Jr. 1,350 *
G. D. Cornwell 8,500 *
Edward Perry 2,000 *
Quest Advisory Corp. (4) 110,900 (4) 7.60%
Cannell Capital Management (5) 85,600 (5) 5.90%
All Directors and Officers as a 155,096 10.70%
Group (eight persons including
those named above)
</TABLE>
- --------------------
*Less than 1%.
(1) Does not include 150 shares owned of record by Mrs. Jo Ann Stone, Mr.
Stone's wife, as to which shares Mr. Stone disclaims any beneficial
interest.
(2) Includes 26,000 shares owned of record by Mr. Sillers as sole trustee
of a trust, the income from which is payable for life to Mr. Sillers
and his wife, remainder to their children. Does not include 939
shares owned of record by Mrs. Virginia Sillers, Mr. Sillers' wife, as
to which shares Mr. Sillers disclaims any beneficial interest.
(3) Does not include 3,000 shares owned of record by Mrs. Pauline Lee, Mr.
Lee's wife, as to which shares Mr. Lee disclaims any beneficial
interest.
(4) Based on a 13(g) filing dated February 4, 1997, Quest Advisory Corp.,
Quest Management Company and Charles M. Royce, controlling person of
Quest Advisory Corp. and Quest Management Company, are deemed the
beneficial owners of 110,900 shares of Common Stock.
(5) Based on a 13(d) filing dated June 11, 1997, Cannell Capital Management
is deemed the beneficial owner of 85,600 shares of Common Stock.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid during its fiscal year ended June 30, 1997 to the Company's
Chief Executive Officer and its most highly compensated executive officers
whose total annual salaries and bonuses during fiscal 1997 exceeded $100,000.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------ ---------------------------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
BONUS SATION AWARD(S) SAR'S PAYOUTS SATION
PRINCIPAL FISCAL SALARY ($) ($) ($) (#) ($) ($)
POSITION YEAR ($) (1) (2) (3) (4) (5)
- ------------------- ----- ------ ----- ------ --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sherrill Stone 1997 171,693 None None None N/A N/A 3,434
Chairman, CEO 1996 168,000 8,716 None None 10,000 N/A 3,360
& President 1995 164,480 10,878 None 33,750 N/A N/A 3,290
Dayle B. Ellis 1997 140,990 None None None N/A N/A 2,161
Executive Vice 1996 92,500 5,684 None None 5,000 N/A 1,850
President & COO(6) 1995 92,541 7,095 None 33,750 N/A N/A 1,743
Edward Perry 1997 117,942 None None None N/A N/A 2,315
Vice President 1996 115,750 6,063 None None 5,000 N/A 2,315
1995 113,946 7,568 None 33,750 N/A N/A 2,268
G.D. Cornwell 1997 103,723 None None None N/A N/A 2,074
Vice President 1996 101,600 6,063 None None 5,000 N/A 2,032
1995 104,692 7,568 None 33,750 N/A N/A 1,982
</TABLE>
(1) Bonuses are paid in the fiscal year following the fiscal year in which
earned.
(2) The aggregate value of Other Annual Compensation paid does not exceed
the lesser of $50,000 or 10% of the salary and bonuses paid to the
executive officers named above.
(3) Restricted stock awards are valued at the closing market price of the
Common Stock as of the date of grant. Dividends are paid on
restricted shares at the same rate paid to all shareholders. The
Company's Restricted Stock Plan is discussed in the "Board
Compensation Committee Report on Executive Compensation - 1995 Stock
Option and Restricted Stock Plan" section.
(4) Amounts shown give effect to grants under the 1995 Stock Option and
Restricted Stock Plan.
(5) Amounts shown represent contributions made by the Company on behalf of
the named executive officers to the Peerless Mfg. Co. Retirement
Savings Plan Trust, a defined contribution plan defined under Section
401(k) of the Internal Revenue Code of 1986, as amended.
(6) Mr. Ellis' employment with the Company was voluntarily terminated on
April 17, 1997.
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<PAGE> 11
OPTION GRANTS DURING 1997 FISCAL YEAR
There were no options granted during Fiscal 1997 to the Named Executive
Officers. In Fiscal 1997, 2,000 Common Stock options (500 Common Stock options
for each non-employee director) were granted, all of which were immediately
exercisable, and 500 common stock options were given to an employee which vests
25% ratably over the first four years of its 10-year exercise period.
<TABLE>
<CAPTION>
OPTION EXERCISES IN 1997 FISCAL YEAR AND
FISCAL YEAR ENDED JUNE 30, 1997, VALUE TABLE
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF OPTIONS AT FY-END IN-THE-MONEY OPTIONS AT
ON EXERCISE VALUE 06/30/97 FY-END 06/30/97
REALIZED (#) ($)
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ----------- --------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHERRILL STONE 0 0 2,500 7,500 3,750 11,250
DAYLE B. ELLIS 1,250 $14,844 0 0 0 0
EDWARD PERRY 0 0 1,250 3,750 1,875 5,625
G. D. CORNWELL 0 0 1,250 3,750 1,875 5,625
</TABLE>
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<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed of
Messrs. Battershell, Lee, Sillers and Mariner, the four independent outside
directors of the Company. No Compensation Committee interlocks existed and no
insiders participated in Compensation Committee decisions in Fiscal 1997.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for setting the annual base
compensation and bonus levels and administering the restricted stock program
for the Company's employees, including its executive officers. Its
recommendations are subject to final approval by the Board of Directors. The
Company believes that the key to a successful executive compensation program is
in setting aggressive business goals by integrating the program with the
Company's annual and strategic planning and evaluation processes and by
comparing the Company's results against industry performance levels. The
Company's achievements during the past fiscal year, as well as the individual
achievements of its various business units and divisions, are taken into
account in making executive compensation determinations. In addition, the
Company recognizes that it competes in an increasingly competitive environment,
and executive compensation therefore must also take into account the Company's
performance as compared to that of other companies in the industry or in
similar industries. The Compensation Committee also evaluates on an annual
basis the Company's corporate performance, revenues and share performance with
respect to a broader group of companies, such as the Standard & Poor's 500.
Annual Base Compensation
Annual base compensation awarded in any particular fiscal year to each
of the Company's executive officers is based upon the following factors:
corporate performance of the Company during the prior year, performance of the
divisions within the Company for which the executive officer is responsible,
and a more subjective evaluation of the executive officer's personal
performance. The evaluation of the Company's corporate performance is directly
linked to the Company's profitability during the period, and therefore is based
upon the value of the stock of the Company. In making this determination, the
Compensation Committee reviews the Company's percentage growth in earnings per
share over the prior year, and the Company's overall return on equity for that
period. The Compensation Committee believes that these two factors are the
primary determinants of stock price over time. The Compensation Committee next
reviews the profit performance of the individual divisions for which the
executive officer is responsible. Finally, the Compensation Committee
determines the personal rating for each executive officer, which is based upon
such qualitative factors as the achievement of certain financial objectives and
specific organizational and management goals for that officer. Annual base
compensation for the Company's Chief Executive Officer is determined in the
same manner as for the Company's other executive officers, except that the
Compensation Committee does not review or evaluate any particular division's
performance, but looks to the Company as a whole in
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<PAGE> 13
determining corporate performance relevant to the Chief Executive Officer's
compensation. Additionally, the Company and the Chief Executive Officer
entered into an Employment Agreement in 1994 which provides that, under certain
circumstances, the Company will pay the Chief Executive Officer ninety percent
of his annual base compensation for three years as severance pay.
The Committee also recognizes that in order to attract and retain the
highest quality executive officers, its base compensation must be competitive
when compared to that paid by companies in similar industries and in comparable
geographic areas. Accordingly, the Compensation Committee periodically reviews
the executive compensation paid by such companies.
Annual Bonus Plans
The Company has an incentive bonus plan pursuant to which certain key
employees, including the named executive officers, are selected annually by the
Compensation Committee to earn a cash bonus based upon the after-tax
profitability of the Company. This plan requires that the Company achieve a
specific after-tax return on beginning-of-year equity, after which bonuses may
be paid out. The available bonus pool for the Company is calculated on
earnings in excess of the base level.
Once the total bonus pool is calculated, it is distributed to
participants in the plan in accordance with pre-determined percentages as set
by the Compensation Committee annually. The determination of the bonus level
awarded to the Company's Chief Executive Officer is made in the same manner as
that of the Company's other executive officers. The bonuses paid in Fiscal
1997 to the executive officers are set forth in the Summary Compensation Table.
The Compensation Committee also recommended that an additional
discretionary bonus pool of $20,000 be established, to be used by the President
for the purpose of recognizing certain outstanding contributions made by any
employee, including the named executive officers, but excluding the President.
Awards under this plan may be made in order to recognize new product inventions
or improvements, ideas for major manufacturing cost reductions, originations of
large and profitable orders or for other purposes. No awards were made from
this bonus pool to the executive officers named in the Summary Compensation
Table in Fiscal 1997.
1985 Restricted Stock Plan
The Board of Directors adopted the 1985 Restricted Stock Plan (the
"1985 Plan") to attract, motivate and retain qualified employees. The 1985
Plan was approved by the Company's shareholders on November 13, 1985 and became
effective as of December 13, 1985. The 1985 Plan is administered by the Board
of Directors, which delegates to the Compensation Committee its power to
determine which employees should be awarded restricted stock pursuant to the
plan. Under the terms of the 1985 Plan, the Company may grant up to an
aggregate of 75,000 shares of restricted Common Stock to any employee or
employees. Employees receiving restricted stock
11
<PAGE> 14
do not pay for such stock; however, certain ownership restrictions are placed
upon the stock on the date of its issuance which lapse within five years after
such issuance. Dividends are paid to the employee on restricted shares during
the restriction period.
During Fiscal 1997, the Company made distributions of 8,000 shares of
restricted stock pursuant to the 1985 Plan. Subsequent to the distribution and
before the fiscal year end, 3,000 shares were returned upon an employee's
voluntary termination from the Company and forfeiture of this grant. As of June
30, 1997, following grants were outstanding to the executive officers named in
the Summary Compensation Table, with the restrictions thereon lapsing on the
dates indicated:
<TABLE>
<CAPTION>
Number
Lapse of Value of Shares at
Named Officer Date Shares Grant Issue Date
------------- ---- ------ ----------------
<S> <C> <C> <C>
Sherrill Stone 1/17/98 1,000 $ 11,250
Edward Perry 1/17/98 1,000 $ 11,250
G. D. Cornwell 1/17/98 1,000 $ 11,250
</TABLE>
1995 STOCK OPTION AND RESTRICTED STOCK PLAN
The Board of Directors adopted the 1995 Stock Option and Restricted Stock Plan
(the "1995 Plan") to attract, motivate and retain qualified employees. The 1995
Plan was approved by the Company's shareholders on November 21, 1996 and became
effective immediately thereafter. The 1995 Plan is administered by the Board of
Directors, which delegates to certain members of the Compensation Committee,
Messrs. Battershell, Lee and Mariner, acting as the Stock Option Committee
(the "Stock Option Committee"), its power to determine which employees should be
awarded restricted stock pursuant to the plan. From time to time, the Chief
Executive Officer of the Company will recommend to the Stock Option Committee
individuals he believes should be subject to such Option or grant, and, with
respect to any recommended Option, whether the Option should be a qualified or
nonqualified option. The Stock Option Committee will consider, but need not
accept, the Chief Executive Officer's grant recommendations. Each non-employee
director of the Company or its subsidiaries will receive nonqualified options
to purchase 500 shares of Common Stock on the date that the shareholders
approve the Plan and on the date of the Company's annual shareholder's meeting
for each following year that such director serves on the Board.
Under the terms of the 1995 Plan, the Company may provide options or grant up
to an aggregate of 100,000 shares of restricted common stock to any employees
or non-employee directors.
The Stock Option Committee will determine the number and the exercise price of
the Options, and the time or times that the Options become exercisable,
provided that an Option exercise price may not be less than the fair market
value of the Common Stock on the date of grant. The term of an Option will
also be determined by the Stock Option Committee, provided that the term of a
qualified Option may not exceed 10 years.
The Stock Option Committee may grant shares of Restricted Stock without
requiring the payment of cash consideration for such shares. Currently, there
are no grants awarded under this plan.
In Fiscal 1997, 500 common stock options were given to each non-employee
director which were immediately exercisable, and 500 common stock options were
given to an employee which vests 25% ratably over the first four years of its
10 year exercise period.
This Report is submitted by the members of the Compensation Committee.
DAVID D. BATTERSHELL
BERNARD S. LEE
JOSEPH V. MARINER, JR.
DONALD A. SILLERS, JR.
This Report will not be deemed to be incorporated by reference in any
filing by the Company under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, except to the extent that the Company
specifically incorporates this Report by reference.
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<PAGE> 15
CORPORATE PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
over a five-year period, assuming $100 invested at June 28, 1992 in each of (i)
Peerless Mfg. Co. common stock, (ii) the Dow Jones Industrial Average and (iii)
a peer group consisting of manufacturers in the industrial sector providing
industrial and commercial services to other commercial enterprises. Total
shareholder return is based on the increase in the price of the common stock
with dividends reinvested.
The stock price performance depicted in the Corporate Performance
Graph is not necessarily indicative of future price performance. The Corporate
Performance Graph will not be deemed to be incorporated by reference in any
filing by the Company under the Securities Act or the Exchange Act, except to
the extent that the Company specifically incorporates the graph by reference.
TOTAL RETURN TO STOCKHOLDERS
(Assumes $100 investment on 6/30/92)
<TABLE>
<CAPTION>
TOTAL RETURN ANALYSIS 6/30/92 6/30/93 6/30/94 6/30/95 6/28/96 6/30/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PEERLESS MFG. CO. $ 100.00 $ 75.34 $ 96.09 $ 109.29 $ 113.31 $ 118.43
- -------------------------------------------------------------------------------------------
DJ INDUSTRIAL AVERAGE $ 100.00 $ 105.95 $ 109.23 $ 137.29 $ 170.40 $ 231.21
- -------------------------------------------------------------------------------------------
DJ DIVERSIFIED INDUSTRIAL $ 100.00 $ 120.12 $ 124.52 $ 148.04 $ 185.65 $ 252.67
- -------------------------------------------------------------------------------------------
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (303) 494-5472.
Data from Bloomberg Financial Markets
13
<PAGE> 16
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") (and, if such security is registered
on a national securities exchange, also with the exchange). Executive
officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on the Company's review of the copies of Forms 3, 4 and 5
furnished to the Company or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that, during the fiscal year ended June 30, 1997, its officers, directors and
greater than 10% shareholders complied with all Section 16(a) filing
requirements applicable to them; except for one late filing on Form 4 by Donald
A. Sillers. This late filing resulted in two transactions not being reported
on a timely basis.
AUDITORS
Grant Thornton has audited the Company's financial statements since
fiscal 1970 and has been selected to act in that capacity for the ensuing
fiscal year. Representatives of Grant Thornton are expected to be present at
the Annual Meeting, will have the opportunity to make a statement if they
desire to do so, and will respond to shareholder questions raised during the
meeting.
SHAREHOLDER PROPOSALS
A proper proposal submitted by a shareholder of the Company for
presentation at the Company's 1998 Annual Meeting of Shareholders and received
at the Company's executive office not earlier than May 23, 1998 and not later
than June 22, 1998 will be included in the Company's Proxy Statement and form
of Proxy relating to such Annual Meeting.
OTHER MATTERS
Neither management nor the Board of Directors knows of any matter to
be acted upon at the Annual Meeting other than the matters described above. If
any other matter properly comes before the Annual Meeting or any adjournments
thereof, however, the proxies in the enclosed form confer upon the persons
entitled to vote the shares represented by such proxies discretionary authority
to vote thereon in accordance with their best judgment in the interest of the
Company.
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<PAGE> 17
UPON WRITTEN REQUEST TO THE UNDERSIGNED, C/O PEERLESS MFG. CO., 2819
WALNUT HILL LANE, DALLAS, TEXAS 75229, THE COMPANY WILL PROVIDE, WITHOUT
CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
By Order of the Board of Directors,
KENT J. VAN HOUTEN
Secretary
Dallas, Texas
October 20, 1997
15
<PAGE> 18
FRONT OF PROXY CARD
PEERLESS MFG. CO.
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS AT 10:00 A.M. THURSDAY, NOVEMBER 20, 1997
2819 WALNUT HILL LANE, DALLAS, TEXAS 75229
-------------------------------------------
----------------------------
The undersigned shareholder of Peerless Mfg. Co. (the "Company")
hereby appoints Sherrill Stone and Kent J. Van Houten or either of them,
as proxies, each with full powers of substitution, to vote the shares of the
undersigned at the above-stated Annual Meeting and at any adjournment(s)
thereof:
(1) Election of David D. Battershell as Class I Director.
-----------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR nominee WITHHOLD AUTHORITY
[ ] to vote for nominee [ ]
</TABLE>
-----------------------------------------------------------------------
(2) Election of Bernard S. Lee and Joseph V. Mariner, Jr. as Class II
Directors.
-----------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR all nominees (except as WITHHOLD AUTHORITY
provided to the contrary below) [ ] to vote for all nominees [ ]
</TABLE>
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name here):
-----------------------------------------------------------------------
(3) Election of Sherrill Stone and Donald A. Sillers, Jr. as Class III
Directors.
-----------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR all nominees (except as WITHHOLD AUTHORITY
provided to the contrary below) [ ] to vote for all nominees [ ]
</TABLE>
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name here):
-----------------------------------------------------------------------
(4) Approval of an amendment to the Company's Articles of
Incorporation to authorize 1,000,000 shares of "blank check"
preferred stock, par value $.01 per share.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
--------------------------------------------------------------------
(5) Approval of an amendment to the Company's Articles of
Incorporation to increase the number of shares of authorized
Common Stock of the Company to 10,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
--------------------------------------------------------------------
(6) In their discretion, the proxies are authorized to vote upon
such other business or matters as may properly come before the
meeting or any adjournment thereof.
(Continued and to be signed on the reverse side)
16
<PAGE> 19
BACK OF PROXY CARD
(Continued from reverse side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL
BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF A
CHOICE IS NOT INDICATED WITH RESPECT TO ITEMS (1), (2), (3), (4) AND (5) THIS
PROXY WILL BE VOTED "FOR" SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION
WITH RESPECT TO ANY MATTER REFERRED TO IN ITEM (6). THIS PROXY IS REVOCABLE
AT ANY TIME BEFORE IT IS EXERCISED.
Receipt herewith of the Company's Annual Report and Notice of Meting
and Proxy Statement, dated October 20, 1997, is hereby acknowledged.
Dated:____________________________, 1997
--------------------------------------
--------------------------------------
(Signature(s) of Shareholder(s))
(Joint owners must EACH sign. Please
sign EXACTLY as your name(s) appear(s)
on this card. When signing as attorney,
trustee, executor, administrator,
guardian or corporate officer, please
give your FULL title.)
PLEASE SIGN, DATE AND MAIL TODAY.
17
