<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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)(1) 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:
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(4) Date Filed:
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<PAGE> 2
PEERLESS MFG. CO.
2819 WALNUT HILL LANE
DALLAS, TEXAS 75229
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 25, 1998
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 Company's Corporate Offices, 2819
Walnut Hill Lane, Dallas, Texas, on Wednesday, the 25th day of November, 1998 at
10:00 a.m., local time, for the following purposes:
1. To elect one Director to serve as a Class I Director for a
three-year term and until his successor is elected and qualified;
2. 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 October 2, 1998 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,
/s/ PAUL W. WILLEY
Paul W. Willey
Secretary
Dated: October 20, 1998
YOUR VOTE IS IMPORTANT. PLEASE DATE, EXECUTE AND RETURN PROMPTLY
THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
<PAGE> 3
PEERLESS MFG. CO.
2819 WALNUT HILL LANE
DALLAS, TEXAS 75229
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 25, 1998
---------------------
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 Wednesday, November 25, 1998 at 10:00 a.m.,
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, 1998.
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 October 2,
1998 (the "Record Date"). On the Record Date, there were issued and outstanding
1,457,492 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.
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. 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 Paul W.
Willey, 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.
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.
ELECTION OF CLASS I DIRECTOR
The Board of Directors is expected to consist of five directors following
the Annual Meeting. Unless a shareholder indicates to the contrary, the persons
named as proxies in the enclosed proxy card have indicated that they intend to
vote for the election of the nominee named below. If the nominee is not
available to serve as a director at the time of election, the proxies may be
voted for a substitute nominee.
1
<PAGE> 4
On May 21, 1997, 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. Each class of directors serves three-year terms or until
successors have been elected or qualified.
NOMINEE FOR DIRECTOR TO SERVE UNTIL 2001
David D. Battershell, 72 -- Consulting engineer and a director of the
Company since 1980.
DIRECTORS CONTINUING TO SERVE UNTIL 1999
Bernard S. Lee, 63 -- 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 1982.
Joseph V. Mariner, Jr., 78 -- Investments. Mr. Mariner is also a director
of Renters Choice, Inc. and Temtex Industries, Inc. Mr. Mariner has been a
director of the Company since 1980.
DIRECTORS CONTINUING TO SERVE UNTIL 2000
Sherrill Stone, 62 -- Chairman of the Board, Chief Executive Officer and
President of the Company. Mr. Stone has served as a director of the Company
since 1985.
Donald A. Sillers, Jr., 72 -- 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 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. Messrs.
Battershell, Lee, Sillers and Mariner were members of the Audit Committee and
the Compensation Committee in fiscal 1998. The Board of Directors does not have
a nominating committee.
During fiscal 1998, the Board of Directors held five 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. Non-employee directors are paid $1,575 per quarter, plus $950
for each board or special committee meeting attended.
THE BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE FOR THE NOMINEE FOR
DIRECTOR SET FORTH ABOVE.
2
<PAGE> 5
COMMON STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of the Record Date,
concerning directors, the nominee for director, the named executive officers,
and certain beneficial owners regarding beneficial ownership of the Company's
Common Stock. Mr. Sillers, Royce & Associates, Inc. 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
STOCK PERCENT OF
BENEFICIALLY COMMON
NAME OWNED STOCK
---- ------------ ----------
<S> <C> <C>
Sherrill Stone(1)........................................... 28,258 1.9%
Donald A. Sillers, Jr.(2)................................... 103,488 7.1%
David D. Battershell(3)..................................... 7,600 *
Bernard S. Lee(4)........................................... 4,600 *
Joseph V. Mariner, Jr.(5)................................... 2,350 *
G. D. Cornwell (6).......................................... 11,500 *
Edward Perry(7)............................................. 3,600 *
Ray Muzyka(8)............................................... 1,625 *
Ken Fewel(9)................................................ -0- *
Royce & Associates, Inc.(10)................................ 100,900 6.9%
Cannell Capital Management(11).............................. 85,600 5.9%
All Directors and Officers as a Group (eleven persons
including those named above).............................. 165,521 11.4%
</TABLE>
- - ---------------
* Less than 1%.
(1) Includes 5,000 stock options that are exercisable within 60 days of this
Proxy Statement. 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. Mr. Stone's address is c/o Peerless Mfg. Co., 2819
Walnut Hill Lane, Dallas, TX 75229.
(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 and 1,000 stock options that are
exercisable within 60 days of this Proxy Statement. 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. Mr. Siller's
address is 8609 Northwest Plaza Drive, #403, Dallas, TX 75225.
(3) Includes 1,000 stock options that are exercisable within 60 days of this
Proxy Statement. Mr. Battershell's address is D.D. Battershell and
Associates, 114 Dan Moody Trail, Georgetown, TX 78628.
(4) Includes 1,000 stock options that are exercisable within 60 days of this
Proxy Statement. Does not include 1,500 shares owned of record by Mrs.
Pauline Lee, Mr. Lee's wife, as to which shares Mr. Lee disclaims any
beneficial interest. Mr. Lee's address is Institute of Gas Technology, 1700
S. Mount Prospect Road, Des Plaines, IL 6018-1804.
(5) Includes 1,000 stock options that are exercisable within 60 days of this
Proxy Statement. Mr. Mariner's address is Mariner Ranch, Route 1, Box 156,
Gordon, TX 76453.
(6) Mr. Cornwell's address is c/o Peerless Mfg. Co., 2819 Walnut Hill Lane,
Dallas, TX 75229.
(7) Includes 2,500 stock options that are exercisable within 60 days of this
Proxy Statement. Mr. Perry's address is c/o Peerless Mfg. Co., 2819 Walnut
Hill Lane, Dallas, TX 75229.
(8) Mr. Muzyka's address is c/o Peerless Mfg. Co., 2819 Walnut Hill Lane,
Dallas, TX 75229.
(9) Mr. Fewel's address is c/o Peerless Mfg. Co., 2819 Walnut Hill Lane,
Dallas, TX 75229.
3
<PAGE> 6
(10) Based on a 13(g) filing dated February 5, 1998, Royce & Associates, Inc.
and Charles M. Royce, controlling person of Royce & Associates, Inc., are
deemed the beneficial owners of 100,900 shares of Common Stock. Royce &
Associates is located at 1414 Avenue of the Americas, New York, NY 10019.
(11) 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. Cannell
Capital Management is located at 750 Battery Street, San Francisco, CA
94111.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during its fiscal year ended June 30, 1998 to the Company's Chief Executive
Officer and the four of its most highly compensated executive officers (the
"named executive office") whose total annual salaries and bonuses during fiscal
1998 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ----------------------- -------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
FISCAL SALARY BONUS SATION AWARD(S) SAR'S PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#) ($) ($)(4)
- - ------------------ ------ ------- ------- ------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sherrill Stone................... 1998 187,207 116,496 None None 5,000 N/A 3,744
Chairman, CEO & 1997 171,693 None None None N/A N/A 3,434
President 1996 168,000 8,716 None None 10,000 N/A 3,360
G.D. Cornwell.................... 1998 120,991 105,906 None 31.875 4,000 N/A 2,420
Senior Vice President 1997 103,723 None None None N/A N/A 2,074
1996 101,600 6,063 None None 5,000 N/A 2,032
Edward Perry..................... 1998 125,861 79,429 None None 1,000 N/A 2,517
Senior Vice President 1997 117,942 None None None N/A N/A 2,315
1996 115,750 6,063 None None 5,000 N/A 2,315
Ray Muzyka....................... 1998 99,140 68,839 None None 3,000 N/A 1,983
Vice President 1997 92,694 None None None N/A N/A 1,854
1996 89,135 3,790 None None N/A N/A 1,783
Ken Fewel........................ 1998 96,661 48,658 None None 2,000 N/A 1,933
Vice President 1997 89,045 None None None N/A N/A 1,781
1996 85,491 3,790 None None N/A N/A 1,710
</TABLE>
- - ---------------
(1) Bonuses are paid in the fiscal year following the fiscal year in which the
bonus was earned.
(2) The aggregate value of Other Annual Compensation paid does not exceed the
lesser of $50,000 or 10% of the salary and bonuses paid to the executive
officers named above.
(3) Restricted stock awards are valued at the closing market price of the Common
Stock as of the date of grant. Dividends are paid on restricted shares at
the same rate paid to all shareholders. The Company's Restricted Stock Plan
is discussed in the "Board Compensation Committee Report on Executive
Compensation -- 1995 Stock Option and Restricted Stock Plan" section.
(4) Amounts shown represent contributions made by the Company on behalf of the
named executive officers to the Peerless Mfg. Co. Retirement Savings Plan
Trust, a defined contribution plan defined under Section 401(k) of the
Internal Revenue Code of 1986, as amended.
4
<PAGE> 7
OPTION GRANTS DURING 1998 FISCAL YEAR
In fiscal 1998, 2,000 Common Stock options (500 Common Stock options for
each non-employee director) were granted, all of which were immediately
exercisable. In addition, 22,000 common stock options were given to employees,
which options vest 25% ratably over the first four years of the 10-year exercise
period.
AGGREGATED OPTION EXERCISES IN 1998 FISCAL YEAR AND
FISCAL YEAR ENDED JUNE 30, 1998 OPTION VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY OPTIONS
AT FY-END AT FY-END
SHARES JUNE 30, 1998 JUNE 30, 1998
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sherrill Stone............ 0 0 5,000 10,000 16,250 25,625
G. D. Cornwell............ 2,500 27,875 0 6,500 0 15,625
Edward Perry.............. 0 0 2,500 3,500 8,125 10,000
Ray Muzyka................ 0 0 0 3,000 0 5,625
Ken Fewel................. 0 0 0 2,000 0 3,750
</TABLE>
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 employees
participated in Compensation Committee decisions in fiscal 1998.
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
5
<PAGE> 8
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 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 90% 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 1998 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.
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 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 1998, the Company
made distributions of 2,000 shares of restricted stock pursuant to the 1985
Plan.
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 delegated 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
6
<PAGE> 9
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 restricted stock grants awarded under this plan.
In fiscal 1998, 500 common stock options were given to each non-employee
director which were immediately exercisable, and 22,000 common stock options
were given to employees, which options vest 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 and the following performance graph 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 or the performance
graph by reference.
CORPORATE PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return over a
five-year period, assuming $100 invested at June 30, 1993 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.
7
<PAGE> 10
The stock price performance depicted in the Corporate Performance Graph is
not necessarily indicative of future price performance.
TOTAL RETURN
TOTAL RETURN ANALYSIS
(ASSUMES $100 INVESTMENT ON 6/30/93)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
DJ
MEASUREMENT PERIOD PEERLESS MFG. DJ INDUSTRIAL DIVERSIFIED
(FISCAL YEAR COVERED) CO. AVERAGE INDUSTRIAL
<S> <C> <C> <C>
6/30/93 100 100 100
6/30/94 127.54 105.91 103.66
6/30/95 145.06 136.81 123.24
6/28/96 150.40 173.77 154.55
6/30/97 157.19 240.81 210.35
6/30/98 190.58 285.87 256.89
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (303) 665-4200. Data
from Bloomberg Financial Markets.
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"). 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, 1998, its officers, directors and
greater than 10% shareholders complied with all applicable Section 16(a) filing
requirements.
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.
8
<PAGE> 11
SHAREHOLDER PROPOSALS
A proper proposal submitted by a shareholder of the Company for
presentation at the Company's 1999 Annual Shareholders Meeting and/or for
inclusion in the Company's 1999 proxy statement and received at the Company's
executive office not earlier than May 4, 1999 and not later than June 3, 1999
will be eligible for presentation at the 1999 Annual Shareholders Meeting and/or
to be included in the Company's Proxy Statement and form of Proxy relating to
such Annual Meeting.
Shareholders wanting to properly submit any business at the 1999 Annual
Meeting, must give notice in writing, delivered in person or by certified mail,
to the secretary of the corporation at the address set forth on the cover page
of this proxy statement. A shareholder's notice to submit business to an annual
meeting of shareholders should set forth (i) the name and address of the
shareholder, (ii) the class and number of shares of stock beneficially owned by
such shareholder, (iii) the name in which such shares are registered on the
stock transfer books of the corporation, (iv) a representation that the
shareholder intends to appear at the meeting in person or by proxy to submit the
business specified in such notice, (v) any material interest of the shareholder
in the business to be submitted, and (vi) a brief description of the business
desired to be submitted to the annual meeting, including the complete text of
any resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting. The Company may exclude any
shareholder proposal that is excludable pursuant to any rule, regulation or
ruling of the Securities and Exchange Commission.
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.
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,
/s/ PAUL W. WILLEY
Paul W. Willey,
Secretary
Dallas, Texas
October 20, 1998
9
<PAGE> 12
FRONT OF PROXY CARD
PEERLESS MFG. CO.
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS AT 10:00 A.M. WEDNESDAY, NOVEMBER 25, 1997
2819 WALNUT HILL LANE, DALLAS, TEXAS 75229
-----------------------------------------
---------------------
The undersigned shareholder of Peerless Mfg. Co. (the "Company") hereby
appoints Sherrill Stone and Paul Willey 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 the Class I Director.
FOR Nominee [ ] WITHHOLD AUTHORITY [ ]
(2) 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)
<PAGE> 13
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 ITEM (1) THIS PROXY WILL BE VOTED "FOR"
SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTER
REFERRED TO IN ITEM (2). THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS
EXERCISED.
Receipt herewith of the Company's Annual Report and Notice of Meeting and
Proxy Statement, dated October 20, 1998, is hereby acknowledged.
Dated: , 1998
-----------------------------
-----------------------------------------
-----------------------------------------
(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.
