SECOND AMENDMENT TO CREDIT AGREEMENT

EXHIBIT 10.1

SECOND AMENDMENT TO CREDIT AGREEMENT

     This Second Amendment to Credit Agreement (“Second Amendment”) is made as of this 9 ^th day of September, 2009 by and among Borrowers (as defined below), which are listed on attached Schedule 1, the Lenders (as defined below) signatory hereto and Comerica Bank, as Agent for the Lenders (in such capacity, the “Agent”).

RECITALS

     A. PMFG, Inc. (“Holdings”), Peerless Mfg. Co. (the “Company”), PMC Acquisition, Inc. (“PMC Acquisition”), and, following the execution and delivery by any other Subsidiary (as defined in the Credit Agreement), and acceptance by the Agent, from time to time, of a Credit Agreement Joinder Agreement from such Subsidiary, collectively with the Company, PMC Acquisition and each such Subsidiary, the “Borrowers” and each individually, a “Borrower”) are party to that certain Revolving Credit and Term Loan Agreement dated April 30, 2008, with the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”) and Agent, as amended by that certain Consent and First Amendment to Credit Agreement dated as of September 4, 2009, and as further amended or otherwise modified from time to time (the “Credit Agreement”).

     B. Borrowers have requested that Agent and the Lenders make certain amendments to the Credit Agreement as set forth herein and Agent and the Lenders are willing to do so, but only on the terms and conditions set forth in this Second Amendment.

      NOW, THEREFORE , in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, Borrowers, Agent and the Lenders agree as follows:

     1. Section 1 of the Credit Agreement is hereby amended as follows:

“Applicable Equity Proceeds Recapture Percentage” shall mean (i) at any time the Consolidated Total Leverage Ratio is equal to or greater than 3.50 to 1:00, 100% with respect to the first $5,000,000 in Net Cash Proceeds generated by the issuance of Equity Interests and 50% with respect to any additional Net Cash Proceeds generated by the issuance of Equity Interests; and (ii) at any time the Consolidated Total Leverage Ratio is less than 3.50 to 1.00, 50%.

“Base Rate” shall mean for any day, that rate of interest per annum which is equal to the sum of the Applicable Margin plus the greatest of (a) the Prime Rate for such day, (b) the Federal Funds Effective Rate in effect on such day, plus one percent (1.0%) per annum, and (c) the Daily Adjusting LIBOR Rate plus one percent (1.0%) per annum; provided, however, for purposes of determining the Base Rate during any period that LIBOR Rate is unavailable as determined under Sections 11.3 or 11.4 hereof, the Base

Rate shall be determined using, for clause (c) hereof, the Daily Adjusting LIBOR Rate in effect immediately prior to the LIBOR Rate becoming unavailable pursuant to Sections 11.3 or 11.4.

“Base Rate Advance” shall mean an Advance which bears interest at the Base Rate.

“Daily Adjusting LIBOR Rate” shall mean for any day a per annum interest rate which is equal to the quotient of the following:

      (a) the LIBOR Rate;

      divided by

      (b) a percentage equal to 1.00 minus the maximum rate on such date at which Agent is required to maintain reserves on “Euro-currency Liabilities” as defined in and pursuant to Regulation D of the Board of Governors of the Federal Reserve System or, if such regulation or definition is modified, and as long as Agent is required to maintain reserves against a category of liabilities which includes eurodollar deposits or includes a category of assets which includes eurodollar loans, the rate at which such reserves are required to be maintained on such category;

      such sum to be rounded upward, if necessary, in the discretion of the Agent, to the nearest whole multiple of 1/100th of 1%.

“Defaulting Lender” shall mean a Lender which, in the reasonable determination of the Agent (a) has failed to fund its Percentage of any Advance or to purchase participations in a Swing Line Advance or any Reimbursement Obligations as required under this Agreement, unless such Lender is disputing its funding obligation in good faith, (b) has otherwise failed to pay to the Agent or any other Lender any other amount required to be paid by it under the terms of this Agreement or any other Loan Document, unless such Lender is disputing such obligation to pay any such amount in good faith, (c) has been, or whose holding company has been, determined to be insolvent or that has become subject to a bankruptcy, receivership or other similar proceeding, or (d) prior to the time it became a party to this Agreement, has had a substantial portion of its assets or management (or a substantial portion of the assets or management of its holding company) taken over by any governmental authority or any governmental authority has restricted its ability to act under this Agreement, including its ability to enter into amendments, waivers or modifications of this Agreement or any of the other Loan Documents (provided that the exercise of the customary rights of a shareholder by a governmental authority which owns shares in such Lender (or its holding company) shall not be covered by this clause (d)),

provided, however, in all cases that a Defaulting Lender shall no longer be deemed a Defaulting Lender when (i) the Defaulting Lender shall have cured the conditions which shall have caused it to be a Defaulting Lender hereunder and (ii) the Agent has agreed that such Lender shall no longer be deemed a Defaulting Lender hereunder.

“Defaulting Lender’s Unfunded Portion” shall mean (a) an amount equal to such Defaulting Lender’s Revolving Credit Percentage of the Revolving Credit Aggregate Commitment minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances funded by the Defaulting Lender under the Revolving Credit, plus (ii) such Defaulting Lender’s Revolving Credit Percentage of the aggregate outstanding principal amount of all Swing Line Advances and Letter of Credit Obligations.

“Impaired Lender” means a Defaulting Lender and any other Lender (a) which the Agent, the Issuing Lender or Swing Line Lender believes, in good faith, has defaulted (and continues to be in default) in fulfilling its obligations under any other syndicated credit facilities or as a participant in any other credit facility and such Lender is not in good faith disputing that such a failure has occurred, or (b) which, if carrying an investment grade rating of at least BBB- from S&P or Baa3 from Moody’s at the time it became a party to this Agreement, no longer carries a rating of at least BBB- from S&P or Baa3 from Moody’s, provided, however, in all cases that an Impaired Lender shall no longer be deemed an Impaired Lender when (i) the Impaired Lender shall have cured the conditions which shall have caused it to be an Impaired Lender hereunder and (ii) the Agent has agreed that such Lender shall no longer be deemed an Impaired Lender hereunder.

“LIBOR Floor” shall mean one percent (1.0%) per annum.

“LIBOR Rate” shall mean,

      (a) with respect the principal amount of any Eurodollar-based Advance outstanding hereunder, the per annum rate of interest determined on the basis of the rate per annum for deposits in United States Dollars for a period equal to the relevant Eurodollar-Interest Period, commencing on the first day of such Eurodollar-Interest Period, appearing on Page BBAM of the Bloomberg Financial Markets Information Service as of 11:00 a.m. (Detroit, Michigan time) (or as soon thereafter as practical), two (2) Business Days prior to the first day of such Eurodollar-Interest Period. In the event that such rate does not appear on Page BBAM of the Bloomberg Financial Markets Information Service (or otherwise on such Service), the “LIBOR Rate” shall be determined by reference to such other publicly available service for displaying LIBOR rates as may be agreed upon by Agent and Borrowers, or, in the absence of such

agreement, the “LIBOR Rate” shall, instead, be the per annum rate equal to the average (rounded upward, if necessary, to the nearest one-sixteenth of one percent (1/16%)) of the rate per annum at which Agent is offered dollar deposits at or about 11:00 a.m. (Detroit, Michigan time) (or as soon thereafter as practical), two (2) Business Days prior to the first day of such Eurodollar-Interest Period in the interbank LIBOR market in an amount comparable to the principal amount of the relevant Eurodollar-based Advance which is to bear interest at such Eurodollar-based Rate and for a period equal to the relevant Eurodollar-Interest Period; and

(b) with respect to the principal amount of any Advance carried at the Daily Adjusting LIBOR Rate outstanding hereunder, the per annum rate of interest determined on the basis of the rate per annum for deposits in United States Dollars for a period equal to one (1) month appearing on Page BBAM of the Bloomberg Financial Markets Information Service as of 11:00 a.m. (Detroit, Michigan time) (or as soon thereafter as practical) on such day, or if such day is not a Business Day, on the immediately preceding Business Day. In the event that such rate does not appear on Page BBAM of the Bloomberg Financial Markets Information Service (or otherwise on such Service), the “LIBOR Rate” shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by Agent and Borrowers, or, in the absence of such agreement, the “LIBOR Rate” shall, instead, be the per annum rate equal to the average of the rate per annum at which Agent is offered dollar deposits at or about 11:00 a.m. (Detroit, Michigan time) (or as soon thereafter as practical) on such day in the interbank eurodollar market in an amount comparable to the principal amount of the Indebtedness hereunder which is to bear interest at such “LIBOR Rate” and for a period equal to one (1) month.

“Non-Defaulting Lender” shall have the meaning ascribed to such term in Section 10.4.

“Purchase” is defined in Section 8.5 hereof.

“Second Amendment” shall mean that certain Second Amendment to Credit Agreement by and among the Borrowers, the Lenders and the Agent, dated as of September 9, 2009.”

“Second Amendment Effective Date” shall mean September 9, 2009.

“Second Amendment Fee” shall have the meaning ascribed to such term in Section 10(b) of the Second Amendment.

“Consolidated Fixed Charges” shall mean, as of any date of determination, the sum, without duplication, of (i) all cash Consolidated Interest Expense paid or payable by any Credit Party in respect of such period on the Consolidated Funded Debt and in respect of Hedging Transactions less interest income (including, without limitation, income earned under Hedging Transactions plus losses incurred under Hedging Transactions), in each case for the four consecutive fiscal quarters ending on the applicable date of determination plus (ii) all installments of principal or other sums due and payable by any Credit Party with respect to the Consolidated Funded Debt (including principal payments in respect of the Term Loan and the principal component of obligations under Capitalized Leases, but excluding voluntary prepayments of the Term Loan), during the four consecutive fiscal quarters ending on the applicable date of determination plus (iii) all Distributions paid in cash by any Credit Party during the four consecutive fiscal quarters ending on the applicable date of determination plus (iv) all Purchases made in cash by any Credit Party during the four consecutive fiscal quarters ending on the applicable date of determination.

“Eligible Assignee” shall mean (a) a Lender; (b) an Affiliate of a Lender; (c) any Person (other than a natural person) that is or will be engaged in the business of making, purchasing, holding or otherwise investing in commercial loans or similar extensions of credit in the ordinary course of its business, provided that such Person is administered or managed by a Lender, an Affiliate of a Lender or an entity or Affiliate of an entity that administers or manages a Lender; or (d) any other Person (other than a natural person) approved by the (i) Agent (and in the case of an assignment of a commitment under the Revolving Credit, the Issuing Lender and Swing Line Lender), and (ii) unless a Event of Default has occurred and is continuing, the Borrowers (each such approval not to be unreasonably withheld or delayed); provided that (x) notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrowers, or any of Borrower’s Affiliates or Subsidiaries; (y) notwithstanding clause (d)(ii) of this definition, no assignment shall be made to an entity which is a competitor of any Credit Party without the consent of the Borrowers, which consent may be withheld in its sole discretion; and (z) and no assignment shall be made to an Impaired Lender without the consent of the Agent, and in the case of an assignment of a commitment under the Revolving Credit, the Issuing Lender and the Swing Line Lender.

“Eurodollar-based Rate” shall mean a per annum interest rate which is equal to the sum of the Applicable Margin, plus the greater of (a) the LIBOR Floor and (b) the quotient of:

      (i) the LIBOR Rate, divided by

      (ii) a percentage equal to 100% minus the maximum rate on such date at which Agent is required to maintain reserves on ‘Eurocurrency Liabilities’ as defined in and pursuant to Regulation D of the Board of Governors of the Federal Reserve System or, if such regulation or definition is modified, and as long as Agent is required to maintain reserves against a category of liabilities which includes eurocurrency deposits or includes a category of assets which includes eurocurrency loans, the rate at which such reserves are required to be maintained on such category,

such sum to be rounded upward, if necessary, in the discretion of the Agent, to the nearest whole multiple of 1/100th of 1%.

“Excess Cash Flow” shall mean, for any Fiscal Year, the sum of (a) Consolidated Net Income for such Fiscal Year plus (b) to the extent deducted in determining Consolidated Net Income, depreciation, depletion and amortization, minus (c) the sum of (i) Capital Expenditures made during such Fiscal Year, excluding any Capital Expenditures financed with money borrowed (other than with Advances of the Revolving Credit or the Swing Line) and the principal portion of any Capitalized Leases, (ii) the amount of all scheduled or mandatory payments or prepayments of principal on Funded Debt made during such Fiscal Year (excluding any payment (1) on the Revolving Credit or any other revolving loan facility except to the extent of any permanent reduction thereof, (2) in respect of Excess Cash Flow for any prior period and (3) with the Net Cash Proceeds, Insurance Proceeds or Condemnation Proceeds except to the extent that Consolidated Net Income was increased as a result thereof) and (iii) the amount of any other prepayment made during such Fiscal Year on any term Debt permitted hereunder, other than any optional prepayments on the Term Loan and other than the prepayment, in September 2009, of the Mezzanine Subordinated Debt.

“Fees” shall mean the Revolving Credit Facility Fee, the Letter of Credit Fees, the Second Amendment Fee and the other fees and charges (including any agency fees) payable from time to time by Borrowers to the Lenders, the Issuing Lender or Agent hereunder or under the Fee Letter.

“Restricted Payment Threshold” shall mean maintaining, as of the end of the most recent fiscal quarter for which Holdings has reported under Section 7.1 hereof and, on a pro forma basis as of the date of the proposed Distribution or Purchase (as applicable), both before and after giving effect thereto, a Consolidated Fixed Charge Coverage Ratio of not less than 1.10 to 1.00 (all capitalized terms used in this definition being defined using the definitions in effect on the First Amendment Effective Date).

“ (e) Both immediately before and after the consummation of such acquisition and after giving effect to the Pro Forma Projected Financial Information, (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Consolidated Fixed Charge Coverage Ratio as of the end of the most recent fiscal quarter for which Holdings has reported under Section 7.1 hereof and, on a pro forma basis as of the date of the proposed acquisition, both before and after giving effect thereto, shall be equal to or greater than 1.40 to 1.00;”

     2. Article 3 of the Credit Agreement is amended as follows:

“ (j) In the event that any Revolving Credit Lender becomes an Impaired Lender, the Issuing Lender may, at its option, require that the Borrowers enter into arrangements reasonably satisfactory to Issuing Lender to eliminate the Issuing Lender’s risk with respect to the participation in Letters of Credit by such Impaired Lender, including creation of a cash collateral account or delivery of other security to assure payment of such Impaired Lender’s Percentage of all outstanding Letter of Credit Obligations.”

     3. Article 4 of the Credit Agreement is hereby amended as follows:

“Notwithstanding the foregoing, subject to clauses (e) and (f) hereof, the Borrowers shall be required to prepay the Term Loan by an amount equal to one hundred percent (100%) of any Net Cash Proceeds received by any Credit Party from the sale of Equity Interests of, or all or substantially all of the assets of, Bos-Hatten, Inc. or any other operating Subsidiary or from the sale of an entire product division or product line, regardless (in each case) of whether the Borrowers have Reinvested or intend to Reinvest any such Net Cash Proceeds.”