Exhibit 10.3

FIRST AMENDMENT TO

SECURITY AGREEMENT

THIS FIRST AMENDMENT TO SECURITY AGREEMENT (the “Amendment”), executed as of the
17th day of August, 2009, but effective for all purposes as of the 15th day of
May, 2009, is made by and among CECO ENVIRONMENTAL CORP. (“Debtor”) and its
Subsidiaries (the Debtor and its Subsidiaries collectively, the “Pledging
Parties”) for the benefit of ICARUS INVESTMENT CORP., an Ontario corporation
(“Secured Party”).

RECITALS

A. Secured Party and Pledging Parties are parties to that certain Security
Agreement, dated August 14, 2008 (the “Agreement;” all capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Agreement).

B. Debtor made a one-time payment to Secured Party of principal under the
original Note, as amended by that certain First Amendment to Subordinated
Convertible Promissory Note dated as of February 13, 2009 and that certain
Second Amendment to Subordinated Convertible Promissory Note dated as of May 1,
2009, in the aggregate amount of approximately USD $3,000,000 on or about
March 31, 2009 and made certain other related payments to Secured Party.

C. Secured Party agreed to re-advance an additional USD $3,000,000 to Debtor
(the “Second Loan”), which is evidenced by a Promissory Note in the principal
amount of USD $3,000,000 dated May 15, 2009 from Debtor to Secured Party, as
amended by that certain First Amendment to Promissory Note dated of even date
herewith (as amended, the “Second Note”; together with the Note, the “Notes”),
and which Second Note was intended to be secured by the Agreement on and as of
May 15, 2009.

D. The Security Agreement incorrectly refers to one of the Subsidiaries, FKI,
LLC, as “FM, LLC”, which scrivener’s error the parties desire to correct so that
the proper name is reflected in the Agreement.

E. Pledging Parties and Secured Party desire to amend the Agreement (i) to add
the Second Loan and the Second Note to the Liabilities secured by the Security
Agreement, and (ii) and to make such other revisions as further provided herein.

AGREEMENT

NOW, THEREFORE in consideration of the foregoing premises and the mutual
covenants contained herein, and for other valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:

Section 1. Amendments.

(a) Where the context requires, all references in the Agreement to “Note” shall
be deemed references to the “Notes”, it being the parties express intention that
the Agreement secure all obligations under both of the Notes. Notwithstanding
the foregoing, to the extent there is any inconsistent definition of a term
defined in both the Note and Second Note or other provision that cannot be
reconciled, the definition of the term or provision in the Note shall control
the Agreement unless otherwise stated herein.

 

 

FIRST AMENDMENT TO SECURITY AGREEMENT    PAGE 1

--------------------------------------------------------------------------------

(b) All references in the Agreement to “FM, LLC” are deemed to be references to
“FKI, LLC”.

(c) Section 2 (Liabilities) of the Agreement is hereby amended by deleting the
definition of “Liabilities” in its entirety and replacing such definition with a
new definition of “Liabilities,” which new definition shall read as follows:

“2. Liabilities. This Agreement, and the security interest herein granted to
Secured Party, is given to secure all the following (the same being herein
sometimes collectively referred to as the “Liabilities”):

 

  (a) the principal, interest and all other sums owed under either or both of
the Notes;

 

  (b) all amounts owed Secured Party under this Agreement including without
limitation of all advances, costs or expenses paid or incurred by the Secured
Party, to protect any or all of the Collateral, perform any obligation of the
Pledging Parties hereunder, or to sell the Collateral;

 

  (c) any and all costs of enforcement and collection of either of the Notes and
the enforcement of this Agreement, including without limitations reasonable
attorneys’ fees; and

 

  (d) interest on all of the foregoing at the rate specified in the Note.

The parties agree that Liabilities do not include (i) the obligations of the
Debtor under that certain Registration Rights Agreement between the Debtor and
Secured Party dated August 14, 2008, (ii) any amounts under the Note that are
converted to common stock under the Note, and (iii) any equity or equity related
rights (including obligations pertaining to any conversion rights) under the
Note.”

(d) Section 17 (Subordination) of the Agreement is hereby amended by deleting
the definition of “Subordination Agreement” in its entirety and replacing such
definition with a new definition of “Subordination Agreement,” which new
definition shall read as follows:

“17. Subordination Agreement. This Agreement, and the security interests and
other liens and rights granted herein, are subordinate to a senior credit
facility of Debtor and the Pledging Parties in favor of Fifth Third Bank
(“Senior Lender”), as lender, pursuant to the terms of that certain
Subordination Agreement dated August 14, 2009 between Secured Party and Senior
Lender, as amended by that certain First Amendment to Subordination Agreement
dated May 1, 2009 and the certain Second Amendment to Subordination Agreement
dated of even date herewith (as amended, the “Subordination Agreement”).”

 

 

FIRST AMENDMENT TO SECURITY AGREEMENT    PAGE 2

--------------------------------------------------------------------------------

Section 2. Miscellaneous.

(a) Continuing Effectiveness. All terms and provisions of the Agreement and the
Notes, except as expressly modified herein, shall continue in full force and
effect, and each of the Pledging Parties hereby confirms each and every one of
its obligations under the Agreement and the Notes, as amended herein. The
indebtedness evidenced by the Notes is continuing indebtedness, and nothing
herein shall be deemed to constitute a payment, settlement or novation of the
Notes, or release or otherwise adversely affect any lien, mortgage, or security
interest securing such indebtedness or any rights of the Secured Party against
any party.

(b) Debtor Obligations. Each of the Pledging Parties reaffirms its obligations
under the Security Agreement and the applicable loan documents, as amended, and
agrees that such obligations are valid and binding, enforceable in accordance
with their terms, subject to no defense, counterclaim, or objection.

(c) Governing Law. This Amendment shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware, without regard to
principles of conflicts of law.

(d) Successors and Assigns. This Amendment shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns.

(e) Counterparts. This Amendment may be executed in one or more counterparts,
each of which shall be deemed to be an original copy of this Amendment, and all
of which, when taken together, shall be deemed to constitute but one and the
same instrument. A fax signature shall be deemed an original signature.

[SIGNATURE PAGE TO FOLLOW]

 

 

FIRST AMENDMENT TO SECURITY AGREEMENT    PAGE 3

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first written above, effective as of May 15, 2009.

 

CECO ENVIRONMENTAL CORP.     CECO GROUP, INC. By:  

/s/ Dennis W. Blazer

    By:  

    /s/ Dennis W. Blazer

  Dennis W. Blazer, Chief Financial Officer and Vice President       Dennis W.
Blazer, Chief Financial Officer, Secretary and Treasurer CECO FILTERS, INC.    
  NEW BUSCH CO., INC.       THE KIRK & BLUM MANUFACTURING COMPANY      
KBD/TECHNIC, INC.     CECO MEXICO HOLDINGS LLC CECOAIRE, INC.       CECO
ABATEMENT SYSTEMS, INC.       EFFOX INC., formerly known as CECO Acquisition
Corp.     By:  

    /s/ Dennis W. Blazer

FISHER-KLOSTERMAN, INC., formerly known as FKI Acquisition Corp.       Dennis W.
Blazer, Treasurer H.M. WHITE, INC.       GMD ENVIRONMENTAL TECHNOLOGIES, INC.,
formerly known as GMD Acquisition Corp.       CECO MEXICO HOLDINGS LLC, INC.    
  By:  

    /s/ Dennis W. Blazer

        Dennis W. Blazer, Secretary and Treasurer       FKI, LLC       By:  

    /s/ Dennis W. Blazer

        Dennis W. Blazer, Manager      

--------------------------------------------------------------------------------

Exhibit 10.3

 

SECURED PARTY:   ICARUS INVESTMENT CORPORATION   By:  

/s/ Phillip DeZwirek

  Its:  

      President