Exhibit 10.1

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR ANY
STATE SECURITIES LAWS OR THE SECURITIES LAWS OF ANY JURISDICTION. THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT TO A
PERSON THAT IS NOT A U.S. PERSON WHO AGREES TO RESTRICTIONS ON RESALE THAT ARE
CONSISTENT WITH THE REQUIREMENTS OF REGULATION S UNDER THE U.S. SECURITIES ACT,
(C) FOLLOWING THE DISTRIBUTION COMPLIANCE PERIOD REQUIRED UNDER RULE 903 OF
REGULATION S UNDER THE SECURITIES ACT, IN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON OR PERSONS IN THE UNITED STATES PURSUANT TO
AN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS IN A TRANSACTION THAT IS EXEMPT FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR OTHER REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, OR
(D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, AND THE HOLDER HAS, PRIOR
TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL, OF RECOGNIZED
STANDING, OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE, REASONABLY
SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U. S.
SECURITIES ACT.

Notwithstanding anything herein to the contrary, (i) the obligations evidenced
by this Subordinated Convertible Promissory Note are subordinated to the prior
payment in full of the Senior Obligations (as defined in the Subordination
Agreement referred to herein) pursuant to, and to the extent provided in the
Subordination Agreement, dated as of November 26, 2009 (as amended, restated,
supplemented or modified from time to time, the “Subordination Agreement”) in
favor of Fifth Third Bank (together with its successors and assigns, and the
other holders, if any, of the Senior Obligations identified therein or
contemplated thereby) and (ii) the rights of the holder of the Note, as amended,
are subject to the limitations and provisions of the Subordination Agreement. In
the event of any conflict between the terms of the Subordination Agreement and
the terms of this Subordinated Convertible Promissory Note, the terms of the
Subordination Agreement shall govern.

 

   CECO ENVIRONMENTAL CORP.    NOTE     

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

 

USD $                November 26, 2009

FOR VALUE RECEIVED, the undersigned, CECO ENVIRONMENTAL CORP. (the “Company”), a
Delaware corporation, hereby promises to pay to the order of             , a
            or registered assigns (“Holder”), the principal sum of
            dollars ($            ) (or such lesser amounts as may be
outstanding from time to time under this Note) on the Maturity Date, as defined
in Section 1 below. Unless otherwise set forth herein, all references to $ means
United States dollars.

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This Note is part of a series of Notes of like tenor and effect to this Note in
the aggregate principal amount of up to $11,400,000 to be issued in connection
with a financing by the Company. Unless otherwise set forth in this Note, this
Note and the other Notes shall rank pari passu as to the payment of principal
and interest.

1. Maturity. This Note shall be due and payable on November 26, 2014 (the
“Maturity Date”), subject to the terms and conditions of this Note.

2. Interest. Interest shall accrue on the unpaid principal balance hereof and on
any interest payment that is not made when due at the rate of six percent
(6%) per annum (the “Base Rate”) until the earlier of (i) the payment in full of
all outstanding principal of the Note or (ii) the conversion of all of the
outstanding principal amount of the Note under Section 6. Accrued interest shall
be due and payable on March 31, June 30, September 30 and December 31, of each
year, with a final payment of accrued and unpaid interest due and payable on the
Maturity Date, provided that if all of the outstanding principal amount of this
Note is prepaid under Section 7.2 or Section 7.3, a final payment of accrued and
unpaid interest shall be made on such prepayment date. For avoidance of doubt,
it shall not be an Event of Default hereunder and interest will not accrue on
any portion of such interest payments deferred pursuant to Section 10 so long as
the interest is paid at the time and in the manner allowed under Section 10.
Upon an Event of Default (as defined herein) interest shall accrue on all unpaid
amounts due hereunder, including without limitation interest, at the rate of the
Base Rate plus three (3%) percent.

3. Payments. Payments of both principal and interest shall be made at the
principal executive office of the Company, or such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America. Except as otherwise provided herein, payments shall be made
pro rata among all holders of Notes in accordance with the outstanding principal
balances of their Notes.

So long as no Event of Default has occurred in this Note, and except as set
forth in Section 7.3, all payments hereunder shall first be applied to interest,
then to principal. Upon the occurrence of an Event of Default in this Note, all
payments hereunder shall first be applied to costs pursuant to Section 11.4,
then to interest and the remainder to principal.

4. Registration, Transfer and Exchange of Notes. The Company will keep at its
principal office a register in which it will provide for the registration of and
transfer of this Note, at its own expense (excluding transfer taxes). If this
Note is surrendered at said office or at the place of payment named in this Note
for registration of transfer or exchange (accompanied in the case of
registration of transfer or exchange by a written instrument of transfer in form
satisfactory to the Company duly executed by or on behalf of the holder), the
Company, at its expense, will deliver in exchange one or more new notes in
denominations of $10,000 or larger multiples of $1,000, as requested by the
holder for the aggregate unpaid principal amount. Any note or notes issued in a
transfer or exchange shall carry the same rights to increase notes surrendered.
The Holder agrees that prior to making any sale, transfer, pledge, assignment,
hypothecation, or other disposition (each, a “Transfer”) of this Note, the
Holder shall give written notice to the Company describing the manner in which
any such proposed Transfer is to be made and providing such additional
information and documentation regarding the Transfer as the Company reasonably
requests. If the Company so requests, the Holder shall at his expense provide
the Company with an opinion of counsel (which counsel must be reasonably
satisfactory to the Company), in form and substance satisfactory to the Company,
that the proposed Transfer complies with applicable federal and state securities
laws. The Company shall have no obligation to Transfer this Note unless the
Holder thereof has complied with the foregoing provisions, and any such
attempted Transfer shall be null and void.

 

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5. Registered Owner. Prior to due presentation for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
and holder of such Note for the purpose of receiving payment of principal of,
and interest on, such Note and for all other purposes.

6. Conversion.

(a) Optional Conversion. Subject to the terms and conditions of this Note,
Holder shall have the right, at Holder’s option, to convert all or any portion
of the outstanding principal amount of this Note, but not the interest, into
shares of common stock, $.01 par value (the “Common Stock”), of the Company, at
a price per share equal to four dollars ($4.00) per share, or in case an
adjustment in such price has taken place pursuant to the provisions of this
Note, then at the price as last adjusted (such price or adjusted price being
referred to herein as the “Conversion Price”). The rights of such conversion
under Section 6(a) shall be exercised by Holder by giving the Company written
notice that Holder elects to convert the stated portion of the principal amount
on this Note into Common Stock and by surrender of this Note accompanied by a
written instrument of transfer duly executed by Holder to the Company, at the
Company’s principal office (or such other office or agency of the Company as the
Company may designate by notice in writing to Holder) at any time during its
usual business hours.

(b) Conversion by the Company. Commencing three years from the date of this Note
and prior to the Maturity Date, all but not less than all amounts of outstanding
principal, but not interest, under this Note may be converted into shares of the
Common Stock of the Company at the Conversion Price by the Company, in its sole
discretion, within sixty (60) days following any time that the Trading Price of
the Common Stock of the Company, commencing three years from the date of this
Note, is equal to or greater than $8.00 (as proportionately adjusted for any
stock splits, dividends, or other similar changes to the Company’s
capitalization) on any five consecutive trading days (each a “Conversion
Trigger”). For avoidance of doubt, the Company will have the option to require
conversion under this Section 6(b) each time a Conversion Trigger occurs. If the
Company elects to convert the Notes pursuant to this Section 6(b), it shall give
written notice to all of the Holders (“Conversion Notice”) that the Company is
converting the Notes pursuant to this Section 6(b), and this Note shall be
deemed to be automatically converted as of close of business on the date of the
Conversion Notice. Upon notice of conversion under this Section 6(b), Holder
shall within five (5) business days of receipt of such notice, surrender this
Note accompanied by a written instrument of transfer duly executed by Holder to
the Company, at the Company’s principal office (or such other office or agency
of the Company as the Company may designate in the Conversion Notice). “Trading
Price” means the closing price of the Common Stock on the principal national
stock exchange on which the Common Stock is listed on such date or, if such
stock is not listed on an exchange, the mean between the closing bid and asked
prices for the Common Stock on such date as quoted on the OTC Bulletin Board or
similar quotation system.

(c) Mechanics of Conversion. Conversion under Section 6(a) shall be deemed to
have been effected and the Conversion Price shall be the Conversion Price as of
the close of business on the date on which such written notice shall have been
received by the Company and the applicable Notes shall have been surrendered for
conversion as aforesaid, and at such time the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become at such time the
holder or holders of record of the shares represented thereby. Upon conversion
under Section 6(b) above, all principal amounts due and owing under this Note
shall be converted automatically at the Conversion Price on the close of
business on the date of the Conversion Notice, without further action by the
Holder and whether or not this Note is surrendered to the Company, into Common
Stock of the Company, which shall be deemed issued and outstanding from and
after the time of such conversion and at such time the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such

 

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conversion shall be deemed to have become the holder or holders of record of the
shares represented thereby. Promptly after the conversion of this Note, the
Company shall issue and deliver, or cause to be issued and delivered, a
certificate or certificates for the number of whole shares of Common Stock
issuable upon the conversion; provided, however, that the Company shall not be
obligated to issue to the Holder such certificate unless and until this Note, or
an appropriate affidavit of loss, is delivered to the Company. In the event that
only a portion of this Note is converted, the Company shall execute and deliver
to Holder, at the expense of the Company, a new Note, in the same form as this
Note, in principal amount equal to the unconverted portion of this Note. All
accrued interest due and owing as of a conversion date shall be paid on the next
date set forth in Section 2, subject to Section 10.

(d) Fractional Shares. No fractional shares shall be issued upon conversion into
Common Stock and no payment or adjustment shall be made upon any conversion on
account of any cash dividends (having a record date prior to the effective date
of conversion) on the Common Stock issued upon such conversion. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this paragraph (d), be delivered upon such conversion, the Company,
in lieu of delivering such fractional share, shall pay to Holder, subject to
Section 10, an amount in cash equal to the fraction represented by such share
multiplied by the closing price of the Common Stock on the conversion date.

(e) Adjustments.

(i) Whenever the Company shall (i) declare or pay a dividend or make a
distribution on shares of Common Stock in shares of Common Stock or in any other
shares of capital stock of the Company or in other securities of the Company
(ii) subdivide, split or reclassify the outstanding shares of Common Stock into
a greater number of shares of Common Stock or (iii) combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, the Conversion Price in effect at the time of the record date for such
dividend or distribution or on the effective date of such subdivision, split,
combination or reclassification, shall be proportionately adjusted so that
Holder shall upon conversion into shares of Common Stock after such time, be
entitled to receive the number of shares of Common Stock or other securities of
the Company which Holder would have been entitled to receive immediately after
such time had this Note been converted into shares of Common Stock immediately
prior to such time. Such adjustment shall be made successively each time any
event described in this paragraph (e)(i) shall occur.

(ii) In case of any reclassification, capital reorganization or change by the
Company of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision, combination or reclassification of the outstanding
shares of Common Stock into a greater or lesser number of shares of Common Stock
(which is treated in paragraph (e)(i) above), but including any change of such
shares into one or more other classes or series of shares of capital stock), or
in case of any consolidation of the Company with, or merger of the Company with
or into, another person (other than a consolidation or merger in which the
Company is the continuing entity and which does not result in any
reclassification or change of the Company’s outstanding shares), or in case of
any sale or other conveyance to another person of the property of the Company as
an entirety or substantially as an entirety, the Company or such successor or
purchasing person shall provide, as a condition to such transaction, that Holder
shall acquire, upon conversion of, or in exchange for, this Note the kind and
amount of shares and other securities and property (including cash and evidences
of indebtedness) which would have been received by Holder upon such
reclassification, reorganization, change, consolidation, merger, or sale or
conveyance of assets if Holder had converted this Note into shares of Common
Stock immediately prior thereto. Such other person, which shall thereafter be
deemed to be the Company for purposes of this paragraph (e)(ii), shall provide
for similar future adjustments as nearly equivalent as may be practicable to the
adjustments provided herein. Such adjustment shall be made successively each
time any event described above in this

 

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paragraph (e)(ii) shall occur.

(iii) In the event the Company at any time after the date of the original
issuance of this Note shall distribute shares of stock or other securities of
other persons, evidences of indebtedness issued by the Company or other property
(other than cash) to the holders of its Common Stock by way of dividend or
otherwise, in either case other than in connection with a capital
reorganization, consolidation, merger or sale or other conveyance of all or
substantially all of the Company’s assets (each of which transaction is provided
for in paragraph (e)(ii) above), then, in each such case, Holder, upon
conversion of this Note into shares of Common Stock as provided hereby, shall be
entitled to receive, and the Company shall reserve for issuance to Holder upon
such conversion, the shares of stock or other securities, evidences of
indebtedness, or other property which it would have been entitled to receive if
it had so converted and become the holder of record of the shares of Common
Stock issued upon such conversion immediately prior to the record date fixed for
the determination of the stockholders entitled to receive such dividend or
distribution. The foregoing adjustments shall be made successively whenever any
event listed above in this paragraph (e)(iii) shall occur.

(iv) Upon the occurrence of any event requiring an adjustment of the Conversion
Price, then and in each such case the Company shall give prompt written notice
thereof to Holder, which notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method upon which such
calculation is based and stating that such adjustment calculation has been
reviewed and approved by the Company’s independent certified public accountants.

(v) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least one percent in such
price; provided, however, that any such adjustment which is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.

(f) Notification of Events. In case at any time:

(i) the Company shall declare any dividend upon its Common Stock payable in
cash, stock, property or any security (whether of the Company or otherwise) or
make any other distribution to the holders of its Common Stock;

(ii) the Company shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or other rights;

(iii) there shall be any capital reorganization or reclassification of the
capital stock of the Company, or a consolidation or merger of the Company with
or into, or a sale of all or substantially all its assets to, another entity or
entities; or

(iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;

then, in any one or more of said cases, the Company shall give (A) at least 10
days prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (B) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, or at least
10 days prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (A) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such

 

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notice in accordance with the foregoing clause (B) shall also specify the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.

(g) Reservation of Shares. The Company shall at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon the conversion of this Note, as provided in this Note, free
from any pre-emptive rights (if any), such number of shares of Common Stock as
shall then be issuable upon the conversion of this Note. The Company covenants
that all shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it shall from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Company shall not take any action which results
in any adjustment of the Conversion Price if the total number of shares of
Common Stock which have been issued at or prior to the time such action was
taken and those which are issuable after such action upon conversion of this
Note and exercise of all options and conversion of all convertible securities of
the Company would exceed the total number of shares of Common Stock authorized
by the Company’s Certificate of Incorporation.

(h) Legends. The issuance to the Holder of certificates for shares of Common
Stock upon conversion of this Note shall be made without charge to the holder
for any issuance, stock transfer or documentary stamp tax in respect thereof.
All such certificates shall bear a legend stating that the shares represented by
such certificates have not been registered under the U.S. Securities Act of
1933, as amended, or applicable state or provincial law and such other legends
as are customary for unregistered securities.

7. Prepayment.

7.1 No prepayment. The Company may not prepay in whole or in part the principal
amount of this Note without the consent of Holder, other than upon a Change of
Control.

7.2 Prepayment Upon Change of Control. Upon a Change of Control, the Company, at
its option and without any premium, may prepay in whole or in part the principal
amount of this Note; provided, however that the Company shall give Holder not
less than ten (10) days written notice prior to any such pre-payment of this
Note (the “Prepayment Notice”). The Prepayment Notice shall specify the date
(“Prepayment Date”) and the place at which, payment may be obtained and shall
call upon the Holder to surrender this Note to the Company in the manner and at
the place designated. On the Prepayment Date, the Holder shall surrender this
Note to the Company in the manner and at the place designated in the Prepayment
Notice, and thereupon prepayment shall be made to Holder and, if the prepayment
is for all of the outstanding principal of this Note, this Note shall be
cancelled. In the event that less than all the principal amount of this Note is
prepaid, upon surrender of this Note to the Company, the Company shall execute
and deliver to Holder a new note or notes in principal amount equal to the
unpaid principal amount of this Note. The Company shall, at the time of any such
prepayment for all of the outstanding principal of this Note, pay to the holder
of this Note all interest accrued and unpaid to the Prepayment Date. The parties
acknowledge that Holder may exercise Holder’s conversion rights under
Section 6(a) prior to any such Prepayment Date, notwithstanding receipt of a
Prepayment Notice. A “Change of Control Event” means (1) any persons acting
together that would constitute a “group” for purposes of Section 13(d) under the
Securities and Exchange Act of 1934, as amended, acquires beneficial ownership
(within the meaning of Rule 13d-3 under the Securities and Exchange Act) in a
single transaction or a series of related transactions, of more than 50% of the
aggregate voting power of

 

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the Company; (2) a merger or consolidation in which the Company’s stockholders
immediately prior to the transaction do not own, directly or indirectly, more
than 50% of the capital stock of the surviving corporation or entity immediately
after the transaction, or (3) the sale or transfer of all or substantially all
of the assets of the Company (measured by economic value).

7.3 Voluntary Prepayment. If the Company desires to prepay all or any portion of
the principal amount of the Notes other than upon a Change of Control, the
Company shall give all holders of Notes not less than ten (10) days written
notice prior to any such pre-payment (the “Voluntary Prepayment Notice”). The
Voluntary Prepayment Notice shall specify the date payment will be made
(“Voluntary Prepayment Date”), the place at which payment may be obtained, and
the amount of the prepayment, which amount may be stated as an aggregate amount
to be paid all holders of Notes, or the amount to be paid Holder individually.
If all of the outstanding principal amount of the Notes is to be repaid on the
Voluntary Prepayment Date, then all accrued and unpaid interest shall also be
paid on the Voluntary Prepayment Date. If Holder desires to be prepaid on the
Voluntary Prepayment Date, Holder must provide written notice to the Company and
surrender this Note to the Company in the manner and at the place designated in
the Voluntary Prepayment Notice, at least one business day prior to the
Voluntary Prepayment Date, and thereupon prepayment shall be made to the Holder
and if the prepayment is for all of the outstanding principal of this Note, this
Note shall be cancelled. In the event that less than all the principal amount of
this Note is prepaid, upon surrender of this Note to the Company, the Company
shall execute and deliver to Holder a new note or notes in principal amount
equal to the unpaid principal amount of this Note.

8. Events of Default.

8.1 Occurrences of Events of Default. Each of the following events shall
constitute an “Event of Default” for purposes of this Note:

(a) if the Company fails to pay any amount payable under this Note and such
default is not cured within ten (10) days of written notice from the Holder;

(b) if the Company breaches any of its representations, warranties or covenants
set forth in this Note and such breach is not cured within thirty (30) days of
notice of such breach;

(c) the commencement of an involuntary case against the Company or any of its
subsidiaries under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or the appointing of a receiver, liquidator,
assignee, custodian, trustee or similar official of the Company or for any
substantial part of the Company or one of its subsidiary’s property, or ordering
the winding-up or liquidation of the Company or one of its subsidiary’s affairs;

(d) if the Company or any of its subsidiaries shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian or
similar official of the Company or its subsidiary or for any substantial part of
the Company or one of its subsidiary’s property, or shall make any general
assignment for the benefit of creditors, or shall take any corporate action in
furtherance of any of the foregoing; or

 

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(e) if the Company’s business shall fail, as determined in good faith by the
Holder and evidenced by the Company’s inability to pay its ongoing debts as such
debts become due.

8.2 Acceleration Upon Event of Default. If any Event of Default shall have
occurred and be continuing, for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise), the unpaid principal amount of, and the accrued
interest on, this Note shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by the Company.

9. Investment Representations of the Holder. With respect to the purchase of
this Note, the Holder hereby represents and warrants to the Company as follows:

9.1 Experience. The Holder has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.

9.2 Not a U.S. Person. The Holder is not a U.S. Person as defined in Rule 902 of
Regulation S under the Securities Act of 1933 (the “Act”) and was not formed for
the purpose of investing in securities not registered under the Act;

9.3 Own Account. The Holder is not acquiring the Note for the account or benefit
of a U.S. Person;

9.4 Offer Location. The offer to purchase the Note of the Company was made to
the Holder outside of the United States;

9.5 Regulation S. All subsequent offers and sales of the Note and the Common
Stock issuable upon conversion of the Notes shall be made in compliance with the
resale provisions of Regulation S under the Act, pursuant to Rule 144
promulgated thereunder, pursuant to another applicable exemption from
registration under the Act, or pursuant to an effective registration statement
(however, no registration rights are granted hereby); and in each case, in
accordance with any applicable state securities laws. In any case, neither the
Note nor the Common Stock issued upon conversation of the Notes will be resold
or transferred to a U.S. person(s) or for the account or benefit of a U.S.
person or within the United States until the end of the six month period
distribution compliance commencing on the later of (i) the date of this
subscription agreement and (ii) the date the undersigned’s subscription funds
have been received by the Company and thereafter cannot be sold to a U.S.
person, for the account or benefit of a U.S. person or within the United States,
unless the Shares are registered under the Act or are exempt from the
registration requirements of the Act;

9.6 Registration Exemption. The Holder understands that the Note is being
offered and sold to it in reliance on the exemption from the registration
requirements of United States federal and state securities laws;

9.7 Representations True. The Holder understands that the Company is relying
upon the truth and accuracy of the representations, warranties, agreement and
understandings of the undersigned set forth herein in order to determine the
applicability of such exemption and the suitability of the undersigned to
acquire the Note.

 

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9.8 Access to Data. The Holder has had an opportunity to discuss the Company’s
business, management and financial affairs with the Company’s management and has
also had an opportunity to ask questions of the Company’s officers, which
questions were answered to its satisfaction.

10. Subordination. This Note is an unsecured obligation of the Company. Pursuant
to, and in accordance with, the terms and conditions contained in the
Subordination Agreement, this Note is subordinate in right of payment to the
prior payment in full in cash and performance in full of all of the Company’s
present and future liabilities, indebtedness and obligations under the Company’s
senior secured credit facilities (as amended from time to time) provided by
Fifth Third Bank (including, without limitation, all “Obligations” as defined in
that certain Credit Agreement dated as of December 29, 2005, among the Company,
certain of the Company’s affiliates, and Fifth Third Bank, as amended, restated,
supplemented, or modified from time to time), as well as any future senior
secured credit facilities provided by any lenders that refinance, refund,
replace or supplement such senior secured credit facilities (all of the
foregoing liabilities, indebtedness and obligations being, collectively, the
“Senior Indebtedness”). Notwithstanding anything to the contrary herein
contained, no payments of interest, principal or other amounts shall be made
hereunder except as expressly set forth in, and to the extent expressly
permitted by, the Subordination Agreement.

By its acceptance of this Note, Holder agrees (a) that without notice to or
consent by it the liability of the Company in respect of any Senior Indebtedness
may, in whole or in part, be renewed, extended, modified, restated, released,
replaced, supplemented, refinanced or refunded by the holders of Senior
Indebtedness and the relevant documents governing Senior Indebtedness may be
amended, replaced, or supplemented, (b) that without notice to or consent by it
the amount of the Senior Indebtedness may, from time to time, be increased
through further loans with Fifth Third Bank, another lender, or otherwise,
(c) to promptly execute the Subordination Agreement (or, as applicable, a
joinder thereto) and such other additional subordination agreements and other
documents as a holder of Senior Indebtedness may reasonably request in order to
protect its status as a holder of Senior Indebtedness.

11. Miscellaneous.

11.1 Invalidity of Any Provision. If any provision or part of any provision of
this Note shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Note and this Note shall be construed as if such
invalid, illegal or unenforceable provisions or part hereof had never been
contained herein, but only to the extent of its invalidity, illegality or
unenforceability.

11.2 Governing Law. The Note shall be governed in all respects by the laws of
the State of Delaware, excluding its conflict of laws.

11.3 Notices. Any notice or other communication required or permitted hereunder
shall be in writing and shall be deemed to have been duly given (i) on the date
of delivery if delivered personally, (ii) one (1) business day after
transmission by facsimile transmission with a written confirmation copy sent by
first class mail, or (iii) five (5) days after mailing if mailed by first class
mail, to the following addresses:

 

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If to the Company:   CECO Environmental Corp.   3120 Forrer Street   Cincinnati,
Ohio 45209   Attention: Chief Financial Officer

And if to the Holder, to the address or facsimile number of Holder as set forth
on the Company’s records, or such other address as the Holder has provided to
the Company by notice duly given.

11.4 Collection. If the indebtedness represented by this Note or any part
thereof is collected at law or in equity or in bankruptcy, receivership or other
judicial proceedings or if this Note is placed in the hands of attorneys for
collection after the occurrence of an Event of Default, the Company agrees to
pay, in addition to the outstanding principal and accrued interest payable
hereon, reasonable attorneys’ fees and costs incurred by the Holder, or on
behalf of the Holder by a representative of the Holder.

11.5 Successors and Assigns. The rights and obligations of the Company and the
Holder shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.

11.6 Waivers. The Company and any endorsers, sureties, guarantors, and all
others who are, or may become liable for the payment hereof severally: (a) waive
presentment for payment, demand, notice of demand, notice of nonpayment or
dishonor, protest and notice of protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default, or enforcement
of the payment of this Note, (b) consent to all extensions of time, renewals,
postponements of time of payment of this Note or other modifications hereof from
time to time prior to or after the maturity date hereof, whether by acceleration
or in due course, without notice, consent or consideration to any of the
foregoing, (c) agree to any substitution, exchange, addition, or release of any
of the security for the indebtedness evidenced by this Note or the addition or
release of any party or person primarily or secondarily liable hereon, (d) agree
that Holder shall not be required first to institute any suit, or to exhaust its
remedies against the Company or any other person or party to become liable
hereunder or against the security in order to enforce the payment of this Note
and (e) agree that, notwithstanding the occurrence of any of the foregoing
(except by the express written release by Holder of any such person), the
Company shall be and remain, directly and primarily liable for all sums due
under this Note.

11.7 Time. Time is of the essence in this Note.

11.8 Captions. The captions of sections of this Note are for convenient
reference only, and shall not affect the construction or interpretation of any
of the terms and provisions set forth in this Note.

11.9 Number and Gender. Whenever used in this Note, the singular number shall
include the plural, and the masculine shall include the feminine and the neuter,
and vice versa.

11.10 Remedies. All remedies of the Holder shall be cumulative and concurrent
and may be pursued singly, successively, or together at the sole discretion of
the Holder and may be exercised as often as occasion therefor shall arise. No
act of omission or commission of the Holder, including specifically any failure
to exercise any right, remedy or recourse

 

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shall be effective unless it is set forth in a written document executed by the
Holder and then only to the extent specifically recited therein. A waiver or
release with reference to one event shall not be construed as continuing as a
bar to or as a waiver or release of any subsequent right, remedy, or recourse as
to any subsequent event.

11.11 No Waiver by Holder. The acceptance by Holder of any payment under this
Note which is less than the amount then due or the acceptance of any amount
after the due date thereof, shall not be deemed a waiver of any right or remedy
available to Holder nor nullify the prior exercise of any such right or remedy
by Holder. None of the terms or provisions of this Note may be waived, altered,
modified or amended except by a written document executed by Holder and then
only to the extent specifically recited therein. No course of dealing or conduct
shall waive, alter, modify or amend any of the terms or provisions hereof. The
failure or delay to exercise any right or remedy available to Holder shall not
constitute a waiver of the right of the Holder to exercise the same or any other
right or remedy available to Holder at that time or at any subsequent time.

11.12 Submission to Jurisdiction. THE COMPANY, AND ANY ENDORSERS, SURETIES,
GUARANTORS AND ALL OTHERS WHO ARE, OR WHO MAY BECOME, LIABLE FOR THE PAYMENT
HEREOF SEVERALLY, IRREVOCABLY AND UNCONDITIONALLY (A) AGREE THAT ANY SUIT,
ACTION, OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY
OTHER AGREEMENT, DOCUMENT OR INSTRUMENT DELIVERED PURSUANT TO, OR IN CONNECTION
WITH THIS NOTE SHALL BE BROUGHT AND MAINTAINED IN THE STATE AND FEDERAL COURTS
IN HAMILTON COUNTY, OHIO; (B) CONSENT TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING; AND (C) WAIVE ANY OBJECTION WHICH
IT OR THEY MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION, OR
PROCEEDING IN ANY OF SUCH COURTS.

 

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11.13 Waiver of Trial by Jury. HOLDER AND THE COMPANY HEREBY KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS
NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER
DOCUMENT EXECUTED IN CONNECTION THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER TO MAKE THE LOAN EVIDENCED BY
THIS NOTE.

[signature page follows]

 

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CECO ENVIRONMENTAL CORP., a Delaware corporation By:  

/s/ Dennis W. Blazer

  Dennis W. Blazer   Vice President and Chief Financial Officer

 

HOLDER  

 

 

 

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