Document:

EXHIBIT D-1

EMPLOYMENT AGREEMENT

This agreement ("Agreement") is entered into as of the /12th/ day of /June/, 2006, and is effective as of the 1st day of January, 2006 (the "Effective Date") by and between CECO Environmental Corp., a Delaware corporation ("CECO"), and DAVID D. BLUM (the "Employee").

RECITALS

CECO Group, Inc. ("CEC") is a wholly-owned subsidiary of CECO; 

 

CEC, CECO and the other direct and indirect subsidiaries of CECO, including without limitation, The Kirk and Blum Manufacturing Company ("K&B" and collectively with all of the foregoing, the "Companies") are engaged in the business of acquiring and operating businesses that engage in engineering, designing, manufacturing or installation services in the air pollution control industry including without limitation of the foregoing, (a) fabrication and installation of industrial ventilation, dust, fume and mist control systems, as well as automotive spray booth systems, industrial and process piping and other industrial sheet metal work, (b) fabrication of parts, subassemblies or customized products for air pollution and non-air pollution applications from sheet, plate and structural steel,  (c) the provision of standard and non-standard components for contractors and companies that design and/or install their own air pollution control equipment, or (d) engineering services concentrated in the industrial ventilation area (the "Business"); 

Employee has been employed by CEC pursuant to an Employment Agreement, which expired as of the date hereof; 

The parties desire that Employee be employed by CECO to assist in the Business; 

Such employment constitutes a confidential relationship wherein Employee will become familiar with and aware of information as to the specific manner of doing business and the potential acquisition candidates of the Companies and their affiliates and future plans with respect thereto, all of which information is secret and proprietary and constitutes valuable goodwill of the Companies and their affiliates; 

Employee recognizes that the success of Companies' Business is dependent upon the maintenance of a number of proprietary trade secrets, including the identity of customers and potential acquisition candidates, the confidential information regarding and analysis of such candidates and the financial data of the Companies or either of them or their affiliates, and that the protection of these proprietary trade secrets is of critical importance to the Companies; and 

Employee recognizes that the Companies will sustain great loss and damage if he should violate the provisions of this Agreement.  Further, monetary damages for such losses would be extremely difficult to measure and would therefore be likely to be inadequate for any violation of this Agreement by Employee;

TERMS

For good and valuable consideration the parties hereby agree as follows:

1. Employment: 

 Positions.  During the term of this Agreement, the Employee agrees to serve as a Senior Vice President of CECO and the President of K&B, and in such other positions which Employee shall agree to accept during the Term. Employee shall (i) report directly to the President of CECO, (ii) maintain the level of duties and responsibilities as in effect as of the Effective Date, or such higher level of duties and responsibilities as Employee may be assigned during the Term and (iii) will perform such others duties as may be assigned to him from time to time by the board of directors, President or CEO of CECO.  During his employment, Employee shall devote his full time and best efforts to promote and further the business and services of CECO and the other Companies.  Employee shall faithfully adhere to, execute and fulfill all policies established by CECO's board of directors.  Employee shall not, during his employment hereunder, be engaged in any business or perform any services in any capacity other than for CECO or the other Companies, whether or not they interfere with his duties to CECO, without the prior approval of the Board of Directors of CECO, except that no such approval shall be required with respect to volunteer activities for organizations with charitable purposes or passive investment activity; provided that such activities do not interfere with his duties for CECO and are only occasionally during business hours.  Without limiting the generality of any other provisions hereunder, under no circumstances shall Employee accept any form of remuneration from any business owner or broker with respect to any matter related to the Business of the Companies.

2. Term. The Company hereby agrees to employ the Employee and the Employee hereby agrees to serve the Company in accordance with the terms and conditions set forth herein, for a period commencing as of the Effective Date and ending December 31, 2008 (the "Initial Term").  Commencing December 31, 2008, and each December 31 thereafter, the term of this Agreement shall automatically be extended for one (1) additional year (each, a "Renewal Term"), unless at least six months prior to the termination of the then current term, the Company or the Employee shall have given notice in accordance with Section 14 hereof that it or he does not wish to extend the term of the Agreement. (The Initial Term and all the Renewal Terms are collectively sometimes referred to as the "Term.") 

3. Compensation. During the Term, CECO shall compensate Employee as follows:

a. Salary. For his services during the Term, CECO shall pay to Employee a base salary ("Base Salary") of $200,000 per year, payable in accordance with CECO's standard payroll practices, but no less frequently than in monthly installments, and which may be increased from time to time in the discretion of the board of directors of CECO.  CECO agrees that Employee's base salary shall be reviewed no less frequently than once every 12 months. The payment of salary and any bonuses paid hereunder shall be subject to all federal, state and local withholding taxes, social security tax deductions and other general obligations.  Employee may be entitled to receive additional compensation from CECO in such form and only to the extent explicitly set forth below.

b.  Other Compensation.  Employee shall be entitled to participate, on the same terms as other non-union, executive employees of CECO, in any medical, dental or other health plan, 401(k) plan, stock option plan, profit-sharing plan and life insurance plan that CECO may adopt or maintain for such employees, any of which plans may be changed, terminated or eliminated by CECO at any time in their sole discretion.  

c. Reimbursement of Expenses. CECO shall reimburse Employee for properly documented expenses that are incurred by Employee on behalf of CECO in accordance with corporate policies in effect from time to time.

d.Automobile Allowance.  During the Term of Employee's employment hereunder, Employee shall receive a monthly car allowance of $452 biweekly, or such greater amount as determined by the Compensation Committee of CECO. Such allowance shall be treated as additional compensation for Employee and be reported on his Form W-2 as such.

e.  Incentive Compensation Agreement.    Employee shall be eligible to participate in any CECO Incentive Compensation Program that CECO establishes, on such terms as are set forth in any such plan ("Bonus Compensation").  Notwithstanding anything contained herein to the contrary, Bonus Compensation shall not be paid until the amount of Bonus Compensation, if any, is determined in accordance with the terms of such plan.

f.Right to Change Plans. CECO shall not be obligated to institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, program, or perquisite, so long as such changes are equally applicable to all executive employees of CECO.

4. Vacation. Employee shall be entitled to four (4) weeks of paid vacation in each full calendar year of employment at times mutually acceptable to Employee and CECO. Vacation shall be earned ratably over the course of a calendar year, and unused vacation time cannot be carried forward past December 31 of any year without the prior written consent of CECO.

5. Termination by CECO.

a. Termination for Cause. CECO may terminate this Agreement at any time for Cause, in which case Employee shall be entitled to receive Base Salary accrued through the date of such termination. Any of the following shall constitute "Cause":

(i) any material breach by Employee of any of the terms of this Agreement where such breach is not cured within thirty (30) days after written notice of such breach is delivered to Employee;

(ii)any breach by Employee of any of the terms of his non-competition agreement set forth in Section 9 with CECO or the Employee Innovations and Proprietary Rights Assignment Agreement between Employee and CECO;

(iii) intoxication with alcohol or drugs while on the premises of CECO or any of the Companies or any customer or potential customer to the extent that in the reasonable judgment of management, Employee is abusive or his ability to perform his duties and responsibilities under this Agreement is impaired;

(iv)conviction of a felony or any misdemeanor involving dishonesty, theft, the failure to tell the truth, other unethical behavior, racial prejudice, drugs, alcohol, sexual misconduct or any other crime likely to result in public disparagement with respect to any of the Companies;

(v) intentional misappropriation of property belonging to CECO or

any of the Companies;

(vi) illegal business practices in connection with any of CECO or the Companies' businesses which could have a material adverse effect on CEC's, CECO's, CECO's or any of the Companies' or their business or financial position or reputation; 

(vii)excessive absence of Employee from his employment during usual business hours for reasons other than vacation, disability or sickness after written notice thereof is delivered to Employee describing the nature of such excess absences and affording Employee one more opportunity to avoid excess absences; or

(viii)failure of Employee to obey directions of the Board of Directors of CECO or chief executive officer of CECO, provided that Employee has been given written notice of such directions.

	Termination Without Cause. CECO may terminate the employment of Employee, and this Agreement, without Cause at any time, in which event CECO shall pay to Employee, in full satisfaction of CECO's obligations to Employee under this Agreement, the compensation accrued but unpaid, including without limitation the Bonus Compensation upon its determination, through the date of the termination of his employment, and shall continue to pay Base Salary for a period paid of twelve (12) months as if he had remained employed by CECO for such twelve (12) months.  Such amounts shall be earned and paid rateably over the applicable period in accordance with CECO's regular payroll practices.  

(c)Breach by CECO.  Employee may terminate his employment with CECO if CECO shall (i) materially breach any of its obligations and responsibilities under this Agreement and such breach shall be continuing, (ii) relocate the location of Employee's regular work place to a location more than 35 miles from its current location in Cincinnati, Ohio (excluding travel in the course of performing Employee's duties), (iii) demote the Employee to a less prestigious position without the mutual agreement of CECO and the Employee, and (iv) materially reduce Employee's Base Salary below $200,000 (collectively, "Breach by CECO"); provided, that, Employee shall not terminate his employment under this paragraph (c) unless he shall first have delivered to CEC a written notice setting forth with particularity the basis for such termination and shall have given the Board of Directors of CEC an opportunity to meet with Employee and, if curable, to cure such breach within thirty (30) days following delivery of such written notice.  If Employee's employment is terminated by reason of Breach by CECO, CECO shall pay the Employee his full accrued and unpaid compensation, including without limitation the Bonus Compensation upon its determination, through the date of such termination, and shall continue to pay Base Salary for a period of twelve (12) months as if he had remained employed by CECO for such twelve (12) months.  Such amounts shall be earned and paid rateably over the applicable period in accordance with CECO's regular payroll practices.

6. Termination on Account of Death or Disability. If Employee dies during the Term, this Agreement shall terminate, and CECO shall pay to the estate of Employee his accrued but unpaid compensation, including without limitation the Bonus Compensation upon its determination, through the date of his death.  The Board of Directors of CECO may elect to terminate the engagement of Employee for "disability," if Employee is no longer able to perform the duties of his position due to illness, accident or other physical or mental condition and such disability is expected to continue, with or without interruption, for a period of six  months, or such greater period as may be required by any applicable law. If the Board of Directors of CECO determines that Employee is so disabled, it shall deliver notice to Employee and CECO shall pay to Employee his accrued but unpaid compensation, including without limitation Bonus Compensation upon its determination, through the date of the termination of his employment hereunder in full satisfaction of CECO's obligations to Employee under this Agreement.  

7. Termination by Employee. Employee may terminate his employment at any time upon ninety (90) days prior written notice.  If he does so other than as a result of a Breach by CECO, CECO shall pay to him the Base Salary accrued but unpaid through the date of such termination of his employment in full satisfaction of CECO's obligations to Employee under this Agreement. 

         8.    a.    Confidentiality.  Except in the furtherance of the business of the Companies, during and at all times after Employee's employment:

(i) Employee shall not disclose to any person or entity, without CECO's prior written consent, any confidential or secret proprietary information, whether prepared by him or others.

(ii) Employee shall not directly or indirectly use any such proprietary information other than as directed by CECO in writing.

(iii) Employee shall not remove confidential or secret proprietary information from the premises of CECO without the prior written consent of CECO.

Upon termination of his employment for whatever reason, with or without Cause, Employee will promptly deliver to CECO all originals and copies (whether in note, memo or other document form or on video, audio or computer tapes or discs or otherwise) of confidential or secret proprietary information in his possession, custody or control, whether prepared by him or others.

Confidential or secret proprietary information includes, but is not limited to:

(i) the name of any company or business, all or any substantial part of which is or at any time was a candidate for potential acquisition by any of the Companies, together with all analyses and other information which any of the Companies has generated, compiled or otherwise obtained with respect to such candidate, business or potential acquisition, or with respect to the potential effect of such acquisition on the business, assets, financial results or prospects of any of the Companies;

(ii) business, pricing and management methods;

(iii) finances, strategies, systems, research, surveys, plans, reports, recommendations and conclusions;

(iv) names of, arrangements with, or other information relating to, the Companies' customers, equipment suppliers, manufacturers, financiers, owners or operators, representatives and other persons who have business relationships with the Companies or who are prospects for business relationships with any of the Companies; 

(v) technical information, work products and know-how; and

(vi) cost, operating, and other management information systems, and other software and programming.

	Employee Inventions.  Employee shall enter into an Employee Innovations and Proprietary Rights Assignment Agreement in the form of Exhibit A attached hereto.

9.Non-Compete; Non-Solicitation.  

a.Non-Compete.  Employee agrees that during the term of his employment and for a period of two (2) years following his termination of employment with CECO for any or no reason he will not Participate in any Restricted Business in the Restricted Territory.  

(i)For purposes of this Agreement, the term "Participate" means to have any direct or indirect interest in a Restricted Business, whether as an officer, director, member, manager, employee, partner, proprietor, agent, representative, independent contractor, consultant, franchiser, franchisee, creditor, owner, advisor or otherwise, or to participate in the financing, operation, management or control of, any person, firm, partnership, corporation, entity or business that engages or participates in a Restricted Business; provided, however, that the term "Participate" shall not include passive ownership of less than five percent (5%) of a class of stock of a publicly-held corporation which is traded on a national securities exchange or in the over-the-counter market, provided that Employee may not sell any shares of such stock unless such shares of stock were held by Employee for a period of at least twelve (12) months; and

(ii)For purposes of this Agreement, the term "Restricted Business" means any enterprise, business or venture engaged in or which proposes to engage in the distribution, service, or sale of any products or services of the same type or nature as, or are otherwise competitive with, those which are distributed, serviced or sold by any of the Companies at any time during the twelve (12) months prior to the termination of the Employee's engagement with CECO; and 

(iii)For purposes of this Agreement, "Restricted Territory" shall mean anywhere worldwide.  Employee acknowledges and agrees that with the use of technology that is available today, this worldwide restriction is reasonable and necessary because any services or products that are or will be offered by the Companies are or will be for sale throughout the world.

b.  Non-Solicitation.  Employee agrees that, during the time of Employee's employment with CECO and for a period ending two (2) years after the termination of Employee's employment for any reason whatsoever or for no reason, whether voluntary or involuntary, Employee will not (i) induce or attempt to induce any customer, supplier, licensee or business relation of any of the Companies to cease doing business with the Companies, or in any way interfere with the relationship between any customer, supplier, licensee, or business relation of the Companies; or (ii) solicit, attempt to solicit, induce, encourage, hire or take any other action that is intended to induce or encourage any then current employee or independent contractor to terminate his or her employment or consulting relationship with any of the Companies. 

The covenants on the part of Employee contained in this Section 9 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against CECO, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer of this covenant.  Employee acknowledges that part of the consideration for the forgoing covenants is Employee's compensation during the term of employment provided in the Agreement.  Employee further acknowledges that the foregoing restrictions placed upon him are necessary and reasonable in scope and duration to protect the goodwill of CECO, and that he will be in a position to earn a livelihood without violating the foregoing restrictions and that it has been made clear to him on behalf of CECO that his ability to earn a livelihood without violating such restrictions is a material condition to his employment or continuation of his employment by CECO.  

10. Damages, etc. The parties acknowledge that monetary damages will be inadequate and the Companies will be irreparably damaged if the provisions of this Agreement are not specifically enforced.  CECO shall be entitled, among other remedies, (a) without any bond or other security being required, to an injunction restraining any violation of this Agreement by Employee and by any person or entity to whom Employee provides or proposes to provide any services in violation of this Agreement, and (b) to require Employee to hold in a constructive trust, account for and pay over to CECO all compensation and other benefits which Employee shall derive as a result of any action or omission which is a violation of any provision of this Agreement.

11. Enforceability.  If any one or more of the provisions of this Agreement shall be held by a court of competent jurisdiction or other authority to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby; such court or other authority is hereby authorized and directed to modify or amend the invalid, illegal or unenforceable provision to the minimum extent necessary to render it valid and enforceable and to achieve as fully as lawful the intention of such provision, and such provision, as so modified or amended, shall be valid and binding upon the parties.

12.Return of Property. All products, records, designs, plans, manuals, "field guides", memoranda, lists and other property delivered to Employee by or on behalf of any of the Companies or by their customers, including, but not limited to, customers obtained for any of them by Employee, and all records compiled by Employee which pertain to the business of any of the Companies, or any of their customers, whether or not confidential, shall be and remain the property of the Companies, and be subject at all times to the discretion and control of the Companies. Likewise, all correspondence with customers or representatives, reports, records, charts, advertising materials, and any data collected by Employee, or by or on behalf of any of the Companies or their representatives, whether or not confidential, shall be delivered promptly to CECO without request by it upon termination of Employee's employment.

13.Suits Against the Companies. Both during and after the term of his employment hereunder, Employee covenants that he will not bring suit or file counterclaims against the Companies or any of them for corporate misconduct, unless both of the following shall have occurred: (a) Employee shall have first made written demand to the Board of Director of CEC to investigate and deal with such misconduct, and (b) such Board of Directors shall have failed within 30 days after the date of receipt of such demand to establish a Special Litigation Committee, consisting exclusively of outside directors, to investigate and deal with such misconduct.  Without limiting the generality of and to further implement the foregoing, Employee irrevocably and unconditionally consents at the option of either of the Companies to the entry of temporary restraining orders and temporary and permanent injunctions, without posting bond or other security, against the filing of any action or counterclaim which is prohibited hereunder. The opinion of such Board of Directors shall be binding and conclusive on the determination of which directors constitute "outside directors", and the determination of the Special Litigation Committee shall be binding and conclusive on all matters relating to the actual or alleged misconduct which is referred to it as aforesaid.

14.Cooperation in Proceedings. During and after the termination of Employee's employment, Employee shall for reasonable compensation consistent with his compensation from CECO cooperate fully and at reasonable times with any of the Companies in all litigation and regulatory proceedings with respect to which any of the Companies seeks Employee's assistance and as to which Employee has any knowledge or involvement.  Without limiting the generality of the foregoing, Employee shall be available to testify at such litigations and other proceedings, and will cooperate with counsel to the Companies in preparing materials and offering advice in such litigation and other proceedings. Except as required by law, and then only upon reasonable prior written notice to CECO, Employee shall not in any way cooperate or assist any person or entity in any matter which is adverse to any of the Companies or to any person who was at any time an officer or director of any of the Companies.

15.Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing and will be deemed duly given when personally delivered, the next business day when deposited with Federal Express or other nationally recognized overnight courier service delivery prepaid or five (5) business days after being sent by registered mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to Employee:                      

David D. Blum 
7925 Annesdale Dr.

Cincinnati, Ohio  45243

If to CECO:Copy to:

CECO Environmental Corp.Leslie J.  Weiss, Esq.

3120 Forrer Street Sugar, Friedberg & Felsenthal
Cincinnati, Ohio 4520930 North LaSalle Street

Attn: CEOSuite 3000

Chicago, Illinois 60602

Either party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth.

16.  Survival. The provisions of Sections 8 through 23 shall survive the termination of this Agreement.

17. Other Agreements. Employee represents that he has furnished to CECO copies of all agreements which restrict or limit or could restrict or limit his services for CECO at any time during the term.  However, nothing in this Agreement shall be construed to render an opinion as to the interpretation or validity of any agreements with prior employers purporting to restrict or limit Employee's services for CECO.

18.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without giving effect to any choice or conflict of law provision or rule, whether of the State of Ohio or any other jurisdiction, that would cause the application of the laws of any jurisdiction other than the State of Ohio.  In the event of any dispute or claim relating to arising out of Employee's employment relationship with CECO, Employee's stock options, his non-compete or the termination of Employee's employment relationship with CECO (including, without limitation of the foregoing, any claim of wrongful termination or age, sex disability, race or other discrimination), Employee and CECO agree that (i) all such disputes shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association in Cook County, Illinois, and (ii) each waives his or its rights to have such dispute tried by a court or a jury.  RIGHT TO TRIAL BY JURY IS WAIVED.   However, Employee and CECO agree that this arbitration provision shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of CECO's or any Companies' trade secrets, proprietary information, other proprietary rights or property.  With respect to each such dispute, each of the parties submits to the jurisdiction of any state court sitting in Cincinnati, Ohio or the United States District Court for the Southern District of Ohio.

19. Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties named herein and their respective heirs, legal representatives, successors and permitted assigns.  Employee may not assign either this Agreement or any of Employee's rights, interests or obligations hereunder.  CECO may assign any or all of its rights and interests hereunder to any person or entity that acquires the business of CECO or any Company, or to any entity with which such company merges or consolidates.

20.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same agreement.

21.Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

22.Waiver. The waiver of a breach of any provision of this Agreement shall not operate or be construed to be a waiver of any other provision or of a subsequent or prior breach of this Agreement.

 

23.Entire Agreement.  This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous negotiations, correspondence, understandings and agreements between the parties regarding the subject matter of this Agreement.  This Agreement may not be amended or modified or any provision waived except in a writing signed by both parties and supported by new consideration.

 

Executed as of the date first above set forth.

CECO ENVIRONMENTAL CORP.

/s/Dennis W. Blazer

By:                                                     

/s/Vice President Finance and Administration

  and CFO

     Its:  _______________________                 

/s/David D. Blum

_____________________________                                                           

David D. Blum, EmployeeA FIFTH THIRD BANCORP BANK

EXECUTION VERSION

A FIFTH THIRD BANCORP BANK

AMENDED AND RESTATED

REVOLVING CREDIT PROMISSORY NOTE

OFFICER NO. __________                             NOTE No. ____________

 

$13,000,000December 29, 2005

First Amendment and Restatement June 8, 2006

(Effective Date)

Promise to Pay.  On or before January 31, 2009 (the "Maturity Date"), the undersigned, CECO FILTERS, INC., a Delaware corporation, NEW BUSCH CO., INC., a Delaware corporation, THE KIRK & BLUM MANUFACTURING COMPANY, an Ohio corporation, KBD/TECHNIC, INC., an Indiana corporation, CECOAIRE, INC., a Delaware  corporation, CECO ABATEMENT SYSTEMS, INC., a Delaware corporation, and H.M. WHITE, INC., a Delaware corporation (each, a "Borrower", and, collectively, the "Borrowers"), for value received, hereby jointly and severally promise to pay to the order of FIFTH THIRD BANK, an Ohio banking corporation (together with its successors and assigns, "Lender"), at 38 Fountain Square Plaza, MD #10AT63, Cincinnati, Ohio 45263, or such other address as Lender may provide from time to time, the sum of THIRTEEN MILLION AND 00/100 Dollars ($13,000,000), plus interest as provided herein, or so much thereof as is loaned by Lender to Borrowers as Revolving Loans or for which credit is extended by Lender as a Letter of Credit pursuant to the Credit Agreement among Lender, Borrowers, and certain of Borrower's affiliates dated as of December 29, 2005, as amended by the First Amendment to Credit Agreement dated as of even date herewith (as the same may be further amended, renewed, consolidated, restated or replaced from time to time, the "Credit Agreement").  The outstanding balance of this Note shall appear on supplemental bank records and is not necessarily the face amount of this Note, which record shall evidence the balance due pursuant to this Note at any time.  As used herein, "Local Time" means the time at the office of Lender specified in this Note.

This Note, and any request by Borrowers from time to time for an advance of a specified principal amount hereunder, shall be subject to the terms and conditions of the Credit Agreement.  Capitalized terms used herein which are not otherwise defined in this Note shall have the meanings set forth in the Credit Agreement.  This Note is entitled to the benefits and security of the Credit Agreement, including, without limitation, acceleration upon the terms provided therein, and of the other Loan Documents.

The entire unpaid principal balance of this Note, together with all accrued and unpaid interest and any other charges, advances and fees, if any, outstanding hereunder, shall be due and payable in full on the earlier of the Maturity Date or upon acceleration of the Indebtedness evidenced by this Note, notwithstanding any other inconsistent or contradictory provisions contained in this Note.

Upon the occurrence and during the continuance of any Event of Default, the entire unpaid principal balance of this Note, together with all accrued but unpaid interest, and all other Obligations, shall, at Lender's option, become immediately due and payable, except that if there occurs an Event of Default of the type described in Sections 6.1(d), 6.1(e), or 6.1(k) of the Credit Agreement, the entire unpaid principal balance of this Note, together with all accrued but unpaid interest, and all other Obligations shall become automatically and immediately due and payable without notice, which Borrowers hereby waive.

Interest.  Principal amounts outstanding under this Note shall bear interest commencing on the date of the first advance hereunder at the rate or rates per annum set forth below, which rate or rates shall be designated by Borrowers as more fully set forth herein (the "Interest Rate").  At any time and from time to time during the term of this Note, so long as no Event of Default has occurred and is continuing and so long as such outstanding principal amounts hereunder are not then subject to a LIBOR Election, Borrowers may exercise their right to adjust the Interest Rate on amounts of principal outstanding under this Note to one of the rates set forth below upon notice to Lender as set forth below; provided, however, that once the Interest Rate accruing against any amounts outstanding hereunder is adjusted to a LIBOR Rate for a particular LIBOR Interest Period, Borrowers may not elect to adjust such Interest Rate to a different Interest Rate until the expiration of such LIBOR Interest Period:

(a)LIBOR Rate. Upon telephonic notice to Lender by 10:00 a.m. Local Time given at least two Business Days prior to the beginning of a LIBOR Interest Period, Borrowers may, subject to the terms of this Note, elect to have advances under this Note bear interest at a rate per annum equal to the rate (rounded upwards, if necessary, to the next 1/8 of 1% and adjusted for reserves if Lender is required to maintain reserves with respect to relevant advances) being asked on an amount of Eurodollar deposits approximately equal to the amount of the advances subject to a LIBOR Election on the first day of a LIBOR Interest Period and which has a maturity corresponding to the maturity of the LIBOR Interest Period, as reported by the Dow Jones Telerate news service (or any successor or other reporting service selected by Lender) as determined by Lender by noon on the effective date of the LIBOR Interest Period (the "LIBOR Rate") plus the Applicable LIBOR Rate Margin (as defined herein) (a "LIBOR Election").  Each determination by Lender of the LIBOR Rate shall be conclusive in the absence of manifest error.  Interest shall be: (i) calculated based on a 360-day year and charged for the actual number of days elapsed and (ii) payable in arrears on the last day of the applicable LIBOR Interest Period.  The Interest Rate applicable to a particular advance shall remain at the rate elected for the remainder of the subject LIBOR Interest Period.

The "LIBOR Interest Period" for each advance is a period of 30, 60, or 90 days, at Borrowers' election, which period shall commence on a Business Day selected by Borrowers subject to the terms of this Note.  If a LIBOR Interest Period would otherwise end on a day that is not a Business Day, such LIBOR Interest Period shall end on the next succeeding Business Day; provided that, if the next succeeding Business Day falls in a new month, such LIBOR Interest Period shall end on the immediately preceding Business Day.

In addition, notwithstanding anything herein contained to the contrary, if, prior to or during any period with respect to any LIBOR Election, any change in any law, regulation or official directive, or in the interpretation thereof, by any governmental body charged with the administration thereof, shall make it unlawful for Lender to fund or maintain its funding in Eurodollars of any portion of the advance subject to the LIBOR Rate or otherwise to give effect to Lender's obligations as contemplated hereby: (i) Lender may, by written notice to Borrowers, declare Lender's obligations in respect of the LIBOR Rate to be terminated forthwith, and (ii) the LIBOR Rate with respect to Lender shall forthwith cease to be in effect, and interest shall from and after such date be calculated at the Prime Rate as if a Prime Rate Election had been made, and interest shall be paid, in arrears, on the first (1st) day of each calendar month.  Borrowers hereby agree to reimburse and indemnify Lender from all increased costs or fees incurred by Lender subsequent to the date hereof relating to the offering of rates of interest based upon the LIBOR Rate.  A certificate of Lender setting forth the amount or amounts necessary to compensate Lender as specified in this paragraph and delivered to Borrowers shall be conclusive absent manifest error.  Borrowers shall pay Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

Borrowers' right to make a LIBOR Election shall be terminated automatically if Lender, by telephonic notice, shall notify Borrowers that Eurodollar deposits with a maturity corresponding to the maturity of the LIBOR Interest Period, in an amount equal to the advances to be subject to the LIBOR Election are not readily available in the London Inter-Bank Offered Rate Market, or that, by reason of circumstances affecting such Market, adequate and reasonable methods do not exist for ascertaining the rate of interest applicable to such deposits for the proposed LIBOR Interest Period.  In such event, amounts outstanding hereunder shall bear interest at the Prime Rate as if a Prime Rate Election had been made or such other rate of interest as may be agreed to between Lender and Borrowers.

If any amount as to which a LIBOR Election is in effect is repaid on a day other than the last day of the applicable LIBOR Interest Period, or becomes payable on a day other than the last day of the applicable LIBOR Interest Period due to acceleration or otherwise, Borrowers, whether or not a debtor in a proceeding under Title 11, United States Code, shall pay, on demand by Lender, such amount (as determined by Lender) as is required to compensate Lender for any losses, costs or expenses ("LIBOR Breakage Fee"), which Lender may incur as a result of such payment or acceleration, including, without limitation, any loss, cost or expense (including loss of profit) incurred by reason of liquidation or reemployment of deposits or other funds acquired by Lender to fund or maintain such amount bearing interest at the applicable LIBOR Rate.

(b)Prime Rate.  Upon telephonic notice by Borrowers to Lender by 10:00 a.m. Local Time, Borrower may elect to have all or any portion of the Revolving Loans outstanding hereunder (provided such amounts are not then subject to a LIBOR Election), bear interest at a floating rate equal to the rate of interest per annum established from time to time by Lender at its principal office as its "Prime Rate" plus the Applicable Prime Rate Margin (as defined below) (the "Prime Rate Election") (it being understood by Borrowers that such Prime Rate is established for reference purposes only and not as Lender's best loan rate).  Any adjustment in the Interest Rate resulting from a change in Lender's Prime Rate shall become effective as of the opening of business on the date of each change (or if not a Business Day, the beginning of the day).  Interest on the principal amount subject to a Prime Rate Election shall be calculated based on a 360-day year and charged for the actual number of days elapsed, and shall be payable in arrears on the first day of each calendar month.

On or before the date of any advance hereunder bearing interest with reference to the LIBOR Rate, and on or before the date which is two Business Days prior to the expiration of the applicable LIBOR Interest Period, Borrowers shall notify Lender of each of the following: (a) the LIBOR Interest Period Borrowers have elected regarding each advance hereunder or any continuation of a LIBOR Election with respect to a portion of the indebtedness evidenced hereby, (b) the amount of each such advance or continuation, and (c) the commencement date of each LIBOR Interest Period.  Borrowers may have advances outstanding hereunder bearing interest with reference to the LIBOR Rate in minimum amounts of $1,000,000 (and integral multiples of $100,000) bear interest at the applicable Interest Rate for different LIBOR Interest Periods so long as (i) the last day of any LIBOR Interest Period does not exceed the Maturity Date hereof; (ii) no LIBOR Interest Period election with respect to any advance commences prior to the expiration of the applicable LIBOR Interest Period in effect with respect to such advance; and (iii) at no time may Borrowers have more than three outstanding LIBOR Elections, in the aggregate, under all of their Notes and one Prime Rate Election under this Note.  If, at any time during the term hereof, Borrowers fail to designate a LIBOR Interest Period or if Borrowers have not elected another LIBOR Interest Period in accordance with this Note at least two Business Days prior to the expiration of the LIBOR Interest Period then in effect, Lender may assume that Borrowers have elected a Prime Rate Election.

(c)Pricing Grid.  As used herein, the terms "Applicable Prime Rate Margin" and "Applicable LIBOR Rate Margin" (hereafter sometimes collectively referred to as the "Applicable Margins") mean, as of any date, the applicable per annum rate shown in the applicable column in the table below based on the then applicable Fixed Charge Coverage Ratio.  "Fixed Charge Coverage Ratio" has the meaning given in the Credit Agreement. 

	

Pricing Grid Level
	

Fixed Charge Coverage Ratio
	

Applicable Prime Rate

Margin
	

Applicable LIBOR Rate

Margin

	

Level 1
	

£

 1.10 to 1.0
	

2.0%
	

Not Available

	

Level 2
	

>

 1.10 to 1.0 and £

 1.250 to 1.0
	

0.50%
	

2.75%

	

Level 3
	

>

 1.250 to 1.0 and £

 1.50 to 1.0
	

0.25%
	

2.50%

	

Level 4
	

>

 1.50 to 1.0
	

0%
	

2.25%

For purposes of determining the Applicable Margins: the Fixed Charge Coverage Ratio will, on and after the First Pricing Grid Determination Date, be determined (i) as of the end of each Fiscal Year ending on and after the First Pricing Grid Determination Date (each such date being a "Determination Date") and (ii) in the same manner used to determine the Fixed Charge Coverage Ratio set forth in Section 5.10 of the Credit Agreement.  The "First Pricing Grid Determination Date" will be December 31, 2006.  On Lender's receipt of the financial statements and Compliance Certificate required to be delivered to Lender pursuant to Sections 4.3(b) and 4.3(d) of the Credit Agreement for the Fiscal Year then ended, the Interest Rate will be subject to adjustment in accordance with the table set forth above in this subparagraph (c) based on the then Fixed Charge Coverage Ratio for such Fiscal Year then ended so long as no Event of Default is existing as of the applicable effective date of adjustment.  The foregoing adjustment, if applicable, will become effective for LIBOR Elections made with respect to the Revolving Loans, the unpaid principal balance of the Revolving Loans subject to a Prime Rate Election and other outstanding Obligations related to the Revolving Loans and the Letter of Credit Obligations due with respect to Letters of Credit issued or renewed, on and after the first day of the first calendar month following delivery to Lender of the financial statements and Compliance Certificate required to be delivered to Lender pursuant to Sections 4.3(b) and 4.3(d) of the Credit Agreement for the Fiscal Year then ended until the next succeeding effective date of adjustment pursuant to this subparagraph (c).  Each of the financial statements and Compliance Certificate required to be delivered to Lender must be delivered to Lender in compliance with Section 4.3 of the Credit Agreement.  If, however, either the financial statements or the Compliance Certificate required to be delivered to Lender pursuant to Sections 4.3(b) and 4.3(d) of the Credit Agreement have not been delivered in accordance with Section 4.3 of the Credit Agreement, then, at Lender's option, commencing on the date upon which such financial statements or Compliance Certificate should have been delivered in accordance with Section 4.3 of the Credit Agreement and continuing until such financial statements or Compliance Certificate are actually delivered in accordance with Section 4.3 of the Credit Agreement, it shall be assumed for purposes of determining the Applicable Margins, that the Fixed Charge Coverage Ratio was £

 1.10 to 1.0 and the pricing associated therewith (i.e., Pricing Grid Level 1) will be applicable on the then applicable Determination Date.  As of the Effective Date of this Note, the Applicable Prime Rate Margin is 0.50% per annum and the Applicable LIBOR Rate Margin is 2.75% (i.e., Pricing Grid Level 2, notwithstanding the Loan Parties' actual Fixed Charge Coverage Ratio prior to and as of such Effective Date).  Notwithstanding anything to the contrary herein, upon the occurrence, and during the continuance of, any period in which Borrowers' Fixed Charge Coverage Ratio is, or is deemed to be, £

 1.10 to 1.0 and the pricing associated therewith (i.e., Pricing Grid Level 1) (such period being a "Pricing Grid Level 1 Period"), Borrowers may not make any LIBOR Elections (other than those made and existing prior to the Determination Date upon which the Pricing Grid Level 1 Period commenced).

Maximum Rate.  In no event shall the Interest Rate provided for hereunder, together with all fees and charges as provided for herein or in any other Loan Document which are treated as interest under applicable law (collectively with interest, the "Charges"), exceed the maximum rate legally chargeable by Lender under applicable law for loans of the type provided for hereunder (the "Maximum Rate").  If, in any month, the Charges, absent such limitation, would have exceeded the Maximum Rate, then the Charges for that month shall be at the Maximum Rate, and, if in future months, such Charges would otherwise be less than the Maximum Rate, then such Charges shall remain at the Maximum Rate until such time as the amount of Charges paid hereunder and under the other Loan Documents equals the amount of Charges which would have been paid if the same had not been limited by the Maximum Rate.  In the event that, upon payment in full of the Obligations, the total amount of Charges paid or accrued in respect of the Indebtedness evidenced by this Note and the other Obligations is less than the total amount of Charges which would, but for this paragraph, have been paid or accrued if the Charges otherwise set forth in this Note and in the other Loan Documents had at all times been in effect, then Borrowers shall, to the extent permitted by applicable law, pay to Lender an amount equal to the difference between:  (a) the lesser of:  (i) the amount of Charges which would have been charged if the Maximum Rate had, at all times, been in effect or (ii) the amount of Charges which would have accrued had such Charges otherwise provided for in this Note and in the other Loan Documents at all times been in effect and (b) the amount of Charges actually paid or accrued in respect of the Indebtedness evidenced by this Note or any of the other Loan Documents.  In the event that a court of competent jurisdiction determines that Lender has received any Charges in respect of the Indebtedness evidenced by this Note and the other Loan Documents in excess of the Maximum Rate, such excess shall be deemed received on account of, and shall automatically be applied to reduce, the Obligations owed to Lender other than any Charges, in the inverse order of maturity, and if there are no Obligations to Lender outstanding, Lender shall refund to Borrowers (or to such Person to which Lender is directed by a court of competent jurisdiction) such excess.

Use of Proceeds.  Borrowers certify that the proceeds of the Revolving Loans will be used for the purposes set forth in the Credit Agreement.

Default Rate; Fees. To the extent any payment is not made within 15 days after the date when due under this Note and, at or before the end of such 15-day period, there was insufficient Revolving Loan Availability to charge the full amount of such payment to the loan account with Lender as an advance of the Revolving Loans, Borrowers shall pay to Lender a late payment fee equal to two percent (2%) of that portion of any payment not paid when due (whether by maturity, acceleration or otherwise).  After the occurrence and during the continuation of an Event of Default, Borrowers agree that Lender may, without notice, increase the Interest Rate by an additional 2.0% per annum (the "Default Rate"); provided that this paragraph shall not be deemed to constitute a waiver of any Event of Default or an agreement by Lender to permit any late payments whatsoever.

Prepayment.  Subject to Section 6.4(b) of the Credit Agreement, Borrowers may prepay all of this Note at any time; provided that if any prepayment results in any LIBOR Breakage Fee or a Termination Fee (as defined in Section 6.4(b) of the Credit Agreement), Borrower will pay such LIBOR Breakage Fee due in accordance with this Note and, as applicable, the Termination Fee.

Entire Agreement.  Borrowers agree that there are no conditions or understandings which are not expressed in this Note or the other Loan Documents.

Severability.  If any provision of this Note is held to be invalid by a court of competent jurisdiction in a final order, the invalid provision will, subject to the provisions of this Note with respect to the Maximum Rate, be deemed severed from this Note and shall not affect any part of the remainder of the provisions of this Note.

Joint Obligations.  All of the obligations of Borrowers hereunder are joint, several and primary.  No Borrower shall be or be deemed to be an accommodation party with respect to this Note.

Assignment.  Borrowers agree not to assign any of any Borrower's rights, remedies or obligations described in this Note without the prior written consent of Lender, which consent may be withheld in Lender's sole discretion.  Borrowers agree that Lender may assign some or all of its rights and remedies described in this Note without prior consent from Borrowers, provided that Lender will promptly notify Borrowers of a total assignment of this Note.

Prior Note.  This Note is issued, not as a refinancing or refunding of or payment toward, but as a continuation of, the Obligations of Borrowers to Lender pursuant to that certain Revolving Credit Promissory Note dated as of December 29, 2005 in the principal amount of $13,000,000 (the "Prior Note"), together with any and all additional Revolving Loans incurred under this Note.  Accordingly, this Note shall not be construed as a novation or extinguishment of the Obligations arising under the Prior Note, and its issuance shall not affect the priority of any Lien granted in connection with the Prior Note.  Interest accrued under the Prior Note prior to the date of this Note remains accrued and unpaid under this Note and does not constitute any part of the principal amount of the Indebtedness evidenced hereby.  The entire unpaid principal balance created or existing under, pursuant to, as a result of, or arising out of, the Prior Note shall, together with any and all additional Revolving Loans incurred under this Note, continue in existence under this Note, which Obligations Borrowers acknowledge, affirm, and confirm to Lender.  The Indebtedness evidenced by this Note will continue to be secured by all of the collateral and other security granted to Lender under the Prior Note and the other Loan Documents.

Modification; Waiver of Lender.  The modification or waiver of any of Borrowers' obligations or Lender's rights under this Note must be contained in a writing signed by Lender and Borrowers.  Lender may perform a Borrower's obligations, or delay or fail to exercise any of Lender's rights or remedies, without causing a waiver of those obligations or rights.  A waiver on one occasion shall not constitute a waiver on another occasion. Borrowers' obligations under this Note shall not be affected if Lender amends, compromises, exchanges, fails to exercise, impairs or releases: (i) any of the obligations belonging to any co-borrower, indorser or guarantor, (ii) any of its rights against any co-borrower, guarantor or indorser, or (iii) any of the Loan Collateral.

Waivers of Borrowers.  To the extent not prohibited by law or required by the Credit Agreement, demand, presentment, protest and notice of dishonor, notice of protest and notice of default are hereby waived by each Borrower, and any indorser or guarantor hereof.  Borrowers and all co-makers and accommodation makers of this Note hereby waive all suretyship defenses, including, but not limited to, all defenses based upon impairment of collateral and all suretyship defenses described in Section 3-605 of the Uniform Commercial Code (the "UCC").  Such waiver is entered to the fullest extent permitted by Section 3-605 of the UCC.  

Governing Law; Consent to Jurisdiction.  This Note is delivered in, is intended to be performed in, will be construed and enforceable in accordance with and governed by the internal laws of, the State of Ohio, without regard to principles of conflicts of law.  Each Borrower agrees that the state and federal courts in Hamilton County, Ohio shall, at Lender's sole option, have exclusive jurisdiction over all matters arising out of this Note, WITHOUT LIMITATION ON THE ABILITY OF LENDER, ITS SUCCESSORS AND ASSIGNS, TO INITIATE AND PROSECUTE IN ANY APPLICABLE JURISDICTION ACTIONS RELATED TO THE REPAYMENT AND COLLECTION OF THE OBLIGATIONS AND THE EXERCISE OF ALL OF LENDER'S RIGHTS AGAINST EACH BORROWER WITH RESPECT THERETO AND ANY SECURITY OR PROPERTY OF EACH BORROWER, INCLUDING, WITHOUT LIMITATION, DISPOSITIONS OF THE LOAN COLLATERAL, and that service of process in any such proceeding shall be effective if mailed to Borrowers at the address set forth herein by certified mail, return receipt requested, if such service of process is received by Borrowers.

JURY WAIVER.  EACH BORROWER, ANY INDORSER OR GUARANTOR HEREOF, AND LENDER WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

[Signature Page Follows]

IN WITNESS WHEREOF, each Borrower has executed this Note by its duly authorized officer as of the date first above written.

	

CECO FILTERS, INC.
	

NEW BUSCH CO., INC.

	 	 
	

/s/Dennis W. Blazer
	

/s/Dennis W. Blazer

	

By:  
	

By:  

	

       Dennis W. Blazer, Secretary and Treasurer
	

       Dennis W. Blazer, Secretary and Treasurer

	 	 
	 	 
	

THE KIRK & BLUM

 MANUFACTURING COMPANY
	

KBD/TECHNIC, INC.

	 	 
	

/s/Dennis W. Blazer
	

/s/Dennis W. Blazer

	

By:  
	

By:  

	

       Dennis W. Blazer, Secretary and Treasurer
	

       Dennis W. Blazer, Secretary and Treasurer

	 	 
	 	 
	

CECOAIRE, INC.
	

CECO ABATEMENT SYSTEMS, INC.

	 	 
	

/s/Dennis W. Blazer
	

/s/Dennis W. Blazer

	

By:  
	

By:  

	

       Dennis W. Blazer, Secretary and Treasurer
	

       Dennis W. Blazer, Secretary and Treasurer

	 	 
	 	 
	

H.M. WHITE, INC.
	 
	 	 
	

/s/Dennis W. Blazer
	 
	

By:  
	 
	

       Dennis W. Blazer, Treasurer

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