EXHIBIT 10.5
CECO ENVIRONMENTAL
CORP.
PROMISSORY NOTE
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USD
$3,000,000
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May 15, 2009
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FOR VALUE RECEIVED, the undersigned,
CECO ENVIRONMENTAL CORP. (the “Company”), a Delaware
corporation, hereby promises to pay to the order of ICARUS
INVESTMENT CORP., an Ontario corporation or registered assigns
(“Holder”), the principal sum of THREE MILLION DOLLARS
($3,000,000) (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.
1. Maturity . This Note shall
be due and payable upon the earlier to occur of the following
events (the “Maturity Date”): (i) May 15,
2012; (ii) six (6) months after repayment of the Superior
Debt (as defined in Section 8 below); or (iii) the
closing (any such closing referred to as the “Closing”)
of a Sale Transaction. For purposes of this Note, a Sale
Transaction shall mean (i) a merger, consolidation, corporate
reorganization, or sale of shares of stock of the Company as a
result of which there is a change in control and/or the
shareholders of the Company on the date hereof (“Current
Shareholders”) own 50% or less of the outstanding shares of
the Company on a fully-diluted basis immediately after the
transaction and, including as outstanding for purposes of such
calculation, any warrants, options or other instruments convertible
or exchangeable into equity securities of the Company issued to
persons other than the Current Shareholders in connection with the
transaction or (ii) the sale of (A) fifty percent or more
of the assets of the Company or (B) any subsidiary, division
or line of business of the Company for total consideration in
excess of USD $5 million.
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 twelve percent
(12%) per annum (the “Base Rate”) until the
principal amount of this Note is paid in full. Accrued interest
shall be due and payable on the fifteenth of each month with a
final payment of accrued and unpaid interest due and payable on the
Maturity Date. It shall not be a default hereunder and interest
will not accrue on any portion of such interest payments if such
interest payments are deferred (“Deferred Interest”)
because payment of such interest payments will constitute a default
under the Credit Agreement dated December 29, 2005, as amended
(the Credit Agreement, as amended, restated, supplemented or
modified from time to time, the “Credit Agreement”)
among the Company, certain of its affiliates and Fifth Third Bank,
so long as the Deferred Interest is paid at the time and in the
manner allowed by the Credit Agreement. In the 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 percent (3%). If a judgment is entered
against Lender on this Note, the amount of the judgment so entered
shall bear interest at the highest rate authorized by law as of the
date of the entry of the judgment.
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, provided, that Holder, in its sole
discretion, may require that payments be made in Canadian funds,
based on an exchange rate of 1.1789. The Company shall notify
Holder prior to any payment, and Holder shall instruct the Company
as to whether such payment shall be made in United States or
Canadian funds.
So long as no Event of Default has
occurred in this Note, 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 10.5, 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.
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. Prepayment . The Company,
at its option and without any premium, may prepay in whole or in
part the principal amount of this Note at any time, subject to the
terms of paragraph 3 herein.
7. Repayment of Notes . In
the event the Company completes an equity financing or offering or
a series of equity financing or offerings for a total consideration
in excess of USD $10,000,000, then twenty-five percent
(25%) of all such consideration in excess of USD $10,000,000
shall be used immediately, upon receipt by the Company, to pre-pay
this Note, provided such payment is not a default by the Company
under the Credit Agreement.
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8. Events of Default
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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
5 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 o
