EXHIBIT 10.4.5
--------------
SUBORDINATION AGREEMENT
To: Bank of America National
Trust and Savings Association
July 3rd , 1996
----------
Gentlemen:
The undersigned, American Eco Corporation, an Ontario, Canada
corporation ("Creditor") is a creditor of Separation and Recovery Systems,
Inc., a Nevada corporation ("Borrower") and desires that Bank of America
National Trust and Savings Association, a national banking association
("Bank") continue to extend or extend such financial accommodations to
Borrower as Borrower may request and as Bank may deem proper. At the
present time Borrower is indebted to Creditor in the principal sum of Four
Hundred Twenty Thousand Dollars ($420,000) plus accrued interest, if any,
thereon. For the purposes of inducing Bank to grant, continue or renew
such financial accommodations, and in consideration thereof, Creditor
agrees as follows:
1. Any and all claims of Creditor against Borrower, now or
hereafter existing, are, and shall be at all times, subject and subordinate
to any and all claims, now or hereafter existing which Bank may have
against Borrower (including any claim by Bank for interest accruing after
any assignment for the benefit of creditors by Borrower or the institution
by or against Borrower of any proceedings under the Bankruptcy Act, or any
claim by Bank for any such interest which would have accrued in the absence
of such assignment or the institution of such proceedings).
2. Creditor agrees not to sue upon, or to collect, or to
receive payment of the principal or interest of any claim or claims now or
hereafter existing which Creditor may hold against Borrower, and not to
sell, assign, transfer, pledge, hypothecate, or encumber such claim or
claims except subject expressly to this Agreement, and not to enforce or
apply any security now or hereafter existing therefor, nor to file or join
in any petition to commence any proceeding under the Bankruptcy Act, nor to
take any lien or security on any of Borrower's property, real or personal,
so long as any claim of Bank against Borrower shall exist.
3. In case of any assignment for the benefit of creditors by
Borrower or in case any proceedings under the Bankruptcy Act are instituted
by or against Borrower, or in case of the appointment of any receiver for
Borrower's business or assets, or in case of any dissolution or winding up
of the affairs of Borrower: (a) Borrower and any assignee, trustee in
bankruptcy, receiver, debtor in possession or other person or persons in
charge are hereby directed to pay to Bank the full amount of Bank's claims
against Borrower (including interest to the date of payment) before making
any payment of principal or interest to Creditor, and insofar as may be
necessary for that purpose, Creditor hereby assigns and transfers to Bank
all security or the proceeds thereof, and all rights to any payments,
dividends or other distributions, and (b) Creditor hereby irrevocably
constitutes and appoints Bank its true and lawful attorney to act in its
name and stead: (i) to file the appropriate claim or claims on behalf of
Creditor if Creditor does not do so prior to 30 days before the expiration
of the time to file claims in such proceeding and if Bank elects at its
sole discretion to file such claim or claims and (ii) to accept or reject
any plan of reorganization or arrangement on behalf of Creditor, and to
otherwise vote Creditor's claim in respect of any indebtedness now or
hereafter owing from Borrower to Creditor in any manner Bank deems
appropriate for its own benefit and protection.
4. Bank is hereby authorized by Creditor to: (a) renew,
compromise, extend, accelerate or otherwise change the time of payment, or
any other terms, of any existing or future claim of Bank against Borrower,
(b) increase or decrease the rate of interest payable thereon or any part
thereof, (c) exchange, enforce, waive or release any security therefor, (d)
apply such security and direct the order or manner of sale thereof in such
manner as Bank may at its discretion determine, (e) release Borrower or any
guarantor of any indebtedness of Borrower from liability, and (f) make
optional future advances to Borrower, all subordination provided by this
Agreement.
5. On request of Bank, Creditor shall deliver to Bank the
original of any promissory note or other evidence of any existing or future
indebtedness of Borrower to Creditor, and mark same with a conspicuous
legend which reads substantially as follows:
"THIS PROMISSORY NOTE IS SUBORDINATED TO ANY
PRESENT OR FUTURE INDEBTEDNESS OWING FROM THE MAKER TO
BANK OF AMERICA NT&SA AND ITS ASSIGNS, AND MAY BE
ENFORCED ONLY IN ACCORDANCE WITH THAT CERTAIN
SUBORDINATION AGREEMENT DATED JULY 3, 1996 BETWEEN
AMERICAN ECO CORPORATION AND BANK OF AMERICA NT&SA."
6. In the event that any payment or any cash or noncash
distribution is made to Creditor in violation of the terms of this
Agreement, Creditor shall receive same in trust for the benefit of Bank,
and shall forthwith remit it to Bank in the form in which it was received,
together with such endorsements or documents as may be necessary to
effectively negotiate or transfer same to Bank.
7. Until all such claims of Bank against Borrower, now or
hereafter existing, shall be paid in full, no gift or loan shall be made by
Borrower to Creditor.
8. For violation of this Agreement, Creditor shall be liable
for all loss and damage sustained by reason of such breach, and upon any
such violation Bank may, at its option, accelerate the maturity of any of
its existing or future claims against Borrower.
9. This Agreement shall be binding upon the heirs, successors
and assigns of Creditor, Borrower and Bank. This Agreement and any
existing or future claim of Bank against Borrower may be assigned by Bank,
in whole or in part, without notice to Creditor or Borrower.
10. Notwithstanding the provisions of Paragraph 2, so long as
there has been no occurrence of any default under any agreement between
Borrower and Bank, now existing or hereafter entered into, and so long as
no such default would be caused by the making of any payment, Creditor may
receive regularly scheduled interest payments on the presently existing
indebtedness of Borrower to Creditor, and, commencing no earlier than June
30, 1997, principal payments on such indebtedness in any amount; provided,
--------
however, that Creditor shall not receive any prepayment of interest on said
-------
indebtedness without the prior written consent of Bank.
AMERICAN ECO CORPORATION
By: /s/ Michael E. McGinnis
--------------------------------
Title: President & CEO
-----------------------------
ACCEPTANCE OF SUBORDINATION AGREEMENT BY BORROWER
-------------------------------------------------
The undersigned being the Borrower named in the foregoing
Subordination Agreement, hereby accepts and consents thereto and agrees to
be bound by all the provisions thereof and to recognize all priorities and
other rights granted thereby to Bank of America National Trust and Savings
Association, its successors and assigns, and to perform in accordance
therewith.
SEPARATION AND RECOVERY
SYSTEMS, INC.
Dated: July 3rd , 1996 By: /s/ Joseph DeFranco
------------------ ----------------------------
Title: President
------------------------