FOURTH MODIFICATION TO LOAN AND SECURITY AGREEMENT
Exhibit 10.16.4
FOURTH MODIFICATION TO LOAN AND SECURITY AGREEMENT
This Fourth Modification to Loan and Security Agreement (this “Modification”) is entered into
by and between ENERGY RECOVERY, INC. (“Borrower”) and COMERICA BANK (“Bank”) as of December 23,
2008, at San Jose, California.
RECITALS
This Modification is entered into upon the basis of the following facts and understandings
of the parties, which facts and understandings are acknowledged by the parties to be true and
accurate:
Bank and Borrower previously entered into a Loan and Security Agreement (Accounts and
Inventory) dated March 27, 2008, which was subsequently modified by First Modification to Loan and
Security Agreement dated as of March 27, 2008, Second Modification to Loan and Security Agreement
dated as of May 29, 2008, and Third Modification to Loan and Security Agreement dated as of
September 18, 2008. The Loan and Security Agreement and each modification shall collectively be
referred to herein as the “Agreement”.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as set forth below.
AGREEMENT
1. Incorporation by Reference. The Recitals and the documents referred to therein are
incorporated herein by this reference. Except as otherwise noted, the terms not defined herein
shall have the meaning set forth in the Agreement.
2. Modification to the Agreement. Subject to the satisfaction of the conditions
precedent as set forth in Section 3 hereof, the Agreement is hereby modified as set forth below.
(a) Section 3.1 of the Agreement is amended to read in its entirety as follows:
“3.1 This Agreement shall remain in full force and effect until March 31,
2009, unless earlier terminated by notice by Borrower. Notice of such termination
by Borrower shall be effectuated by mailing of a registered or certified letter
not less than thirty (30) days prior to the effective date of such termination,
addressed to Bank at the address set forth herein and the termination shall be
effective as of the date so fixed in such notice.”
(b) The Libor Addendum to Loan and Security Agreement attached to the
Agreement is replaced with the Amended and Restated LIBOR Addendum to Loan and Security
Agreement (Daily Adjusting LIBOR) between Borrower and Bank dated as of the date of this
Modification.
3. Recertification of Authority. Borrower certifies to Bank that:
(a) the Restated Certification of Incorporation and Bylaws of Borrower delivered to Bank on
or about December 1, 2005 remain in full force and effect and have not been amended, rescinded or
repealed in any respect;
(b) the Corporate Resolutions and Incumbency Certification of Borrower delivered
to Bank dated on or as of March 7, 2008 remain in full force and effect and the officers shown
on such Incumbency Certification as officers authorized to execute and deliver to Bank documents in
connection with loan financings: (i) continue to hold, and be duly appointed to, the offices indicated
thereon; and (ii) continue to be duly authorized to execute and deliver to Bank this Modification and any and
all documents necessary to evidence indebtedness and obligations of Borrower to Bank; and
(c) Borrower is in good standing in the State of Delaware and under each jurisdiction
in which it is authorized to do business, including the State of California.
4. Legal Effect. This Modification may be executed in as many counterparts as Bank and
Borrower deem convenient, and shall become effective upon: (a) delivery to Bank of all
executed counterparts hereof; and (b) payment by Borrower of all costs and expenses of Bank incurred in
connection herewith, including without limitation, a non-refundable commitment fee in the
amount of Fifteen Thousand Dollars ($15,000) and fees and expenses of Bank’s counsel incurred in
connection with the preparation and negotiation of this Amendment and the documents contemplated hereby.
Except as specifically set forth in this Modification, all of the terms and conditions of the Agreement
remain in full force and effect.
5. Integration. This is an integrated Modification and supersedes all prior
negotiations and agreements regarding the subject matter hereof. All amendments hereto must be in writing and
signed by the parties.
IN WITNESS WHEREOF, the parties have agreed as of the date first set forth above.
| ENERGY RECOVERY, INC. | COMERICA BANK | |||||||
By:
|
/s/ Xxx Xxxxxxxxxx | By: | /s/ Xxxxxx Xxxxxx | |||||
Its:
|
CFO | Its: | Corporate Banking Officer-Western Market | |||||
Amended and Restated LIBOR Addendum To Loan and Security Agreement
(Daily Adjusting LIBOR)
(Daily Adjusting LIBOR)
This Amended and Restated LIBOR Addendum to Loan and Security Agreement (Daily Adjusting
LIBOR) (this “Addendum”) is entered into as of December 23, 2008, by and between Comerica Bank
(“Bank”) and Energy Recovery, Inc., a Delaware corporation (“Borrower”). This Addendum supplements
the terms of the Loan and Security Agreement (Accounts and Inventory) dated March 27, 2008 (the
“Agreement”).
This Addendum replaces entirely the LIBOR Addendum To Loan and Security Agreement dated March
27, 2008 between Borrower and Bank.
1. Definitions. As used in this Addendum, the following terms shall have the
following meanings. Initially capitalized terms used and not defined in this Addendum shall have
the meanings ascribed thereto in the Agreement.
a. “Applicable Margin” means two and three-quarters percent (2.75%) per annum.
b. “Business Day” means any day, other than a Saturday, Sunday or any other day designated as
a holiday under Federal or applicable State statute or regulation, on which Bank is open for all or
substantially all of its domestic
and international business (including dealings in foreign exchange) in Detroit, Michigan and
San Jose, California, and, in
respect of notices and determinations relating the Daily Adjusting LIBOR Rate, also a day on
which dealings in dollar
deposits are also carried on in the London interbank market and on which banks are open for
business in London, England.
c. “Daily Adjusting LIBOR Rate” means, for any day, a per annum interest rate which is equal
to the Applicable Margin, plus the quotient of the following:
| (1) | for any day, the per annum rate of interest determined on the basis of the rate for deposits in United States Dollars for a period equal to one (1) month appearing on Page BBAM of the Bloomberg Financial Markets Information Service as of 8:00 a.m. (California time) (or as soon thereafter as practical) on such day, or if such day is not a Business Day, on the immediately preceding Business Day. In the event that such rate does not appear on Page BBAM of the Bloomberg Financial Markets Information Service (or otherwise on such Service) on any day, the “Daily Adjusting LIBOR Rate” for such day shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be reasonably selected by Bank, or in the absence of such other service, the “Daily Adjusting LIBOR Rate” for such day shall, instead, be determined based upon the average of the rates at which Bank is offered dollar deposits at or about 8:00 a.m. (California time) (or as soon thereafter as practical), on such day, or if such day is not a Business Day, on the immediately preceding Business Day, in the interbank eurodollar market in an amount comparable to the principal amount of the Indebtedness and for a period equal to one (1) month; | ||
| divided by | |||
| (2) | a percentage (expressed as a decimal) equal to 1.00 minus the maximum rate on such day at which Bank is required to maintain reserves on “Euro-currency Liabilities” as defined in and pursuant to Regulation D of the Board of Governors of the Federal Reserve System or, if such regulation or definition is modified, and as long as Bank is required to maintain reserves against a category of liabilities which includes eurodollar deposits or includes a category of assets which includes eurodollar loans, the rate at which such reserves are required to be maintained on such category. |
d. “LIBOR Lending Office” means Bank’s office located in the Cayman Islands, British West
Indies, or such other branch of Bank, domestic or foreign, as it may hereafter designate as its LIBOR
Lending Office by notice to Borrower.
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e. “Prime Rate” means the per annum interest rate established by Bank as its prime
rate for its borrowers, as such rate may vary from time to time, which rate is not necessarily the
lowest rate on loans made by Bank at any such time.
f. “Prime-based Rate” means a per annum interest rate which is equal to the sum of the
Applicable Margin plus the greater of (i) the Prime Rate; or (ii) the rate of interest
equal to the sum of (a) one percent (1%), and (b) the rate of interest equal to the average of the
rates on overnight Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers (the “Overnight Rates”), as published by the Federal Reserve Bank of New
York, or, if the Overnight Rates are not so published for any day, the average of the quotations
for the Overnight Rates received by Bank from three (3) Federal funds brokers of recognized
standing selected by Bank, as the same may be changed from time to time.
2. Interest Rate Options. Subject to the terms and conditions of this Addendum, the
Indebtedness under the
Agreement shall bear interest at the Daily Adjusting LIBOR Rate, except during any period of time
during which, in
accordance with the terms and conditions of this Addendum, the Indebtedness under the Agreement
shall bear interest at
the Prime-based Rate.
3. Payment of Interest. Accrued and unpaid interest on the unpaid balance of the
Indebtedness outstanding under the
Agreement shall be payable monthly, in arrears, on the last Business Day of each month, until
maturity (whether as stated
herein, by acceleration, or otherwise). In the event that any payment under this Addendum becomes
due and payable on
any day which is not a Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and, to
the extent applicable, interest shall continue to accrue and be payable thereon during such
extension at the rates set forth
in this Addendum. Interest accruing hereunder shall be computed on the basis of a year of 360 days,
and shall be assessed
for the actual number of days elapsed, and in such computation, effect shall be given to any change
in the applicable
interest rate as a result of any change in the Daily Adjusting LIBOR Rate or, to the extent
applicable, the Prime-based
Rate on the date of each such change.
4. Bank’s Records. The amount and date of each advance under the Agreement, its applicable
interest rate, and the
amount and date of any repayment shall be noted on Bank’s records, which records shall be
conclusive evidence thereof,
absent manifest error; provided, however, any failure by Bank to make any such notation, or
any error in any such
notation, shall not relieve Borrower of its obligations to repay Bank all amounts payable by
Borrower to Bank under or
pursuant to this Addendum and the Agreement, when due in accordance with the terms hereof. For any
advance under the
Agreement bearing interest at the Daily Adjusting LIBOR Rate, if Bank shall designate a LIBOR
Lending Office which
maintains books separate from those of the rest of Bank, Bank shall have the option of maintaining
and carrying such
advance on the books of such LIBOR Lending Office.
5. Default Interest Rate. From and after the occurrence of any Event of Default, and so
long as any such Event of
Default remains unremedied or uncured thereafter, the Indebtedness outstanding under the Agreement
shall bear interest
at a per annum rate of three percent (3%) above the otherwise applicable interest rate hereunder,
which interest shall be
payable upon demand. In addition to the foregoing, a late payment charge equal to five percent (5%)
of each late payment
hereunder may be charged on any payment not received by Bank within ten (10) calendar days after
the payment due date
therefor, but acceptance of payment of any such charge shall not constitute a waiver of any Event
of Default under the
Agreement. In no event shall the interest payable under this Addendum and the Agreement at any
time exceed the
maximum rate permitted by law.
6. Prepayment. Borrower may prepay all or part of the outstanding balance of any
Indebtedness at any time without
premium or penalty. Any prepayment hereunder shall also be accompanied by the payment of all
accrued and unpaid
interest on the amount so prepaid. Borrower hereby acknowledges and agrees that the foregoing shall
not, in any way
whatsoever, limit, restrict, or otherwise affect Bank’s right to make demand for payment of all or
any part of the
Indebtedness under the Agreement due on a demand basis in Bank’s sole and absolute discretion.
7. Regulatory Developments or Other Circumstances Relating to the Daily Adjusting LIBOR
Rate.
a. If, at any time, Bank determines that, (1) Bank is unable to determine or ascertain the
Daily Adjusting LIBOR Rate, or (2) by reason of circumstances affecting the foreign exchange and
interbank markets generally, deposits in eurodollars in the applicable amounts or for the relative
maturities are not being offered to Bank, or (3) the Daily Adjusting LIBOR Rate will not
accurately or fairly cover or reflect the cost to Bank of maintaining any of the
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Indebtedness under this Addendum at the Daily Adjusting LIBOR Rate, then Bank shall forthwith give
notice thereof to Borrower. Thereafter, until Bank notifies Borrower that such conditions or
circumstances no longer exist, the Prime-based Rate shall be the applicable interest rate for all
Indebtedness during such period of time.
b. If, after the date hereof, the introduction of, or any change in, any applicable law, rule or
regulation or in the interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by Bank (or its LIBOR Lending
Office) with any request or directive (whether or not having the force of law) of any such
authority, shall make it unlawful or impossible for the Bank (or its LIBOR Lending Office) to make
or maintain any Indebtedness under the Agreement with interest at the Daily Adjusting LIBOR Rate,
Bank shall forthwith give notice thereof to Borrower. Thereafter, until Bank notifies Borrower that
such conditions or circumstances no longer exist, the Prime-based Rate shall be the applicable
interest rate for all Indebtedness during such period of time.
c. Further, at any time upon prior written notice to the undersigned, Bank may, in its sole
discretion based upon its good faith belief that the Prime-based Rate is an appropriate basis for
its floating rate loans, suspend use of the Daily Adjusting LIBOR Rate as the applicable interest
rate hereunder, at which time, the Prime-based Rate shall thereafter be the applicable interest
rate for all Indebtedness outstanding under the Agreement, unless Bank, in its sole discretion
based upon its good faith belief that the Prime-based Rate is no longer an appropriate basis for
its floating rate loans, rescinds such notice, in which case, the Daily Adjusting LIBOR Rate shall,
upon written notice from Bank to the undersigned, again be the applicable interest rate for all
Indebtedness outstanding under the Agreement
d. If the adoption after the date hereof, or any change after the date hereof in, any applicable
law, rule or regulation (whether domestic or foreign) of any governmental authority, central bank
or comparable agency charged with the interpretation or administration thereof, or compliance by
Bank (or its LIBOR Lending Office) with any request or directive (whether or not having the force
of law) made by any such authority, central bank or comparable agency after the date hereof: (a)
shall subject Bank (or its LIBOR Lending Office) to any tax, duty or other charge with respect to
this Addendum or any Indebtedness under the Agreement, or shall change the basis of taxation of
payments to Bank (or its LIBOR Lending Office) of the principal of or interest under this Addendum
or any other amounts due under this Addendum in respect thereof (except for changes in the rate
of tax on the overall net income of Bank or its LIBOR Lending Office imposed by the jurisdiction in
which Bank’s principal executive office or LIBOR Lending Office is located); or (b) shall impose,
modify or deem applicable any reserve (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by Bank (or its LIBOR Lending Office), or
shall impose on Bank (or its LIBOR Lending Office) or the foreign exchange and interbank markets any
other condition affecting this Addendum or the Indebtedness; and the result of any of the foregoing
is to increase the cost to Bank of maintaining any part of the Indebtedness or to reduce the amount
of any sum received or receivable by Bank under this Addendum by an amount deemed by the Bank to be
material, then Borrower shall pay to Bank, within fifteen (15) days of Borrower’s receipt of
written notice from Bank demanding such compensation, such additional amount or amounts as will
compensate Bank for such increased cost or reduction. A certificate of Bank, prepared in good faith
and in reasonable detail by Bank and submitted by Bank to Borrower, setting forth the basis for
determining such additional amount or amounts necessary to compensate Bank shall be conclusive and
binding for all purposes, absent manifest error.
e. In the event that any applicable law, treaty, rule or regulation (whether domestic or foreign)
now or hereafter in effect and whether or not presently applicable to Bank, or any interpretation
or administration thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by Bank with any guideline, request or directive of any such
authority (whether or not having the force of law), including any risk-based capital guidelines,
affects or would affect the amount of capital required or expected to be maintained by Bank (or any
corporation controlling Bank), and Bank determines that the amount of such capital is increased by or based upon the existence of any obligations of
Bank hereunder or the maintaining of any Indebtedness, and such increase has the effect of reducing
the rate of return on Bank’s (or such controlling corporation’s) capital as a consequence of such
obligations or the maintaining of such Indebtedness to a level below mat which Bank (or such
controlling corporation) could have achieved but for such circumstances (taking into consideration
its policies with respect to capital adequacy), then Borrower shall pay to Bank, within fifteen
(15) days of Borrower’s receipt of written notice from Bank demanding such compensation, additional
amounts as are sufficient to compensate Bank (or such controlling corporation) for any increase in
the amount of capital and reduced rate of return which Bank reasonably determines to be allocable
to the existence of any obligations of the Bank hereunder or to maintaining any Indebtedness. A
certificate of Bank as to the amount of such
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compensation, prepared in good faith and in reasonable detail by the Bank and submitted by Bank to
Borrower, shall be conclusive and binding for all purposes absent manifest error.
8. Legal Effect. Except as specifically modified hereby, all of the terms and conditions of
the Agreement remain in full force and effect.
9. Conflicts. As to the matters specifically the subject of this Addendum, in the event of
any conflict between this Addendum and the Agreement, the terms of this Addendum shall control.
IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date first set forth above.
| ENERGY RECOVERY, INC. | COMERICA BANK | |||||||
By:
|
/s/ Xxx Xxxxxxxxxx | By: | /s/ Xxxxxx Xxxxxx | |||||
| Xxxxxx Xxxxxx | ||||||||
Its:
|
CFO
|
Its: | Corporate Banking Officer-Western Market | |||||
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