exv10w16w2






Exhibit 10.16.2




SECOND MODIFICATION TO LOAN AND SECURITY AGREEMENT



 




     This
Second Modification to Loan and Security Agreement (this “Modification”) is entered into
by and between ENERGY RECOVERY, INC. (“Borrower”)
and COMERICA BANK (“Bank”) as of May 29, 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, as amended. The Loan and Security Agreement shall 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 1.2
of the Agreement is hereby deleted in its entirety and replaced with
the following:





     “1.2 Adjusted Current Ratio” shall mean, as of an applicable date of
determination, a ratio of Cash plus Eligible Accounts plus Inventory to Current
Liabilities (excluding Subordinated Debt) plus (to the extent not already included
therein) all Indebtedness to Bank including Letter of Credit Obligations.”



          (b) Section 1.12
of the Agreement is hereby deleted in its entirety and replaced with the following:





     “1.12 ‘Eligible Accounts’ shall mean and includes those Accounts of Borrower
which are due and payable within one hundred fifty (150) days, or less, from the
date of invoice (including but not limited to any accounts receivable due to
Borrower for work product or services completed for a customer but not yet invoiced
because of a delay in linking the actual time for work completed to specific jobs
and assembling a complete and comprehensive invoice), have been validly assigned to
Bank and strictly comply with all of Borrower’s warranties and representations to
Bank.”



          (c) Clause
(a) of Section 6.17 of the Agreement is hereby deleted in its entirety and replaced with the following:




 









 









     “6.17 Borrower shall maintain the following financial ratios and covenants
on a consolidated and non-consolidated basis, which shall be monitored on a
quarterly basis, except as noted below:




          a. an Adjusted Current Ratio of not less than 1.10 to 1.00.”



     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 Slate of Delaware and under each jurisdiction in
which it is authorized to do business, including the State of California.




     4. Legal Effect. The effectiveness of this Modification is conditioned upon receipt by
Bank of this Modification, and any other documents which Bank may require to carry out the terms
hereof. 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/ Tom Willardson
 

	 	 	 	By:
	 	/s/ not Legible
 

	Its:	 	
CFO
 

	 	 	 	Its:
	 	Corporate Banking Officer - Western Market
 

	By:	 	
 
 
	 	 	 	 	 	 
	Its: