EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
     This Registration Rights Agreement (this “Agreement”), dated as of June 11,
2008, is by and among Lime Energy Co., a Delaware corporation (the “Company”),
and Eric DuPont, Stephen Glick, Kyle Marshall, John O’Rourke and James Smith
(each an “Investor,” collectively the “Investors”).
RECITALS
          WHEREAS, the Company and the Investors are parties to that certain
Stock Purchase Agreement of even date herewith (the “Purchase Agreement”); and
          WHEREAS, the closings of the transactions contemplated by the Purchase
Agreement are conditioned, among other things, on the execution and delivery of
this Agreement;
     NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
“Advice” shall have the meaning set forth in Section 4.2 hereof.
“Affiliate” shall have the meaning set forth in Rule 405 promulgated under the
Securities Act.
“Agreement” shall have the meaning set forth in the first paragraph of this
Agreement.
“Business Day” means any day other than a Saturday, Sunday or other day on which
banks in Chicago, Illinois are authorized or required by law to be closed.
“Common Stock” means the common stock of the Company.
“Company” shall have the meaning set forth in the first paragraph of this
Agreement.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor federal law then in force.
“FINRA” means the Financial Industry Regulatory Authority.
“Holder” means a holder of Registrable Securities.
“Initial Public Offering” shall mean the sale of securities pursuant to the
first Registration Statement of the Company or any Related Issuer filed under
the Securities Act to register any class of securities which is declared
effective by the SEC or otherwise becomes effective by operation of law.
“Investor” shall have the meaning set forth in the first paragraph of this
Agreement.
“Notices” shall have the meaning set forth in Section 9.10 hereof.
“Other Holders” shall have the meaning set forth in Section 3.4 hereof.

 

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“Person” means an individual, a partnership, an association, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department, agency or principal subdivision thereof.
“Piggyback Notice” shall have the meaning set forth in Section 3.1 hereof.
“Piggyback Registration” shall have the meaning set forth in Section 3.1 hereof.
“Piggyback Registration Statement” shall have the meaning set forth in
Section 3.1 hereof.
“Prospectus” is the prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and material incorporated by
reference in such prospectus.
“Registrable Securities” means those shares of Common Stock acquired by the
Investors pursuant to the Purchase Agreement. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (a) a
Registration Statement with respect to the sale or transfer of such securities
has been declared effective under the Securities Act, (b) such securities shall
become saleable pursuant to Rule 144 (or any successor provision) under the
Securities Act (and the holder thereof is able to sell, transfer or otherwise
convey all of such Registrable Securities within any three-month period without
violating any volume restriction thereunder), (c) they shall have ceased to be
outstanding or (d) the shares are sold or transferred.
“Registration Expenses” shall have the meaning set forth in Section 6.1 hereof.
“Registration Statement” means any registration statement of the Company filed
under the Securities Act which covers any of its securities, including any
prospectus constituting a part thereof, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all materials incorporated by reference in such Registration Statement.
“Related Issuer” means (i) the Company’s successors, (ii) the parent of either
the Company or its successors, or (iii) the subsidiaries of either the Company
or its successors.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, or any successor
federal law then in force.
“Shelf Registration Statement” means a “shelf” registration statement of the
Company that covers all the Registrable Securities on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and any document incorporated by
reference therein.
2. Registration Under the Securities Act.
          2.1 Right to Registration. The Company shall use its reasonable best
efforts to cause to be filed by December 31, 2008 a Shelf Registration Statement
providing for the sale of all the Registrable Securities by the Investors and to
have such Shelf Registration Statement declared effective by the SEC. The
Company agrees to use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective until the Investors are eligible to sell any of
their Registrable Securities under Rule 144.

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          2.2 Restrictions. The Company may postpone for up to three months the
filing or the effectiveness of a Shelf Registration Statement if the Company
reasonably believes that such Shelf Registration Statement will have a material
adverse effect on any proposal or plan by the Company to engage in any
financing, acquisition of assets (other than in the ordinary course of business)
or any merger, consolidation, tender offer or other significant transaction.
     3. Piggyback Registrations.
          3.1 Right to Piggyback. If the Company proposes to file a Registration
Statement in connection with a public offering of any of its securities and the
registration form to be used may be used for the registration of Registrable
Securities (other than a Registration Statement on Form S-4 or Form S-8, or any
comparable successor form or form substituting therefor, or filed in connection
with any exchange offer or an offering of securities solely to the Company’s
existing equity holders) (a “Piggyback Registration Statement”), whether or not
for sale for its own account, then each such time the Company shall give written
notice of a proposed offering (a “Piggyback Notice”) to the Holders of its
intention to effect such a registration at least twenty (20) days prior to the
anticipated filing date of such Piggyback Registration Statement. The Piggyback
Notice shall offer the Holders the opportunity to include in such Piggyback
Registration Statement such amount of Registrable Securities as they may request
(“Piggyback Registration”). The Company will, subject to the limitations set
forth in Sections 3.3 and 3.4 of this Agreement, include in such Piggyback
Registration Statement (and related qualifications under blue sky laws) and the
underwriting, if any, involved therein, all Registrable Securities with respect
to which the Company has received a written request for inclusion therein within
fifteen (15) days after receipt of the Piggyback Notice (five (5) days if the
Company gives telephonic notice to all registered Holders, with written
confirmation to follow promptly thereafter). Notwithstanding the above, the
Company may determine, at any time, not to proceed with such Piggyback
Registration Statement.
          3.2 Underwriting Agreement. To the extent that the Holders request
Piggyback Registration of their Registrable Securities, the Holders shall
(together with the Company) enter into an underwriting agreement in customary
form with the managing underwriter, if any, selected by the Company for such
underwriting.
          3.3 Priority on Primary Registrations. If a Piggyback Registration
involves an underwritten offering and the managing underwriter or underwriters
of any such proposed public offering advises the Company in writing that, in
such managing underwriter’s or underwriters’ opinion, the total number or kind
of securities which such holders and any other Persons entitled to be included
in such public offering would adversely affect its ability to effect such an
offering, then the Company will include in such registration and underwriting,
to the extent of the number or kind of securities which the Company is so
advised can be sold in (or during the time of) such offering without having such
an adverse effect: (a) first, all securities proposed by the Company to be sold
for its own account for working capital needs; and (b) second, other securities
proposed by the Company to be sold for its own account and the Registrable
Securities and other securities requested to be included in the registration pro
rata among the Holders and other securities requesting such registration, on the
basis of the total number of shares of such securities that each such Holder and
other securities otherwise proposed to include in the Piggyback Registration.
          3.4 Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company’s
securities other than Holders (the “Other Holders”), and the managing
underwriter or underwriters advises the Company in writing that in their opinion
the number and kind of securities requested to be included in such registration
exceeds the number that can be sold in such offering, then the Company will
include in such registration: (a) first, the securities requested to be included
therein by the Other Holders exercising “demand” registration rights, up to that
number which, in the opinion of the managing underwriter or underwriters, can be
sold in the offering; and (b) second, the Registrable Securities and other
securities requested to be included in such registration up to that number
which, in the opinion of the managing underwriter or underwriters, can be sold
in such offering, and if all such Registrable Securities and other securities
cannot be so included, then pro rata among the Holders and other securities
requesting such registration on the basis of the number of shares of Registrable
Securities and other securities each holder otherwise sought to have included in
the Piggyback Registration.

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     4. Registration Procedures.
          4.1 Whenever the Holders have requested that any Registrable
Securities be registered for sale pursuant to this Agreement or the Company is
otherwise required to register Registrable Securities under this Agreement, the
Company will use its commercially reasonable efforts to effect the registration
and the sale of such Registrable Securities in accordance with the intended
method of disposition thereof (subject to the Company’s right to not proceed
with a Piggyback Registration Statement in its sole discretion), and pursuant
thereto the Company will as expeditiously as commercially reasonably possible:
               (a)  Registration Statement. (i) Prepare and file with the SEC a
Registration Statement relating to the applicable registration on any
appropriate form under the Securities Act, which form shall be available for the
sale of the Registrable Securities in accordance with the intended method or
methods of distribution thereof, and shall include all financial statements
required by the SEC to be filed therewith; (ii) cooperate and assist in any
filings required to be made with FINRA; and (iii) use its commercially
reasonable efforts to cause such Registration Statement to become effective;
provided, however, that the Company may discontinue any registration of
securities to be offered by the Company at any time prior to the effective date
of the Piggyback Registration Statement relating thereto.
               (b) Amendments and Supplements. (i) Prepare and file with the SEC
such amendments, post-effective amendments, and supplements to the Registration
Statement as may be necessary to keep such Registration Statement continuously
effective for the applicable period, and (ii) cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act.
               (c)  Notifications. Notify the Holders covered thereby and the
managing underwriter or underwriters, if any, promptly, and (if requested by any
such Person) confirm such advice in writing: (i) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to the Piggyback Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the SEC for
amendments or supplements to the Registration Statement or the Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iv) if at any time the representations and
warranties of the Company contemplated by Section 4.1(n)(i) below prove not to
be true and correct in all material respects as of the date made; (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; or (vi) of the
happening of any event which makes any material statement made in the
Registration Statement, the Prospectus, or any document incorporated therein by
reference untrue or which requires the making of any changes in the Registration
Statement, the Prospectus, or any document incorporated therein by reference in
order to make the material statements therein not misleading in light of the
circumstances under which they were made.
               (d) Stop-Orders and Suspensions. In the event of the issuance of
a stop-order or a suspension in the sale of the Registrable Securities, make
reasonable efforts to obtain promptly the withdrawal of any order suspending the
effectiveness of the Registration Statement or otherwise prohibiting the offer
or sale of the Registrable Securities, including those issued by state
governmental authorities.
               (e) Distribution Disclosures. If requested by the managing
underwriter or underwriters or a Holder if the Registrable Securities are being
sold in connection with an underwritten offering, promptly incorporate in a
Prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters and holders of majority of the Registrable
Securities being sold reasonably agree should be included therein relating to
the plan of distribution with respect to such Registrable Securities, including,
without limitation, information with respect to the amount of Registrable
Securities being sold to such underwriters, the purchase price being paid
therefor by such underwriters, and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment promptly upon being notified
of the matters to be incorporated in such Prospectus supplement or
post-effective amendment. The Company may require each of such holders to

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furnish to the Company such information regarding the distribution of such
Registrable Securities as the Company may from time to time reasonably request
in writing.
               (f) Copies of Registration Statement. Furnish to each holder of
Registrable Securities which are covered by a Registration Statement pursuant to
this Agreement and each managing underwriter, without charge, at least one
signed or conformed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference).
               (g) Copies of the Prospectus. Deliver to each holder of
Registrable Securities which are covered by a Registration Statement pursuant to
this Agreement and the underwriters, if any, without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of the Prospectus or any amendment or supplement
thereto by the Holders and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto.
               (h) Blue Sky Laws. Prior to any public offering of the
Registrable Securities, use its commercially reasonable efforts to register or
qualify or cooperate with Holders, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of, such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions (where an exemption is not available) as such holder or
underwriter reasonably requests in writing and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to general service of process in
any jurisdiction where it is not then so subject or subject the Company to any
income or sale tax in any such jurisdiction where it is not then so subject.
               (i) Removal of Legends. Cooperate with the holders of Registrable
Securities and the managing underwriter or underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends; and enable such
to be in such denominations and registered in such names as the managing
underwriter or underwriters may request at least two business days prior to any
sale of Registrable Securities to the underwriters.
               (j) Other Governmental Filings. Use commercially reasonable
efforts to cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the holders
thereof or the underwriters, if any, to consummate the disposition of such
Registrable Securities.
               (k) Prospectus Amendments and Supplements. Upon the occurrence of
any event contemplated by Section 4.1(c)(v) above, prepare and promptly file a
supplement or post-effective amendment to the Registration Statement or the
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading under the circumstances in which they were
made.
               (l) Securities Exchange Listings. Use commercially reasonable
efforts to cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which similar securities
issued by the Company are then listed, if any.
               (m) Delivery of Certificates. Not later than the effective date
of the applicable Registration Statement, use its reasonable best efforts to
provide a CUSIP number for the Registrable Securities and provide the transfer
agent with printed certificates for the Registrable Securities which are in a
form eligible for deposit with Depository Trust Company.

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               (n) Agreements and Further Actions. Enter into such customary
agreements (including an underwriting agreement) and take all such other
reasonable actions in connection therewith in order to facilitate the
disposition of such Registrable Securities and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration (i) make such representations and
warranties to the holders of Registrable Securities and the underwriters, if
any, in form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings and covering matters including,
without limitation, those set forth in an underwriting agreement; (ii) obtain
opinions of counsel to the Company and updates thereof (which opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriter or underwriters, if any, and not reasonably objected to by the
holders of a majority of the Registrable Securities being sold), addressed to
each holder selling Registrable Securities and the underwriters, if any,
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by a majority of
the holders selling such Registrable Securities and the underwriters, if any;
(iii) obtain “cold comfort” letters and updates thereof from the Company’s
independent certified public accountants addressed to the holders of Registrable
Securities and the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in “cold comfort” letters
by accountants in connection with primary underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall set forth in full the
indemnification provisions and procedures of Section 7 hereof with respect to
all parties to be indemnified pursuant to such section; and (v) the Company
shall deliver such documents and certificates as may be reasonably requested by
the holders of a majority of the Registrable Securities being sold and the
managing underwriter or underwriters, if any, to evidence compliance with
Section 4.1(k) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company. The above
shall be done at each closing under such underwriting or similar agreement or as
and to the extent required thereunder.
               (o) Due Diligence Examination. Make available for inspection by
any managing underwriter or underwriters participating in any disposition
pursuant to such Registration Statement and any attorney or accountant retained
by such underwriters, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company’s officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with such
Registration Statement.
               (p) Earning Statements. Use its reasonable efforts to comply with
all applicable rules and regulations of the SEC, and make generally available to
its security holders, earnings statements satisfying the provision of Section
11(a) of the Securities Act no later than 45 days after the end of each 12-month
period (or 90 days after the end of each 12-month period, if such period is a
fiscal year end) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm or best efforts
underwritten offering; or (ii) if not sold to underwriters in such an offering,
beginning with the first month of the Company’s first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover each of such 12-month periods.
               (q) Incorporated Documents. Promptly prior to the filing of any
document which is to be incorporated by reference into the Registration
Statement or the Prospectus (after initial filing of the Registration
Statement), provide copies of such document to counsel to the holders of
Registrable Securities included in the Registration Statement and to the
managing underwriters, if any; and make the Company’s representatives available
for discussion of such document, and make such changes in such document (other
than exhibits thereto) prior to the filing thereof as counsel for such holders
or underwriters may reasonably request.
          4.2 Discontinuation of Distribution by Holders. Each holder of
Registrable Securities agrees, by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind that would require a Prospectus amendment or supplement pursuant to
Section 4.1(k) hereof, such holders will forthwith discontinue disposition of
Registrable Securities until such holder’s receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4.1(k) hereof, or
until he is advised in writing (the “Advice”) by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus, and,
if so directed by the Company, such holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such
holder’s possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time periods regarding the

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maintenance of the effectiveness of the term of this Agreement in Section 8.3
shall be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 4.1(c)(vi) hereof to and
including the date when such holder shall have received the copies of the
supplemented or amended prospectus contemplated by Section 4.1(k) hereof or the
Advice.
     5. Lock-Up.
          5.1 Lock-Up Agreements. With respect to any underwritten public
offering of securities pursuant to an effective Registration Statement, each
holder of Registrable Securities agrees, that he will not, without, the prior
written consent of the managing underwriter or underwriters in such underwritten
offering (the “Underwriter”), for a period of ninety (90) days from the
effective date of the Registration Statement (the “Lock-Up Period”), directly or
indirectly, (i) offer, sell (including “short” selling), assign, transfer,
encumber, pledge, contract to sell, grant an option to purchase, establish an
open “put equivalent position” within the meaning of Rule 16a-1(h) under the
Securities Act, or otherwise dispose of any Registrable Securities, or
(ii) enter any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Registrable
Securities; provided, however, that if (a) during the last seventeen (17) days
of the initial Lock-Up Period, the Company releases earnings results or material
news or a material event relating to the Company occurs or (b) prior to the
expiration of the initial Lock-Up Period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of
the initial Lock-Up Period, then in either case the Lock-Up Period will be
extended until the expiration of the 18-day period beginning on the date of
release of the earnings results or the occurrence of the material news or
material event, as applicable, unless the Underwriter, in writing, such
extension.
          5.2 Notice. Each holder of Registrable Securities agrees that, prior
to engaging in any transaction or taking any other action that is subject to the
terms of this Section 5 during the period from and including the effective date
of the Registration Statement through and including the 34th day following the
expiration of the 90-day period, the holder will give prior notice thereof to
the Company and will not consummate any such transaction or take any such action
unless he has received written confirmation from the Company that the Lock-Up
Period (as the same may have been extended pursuant to the previous paragraph)
has expired.
          5.3 Notwithstanding the foregoing, if the holder of Registrable
Securities is an individual, he or she may transfer any Registrable Securities
either during his or her lifetime or on death (i) by will or intestacy to his or
her immediate family or to a trust the beneficiaries of which are exclusively
the undersigned and/or a member or members of his or her immediate family or
(ii) by bona fide gift or gifts to a donee or donees; provided, however, that
prior to any such transfer each transferee shall execute an agreement,
satisfactory to the Underwriter pursuant to which each transferee shall agree to
receive and hold such Registrable Securities, subject to the provisions hereof,
and there shall be no further transfer except in accordance with the provisions
hereof. For the purposes of this paragraph, “immediate family” shall mean
spouse, lineal descendant, father, mother, brother or sister of the transferor.
In addition, for the avoidance of doubt, nothing in this Section 4 shall
restrict the ability of the holder of Registrable Securities to purchase shares
of Common Stock on the open market or exercise any option to purchase shares of
Common Stock granted under any benefit plan of the Company.
     6. Registration Expenses.
          6.1 Expenses Borne by Company. Except as specifically otherwise
provided in Section 6.2 hereof, the Company will be responsible for payment of
all reasonable expenses incident to the Company’s performance of or compliance
with this Agreement and any registration hereunder, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters in connection with the blue sky qualifications of
the Registrable Securities as the managing underwriter or the holders of a
majority of the Registrable Securities being sold may designate), fees and
expenses associated with filings required to be made with the NASD, printing
expenses (including expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with Depository Trust Company and of
prospectuses), messenger and delivery expenses, and fees and disbursements of
counsel for the Company and for all independent certified public accountants
(including the expenses of any special audit and “cold comfort” letters required
by or incident to such performance), underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals

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relating to the distribution of the Registrable Securities), Securities Act
liability insurance if the Company so desires and other Persons retained by the
Company in connection with such registration (all such expenses borne by the
Company being herein called the “Registration Expenses”).
          6.2 Expenses Borne by Holders. Each holder of Registrable Securities
included in such registration will be responsible for payment of brokerage
discounts, commissions and other sales expenses incident to the registration of
any Registrable Shares registered hereunder. In addition, holders of the
Registrable Securities will be responsible for the payment of their own legal
fees if they retain legal counsel separate from that of the Company. The holders
of the Registrable Securities included in such registration shall be responsible
for payment of their out-of-pocket expenses and the out-of-pocket expenses of
any agents who manage their account. Holders of Registrable Securities included
in such registration also shall be responsible for payment of any underwriting
fees associated with the sale of Registrable Securities. Any such expenses which
are common to the holders of the Registrable Securities included in the
registration shall be divided among such holders pro rata on the basis of the
number of shares of Registrable Securities being registered on behalf of such
holder, or as such holders may otherwise agree.
     7. Indemnification.
          7.1 Indemnification by Company. In the event of any registration of
any Registrable Securities under the Securities Act, the Company hereby agrees
to indemnify, to the fullest extent permitted by law, and hold harmless each
seller of the Registrable Securities hereby, its officers, directors, employees,
partners, and each Person who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and the rules and regulations
promulgated thereunder) such holder, and each other Person who participates as
an underwriter in the offering or sale of such Registrable Securities, against
all losses, claims, damages, liabilities and expenses (including reasonable
attorneys’ fees) in connection with defending against any such losses, claims,
damages and liabilities or in connection with any investigation or inquiry, in
each case caused by or based on any untrue or alleged untrue statement of
material fact contained in any Registration Statement in which such Registrable
Securities are registered under the Securities Act, Prospectus or preliminary
prospectus contained therein, or any amendment thereof or supplement thereto, or
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will reimburse each such indemnified person for any reasonable legal or
any other expenses reasonably incurred by them or any of them in connection with
investigating or defending any such claim (or action or proceeding in respect
thereof); provided, that the Company shall not be liable in any such case to the
extent that (i) same arises out of or is based on an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, any such Prospectus or preliminary prospectus, or in any amendment or
supplement thereto in reliance on and in conformity with written information
furnished to the Company by such holder of Registrable Securities specifically
stating that it is for use in the preparation thereof, (ii) such holder or any
underwriter or selling agents failed to deliver a copy of the Prospectus or any
amendments or supplements thereto to the Person asserting such loss, claim,
damage, liability, or expense if the Company had furnished such holder with a
reasonably sufficient number of copies of the same, or (iii) such holder has
violated the provisions of Section 4.2 hereof. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each Person who controls (within the meaning of the
Securities Act) such underwriters at least to the same extent as provided above
with respect to the indemnification of the holders of Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a holder or any such underwriter and shall
survive the transfer of the Registrable Securities by a holder.
          7.2 Indemnification by Investors. In connection with any Registration
Statement in which a holder of Registrable Securities is participating, each
such holder will furnish to the Company in writing information concerning such
holder that is required by the provisions of applicable law and regulation to be
included in a Registration Statement as the Company reasonably requests for use
in connection with any such Registration Statement or Prospectus and, to the
extent permitted by law, each such holder, jointly and severally, will indemnify
the Company, its directors and officers, and each Person who controls (within
the meaning of the Securities Act) the Company against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the Registration Statement, Prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue

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statement or omission is contained in any information so furnished in writing by
such holder expressly for use in connection with such Registration Statement;
provided, however, that the indemnity agreement contained in this Section 7.2
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of such
holder, which consent shall not be unreasonably withheld or delayed; and
provided, further, that, in no event shall any indemnity under this Section 7.2
exceed the net proceeds from the offering actually received by such holder.
          7.3 Assumption of Defense by Indemnifying Party. Any Person entitled
to indemnification hereunder will (a) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (b) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided, however,
that any Person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Person unless
(i) the indemnifying party has agreed to pay such fees or expenses, or (ii) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (iii) in the reasonable
judgment of any such Person, based upon written advice of its counsel, a
conflict of interest may exist between such Person and the indemnifying party
with respect to such claims (in which case, if the Person notifies the
indemnifying party in writing that such Person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claims on behalf of such Person). If
such defense is not assumed, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld). An indemnifying party which is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim, in which case the indemnifying party shall pay the reasonable fees and
expenses of such additional counsel or counsels. The failure of any indemnified
party to provide the notice required by Section 7.3(a) above shall not relieve
the indemnifying party under this Section 7, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice.
          7.4 Contribution. If for any reason the indemnification provided for
in Sections 7.1 and 7.2 is unavailable to an indemnified party or insufficient
to hold it harmless as contemplated by Sections 7.1 and 7.2, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnified party and the indemnifying party, but also the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
          7.5 Binding Effect. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer of
securities.
     8. Participation in Underwritten Registrations.
          8.1 Underwriting Arrangements. No Person may participate in any
Piggyback Registration Statement hereunder which is underwritten unless such
Person (a) agrees to sell such Person’s securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under such underwriting arrangements.
          8.2 Agreement To Provide Information. Each holder of Registrable
Securities seeking registration of its Registrable Securities pursuant to the
terms of this Agreement will furnish promptly to the Company and any managing
underwriter such information regarding such holder and the proposed distribution
of the Registrable Shares by such holder as they may request and as may be
required in connection with any registration, qualification, or compliance
referred to in this Agreement. In the event that a holder of Registrable
Securities fails or refuses to provide such information for any reason within a
reasonable time after a request

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therefor by the Company or the managing underwriter, if any, the Company will be
relieved of obligations to include such Registrable Securities in such
registration.
     9. General Provisions.
          9.1 Remedies. All remedies under this Agreement, or by law or
otherwise afforded to any party hereto, shall be cumulative and not alternative.
Any Person having rights under any provision of this Agreement will be entitled
to enforce such rights specifically to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all other rights
granted by law. The parties hereto agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
          9.2 Term. Except as specifically otherwise provided herein, the
provisions of this Agreement shall terminate upon the earliest to occur of the
following: (i) no Registrable Securities remain outstanding; or (ii) all of the
Registrable Securities may be transferred, sold, or otherwise disposed of in
accordance with the provisions of Rule 144 promulgated under the Securities Act
(and the holders thereof are able to sell, transfer or otherwise convey all of
such Registrable Securities within any three-month period without violating any
volume restriction thereunder); provided, however, that the indemnification
provisions in Section 7 shall survive the termination of this Agreement.
          9.3 Amendments and Waivers. Except as otherwise specifically provided
herein, this Agreement may be amended or waived only upon the prior written
consent of the Company and the holders of at least two-thirds of the then
outstanding Registrable Securities.
          9.4 Assignment. Except as otherwise expressly provided herein, this
Agreement shall be binding upon and inure to the benefit and be enforceable by
the parties hereto, and their respective successors and permitted assigns,
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
holders of Registrable Securities also are for the benefit of, and enforceable
by, any subsequent holder of such Registrable Securities who consents in writing
to be bound by this Agreement so long as, and to the extent that, such
securities continue to be Registrable Securities and have not been sold,
assigned or otherwise transferred in violation of this Agreement.
          9.5 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
          9.6 Counterparts. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
Agreement.
          9.7 Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
          9.8 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
          9.9 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto with respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

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          9.10 Notices. All notices, requests, demands or other communications
(“Notices”) required to be given pursuant to this Agreement by any party shall
be in writing and shall be delivered by (a) certified mail, postage prepaid,
return receipt requested, (b) commercial overnight courier service with
signature required for delivery, or (c) electronic mail (with confirmation of
successful transmission). If the Notice is given by mail or courier service,
delivery shall be evidenced by the certified mail return receipt, or the
commercial courier’s standard method of confirming delivery. If the Notice is
sent by electronic mail, delivery shall be conclusively deemed made the first
Business Day following successful transmission. Notices shall be provided to the
following addresses (any of which may be changed upon like notice to the other
parties to this Agreement):
     If to the Company, to:
c/o Lime Energy Co.
1280 Landmeier Road
Elk Grove Village, Illinois 60007
Attention: Jeffrey Mistarz
Telephone No.: 847.437.1666
Email to                                         
     with a copy (which shall not constitute notice) to:
Reed Smith LLP
10 S. Wacker Dr.
Chicago, Illinois 60606
Attention: Evelyn C. Arkebauer, Esq.
Telephone No.: 312.207.3879
Email to                                         
     If to the Investors to:
Applied Energy Management, Inc.
16810 Kenton Drive, Suite 240
Huntersville, NC 28078
Attention: Eric M. DuPont
Telephone No.: 704.892.4442
Email to                                         

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     with a copy to (which will not constitute notice):
Smith, Currie & Hancock LLP
2700 Marquis One Tower
245 Peachtree Center Avenue, N.E.
Atlanta, GA 30303-1277
Attention: James W. Copeland
Telephone No.: 404.582.8042
Email to                                         
          9.11 Delays or Omissions. No failure to exercise or delay in the
exercise of any right, power or remedy accruing to a party on any breach or
default of another party under this Agreement shall impair any such right, power
or remedy nor shall it be construed to be a waiver of any such breach.
[Remainder of Page Intentionally Left Blank – Signatures on Next Page]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

         
 
  INVESTORS:    
 
       
 
       /s/ Eric M. Dupont
 
ERIC M. DUPONT, individually    
 
       
 
        /s/ Stephen Glick    
 
       
 
  STEPHEN GLICK, individually    
 
       
 
        /s/ Kyle Marshall    
 
       
 
  KYLE MARSHALL, individually    
 
       
 
        /s/ John O’Rourke    
 
       
 
  JOHN O’ROURKE, individually    
 
       
 
        /s/ James Smith    
 
       
 
  JAMES SMITH, individually    

                  COMPANY:    
 
                LIME ENERGY CO.    
 
           
 
  By:         /s/ Jeffrey Mistarz
 
   
 
           
 
  Name:            Jeffrey Mistarz    
 
           

Signature Page to Registration Rights Agreement