Exhibit 10.31
 
AR NOTE ISSUANCE AGREEMENT
 
This AR Note Issuance Agreement (this “Agreement”) is dated as of the 6th day of
June, 2008, and is made by and between Lime Energy Co., a Delaware corporation
(the “Company”), and Richard P. Kiphart (“Kiphart”) and Advanced Biotherapy,
Inc. (“ADVB” and together with Kiphart, “Noteholders”).
 
W I T N E S S E T H:
 
WHEREAS, the Company and the Noteholders are parties to that certain Note
Issuance Agreement dated as of March 12, 2008 (the “Existing Agreement”),
pursuant to which the Company issued to the Noteholders that certain Revolving
Line of Credit Note dated March 12, 2008 and due March 31, 2009, in the maximum
principal amount of $3,000,000 (the “Existing Note”); and
 
WHEREAS, Kiphart desires to increase his commitment to the Company, and the
parties desire to amend and restate the Existing Note and to divide it into two
separate Notes (the “AR Notes”) payable to each Lender and separately reflecting
each Lender’s commitment to the Company;
 
WHEREAS, the Company has agreed to make the AR Notes convertible if they are not
paid at maturity; and
 
WHEREAS, the parties desire to set forth certain additional understandings among
themselves relating to the obligations of the Company to Noteholders and to
certain other matters, all as more fully described herein;
 
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein, the parties hereby agrees as follows:
 
1.  Amended and Restated Notes. Contemporaneously with the execution of this
Agreement and delivery by the Company to the Noteholders of the AR Notes,
Noteholders shall deliver to the Company the original Existing Note.
 
2.  Condition to Advances. It shall be a condition to each advance under the AR
Notes that no Event of Default (as defined in the AR Notes) shall have occurred
and be continuing. At the time of each request for an advance, the Company shall
provide to the Noteholders a certificate, executed by the Chief Executive
Officer or Chief Financial Officer of the Company, stating that no Event of
Default has occurred and is continuing.
 
3.  Manner of Advances, Repayments and Prepayments. All advances requested by
the Company shall be drawn 95/110 from Kiphart’s AR Note and 15/110 from ADVB’s
AR Note. As long as both AR Notes remain outstanding, all repayments and
prepayments shall be made between the two AR Notes in the same proportion.
 

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4.  Commitment by ADVB. ADVB hereby covenants and agrees that it has reserved
cash or other immediately liquid assets in the amount of $1,500,000 and shall at
all times while its AR Note remains outstanding continue to reserve a sufficient
amount of cash or other immediately liquid assets as to enable it to make
advances under its AR Note.
 
5.  Subordination by Noteholders. Each Noteholder agrees to subordinate its AR
Note in the event the Company arranges to have a commercial lender provide
financing to the Company for similar purposes, which subordination must be on
terms and conditions acceptable to the Noteholders in their reasonable
discretion.
 
6.  Information Regarding Use of Proceeds. Promptly following request therefore
by either Noteholder, the Company shall provide Noteholders with reasonable
detail regarding the use of proceeds with respect to any advance made under the
AR Notes, subject to the Company’s obligations under Regulation F-D.
 
7.  Arbitration. In the event of any and all disagreements and controversies
arising from this Agreement or the AR Notes, such disagreements and
controversies shall be subject to binding arbitration as arbitrated in
accordance with the then current Commercial Arbitration Rules of the American
Arbitration Association in Chicago, Illinois before one neutral arbitrator. Any
party involved in such disagreement or controversy may apply to the arbitrator
seeking injunctive relief until the arbitration award is rendered or the
controversy is otherwise resolved. Without waiving any remedy under this
Agreement, any involved party may also seek from any court having jurisdiction
any interim or provisional relief that is necessary to protect the rights or
property of that party, pending the establishment of the arbitral tribunal (or
pending the arbitral tribunal’s determination of the merits of the controversy).
In the event of any such disagreement or controversy, no party shall directly or
indirectly reveal, report, publish or disclose any information relating to such
disagreement or controversy to any person, firm or corporation not expressly
authorized by the other party to receive such information or use such
information or assist any other person in doing so, except to comply with actual
legal obligations of such party, or unless such disclosure is directly related
to an arbitration proceeding as provided herein, including, but not limited to,
the prosecution or defense of any claim in such arbitration. The costs and
expenses of the arbitration (excluding attorneys’ fees) shall be paid by the
non-prevailing party or as determined by the arbitrator.
 
8.  Miscellaneous.
 
(a)  All of the WHEREAS clauses and other recitals at the beginning of this
Agreement are hereby incorporated into and made part of this Agreement.
 
(b)  This Agreement shall be binding upon, and shall inure solely to the benefit
of, each of the parties hereto, and each of their respective heirs, executors,
administrators, successors and permitted assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No Noteholder
shall assign its rights under this Agreement except in connection with an
assignment under the AR Note permitted by the terms thereof.
 

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(c)  This Agreement amends and restates the Existing Agreement in its entirety
as of the date hereof, and this Agreement may be amended only by written
execution by all parties. No waiver of any provision of this Agreement shall in
any event be effective unless the same shall be in writing and acknowledged by
the party against whom enforcement is sought, and then any such waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
 
(d)  The descriptive headings of the several sections and paragraphs of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
 
(e)  All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal 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.
 
(f)  Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by, unenforceable or invalid
under any jurisdiction, such provision shall as to such jurisdiction, be
severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
 
(g)  This Agreement may be executed in one or more counterparts, all of which
shall be deemed but one and the same agreement and each of which shall be deemed
an original. Delivery by facsimile of an executed counterpart of this Agreement
shall be effective as an original executed counterpart hereof and shall be
deemed a representation that an original executed counterpart hereof will be
delivered.
 
(h)  THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE
OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT.
 
(i)  ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH THIS AGREEMENT SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF
THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first above written.
 
LIME ENERGY CO.

By: /s/ Jeffrey Mistarz                          
Name: Jeffrey R. Mistarz
Title: Executive Vice President and Chief Financial Officer
 
NOTEHOLDERS:

By: /s/ Richard Kiphart                        
Name: RICHARD P. KIPHART
 
ADVANCED BIOTHERAPY INC.

By: /s/ Christopher Capps                   
         Christopher W. Capps, President

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