Exhibit 10.3

 

2009 SECURITY AGREEMENT

 

This 2009 Security Agreement (this “Agreement”) is dated as of August 10, 2009,
and  is made by and between Lime Energy Co., a Delaware corporation (the
“Debtor”), and Richard P. Kiphart (the “Secured Party”).

 

Explanatory Statement

 

The Debtor has agreed to grant to the Secured Party a security interest in the
Debtor’s assets to secure the payment and performance of the obligations in
connection with that certain 2009 Revolving Line of Credit Note made by the
Debtor in favor of the Secured Party (“2009 Note”) dated as of the date hereof.

 

NOW, THEREFORE, for good and valuable consideration, including, without
limitation, the covenants and conditions set forth herein, the parties hereto
agree as follows:

 

1.             Definitions.

 

(a)           As used herein, the capitalized terms set forth in bold below
shall have the following meanings:

 

“Collateral” shall mean all right, title and interest of the Debtor in and to
(a) all Accounts, (b) all Instruments, (c) all Inventory, (d) all General
Intangibles, (e) all Equipment, (f) any and all Proceeds, (g) all contract
rights, (h) all computer software, and (i) all right, title and interest in and
to any and all other assets and property of the Debtor to secure the
Obligations, but shall not include any Equipment or other Collateral obtained or
acquired or to be obtained or acquired by the Debtor on a lease financing basis.

 

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“Obligations” shall mean any and all payment obligations of the Debtor under the
2009 Note, and this Agreement.

 

“Permitted Liens” shall mean: (a) the liens and security interests of any Senior
Lender; (b) the liens and security interests of the Secured Party hereunder;
(c) liens for taxes, assessments, or similar charges either not yet due or being
contested in good faith; (d) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (e) purchase money liens or
purchase money security interests upon or in any property acquired or held by
the Debtor in the ordinary course of business to secure indebtedness outstanding
on the date of this Agreement; (f) liens and security interests which, as of the
date of this Agreement, have been disclosed to and approved by the Secured Party
in writing; and (g) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of the Debtor’s assets.

 

“Senior Lender” shall mean each of American Chartered Bank and any commercial
lender which provides financing to the Debtor.

 

“Senior Lien” shall mean liens made in favor of the Senior Lender by the Debtor.

 

“UCC” shall mean the Uniform Commercial Code as in effect in the State of
Illinois from time to time.

 

(b)           Incorporation of UCC Terms.  Except as specifically defined in
this Agreement, all words, terms and/or phrases used in this Agreement shall be
defined by the applicable definition ascribed thereto in Article 9 of the UCC,
which definitions are incorporated herein by reference as if fully set forth
herein, including:  “Accounts,” “Documents,” “Equipment,” “General Intangibles,”
“Goods,” “Instruments,” “Inventory” and “Proceeds.”  If a term is defined in
Article 9 of the UCC differently than in another Article of the UCC, the term
shall have the meaning ascribed to such term in Article 9.

 

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2.             Grant of Security Interest.  The Debtor hereby grants and conveys
to the Secured Party a continuing perfected security interest in and a lien upon
all of the Debtor’s right, title and interest in, to and under the Collateral,
whether presently existing or hereafter created or acquired, and all products
and proceeds for the foregoing to secure the payment and performance of the
Obligations.  Nothing in this Agreement shall be deemed to constitute an
assumption or acceptance by the Secured Party of any of the obligations of the
Debtor under any of the Collateral or any contract or agreement for purchase,
sale, lease or disposition of the Collateral, and the Debtor hereby specifically
confirms and acknowledges that it shall remain liable for any obligations it may
have under or in respect of any of the Collateral and agree to indemnify the
Secured Party and hold the Secured Party harmless against any such liability or
obligation.

 

3.             Continuing Security Interest.  This Agreement creates a
continuing perfected security interest in and lien upon the Collateral and
shall:  (a) remain in full force and effect until all Obligations have been paid
in full or otherwise discharged; (b) be binding upon the Debtor and its
successors, permitted transferees and permitted assigns; and (c) inure, together
with the rights and remedies of the Secured Party hereunder, to the benefit of
the Secured Party and his respective successors, transferees and assigns.  Upon
the payment in full of all Obligations, the security interest and lien granted
hereunder shall terminate and all rights to the Collateral shall revert to the
Debtor.  Upon such termination, the Secured Party will execute and deliver to
the Debtor such documents as the Debtor shall reasonably request to evidence
such termination.

 

4.             Representations, Warranties and Covenants.  The Debtor
represents, warrants, covenants and agrees as follows:

 

(a)           Debtor is the sole legal and beneficial owner of each item of the
Collateral, having good and marketable title thereto, free and clear of any and
all liens, charges, encumbrances, taxes and assessments other than the Permitted
Liens.

 

(b)           The execution, delivery and performance of this Agreement and the
endorsement and delivery of the Collateral does not and will not contravene or
violate any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect and applicable to
the Debtor, or result in a breach of or constitute a default (with or without
the giving of notice or the lapse of time, or both) under any indenture or any
other agreement to which the Debtor is a party, or by which the Debtor or any of
the Debtor’s property may be bound or affected.

 

(c)           Debtor shall pay and perform all of the obligations secured by
this Agreement according to their terms.

 

(d)           Debtor shall defend the title to the Collateral against all
persons and against all claims and demands whatsoever, which Collateral is free
and clear of any and all liens, security interests, claims, charges,
encumbrances, taxes and assessments, except for the Permitted Liens.

 

(e)           Debtor shall do the following: (i) furnish any further assurances
of title reasonably requested by the Secured Party; (ii) execute any written
agreement or do any other acts reasonably necessary to effectuate the purposes
and provisions of the Agreement; (iii) execute any instrument or statement
required by law in order to perfect or continue the security interest of the
Secured Party in the Collateral; and (iv) pay all costs of filing in connection
therewith.

 

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(f)            Debtor shall keep the Collateral free and clear of all liens,
charges, encumbrances, taxes and assessments other than the Permitted Liens.

 

(g)           Debtor shall pay, when due, all taxes, assessments and license
fees relating to the Collateral unless such taxes and/or assessments are being
contested by Debtor in good faith.

 

(h)           The Debtor has the full corporate right and authority to enter
into this Agreement and to pledge the Collateral in accordance with the terms
hereof.

 

(i)            Except for the filing of financing statements with the Secretary
of State for the State of Delaware under the UCC, no authorization, approval or
other action by, and no notice to or filing with, any governmental or regulatory
authority, agency or office is required either (1) for the grant by the Debtor
or the effectiveness of the security interest and lien granted hereby or for the
execution, delivery and performance of this Agreement by the Debtor, or (2) for
the perfection of or the exercise by the Secured Party of any of their rights
and remedies hereunder.

 

5.             Waiver.  Waiver of, or acquiescence in, any default by the
Debtor, or failure of the Secured Party to insist upon strict performance by the
Debtor of any warranties or agreements in this Agreement, shall not constitute a
waiver of any subsequent or other default or failure.

 

6.             Debtor Remains Liable.  Anything herein to the contrary
notwithstanding (a) the Debtor shall remain liable under any agreements which
have been (in whole or in part) pledged or assigned herein to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, (b) the exercise by the Secured Party of any of the rights
hereunder shall not release the Debtor from any of its respective duties or
obligations under any such agreements, and (c) Secured Party shall have no
obligation or liability under any such agreements by reason of this Agreement,
nor shall the Secured Party be obligated to perform any of the obligations or
duties of the Debtor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.

 

7.             Governing Statute.  The UCC shall govern the rights, duties and
remedies of the parties and any provisions herein declared invalid under any law
shall not invalidate any other provision or this Agreement.

 

8.             Remedies Upon Default.

 

(a)           Upon any Event of Default (as defined in the 2009 Note), the
Obligations secured by this Agreement shall immediately become due and payable
in full without notice or demand and the Secured Party shall have all the
rights, remedies and privileges with respect to the retention and sale of the
Collateral and disposition of the proceeds thereof as are accorded by the
applicable sections of the Uniform Commercial Code respecting “Default.”

 

(b)           Upon any Event of Default, the Debtor shall assemble all materials
relevant to the Collateral and make it available to the Secured Party at the
place and at the time designated in the demand.  The proceeds of all sales and
collections of the Collateral shall be applied as follows:

 

(i)            to the payment of costs and expenses of such sales and
collections incurred by the Secured Party;

 

(ii)           any surplus then remaining to the payment of unpaid interest
under the 2009 Note;

 

(iii)          any surplus remaining to the payment of the unpaid principal of
the 2009 Note;

 

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(iv)          to the payment of any other amounts required by applicable law,
including without limitation, the UCC; and

 

(v)           any surplus then remaining shall be paid over (subject to the
rights of third parties) to the Debtor or for its account.  The Debtor shall
remain liable for any deficiency resulting from the sale of the Collateral and
shall pay any such deficiency forthwith on demand.

 

9.             Subordination.  The security interest in the Collateral described
in Section 2 is hereby expressly subordinated to the any lien now or hereafter
granted to a Senior Lender by Debtor or by law, notwithstanding the date, order
or method of attachment or perfection of any such Senior Lien or the provisions
of any applicable law, provided that such subordination must be on terms and
conditions acceptable to Lender, in his reasonable discretion.

 

10.           Termination.  This Agreement shall terminate upon payment of all
indebtedness and performance of all obligations under the 2009 Note, and the
Secured Party shall execute and deliver to the Debtor a UCC-3 financing
statement terminating the lien of the Secured Party on the Collateral.

 

11.           Miscellaneous.

 

(a)           This Agreement shall bind and inure to the benefit of the
respective parties hereto, and their legal representatives, successors and
assigns.

 

(b)           This Agreement may be modified or amended only by a writing signed
by the Debtor and the Secured Party.

 

(c)           All notices, requests, demands, claims and other communications
hereunder (“Notices”) shall be in writing.  Any Notice hereunder shall be deemed
duly given (i) upon receipt if delivered in person; (ii) upon the third business
day after being sent if sent by registered or certified mail, return receipt
requested with postage thereon prepaid; or (iii) on the next business day if
sent by Federal Express or similar overnight courier service; in each case
addressed to the intended recipient as set forth below (or to such other address
as the intended receipt may request by way of Notice delivered in accordance
with this Section):

 

If to the Debtor, to:

 

Lime Energy Co.

1280 Landmeier Road

Elk Grove Village, Illinois 60007

Attention: Chief Financial Officer

 

If to Kiphart:

 

Richard P. Kiphart

c/o William Blair & Co. LLC

222 West Adams Street

Chicago, Illinois 60606

 

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(d)           This Agreement shall be governed by, and interpreted and enforced
in accordance with, the laws of the State of Illinois, as applied to contracts
made and to be performed in that state, without regard to conflicts of law
principles.

 

(e)           This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same agreement.

 

IN WITNESS WHEREOF, the undersigned have executed this 2009 Security Agreement
effective as of the date first set forth above.

 

 

DEBTOR:

 

 

 

 

 

 

 

Lime Energy Co.,

 

 

 

 

 

 

 

a Delaware corporation

 

 

 

 

 

 

 

By:

/s/ Jeffrey Mistarz

 

Name:

Jeffrey R. Mistarz

 

Title:

Executive Vice President and

 

 

Chief Financial Officer

 

 

 

 

SECURED PARTY:

 

 

 

 

 

/s/ Richard P. Kiphart

 

 

 

 

 

Richard P. Kiphart

 

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