EX-10.1






Exhibit 10.1




Letter of Credit AGREEMENT




     THIS LETTER OF CREDIT AGREEMENT (this “Agreement”) is made as of July 11, 2008, between Lime
Energy Co., a Delaware corporation (“Lime”) and Richard P. Kiphart (“Guarantor”).



          WHEREAS, Applied Energy Management, Inc. and its subsidiaries (collectively, “AEM”) are
subsidiaries of Lime.




          WHEREAS, AEM is in need of letters of credit (“Letters of Credit”) guaranteeing certain future
liabilities of AEM to construction surety bonding companies (each a “Bonding Company”) in
connection with construction surety bonds issued in support of AEM projects subject to bonded
construction contracts (“Bonded Projects”).




          WHEREAS, Guarantor has agreed to cause the issuance of certain Letters of Credit for the
account and on behalf of Lime and/or AEM in an aggregate amount of $10,000,000 under the terms set
forth herein.




          NOW, THEREFORE, the parties hereto agree as follows:



Letters of Credit. Guarantor hereby agrees to cause the issuance of any and all Letters
of Credit for the benefit of Bonding Companies at Lime’s request, up to an aggregate amount of
$10,000,000.



Termination of Guarantor’s Obligation. Guarantor will have no obligation to cause the
issuance of or leave in place any Letters of Credit on and after the earlier of (i) July 10, 2009
or (ii) the date on which Lime completes an offering resulting in gross proceeds to Lime of at
least $20,000,000 (the “New Obligation Termination Date”); provided, however, that each existing
Letter of Credit issued prior to the New Obligation Termination Date shall remain in place and in
effect, subject to a reduction of the amount of the Letter of Credit to the extent permitted by the
subject Bonding Company, until completion of the applicable Bonded Project and release or
termination of the accompanying surety bond. The date on which each Letter of Credit is terminated
shall be its “Termination Date”.



Indemnification Obligation. Lime hereby agrees to indemnify the Guarantor for any
liability in connection with any payment or disbursement made under any Letter of Credit (the
“Letter of Credit Liability”). Lime hereby agrees that the entire amount of any Letter of Credit
Liability incurred by Guarantor shall be payable within ten (10) business days of Lime’s receipt of
Guarantor’s written demand.



Letter of Credit Expenses. Lime agrees to reimburse the Guarantor for all fees and
out-of-pocket expenses incurred by Guarantor with respect to each Letter of Credit (including,
without limitation, all fees associated with the procurement of, amendment to, drawing under,
banker’s acceptance pursuant to, or transfer of a Letter of Credit) (the “Letter of Credit
Expenses”) within ten (10) business days of Lime’s receipt of Guarantor’s written demand following
the Guarantor’s payment of the Letter of Credit Expenses.



Guarantor’s Fees. For each outstanding Letter of Credit, Lime agrees that it will pay, on
the first business day of each calendar quarter and on the Termination Date, to the Guarantor, a
fee equal to the product of 3-5/8% per annum multiplied by the average daily face amount of the
outstanding Letter of Credit during the immediately preceding calendar quarter or shorter period if
calculated to the first calendar quarter hereafter or the Termination Date (the “Guarantor Fees”).
The Guarantor Fees shall be computed on the basis of a 360-day year for the actual number of days
elapsed. If on the Termination Date of the last


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outstanding Letter of Credit (the “Final Termination Date”) the Guarantor’s Fees are less than
$300,000 in the aggregate, then Lime shall pay to Guarantor an amount equal to (i) $300,000 minus
(ii) the aggregate Guarantor’s Fees paid through the Final Termination Date, payable within ten
(10) business days of the Final Termination Date.



Entire Agreement. This Agreement constitutes the entire agreement between the parties and
supersedes any prior understandings, agreements, or representations by or between the parties,
written or oral, that may have related in any way to the subject matter hereof.



Succession and Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties named herein and their respective successors and permitted assigns. No party may
assign this Agreement or any of such party’s rights, interests, or obligations hereunder without
the prior written approval of the other parties.



Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together will constitute one and the same instrument.
It is the express intent of the parties to be bound by the exchange of signatures on this Agreement
via telecopy, which the parties agree shall constitute a writing for all legal purposes.



Notices. All notices or other communications required or permitted hereunder shall be in
writing and shall be deemed given or delivered when (i) delivered personally, (ii) one (1) business
day after being sent by facsimile to the number below or (iii) three (3) business days after being
sent by registered or certified mail or by private overnight courier addressed as follows:



If to the Guarantor:



Richard P. Kiphart

c/o William Blair & Company

222 West Adams Street

Chicago, IL 60606

Fax No.: (312) 368-9418



If to Lime:



Lime Energy Co.

1280 Landmeier Road

Elk Grove Village, Illinois 60007

Fax No.: (847) 437-4969

Attention: Jeffrey Mistarz



with a copy to:



Reed Smith LLP

10 S. Wacker Dr.

Chicago, Illinois 60606

Fax No.: (312) 207-6400

Attention: Evelyn C. Arkebauer, Esq.




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Any party may give any notice, request, demand, claim, or other communication hereunder using any
other means (including personal delivery, expedited courier, messenger service, telex, ordinary
mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is delivered to the individual for
whom it is intended. Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other parties notice in the
manner herein set forth.



Governing Law. This Agreement shall 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 that would cause the application of the laws of any jurisdiction other than
the State of Illinois.



Waiver of Trial by Jury. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTION DOCUMENTS, INCLUDING
TO ENFORCE OR DEFEND ANY RIGHTS HEREUNDER, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.



Amendments and Waivers. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the parties. No waiver by any party of
any default or breach hereunder, whether intentional or not, shall be deemed to extend to any prior
or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in
any way any rights arising by virtue of any prior or subsequent occurrence of such kind.



Severability. Any term or provision of this agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the invalid or unenforceable term
or provision in any other situation or in any other jurisdiction. If a final judgment of a court
of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable,
the parties agree that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be appealed.




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



	 	 	 	 	 	 	 
	 	 	Lime Energy Co.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Jeffrey Mistarz
 

Jeffrey Mistarz
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Richarh P. Kiphart	 	 
	 	 	 	 	 
	 	 	Richard P. Kiphart	 	 







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