Exhibit 10.7


 


SECOND
AMENDMENT TO INVESTOR RIGHTS AGREEMENT


 


This SECOND AMENDMENT TO INVESTOR RIGHTS
AGREEMENT (this “Second Amendment”), entered into and dated  August 10, 2009,  is made by and among Lime Energy Co., a
Delaware corporation (the “Company”), and the holders of the Term Notes
due May 31, 2010 (“Notes”), issued by the Company (such holder is
referred to herein as the “Lender,” and collectively as the “Lenders”).


 


R E C I T A L S


 


A.            Lenders and the Company are parties to that certain
Investor Rights Agreement, dated as of May 29, 2007 (the “Original
Agreement”), as amended by the Amendment to Investor Rights Agreement,
dated as of September 13, 2007 (the “First Amendment”; the Original
Agreement as amended by the First Amendment, the “Agreement”).


 


B.            The Company plans to file a registration statement
on Form S-1 for a public offering (“2009 Public Offering”) of shares of
its common stock, par value $0.0001 per share (“Common Stock”).


 


C.            The Agreement currently provides that Lenders may
convert any or all of their Notes into shares of Common Stock at a price equal
to $7.00 per share (the “Conversion Price”), which Conversion Price
takes into effect the adjustment for the Company’s 1-for-7 reverse stock split
effected January 28, 2008.


 


D.            The Lenders and the Company desire to amend the
Agreement to provide that Lenders, except for Richard P. Kiphart, may elect to
convert all or a portion of the outstanding principal amount of their
respective Loans into shares of Common Stock at a conversion price equal to the
lower of (i) the Conversion Price and (ii) the public offering price
per share of the Common Stock sold in the 2009 Public Offering (the “2009
Offering Price”) less the underwriting discount per share.


 


E.             Richard P. Kiphart (“Kiphart”) and the Company
desire to amend the Agreement to provide that Kiphart may on August 10,
2009, elect to convert all or a portion of the outstanding principal amount of
his Loan into shares of Common Stock, at a conversion price equal to the lower
of (i) the Conversion Price and (ii) the Fair Market Value of a share
of Common Stock on the date of this Second Amendment.


 


F.             Pursuant to Section 8(c) of the Agreement,
the Agreement may be amended only by written execution of all the Lenders and
the Company.


 


NOW, THEREFORE, in consideration of the
foregoing premises and mutual agreements contained herein, the parties hereby
agree as follows:


 

















 


ARTICLE I

AMENDMENTS TO AGREEMENT


 


1.1           Section 1.  Section 1 of the Agreement is hereby
amended by adding the following definition of “2009 Public Offering”
thereto:


 


“2009 Public Offering”
means the public offering of shares of the Company’s Common Stock registered
under the Securities Act on Form S-1 that results in gross proceeds to the
Company of not less than $20 million by no later than December 31, 2009.”


 


1.2           Section 3.  Section 3 of the Agreement is hereby
amended to delete and restate clause (e) thereto to read as follows:


 


“(e)         Upon the Company’s receipt of a notice of conversion
from a Lender under clause (a) above or clause (g) below, upon
automatic conversion under clause (b) above, or as of the date such
conversion shall be deemed effective, if at all, under clause (f) below,
such Lender shall be deemed for all corporate purposes to have become the
holder of record of the shares of Common Stock with respect to which such
conversion occurs (which, for purposes of clause (a) and clause (g) shall
be the date specified in the notice given with respect to a conversion under
clause (a) or clause (g), as applicable), irrespective of the date of
delivery of certificates evidencing such shares.”


 


1.3.          Section 3.  Section 3 of the Agreement is hereby
amended to add the following clause (f) and clause (g) to read as
follows:


 


“(f)          At the option of any Lender (except Richard P.
Kiphart), exercisable by written notice received by the Company not less than
two (2) days prior to the filing with the SEC of the Company’s
Registration Statement in connection with the 2009 Public Offering,  such Lender may convert  all or a portion of the outstanding principal
amount of such Lender’s Loan into shares of the Common Stock at the lower of (i) the
Conversion Price and (ii) the 2009 Offering Price less the underwriting
discount per share, with such conversion deemed to be effective immediately
prior to the closing of the 2009 Public Offering.  If the closing of the 2009 Public Offering
shall not have occurred by December 31, 2009, then the election to convert
made by any Lender pursuant to this Section 3(f) shall be deemed
automatically revoked and null and void, unless otherwise agreed upon in
writing by such Lender and the Company.


 


(g)           Without limiting the rights of Richard P. Kiphart
under Section 3(a) above, at the option of Mr. Kiphart,
exercisable on August 10, 2009, by written notice received by the Company,
Mr. Kiphart may convert all or a portion of the outstanding principal
amount of such Lender’s Loan into shares of 
Common Stock at the Fair Market Value of a share of Common Stock
determined on August 10, 2009, the date of the Second Amendment to
Investor Rights Agreement.”


 

















 


ARTICLE II

EFFECTIVENESS; TERMINATION


 


2.1           Effectiveness.  This Second Amendment shall be effective upon
the date first set forth above.


 


2.2           Termination of Election to Convert.  Except as to Kiphart, if the Company fails to
raise $20 million in gross proceeds in the 2009 Public Offering by December 31,
2009, then any election to convert made by a Lender pursuant to Section 3(f) shall
terminate automatically as of January  1, 2010, and shall be null and
void, unless otherwise agreed upon in writing by such Lender and the Company.


 


ARTICLE III

MISCELLANEOUS


 


3.1           No Further Amendment.  Other than as expressly amended by this
Second Amendment, all terms and conditions of the Agreement shall remain in
full force effect.


 


3.2           Reference to “Agreement”.  Each reference in the Agreement to “this
Agreement,” “hereunder,” “hereof,” “hereon,” or words of like import referring
to the Agreement shall mean and be a reference to the Agreement as amended by
this Second Amendment.


 


3.3           Counterparts.  This Second Amendment may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.  Each party need not sign the same
counterpart.  Delivery of an executed
counterpart of a signature page of this Second Amendment by facsimile or
e-mail transmission shall be effective as delivery of a manually executed
counterpart of this Second Amendment.


 


3.4           Headings.  The headings used in this Second Amendment
are used for convenience only and are not to be considered in construing or
interpreting this Second Amendment.


 


3.5           Successors and Assigns.  The terms and conditions of this Second
Amendment shall inure to the benefit of, and be binding upon, the successors
and assigns of the parties hereto.


 


3.6           Independent Counsel.  Each party acknowledges that it has been
encouraged to retain its counsel and has been represented by counsel of its own
choice in connection with this Second Amendment and the transactions
contemplated herein or declined to do so. 
Each party acknowledges that Rutter Hobbs & Davidoff
Incorporated (“RHD”) has represented only the Company and not represented
any Lender in connection with this Second Amendment and the transactions
contemplated herein.  RHD is an intended
third party beneficiary of this Section 3.6.


 


3.7           Entire Agreement; Third Party Beneficiaries.  This Second Amendment (i) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and (ii) is not intended to confer upon any person, other than the
parties hereto and RHD pursuant to Section 3.6 above, any rights or
remedies hereunder.


 

















 


3.8           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Second Amendment 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.


 


3.9           Miscellaneous.  All of the recitals at the beginning of this
Second Amendment are hereby incorporated into and made a part of this Second
Amendment.


 


[REMAINDER OF DOCUMENT ON FOLLOWING PAGE]


 

















 


IN WITNESS WHEREOF, the undersigned have
executed this Second Amendment to Investor Rights Agreement as of the day and
year first above written.


 


LIME ENERGY CO.


 


 


	
  By:

  	
  /s/ Jeffrey R. Mistarz

  	
   

  
	
  Name: Jeffrey R. Mistarz

  	
   

  
	
  Title: Executive Vice President and Chief Financial Officer

  	
   

  



 


 


LENDERS


 


 


	
  By:

  	
  /s/ Richard P. Kiphart

  	
   

  	
  By:

  	
  /s/ Ned Jannotta

  
	
  Name:Richard P. Kiphart

  	
   

  	
  Name:Ned Jannotta

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ James McMullan

  	
   

  	
  By:

  	
  /s/ Conrad Fischer

  
	
  Name:James McMullan

  	
   

  	
  Name:Conrad Fischer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Mark Brady

  	
   

  	
  By:

  	
  /s/ James Hickey

  
	
  Name:Mark Brady

  	
   

  	
  Name:James Hickey

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John Ettleson

  	
   

  	
  By:

  	
  /s/ Rebecca Kiphart

  
	
  Name:John Ettleson

  	
   

  	
  Name:Rebecca Kiphart

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Brent Felitto

  	
   

  	
  By:

  	
  /s/ Robert Fix

  
	
  Name:Brent Felitto

  	
   

  	
  Name:Robert Fix

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Fred Fischer

  	
   

  	
   

  
	
  Name:Fred Fischer