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.


 

















 


“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.


 

















 


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.


 

















 


(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;


 

















 


(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


 

















 


(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