exv10w1



 





Exhibit 10.1




LOAN AGREEMENT




     This LOAN AGREEMENT, dated as of May 29, 2007, is executed by and between LIME ENERGY CO., a
Delaware corporation (“Borrower”), and the holders of the Term Notes due May 31, 2010, issued by
Borrower (each holder referred to herein as “Lender,” and collectively as the ‘Lenders”).



W I T N E S S E T H:




     WHEREAS, Borrower desires to borrow funds from Lenders; and



     WHEREAS, pursuant to Borrower’s request, Lenders are willing to extend such financial
accommodations to Borrower under the terms and conditions set forth herein;



     NOW THEREFORE, in consideration of the premises, and the mutual covenants and agreements set
forth herein, Borrower agrees to borrow from Lenders, and Lenders agree to lend to Borrower,
subject to and upon the following terms and conditions:



ARTICLE 1 —  DEFINITIONS



1.1 Defined Terms. For the purposes of this Agreement, the following
capitalized words and phrases shall have the meanings set forth below.




     “Affiliate” of any Person shall mean (a) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person, and (b) any officer or
director of such Person. A Person shall be deemed to be “controlled by” any other Person if such
Person possesses, directly or indirectly, power to direct or cause the direction of the management
and policies of such Person whether by contract, ownership of voting securities, membership
interests or otherwise. Notwithstanding the foregoing, no Lender shall be deemed to be an
Affiliate of the Borrower, nor shall the Borrower or the Guarantor be deemed to be an Affiliate of
Lender.



     “Agreement” shall mean this Loan Agreement.



     “Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing or hereafter
amended.



     “Borrowing” shall mean the borrowing described in Section 2.1(a) hereof, which shall be funded
on the Closing Date.



     “Business Day” shall mean any day other than a Saturday, Sunday or a legal holiday on which
banks are authorized or required to be closed for the conduct of commercial banking business in
Chicago, Illinois.



     “Closing Date” shall mean the date when the conditions set forth in Section 3.1 hereto are met
to the Lender’s reasonable satisfaction. Funding of the initial borrowing under the Loan shall be
conclusive evidence that such conditions are met to Lender’s satisfaction.



     “Common Stock” shall mean the common stock of Lime Energy Co., par value $0.0001 per share.



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     “Debt” shall mean, as to any Person, without duplication, (a) all obligations of such Person
required to be reflected as indebtedness on a financial statement of such Person prepared in
accordance with GAAP; (b) all borrowed money of such Person (including principal, interest, fees
and charges), whether or not evidenced by bonds, debentures, notes or similar instruments; (c) all
obligations of such Person to pay the deferred purchase price of property or services; (d) all
indebtedness secured by any Lien on any property owned by such Person, whether or not such
indebtedness has been assumed by such Person (provided, however, if such Person has not assumed or
otherwise become liable in respect of such indebtedness, such indebtedness shall be deemed to be in
an amount equal to the fair market value of the property subject to such Lien at the time of
determination); (e) the aggregate amount of all Capitalized Lease Obligations of such Person; (f)
all Debt of any partnership of which such Person is a general partner; and (g) all monetary
obligations of such Person under (i) a so-called synthetic, off-balance sheet or tax retention
lease, or (ii) an agreement for the use or possession of property creating obligations that do not
appear on the balance sheet of such Person prepared in accordance with GAAP but which, upon the
insolvency or the bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment). Notwithstanding the foregoing, Debt shall not
include trade payables and accrued expenses incurred by such Person in accordance with customary
practices and in the ordinary course of business of such Person.



     “Default Rate” shall mean a per annum rate of interest of twelve percent (12%), calculated
using a year of 365 or 366 days, as applicable, and actual days elapsed.



     “Environmental Laws” shall mean all present or future federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all administrative or
judicial orders, consent agreements, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authority, in each case relating to any matter
arising out of or relating to public health and safety, or pollution or protection of the
environment or workplace, including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution, discharge, emission,
release, threatened release, control or cleanup of any Hazardous Substance.



     “Event of Default” shall have the meaning set forth in Section 8.1 hereof.



     “GAAP” shall mean generally accepted accounting principles set forth from time to time in the
opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the date of
determination, provided, however, that interim financial statements or reports shall be deemed in
compliance with GAAP despite the absence of footnotes and fiscal year-end adjustments as required
by GAAP.



     “Indemnified Party” and “Indemnified Parties” shall mean, respectively, each Lender and its
directors, offices, employees, attorneys, agents, heirs, executors and representatives.



     “Investor Rights Agreement” shall mean the agreement by and between the Borrower and the
Lenders in substantially the form of Exhibit D hereto.



     “Liabilities” shall mean at all times all liabilities of Borrower that would be shown as such
on a balance sheet of Borrower prepared in accordance with GAAP.



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     “Lien” shall mean, with respect to any Person, any interest granted by such Person in any real
or personal property, asset or other right owned or being purchased or acquired by such Person
(including an interest in respect of a capital lease) which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, title retention lien, charge or other
security interest of any kind, whether arising by contract, as a matter of law, by judicial process
or otherwise.



     “Loan” and “Term Loan” shall mean the loan made by each Lender to Borrower under and pursuant
to Section 2.1(a) of this Agreement.



     “Loan Documents” shall mean this Agreement, the Note, and each of the agreements, documents,
instruments and certificates listed in Section 3.1 hereof, and any and all such other instruments,
documents, certificates and agreements from time to time executed and delivered by Borrower for the
benefit of any Lender pursuant to any of the foregoing.



     “Material Adverse Effect” shall mean (a) a material adverse change in, or a material adverse
effect upon, the assets, business, properties, prospects, condition (financial or otherwise) or
results of operations of Borrower taken as a whole, (b) a material impairment of the ability of
Borrower to perform any of the Obligations under any of the Loan Documents, or (c) a material
adverse effect on (i) the legality, validity, binding effect or enforceability against Borrower of
any of the Loan Documents, (ii) the rights or remedies of Lender under any Loan Document.



     “Maturity Date” shall mean May 31, 2010.



     “Notes” and “Term Notes” shall mean the promissory notes of the Borrower in substantially the
form of Exhibit B hereto, all of like terms and maturity (except variations necessary to express
the issuance date, the principal amount and the holder thereof) duly completed, together with any
and all renewal, extension, modification or replacement notes executed by Borrower and delivered to
a Lender and given in substitution therefor. “Note” and “Term Note” shall mean any one of the
Notes and Term Notes.



     “Obligations” shall mean the Term Loan, as evidenced by the Term Note, all interest accrued
thereon (including interest which would be payable as post-petition in connection with any
bankruptcy or similar proceeding, whether or not permitted as a claim thereunder), any fees due any
Lender hereunder, any expenses incurred by any Lender hereunder and any and all other liabilities
and obligations of Borrower to Lenders under this Agreement and any other Loan Document, in each
case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent,
now or hereafter existing, or due or to become due, together with any and all renewals or
extensions thereof.



     “Obligor” shall mean Borrower.



     “Organizational Identification Number” means, with respect to Borrower, the organizational
identification number assigned to Borrower by the applicable governmental unit or agency of the
jurisdiction of organization of Borrower.



     “OTCBB” shall mean the Over the Counter Bulletin Board.



     “Person” shall mean any natural person, partnership, limited liability company, corporation,
trust, joint venture, joint stock company, association, unincorporated organization, government or
agency or political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.



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     “Subordination Terms” shall mean the terms upon which the Obligations will be subordinated by
the Lender as set forth on Exhibit C hereto.



     “Subsidiary” shall mean means, as to any Person, (a) any corporation more than 50% of whose
capital stock of any class or classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether or not at the time, any
class or classes of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or indirectly through
Subsidiaries, and (b) any partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50% equity interest at any time.



     “Warrant” shall mean a warrant certificate, in substantially the form of Exhibit E hereto,
duly completed.



     “Voidable Transfer” shall have the meaning set forth in Section 9.18 hereof.


1.2 Accounting Terms. Any accounting terms used in this Agreement which are not
specifically defined herein shall have the meanings customarily given them in accordance with GAAP.



1.3 Other Interpretive Provisions.




     (a) The meanings of defined terms are equally applicable to the singular and plural forms of
the defined terms. Whenever the context so requires, the neuter gender includes the masculine and
feminine, the single number includes the plural, and vice versa, and in particular the word
“Borrower” shall be so construed.



     (b) Section and Schedule references are to this Agreement unless otherwise specified. The
words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this Agreement.



     (c) The term “including” is not limiting, and means “including, without limitation.”



     (d) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including”; the words “to” and “until” each mean “to but excluding,”
and the word “through” means “to and including.”



     (e) Unless otherwise expressly provided herein, (i) references to agreements (including this
Agreement and the other Loan Documents) and other contractual instruments shall be deemed to
include all subsequent amendments, restatements, supplements and other modifications thereto, but
only to the extent such amendments, restatements, supplements and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation
shall be construed as including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.



     (f) To the extent any of the provisions of the other Loan Documents are inconsistent with the
terms of this Agreement, the provisions of this Agreement shall govern.



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ARTICLE 2 —  LOAN COMMITMENT



2.1 Term Loan.




     (a) Loan Commitment. Subject to the terms and conditions of this Agreement and the
other Loan Documents, and in reliance upon the representations and warranties of Borrower set forth
herein and in the other Loan Documents, and agrees to make a Term Loan to Borrower as follows: On
the Closing Date, Lender will lend to Borrower the principal amount set forth opposite such
Lender’s name on Schedule A affixed hereto, as amended from time to time.



     Amounts borrowed and repaid under this Section 2.1 may not be reborrowed.



     (b) Use of Proceeds. Proceeds of the borrowing funded on the Closing Date and each
additional borrowing shall be used for general corporate purposes.



     (c) Maturity; Optional Prepayment. The outstanding principal balance of the Term Loan
and any unpaid interest shall be due and payable in full on the Maturity Date, unless the same
shall become due sooner pursuant to the terms of this Agreement. Commencing June 1, 2008 (but not
before such date) Borrower shall have the right to prepay all or any part of the Term Loan, upon
not less than thirty (30) days’ prior written notice to Lender, without premium or penalty.



     (d) Interest. (i) Except as otherwise provided below, the principal amount of the
Term Loan outstanding shall bear interest at ten percent (10%) per annum, calculated using a year
of 365 or 366 days (as applicable) and actual days elapsed. During any period when an Event of
Default has occurred and is continuing, the Loan shall bear interest at the Default Rate. Prior to
maturity, interest shall be payable quarterly in arrears on each March 31, June 30, September 30
and December 31, with the first such payment due on June 30, 2007. After maturity, whether at
scheduled maturity or pursuant to acceleration, interest shall be payable on demand.



          (ii) The Loan is a business loan. Notwithstanding any provision to the contrary contained in
this Agreement or the Note or any other Loan Document, Borrower shall not be required to pay, nor
shall Lender be permitted to collect, any amount of interest in excess of the maximum amount of
interest permitted by law (“Excess Interest”). If any Excess Interest is provided for, or
determined by a court of competent jurisdiction to have been provided for, in this Agreement, the
Note or any other Loan Document, then in such event:




               (A) the provisions of this Section 2.1(d)(ii) shall govern and control;



               (B) Borrower shall not be obligated to pay any Excess Interest;



               (C) any Excess Interest that a Lender may have received hereunder shall be, at Lender’s
option, (x) applied as a credit against the outstanding principal balance of the Term Loan or
accrued and unpaid interest (not to exceed the maximum amount permitted by law), (y) refunded to
Borrower, or (z) any combination of the foregoing;



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               (D) the interest rate(s) provided for herein shall be automatically reduced to the maximum
lawful rate allowed from time to time under applicable law (the “Maximum Rate”), and this
Agreement, the Note and the other Loan Documents shall be deemed to have been and shall be reformed
and modified to reflect such reduction; and



               (E) Borrower shall not have any action against Lender for any damages arising out of the
payment or collection of any Excess Interest.



     (e) Subordination. Each Lender agrees to subordinate the Borrower’s Obligations in
the event that Borrower is able to arrange to have a commercial lender provide financing to
Borrower for similar purposes and such commercial lender requires that the Term Loan be
subordinated. Such subordination shall be substantially on the terms and conditions set forth in
the Subordination Terms.


2.2 Term Note; Lender’s Loan Records. The Term Loan shall be evidenced by the
Term Note. At the time of the initial disbursement of the Term Loan, and at each time a repayment
made in whole or in part thereon, a notation thereof shall be made on the books and records of
Lender. All amounts recorded shall be, absent demonstrable error, conclusive and binding evidence
of (i) the principal amount of the Term Loan advanced hereunder, (ii) any accrued and unpaid
interest owing on the Term Loan and (iii) all amounts repaid on the Term Loan. The failure to
record any such amount or any error in recording such amounts shall not, however, limit or
otherwise affect the obligations of Borrower to repay the principal amount of the Term Loan,
together with all interest accruing thereon.



2.3 Payments. If any payment to be made by Borrower hereunder shall become due on a
day other than a Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of such payment. All
payments made by Borrower hereunder or under any of the Loan Documents shall be made without
setoff, counterclaim, or other defense. To the extent permitted by applicable law, all payments
hereunder or under any of the Loan Documents (including any payment of principal, interest, or
fees) to, or for the benefit, of any Person shall be made by Borrower free and clear of, and
without deduction or withholding for, or account of, any taxes now or hereinafter imposed by any
taxing authority.




ARTICLE 3 —  CONDITIONS OF BORROWING



3.1 Conditions to Borrowing and Closing. The obligation of the Lender to fund the
Borrowing under this Agreement shall be subject to the following conditions and Lender’s receipt of
each instrument, document or agreement specified in this Section 3.1, in form and substance
satisfactory to the Lender and duly executed (where applicable) by all parties thereto:




     (a) Loan Documents. Lender shall have received each of the following:



          (i) This Agreement, duly executed by Borrower;




          (ii) The Term Note, duly executed by Borrower;




          (iii) The Investor Rights Agreement, duly executed by Borrower; and




          (iv) The Warrant, duly executed by the Borrower.




     (b) Search Results. UCC, judgment and tax lien search reports dated of a recent date
reasonably acceptable to Lender, showing no Liens, judgments or tax liens of record against
Borrower.



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     (c) Borrower’s Organizational and Authorization Documents. Copies of (i) the articles
of organization and operating agreement of Borrower; (ii) resolutions of the managers of Borrower
approving and authorizing Borrower’s execution, delivery and performance of the Loan Documents to
which it is party and the transactions contemplated thereby; (iii) signature and incumbency
certificates of those managers of Borrower executing any of the Loan Documents (Borrower hereby
agrees that Lender may conclusively rely on until formally advised by Borrower of any changes
therein); and (iv) a good standing certificate for Borrower of recent date from the state of
Illinois.



     (d) Additional Documents. Such other certificates, financial statements, schedules,
resolutions, opinions of counsel, notes and other documents which are provided for hereunder or
which Lender shall require.


3.2 Conditions to Borrowing. The obligation of Lender to make any borrowing hereunder
is subject to the satisfaction of the following conditions precedent (in addition to the conditions
described in Section 3.1) on the relevant borrowing date:




     (a) No Existing Default. No Event of Default shall then exist.



     (b) No Material Adverse Effect. No Material Adverse Effect shall then exist.



     The request for a borrowing shall constitute a representation and warranty by Borrower
hereunder, as of the date of such request, that the conditions in this Section 3.2 are then
satisfied.



ARTICLE 4 —  REPRESENTATIONS AND WARRANTIES.




     To induce each Lender to make the Loan, Borrower makes the following representations and
warranties to each Lender, each of which shall survive the execution and delivery of this
Agreement:


4.1 Borrower Organization and Name. Borrower is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware, with full and adequate power
to carry on and conduct its business as presently conducted and to enter into and perform its
obligations under the Loan Documents to which it is a party. Borrower is duly licensed or
qualified in all foreign jurisdictions wherein the nature of its activities require such
qualification or licensing, except for such jurisdictions where the failure to so qualify would not
have a Material Adverse Effect.



4.2 Authorization. Borrower has full right, power and authority to enter into this
Agreement and the other Loan Documents to which it is a party, to make the borrowings and execute
and deliver all such Loan Documents as provided herein and to perform all of its duties and
obligations under this Agreement and the other Loan Documents. The execution and delivery of this
Agreement and the other Loan Documents to which Borrower is a party will not, nor will the
observance or performance of any of the matters and things herein or therein set forth, violate or
contravene any provision of law or of the articles of formation or operating company agreement of
Borrower. All necessary and appropriate action has been taken on the part of Borrower to authorize
the execution and delivery of this Agreement and the Loan Documents to which Borrower is a party.




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4.3 Validity and Binding Nature. This Agreement and the other Loan Documents to which
Borrower is a party are the legal, valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors’ rights generally and to general principles of equity.



4.4 Consent; Absence of Breach. The execution, delivery and performance of this
Agreement, the other Loan Documents and any other documents or instruments to be executed and
delivered by Borrower in connection with the Loan, and the borrowings by Borrower hereunder, do not
and will not:




     (i) require any consent, approval, authorization of, or filings with, notice to or other act
by or in respect of, any governmental authority or any other Person (other than any consent or
approval which has been obtained and is in full force and effect);



     (ii) conflict with (A) any provision of law or any applicable regulation, order, writ,
injunction or decree of any court or governmental authority, or (B) any material agreement,
indenture, instrument or other document, or any judgment, order or decree, which is binding upon
Borrower or any of its properties or assets; or



     (iii) require, or result in, the creation or imposition of any Lien on any asset of Borrower.


4.5 Lending Relationship. The relationship hereby created between Borrower and Lender
is and has been conducted on an open and arm’s length basis in which no fiduciary relationship
exists, and Borrower has not relied and is not relying on any such fiduciary relationship in
executing this Agreement and in consummating the Loans.



4.6 Business Loan. The Loan, including interest rate, as contemplated hereby, (i) is
a business loan within the purview of 815 ILCS 205/4(1)(c), as amended from time to time, (ii) is
an exempted transaction under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from
time to time, and (iii) does not, and when disbursed shall not, violate the provisions of the
Illinois usury laws, any consumer credit laws or the usury laws of any state which may have
jurisdiction over this transaction, Borrower or any property securing the Loan.



4.7 Compliance with Regulation U. No portion of the proceeds of the Loan shall be used
by Borrower, either directly or indirectly, for the purpose of purchasing or carrying any margin
stock, within the meaning of Regulation U as adopted by the Board of Governors of the Federal
Reserve System or any successor thereto.



4.8 Governmental Regulation. Borrower is not, or after giving effect to the borrowing
hereunder, will not be, subject to regulation under any federal or state statute or regulation
limiting its ability to incur indebtedness for borrowed money.



4.9 Place of Business. The principal place of business and books and records of
Borrower is at 1280 Landmeier Road, Elk Grove Village, Illinois 60007, and the location of all
Collateral is at such principal place of business, and Borrower shall promptly notify Lender of any
change in such location.



4.10 Complete Information. This Agreement and all financial statements, schedules,
certificates, confirmations, agreements, contracts, and other materials and information heretofore
or contemporaneously herewith furnished in writing by Borrower to Lender for purposes of, or in
connection with, this Agreement and the transactions contemplated hereby is, and all written
information hereafter furnished by or on behalf of Borrower to Lender pursuant hereto or in
connection herewith will


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be, true and accurate in every
material respect on the date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under which made.




ARTICLE 5 —  AFFIRMATIVE COVENANTS




     Borrower covenants and agrees that, so long as any Loan or other Obligation shall remain
unpaid or unsatisfied:


5.1 Borrower Existence. Borrower shall at all times preserve and maintain its (a) its
existence and good standing in the jurisdiction of its organization, and (b) its qualification to
do business and good standing in each jurisdiction where the nature of its business makes such
qualification necessary (other than such jurisdictions in which the failure to be qualified or in
good standing could not reasonably be expected to have a Material Adverse Effect), and shall at all
times continue as a going concern in the business which Borrower is presently conducting.



5.2 Compliance With Laws. Borrower shall use the proceeds of the Loan to fund or
purchase Eligible Contract Receivables and to pay costs and expenses reasonably related thereto,
and not in contravention of any requirements of law and not in violation of this Agreement, and
shall comply in all material respects, including the conduct of its business and operations and the
use of its properties and assets, with all applicable laws, rules, regulations, decrees, orders,
judgments, licenses and permits, except where failure to comply could not reasonably be expected to
have a Material Adverse Effect.



5.3 Payment of Taxes and Liabilities. Borrower shall pay and discharge, prior to
delinquency and before penalties accrue thereon, all property and other taxes, and all governmental
charges or levies against it or any of its property, as well as claims of any kind which, if
unpaid, could become a Lien on any of its property; provided that the foregoing shall not require
Borrower to pay any such tax or charge so long as it shall contest the validity thereof in good
faith by appropriate proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP and, in the case of a claim which could become a Lien on any of its
property, such contest proceedings stay the foreclosure of such Lien or the sale of any portion of
its property to satisfy such claim.



5.4 Maintain Property. Borrower shall at all times maintain, preserve and keep its
property, in good repair, working order and condition, normal wear and tear excepted.



5.5 Reports. Borrower shall, within such period of time as Lender may reasonably
request, deliver to Lender such financial information and other reports concerning Borrower as
Lender may from time to time request.



5.6 Notice of Proceedings. Borrower, promptly upon becoming aware, shall give written
notice to Lender of any litigation, arbitration or governmental investigation or proceeding not
previously disclosed by Borrower to Lender which has been instituted or, to the knowledge of
Borrower, is threatened against Borrower or to which any of its properties is subject which could
reasonably be expected to have a Material Adverse Effect.



5.7 Notice of Event of Default or Material Adverse Effect. Borrower shall, promptly
after the commencement thereof, give notice to Lender in writing of the occurrence of any Event of
Default or of any condition or event having a Material Adverse Effect.



5.8 Further Assurances. Borrower shall take such actions as are necessary or as Lender
may


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reasonably
request from time to time to ensure that the Obligations under the Loan Documents are secured by
substantially all of the assets of Borrower, in each case as Lender may determine, including (a)
the execution and delivery of security agreements, pledge agreements, mortgages, deeds of trust,
financing statements and other documents, and the filing or recording of any of the foregoing, and
(b) the delivery of certificated securities and other collateral with respect to which perfection
is obtained by possession.




ARTICLE 6 —  NEGATIVE COVENANTS




     Borrower hereby covenants and agrees that, so long as any Loan or other Obligation shall
remain unpaid or unsatisfied:


6.1 Liens. Borrower shall not, either directly or indirectly, create, assume, incur
or suffer or permit to exist any Lien or charge of any kind or character upon any asset of
Borrower, whether owned at the date hereof or hereafter acquired, which Liens shall be subject to
prior written consent of the Lender (provided, that if Borrower is able to arrange similar
financing with a commercial lender, Borrower may grant Liens to such commercial lender covering
substantially all of Borrower’s assets, and Lender will subordinate its Term Loan to such
commercial lender’s Liens in accordance with and subject to this Agreement.



6.2 Inconsistent Agreements. Borrower shall not enter into any agreement containing
any provision which would (a) be violated or breached by any borrowing by Borrower hereunder or by
the performance by Borrower of any of its Obligations hereunder or under any other Loan Document.



6.3 Use of Proceeds. Borrower shall not use any portion of the proceeds of the Loans,
either directly or indirectly, for the purpose of purchasing any margin securities.



6.4 Business Activities; Change of Legal Status and Organizational Documents.
Borrower shall not (a) engage in any line of business other than the businesses engaged in on the
date hereof and businesses reasonably related thereto, (b) change its name, its Organizational
Identification Number, if it has one, its type of organization, its jurisdiction of organization or
other legal structure, or (b) permit its organizational documents to be amended or modified in any
way which could reasonably be expected to materially adversely affect the interests of Lender.




ARTICLE 7 —  EVENTS OF DEFAULT.



7.1 Events of Default. Borrower, without notice or demand of any kind, shall be in
default under this Agreement upon the occurrence of any of the following events (each an “Event of
Default”).




     (a) Nonpayment of Obligations. Any amount due and owing on any Note or any of the
Obligations is not paid within ten (10) days after notice from Lender that such amount was not paid
when due.



     (b) Misrepresentation. Any representation or warranty of Borrower in this Agreement
or the other Loan Documents shall be false in any material respect when made.



     (c) Nonperformance. Any failure to perform or default in the performance of any
covenant, condition or agreement contained in this Agreement, and, if capable of being cured, such
failure to perform or default in performance continues for a period of thirty (30) days after
Borrower receives notice or knowledge from any source of such failure to perform or default in
performance, or any failure



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to perform or default in the performance of any covenant, condition or
agreement contained in any other Loan
Documents to which Borrower is a party and such failure to perform or default in performance
continues beyond any applicable grace or cure period.



     (d) Bankruptcy, Insolvency, etc. (i) Borrower becomes insolvent or generally fails to
pay, or admits in writing its inability or refusal to pay, debts as they become due; or (ii) any
Borrower applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other
custodian for Borrower or any property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for Borrower or for a substantial part of the property of any thereof
and is not discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement,
or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of Borrower, and if such case or proceeding is not
commenced by Borrower, it is consented to or acquiesced in by Borrower, or remains undismissed for
sixty (60) days; or Borrower takes any action to authorize, or in furtherance of, any of the
foregoing.



     (e) Judgments. The entry of any final judgment, decree, levy, attachment, garnishment
or other process, or the filing of any Lien against Borrower which is not fully covered by
insurance and which judgment or other process would have a Material Adverse Effect on Borrower.



     (f) Collateral Impairment. The entry of any judgment, decree, levy, attachment,
garnishment or other process, or the filing of any Lien against, any of the property of Borrower
and such judgment or other process shall not have been, within thirty (30) days from the entry
thereof, (i) bonded over to the satisfaction of Lender and appealed, (ii) vacated, or (iii)
discharged.



     (g) Transfer; Merger; Sales. Borrower, whether in one transaction or a series of
related transactions, (a) is or becomes a party to any merger or consolidation, or (b) sells,
transfers, conveys or leases all or any substantial part of its assets.



     (h) Distributions. Borrower makes any distribution or dividend to any of its
equityholders, or (b) purchases or redeems any of its equity interests or any warrants, options or
other rights in respect thereof, other than in connection with the purchase of rights held by an
employee or consultant.


7.2 Remedies. Upon the occurrence of an Event of Default, each Lender shall have all
rights, powers and remedies set forth in the Loan Documents, in any other written agreement or
instrument (other than this Agreement or the Loan Documents) relating to any of the Obligations or
as otherwise provided at law or in equity. Lender may, at its option upon the occurrence of an
Event of Default, declare all Obligations to be immediately due and payable.



7.3 No Waiver. No Event of Default shall be waived by any Lender, except in writing
and upon prior consent of such Lender. No failure or delay on the part of any Lender in exercising
any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any
other right at any other time; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. There shall be no obligation on the part of any Lender to exercise any remedy
available to Lender in any order. The remedies provided for herein are cumulative and not
exclusive of any remedies provided at law or in equity.




Page 11 of 17









 








ARTICLE 8 —  MISCELLANEOUS.



8.1 Entire Agreement. This Agreement and the other Loan Documents constitute the
entire agreement
between the parties with respect to the subject matter hereof and thereof; and are the final
expression of the intentions of Borrower and each Lender. No promises, either expressed or
implied, exist between Borrower and any Lender, unless contained herein or therein. This
Agreement, together with the other Loan Documents, supersedes all negotiations, representations,
warranties, commitments, term sheets, discussions, negotiations, offers or contracts (of any kind
or nature, whether oral or written) prior to or contemporaneous with the execution hereof with
respect to any matter, directly or indirectly related to the terms of this Agreement and the other
Loan Documents. This Agreement and the other Loan Documents are the result of negotiations between
each Lender and Borrower, and have been reviewed (or have had the opportunity to be reviewed) by
counsel to all such parties, and are the products of all parties. Accordingly, this Agreement and
the other Loan Documents shall not be construed more strictly against any party merely because of
such party’s involvement in their preparation.



8.2 Amendments; Waivers; Lender Consent Terms. No amendment, modification or waiver
of, or consent with respect to, any provision of this Agreement or the other Loan Documents shall
in any event be effective unless the same shall be in writing and acknowledged and consented to by
Lenders and then any such amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. Any approval, consent or
satisfaction with respect to, or any amendment, modification or waiver of, any provision of this
Agreement or any other Loan Document by Lenders as a group or any individual Lender shall require
the prior written consent of the holders of a majority of the then-outstanding principal amount of
the Term Notes.



8.3 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, 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. BORROWER 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. BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. BORROWER HEREBY 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.



8.4 WAIVER OF JURY TRIAL. EACH LENDER AND BORROWER, 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, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE
COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING


Page 12 of 17









 






RELATIONSHIP
EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN
WHICH LENDER AND BORROWER ARE
ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY FINANCIAL
ACCOMMODATION TO BORROWER.



8.5 Assignability. A Lender may at any time assign such Lender’s rights in this
Agreement, the other Loan Documents, the Obligations, or any part thereof to any Person which is
not a competitor of the Borrower or of any of Subsidiary of the Guarantor, and which expressly
agrees in writing that it will subordinate the interests which it is acquiring to the extent
provided with respect to such Lender in Section 2.1(e) hereof. In addition, a Lender may at any
time sell one or more participations in the Loans. Borrower may not sell or assign this Agreement,
or any other agreement with Lender or any portion thereof, either voluntarily or by operation of
law, without the prior written consent of the Lenders. This Agreement shall be binding upon each
Lender and Borrower and their respective legal representatives and successors. All references
herein to Borrower shall be deemed to include any successors, whether immediate or remote.



8.6 Confirmations. Borrower and Lender agree from time to time, upon written request
received by either from the other, to confirm to the other in writing the aggregate unpaid
principal amount of the Loans then outstanding.



8.7 Confidentiality. Each Lender, severally and jointly, agrees to use commercially
reasonable efforts (equivalent to the efforts such Lender applies to maintain the confidentiality
of its own confidential information) to maintain as confidential all information provided to it by
Borrower and designated as confidential, except that Lender may disclose such information (a) to
Persons employed or engaged by Lender in evaluating, approving, structuring or administering the
Loans; (b) to any assignee or participant or potential assignee or participant that has agreed to
comply with the covenant contained in this Section 8.7 (and any such assignee or participant or
potential assignee or participant may disclose such information to Persons employed or engaged by
them as described in clause (a) above); (c) as required or requested by any federal or state
regulatory authority or examiner, or any insurance industry association, or as reasonably believed
by Lender to be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, is required by law; (e) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any litigation to which Lender is a party; (f) to
any nationally recognized rating agency that requires access to information about Lender’s
investment portfolio in connection with ratings issued with respect to Lender; or (g) that ceases
to be confidential through no fault of Lender.




Page 13 of 17









 







8.8 Binding Effect. This Agreement shall become effective upon execution by Borrower
and any Lender. If this Agreement is not dated when executed by Borrower, Lender is hereby
authorized, without notice to Borrower, to date this Agreement as of the date when it was executed
by Borrower.



8.9 Governing Law. This Agreement, the Loan Documents and any Note shall be delivered
and accepted in and shall be deemed to be contracts made under and governed by the internal laws of
the State of Illinois applicable to contracts made and to be performed entirely within such state,
without regard to conflict of laws principles.



8.10 Enforceability. 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.



8.11 Extensions of Lender’s Commitment. This Agreement shall secure and govern the
terms of (i) any extensions or renewals of Lender’s commitment hereunder, and (ii) any replacement
note executed by Borrower and accepted by Lender in its sole and absolute discretion in
substitution for any Note.



8.12 Time of Essence. Time is of the essence in making payments of all amounts due
Lender under this Agreement and in the performance and observance by Borrower of each covenant,
agreement, provision and term of this Agreement.



8.13 Counterparts; Facsimile Signatures. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and each such counterpart
shall be deemed to be an original, but all such counterparts shall together constitute but one and
the same Agreement. Receipt of an executed signature page to this Agreement by facsimile or other
electronic transmission shall constitute effective delivery thereof. Electronic records of
executed Loan Documents maintained by Lender shall deemed to be originals thereof.



8.14 Notices. All notices, requests, demands and other communications provided for
hereunder shall be in writing and addressed as follows:




	 	 	 
	If to Borrower:

	 	Lime Energy Co.
	 

	 	1280 Landmeier Road
	 

	 	Elk Grove Village, IL 60007
	 

	 	Attention: Chief Financial Officer
	 
	 	 
	If to Lender:

	 	To the person and address set forth on the
signature page hereof





or, as to each party, at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this subsection. All notices
addressed as above shall be deemed to have been properly given (i) if served in person, upon
acceptance or refusal of delivery; (ii) if mailed by certified or registered mail, return receipt
requested, postage prepaid, on the third (3rd) Business Day following the day deposited in the U.S.
Mail (iii) if sent by recognized overnight courier, on the first (1st) Business Day following the
day such notice is delivered to such carrier.




Page 14 of 17









 







8.15 Costs, Fees and Expenses. Borrower shall pay or reimburse each Lender for all
reasonable costs,
fees and expenses incurred by such Lender or for which Lender becomes obligated in connection with
the negotiation, preparation, consummation, collection of the Obligations or enforcement of this
Agreement, the other Loan Documents and all other documents provided for herein or delivered or to
be delivered hereunder or in connection herewith (including any amendment, supplement or waiver to
any Loan Document), or during any workout, restructuring or negotiations in respect thereof,
including reasonable consultants’ fees and attorneys’ fees and time charges of counsel to Lender,
plus costs and expenses of such attorneys or of Lender; search fees, costs and expenses; and all
taxes payable in connection with this Agreement or the other Loan Documents, whether or not the
transaction contemplated hereby shall be consummated. In furtherance of the foregoing, Borrower
shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and
expenses in connection with the execution and delivery of this Agreement, any Note and the other
Loan Documents to be delivered hereunder, and agrees to save and hold each Lender harmless from and
against any and all liabilities with respect to or resulting from any delay in paying or omission
to pay such costs and expenses. That portion of the Obligations consisting of costs, expenses or
advances to be reimbursed by Borrower to any Lender pursuant to this Agreement or the other Loan
Documents shall be payable by Borrower to such Lender on demand.



8.16 Indemnification. Borrower agrees to defend (with counsel reasonably satisfactory
to the Lenders), protect, indemnify, exonerate and hold harmless each Indemnified Party from and
against any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and distributions of any kind or nature (including the disbursements
and the reasonable fees of counsel for each Indemnified Party thereto), which may be imposed on,
incurred by, or asserted against, any Indemnified Party in any manner relating to or arising out of
this Agreement or any of the Loan Documents, or any act, event or transaction related or attendant
thereto, the preparation, execution and delivery of this Agreement and the Loan Documents,
including the making or issuance and management of the Loans, the use or intended use of the
proceeds of the Loans, the enforcement of Lender’s rights and remedies under this Agreement, the
Loan Documents, any Note, any other instruments and documents delivered hereunder, or under any
other agreement between Borrower and Lender; provided, however, that Borrower shall not have any
obligations hereunder to any Indemnified Party with respect to matters determined by a court of
competent jurisdiction by final and nonappealable judgment to have been caused by or resulting from
the willful misconduct or negligence of such Indemnified Party or by the Lender’s breach of its
obligations under the Loan Documents. To the extent that the undertaking to indemnify set forth in
the preceding sentence may be unenforceable because it violates any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable law. Any liability,
obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each
Indemnified Party on demand, and failing prompt payment, together with interest thereon at the
Default Rate from the date of demand until paid by Borrower, shall be added to the Obligations of
Borrower and be secured by the Collateral. The provisions of this Section shall survive the
satisfaction and payment of the other Obligations and the termination of this Agreement.





Page 15 of 17










 




8.17 Revival and Reinstatement of Obligations. If the incurrence or payment of the
Obligations by any Obligor or the transfer to any Lender of any property should for any reason
subsequently be declared to be void or voidable under any state or federal law relating to
creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if such Lender is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that such Lender is required
or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of such
Lender, the Obligations shall automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.



8.18 Customer Identification — USA Patriot Act Notice. Each Lender hereby notifies
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56,
signed into law October 26, 2001) (the “Act”), and such Lender’s policies and practices, such
Lender is required to obtain, verify and record certain information and documentation that
identifies Borrower, which information includes the name and address of Borrower and such other
information that will allow Lender to identify Borrower in accordance with the Act.




[Signatures on next page]



Page 16 of 17




 









 





     IN WITNESS WHEREOF, Borrower and each Lender have executed this Loan Agreement as of the date
first above written.



	 	 	 	 	 	 	 
	BORROWER:	 	LIME ENERGY CO.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Jeffrey Mistarz
 

Jeffrey Mistarz
	 	 
	 

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

	 	Name:
	 	Richard P. Kiphart	 	 
	 
	 	 	 	 	 	 
	 	 	Address for	 	 
	 

	 	Notices:	 	 	 	 
	 

	 	 	 	 

	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	LENDER:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	Address for	 	 
	 

	 	Notices:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 





SCHEDULE A




LOAN AGREEMENT




	 	 	 	 	 
	Name of Lender	 	Loan Amount
	Richard P. Kiphart
	 	$	3,000,000.00	 





Page 17 of 17




 









 






EXHIBIT B




TERM NOTE




	 	 	 
	$3,000,000.00

	 	Date: May 29, 2007
	Chicago, Illinois

	 	Due Date: May 31, 2010






     FOR VALUE RECEIVED, LIME ENERGY CO., a Delaware corporation, an Illinois limited liability
company (the “Borrower”), whose address is 1280 Landmeier Road, Elk Grove Village, Illinois 60007,
promises to pay to the order of RICHARD P. KIPHART (hereinafter, together with any successor holder
hereof, the “Lender”), whose address is                                         , on or before
May 31, 2010 (the “Maturity Date”), the principal sum of THREE MILLION and 00/100 DOLLARS
($3,000,000.00), or, if different, the aggregate principal amount of the Term Loan made by the
Lender to the Borrower under and pursuant to Section 2.1 of that certain Loan Agreement dated as of
May 29, 2007, executed by and between the Borrower and the Lender (as amended, restated, modified
or supplemented and in effect from time to time, the “Loan Agreement”), together with interest
thereon computed in accordance with the Loan Agreement.



     This Note evidences the Term Loan incurred by the Borrower under and pursuant to the Loan
Agreement, to which reference is hereby made for a statement of the terms and conditions under
which the maturity hereof may be accelerated. The holder of this Term Note is entitled to all of
the benefits and security provided for in the Loan Agreement. Obligations of the Borrower under
the Loan Agreement and this Term Note may be subordinated pursuant to the requirements of the Loan
Agreement. Capitalized words used in this Term Note which are not otherwise defined herein and are
defined in the Loan Agreement shall have the meanings assigned thereto in the Loan Agreement. The
Term Note is or will be one of the Term Notes of the Borrower, all of like terms and maturity,
except variations necessary to express the issuance date, the principal amount and the holders of
each Term Note.



     The outstanding principal of this Term Note, and all accrued interest thereon, shall be
payable as provided in the Loan Agreement. Except as otherwise provided in the Loan Agreement,
prior to maturity interest hereon shall be payable quarterly in arrears on each March 31, June 30,
September 30 and December 31. From and after maturity (whether by acceleration or otherwise),
interest hereon shall be payable on demand. The outstanding principal balance of this Term Note,
and all accrued and unpaid interest thereon, shall be due and payable in full on the Maturity Date,
unless payable sooner pursuant to the provisions of the Loan Agreement. Each Term Note shall rank
pari passu with and be subject to the same terms as any other Term Note, except, as the case may
be, with respect to the issuance date and aggregate principal amount.



     Principal and interest shall be paid to the Lender at its address set forth above, or at such
other place as the holder of this Term Note shall designate in writing to the Borrower. Each
disbursement of the Term Loan made by the Lender, and all payments on account of the principal and
interest thereof shall be recorded on the books and records of the Lender and the principal balance
as shown on such books and records, or any copy thereof certified by an officer of the Lender,
shall be rebuttably presumptive evidence of the principal amount owing hereunder.



 









 





     Except for such notices as may be required under the terms of the Loan Agreement or by law,
the Borrower waives presentment, demand, notice, protest, and all other demands, or notices, in
connection with the delivery, acceptance, performance, default, or enforcement of this Term Note,
and assents to any extension or postponement of the time of payment or any other indulgence.



     The Term Loan evidenced hereby has been made and this Term Note has been delivered at the
Borrower’s main office set forth above. This Term Note shall be governed and construed in
accordance with the laws of the State of Illinois, without regard to conflict of laws provisions.



     ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER, OR RESPECT, ARISING OUT OF OR FROM OR RELATED
TO THIS TERM NOTE SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN COOK COUNTY, ILLINOIS. THE
COMPANY HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED WITHIN SAID COUNTY AND STATE. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER
OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST THE BORROWER IN ACCORDANCE WITH THIS SECTION.



     WAIVER OF JURY TRIAL. BORROWER HEREBY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY ACTION IN RESPECT OF THIS TERM NOTE.



     WHENEVER POSSIBLE EACH PROVISION OF THIS TERM NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO
BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS TERM NOTE SHALL BE
PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF
SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE OTHER
PROVISIONS OF THIS TERM NOTE. WHENEVER IN THIS TERM NOTE REFERENCE IS MADE TO LENDER OR BORROWER,
SUCH REFERENCE SHALL BE DEEMED TO INCLUDE AS APPLICABLE, A REFERENCE TO THEIR RESPECTIVE SUCCESSORS
AND ASSIGNS. THE PROVISIONS OF THIS TERM NOTE SHALL BE BINDING UPON AND SHALL INURE TO THE BENEFIT
OF SUCH SUCCESSORS AND ASSIGNS. BORROWER’S SUCCESSORS AND ASSIGNS SHALL INCLUDE, WITHOUT
LIMITATION, A RECEIVER, TRUSTEE OR DEBTOR IN POSSESSION OF OR FOR BORROWER.



     IN WITNESS WHEREOF, the Borrower has executed this Term Note as of the date set forth above.



	 	 	 	 	 	 	 
	 	 	LIME ENERGY CO.	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Jeffrey Mistarz
 

Jeffrey Mistarz
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 






 









 





EXHIBIT C




SUBORDINATION TERMS




     1. Certain Defined Terms. For purposes of this Agreement, the following terms shall
have the meanings indicated:




     “Borrower” means Lime Energy Co., a Delaware corporation.




     “Insolvency Event” shall mean any proceeding for dissolution, winding up,
liquidation, reorganization, arrangement, protection, relief or composition of the Borrower
or its debts, whether voluntary or involuntary, total or partial, in bankruptcy, insolvency,
receivership, arrangement, reorganization, relief or other proceedings, or upon an
assignment for the benefit of creditors or any other marshaling of the assets and
liabilities of the Borrower.




     “Junior Event of Default” shall mean any event or condition which occurs and as
a result of which any Subordinated Debt becomes immediately due and payable, or pursuant to
which the Subordinated Lender may declare any Subordinated Debt to be immediately due and
payable.




     “Junior Loan Agreement” shall mean the Loan Agreement dated as of May 29, 2007,
by and among Kiphart, the other lenders who become a party thereto, and Borrower, as amended
and in effect from time to time.




     “Junior Loan Documents” shall mean the “Loan Documents” as defined in the
Junior Loan Agreement.




     “Kiphart” shall mean Richard P. Kiphart.




     “Senior Loan Agreement” shall mean [describe the loan agreement with the Senior
Lender.]




     “Maximum Amount” shall mean $15,000,000.




     “Security Interest” shall mean any security interest, lien, claim, right or
title in any property of Borrower.




     “Senior Event of Default” shall mean any event or condition which occurs and as
a result of which the Senior Obligations become immediately due and payable, or pursuant to
which the Senior Lender may declare the Senior Obligations to be immediately due and
payable.




     “Senior Lender” shall mean the lender under the Senior Loan Agreement in effect
from time to time (or, in the event of more than one such lender at any time, “Senior
Lender” shall refer collectively to all such lenders, and to the extent that such
lenders shall have designated an agent to act on their behalf, such agent).




     “Senior Loan Agreement” shall mean, collectively, (a) the Senior Loan
Agreement, as in effect from time to time, including, without limitation, giving effect to
increases, renewals, extensions, refundings, deferrals, restructurings, replacements or
refinancings of, or additions to, the loans and credit arrangements provided in the Loan
Agreement; and (b) any loan agreement, credit agreement, mortgage, note or other similar
financing agreement under which Borrower



 









 







incurs any indebtedness for the purpose of repaying all or any part of Borrower’s
obligations to Senior Lender under the Senior Loan Agreement.




     “Senior Loans” shall mean the loans and extensions of credit made by the Senior
Lenders to or on behalf of Borrower from time to time pursuant to the Senior Loan Agreement.




     “Senior Loan Documents” shall mean the collective reference to the Senior Loan
Agreement, the Senior Security Documents, and all other agreements, instruments and
documents referred to in or delivered pursuant to the Senior Loan Agreement and all other
documents that from time to time evidence the Senior Obligations or secure or support
payment or performance thereof.




     “Senior Obligations” shall mean the collective reference to the unpaid
principal of and interest on all Senior Loans and all other obligations and liabilities of
Borrower to the Senior Lenders of whatever kind or nature (including, without limitation,
interest accruing at the then applicable rate provided in the Senior Loan Agreement after
the maturity of the Senior Loans and interest accruing at the then applicable rate provided
in the Senior Loan Agreement after the filing of any petition in bankruptcy, or the
commencement of any Insolvency Event, relating to Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or hereafter
incurred, whether arising under, out of, or in connection with, the Senior Loan Agreement,
the other Senior Loan Documents or any other document made, delivered or given by Borrower,
in each case whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Senior Lenders that are required to be paid by Borrower
pursuant to the terms of the Senior Loan Agreement or any other Senior Loan Document).




     “Senior Security Documents” shall mean the collective reference to all
documents and instruments, now existing or hereafter arising, which create or purport to
create a security interest in real or personal property of Borrower to secure payment or
performance of the Senior Obligations, as the same may be amended, restated, modified or
supplemented and in effect from time to time.




     “Subordinated Debt” shall mean the Borrower’s Obligations as such term is
defined in the Junior Loan Agreement.




     “Subordinated Lender” shall mean Kiphart, initially, and the other lenders who
become a party to the Junior Loan Agreement, and shall include all successors and assigns
and other subsequent holders of any of the Subordinated Debt.




     “Subordinated Loan” shall mean the “Term Loan” as such term is defined in the
Junior Loan Agreement.



     2. Obligations Subordinated. The Subordinated Lender, for itself and all subsequent
holders of any the Subordinated Debt, agrees:




     (i) that the Subordinated Debt shall be and hereby is subordinated, except as
provided in Section 4 below, to the prior payment and satisfaction in full of any and all
Senior Obligations, up to the Maximum Amount;



 









 






     (ii) that any Security Interest securing the Senior Obligations (or any part
thereof) in any property which also secures the Subordinated Debt shall be superior to any
Security Interest securing any of the Subordinated Debt, with the same force and effect as
though such Security Interest securing the Senior Obligations had attached and was perfected
prior to the perfection of any such Security Interest securing any of the Subordinated Debt;




     (iii) that, except to the extent expressly set forth herein, notwithstanding the
occurrence of any Junior Event of Default, no holder of any Subordinated Debt shall exercise
any remedies with respect to the Subordinated Debt, including, but not limited to the
commencement of any litigation or proceeding, or the taking of any other enforcement action
against Borrower at any time without first giving ninety (90) days’ prior written notice to
each Senior Lender of such Subordinated Lender’s intent to exercise such remedy (however,
the previous sentence shall not restrict the exercise of remedies available to any
Subordinated Lender during any Insolvency Event); and




     (iv) to execute such instruments as any Senior Lender may reasonably request in
order to evidence or accomplish the intent of this agreement, and consents to the delivery,
filing and recording of any of such instruments with such persons and authorities as any
Senior Lender shall deem appropriate.



     3. Senior Debt to be Paid in Full. Except as provided in Section 4 below, any and all
of the Senior Obligations shall be fully paid and discharged, together with all interest thereon
and all expenses of collecting the same and otherwise protecting and enforcing the rights of the
Senior Lender, including but not limited to reasonable attorneys’ and legal assistants’ fees and
reasonable legal expenses, before any payment, by way of cash, setoff or otherwise, may be accepted
from, required of, or otherwise received from Borrower by any Subordinated Lender as to any of the
Subordinated Debt.



     4. Permitted Payments of Subordinated Debt. Notwithstanding anything contained herein
to the contrary, the Subordinated Lenders may receive, and Borrower may pay regularly scheduled
payments of interest on the Subordinated Loan as and when the same become due in accordance with
the provisions the Junior Loan Agreement as in effect on the date of this agreement,
provided that at the time of making such payment, no Senior Event of Default exists or
would be caused thereby.



     5. No Payments in Violation of this Agreement. Borrower shall not make any payment,
and the Subordinated Lenders shall not receive or accept any payment, with respect to the
Subordinated Debt in violation of this Agreement. In the event that any Subordinated Lender
receives any payment from Borrower in violation of this Agreement, whether such payment is in cash,
by setoff or otherwise, such Subordinated Lender shall be liable and accountable therefore to the
Senior Lenders in the manner hereinafter set forth. The Subordinated Lender shall be deemed to
have received such payment in trust for the use and benefit of the Senior Lenders. The
Subordinated Lender shall not commingle the same with any other funds and shall pay over and
deliver such payment immediately to the Senior Lenders.



     6. Continuing Subordination. The subordination provided by this Agreement shall
survive and remain in full force and effect in the event of any administration of the property
and/or affairs of Borrower arising from any assignment for the benefit of creditors, or other
Insolvency Event. This is a continuing subordination and shall continue in full force and effect,
and Senior Lenders may make advancements of credit to Borrower in reliance upon this Agreement at
any time any Senior Obligations remain unpaid. Subordinated Lenders agree that the Senior Lenders,
at any time and from time to time, may enter into such agreement with Borrower as the Senior
Lenders and Borrower may deem proper
affecting any property which secures the Senior Obligations (the “Collateral”) and may
sell, surrender or



 









 







otherwise deal with any of the Collateral without notice to the Subordinated
Lenders (except as required by the Uniform Commercial Code or any other applicable law) and without
in any way impairing or affecting the subordination provided in this Agreement. The obligations of
the Subordinated Lenders hereunder shall not be affected or impaired by any compromise, release,
renewal, extension, forbearance, indulgence, alteration, change in, modification of, grant of
participation in, or other disposition of any of the Senior Loan Documents or any other documents
or instruments executed by Borrower in favor of the Senior Lenders, any release of any guarantor of
the obligations of Borrower to the Senior Lenders or any other person or the failure of the Senior
Lenders to pursue remedies against any one or more of the guarantors or any other person, failure
to collect any indebtedness owed by Borrower to the Senior Lenders when due, or any delay or
omission by the Senior Lenders in the exercise of any right or remedy against Borrower or any
guarantor of any of the Senior Obligations.



     7. No Assignment, Modification or Management. So long as any Senior Obligations are
outstanding, the Subordinated Lenders agree not to assign, transfer or pledge any rights, claims or
interests of any kind in or to any Subordinated Debt or to amend or modify any of the terms and
provisions of any of the Junior Loan Documents, without first obtaining the prior written consent
of the Senior Lenders. Any such transfer, assignment or pledge without such prior written consent
shall be void. Any such transfer, assignment or pledge to which the Senior Lenders consent shall
be made expressly subject to the terms and conditions hereof.



 









 





EXHIBIT D




INVESTOR RIGHTS AGREEMENT




     This Investor Rights Agreement (this “Agreement”) is dated as of the 29th day of May,
2007, and is made by and between Lime Energy Co., a Delaware corporation (the “Company”),
and the holders of the Term Notes due May 31, 2010, issued by the Company (such holder is referred
to herein as the “Lender,” and collectively as the “Lenders”).



W I T N E S S E T H:




     WHEREAS, Lenders and the Company are parties to that certain Loan Agreement dated as of the
date hereof pursuant to which Lenders have agreed to make certain loans available to the Company,
on and subject to the terms and conditions set forth therein (the “Loan Agreement”); and



     WHEREAS, the execution and delivery by the parties hereto of this Agreement is one of the
conditions precedent to the obligation of Lenders to make loans to the Company under the Loan
Agreement; and



     WHEREAS, the parties desire to set forth certain additional understandings among themselves
relating to the obligations of the Company to Lenders 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. Definitions. Terms which are defined in the Loan Agreement and which are used in
capitalized form herein and not otherwise specifically defined herein are used with the meanings
given such terms in the Loan Agreement. The following terms shall have the indicated meanings:




     “Fair Market Value” means, the fair market value of a share of Common Stock as of the
applicable date (the “Determination Date”), determined as follows:




     (a) If the Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or SmallCap Market of The Nasdaq
Stock Market, Inc. (“Nasdaq”), then the closing or last sale price,
respectively, reported for the last Business Day immediately preceding the
Determination Date.




     (b) If the Common Stock is not traded on the American Stock Exchange or another
national exchange or on the Nasdaq but is traded on the NASD OTC Bulletin Board,
then the mean of the average of the closing bid and asked prices reported for the
last Business Day immediately preceding the Determination Date.




     “Rule 144” means Rule 144 promulgated by the SEC under the Securities Act, as
in effect from time to time.




     “SEC” means the Securities and Exchange Commission of the United States of
America.




     “Securities Act” means the Securities Act of 1933, as amended, and the
regulations of the SEC promulgated thereunder, as in effect from time to time.



 









 






     “Securities Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the regulations of the SEC promulgated thereunder, as in effect from time to
time.




     “Warrant” means the Warrant referred to in the Loan Agreement.




     “Warrant Shares” has the meaning give such term in the Warrant.



     2. Payment of Interest by Delivery of Shares of Common Stock. The parties hereto
hereby agree with respect to all interest payments payable by the Company under the Loan Agreement
and the Notes delivered thereunder that, provided that the Company’s common stock, par value
$0.0001 per share (“Common Stock”) continues to be publicly traded and the Company
continues to comply with the reporting requirements of the Securities Exchange Act, the Company
will pay in cash one-half (1/2) of each such interest payment and will pay the other one-half (1/2)
of each such interest payment by issuance of shares of Common Stock having a Fair Market Value
equal to one-half (1/2) of the amount of such interest payment; provided that the Company shall not
be obligated to issue fractional shares and any fractional share shall be rounded to the nearest
whole number. All shares of Common Stock issued in payment of interest will be ‘restricted
securities’ for purposes of Rule 144.



     3. Conversion.



     (a) At the option of any Lender, exercisable at any time by not less than three (3) Business
Days’ prior written notice, any or all of such Lender’s Loan may be converted into shares of the
Common stock at a conversion price of $1.00 per share (the “Conversion Price”). Any such
written notice shall be delivered at the address for the Company applicable under the Loan
Agreement and shall state the amount of principal and interest being converted and the applicable
conversion date (which shall not be earlier than the date upon which such notice is given to the
Company).



     (b) The outstanding principal balance of the Loan and all accrued unpaid interest thereon
shall automatically be converted into shares of Common Stock at the Conversion Price, without
notice or other action by the Company or Lenders, if, at any time after May 31, 2008, for twenty
(20) Business Days in any period of thirty (30) consecutive Business Days, the Fair Market Value of
the Common Stock is higher than $1.50 per share.



     (c) All shares of Common Stock issued under this Section 3 will be restricted
securities for purposes of Rule 144.



     (d) In the event of any issuance of shares pursuant to this Section 3, the Company
shall, on or before the tenth (10th) Business Day following the date when conversion occurs deliver
at the Company’s expense to the respective Lender, a certificate or certificates for the shares of
Common Stock being issued registered in the name of such Lender.



     (e) Upon the Company’s receipt of a notice of conversion from a Lender under clause (a) above,
or upon automatic conversion under clause (b) above, such Lenders 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) shall be the date specified in the notice
given with respect to a conversion under clause (a)), irrespective of the date of delivery of
certificates evidencing such shares.



 









 





     4. Legends. Unless upon their issuance such shares of Common Stock are then registered
under the Securities Act pursuant to an effective registration statement, any certificates
representing shares of Common Stock issued under Section 2 or Section 3 hereof shall bear a legend
substantially in the following form:




THE SHARES OF COMMON STOCK OF LIME ENERGY CO. (THE “THE COMPANY”) REPRESENTED BY
THIS CERTIFICATE (THE “SHARES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED UNLESS (A) SUBSEQUENTLY REGISTERED PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
OR (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE COMPANY A WRITTEN OPINION OF
COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, TO THE
EFFECT THAT THE SHARES TO BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED ARE
BEING OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION.



     5. Registration Rights. The Company shall:



     (a) Demand Registration. In the event the Company shall receive from a Lender a
written request that the Company effect any registration, qualification or compliance under the
Securities Act with respect to at least thirty-three percent (33%) of the aggregate Warrant Shares
and the shares of Common Shares which have been issued to such Lender pursuant to Section 2
or Section 3 of this Agreement (“Agreement Shares,” and, collectively with the
Warrant Shares, the “Registrable Securities”) for resale by the Lenders from time to time
through the over-the-counter market or in privately-negotiated transactions or otherwise, the
Company, as soon as practicable, shall (i) use its best efforts to prepare and file with the SEC a
registration statement (the “Registration Statement”), and (ii) provide to each Lender a
draft of the Registration Statement for review and comment within thirty (30) days after receipt of
the initial Lender’s request for such registration. Notwithstanding the foregoing, the Company
shall have no obligations pursuant to this Section 5(a) unless the number of shares to be
registered for the Lenders pursuant to this Section 5(a) shall be at least 1,000,000 in the
aggregate, which amount shall be subject to adjustment for stock splits and other similar pro rata
combinations of the Company’s common stock.



     (b) Subject to the provisions of clause (g) below, and to receipt of all necessary information
from the Lenders, the Company uses reasonable efforts to cause the Registration Statement to be
declared effective as promptly as practicable after filing thereof, and in any event within ninety
(90) days after filing thereof.



     (c) Use reasonable efforts to keep the Registration Statement continuously effective under the
Securities Act until the date which is the earlier of the date (i) when all Registrable Securities
have been sold, or (ii) the date that is the eighteenth (18th) month anniversary of the date the
Registration Statement shall have been declared effective.



     (d) File any documents required of the Company for customary “blue sky” clearance in Illinois.



 









 





     (e) File with the SEC in a timely manner the reports and other documents required to be filed by
it under the Securities Act and the Securities Exchange Act (or, if the Company is not required to
file such reports, it will, upon the request of any Lender, make publicly available other
information so long as necessary to permit sales by Lenders under Rule 144), all to the extent
required to enable Lenders to sell the Registrable Securities from time to time without
registration under the Securities Act within the limitations provided by Rule 144;
provided, however, that nothing in this Agreement shall require the Company to file reports
under the Securities Act or the Securities Exchange Act, to register any of its securities under
the Securities Exchange Act, or to make publicly available any information concerning the Company
at any time when it is not required by law or by any other agreement by which it is bound to do any
of the foregoing.



     (f) All expenses relating to the registration and offering of the Registrable Securities
pursuant to this Section 5 shall be borne by the Company, except that Lenders shall bear
underwriting and selling commissions attributable to the Registrable Securities being registered
and any transfer taxes on shares being sold by Lenders.



     (g) In addition to and without limitation of any other covenant of Lenders contained in this
Agreement, each Lender who desires to have its Registrable Securities registered pursuant to this
Section 5 shall:




     (i) Furnish to the Company, upon the Company’s request, all information regarding
Lenders and the intended distribution of the Registrable Securities for the purpose of
preparing such Registration Statement, to the extent that such information is required to
comply with applicable legal requirements; and




     (ii) Upon the Company’s request, notify the Company of the number of Registrable
Securities that have been sold and remain to be sold pursuant to any the Registration
Statement; and




     (iii) promptly notify the Company when all registered Registrable Securities have been
sold.



     (h) Lender agrees not to effect any disposition of any Registrable Securities or the right to
purchase any Registrable Securities that would constitute an offer or sale within the meaning of
the Securities Act except as contemplated in this Section 5 or pursuant to an exemption
from registration under the Securities Act.



     (i) The Company will promptly notify Lender at any time when a prospectus relating to
Registrable Securities is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading or incomplete in
the light of the circumstances then existing.



     (j) The Company will furnish to Lender with respect to the Registrable Securities registered
under the Registration Statement (and to each underwriter, if any, of such Registrable Securities)
such number of copies of the Registration Statement and any amendment or supplement thereto and of
prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act
as Lender shall reasonably request.



 









 





     (k) The Company shall prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing; provided, however, the Company may,
subject to the last sentence of this clause (k), temporarily suspend the use of the prospectus
forming a part of such registration statement in the event that, and during such period as,




     (i) the Company is engaged in confidential negotiations or other confidential
business activities, disclosure of which would be required to be included or incorporated by
reference in such prospectus or registration statement, and




     (ii) the Board of Directors of the Company determines in good faith that such
disclosure would have a material adverse effect on any such confidential negotiations or
other confidential business activities or would be materially detrimental to the Company.


In such event, subject to the last sentence of this clause (k), the Company may suspend the use of
such prospectus until such time as an amendment to such Registration Statement has been filed by
the Company and declared effective by the SEC, or until such time as the Company has filed an
appropriate report with the SEC pursuant to the Securities Exchange Act. Anything herein to the
contrary notwithstanding, the Company does not have the right to suspend the use of such prospectus
or otherwise restrict Lender’s ability to sell or otherwise transfer the Registrable Securities for
a period of more than 90 days (which need not be consecutive days) in any twelve month period.




     (l) The Company will promptly inform Lender when any stop order by the SEC has been issued
with respect to the Registrable Securities and use its best efforts to promptly cause such stop
order to be withdrawn.



     (m) The Company will cause all Registrable Securities registered pursuant to such Registration
Statement to be listed on each securities exchange or market system on which the Company’s Common
Stock then is listed.



     (n) The Company will take such other actions as may be reasonably necessary to effect the
registration of the resale of the Registrable Securities in accordance with the terms of this
Agreement, to allow such Registrable Securities to trade in the same market system or exchange
where the Company’s Common Stock then trades, and to comply with all rules and regulations of the
SEC applicable thereto.



     (o) Indemnification and Contribution. For the purpose of this clause (o), the term
“Lender Party” shall include the Lender and its respective officers, directors, and any
Person which controls Lender, and the term “Registration Statement” shall include the
Registration Statement to be filed pursuant to this Section 5 and any final prospectus,
supplement or amendment included in or relating to such Registration Statement.



     The Company agrees to indemnify and hold harmless each Lender Party from and against any
losses, claims, damages or liabilities to which such Person may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading or
arise out of



 









 







any failure by the Company to fulfill any undertaking included in a Registration
Statement and the Company will reimburse such Lender Party for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend any such action,
proceeding or claim as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, any such untrue statement or omission made in such Registration
Statement in reliance upon written information furnished to the Company by or on behalf of Lender
or any Lender Party expressly for use in preparation of the Registration Statement, or the failure
of such Lender Party to comply with the covenants and agreements of the Lender contained in this
Section 5 respecting sale of any Registrable Securities or any statement or omission in any
prospectus that is corrected or made not misleading in any subsequent prospectus that was delivered
to Lender or such Lender Party prior to the pertinent sale or sales by such Lender Party.



     Each Lender agrees, severally and jointly, to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of Section 15 of the Securities
Act, and each of its officers and directors who sign the Registration Statement) from and against
any losses, claims, damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of,
or are based upon, any failure by such Lender or any respective Lender Party to comply with the
covenants and agreements of such Lender contained in Section 4 hereof respecting sale of
any Registrable Securities, or any untrue statement or alleged untrue statement of a material fact
contained (or incorporated by reference), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not
misleading, in the Registration Statement on the effective date thereof if such untrue statement
was made in reliance upon and in conformity with written information furnished by or on behalf of
such Lender or any respective Lender Party for use in preparation of such Registration Statement.
Each Lender will reimburse, severally and not jointly, the Company (or such officer, director or
controlling person), as the case may be, for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or claim. In no event
shall the liability of any Lender hereunder be greater in amount than the dollar amount of the net
proceeds received by such Lender and the respective Lender Parties upon the sale of the Registrable
Securities giving rise to such indemnification obligation.



     Promptly after receipt by any indemnified person of a notice of a claim or the beginning of
any action in respect of which indemnity is to be sought against an indemnifying person pursuant to
this clause (o), such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions hereinafter stated, in
case any such action shall be brought against an indemnified person, such indemnifying person shall
be entitled to participate therein, and, to the extent it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with the defense thereof;
provided, however, that if there exists or shall exist a conflict of interest that would
make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to
represent both the indemnified person and such indemnifying person, the indemnified person shall be
entitled to retain its own counsel (in addition to local counsel) at the expense of such
indemnifying person; provided, further, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel for all indemnified parties
collectively without regard to the number of Lenders or Lender Parties. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its written
consent, but, if settled with such consent or if there be a final



 









 







judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party or parties in accordance with the
provisions of this clause (o).



     If the indemnification provided for in this clause (o) from the indemnifying person is
determined by a court of competent jurisdiction to be unavailable to an indemnified person
hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein,
then the indemnifying person, in lieu of indemnifying such indemnified person, shall contribute to
the amount paid or payable by such indemnified person as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the
indemnifying person and indemnified persons in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying person and indemnified persons shall be
determined by reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged omission, has been
made by, or relates to information supplied by, such indemnifying person or indemnified persons,
and the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include, subject to the
limitations set forth in this clause (o), any reasonable legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this clause (o) were
determined by pro rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this clause (o), no Lender shall be required to contribute any
amount in excess of the dollar amount of the gross proceeds received by such Lender and the
respective Lender Parties upon the sale of the Registrable Securities giving rise to such
contribution obligation. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.



     (p) The conditions precedent imposed upon the transferability of the Registrable Securities by
this Section 5 shall cease and terminate as to any particular number of the Registrable
Securities when such Registrable Securities shall have been effectively registered under the
Securities Act and sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Registrable Securities or at such
time as an opinion of counsel satisfactory to the Company shall have been rendered to the effect
that such conditions are not necessary in order to comply with the Securities Act.



     (q) So long as a registration statement is effective covering the resale of any Registrable
Securities, the Company will furnish to each Lender:




     (i) As soon as practicable after available (but in the case of the Company’s Annual
Report on Form 10-K, within 120 days after the end of each fiscal year of the Company), one
copy of (i) its Annual Report on Form 10-K or equivalent form (which shall contain financial
statements audited in accordance with generally accepted accounting principles by a firm of
certified public accountants), and (ii) a full copy of the Registration Statement covering
the Registrable Securities which are registered thereby (the foregoing, in each case,
excluding exhibits);




     (ii) Upon the reasonable request of any Lender, any exhibits excluded by the
parenthetical to clause (i) of this clause (q) and all other information that is made
available to stockholders; and




 










 






     (iii) Upon the reasonable request of any Lender, an adequate number of copies of
the prospectuses to supply to any other party requiring such prospectuses;


and the Company, upon the reasonable request of any Lender, will meet with such Lender or a
representative thereof at the Company’s headquarters to discuss all information relevant for
disclosure in the Registration Statement covering the Registrable Securities and will otherwise
cooperate with Lender conducting an investigation for the purpose of reducing or eliminating
Lender’s exposure to liability under the Securities Act, including the reasonable production of
information at the Company’s headquarters.




     (r) Piggyback Registration Rights. In the event that the Company shall determine
to prepare and file with the SEC a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity securities, other
than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) relating to equity
securities to be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee benefit plans, then
the Company shall send to each Lender written notice of such determination and, if within fifteen
(15) days after receipt of such notice, any Lender shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable Securities which such
Lender requests to be registered to the extent the Company may do so without violating registration
rights of others which exist as of the date of this Agreement, subject to customary underwriter
cutbacks applicable to all holders of registration rights and subject to obtaining such Lender’s
cooperation substantially on the terms set forth above in this Section 5.



     6. No Shorting. Each Lender agrees that it and its Affiliates will not and will
not cause any person or entity, directly or indirectly, to, engage in “short sales” of the Common
Stock or any other hedging strategies with respect to the Common Stock, as long as the Note or any
part of the Term Loan principal balance shall be outstanding.



     7. Arbitration. In the event of any and all disagreements and controversies arising
from this Agreement, 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. Either party 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, either 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, neither 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 Lender shall assign its rights under this Agreement except in connection with an
assignment under the Loan Agreement permitted by the terms thereof.



     (c) 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.



 









 





     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	 	 
	LENDER	 	 






	 	 	 	 	 
	By:

	 	/s/ Richard P. Kiphart
 

	 	 
	Name: Richard P. Kiphart	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 





 









 





EXHIBIT E



NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS (A)
SUBSEQUENTLY REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER HEREOF SHALL HAVE
DELIVERED TO THE COMPANY A WRITTEN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY
ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT THE SHARES TO BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED ARE BEING OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION.




LIME ENERGY CO.




Warrant To Purchase Common Stock




	 	 	 
	Warrant No.: 110

	 	Number of Shares: 865,385
	Original Date of Issuance: May 29, 2007
	 	 





Lime Energy Co., a Delaware corporation (the “Company”), hereby certifies that, for good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Richard P.
Kiphart., the registered holder hereof or his permitted assigns registered on the books of the
Company (the “Holder”), is entitled, subject to the terms and conditions set forth below, to
purchase from the Company upon surrender of this Warrant, at any time or times on or after the date
hereof, but before May 29, 2011 (the “Expiration Date”), Eight Hundred Sixty Five Thousand Three
Hundred and Eighty Five (865,385) fully paid and nonassessable shares (the “Warrant Shares”) of the
Company’s common stock, par value $0.0001 per share (the “Common Stock”), at the exercise price per
share equal to $1.04, subject to adjustment as hereinafter provided (the “Warrant Exercise Price”).




     1. Definitions. In addition to the capitalized terms defined elsewhere herein,
the following terms as used in this Warrant shall have the following meanings:




     “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in the City of Chicago are authorized or required by law to remain closed.




     “Fair Market Value” means, the fair market value of a share of Common Stock as of a
particular date (the “Determination Date”) as follows:




     (a) If the Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or SmallCap Market of The
Nasdaq Stock Market, Inc.(“Nasdaq”), then the closing or last sale price,
respectively, reported for the last Business Day immediately preceding the
Determination Date.



 









 






     (b) If the Common Stock is not traded on the American Stock Exchange or another
national exchange or on the Nasdaq but is traded on the NASD OTC Bulletin Board,
then the mean of the average of the closing bid and asked prices reported for the
last Business Day immediately preceding the Determination Date.




     (c) Except as provided in clause (d) of this definition below, if the Common
Stock is not then publicly traded, then as the Holder and the Company agree, or in
the absence of agreement as determined by arbitration in accordance with Section 17
hereof.




     (d) If the Determination Date is the date of a liquidation, dissolution or
winding up, or any event deemed to be a liquidation, dissolution or winding up
pursuant to the Company’s charter, then all amounts to be payable per share to
holders of the Common Stock pursuant to the charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter, assuming for
the purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of this Warrant are outstanding at the Determination Date.




     “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization or a government or any
department or agency thereof.




     “Securities Act” means the Securities Act of 1933, as amended.



     2. Exercise of Warrant.




     (a) Subject to the terms and conditions hereof, this Warrant may be exercised by the
Holder, in whole or in part, during normal business hours on any Business Day on or after
the date hereof and prior to 5:00 P.M. Chicago Time on the Expiration Date by




     (i) delivery of a duly executed written notice, in the form of the subscription
notice attached as Exhibit A hereto (the “Exercise Notice”), of such
Holder’s election to exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased;




     (ii) payment to the Company of an amount equal to the Warrant Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the “Aggregate Exercise Price”), either in cash or by certified check or
wire transfer of immediately available funds or by delivery of Warrant Shares
receivable upon exercise of this Warrant in accordance with Section 2(b) below; and




     (iii) delivery to the Company of this Warrant (or an indemnity and evidence
with respect to this Warrant in the case of its loss, theft, mutilation or
destruction as provided in Section 11).


In the event of any exercise of the rights represented by this Warrant in compliance with this
Section 2(a), the Company shall, on or before the tenth (10th) Business Day following
the date of its receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant (or
an indemnity and evidence with
respect to this Warrant in the case of its loss, theft, mutilation or destruction as provided in
Section 11) (the “Exercise Delivery Documents”), deliver at the Company’s expense to the Holder, a
certificate or




 









 




certificates for the Warrant Shares so purchased, in such denominations as may be
requested by Holder and registered in the name of Holder. Upon the Company’s receipt of the
Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of certificates evidencing such Warrant Shares.




          (b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one
share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being exercised) by
surrender of this Warrant at the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of
Common Stock computed using the following formula:




	 	 	 	 	 	 	 
	X

	 	=
	Y	(A-B)
 

A
	 	 






          Where X = the number of shares of Common Stock to be issued to the Holder





	 	Y=	 	 the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised (at the date of such calculation)
	 
	 	A=	 	 the Fair Market Value of one share of the Company’s Common
Stock (at the date of such calculation)
	 
	 	B=	 	 Exercise Price (as adjusted to the date of such calculation)





 









 





          (c) Unless the rights represented by this Warrant shall have expired or shall have been fully
exercised, the Company shall, as soon as practicable and in no event later than ten (10) Business
Days after any exercise and at its own expense, issue a new Warrant identical in all respects to
this Warrant exercised, except it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant exercised, less the number of
Warrant Shares with respect to which this Warrant is exercised.




          (d) No fractional shares of Common Stock are to be issued upon the exercise of this Warrant,
but rather the number of shares of Common Stock issued upon exercise of this Warrant shall be
rounded up or down to the nearest whole number.




     3. Covenants. The Company hereby represents, covenants and agrees as follows:




     (a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly issued.




     (b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable.




     (c) The Company has full power and authority to enter into this Warrant, and to
issue and deliver this Warrant and the Warrant Shares, and to incur and perform fully the
obligations provided herein, all of which have been duly authorized by all necessary
corporate action.




     (d) This Warrant has been duly executed and delivered and is the valid and binding
obligation of the Company enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting creditors’ rights generally and by general principles of equity.



     4. Taxes. The Company shall pay any and all taxes, except income taxes, which may be
payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.



     5. Holder Not Deemed a Stockholder. Except as otherwise specifically provided herein,
this Warrant shall not entitle Holder to vote or receive dividends or any other rights of a
stockholder of the Company, including, without limitation, any right to vote, give or withhold
consent to any corporate action (whether a reorganization, issue of stock, reclassification of
stock, consolidation, merger, conveyance or otherwise), receive notice of meetings or receive
subscription rights.



     6. Representations of Holder. The Holder, by the acceptance hereof, represents and
warrants that it:




     (a) is acquiring this Warrant and the Warrant Shares solely for its own account, for
investment and not with a view towards the distribution or resale thereof in violation of
the Securities Act or any applicable state securities laws;




     (b) has received such documents, materials and information as the Holder deems
necessary or appropriate for evaluation of the acquisition of this Warrant and the right to
acquire Warrant Shares hereunder;




     (c) is an “accredited investor” as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act and has such knowledge and experience in financial and



 









 






business matters that it is capable of evaluating the merits and risks of an investment
in this Warrant and the Warrant Shares;




     (d) understands that no U.S. federal, state or regulatory agency has recommended,
approved or endorsed, or passed upon the fairness or suitability of, an investment in this
Warrant or the Warrant Shares or passed up on the accuracy or adequacy of the information
provided to the Holder; and




     (e) recognizes that an investment in the Warrant Shares involves a high degree of
financial risk, and that it can bear the economic risk of losing its entire investment in
the Warrant Shares and has sought, or will seek, such accounting, legal and tax advice as it
has considered, or will consider, necessary to make an informed investment decision with
respect to its acquisition of this Warrant and of any Warrant Shares.


If the Holder cannot make any of the foregoing representations at the time of any exercise of this
Warrant because it would be factually incorrect at that time, the Holder shall so notify the
Company, and it shall be a condition to the Holder’s exercise of this Warrant at that time that the
Company receive such other assurances as the Company then considers reasonably necessary to assure
the Company that the issuance of the Warrant Shares upon such exercise of this Warrant at such time
shall not violate the Securities Act or any state securities laws.




     7. Restriction on Transfer.



          (a) This Warrant and the rights granted to Holder are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed transfer endorsement in the form of
Exhibit B attached hereto; provided, however, that any transfer or assignment shall
be subject to the approval of the Company, such approval not to be unreasonably withheld, and the
conditions set forth in Section 7(b) below.




          (b) Holder represents and warrants that it understands that the Company is under no obligation
to register this Warrant or, except as set forth in Section 8 below, any of the Warrant Shares,
under the Securities Act and that this Warrant and Warrant Shares will be characterized as
“restricted securities” under the Securities Act because they are being acquired from the Company
in a transaction not involving a public offering. The Holder also represents and warrants that it
understands that neither the Warrant nor the Warrant Shares may be offered for sale, sold, assigned
or transferred unless (a) at that time they have been registered pursuant to an effective
registration statement under the Securities Act and applicable state securities laws, or (b) the
Holder shall have delivered to the Company a written opinion of counsel, in form, substance and
scope reasonably acceptable to the Company, to the effect that the securities to be offered for
sale, sold, assigned or transferred are being offered for sale, sold, assigned or transferred
pursuant to an exemption from such registration.




          (c) Unless upon their issuance such Warrant Shares are then registered under the Securities
Act pursuant to an effective registration statement, any certificates representing Warrant Shares
issued in accordance with this Warrant shall bear a legend substantially in the following form:





THE SHARES OF COMMON STOCK OF LIME ENERGY CO. (THE “COMPANY”) REPRESENTED BY THIS
CERTIFICATE (THE “SHARES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED UNLESS (A) SUBSEQUENTLY REGISTERED PURSUANT TO AN



 









 






EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER HEREOF SHALL HAVE
DELIVERED TO THE COMPANY A WRITTEN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT THE SHARES TO BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED ARE BEING OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.



     8. Registration of Warrant Shares. The Company has granted Holder rights to seek
to register the Warrant Shares under the Securities Act, as more fully set forth in that certain
Investor Rights Agreement dated as of May 29, 2007 by and between the Company and Holder.



     9. Adjustment of Warrant Exercise Price and Number of Warrant Shares upon Subdivision or
Combination of Common Stock.



          (a) If the Company at any time after the date of issuance of this Warrant subdivides (by any
stock split or stock dividend of its Common Stock) its outstanding shares of Common Stock into a
greater number of shares of Common Stock, the Warrant Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of Warrant Shares obtainable upon
exercise of this Warrant will be proportionately increased. If the Company at any time after the
date of issuance of this Warrant combines (by reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, the Warrant Exercise Price
in effect immediately prior to such combination will be proportionately increased and the number of
Warrant Shares obtainable upon exercise of this Warrant will be proportionately decreased. Any
adjustment under this Section 9(a) shall become effective at the close of business on the date the
subdivision or combination becomes effective.




          (b) Upon any adjustment of the Warrant Exercise Price or number of issuable Warrant Shares
pursuant to Section 9(a), the Company will give written notice thereof to the Holder, setting forth
in reasonable detail the calculation of such adjustment.




     10. Reorganization, Reclassification, Consolidation, Merger or Sale. If at any time,
as a result of:



          (a) a capital reorganization or reclassification (other than a subdivision or combination
provided for in Section 9), or




          (b) a merger or consolidation of the Company with another corporation (whether or not the
Company is the surviving corporation) or sale of substantially all of the Company’s stock, the
Common Stock issuable upon exercise of this Warrant shall be changed into or exchanged for the same
or a different number of shares of any class or classes of capital stock of the Company or any
other Person, or other securities convertible into such shares, then, as a part of such
reorganization, reclassification, merger, consolidation or sale, appropriate adjustments shall be
made in the terms of this Warrant (or of any securities into which this Warrant is exercised or for
which this Warrant is exchanged), so that Holder shall thereafter be entitled to receive, upon
exercise of this Warrant or of such substitute securities, the kind and amount of shares of stock,
other securities, money and property which Holder would have received at the time of such capital
reorganization, reclassification, merger, consolidation or sale, if Holder had exercised this
Warrant immediately prior to such capital reorganization, reclassification, merger, consolidation
or sale. This Warrant, including, without limitation, the provisions of this Section 10 will be
binding upon any entity succeeding to the Company




 









 




by merger, consolidation or acquisition of all or
substantially all of the Company’s assets. The provisions of this Section 10 shall similarly apply
to (x) successive capital reorganizations, reclassifications, mergers, consolidations and sale and (y)
the securities of any other Person that are at the time receivable upon the exercise of this
Warrant.




     11. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen,
mutilated or destroyed, the Company shall promptly, on receipt of evidence reasonably satisfactory
to the Company of the ownership of, and the loss, theft, mutilation or destruction of, this
Warrant, and an indemnity reasonably satisfactory to the Company (or in the case of a mutilated
Warrant, the Warrant), issue in lieu thereof a new Warrant of like denomination and tenor as this
Warrant so lost, stolen, mutilated or destroyed.



     12. Notice. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Warrant must be in writing and will be deemed to have
been made upon receipt when delivered personally, via pre-paid overnight courier or by certified
mail, postage pre-paid, return receipt requested. The addresses for such communications shall be:



          If to the Company:



Lime Energy Co.

1280 Landmeier Road

Elk Grove Village, IL 60007

Attention: General Counsel




          If to the Holder:



Richard P. Kiphart

                                                            

                                                            

                                                            



or such other address as the Company or Holder, as applicable, may specify in written notice given
to the other party in accordance with this Section 12.




     13. Amendments. This Warrant and any term hereof may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party hereto against which
enforcement of such change, waiver, discharge or termination is sought.



     14. Expiration. This Warrant, in all events, shall be wholly void and of no effect
after 5:00 P.M. Chicago Time on the Expiration Date.



     15. Successors and Assigns. The terms and provisions of this Warrant shall inure to
the benefit of, and be binding upon, the Company and the Holder and their respective successors and
permitted assigns.



     16. Descriptive Headings; Governing Law. The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a
part of this Warrant. All questions concerning the construction, validity, enforcement and
interpretation of this Warrant 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.




     17. Arbitration. In the event of any and all disagreements and controversies arising
from this Warrant, 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. Either party 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 Warrant, either 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, neither 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.


[Remainder of page intentionally left blank; signature page follows]




 









 





     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by a duly authorized
officer, as of the 29th day of May 2007.



	 	 	 	 	 	 	 
	 	 	LIME ENERGY CO.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jeffrey Mistarz	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Jeffrey R. Mistarz	 	 
	 	 	Title: Chief Financial Officer	 	 






 









 





EXHIBIT A TO WARRANT




SUBSCRIPTION FORM




TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT



The undersigned, pursuant to the provisions set forth in the attached Warrant (No.___),
hereby irrevocably elects to purchase (check applicable box):



___                       shares of the Common Stock covered by such Warrant; or



                    
the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless
exercise procedure set forth in Section 2 of such Warrant.



The undersigned herewith makes payment of the Aggregate Exercise Price for such shares at the price
per share provided for in such Warrant, which is $                    . Such payment takes the form of
(check applicable box or boxes):



___$                     in lawful money of the United States; and/or



___ the cancellation of such portion of the attached Warrant as is exercisable for a total of
___ shares of Common Stock (using a Fair Market Value of $                     per share for purposes of
this calculation); and/or



___
the cancellation of such number of shares of Common Stock as is necessary, in accordance with
the formula set forth in Section 2(b), to exercise this Warrant with respect to the maximum number
of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in
Section 2.




     The undersigned requests that the certificates for such shares be issued in the name of, and
delivered to 
                                         whose address is                                  
                                               

                                                                              
                                                                              
    .


The undersigned represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the within Warrant shall be made pursuant to registration of
the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to
an exemption from registration under the Securities Act.




Date:                     , 200___




	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	[Name of Holder]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





 









 





EXHIBIT B TO WARRANT




FORM OF TRANSFEROR ENDORSEMENT




(To be signed only on transfer of Warrant)




     For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading “Transferees” the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of Lime Energy Co. into which the within
Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of Lime Energy Co. with full power of substitution in
the premises.



	 	 	 	 	 	 	 
	Transferees	 	Address	 	Percentage Transferred	 	Number Transferred
	 

	 	 
	 	 
	 	 





	 	 	 	 	 	 	 	 	 
	Dated:                                        	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(Signature must conform to name of holder as
specified on the face of the Warrant)	 	 






Signed in the presence of:




	 	 	 	 	 
	 


	 	 

	 	 
	(Name)

	 	(address)	 	 
	 
	 	 	 	 
	ACCEPTED AND AGREED:

	 	(address)	 	 
	[TRANSFEREE]

	 	 	 	 
	 
	 	 	 	 
	 

               (Name)