Document:

EMPLOYMENT AGREEMENT
	 

	 
		(Executive Level)
	 

	 
		AGREEMENT, dated as of January 1, 2007,
		between MDwerks, Inc., a Delaware corporation (the “Company”), and
		the Executive identified on Exhibit
		A attached hereto (the
		“Executive”).
	 

	 
		WITNESSETH:
	 

	 
		WHEREAS, the Company desires to retain the
		services of the Executive and to that end desires to enter into a contract of
		employment with him, upon the terms and conditions herein set forth; and

	 

	 
		WHEREAS, the Executive desires to be
		employed by the Company upon such terms and conditions;
	 

	 
		NOW, THEREFORE, in consideration of the
		premises and of the mutual benefits and covenants contained herein, the parties
		hereto, intending to be bound, hereby agree as follows:
	 

	 
		1. APPOINTMENT AND TERM
	 

	 
		Subject to the terms hereof, the Company
		hereby employs the Executive, and the Executive hereby accepts employment with
		the Company, all in accordance with the terms and conditions set forth herein,
		for a period commencing on the date hereof (the “Commencement Date”)
		and ending on the date (the “Expiration Date”) set forth in
		Exhibit A, unless the parties mutually agree in writing upon a
		later date.
	 

	 
		2. DUTIES
	 

	 
		(a) During the term of this Agreement, the
		Executive shall be employed in the position set forth in Exhibit A and
		shall, unless prevented by incapacity, devote all of his business time,
		attention and ability during normal corporate office business hours to the
		
	 

	 
		 
	 

	 
	 

	 

	 
		discharge of his duties hereunder and to the
		faithful and diligent performance of such duties and the exercise of such
		powers as may be assigned to or vested in him by the Board of Directors of the
		Company (the “Board”), the President and Chief Executive Officer of
		the Company and any other senior executive officer of the Company, such duties
		to be consistent with his position. The Executive shall obey the lawful
		directions of the Board, the Company’s President and Chief Executive
		Officer and any other senior executive officer of the Company and shall use his
		diligent efforts to promote the interests of the Company and to maintain and
		promote the reputation thereof.
	 

	 
		(b) The Executive shall not during his term
		of employment (except as a representative of the Company or with the consent in
		writing of the Board) be directly or indirectly engaged or concerned or
		interested in any other business activity, except through ownership of an
		interest of not more than 2% in any entity that does not compete with the
		Company, provided it does not impair the ability of the Executive to discharge
		fully and faithfully his duties hereunder.
	 

	 
		(c) Notwithstanding the foregoing
		provisions, the Executive shall be entitled to serve in various leadership
		capacities in civic, charitable and professional organizations. The Executive
		recognizes that his primary and paramount responsibility is to the
		Company.
	 

	 
		(d) The Executive shall be based in the
		Deerfield Beach, Florida area, except for required travel on the Company’s
		business.
	 

	 
		3. REMUNERATION
	 

	 
		(a) As compensation for his services
		pursuant hereto, the Executive shall be paid a base salary during his
		employment hereunder at the annual rate set forth in Exhibit A.
		
	 

	 
		 
	 

	 
		 
	 

	 
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		This amount shall be payable in equal
		periodic installments in accordance with the usual payroll practices of the
		Company.
	 

	 
		(b) Except as provided above, in
		Exhibit A and in Sections 4 and 6 hereof, the Executive shall not
		be entitled to receive any additional compensation, remuneration or other
		payments from the Company.
	 

	 
		4. HEALTH INSURANCE AND OTHER FRINGE BENEFITS
	 

	 
		The Executive shall be entitled to
		participate in regular employee fringe benefit programs to the extent such
		programs are offered by the Company to its executive employees, including, but
		not limited to, medical, hospitalization and disability insurance and life
		insurance, Section 529 education plan and 401(k) plan. 
	 

	 
		5. VACATION
	 

	 
		The Executive shall be entitled to the
		number of weeks of vacation set forth in Exhibit A (in
		addition to the usual national holidays) during each contract year during which
		he serves hereunder. Such vacation shall be taken at such time or times as will
		be mutually agreed between the Executive and the Company. Vacation not taken
		during a calendar year may not be carried forward.
	 

	 
		6. REIMBURSEMENT FOR EXPENSES
	 

	 
		The Executive shall be reimbursed for
		reasonable documented business expenses incurred in connection with the
		business of the Company in accordance with practices and policies established
		by the Company.
	 

	 
		  
	 

	 
		 
	 

	 
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		7. TERMINATION
	 

	 
		(a) This Agreement shall terminate in
		accordance with the terms of Section 7(b) hereof; provided,
		however, that such termination shall not affect the obligations
		of the Executive pursuant to the terms of Sections 8 and 9.
	 

	 
		(b) This Agreement shall terminate on the
		Expiration Date; or as follows:
	 

	 
		(i) Upon the written notice to the Executive
		by the Company at any time, because of the willful and material malfeasance,
		dishonesty or habitual drug or alcohol abuse by the Executive related to or
		affecting the performance of his duties, the Executive’s continuing and
		intentional breach, non-performance or non-observance of any of the terms or
		provisions of this Agreement, but only after notice by the Company of such
		breach, nonperformance or nonobservance and the failure of the Executive to
		cure such default as soon as practicable (but in any event within ten (10) days
		following written notice from the Company), the conduct by the Executive which
		the Board in good faith determines could reasonably be expected to have a
		material adverse effect on the business, assets, properties, results of
		operations, financial condition, personnel or prospects of the Company (within
		each category, taken as a whole), but only after notice by the Company of such
		conduct and the failure of the Executive to cure same as soon as practicable
		(but in any event within ten (10) days following written notice from the
		Company), or upon the Executive’s conviction of a felony, any crime
		involving moral turpitude (including, without limitation, sexual harassment)
		related to or affecting the performance of his duties or any act of fraud,
		embezzlement, theft or willful breach of fiduciary duty against the
		Company.
	 

	 
		(ii) In the event the Executive, by reason
		of physical or mental disability, shall be unable to perform the services
		required of him hereunder for a period of more 
	 

	 
		 
	 

	 
		 
	 

	 
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		than 60 consecutive days, or for more than a
		total of 90 non-consecutive days in the aggregate during any period of twelve
		(12) consecutive calendar months, on the 61st consecutive day, or the 91st day,
		as the case may be. The Executive agrees, in the event of any dispute under
		this Section 7(b)(ii), and after written notice by the Board, to submit to a
		physical examination by a licensed physician practicing in the South Florida
		area selected by the Board, and reasonably acceptable to the Executive.
	 

	 
		(iii) In the event the Executive dies while
		employed pursuant hereto, on the day in which his death occurs.
	 

	 
		(c) If this Agreement is terminated pursuant
		to Section 7(b), the Company will have no further liability to the Executive
		after the date of termination including, without limitation, the compensation
		and benefits described herein; provided that,
		in the case of termination pursuant to Section 7(b)(ii), the Executive will
		receive his then current salary until such time (but not more than 90 days
		after such disability) as payments begin under any disability insurance plan of
		the Executive.
	 

	 
		(d) In the event the Company chooses not to
		enter into any agreement or amendment extending the Executive’s employment
		beyond the Expiration Date, the Company agrees to provide Executive at least 60
		days prior written notice of such determination (which notice may be given
		either prior to or after such Expiration Date, but if notice is given any later
		than 60 days prior to the Expiration Date, then the term of this Agreement
		shall be extended until the date which is 60 days after the date such notice is
		given), during which time the Executive may seek alternative employment while
		still being employed by the Company.
	 

	 
		 
	 

	 
		 
	 

	 
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		8. CONFIDENTIAL INFORMATION
	 

	 
		(a) The Executive covenants and agrees that
		he will not at any time during the continuance of this Agreement or at any time
		thereafter (i) print, publish, divulge or communicate to any person, firm,
		corporation or other business organization (except in connection with the
		Executive’s employment hereunder) or use for his own account any secret or
		confidential information relating to the business of the Company (including,
		without limitation, information relating to any customers, suppliers,
		employees, products, services, formulae, technology, know-how, trade secrets or
		the like, financial information or plans) or any secret or confidential
		information relating to the affairs, dealings, projects and concerns of the
		Company, both past and planned (the “Confidential Information”),
		which the Executive has received or obtained or may receive or obtain during
		the course of his employment with the Company (whether or not developed,
		devised or otherwise created in whole or in part by the efforts of the
		Executive), or (ii) take with him, upon termination of his employment
		hereunder, any information in paper or document form or on any
		computer-readable media relating to the foregoing. The term “Confidential
		Information” does not include information which is or becomes generally
		available to the public other than as a result of disclosure by the Executive
		or which is generally known in the medical claim processing and receivable
		financing business. The Executive further covenants and agrees that he shall
		retain the Confidential Information received or obtained during such service in
		trust for the sole benefit of the Company or its successors and assigns.

	 

	 
		(b) The term Confidential Information as
		defined in Section 8(a) hereof shall include information obtained by the
		Company from any third party under an agreement including restrictions on
		disclosure known to the Executive.
	 

	 
		 
	 

	 
		 
	 

	 
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		(c) In the event that the Executive is
		requested pursuant to subpoena or other legal process to disclose any of the
		Confidential Information, the Executive will provide the Company with prompt
		notice so that the Company may seek a protective order or other appropriate
		remedy and/or waive compliance with Section 8 of this Agreement. In the event
		that such protective order or other remedy is not obtained or that the Company
		waives compliance with the provisions of Section 8 of this Agreement, the
		Executive will furnish only that portion of the Confidential Information which
		is legally required.
	 

	 
		9. RESTRICTIONS DURING EMPLOYMENT AND FOLLOWING
		TERMINATION
	 

	 
		(a) The Executive shall not, anywhere within
		the United States, during his full term of employment under Section 1 hereof
		and for a period of one (1) year thereafter, notwithstanding any earlier
		termination pursuant to Section 7(b) hereof, without the prior written consent
		of the Company, directly or indirectly, and whether as principal, agent,
		officer, director, partner, employee, consultant, broker, dealer or otherwise,
		alone or in association with any other person, firm, corporation or other
		business organization, carry on, or be engaged, have an interest in or take
		part in, or render services to any person, firm, corporation or other business
		organization (other than the Company) engaged in a business which is
		competitive with all or part of the Business of the Company. The term
		“Business of the Company” shall mean developing, providing and
		marketing technology and financial services that focus on products and services
		related to processing claims by medical professionals and service providers for
		insurance reimbursement and the financing of receivables due to them arising
		out of such claims.
	 

	 
		(b) The Executive shall not, for a period of
		one (1) year after termination of his employment hereunder, either on his own
		behalf or on behalf of any other person, firm, corporation or other business
		organization, endeavor to entice away from the Company any 
	 

	 
		 
	 

	 
		 
	 

	 
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		person who, at any time during the
		continuance of this Agreement, was an employee of the Company.
	 

	 
		(c) The Executive shall not, for a period of
		one (1) year after termination of his employment hereunder, either on his own
		behalf or on behalf of any other person, firm, corporation or other business
		organization, solicit or direct others to solicit, any of the Company’s
		customers or prospective customers (including, but not limited to, those
		customers or prospective customers with whom the Executive had a business
		relationship during his term of employment) for any purpose or for any activity
		which is competitive with all or part of the Business of the Company.
	 

	 
		(d) It is understood by and between the
		parties hereto that the foregoing covenants by the Executive set forth in this
		Section 9 are essential elements of this Agreement and that, but for the
		agreement of the Executive to comply with such covenants, the Company would not
		have entered into this Agreement. It is recognized by the Executive that the
		Company currently operates in, and may continue to expand its operations
		throughout, the geographical territories referred to in Section 9(a) above. The
		Company and the Executive have independently consulted with their respective
		counsel and have been advised in all respects concerning the reasonableness and
		propriety of such covenants.
	 

	 
		10. REMEDIES
	 

	 
		(a) Without intending to limit the remedies
		available to the Company, it is mutually understood and agreed that the
		Executive’s services are of a special, unique, unusual, extraordinary and
		intellectual character giving them a peculiar value, the loss of which may not
		be reasonably or adequately compensated in damages in an action at law, and,
		therefore, in the 
	 

	 
		 
	 

	 
		 
	 

	 
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		event of any material breach by the
		Executive that continues after any applicable cure period, the Company shall be
		entitled to equitable relief by way of injunction or otherwise.
	 

	 
		(b) The covenants of Section 8 shall be
		construed as independent of any other provisions contained in this Agreement
		and shall be enforceable as aforesaid notwithstanding the existence of any
		claim or cause of action of the Executive against the Company, whether based on
		this Agreement or otherwise. In the event that any of the provisions of
		Sections 8 or 9 hereof should ever be adjudicated to exceed the time,
		geographic, product/service or other limitations permitted by applicable law in
		any jurisdiction, then such provisions shall be deemed reformed in any such
		jurisdiction to the maximum time, geographic, product/service or other
		limitations permitted by applicable law.
	 

	 
		11. COMPLIANCE WITH OTHER AGREEMENTS
	 

	 
		The Executive represents and warrants to the
		Company that the execution of this Agreement by him and his performance of his
		obligations hereunder will not, with or without the giving of notice or the
		passage of time or both, conflict with, result in the breach of any provision
		of or the termination of, or constitute a default under, any agreement to which
		the Executive is a party or by which the Executive is or may be bound.
	 

	 
		12. WAIVERS
	 

	 
		The waiver by the Company or the Executive
		of a breach of any of the provisions of this Agreement shall not operate or be
		construed as a waiver of any subsequent breach.
	 

	 
		13. BINDING EFFECT; BENEFITS
	 

	 
		This Agreement shall inure to the benefit
		of, and shall be binding upon, the parties hereto and their respective
		successors, assigns, heirs and legal representatives, including any corporation
		or other business organization with which the Company may merge or consolidate
		or
	 

	 
		 
	 

	 
		 
	 

	 
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		 sell all or substantially all of its
		assets. Insofar as the Executive is concerned, this contract, being personal,
		cannot be assigned.
	 

	 
		14. NOTICES
	 

	 
		All notices and other communications which
		are required or may be given under this Agreement shall be in writing and shall
		be deemed to have been duly given when delivered to the person to whom such
		notice is to be given at his or its address et forth below, or such other
		address for the party as shall be specified by notice given pursuant
		hereto:
	 

	 
		(a) If to the Executive, to him at the
		address set forth in Exhibit
		A.
	 

	 
		and
	 

	 
		(b) If to the Company, to it at:
	 

	 
		MDwerks, Inc.
	 

	 
		Windolph Center, Suite I
	 

	 
		1020 N.W. 6th Street
	 

	 
		Deerfield Beach, Florida 33442
	 

	 
		Attention: Chairman of the Board
	 

	 
		with a copy to:
	 

	 
		Greenberg Traurig, LLP
	 

	 
		200 Park Avenue, 14th
		Floor
	 

	 
		New York, New York 10166
	 

	 
		Attention: Spencer G. Feldman, Esq.
	 

	 
		15. MISCELLANEOUS
	 

	 
		 (a) This Agreement contains the entire
		agreement between the parties hereto and supersedes all prior agreements and
		understandings, oral or written, between the parties hereto with respect to the
		subject matter hereof. This Agreement may not be changed, modified, extended or
		terminated except upon written amendment approved by the Board and executed by
		a duly authorized officer of the Company.
	 

	 
		 
	 

	 
		 
	 

	 
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		(b) The Executive acknowledges that from
		time to time, the Company may establish, maintain and distribute employee
		manuals of handbooks or personnel policy manuals, and officers or other
		representatives of the Company may make written or oral statements relating to
		personnel policies and procedures. Such manuals, handbooks and statements are
		intended only for general guidance. No policies, procedures or statements of
		any nature by or on behalf of the Company (whether written or oral, and whether
		or not contained in any employee manual or handbook or personnel policy
		manual), and no acts or practices of any nature, shall be construed to modify
		this Agreement or to create express or implied obligations of any nature to the
		Executive.
	 

	 
		(c) This Agreement may be executed in
		counterparts, each of which shall be deemed to be an original, but all of which
		together shall constitute one and the same instrument.
	 

	 
		(d) All questions pertaining to the
		validity, construction, execution and performance of this Agreement shall be
		governed by and construed in accordance with the laws of the State of Florida,
		without regard to its conflict of law principles.
	 

	 
		(e) Any controversy or claim arising from,
		out of or relating to this Agreement, or the breach hereof (other than
		controversies or claims arising from, out of or relating to the provisions in
		Sections 8, 9 and 10), shall be determined by final and binding arbitration in
		Broward County, Florida, in accordance with the Employment Dispute Resolution
		Rules of the American Arbitration Association, by a panel of not less than
		three (3) arbitrators appointed by the American Arbitration Association. The
		decision of the arbitrators may be entered and enforced in any court of
		competent jurisdiction by either the Company or the Executive.
	 

	 
		 
	 

	 
		 
	 

	 
		 
	 

	 
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		The parties indicate their acceptance of the
		foregoing arbitration requirement by initialing below:
	 

	 
		 
	 

	 
			
				
				  For the Company
				

			 	
				
				   
				

			 	
				
				  Executive
				

			 

 

	 
		 
	 

	 
		IN WITNESS WHEREOF, the parties hereto have
		executed this Agreement as of the day and year first above written.
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  MDWERKS, INC.
				

			 
	
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				  
 /s/ Vincent Colangelo
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: 
				

			 	
				
				  Vincent Colangelo
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Title:
				

			 	
				
				  Chief Financial Officer
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  EXECUTIVE
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				               /s/
				  Stephen M. Weiss
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: 
				

			 	
				
				  Stephen M. Weiss
				

			 

 

	 
		 
	 

	 
		 
	 

	 
		12exv4w1

 

Exhibit 4.1

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.

          (e) 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 ___, 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 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.

	 	 	 	 	 	 	 
	 	 	 	 	Percentage	 	 
	Transferees	 	Address	 	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:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	[TRANSFEREE]

	 	 	 	(address)	 	 
	 
	 	 	 	 	 	 
	 

(Name)

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