Document:

Exhibit 10.1

 

LIME ENERGY CO.

 

PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

 

This Preferred Stock And Warrant Purchase Agreement (this “Agreement”) is dated and effective as of September 23, 2013, by and among Lime Energy Co., a Delaware corporation (the “Company”), and the investors listed on Schedule 2.2 of this Agreement (each, a “Purchaser” and collectively, the “Purchasers”).

 

Recitals

 

A.                                    The Company desires to sell and issue to the Purchasers as of the date hereof or at “Subsequent Closings” (as hereinafter defined), an aggregate of up to 927,992 shares of the Company’s Series A Preferred Convertible Stock (the “Preferred Shares”), which Preferred Shares are convertible into shares of Company common stock, par value $0.0001 per share (the “Common Stock”), and warrants exercisable for up to 1,851,851 shares (subject to adjustment) of Common Stock (the “Warrants”), as more particularly set forth on Schedule 2.2 hereto, in exchange for the aggregate purchase price (for each Purchaser, the “Purchase Price”) set forth opposite such Purchaser’s name on Schedule 2.2 hereto.

 

B.                                    Each Purchaser desires to purchase and acquire the Preferred Shares and the Warrants, as set forth opposite such Purchaser’s name of Schedule 2.2 hereto.

 

NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 

Agreement

 

1.                                      Defined Terms.  The terms defined in this Section 1 and parenthetically elsewhere in this Agreement shall have such defined meaning throughout this Agreement.

 

1.1                               “Affiliate” of a Person shall mean any Person that directly or indirectly, Controls, is Controlled by, or is under common Control with, the Person in question.

 

1.2                               “Agreement” shall mean this Preferred Stock and Warrant Purchase Agreement.

 

1.3                               “Company” shall mean Lime Energy Co., a Delaware corporation.

 

1.4                               “Control” shall mean the power to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise.

 

1.5                               “Conversion Shares” shall mean the shares of Common Stock into which the Preferred Stock may be converted.

 

1.6                               “Convertible Notes” shall mean the Company’s 2012 Subordinated Second Convertible Pay-in-Kind Notes due 2017.

 

1.7                               “Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan;

 

 

(ii) a registration relating to an transaction within SEC Rule 145; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

1.8                               “Lien” shall mean, with respect to any property or asset (whether tangible or intangible), any mortgage, lien, pledge, charge, security interest, encumbrance, or other adverse claim of any kind in respect of such property or asset.

 

1.9                               “Material Adverse Effect” shall mean any material adverse change in, or material adverse effect on, the business, assets, results of operations, value, financial or other condition of the Company and its Subsidiaries taken as a whole, or any event or circumstance that could reasonably be expected to have any such effect or that could reasonably be expected to prevent, hinder or delay the consummation of any of the transactions contemplated by this Agreement or any of the other documents, instruments or agreements contemplated hereby.

 

1.10                        “Person” shall mean an individual, corporation, partnership, limited liability company, association, trust, or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

1.11                        “Registrable Securities” means the Common Stock issuable or issued upon conversion of the Preferred Stock and upon the exercise of the Warrants.

 

1.12                        “SEC” shall mean the United States Securities and Exchange Commission.

 

1.13                        “Securities Act” shall mean the Securities Act of 1933, as amended.

 

1.14                        “Subsidiary” shall mean any corporation, partnership, or other entity that is owned, in whole or in part, by the Company.

 

1.15                        “Taxes” shall mean any federal, state, local, or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, severance, stamp, occupation, premium, windfall profit, customs, duties, real property, personal property, capital stock, intangibles, social security, unemployment, disability, payroll, license, employee, or other tax or levy, of any kind whatsoever, including any interest, penalties, or additions to tax in respect of the foregoing.

 

1.16                        “Warrant Shares” shall mean the shares of Common Stock issuable upon exercise of the Warrants.

 

2.                                      Purchase and Sale of Securities.

 

2.1                               Authorization.  On or prior to the closing of the transactions contemplated hereby, the Company shall have authorized (i) the sale and issuance to each Purchaser of the Preferred Stock and Warrants (collectively, the “Securities”); (ii) the sale and issuance of the Warrant Shares upon the exercise of the Warrants; and (iii) the issuance of the Conversion Shares upon conversion of the Preferred Stock, except that with respect to subparagraphs (ii) and (iii), such authorization shall be contingent upon the Company’s further amendment to its Certificate of Incorporation to increase the authorized number of shares of Common Stock.

 

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2.2                               Sale and Issuance.  Subject to the terms and conditions set forth in this Agreement, each Purchaser agrees to purchase at Closing (as hereinafter defined), and the Company agrees to sell and issue to each Purchaser at Closing, that number of Preferred Stock and Warrants set forth opposite such Purchaser’s name on Schedule 2.2 hereto for the aggregate Purchase Price set forth thereon, which Purchase Price shall comprise cash (the “Cash Purchase Price”) and Convertible Notes held by such Purchaser (the “Exchanged Notes”).  The per share exercise price of the Warrants, and the initial conversion price of the Preferred Stock is set forth opposite each Purchaser’s name on Schedule 2.2 hereto.

 

2.3                               Closings; Delivery of Certificates.

 

(a)                                 Closing.  The purchase and sale of the Preferred Stock and Warrants shall take place at one or more closings (each, a “Closing”).  The first Closing (the “First Closing”) shall take place on September 2013, 2013 at the offices of Greenberg Glusker Fields Claman & Machtinger, LLP, 1900 Avenue of the Stars, Suite 2100, Los Angeles, California 90067, or at such other time and place mutually agreeable to the Company and the applicable Purchasers.  Subsequent Closings (each a “Subsequent Closing”) shall take place at times and places mutually agreeable to the Company and the applicable Purchasers; provided, that the terms of sale consummated at each Subsequent Closing shall be the same in all material respects as the terms of sale contained herein but not prior to the date that the conditions for such Closing set forth in Section 5 below have been satisfied or waived by the appropriate party; provided, further, that no Subsequent Closing shall take place later than December 31, 2013.

 

(b)                                 Delivery.  On each Closing Date, (i) each Purchaser shall remit its respective Cash Purchase Price to the Company via check or wire transfer in accordance with written instructions provided by the Company and deliver to the Company its Exchanged Notes, and (ii) the Company shall deliver to each Purchaser a certificate for Preferred Shares (“Preferred Stock Certificates”) representing the Preferred Shares purchased by such Purchaser, registered in the name of such Purchaser, and a Warrant, substantially in the form of Exhibit A, representing the Warrants purchased by such Purchaser.  Upon the delivery of the Preferred Stock Certificates, the Exchanged Notes shall be deemed paid in full and the Company shall be authorized to so mark the Exchanged Notes.

 

3.                                      Representations and Warranties of the Company.  Except as set forth in the Schedule of Exceptions attached hereto as Schedule 3 (the “Schedule of Exceptions”), the Company hereby makes the following representations and warranties to the Purchasers as of the applicable Closing Date, unless stated as of an alternate date.

 

3.1                               Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which qualification is required, except where the failure to so qualify, individually or in the aggregate, would not have a Material Adverse Effect.

 

3.2                               Capitalization and Voting Rights.  As of the First Closing, the authorized capital stock of the Company consists of the following:

 

(a)                                 Preferred Stock.  5,000,000 shares of preferred stock, par value $0.01 per share, all of which are undesignated, and none of which are issued and outstanding.

 

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(b)                                 Common Stock.  50,000,000 shares of common stock, par value $0.0001 per share (“Common Stock”), of which 25,152,693 shares are issued and outstanding as of September 4, 2013.

 

(c)                                  Other Rights.  Except for (i) currently outstanding warrants to purchase 4,805,802 shares of Common Stock, (ii) stock options exercisable for up to 3,232,459  shares of Common Stock, (iii) an aggregate of 1,793,911 shares of Common Stock reserved under the Company’s 2008 Long-Term Incentive Plan and 2010 Non-Employee Director Stock Plan, and (iv) 9,194,895 shares of Common Stock issuable upon conversion of the Convertible Notes (including accrued interest through September 11, 2013 and assuming such interest is paid in kind), there are not outstanding any options, warrants, rights (including purchase, conversion or preemptive rights), calls, commitments, subscription rights, exchange rights, profit participation, or other agreements for the purchase or acquisition from the Company, or similar rights to acquire from the Company or similar obligations of the Company to issue, any shares of its capital stock.

 

3.3                               Subsidiaries.  Each of the Company’s Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.  Each of the Company’s Subsidiaries is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

3.4                               Authorization.  The Company has all requisite power and authority to execute and deliver this Agreement and perform its obligations thereunder, except as set forth on the Schedule of Exceptions and in Sections 7.2 and 7.3.  All corporate action on the part of the Company and its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company thereunder, and the authorization, issuance, sale and delivery of the Preferred Stock and the Warrants pursuant to this Agreement, the Conversion Shares upon conversion of the Preferred Stock, and the Warrant Shares pursuant to the Warrants has been taken or will be taken prior to the Closing, except as set forth in the Schedule of Exceptions and in Section 7.2.  This Agreement has been duly executed and delivered by the Company, and assuming that it has been duly executed and delivered by the applicable Purchaser, constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.  The sale of the Preferred Stock and the Warrants, the issuance of the Conversion Shares and the Warrant Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

 

3.5                               Valid Issuance of Preferred Stock, Warrants, Conversion Shares and Warrant Shares.  The Preferred Shares and the Warrants, when issued, sold and delivered in accordance with the terms of this Agreement for the Purchase Price, and with respect to the Warrant Shares, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration set forth in the Warrants, and with respect to the Conversion Shares, when issued upon conversion of the Preferred Shares in accordance with the terms of the Preferred Shares, respectively, will be duly and validly issued, fully paid, and nonassessable, and will be free of all Liens and restrictions on transfer other than the restrictions on transfer contained in this Agreement, and under applicable state and federal securities laws.  The Conversion Shares and the Warrant Shares shall be duly and validly reserved for issuance consistent with Sections 2.1, 7.2 and 7.3.

 

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3.6                               Offering.  Subject to the truth and accuracy of each Purchaser’s representations set forth in Section 4 of this Agreement, the offer, sale and issuance by the Company of the Preferred Stock, the Warrants, the Conversion Shares, and the Warrant Shares will be exempt from the registration requirements of the Securities Act, and are exempt from registration and qualification under the registration, permit or qualification requirements of all applicable securities laws of any state of the United States.

 

3.7                               Litigation.  There is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company or its Subsidiaries, as the case may be, that questions the validity of this Agreement, the Preferred Stock, or the Warrants or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in a Material Adverse Effect.

 

3.8                               Registration Rights.  The Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity.

 

3.9                               Investment Company.  The Company is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

3.10                        Offering Materials.  The Company has not distributed and will not distribute prior to the Closing Date any offering material, including any “free writing prospectus” (as defined in Rule 405 promulgated under the Securities Act), in connection with the offering and sale of the Securities.

 

3.11                        Foreign Corrupt Practices.  Neither the Company, nor any Subsidiary, nor, to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any Subsidiary has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

4.                                      Representations and Warranties of Purchasers.  Each Purchaser, severally but not jointly, hereby represents and warrants as of the applicable Closing Date that:

 

4.1                               Authorization.  It has the full power and authority to enter into this Agreement, and (assuming due execution by the Company and the other parties to such agreements) such agreement constitutes its valid and legally binding obligation, enforceable against it in accordance with its terms.

 

4.2                               Purchase Entirely for Own Account.  The Securities are being acquired for investment for the Purchaser’s own account, not as a nominee or agent and not with a view to the resale or distribution of any part thereof.

 

4.3                               Disclosure of Information.  Prior to the time of purchase of any Securities, the Purchaser received a copy of this Agreement.  The Purchaser has reviewed this Agreement, and has had the opportunity to ask questions and receive any additional information from persons acting on behalf of the Company to verify the Purchaser’s understanding of the terms thereof and of the Company’s business

 

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and status thereof.  The Purchaser acknowledges that no officer, director, attorney, broker-dealer, placement agent, finder or other person affiliated with the Company has given the Purchaser any information or made any representations, oral or written, other than as expressly provided in this Agreement, on which the Purchaser has relied upon in deciding to invest in the Securities, including without limitation, any information with respect to future acquisitions, mergers or operations of the Company or the economic returns which may accrue as a result of the purchase of the Securities.  The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 3 of this Agreement or the right of the Purchaser to rely thereon.  The Purchaser acknowledges and agrees that this Agreement contains all representations and warranties made by the Company to the Purchaser in connection with the offering, sale and purchase of the Securities.

 

4.4                               Investment Experience.  The Purchaser understands that the purchase of the Securities involves substantial risk.  It is an investor in securities of companies in the developmental stage and acknowledges that it can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of its investment in the Securities.  The Purchaser also represents it has not been organized for the purpose of acquiring the Securities.

 

4.5                               No General Solicitation.  The Purchaser acknowledges that it has not seen, received, been presented with, or been solicited by any leaflet, public promotional meeting, newspaper or magazine article or advertisement, radio or television advertisement, or any other form of advertising or general solicitation with respect to the Securities.

 

4.6                               Accredited Purchaser.  Each U.S. Purchaser represents and warrants that it is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D, as presently in effect and such U.S. Purchaser has executed the Certificate of Accredited Purchaser Status, attached hereto as Exhibit B.

 

4.7                               Restricted Securities.  The Purchaser acknowledges and understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances.  The Purchaser acknowledges that the Company has no obligation to file a registration statement regarding Purchaser’s resale of the Securities.  In this connection, the Purchaser represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby.  The Purchaser understands that Purchaser must hold the Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares indefinitely unless such Securities, as applicable, are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

 

4.8                               Public Information.  The Purchaser understands that the Company has not agreed with the Purchaser to comply with the public information or other provisions of SEC Rule 144 or any other exemption under federal or state law respecting the resale or other transfer of the Securities.

 

4.9                               SEC Reports.  The Purchaser acknowledges that it has had access to and has reviewed the following (collectively, the “Disclosure Documents”): (i) the Company’s Annual Report on Form

 

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10-K for the year ended December 31, 2012, including, without limitation, the section captioned “Factors That May Affect The Company” regarding risk factors associated with an investment in the Company, (ii) the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and (iii) the Company’s Forms 8-K filed August 19, 2013; August 23, 2013; and August 30, 2013, respectively, all as filed with the SEC.  In making this investment, the Purchaser has not relied upon any information not included in the Disclosure Documents, and the Purchaser has not relied upon any representations or warranties made by the Company, any other director or officer thereof, except as expressly set forth in this Agreement.

 

4.10                        Consultation With Own Attorney.  The Purchaser has been advised to consult with its own attorney and other financial and tax advisers regarding all legal matters concerning an investment in the Company and the tax consequences of purchasing the Securities, and has done so, to the extent such Purchaser considers necessary.

 

4.11                        Tax Consequences.  The Purchaser acknowledges that the tax consequences of investing in the Company will depend on particular circumstances, and neither the Company, the Company’s officers, any other investors, nor the partners, shareholders, members, managers, agents, officers, directors, employees, affiliates or consultants of any of them, will be responsible or liable for the tax consequences to the Purchaser of an investment in the Company.  The Purchaser has relied solely upon its own advisers with respect to the tax consequences of this investment.

 

4.12                        Information Provided by Purchaser(s).  All information which each Purchaser has provided to the Company concerning the Purchaser, its financial position and its knowledge of financial and business matters, and any information found in the Certificate of Accredited Purchaser Status, is truthful, accurate, correct, and complete as of the date set forth herein.

 

4.13                        Legends.  The Purchaser understands that the certificates evidencing its Securities may bear a legend substantially similar to the following, and other legends as may be determined by the Company upon consultation with its legal counsel:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”

 

4.14                        Patriot Act.  All capitalized words and phrases and all defined terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001) and in other statutes and all orders, rules and regulations of the United States government and its various executive departments, agencies and offices related to the subject matter of the Patriot Act, including Executive Order 13224 effective September 24, 2001 (collectively referred as the “Patriot Act”) are incorporated into this Section.  The Purchaser and each and every Person affiliated with such Purchaser is:  (i) not a “blocked” person listed in the Annex to Executive Order Nos. 12947, 13099 and 13224 and all modifications thereto or thereof (as used in this Section only, the “Annex”); (ii) in full compliance with the requirements of the Patriot Act and all other requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“OFAC”); (iii) not in receipt of any notice from the Secretary of State or the Attorney General of the United States or any other department, agency or office of the United States claiming a violation or possible violation of the Patriot Act; and (iv) not listed as a Specially Designated Terrorist or

 

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as a “blocked” person on any lists maintained by the OFAC pursuant to the Patriot Act or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of the OFAC issued pursuant to the Patriot Act or on any other list of terrorists or terrorist organizations maintained pursuant to the Patriot Act.

 

5.                                      Conditions of Purchasers’ Obligations at Closing.  The obligations of the Purchaser participating in the First Closing are subject to the fulfillment, on or before the First Closing, of each of the following conditions, the waiver of which shall not be effective against such Purchaser who does not consent thereto (and the obligations of the Purchasers who participate in a Subsequent Closing are subject to the fulfillment, on or before such applicable Subsequent Closing, of each of the following conditions, the waiver of which shall not be effective against any Purchaser who does not consent thereto):

 

5.1                               Secretary’s Certificate.  Company shall have delivered to the Purchasers a certificate executed by the Company’s Secretary dated as of such Closing Date, certifying the resolutions adopted by the Board of Directors of the Company, approving the transactions contemplated by this Agreement and the issuance of the Preferred Stock and the Warrants, certifying the current versions of its Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and authority of persons signing this Agreement, the Preferred Stock, the Warrants and related documents on behalf of the Company.

 

5.2                               Representations and Warranties.  The representations and warranties of the Company contained in Section 3 shall be true and correct as of the Closing Date.

 

5.3                               Performance.  The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on, or prior to, the Closing Date.

 

5.4                               Qualifications.  All authorizations, approvals, consents or permits, if any, of any Person that are required in connection with the lawful issuance and sale of the Preferred Stock, Conversion Shares, Warrants and the Warrant Shares, pursuant to this Agreement shall be duly obtained and effective as of the Closing Date.

 

5.5                               No Material Adverse Change.  Except as set forth in the Schedule of Exceptions, nothing shall have occurred or be threatened that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

6.                                      Conditions of the Company’s Obligations at Closing.  The obligations of the Company to each Purchaser as of the applicable Closing Date are subject to the fulfillment on or prior to the applicable Closing Date of each of the following conditions by that Purchaser:

 

6.1                               Representations and Warranties.  The representations and warranties of each Purchaser contained in Section 4 shall be true and correct as of the applicable Closing Date.

 

6.2                               Payment of Purchase Price.  Each Purchaser shall have delivered its Purchase Price.

 

6.3                               Performance.  Each Purchaser shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on, or prior to, the Closing Date.

 

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7.                                      Post-Closing Covenants.

 

7.1                               Consent Notice.  The Company shall solicit consent of the holders of its Common Stock to enable an increase in the authorized number of shares of Common Stock in order to, at a minimum, issue shares of Common Stock upon conversion of the Preferred Stock as well as shares of Common Stock upon exercise of the Warrants.  The Company covenants to seek such stockholder approval and file the appropriate documentation with the Delaware Secretary of State to increase the Company’s authorized number of shares of Common Stock by December 31, 2013.

 

7.2                               Purchasers’ Covenant Not to Exercise Warrants or Convert Preferred Stock Until Additional Common Stock is Authorized.  Each Purchaser acknowledges that until the Company completes the consent to increase the Company’s authorized number of shares of Common Stock and files the appropriate documentation with the Delaware Secretary of State, the Company may not have sufficient authorized and unissued shares of Common Stock to satisfy the conversion of the Preferred Stock and/or the exercise of Warrants.  Each Purchaser hereby agrees that it will not convert any of its Preferred Stock nor will it exercise any Warrants until such time as the Company obtains stockholder approval to an increase in the authorized number of shares of Common Stock and has filed the appropriate documentation with the Delaware Secretary of State to increase its authorized Common Stock.

 

7.3                               Purchaser’s Covenant Not to Exercise Warrants or Convert Preferred Stock in Excess of Share Cap.

 

(a)                                 Each Purchaser hereby covenants that it shall not convert any Preferred Stock or exercise any Warrant unless and until the Company obtains the approval of its stockholders as required by the applicable Marketplace Rules of The NASDAQ Stock Market for issuances of shares of Common Stock pursuant to the terms of the Preferred Stock and Warrants  (the “Stockholder Approval”).  In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Preferred Stock or Warrants, the restrictions of the prior sentence shall apply to such transferee and no such transfer shall be made unless the transferee agrees to be bound thereby.  The Company shall not be obligated to issue any Registrable Securities unless and until the Company obtains the Stockholder Approval. The Company covenants to seek the Stockholder Approval by December 31, 2013.

 

(b)                                 In addition to any other legend required or permitted hereby, the Preferred Stock Certificates shall bear a legend substantially similar to the following:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY AND WHICH MAY BE OBTAINED UPON REQUEST THERETO, AND MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH SUCH RESTRICTIONS.”

 

7.4                               Blue Sky Filings.  The Company shall file documents required of the Company for normal Blue Sky clearance in states specified in writing by the Purchasers; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented.

 

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7.5                               Securities Act Filings.  The Company shall file a Form D with respect to the Securities as required under Regulation D under the Securities Act.

 

7.6                               Registration Rights.  If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Purchasers) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Purchaser notice of such registration.  Upon the request of each Purchaser given within twenty (20) days after such notice is given by the Company, the Company shall cause to be registered all of the Registrable Securities that each such Purchaser has requested to be included in such registration; provided, however, that in connection with any offering involving an underwriting of shares of Common Stock, the Company shall not be required to include any of the Purchasers’ Registrable Securities in such underwriting unless the Purchasers accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company.  If the total number of securities, including Registrable Securities, requested by Purchaser to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering.  If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Purchasers in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Purchaser or in such other proportions as shall mutually be agreed to by all such selling Purchasers.  Notwithstanding the foregoing, in no event shall the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 7.6 before the effective date of such registration, whether or not any Purchaser has elected to include Registrable Securities in such registration.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 7.6 with respect to the Registrable Securities of any selling Purchaser that such Purchaser shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Purchaser’s Registrable Securities.

 

8.                                      Indemnification.

 

8.1                               Company Indemnity.  In consideration of each Purchaser’s execution and delivery of this Agreement and purchase of the Preferred Stock and Warrants hereunder and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, indemnify and hold harmless each Purchaser and all its stockholders, partners, members, officers, directors, employees and its agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Purchaser Indemnitees”) from and against any and all actions, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith, and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Purchaser Indemnitee as a result of, or arising out of, or relating to (a) any claims brought by such Purchaser Indemnitee arising out of any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or any Closing certificate delivered to Purchaser as a condition to Closing, (b) any claims brought by such Purchaser Indemnitee arising out of any breach of any covenant, agreement or obligation of the Company contained

 

10

 

in this Agreement or any other Closing certificate delivered to Purchaser as a condition to Closing, or (c) any cause of action, suit or claim brought or made against such Purchaser Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other certificate, instrument or document contemplated hereby or thereby.  The Company shall not be obligated to indemnify a Purchaser Indemnitee pursuant to this Section 8.1 for Indemnified Liabilities to the extent such Indemnified Liabilities are caused by acts of gross negligence or willful misconduct on the part of such Purchaser Indemnitee.  To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.

 

8.2                               Procedure.  Each Purchaser Indemnitee entitled to indemnification under Section 8.1 shall give notice to the Company required to provide indemnification promptly after such Purchaser Indemnitee has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Company to assume the defense of any such claim in any litigation resulting therefrom, provided that counsel for the Company, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Purchaser Indemnitee (whose approval shall not be unreasonably withheld) and the Purchaser Indemnitee may participate in such defense at its own expense, and provided further that the failure of any Purchaser Indemnitee to give notice as provided herein shall not relieve the Company of its obligations under Section 8.1 except to the extent that the Company is materially and adversely affected by such failure to provide notice.  The Company, in the defense of any such claim or litigation, shall, except with the consent of each Purchaser Indemnitee, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof a release of such Purchaser Indemnitee from all liability in respect to such claim or litigation.  Each Purchaser Indemnitee shall furnish such non-privileged information regarding itself or the claim in questions as the Company may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

 

8.3                               Survival.  The indemnity and contribution agreements contained in Section 8.1 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement and (ii) the consummation of the sale or successive resales of the Securities.

 

9.                                      Miscellaneous.

 

9.1                               Survival of Warranties.  The warranties, representations and covenants of the Company and Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and each Closing for a period of twelve (12) months after such Closing.

 

9.2                               Subsequent Closings.  Notwithstanding anything to the contrary contained herein, if the Company shall issue additional Preferred Stock and Warrants pursuant to this Agreement, any Purchaser of such Shares and Warrants may become a party to this Agreement and shall be bound by the terms and conditions hereof as of the applicable Closing Date by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed a “Purchaser” hereunder as of the applicable Closing Date.

 

9.3                               Assignment of Preferred Stock and/or Warrants.  Each Purchaser shall be entitled to transfer all or a part of its Shares and/or Warrants purchased by it to one or more affiliated partnerships or funds managed by it or any of their respective directors, officers or partners, provided any such transferee agrees in writing to be subject to the terms of this Agreement and related agreements as if it were a Purchaser hereunder or thereunder.

 

11

 

9.4                               Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of, and be binding upon, the respective successors and permitted assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under, or by reason of, this Agreement, except as expressly provided in this Agreement.

 

9.5                               Governing Law and Jurisdiction.  This Agreement shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware.  The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Illinois for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement.  Nothing contained herein shall be deemed or operate to preclude the Purchaser from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Purchaser, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Purchaser.

 

9.6                               Counterparts and Facsimile Signatures.  This Agreement may be executed manually or by facsimile or electronic signature and in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.

 

9.7                               Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

9.8                               Notices.  Except as otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party, (b) when received by facsimile at the address and number for such party set forth on the signature page hereto, or (c) the next business day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties as set forth on the signature page below, with next business day delivery guaranteed.  A party may change or supplement its addresses for the purposes of receiving notice pursuant to this Section 9.8 by giving the other parties written notice of the new address in the manner set forth above.

 

9.9                               Finder’s Fee.  Each party represents that it neither is nor will be obligated for any brokers’ fee, finders’ fee or similar compensation in connection with this transaction.  Each Purchaser agrees to indemnify and hold harmless the Company from any liability for any commission or

 

12

 

compensation in the nature of a brokers’ fee, finders’ fee or similar compensation (and the costs and expenses of defending against such liability or asserted liability) for which such Purchaser or any of its officers, partners, employees or representatives is responsible, and the Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a brokers’ fee, finder’s fee or similar compensation (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

 

9.10                        Expenses.  Each Purchaser and the Company shall bear its own fees and expenses in connection with this transaction.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the Preferred Stock or the Warrants, the prevailing party as determined specifically by the court shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

 

9.11                        Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the then outstanding Preferred Stock.  Any amendment or waiver effected in accordance with this Section 9.11 shall be binding upon each holder of Preferred Stock.

 

9.12                        Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

9.13                        Further Assurances.  The Company and the Purchasers shall take all further actions and execute and deliver all further documents that are reasonably be required to effect the transactions contemplated by this Agreement.

 

9.14                        Entire Agreement.  This Agreement and the documents referred to herein constitute the entire agreement and understanding among the parties hereto and supersede all prior and contemporaneous negotiations and agreements between the parties regarding the subject matter hereof, whether oral or written.

 

9.15                        Publicity.  Except as may be required by applicable law, including federal securities laws, none of the parties hereto shall issue a publicity release or announcement or otherwise make a public disclosure concerning this Agreement or the transactions contemplated hereby, without prior approval by the other parties hereto.  Notwithstanding the foregoing, the Company shall be entitled to issue press release(s) regarding such transactions upon the Closing, provided that the Company will deliver a draft of such press release(s) to each Purchaser who invests at the First Closing and shall give such Purchaser an opportunity to comment thereon, and legal counsel for the Company may publish a standard tombstone as to the transactions herein so long as it omits the name of the Purchasers.

 

9.16                        Independent Counsel.  Each Purchaser confirms that either he or it has consulted with separate legal counsel or has determined of his or its free will not to obtain such separate representation.  Each Purchaser acknowledges that legal counsel for the Company has not represented such Purchaser in connection with this Agreement, the Preferred Stock, the Warrants, or the transactions contemplated hereby or thereby.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

13

 

IN WITNESS WHEREOF, the parties have executed this Preferred Stock and Warrant Purchase Agreement as of the date first above written.

 

 

 

	
“COMPANY”
    	
 
    	
“PURCHASER”
    
	
 
    	
 
    	
 
    
	
LIME ENERGY CO.
    	
 
    	
PURCHASER
    
	
 
    	
 
    	
SIGNATURE PAGE
    
	
 
    	
 
    	
ATTACHED
    
	
By:
    	
/s/   John O’Rourke
    	
 
    	
 
    
	
Name:
    	
John   O’Rourke
    	
 
    	
 
    
	
Title:
    	
Chief   Executive Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ Jeffrey Mistarz
    	
 
    	
 
    
	
Name:
    	
Jeffrey   Mistarz
    	
 
    	
 
    
	
Title:
    	
Chief   Financial Officer
    	
 
    	
 
    

 

Purchaser Signature Page to Preferred Stock and Warrant Purchase Agreement

 

 

SIGNATURE PAGE TO

CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT

 

The undersigned Purchaser, by signing and returning this signature page, irrevocably commits to the purchase of the number of shares of Preferred Stock and Warrants set forth below, subject to the terms and conditions of this Preferred Stock and Warrant Purchase Agreement, the Preferred Stock and the Warrants and hereby delivers to the Company, by wire transfer or check made payable to “Lime Energy Co.” the Cash Purchase Price and the Exchanged Notes.  The undersigned Purchaser further understands and agrees that while it is irrevocably committed to purchase the number of shares of Preferred Stock and Warrants subscribed for hereby, subject to the terms and conditions of this Preferred Stock and Warrant Purchase Agreement, the Preferred Stock and the Warrants, the Company may reject this subscription, in whole or in part, for any reason and refund to the undersigned Purchaser all or any portion of the Purchase Price, without deduction or interest.

 

	
PURCHASER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Cash   Purchase Price
    	
 
    	
$
    
	
 
    	
 
    	
 
    
	
Principal   Amount of Exchanged Notes
    	
 
    	
$
    
	
 
    	
 
    	
 
    
	
Total   Purchase Price
    	
 
    	
$
    

 

Forms of Ownership.  Please indicate the form of ownership you desire for the Preferred Stock.

 

Individual (one signature required

 

Joint Tenants with right survivorship (both parties must sign)

 

Tenants in common (both parties must sign)

 

Community Property (one signature required if interest held in one name, i.e., managing spouse; two signatures required if interest is held in both names)

 

Corporation or Limited Liability Company (signature of authorized party or parties)

 

Partnership (signature of general partner and additional signatures if required by partnership agreement)

 

Trust (signature of trustee and additional signatories if required by trust instrument)

 

 

Please PRINT the exact name (registration) investor

desires for the Preferred Stock.

 

Purchaser Signature Page to Preferred Stock and Warrant Purchase Agreement

 

 

SIGNATURE BY INDIVIDUAL SUBSCRIBERS

 

 

	
 
    	
 
    	
 
    
	
Signature
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Social   Security Number
    	
 
    	
Social   Security Number
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Print   or Type Name
    	
 
    	
Print   or Type Name
    
	
 
    	
 
    	
 
    
	
Executed   at:
    	
 
    	
Executed   at:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
City
    	
State
    	
Zip
    	
 
    	
City
    	
State   
    	
Zip
    
	
 
    	
 
    	
 
    
	
this              day of                               ,   2012
    	
 
    	
this              day of                               ,   2012
    
							

 

SIGNATURE BY CORPORATION, PARTNERSHIP OR TRUST

On Next Page

 

Individual Subscriber Signature Page to Preferred Stock and Warrant Purchase Agreement

 

 

SIGNATURE BY CORPORATION,

 

PARTNERSHIP OR TRUST SUBSCRIBERS

 

 

Name of Corporation, Partnership or Trust (Please Print or Type)

 

 

	
By:
    	
 
    	
 
    
	
 
    	
Signature   of Authorized Agent
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
				

 

Taxpayer Identification No.

 

Executed at:                                ,                                       this          day of                                                  , 2012.

 

Individual Subscriber Signature Page to Preferred Stock and Warrant Purchase Agreement

 

 

SCHEDULE 2.2

 

Schedule of Purchasers

 

	
Purchaser
    	
 
    	
Cash
   Purchase
   Price
    	
 
    	
Total Amount of
   Convertible Notes
   Exchanged, including
   accrued but unpaid
   interest
    	
 
    	
Number of
   Preferred Shares
   Purchased
    	
 
    	
Number of
   Warrants
   Purchased
    	
 
    	
Initial
   Conversion
   Price
    	
 
    	
Initial
   Warrant
   Exercise
   Price
    	
 
    
	
Richard Kiphart
    	
 
    	
$
    	
2,000,000
    	
 
    	
$
    	
2,797,749.88
    	
 
    	
479,774
    	
 
    	
1,481,481
    	
 
    	
$
    	
0.   
    	
 
    	
$
    	
0.   
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
The John Thomas Hurvis Revocable Trust
    	
 
    	
$
    	
500,000
    	
 
    	
$
    	
2,797,749.88
    	
 
    	
329,774
    	
 
    	
370,370
    	
 
    	
$
    	
0.   
    	
 
    	
$
    	
0.   
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Nettlestone Enterprises Limited
    	
 
    	
—
    	
 
    	
$
    	
1,117,602.08
    	
 
    	
111,760
    	
 
    	
0
    	
 
    	
$
    	
0.   
    	
 
    	
$
    	
—   
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Christopher Capps
    	
 
    	
—
    	
 
    	
$
    	
66,848.01
    	
 
    	
6,684
    	
 
    	
0
    	
 
    	
$
    	
0.   
    	
 
    	
$
    	
—   
    	
 
    

 

 

SCHEDULE 3

 

Schedule of Exceptions

 

Section 3.4                                    Authorization

 

As disclosed in and contemplated by Sections 2.1, 7.1 and 7.2 of the Agreement, the Company does not have sufficient authorized Common Stock to honor all outstanding convertible and exercisable rights for Common Stock, but has agreed to seek stockholder approval for an increase in the authorized shares of Common Stock to cover all such obligations pursuant to Section 7.2 of the Agreement.

 

As disclosed in and contemplated by Sections 2.1 and 7.3 of the Agreement, the Company must obtain the approval of its stockholders as required by the applicable Marketplace Rules of The NASDAQ Stock Market for issuances of shares of Registrable Securities in excess of the Share Cap described in Section 7.3.

 

 

Section 3.7                                    Litigation.

 

Shareholder and Derivative Action Lawsuits:

 

Satterfield v. Lime Energy Co., et al.

 

Kuberski v. Lime Energy Co., et al.

 

 

EXHIBIT A

 

FORM OF WARRANT

 

 

EXHIBIT B

 

CERTIFICATE OF ACCREDITED INVESTOR STATUS

 

Except as may be indicated by the undersigned below, the undersigned is an “accredited investor,” as that term is defined in Regulation D under the Securities Act of 1933, as amended (the “Securities Act”).  The undersigned has initialed the spaces below indicating the basis on which he is representing his status as an “accredited investor”:

 

a bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”); an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, and such plan has total assets in excess of US$5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are “accredited investors;”

 

a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

 

an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000;

 

a natural person whose individual net worth, or joint net worth with the undersigned’s spouse, at the time of this purchase exceeds US$1,000,000 (excluding the market value of personal residence);

 

a natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with the undersigned’s spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

 

a trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment;

 

an entity in which all of the equity holders are “accredited investors” by virtue of their meeting one or more of the above standards; or

 

an individual who is a director or executive officer of Lime Energy Co.

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Accredited Purchaser Status effective as of                                     , 2012.

 

 

	
 
    	
PURCHASER
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:EX 10.1

Exhibit 10.1

NORTHROP GRUMMAN CORPORATION
TERMS AND CONDITIONS APPLICABLE TO 
2013 RESTRICTED STOCK RIGHTS
GRANTED UNDER THE 2011 LONG-TERM INCENTIVE STOCK PLAN

These Terms and Conditions (“Terms”) apply to certain “Restricted Stock Rights” (“RSRs”) granted by Northrop Grumman Corporation (the “Company”) to James F. Palmer in 2013 under its 2011 Long-Term Incentive Stock Plan.  The date of grant of the RSR award is September 17, 2013 (the “Grant Date”) and the number of RSRs applicable to the award is 20,253.  The date of grant and number of RSRs are also reflected in the electronic stock plan award recordkeeping system (“Stock Plan System”) maintained by the Company or its designee.  These Terms apply only with respect to this special 2013 RSR award identified above.  You are referred to as the “Grantee” with respect to your award.  Capitalized terms are generally defined in Section 12 below if not otherwise defined herein.
Each RSR represents a right to receive one share of the Company's Common Stock, or cash of equivalent value as provided herein, subject to vesting as provided herein.  The number of RSRs subject to your award is subject to adjustment as provided herein.  The RSR award is subject to all of the terms and conditions set forth in these Terms, and is further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Committee, as such rules are in effect from time to time.

		
	1.
	Vesting; Issuance of Shares.

Subject to Sections 2 and 6 below, one hundred percent (100%) of the number of RSRs (and any Dividend Equivalents (as defined below)) subject to your award (subject to adjustment as provided in Section 6.1) shall vest on March 1, 2015.
1.1   Payment of RSRs.  Except as otherwise provided below, the Company shall pay an RSR subject to the award that vests (“Vested RSR”) (and related Dividend Equivalents) within 60 days following the vesting of the RSR on March 1, 2015.  The Company shall pay such Vested RSRs in either an equivalent number of shares of Common Stock, or, in the discretion of the Committee, in cash or in a combination of shares of Common Stock and cash.  In the event of a cash payment, the amount of the payment for each Vested RSR to be paid in cash will equal the Fair Market Value (as defined below) of a share of Common Stock as of the date that such RSR became vested.  No fractional shares will be issued. 
1.2   Dividend Equivalents.  The Grantee shall be entitled to payment for Dividend Equivalents (if any) with respect to any Vested RSRs.  For purposes of these Terms, “Dividend Equivalents” means the aggregate amount of dividends paid by the Company on a number of shares of Common Stock equivalent to the number of Vested RSRs during the period from the Grant date until the date the Vested RSRs are paid without interest or other adjustments to reflect the time value of money.  Dividend Equivalents (if any) will be paid at the same time as the Vested RSRs to which they relate are paid.  Dividend Equivalents will be paid in cash.

 
		
	2.
	Early Termination of Award; Termination of Employment.

2.1    General.  The RSRs (and related Dividend Equivalents) subject to the award, to the extent not previously vested, shall terminate and become null and void if and when (a) the award terminates in connection with a Change in Control pursuant to Section 6 below, or (b) except as provided in Section 2.6 and in Section 6, the Grantee ceases for any reason to be an employee of the Company or one of its subsidiaries.
2.2    Leave of Absence.  Unless the Committee otherwise provides (at the time of the leave or otherwise), if the Grantee is granted a leave of absence by the Company, the Grantee (a) shall not be deemed to have incurred a termination of employment at the time such leave commences for purposes of the award, and (b) shall be deemed to be employed by the Company for the duration of such approved leave of absence for purposes of the award.  A termination of employment shall be deemed to have occurred if the Grantee does not timely return to active employment upon the expiration of such approved leave or if the Grantee commences a leave that is not approved by the Company.
2.3    Salary Continuation.  Subject to Section 2.2 above, the term “employment” as used herein means active employment by the Company and salary continuation without active employment (other than a leave of absence approved by the Company that is covered by Section 2.2) will not, in and of itself, constitute “employment” for purposes hereof (in the case of salary continuation without active employment, the Grantee's cessation of active employee status shall, subject to Section 2.2, be deemed to be a termination of “employment” for purposes hereof).  Furthermore, salary continuation will not, in and of itself, constitute a leave of absence approved by the Company for purposes of the award.

1

Exhibit 10.1

2.4    Sale or Spinoff of Subsidiary or Business Unit.  For purposes of the RSRs (and related Dividend Equivalents) subject to the award, a termination of employment of the Grantee shall be deemed to have occurred if the Grantee is employed by a subsidiary or business unit and that subsidiary or business unit is sold, spun off, or otherwise divested, the Grantee does not otherwise continue to be employed by the Company or one of its subsidiaries after such event, and the divested entity or business (or its successor or a parent company) does not assume the award in connection with such transaction.
2.5    Continuance of Employment Required.  Except as expressly provided in Section 2.6 and in Section 6, the vesting of the RSRs (and related Dividend Equivalents) subject to the award requires continued employment through March 1, 2015 as a condition to the vesting of any portion of the award.  Employment for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment.  Nothing contained in these Terms, the Stock Plan System, or the Plan constitutes an employment commitment by the Company or any subsidiary, affects the Grantee's status (if the Grantee is otherwise an at-will employee) as an employee at will who is subject to termination without cause, confers upon the Grantee any right to continue in the employ of the Company or any subsidiary, or interferes in any way with the right of the Company or of any subsidiary to terminate such employment at any time.
2.6    Death or Disability.  If the Grantee dies or incurs a Disability while employed by the Company or a subsidiary and such death or Disability occurs more than six months after the Grant Date, the outstanding and previously unvested RSRs (and related Dividend Equivalents) subject to the award shall vest as of the date of the Grantee's death or Disability, as applicable.  RSRs (and related Dividend Equivalents) vesting under this Section shall be paid within 60 days following the earlier of (a) Grantee's death or (b) Grantee's Disability, but in no event later than March 15 of the year following the date of the death or Disability.  In the event of the Grantee's death prior to the delivery of shares or other payment with respect to any vested RSRs (and related Dividend Equivalents), the Grantee's Successor shall be entitled to any payments to which the Grantee would have been entitled under these Terms with respect to such vested and unpaid RSRs (and related Dividend Equivalents).

 
		
	3.
	Non-Transferability and Other Restrictions.

3.1        Non-Transferability.  The award, as well as the RSRs (and related Dividend Equivalents) subject to the award, are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge.  The foregoing transfer restrictions shall not apply to transfers to the Company.  Notwithstanding the foregoing, the Company may honor any transfer required pursuant to the terms of a court order in a divorce or similar domestic relations matter to the extent that such transfer does not adversely affect the Company's ability to register the offer and sale of the underlying shares on a Form S-8 Registration Statement and such transfer is otherwise in compliance with all applicable legal, regulatory and listing requirements.
3.2        Recoupment of Awards.  Any payments or issuances of shares with respect to the award are subject to recoupment pursuant to the Company's Policy Regarding the Recoupment of Certain Performance-Based Compensation Payments as in effect from time to time, as well as any recoupment or similar provisions of applicable law, and the Grantee shall promptly make any reimbursement requested by the Board or Committee pursuant to such policy or applicable law with respect to the award.  Further, the Grantee agrees, by accepting the award, that the Company and its affiliates may deduct from any amounts it may owe the Grantee from time to time (such as wages or other compensation) to the extent of any amounts the Grantee is required to reimburse the Company pursuant to such policy or applicable law with respect to the award.
		
	4.
	Post-Employment Conduct.

4.1    Corporate Policy Council Contribution.   You acknowledge and agree that as a member of the Corporate Policy Council (“CPC”), you are involved in managing the global operations of the Company, incorporated in Delaware and headquartered in Virginia.  You are involved in the most sensitive and proprietary matters affecting the Company, its subsidiaries, predecessors, and/or affiliates (collectively, “Northrop Grumman”), including from a technical, strategic and financial perspective, and are widely exposed to confidential, sensitive and proprietary information concerning Northrop Grumman's global operations, at the headquarters and each of the operating sectors, including in the areas of manned and unmanned aircraft, space, C4ISR, cyber, sensors, electronics, through-life support and technical services.  Your job responsibilities require that you have a primary office location in Virginia and/or you spend substantial time at the corporate headquarters in Virginia, among other things, attending CPC and other leadership meetings, and managing operations and employees in Virginia.  You occupy one of the most senior executive positions in the Company and have far-reaching 

2

Exhibit 10.1

access to highly confidential, valuable and sensitive information, customer, vendor and employee relationships, intellectual property, strategic and tactical plans, and financial information and plans.   The Company has a legitimate business interest in restricting your ability to compete in the specific manner set forth below.  The Company has provided you this grant, subject to these Terms and as consideration for the restrictive covenants set forth in this section 4.
4.2    Non-Competition.   For a period of six (6) months from the date of the termination of Grantee's employment for any reason other than a Reduction-in-Force as determined at the Company's sole discretion (“Termination”), you will not, directly or indirectly, oversee, control, or participate in the design, operation, research, manufacture, marketing, sale, or distribution of “Competitive Products and Services”.  For the purpose of this section, “Competitive Products and Services” shall mean products or services that compete with, or are an alternative or potential alternative to, the products sold or services provided by Northrop Grumman, including without limitation products and services in the areas of manned and unmanned aircraft, space, C4ISR, cyber, sensors, electronics, through-life support and technical services.

4.3    Non-Solicitation of Customers.  For a period of eighteen (18) months from your Termination, you shall not, directly or indirectly, solicit any customer, supplier, or teammate of Northrop Grumman with whom you came into contact, or about whom you received confidential information, while employed by Northrop Grumman, for purposes of providing products or services in competition with Northrop Grumman.  In the case of a governmental, regulatory or administrative agency, commission, department or other governmental authority, the customer is determined by reference to the specific program offices or activities for which Northrop Grumman provides goods or services.

4.4    Non-Solicitation of Employees.   For a period of eighteen (18) months from your Termination, you shall not, directly or indirectly, solicit or offer to hire, any person who was, within a period of six months prior to your Termination, employed by Northrop Grumman, with whom you worked or about whom you received confidential information while employed by Northrop Grumman.

4.5    Exceptions.  You may request an exception to the covenants in this section by making a written request to the Company's Chief Human Resources Officer, with such exceptions being considered at the sole discretion of the Company and communicated in writing to you.

 
4.6    Reasonableness.  You agree that the restrictions set forth in this section are (i) reasonable and necessary in all respects, including duration, territory and scope of activity, in order to protect the Company's legitimate business interests, (ii) that the parties have attempted to limit your right to compete only to the extent necessary to protect the Company's legitimate business interests, and (iii) that you will be able to earn a livelihood without violating the restrictions in this section.  It is the intent of the parties that the provisions of this section shall be enforced to the fullest extent permissible under applicable law.  However, if any portion of this covenant is deemed unenforceable, the parties agree that a court or arbitrator may revise the portion deemed unenforceable to the maximum extent possible to achieve the objective of the parties, and the remainder of the covenant shall remain in full force and affect.

4.7    Remedies.   If you violate any provision in Section 4.2, 4.3, and/or 4.4 of this section, the Company shall have the right to terminate without payment to you any unvested and/or unpaid RSRs (and associated Dividend Equivalents) and require that you immediately deliver to the Company an amount in cash equal to the aggregate Fair Market Value, determined as of the vesting and/or payment date of all RSRs already received, including any Dividend Equivalents, within one year prior to the breach.  Further, you acknowledge and agree that a breach of any of the provisions of this section will result in immediate, irreparable, and continuing damage to the Company for which there is no adequate remedy at law, and the Company will be entitled to injunctive relief, a decree of specific performance, and other relief as may be proper, including monetary damages, to the maximum extent available.

		
	5.
	Compliance with Laws; No Stockholder Rights Prior to Issuance.

The Company's obligation to make any payments or issue any shares with respect to the award is subject to full compliance with all then applicable requirements of law, the Securities and Exchange Commission, or other regulatory agencies having jurisdiction over the Company and its shares, and of any exchange upon which stock of the Company may be listed.  The Grantee shall not have the rights and privileges of a stockholder, including without limitation the right to vote or receive dividends (except as expressly provided in these Terms with respect to Dividend Equivalents), with respect to any shares which may be issued in respect of the RSRs until the date appearing on the certificate(s) for such shares (or, in the case of shares entered in book entry form, the date that the shares are actually recorded in such form for the benefit of the Grantee), if such shares become deliverable.

3

Exhibit 10.1

		
	6.
	Adjustments; Change in Control.

6.1    Adjustments.  The RSRs and the shares subject to the award are subject to adjustment upon the occurrence of events such as stock splits, stock dividends and other changes in capitalization in accordance with Section 6(a) of the Plan.  
6.2    Possible Acceleration on Change in Control.  Notwithstanding the provisions of Section 2 hereof, and further subject to the Company's ability to terminate the award as provided in Section 6.3 below, the outstanding and previously unvested RSRs (and related Dividend Equivalents) subject to the award shall become fully vested as of the date of the Grantee's termination of employment if the termination occurs either within the Protected Period corresponding to a Change in Control of the Company or within twenty-four (24) calendar months following the date of a Change in Control of the Company, the Grantee's employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason.
Notwithstanding anything else contained herein to the contrary, the termination of the Grantee's employment (or other events giving rise to Good Reason) shall not entitle the Grantee to any accelerated vesting pursuant to this Section 6.2 if there is objective evidence that, as of the commencement of the Protected Period, the Grantee had specifically been identified by the Company as an employee whose employment would be terminated as part of a corporate restructuring or downsizing program that commenced prior to the Protected Period and such termination of employment was expected at that time to occur within six (6) months.  
Payment of any RSRs (and related Dividend Equivalents) that vest under this Section will be made within 60 days of the Grantee's termination of employment, but in no event later than March 15 of the year following the Grantee's date of termination of employment.
6.3    Automatic Acceleration; Early Termination.  If the Company undergoes a Change in Control triggered by clause (iii) or (iv) of the definition thereof and the Company is not the surviving entity and the successor to the Company (if any) (or a Parent thereof) does not agree in writing prior to the occurrence of the Change in Control to continue and assume the award following the Change in Control, or if for any other reason the award would not continue after the Change in Control, then upon the Change in Control the outstanding and previously unvested RSRs (and related Dividend Equivalents) subject to the award shall vest fully and completely.  Unless the Committee expressly provides otherwise in the circumstances, no acceleration of vesting of the award shall occur pursuant to this Section 6.3 in 

 
connection with a Change in Control if either (a) the Company is the surviving entity, or (b) the successor to the Company (if any) (or a Parent thereof) agrees in writing prior to the Change in Control to assume the award.  The award shall terminate, subject to such acceleration provisions, upon a Change in Control triggered by clause (iii) or (iv) of the definition thereof in which the Company is not the surviving entity and the successor to the Company (if any) (or a Parent thereof) does not agree in writing prior to the occurrence of the Change in Control to continue and assume the award following the Change in Control.  The Committee may make adjustments pursuant to Section 6(a) of the Plan and/or deem an acceleration of vesting of the award pursuant to this Section 6.3 to occur sufficiently prior to an event if necessary or deemed appropriate to permit the Grantee to realize the benefits intended to be conveyed with respect to the shares underlying the RSRs (and related Dividend Equivalents); provided, however, that, the Committee may reinstate the original terms of the award if the related event does not actually occur.
Payment of any RSRs (and related Dividend Equivalents) that vest under this Section 6.3 will be made within 60 days of the Change of Control, but in no event later than March 15 of the year following the Change in Control.
		
	7.
	Tax Matters.

7.1    Tax Withholding.  The Company or the subsidiary which employs the Grantee shall be entitled to require, as a condition of making any payments or issuing any shares upon vesting of the RSRs (and related Dividend Equivalents), that the Grantee or other person entitled to such shares or other payment pay the minimum sums required to be withheld by federal, state, local or other applicable tax law with respect to such vesting or payment.  Alternatively, the Company or such subsidiary, in its discretion, may make such provisions for the withholding of taxes as it deems appropriate (including, without limitation, withholding the taxes due from compensation otherwise payable to the Grantee or reducing the number of shares otherwise deliverable with respect to the award (valued at their then Fair Market Value) by the amount necessary to satisfy such statutory minimum withholding obligations).
7.2    Transfer Taxes.  The Company will pay all federal and state transfer taxes, if any, and other fees and expenses in connection with the issuance of shares in connection with the vesting of the RSRs.
7.3    Compliance with Code.  These Terms are designed to be exempt from Code Section 409A, and the Committee shall administer and construe the award, and may amend the Terms of the award, in such a way as to be 

4

Exhibit 10.1

exempt from and to avoid adverse tax consequences under Code Section 409A.
7.4    Unfunded Arrangement. The right of the Grantee to receive payment under the award shall be an unsecured contractual claim against the Company. As such, neither the Grantee nor any Successor shall have any rights in or against any specific assets of the Company based on the award. Awards shall at all times be considered entirely unfunded for tax purposes.
7.5    Code Section 280G.  Notwithstanding any other provision of this Agreement to the contrary, in the event that any amounts payable to you as a result of Section 6.2 or 6.3 hereof, either alone or together with amounts payable pursuant to any other plan, program or arrangement (a) constitute “parachute payments” within the meaning of Section 280G of the Code, and (b) but for this Section 7.5 would be subject to the excise tax imposed by Section 4999 of the Code or any comparable successor provisions (the “Excise Tax”), then the vesting acceleration provided in Section 6.2 or 6.3, as applicable, shall be either (a) provided to you in full, or (b) provided to you to such lesser extent that would result in no portion of the payments so accelerated being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by you, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be subject to the Excise Tax.  All determinations required to be made under this Section 7.5 shall be made by a registered public accounting firm selected by the Company, which shall provide supporting calculations both to the Company and you no later than the date of the applicable Change in Control. In the event that the Payments are to be reduced pursuant to this Section 7.5, such Payments shall be reduced such that the reduction of compensation to be provided to the Executive as a result of this Section 7.5 is minimized.  In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.  The terms and conditions of all prior grants are hereby modified to add this Section 7.5.

 
		
	8.
	Choice of Law; Venue; Arbitration 

This agreement shall be governed by the laws of the State of Delaware.  Any cause of action or claim arising out of or related to the terms and conditions applicable to this grant will be determined through final and binding arbitration, in accordance with Northrop Grumman Corporate Procedure H103A, provided that the prevailing party in the arbitration shall be entitled to receive from the losing party reasonably incurred attorneys' fees and costs.  You and the Company agree that any arbitration hearing and related proceedings shall be convened and conducted in Falls Church, VA.  If you or the Company believes they require immediate relief to enforce or challenge these terms, before arbitration is commenced or concluded, either party may seek injunctive or other provisional equitable relief from a state or federal court in the Commonwealth of Virginia.  All court actions or proceedings arising under these terms shall be heard in a state or federal court in the Commonwealth of Virginia.  The Company and you hereby agree to the jurisdiction of the state and federal courts in the Commonwealth of Virginia and waive any right to object to such actions on grounds of venue, jurisdiction or convenience.
		
	9.
	Committee Authority.

The Committee has the discretionary authority to determine any questions as to the date when the Grantee's employment terminated and the cause of such termination and to interpret any provision of these Terms, the Stock Plan System, the Plan, and any other applicable rules.  Any action taken by, or inaction of, the Committee relating to or pursuant to these Terms, the Stock Plan System, the Plan, or any other applicable rules shall be within the absolute discretion of the Committee and shall be conclusive and binding on all persons.
		
	10.
	Plan; Amendment.

The RSRs (and related Dividend Equivalents) subject to the award are governed by, and the Grantee's rights are subject to, all of the terms and conditions of the Plan and any other rules adopted by the Committee, as the foregoing may be amended from time to time.  The Grantee shall have no rights with respect to any amendment of these Terms or the Plan unless such amendment is in writing and signed by a duly authorized officer of the Company.  In the event of a conflict between the provisions of the Stock Plan System and the provisions of these Terms and/or the Plan, the provisions of these Terms and/or the Plan, as applicable, shall control.

5

Exhibit 10.1

		
	11.
	Required Holding Period.

         The holding requirements of this Section 11 shall apply to any Grantee who is an elected or appointed officer of the Company on the date Vested RSRs are paid (or, if earlier, on the date the Grantee's employment by the Company and its subsidiaries terminates for any reason).  Any Grantee subject to this Section 11 shall not be permitted to sell, transfer, anticipate, alienate, assign, pledge, encumber or charge 50% of the total number (if any) of shares of Common Stock the Grantee receives as payment for Vested RSRs until the earlier of (A) the third anniversary of the date such shares of Common Stock are paid to the Grantee, (B) the date the Grantee's employment by the Company and its subsidiaries terminates due to the Grantee's death or Disability, or (C) the occurrence of a Change in Control that results in termination and payment under Section 6.2 or 6.3 above.  For purposes of this Section 11, the total number of shares of Common Stock the Grantee receives as payment for Vested RSRs shall be determined on a net basis after taking into account any shares otherwise deliverable with respect to the award that the Company withholds to satisfy tax obligations pursuant to Section 7.1.   Any shares of Common Stock received in respect of shares that are covered by the holding period requirements of this Section 11 (such as shares received in respect of a stock split or stock dividend) shall be subject to the same holding period requirements as the shares to which they relate.
		
	12.
	Definitions.

Whenever used in these Terms, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
“Board” means the Board of Directors of the Company.
“Cause” means the occurrence of either or both of the following:
		
	(i)
	The Grantee's conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses, as a result of vicarious liability, or as a result of good faith actions as an officer of the Company); or

		
	(ii)
	The willful engaging by the Grantee in misconduct that is significantly injurious to the Company.  However, no act, or failure to act, on the Grantee's part shall be considered “willful” unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.

 
“Change in Control” is used as defined in the Plan.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Committee” means the Company's Compensation Committee or any successor committee appointed by the Board to administer the Plan.
“Common Stock” means the Company's common stock.
“Disability” means, with respect to a Grantee, that the Grantee:  (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Grantee's employer.
 “Fair Market Value” is used as defined in the Plan; provided, however, the Committee in determining such Fair Market Value for purposes of the award may utilize such other exchange, market, or listing as it deems appropriate.
“Good Reason” means, without the Grantee's express written consent, the occurrence of any one or more of the following:
		
	(i)
	A material and substantial reduction in the nature or status of the Grantee's authorities or responsibilities (when such authorities and/or responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than (A) an inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Grantee, and/or (B) changes in the nature or status of the Grantee's authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee having not materially and substantially fewer authorities and responsibilities (taking into consideration the Company's industry) when compared to the authorities and responsibilities applicable to the position held by the Grantee immediately prior to the start of the Protected Period.  The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. 

6

Exhibit 10.1

In addition, if the Grantee is a vice president, the Grantee's loss of vice-president status will constitute “Good Reason”; provided that the loss of the title of “vice president” will not, in and of itself, constitute Good Reason if the Grantee's lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantee's business unit or if the loss of the title is the result of a promotion to a higher level office.  For the purposes of the preceding sentence, the Grantee's lack of a vice-president title will only be considered generally consistent with the manner in which such title is used if most persons in the business unit with authorities, duties, and responsibilities comparable to those of the Grantee immediately prior to the commencement of the Protected Period do not have the title of vice-president. 
		
	(ii)
	A reduction by the Company in the Grantee's annualized rate of base salary as in effect at the start of the Protected Period, or as the same shall be increased from time to time. 

		
	(iii)
	A material reduction in the aggregate value of the Grantee's level of participation in any of the Company's short and/or long-term incentive compensation plans (excluding stock-based incentive compensation plans), employee benefit or retirement plans, or policies, practices, or arrangements in which the Grantee participates immediately prior to the start of the Protected Period; provided, however, that a reduction in the aggregate value shall not be deemed to be “Good Reason” if the reduced value remains substantially consistent with the average level of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. 

		
	(iv)
	A material reduction in the Grantee's aggregate level of participation in the Company's stock-based incentive compensation plans from the level in effect immediately prior to the start of the Protected Period; provided, however, that a reduction in the aggregate level of participation shall not be deemed to be “Good Reason” if the reduced level of participation remains substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. 

		
	(v)
	The Grantee is informed by the Company that his or her principal place of employment for the Company will be relocated to a location that is greater than fifty (50) miles away from the Grantee's principal 

 
place of employment for the Company at the start of the corresponding Protected Period. 
The Grantee's right to terminate employment for Good Reason is conditioned upon (a) the Grantee providing the Company with written notice of the Good Reason condition within 90 days of its first occurrence; (b) Grantee's notice including a period of no less than 30 days from the Company's receipt of the notice for the Company to cure the Good Reason condition; and (c) Grantee implementing a Good Reason termination only if the condition continues to go uncured and such termination is initiated and executed no later than six (6) months from the date of its first occurrence.
The Grantee's right to terminate employment for Good Reason shall not be affected by the Grantee's incapacity due to physical or mental illness. The Grantee's continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason herein.
“Parent” is used as defined in the Plan.
“Plan” means the Northrop Grumman 2011 Long-Term Incentive Stock Plan, as it may be amended form time to time.
The “Protected Period” corresponding to a Change in Control of the Company shall be a period of time determined in accordance with the following:
		
	(i)
	If the Change in Control is triggered by a tender offer for shares of the Company's stock or by the offeror's acquisition of shares pursuant to such a tender offer, the Protected Period shall commence on the date of the initial tender offer and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control.

		
	(ii)
	If the Change in Control is triggered by a merger, consolidation, or reorganization of the Company with or involving any other corporation, the Protected Period shall commence on the date that serious and substantial discussions first take place to effect the merger, consolidation, or reorganization and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control.

7

Exhibit 10.1

		
	(iii)
	In the case of any Change in Control not described in clause (i) or (ii) above, the Protected Period shall commence on the date that is six (6) months prior to the Change in Control and shall continue through and including the date of the Change in Control.

“Successor” means the person acquiring a Grantee's rights to a grant under the Plan by will or by the laws of descent or distribution.

8

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