Document:

Exhibit 4.1

 

Schedule Prepared in Accordance with Instruction 2 to Item 601 of Regulation S-K

 

The Warrants dated October 22, 2012 are substantially identical in all material respects except as to the holder and the number of shares for which the Warrants may be exercised.

 

	
Holder
    	
 
    	
Underlying Shares
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Richard Kiphart
    	
 
    	
1,865,672
    	
 
    
	
John Thomas Hurvis Revocable Trust
    	
 
    	
1,865,672
    	
 
    
	
Christopher Capps
    	
 
    	
37,314
    	
 
    
	
Nettlestone Enterprises Limited
    	
 
    	
746,269
    	
 
    

 

FORM OF WARRANT

 

NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

 

LIME ENERGY CO.

 

WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.:

Number of Shares of Common Stock:                                             (subject to adjustment)

Exercise Price:  $0.67 per share (subject to adjustment) (“Exercise Price”)(1)

Date of Issuance:  October 22, 2012 (“Issuance Date”)

 

Lime Energy Co., a Delaware corporation (the “Company”), hereby certifies that, for value received,[                                                                        ] the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon surrender of this Warrant (including any Warrants to purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the date hereof, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below),                                                             (                        ) fully-paid nonassessable shares of Common Stock (as defined below)  (the “Warrant Shares”).  Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 15.  This Warrant is being issued pursuant to the Convertible Note and Warrant Purchase Agreement, dated as of October 22, 2012, by and among the Company and initial Purchasers (the “Securities Purchase Agreement”).

 

1.                                       EXERCISE OF WARRANT.

 

(a)                                  Mechanics of Exercise.  Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder, in whole or in part, at any time during the Exercise Period by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of immediately available funds or (B) by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)), and (iii) delivery to the Company of this Warrant (or an indemnity and evidence with respect to this Warrant in the case of its loss, theft, mutilation or destruction, as provided in Section       ).

 

(1)  The per-share Exercise Price will be equal to the consolidated closing bid price per share of Company Common Stock immediately preceding the entering into of this Agreement.

 

 

Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares.  On or before the third (3rd) Business Day following the date on which the Company has received Exercise Notice, the Aggregate Exercise Price (or notice of a Cashless Exercise) and this Warrant (or an indemnity and evidence with respect to this Warrant in the case of its loss, theft, mutilation or destruction, as provided in Section 7(c)) (the “Exercise Delivery Documents”), the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”).  On or before the third (3rd) Business Day following the date on which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, which balance account shall be specified in the Exercise Notice, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon receipt by the Company of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares.

 

(b)                                 Partial Exercise. If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than ten (10) Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.

 

(c)                                  No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.  The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

 

(d)                                 Company’s Failure to Timely Deliver Securities. Upon the Company’s receipt of an Exercise Delivery Documents or request for removal of restrictive legends on the shares of Common Stock issuable in connection therewith, the Company will deliver, or cause to be delivered, the certificates evidencing such shares of Common Stock to the Holder within three (3) Trading Days.  If the certificates have not been delivered by the fifth (5th) Trading Day after valid conversion or request for removal of legend, as the case may be, and the Holder, or any third party on behalf of Holder or for Holder’s account, has purchased (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion or represented by such certificate that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Trading Days after the Holder’s request promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay in cash to the Holder (for costs incurred either directly by such Holder or on behalf of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceeds the proceeds received by such Holder as a result of the sale to which the Buy-In relates.  The

 

 

Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

(e)                                  Cashless Exercise.  Notwithstanding anything provisions herein to the contrary, if at the time this Warrant is exercised, (a) there is no effective registration statement registering, or the prospectus contained therein is not available for, the issuance of the Warrant Shares to the Holder, (ii) all of the Warrant Shares are not then registered for resale by the Holder into the market at market prices from time to time on an effective registration statement for use on a continuous basis (or the prospectus contained therein is not available or used) and (iii) the Current Market Price (as defined below) of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), then in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless exercise by surrender of this Warrant at the principal office of the Company (or at such other address as it may designate by notice in writing to the Holder) together with the properly endorsed Notice of Exercise and the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

 

	
 
    	
X =
    	
Y (B-A)
    
	
 
    	
 
    	
     B
    
	
 
    	
 
    	
 
    
	
Where:
    	
X =
    	
the   number of shares of Common Stock to be issued to the Holder.
    
	
 
    	
 
    	
 
    
	
 
    	
Y =
    	
the   number of shares of Common Stock purchasable upon exercise of all of the   Warrant or, if only a portion of the Warrant is being exercised, the portion   of the Warrant being exercised.
    
	
 
    	
 
    	
 
    
	
 
    	
A =
    	
the   Exercise Price.
    
	
 
    	
 
    	
 
    
	
 
    	
B =
    	
the   Current Market Price of one share of Common Stock.
    

 

“Current Market Price” means on any particular date:

 

(a)                      if the Common Stock is traded on the NASDAQ Global Market or the NASDAQ Capital Market, the closing price of the Common Stock of the Company on such market on the Trading Day prior to the applicable date of valuation;

 

(b)                     if the Common Stock is traded on any registered national stock exchange but is not traded on the NASDAQ Global Market or the NASDAQ Global Market, the closing price of the Common Stock of the Company on such exchange on the Trading Day prior to the applicable date of valuation;

 

(c)                      if the Common Stock is traded over-the-counter, but not on the NASDAQ Global Market, the NASDAQ Capital Market or a registered national stock exchange, the closing bid price of the Common Stock of the Company on the day prior to the applicable date of valuation; and

 

(d)                     if there is no active public market for the Common Stock, the value thereof, as determined in good faith by the Board of Directors of the Company.

 

(f)                                    Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 12.

 

(g)                                 Insufficient Authorized Shares.  If at any time while any of the Warrants remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock (an “Authorized Share Failure”) to satisfy its obligation to reserve for issuance upon exercise of the Warrants no less than the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Warrants then outstanding (in addition to all other

 

 

convertible securities) (the “Required Reserve Amount”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Warrants then outstanding.  Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock.  In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

 

(h)                                 Limitations on Conversions.  The Company shall not be obligated to issue any shares of Common Stock upon exercise of this Warrant, and no Purchaser shall be entitled to receive any shares of Common Stock if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue upon conversion of the Notes and exercise of the Warrants or otherwise without breaching the Company’s obligations under the rules or regulations of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (i) obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (ii) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Required Holders.  Until such approval or written opinion is obtained, no Purchaser shall be issued in the aggregate, upon conversion of any Notes or exercise of any Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the total number of shares of Common Stock underlying the Notes and Warrants issued to such Purchaser pursuant to the Securities Purchase Agreement on the Issuance Date and the denominator of which is the aggregate number of shares of Common Stock underlying all the outstanding Notes and Warrants (with respect to each Purchaser, the “Exchange Cap Allocation”).  In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes or Warrants, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee.  In the event that any holder of Notes or Warrants shall convert all of such holder’s Notes and exercise all of such holder’s Warrants for a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes on a pro rata basis in proportion to the total number of shares of Common Stock underlying the Notes then held by each such holder

 

2.                                       ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a)                                  Adjustment upon Subdivision or Combination of Common Stock.  If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased.  If the Company combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased.  Any adjustment under this Section 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

 

(b)                                 Minimum Adjustment.  No adjustment in the Exercise Price and the number of Warrants shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price as last adjusted; provided, however, that any adjustments which would be required to be made but for this Section 2(b) shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 2 shall be made to the nearest cent, with one half cent being rounded upward.

 

(c)                                  Notification of Adjustment. Upon any adjustment of the Warrant Exercise Price or number of issuable Warrant Shares pursuant to this Section 2, the Company shall give written notification to the Holder, setting forth in reasonable detail, the calculation of such adjustment.

 

3.                                       COVENANTS OF THE COMPANY.

 

(a)                                  Covenants as to Exercise Shares.  The Company covenants and agrees that it will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant.  All Warrant Shares will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. If at any time during the Exercise Period the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock (or other securities as provided herein) to such number of shares as shall be sufficient for such purposes.

 

(b)                                 No Impairment.  Except and to the extent as waived or consented to by the Holder, the Company will not, by amendment of its Certificate of Incorporation (as such may be amended from time to time), or through any means, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment.

 

4.                                       CERTAIN ADJUSTMENTS.

 

(a)                                  Subdivisions, Combinations and Other Issuances.  In the event the Company pays a dividend in Common Stock or makes a distribution in Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock to holders of its outstanding Common Stock; subdivides its outstanding Common Stock into a greater number of shares; combines its outstanding Common Stock into a smaller number of shares; or issues any shares of its capital stock in a reclassification of the Common Stock, the number and class of shares available under this Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of this Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment.  The form of this Warrant need not be changed because of any adjustment in the number, class, and kind of shares subject to this Warrant. Upon request, the Company shall promptly provide to the Holder a certificate from its Chief Financial Officer, which certificate shall specify the Exercise Price and number, class and kind of shares under this Warrant after giving effect to such adjustment.

 

(b)                                 Pro Rata Distributions.  If the Company, at any time while this Warrant is outstanding, distributes to holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock subject to Section 4(a), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then in each such

 

 

case the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the Warrant Shares, to receive the amount of Distributed Property which would have been payable to the Holder had such Holder been the holder of such Warrant Shares on the record date for the determination of stockholders entitled to such Distributed Property. The Company will at all times set aside and keep available for distribution to the Holder upon exercise of this Warrant a portion of the Distributed Property to satisfy the distribution to which such Holder is entitled pursuant to the preceding sentence.

 

(c)                                  Fundamental Transactions.  If the Company consummates (i) a merger or consolidation with or into another entity, as a result of which the holders of the Company’s outstanding voting securities as of immediately prior to such merger or consolidation hold less than a majority of the outstanding voting securities of the surviving or successor entity as of immediately after such merger or consolidation or (ii) a sale, transfer or other disposition of all or substantially all its property, assets or business to another person or entity (any such transaction being hereinafter referred to as a “Fundamental Transaction”), then the Company shall ensure that lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant, had such Fundamental Transaction not taken place.  The provisions of this Section 4(c) shall similarly apply to successive consolidations, mergers, sales, transfers or other dispositions.

 

5.                                       FRACTIONAL SHARES.  No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto.  All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share.  If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, at its option, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then Current Market Price of a Warrant Share by such fraction, or round up such fraction to the next whole number of Warrant Shares.

 

6.                                       NO STOCKHOLDER RIGHTS.  This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

 

7.                                       REGISTRATION, TRANSFER AND REISSUANCE.

 

(a)                                  Registration.  The Company shall register this Warrant, upon the records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.  The Company also shall register any transfer, exchange, reissuance or cancellation of any portion of this Warrant in the Warrant Register.

 

(b)                                 Transfer.  This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by applicable securities laws. Subject to applicable securities laws, if this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, together with all applicable transfer taxes, whereupon the Company will issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing

 

 

the right to purchase the number of Warrant Shares not being transferred. The acceptance of the new Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the new Warrant that the Holder has in respect of this Warrant.

 

(c)                                  Lost, Stolen, Mutilated or Destroyed Warrant.  If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof to the Company), cause the Warrant Agent to issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.

 

(d)                                 Issuance of New Warrants.  Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall (a) be of like tenor with this Warrant, (b) represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(b) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (c) have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date and (d) have the same rights and conditions as this Warrant.

 

8.                                       MODIFICATIONS AND WAIVER.  This Warrant and any provision hereof may be waived, modified or amended only by an instrument in writing signed by the Company and the Holder.

 

9.                                       NOTICES, ETC.  All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed email, telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, or (c) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to the Holders at the addresses on the Company records, or at such other address as the Company or Holder may designate by ten days’ advance written notice to the other party hereto.

 

10.                                 ACCEPTANCE.  Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

11.                                 GOVERNING LAW.  This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant 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 Warrant 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

 

 

Warrant.  Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, 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 Holder.

 

12.                                 CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

13.                                 SEVERABILITY.  The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

 

14.                                 ENTIRE AGREEMENT.  This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

 

15.                                 CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)                                  “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(b)                                 “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon exercise of the Warrants.

 

(c)                                  “Common Stock” means (i) the Company’s shares of Common Stock, par value $0.0001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

 

(d)                                 “Convertible Notes” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all notes issued in exchange therefor or replacement thereof.

 

(e)                                  “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable at the option of the holder thereof for shares of Common Stock.

 

(f)                                    “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the NASDAQ Global Market, the NASDAQ Global Select Market, the NASDAQ Capital Market or the NASD’s OTC Bulletin Board.

 

(g)                                 “Exercise Period” means the period commencing on the Issuance Date and ending at 5:00 p.m. New York time, on the Expiration Date.

 

 

(h)                                 “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date, or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.

 

(i)                                     “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities, other than those that may be issued as part of a compensation package of any employee of the Company or it Subsidiaries and which are exercisable at a price not less than the closing price of the Company’s Common Stock as reported on the Principal Market on the Trading Day immediately preceding the date of grant.

 

(j)                                     “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

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

 

(l)                                     “Principal Market” means the NASDAQ Stock Market LLC.

 

(m)                               “Trading Day” means any day on which the Common Stock are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock are then traded; provided that “Trading Day” shall not include any day on which the Common Stock are scheduled to trade on such exchange or market for less than four and one-half (4.5) hours or any day that the Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set forth above.

 

	
 
    	
LIME   ENERGY CO.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
John   O’Rourke
    
	
 
    	
Title:
    	
Chief   Executive Officer
    

 

 

EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

LIME ENERGY CO.

16810 Kenton Drive. Suite 240

Huntersville, North Carolina 28078

Attention: Chief Executive Officer

Fax No.:              

 

The undersigned holder hereby elects to purchase                                    (              ) of the shares of Common Stock (“Warrant Shares”) of Lime Energy Co., a Delaware corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1.  Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as:

 

a “Cash Exercise” with respect to                                    (            ) Warrant Shares; and/or

 

a “Cashless Exercise” with respect to                                    (            ) Warrant Shares.

 

2.  Payment of Exercise Price.  In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder hereby tenders payment of the Aggregate Exercise Price in the sum of $                                        to the Company in accordance with the terms of the Warrant, together with all applicable transfer taxes, if any.

 

3.  Accredited Investor. At the time such Holder was offered the Warrant, it was, at the date hereof, and on each date on which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act of 1933, as amended, or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Buyer is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended.

 

4.  Delivery of Warrant Shares.  The undersigned requests that the certificates for the Warrant Shares be issued in the name of and delivered to the following DWAC Account Numbers or by physical delivery of a certificate to:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
whose   address is
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Federal   Tax ID or Social Security Number
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Signature   must conform in all respects to the name of the
   Holder a specified on the face of the Warrant)
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Registered   Owner
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Federal   EIN or SSN:
    	
 
    	
 
    	
 
    
										

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	
Name:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(Please Print)
    	
 
    
	
 
    	
 
    
	
Address:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(Please Print)
    	
 
    
	
 
    	
 
    
	
Dated:                             ,   20     
    	
 
    
	
 
    	
 
    
	
Holder’s Signature:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Holder’s Address:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing warrant.

 

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs its transfer agent to issue the above-indicated number of shares of Common Stock.

 

 

	
 
    	
LIME   ENERGY CO.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:EXHIBIT 10.1

 

LIME ENERGY CO.

 

CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT

 

This Convertible Note And Warrant Purchase Agreement (this “Agreement”) is dated and effective as of October 22, 2012, 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 $6,050,000.00 principal amount of 2012 Subordinated Secured Convertible Pay-In-Kind Notes due October 22, 2017, in substantially the form of Exhibit A affixed hereto (the “Convertible Notes”), which Convertible Notes are to be secured by the assets of the Company and are convertible on the terms stated therein into shares of Company common stock, par value $0.0001 per share (the “Common Stock”), and warrants exercisable for up to four million one hundred twenty nine thousand six hundred ninety four (4,129,694) 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 Convertible Note 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 Convertible Note and Warrant Purchase Agreement.

 

1.3                               “Collateral Agency Agreement” shall mean the Collateral Agency Agreement dated concurrently herewith among the Company, the Purchasers and the Collateral Agent (as that term is defined in the Collateral Agency Agreement.

 

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

 

1.5                               “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.

 

 

1.6                               “Conversion Shares” shall mean the shares of Common Stock into which the Convertible Notes may be converted.

 

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, the Security Agreement, or any of the other documents, instruments or agreements contemplated hereby and thereby.

 

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 Convertible Notes 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                        “Security Agreement” shall mean the Security Agreement dated concurrently herewith between the Company and the collateral agent for the Purchasers.

 

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

 

1.16                        “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.

 

1.17                        “Transaction Documents” shall mean collectively this Agreement, the Security Agreement, and the Collateral Agency Agreement.

 

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1.18                        “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 Convertible Notes 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 Convertible Notes, 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.

 

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 principal amount of Convertible Notes and Warrants set forth opposite such Purchaser’s name on Schedule 2.2 hereto for the aggregate Purchase Price set forth thereon.  The per share exercise price of the Warrants, and the initial conversion price of the Convertible Notes 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 Convertible Notes and Warrants shall take place at one or more closings (each, a “Closing”).  The first Closing (the “First Closing”) shall take place on October 22, 2012 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, 2012.

 

(b)                                 Delivery.  On each Closing Date, (i) the applicable Purchasers shall remit their respective Purchase Price to the Company via wire transfer in accordance with written instructions provided by the Company, and (ii) the Company shall deliver to each Purchaser a Convertible Note, registered in the name of such Purchaser, and a Warrant, substantially in the form of Exhibit B, representing the Warrants purchased by each Purchaser.

 

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.

 

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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.

 

(b)                                 Common Stock. 50,000,000 shares of common stock, par value $0.0001 per share (“Common Stock”), of which 23,975,651 shares are issued and outstanding as of March 31, 2012.

 

(c)                                  Other Rights.  Except for (i) currently outstanding warrants to purchase 135,952 shares of Common Stock, (ii) stock options exercisable for up to 4,514,253 shares of Common Stock, and (iii) an aggregate of 1,058,296 shares of Common Stock reserved under the Company’s 2011 Employee Stock Purchase Plan, 2008 Long-Term Incentive Plan, as a member, and 2010 Non-Employee Director Stock Plan, 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 the Transaction Documents and perform its obligations thereunder, except as set forth on the Schedule of Exceptions and in Section 7.2.  All corporate action on the part of the Company and its officers, directors and stockholders necessary for the authorization, execution and delivery of the Transaction Documents, the performance of all obligations of the Company thereunder, and the authorization, issuance, sale and delivery of the Convertible Notes and the Warrants pursuant to this Agreement, the Conversion Shares upon conversion of the Convertible Notes, 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.  The Transaction Documents have been duly executed and delivered by the Company, and assuming that they have been duly executed and delivered by the applicable Purchaser, constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective 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 Convertible Notes 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 Notes, Warrants, Conversion Shares and Warrant Shares.  The Notes 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 Notes in accordance with the terms of the Notes, respectively, will be duly and validly issued, fully paid, and nonassessable, and will be free of all Liens 

 

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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 and 7.2.

 

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 Convertible Notes, 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 the Transaction Documents, the Convertible Notes, 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 the Transaction Documents, and (assuming due execution by the Company and the other parties to such agreements) each such agreement constitutes its valid and legally binding obligation, enforceable against it in accordance with its terms.

 

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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 the Transaction Documents.  The Purchaser has reviewed the Transaction Documents, 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 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 the Transaction Documents, 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 the Transaction Documents 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 D.

 

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 Convertible Notes, 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 

 

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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.  The Purchaser acknowledges that public information within the meaning of SEC Rule 144 regarding the Company is not currently available.

 

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 10-K for the year ended December 31, 2011, 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 March 31, 2012, and (iii) the Company’s Forms 8-K filed May 11, 2012; May 15, 2012; May 30, 2012; June 13, 2012; July 17, 2012; August 22, 2012; and September 5, 2012, 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.  Purchaser further acknowledges that the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) has determined that the Company’s consolidated financial statements contained in the Disclosure Documents cannot be relied upon.  Purchaser is aware that in connection with such determination of the Audit Committee, a subcommittee of the Audit Committee is conducting an investigation of the misreporting of revenue by the Company (the “Investigation”).  Purchaser acknowledges that the Investigation is not yet complete and that the completion of the Investigation, the facts and circumstances underlying the Investigation, the disclosures necessary or advisable following the completion of the Investigation, and any regulatory, judicial and other governmental action in response to the Investigation or the facts and circumstances underlying the Investigation might result, either individually or in the aggregate, in a Material Adverse Effect.

 

4.10                        Financial Statements.  The Purchaser acknowledges that the audited financial statements of the Company as of and for the years ended December 31, 2010, and 2011, together with the report thereon by BDO Seidman dated March 16, 2012, do not reflect any events subsequent to December 31, 2011, except as reflected in the notes to such financial statements, and that the Audit Committee has determined that such financial statements cannot be relied upon.

 

4.11                        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.

 

4.12                        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.

 

4.13                        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 

 

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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.

 

4.14                        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.”

 

4.15                        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 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 Convertible Notes 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 Convertible Notes, 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.

 

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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, including, without limitation, execution and delivery of the Security Agreement and the Collateral Agency Agreement.

 

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 Convertible Notes, 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, including, without limitation, execution and delivery of the Security Agreement and the Collateral Agency Agreement

 

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 Purchasers’ Notes 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 February 28, 2013.

 

7.2                               Purchasers’ Covenant Not to Exercise Warrants or Convert Notes 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 Notes and/or the exercise of Warrants.  Each Purchaser hereby agrees that it will not convert any of its Notes 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                               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 

 

9

 

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.

 

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

 

7.5                               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 7.5 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 7.5 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 the Transaction Documents and purchase of the Convertible Notes and Warrants hereunder and in addition to all of the Company’s other obligations under the Transaction Documents, 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

 

10

 

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 the Transaction Documents 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 in the Transaction Documents 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 the Transaction Documents 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 Convertible Notes 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.

 

11

 

9.3                               Assignment of Convertible Notes 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 the Transaction Documents and related agreements as if it were a Purchaser hereunder or thereunder.

 

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 

 

12

 

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 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 the Transaction Documents, the Convertible Notes 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 principal amount of Convertible Notes; provided, however, any amendment or waiver that may reduce the amount of principal or interest owed in connection with the Convertible Notes (which reduction, if any, must be made pro-rata as to all Convertible Notes) or extend the payment date of any principal in connection with the Convertible Notes shall require the consent of the holders of at least eighty percent (80%) of the then outstanding principal amount of Convertible Notes.  Any amendment or waiver effected in accordance with this Section 9.11 shall be binding upon each holder of Convertible Notes.

 

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 

 

13

 

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 Convertible Notes, the Warrants, or the transactions contemplated hereby or thereby.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

14

 

IN WITNESS WHEREOF, the parties have executed this Convertible Note 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 Convertible Note 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 principal amount of Convertible Notes and Warrants set forth below, subject to the terms and conditions of this Convertible Note and Purchase Agreement, the Convertible Notes and the Warrants and hereby delivers to the Company, by wire transfer or check made payable to “Lime Energy Co.” the principal amount of the Convertible Notes and the Warrants subscribed for hereby.  The undersigned Purchaser further understands and agrees that while it is irrevocably committed to purchase the principal amount of Convertible Notes and Warrants subscribed for hereby, subject to the conditions of the Convertible Notes and the Agreement, 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:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
2012   Secured Convertible Note Due                                                  ,   2012
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Principal   Amount of Convertible Notes
    	
 
    	
$                                .
    
	
 
    	
 
    	
 
    
	
Total   Purchase Price of US$                                                           .
    	
 
    	
 
    

 

Forms of Ownership.  Please indicate the form of ownership you desire for the Convertible Notes.

 

	
       
    	
 
    	
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 Convertible Notes.
    	
 
    

 

Purchaser Signature Page to Convertible Note 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

 

Corporation, Partnership or Trust Signature Page to Convertible Note 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.
    
					

 

Corporation, Partnership or Trust Signature Page to Convertible Note and Warrant Purchase Agreement

 

 

Schedule 2.2

 

Schedule of Purchasers

 

	
Purchaser
    	
 
    	
Principal Amount
   of Convertible
   Notes Purchased
    	
 
    	
Number of
   Warrants
   Purchased
    	
 
    	
Initial
   Conversion Price
    	
 
    	
Initial Warrant
   Exercise Price
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Richard Kiphart
    	
 
    	
$
    	
2,500,000.00
    	
 
    	
1,706,485
    	
 
    	
$
    	
0.7325
    	
 
    	
$
    	
0.67
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
John Thomas Hurvis Revocable Trust Dated   March 8, 2002  
    	
 
    	
$
    	
2,500,000.00
    	
 
    	
1,706,485
    	
 
    	
$
    	
0.7325
    	
 
    	
$
    	
0.67
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Christopher Capps
    	
 
    	
$
    	
50,000.00
    	
 
    	
34,130
    	
 
    	
$
    	
0.7325
    	
 
    	
$
    	
0.67
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Nettlestone Enterprises Limited
    	
 
    	
$
    	
1,000,0000.00
    	
 
    	
682,594
    	
 
    	
$
    	
0.7325
    	
 
    	
$
    	
0.67
    	
 
    

 

 

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.

 

Section 3.7                                    Litigation.

 

Shareholder and Derivative Action Lawsuits:

 

Satterfield v. Lime Energy Co., et al.

 

Clausen v. Lime Energy, et al.

 

Edwards v. Lime Energy Co., et al.

 

Galbraith v. Lime Energy, et al.

 

Kuberski v. Lime Energy Co., et al.

 

 

EXHIBIT A

 

FORM OF CONVERTIBLE NOTE

 

 

EXHIBIT B

 

FORM OF WARRANT

 

 

EXHIBIT C

 

SECURITY AGREEMENT

 

 

EXHIBIT D

 

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:

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