Lime Energy Closes $6 Million Placement of Subordinated Secured Convertible Pay-In-Kind Notes

Lime Energy LIME, a leading provider of energy efficiency and clean energy solutions, today announced that it had completed the placement of $6 million in Subordinated Secured Convertible Pay-In-Kind Notes due October 2017 with a group of investors that include Mr. Richard Kiphart, the Chairman of its Board and Mr. Christopher Capps, a member of its Board of Directors. The Notes have a term of five years, accrue interest at the rate of 12-1/2% per year, with the interest payable at the Company's election in cash or additional Notes and the notes are convertible at any time at the Holder's election into shares of the Company's common stock at $$0.7325 per share (the “Conversion Price”). The Company can require conversion of the Notes if the weighted price for its common stock is at least (i) 200% of the Conversion Price for 20 days during a 30 day period during the first year following issuance of the notes, or (ii) 175% of the Conversion Price for 20 days during a 30 day period from the second anniversary of the issuance of the notes through maturity. The Notes are secured and senior to all other Company obligations, except for commercial loans, credit facilities and obligations to sureties for payment and performance bonds. The holders of the Notes can require that the Company redeem all of the Notes upon a change of control at 130% of face value if the change of control event occurs during the first year following issuance; 120% of face value if the change of control event happens during the second through fourth year following issuance; and 100% of face value if the change of control event occurs during the fifth year following issuance. Covenants in the Notes prohibit the Company from (i) repayment of debt that is subordinated to the Notes, if such repayment causes a default under the Notes or (ii) redeeming, repurchasing or declaring or paying a cash dividend or distribution on its capital stock. In addition to the Notes, the Holders also received warrants to purchase 4,129,694 shares of Company common stock at any time during the five-year period following issuance of the Notes at an exercise price equal to $0.67. As part of the transaction, the Company agreed to seek stockholder approval of the transaction prior to issuing any conversion shares or warrant shares that would result in the aggregate number of conversion shares and warrant shares issued exceeding 20% of the currently outstanding common stock, as required by NASDAQ rules, and by February 28, 2013, to seek stockholder approval and to file an amendment to its Certificate of Incorporation to increase its authorized number of shares of common stock to, at a minimum, a number that will allow it to issue all the shares of common stock issuable upon conversion of the Notes and exercise of the Warrants.