LIME ENERGY CO. 2009 MANAGEMENT INCENTIVE COMPENSATION PLAN

EXHIBIT 10.1

LIME ENERGY CO.
2009 MANAGEMENT INCENTIVE COMPENSATION PLAN

Effective August 4, 2009

1. PURPOSE

     The Lime Energy Co. 2009 Management Incentive Compensation Plan (“Plan”) is designed to promote the interests of Lime Energy Co. (the “Company”) and its stockholders by providing incentives to participating officers and key employees of the Company and its subsidiaries to make significant contributions to the Company and its subsidiaries and to reward outstanding performance on the part of those individuals whose decisions and actions most significantly affect the growth, profitability and efficient operation of the Company and its subsidiaries during the “Plan Year.” The Plan Year is the fiscal year of the Company.

     The Plan is designed to:

2. ADMINISTRATION

     The Plan shall be administered by the Compensation Committee of the Company’s Board; provided, however, that, if at any time no such Committee shall be in office, the Plan shall be administered by the Board. The Plan may be administered by different Committees with respect to different groups of Eligible Individuals as directed by the Board or its Compensation Committee. As used herein, the term “Administrator” means the Board or any of its Committees as shall be administering the Plan, as the context may require.

     The Administrator shall have plenary authority to grant Awards pursuant to the Plan and absolute discretion to determine the amount of Awards. Participation shall be limited to such Eligible Individuals as are selected by the Administrator; subject to any eligibility restrictions applicable to Awards under the other provisions of the Plan. The provisions of Awards need not be the same with respect to each Participant.

     The Administrator shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award

issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan.

     Except to the extent prohibited by applicable law, the Administrator may allocate any or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any portion of its responsibilities and powers to any other person or persons selected by it. Any such allocation or delegation may be revoked by the Administrator at any time. The Administrator may authorize any one or more of its members, or any officer of the Company, to execute and deliver documents on behalf of the Administrator.

     Any determination made by the Administrator, or pursuant to authority delegated in accordance with the provisions of the Plan, with respect to any Award shall be made in the sole discretion of the Administrator or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Administrator or any appropriate delegate pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Participants.

     No member of the Administrator, and no officer of the Company, shall be liable for any action taken or omitted to be taken by such individual or by any other member of the Administrator or officer of the Company in connection with the performance of duties under this Plan, except for such individual’s own willful misconduct or as expressly provided by law. Such persons shall be entitled to indemnification and reimbursement from the Company for their service with respect to the Plan to the fullest extent allowed by law. The Company, its Subsidiaries and Affiliates, all officers and directors of any such corporation, and all members of the Administrator shall have no liability with respect to any Participant for any taxes, penalties or related interest imposed upon such Participant in connection with any Award granted under this Plan.

3. PARTICIPANTS IN THE PLAN

     Eligible Individuals must be approved by the Administrator, based on a recommendation from the Chief Executive Officer or the Board and meet all of the following conditions:

     (a)  Service Requirement . An individual shall be eligible to participate in the Plan if he or she has been an active Employee in a position which is designated as eligible for participation in the Plan for a period of not less than six (6) consecutive months at the close of the Plan Year for which an Award is payable, except as provided in Section 9 herein. An individual shall be considered an “Employee” as long as such individual remains employed by the Company or one or more of its subsidiaries.

     (b)  Performance Requirement . During the term of the current Plan Year, the Employee must not have been subject to a disciplinary action and must have achieved a satisfactory performance evaluation, if applicable to such Employee, during the Plan Year.

     (c)  No Participation in Other Cash Incentive Plans . The Employee must not be eligible to participate in any other cash incentive plan of the Company, provided, however, this shall not affect the ability of the Participant to receive a discretionary bonus which is not pursuant to a written plan.

     (d)  Participant Groups . Participants in the Plan may be placed into groups based on their reporting relationship to the Chief Executive Officer, their salary, title or on other criteria, or on no criteria as determined by the Administrator. Groupings used in the Plan, if any, may vary from one group to another, and shall not convey any rights, privileges or obligations except as they relate to the Plan. If groupings are used in the Plan, the specifics of the Plan may vary from one group to another.

     (e)  Initial Eligible Individuals . Upon adoption of the Plan by the Board, the initial Eligible Individuals shall be the Company’s Chief Executive Officer, President, Chief Operating Officer and Chief Financial Officer.

4. FORM OF INCENTIVE AWARD PAYMENTS

     Award payments shall be made in cash, provided that, in lieu of cash, Award payments may be made through the issuance of shares of Stock or options to purchase Stock (“Stock Options”), or by a combination of cash, shares of Stock and/or Stock Options, at the discretion of the Administrator. In the event that the Administrator elects to pay Awards in shares of Stock or Stock Options, the Administrator, in its sole discretion, will make a determination of the number of shares of Stock or Stock Options to be issued to each Plan Participant based, in part, on the market value of the Stock or Stock Options and the ratio that the Participant’s Award amount bears to the aggregate amount of Awards earned by all Participants for the Plan Year. The issuance of shares of Stock and Stock Options will be subject to the availability of shares of Stock and the other terms of the Company’s 2008 Long-Term Incentive Plan, as amended from time to time.

5. PERFORMANCE GOAL CATEGORIES

     As determined and approved by the Administrator, the performance goals for the Participants will be set in various goal categories, including, but not necessarily limited to: (a) Company performance, and (b) individual performance (collectively, the “Performance Goal Categories”). The Performance Goal Categories may be adjusted, expanded or otherwise modified, as the Administrator deems necessary or appropriate. The relative importance, or weight, of goals in these Performance Goal Categories will be set in writing by the Administrator for each Participant at the beginning of, or soon after the beginning of, the Plan Year.

     The relative weight (“Goal Weight”) among the Performance Goal Categories may vary based on the individual’s position within the Company. The weighting will be reviewed annually and may be adjusted, as necessary or appropriate, by the Administrator.

     (a)  Company Objectives . At the beginning of, or soon after the beginning of, the Plan Year, the Chief Executive Officer and the Administrator will decide the Company performance objectives, which shall be comprised of the following two components: (i) revenue and (ii) earnings before interest, taxes, depreciation, amortization and stock-based compensation (“Adjusted EBITDA”) for the Plan Year.

     (b)  Individual Goals . At the beginning of, or soon after the beginning of, the Plan Year, individual goals will be established for each Participant. The specific goals in this category will be discussed and agreed upon between the Participant and the Chief Executive Officer, provided that in the case of the Chief Executive Officer, his or her individual goals will be discussed between such Participant and the Administrator or its designee on the Board. All goals in these categories must be in writing, and accepted and approved by the Administrator.

     (c)  Performance Evaluation . Performance on all Individual goals will be evaluated by the Chief Executive Officer (or his designee), subject to the review and approval of the Administrator.

6. INCENTIVE OPPORTUNITIES

     Each Participant shall be told at the beginning of, or soon after the beginning of, the Plan Year of his or her Plan Base Salary which will be the basis for determining incentive opportunity for that Participant, and which will be allocated among the Participant’s Performance Goal Categories.

     Performance on each Performance Goal Category will be designated at three performance levels (each a “Performance Level”): a Threshold (minimum level), a Target and a Maximum level as determined by the Administrator. If a Participant’s performance does not at least equal the minimum threshold level, no bonus will be payable under that Performance Goal Category. The incentive opportunity for each Performance Level will be set at a percentage (“Incentive Opportunity Percentage”) of the Plan Base Salary, approved by the Administrator. The Incentive Opportunity Percentage may be adjusted for each Plan Year, as necessary or appropriate. The Award earned will be directly related to the Participant’s performance on each Performance Goal Category.

     For illustration purposes, for a Plan Year a Participant may be given a table like the following, showing the basis for computing the Award for the Company Revenue objective on the basis of the Goal Weight percentage and the Incentive Opportunity Percentage for each Performance Level (the numbers are for illustration only ):

     Performance that falls between two Performance Levels (e.g., above the Threshold, but below the Target level) will produce a prorated bonus. Performance that exceeds the Maximum level will not result in an Award in excess of the Maximum level. There is an annual maximum Award limitation under this Plan for each Participant. The maximum Award limitation will be the product of (i) the Maximum Incentive Opportunity Percentage as approved by the Administrator, and (ii) the Plan Base Salary of each Participant, as approved by the Administrator.

     Performance on each Performance Goal Category will be measured independently and will lead to an Award determined separately for each Performance Goal Category. Thus, Awards may be earned in one, two or all three Performance Goal Categories, provided that at least the Threshold level shall have been achieved for at least one Performance Goal Category as a condition to the grant of an Award to a Participant.

7. CALCULATION OF CASH INCENTIVE AWARD

     At the beginning of, or soon after the beginning of, the Plan Year (a) the Administrator will determine the Participant’s Plan Base Salary; (b) the Administrator will establish the Goal Weight Percentage for each of the Company components and the individual component; and (c) the Administrator will establish the Incentive Opportunity Percentage multipliers for each of the three performance levels, i.e., Threshold, Target and Maximum levels. The cash Award for each Company component is equal to the product of (i) the Plan Base Salary of the Participant, (ii) the Goal Weight Percentage for the specific Company Performance Goal Category, and (iii) the Incentive Opportunity Percentage for the Performance Level achieved as of the end of the Plan Year. The Goal Weight percentage for the individual Performance Goal Category and the Incentive Opportunity Percentage for the individual Performance Level achieved as of the end of the Plan Year, which is based on an individual’s performance against objectives, are used in the same way to compute the individual Performance Goal Category cash Award.

     For illustration purposes, the example below shows a sample cash Award calculation under the Plan:

     Suppose the Participant’s Plan Base Salary is $250,000. Further suppose, the “Target” Performance Level is achieved for the three Performance Goal Categories, i.e., the Company revenue and the Company Adjusted EBITDA Performance Goal Categories and the individual Performance Goal Category, then the Award would be computed as follows (the numbers are for illustration only ):

8. TIMING AND PAYMENT OF AWARDS

     Awards are not earned until the Award is approved by the Administrator. Therefore, even if the Plan Year has ended, a Participant is not entitled to an Award unless

the Administrator determines the Participant is entitled to receive the Award. A Participant must be on the active payroll of the Company or its Subsidiaries at the time the Award is approved for it to be paid, except for special provisions for certain separations described in Section 9, Changes in Employment Status, herein.

     No Awards will be approved, and therefore cannot be earned, until after the completion of the Plan Year audit of the Company’s financial statements by its independent auditors.

     Awards will be approved, if earned, promptly after completion of the Plan Year audit, Awards will be paid in a single cash payment within thirty (30) days after the Award has been approved by the Administrator, subject to Section 4 regarding payment of Awards in Stock or Stock Options, and subject to the Company’s available cash. In the event that the Administrator, upon consultation with the Board, determines that it is in the best interest of the Company to delay payment of all or a portion of cash Awards in any Plan Year, then the unpaid balance of such cash Awards shall accrue interest at a commercial rate to be determined by the Administrator commencing as of the date such Awards shall be approved by the Administrator.

9. CHANGES IN EMPLOYMENT STATUS

     Payments of proposed Awards will be subject to the following changes in employment status:

     (a)  Transfers and Promotions . Transfer or promotion into a position not eligible under this Plan, or from an ineligible position to an eligible one, will make the Participant eligible for a prorated Award, as long as he or she has been in an eligible position for not less than six (6) months in the current Plan Year.

     (b)  Plan Base Salary Adjustment . Adjustments to a Participant’s Plan Base Salary during a Plan Year will make the Participant eligible for a prorated Award based on the average weighted Plan Base Salary for such Plan Year.

     (c)  Involuntary Termination . Involuntary termination for reasons due to job elimination or staff reduction, except termination for “cause” (as set forth in Section 10(b)), will make the Participant eligible for a prorated Award (subject to the recommendation of the Chief Executive Officer or the then next senior executive officer), as long as the participant has been in an eligible position for not less than six (6) months in the current Plan Year.

     (d)  Disability . Total and permanent disability will make the Participant eligible for a prorated Award, subject to actual performance on the Performance Goal Categories set for the Participant or for the Company.

     (e)  Death. A prorated Award may be paid, in the discretion of the Administrator, to a Participant’s estate, assuming performance prior to his or her death reached or exceeded the Threshold Performance Level for one or more Performance Goal Categories.

     (f)  Retirement . Retirement from active employment, subject to qualifying for retirement benefits under existing Company retirement plans will make the Participant eligible for a prorated Award, subject to meeting all other performance requirements.

     (g)  Leave of Absence . An approved leave of absence will be treated in the same manner as a transfer from or into an eligible position.

     For purposes of Sections 9(a), (b), (d), (e) and (f), the prorated Award will be computed based on a 365-day year and the actual number of days that the Participant shall have been in an eligible position. All prorated Awards shall be subject to the approval of the Administrator in its discretion.

10. TERMINATION

     (a)  Company Initiated . If employment of a Participant is terminated by the Company for reasons other than for “cause” or those previously listed in Section 9, the Participant will be eligible for a prorated Award (subject to the recommendation of the Chief Executive Officer or the then most senior executive officer), as long as the Participant has been in an eligible position for not less than six (6) months in the then current Plan Year.

     (b)  Termination for Cause . If employment of Participant is terminated for “cause” (or any variation of that term), as that term may be defined in the Participant’s employment agreement with the Company, if applicable or if no such employment agreement exists or shall be applicable, then under applicable law, the Participant shall be ineligible to receive any Award for the then current Plan Year.

     (c)  Voluntary Termination. Participants terminating employment by their own action during the Plan Year forfeit all rights to any Award.

11. DESIGNATION OF BENEFICIARY

     A Participant may file with the Company a designation of a beneficiary or beneficiaries on a form provided by the Administrator. The designation may be changed or revoked by the Participant’s sole action, provided that such change or revocation is filed in writing with the Administrator.

12. 409A EXEMPTION

     All Awards granted under this Plan shall be issued on such terms and conditions as will exempt such Awards from the regulation under Code Section 409A, and all Awards shall be interpreted and administered to preserve that exempt status.

13. PLAN AMENDMENTS

     The Plan shall become effective when adopted by the Compensation Committee or the Board. The Compensation Committee or the Board may at any time amend, suspend or terminate the Plan, even if such amendment, suspension or termination may adversely affect the rights of a Participant.

14. BENEFITS UNFUNDED

     No amounts awarded or accrued under this Plan shall actually be funded, set aside or otherwise segregated prior to payment. The obligation to pay the Awards hereunder shall at all times be an unfunded and unsecured obligation of the Company. Plan Participants that have received an Award approved by the Administrator and that has become due and payable shall have the status of general creditors and shall look solely to the general assets of the Company for the payment of their Awards.

15. BENEFITS NONTRANSFERABLE

     No Plan Participant shall have the right to transfer any interest in, alienate, pledge or encumber his or her interest in this Plan, and such interest shall not (to the extent permitted by law) be subject in any way to the claims of the Participant’s creditors or to attachment, execution or other process of law.

16. OTHER PLANS

     Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting other or additional compensation arrangements for its employees, directors and contract service providers.

17. NO EMPLOYMENT RIGHTS

     The adoption of the Plan shall not confer upon any employee, director, consultant, independent contractor or advisor any right to continued employment, directorship or service, nor shall it interfere in any way with the right of the Company or any Subsidiary or Affiliate to terminate the employment or service of any employee, consultant or advisor at any time.

18. WITHHOLDING TAXES AND OFFSETS

     No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Plan shall be conditioned on such payment arrangements, and the Company, its Subsidiaries and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Administrator may establish such procedures as it deems appropriate for the settlement of withholding obligations with Stock or Stock Options.

     Any amounts owed to the Company or an Affiliate by the Participant of whatever nature may be offset by the Company from the cash, or value of any shares of Stock, or other thing of value under this Plan or an agreement to be transferred to the Participant, and no cash or shares of Stock, or other thing of value under this Plan or an agreement shall be transferred unless and until all disputes between the Company and the Participant have

been fully and finally resolved and the Participant has waived all claims to such against the Company and Affiliates.

19. EXCLUSIVE PLAN DOCUMENT

     This Plan and each agreement granting an Award constitute the entire agreement with respect to the subject matter hereof and thereof.

20. GOVERNING LAW

     This Plan, and all Awards, agreements and actions hereunder, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to its choice of law provisions.

21. GENERAL PROVISIONS

     (a) The grant of an Award shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

     (b) If any payment or right accruing to a Participant under this Plan (without the application of this Section 21(b)), either alone or together with other payments or rights accruing to the Participant from the Company or an Affiliate (“Total Payments”) would constitute a “parachute payment” (as defined in Section 280G of the Code and regulations thereunder), such payment or right shall be reduced to the largest amount or greatest right that will result in no portion of the amount payable or right accruing under this Plan being subject to an excise tax under Section 4999 of the Code or being disallowed as a deduction under Section 280G of the Code, provided, however, that the foregoing shall not apply to the extent provided otherwise in an Award or in the event the Participant is party to an agreement with the Company or an Affiliate that explicitly provides for an alternate treatment of payments or rights that would constitute “parachute payments.” The determination of whether any reduction in the rights or payments under this Plan is to apply shall be made by the Administrator in good faith after consultation with the Participant, and such determination shall be conclusive and binding on the Participant. The Participant shall cooperate in good faith with the Administrator in making such determination and providing the necessary information for this purpose. The foregoing provisions of this Section 21(b) shall apply with respect to any person only if, after reduction for any applicable Federal excise tax imposed by Section 4999 of the Code and Federal income tax imposed by the Code, the Total Payments accruing to such person would be less than the amount of the Total Payments as reduced, if applicable, under the foregoing provisions of this Plan and after reduction for only Federal income taxes. The Company shall have no liability or obligation under this Plan to reimburse or make whole any Participant for any tax, interest or penalty accruing with respect to any “parachute payment.”

     (c) To the extent that the Administrator determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Administrator in its discretion may modify those restrictions as it determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.

     (d) The headings contained in this Plan are for reference purposes only and shall not affect the meaning or interpretation of this Plan.

     (e) If any provision of this Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereby, and this Plan shall be construed as if such invalid or unenforceable provision were omitted.

     (f) This Plan shall inure to the benefit of, and be binding upon, each successor and assign of the Company. All obligations imposed upon a Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal Representatives and successors.

22. DEFINITIONS

     For purposes of this Plan, the following terms are defined as set forth below:

     (a) “Affiliate” means a corporation or other entity controlled by the Company and designated by the Administrator as such.

     (b) “Award” means a cash award or an Award made in Stock or denominated in shares of Stock.

     (c) “Board” means the Board of Directors of the Company.

     (d) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

     (e) “Committee” means the Compensation Committee of Directors appointed by the Board to administer this Plan.

     (f) “Company&rdqu