SECURITIES EXCHANGE AGREEMENT
 
This Securities Exchange Agreement (this “Agreement”) is dated as of June 30,
2011, between Cyalume Technologies Holdings, Inc., a Delaware corporation (the
“Company”) and Rodman Principal Investments, LLC (“Holder”).
 
WHEREAS, the Holder currently holds a Secured Promissory Note of the Company
(the “Note”), issued on December 31, 2009, in the principal amount of $1,818,065
with accrued but unpaid interest equal to $403,946.67 (collectively, the
“Aggregate Outstanding Amount”) that was issued in lieu of the payment of
certain placement agent services undertake and performed by the Holder for the
benefit of the Company;
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the
“Securities Act”), the Company desires to issue shares of Common Stock (as
defined below) in exchange for the Note and the Holder desires to receive Common
Stock in exchange for its Note, as more fully described in this Agreement;
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Holder agree as
follows:
 
 
ARTICLE I.
DEFINITIONS
 
1.1           Definitions.  In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as defined
herein), and (b) the following terms have the meanings set forth in this Section
1.1:
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.
 
“Board of Directors”                                           means the board
of directors of the Company.
 
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
 
“Closing Date” means the Trading Day on which this Agreement has been executed
and delivered by the applicable parties thereto, and all conditions precedent to
(i) the Holder’ obligations to proceed with the Closing and (ii) the Company’s
obligations to deliver the Securities, in each case, have been satisfied or
waived.
 
 
 

--------------------------------------------------------------------------------

 
 
“Commission” means the United States Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
 
 “Company Counsel” means Loeb & Loeb LLP.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

“Public Information Failure” shall have the meaning ascribed to such term in
Section 4.1(a).
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Shares” shall have the meaning ascribed to such term in Section 2.2(a)(ii).

“Trading Day” means a day on which the principal Trading Market is open for
trading.

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).

 
2

--------------------------------------------------------------------------------

 
 
ARTICLE II.
EXCHANGE
 
2.1                  Closing.  On the Closing Date, upon the terms and subject
to the conditions set forth herein, concurrent with the execution and delivery
of this Agreement by the parties hereto, the Company shall issue to the Holder,
in exchange for the Note, shares of Common Stock as determined in Section 2.2(a)
(the “Shares”).  Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of Company Counsel
or such other location as the parties shall mutually agree.
 
 
2.2
Deliveries.

 
(a)           On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to the Holder the following:
 
 
(i)
this Agreement duly executed by the Company; and

 
(ii)           an instruction letter to the Company’s transfer agent to deliver
electronically through the Depository Trust Company (“DTC”) to the DTC account
of the Holder set forth on the signature page hereto a certificate evidencing a
number of shares of Common Stock equal to the Aggregate Outstanding Amount
divided by $4.60 (the “Shares”).
 
(b)           On or prior to the Closing Date, the Holder shall deliver or cause
to be delivered to the Company the following:
 
 
(i)
this Agreement duly executed by the Holder; and

 
 
(ii)
the Note.

 
 
2.3
Closing Conditions.

 
(a)           The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
 
(i)           the accuracy in all material respects on the Closing Date of the
representations and warranties of the Holder contained herein (unless as of a
specific date therein);
 
(ii)           all obligations, covenants and agreements of the Holder required
to be performed at or prior to the Closing Date shall have been performed;
 
(iii)           the delivery by the Holder of the items set forth in Section
2.2(b) of this Agreement; and
 
(iv)           An opinion of counsel to the Holder reasonably acceptable to the
Company indicating that the Shares may be issued free of restrictive legend.
 
 
3

--------------------------------------------------------------------------------

 
 
(b)           The respective obligations of the Holder hereunder in connection
with the Closing are subject to the following conditions being met:
 
(i)           the accuracy in all material respects when made and on the Closing
Date of the representations and warranties of the Company contained herein
(unless as of a specific date therein);
 
(ii)           all obligations, covenants and agreements of the Company required
to be performed at or prior to the Closing Date shall have been performed; and
 
(iii)           the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement.
 
 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1           Representations and Warranties of the Company.  The Company hereby
makes the following representations and warranties to the Holder:
 
(a)           Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, the Board of Directors
or the Company’s stockholders in connection therewith.  This Agreement has been
duly executed by the Company and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except:
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
 
(b)           Issuance of the Shares.  The Shares are duly authorized and, when
issued and paid for in accordance with this Agreement, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in this Agreement.  The
Company has reserved from its duly authorized capital stock a number of shares
of Common Stock for issuance pursuant to this Agreement.
 
(c)           Holding Period for Preferred Stock. Pursuant to Rule 144, the
holding period of the Shares tacks back to December 31, 2008, the original issue
date of the Notes.  The Company agrees not to take a position contrary to this
Section 3.1(d).
 
 
4

--------------------------------------------------------------------------------

 
 
(e)           General Solicitation.  The Company has not undertaken any
advertisement, article, notice or other communication regarding the exchange of
Notes into Shares or otherwise published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar or any
other general solicitation or general advertisement.
 
3.2           Representations and Warranties of the Holder.  The Holder hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:
 
(a)           Organization; Authority.  The execution and delivery of this
Agreement and performance by the Holder of the transactions contemplated this
Agreement have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of the
Holder.  This Agreement has been duly executed by the Holder, and when delivered
by the Holder in accordance with the terms hereof, will constitute the valid and
legally binding obligation of the Holder, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.
 
(f)           General Solicitation.  Such Holder is not exchanging the Shares as
a result of any advertisement, article, notice or other communication regarding
the Shares published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
 
 
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1           Transfer Restrictions.
 
(a)           Provided that the Company is then in compliance with the current
public information requirements under Rule 144, the certificates evidencing the
Shares shall not contain any legend.  In the event that, after the date hereof,
the Company is not in compliance with the public information requirements
 
(“Public Information Failure”), the Holder shall return any Shares then held by
the Holder and a new certificate representing such Shares shall be issued to the
Holder with the following legend:
 
THIS SECURITY HAS NOT BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
 
 
5

--------------------------------------------------------------------------------

 
 
(b)           Upon written notice from the Company that the public information
requirements of Rule 144 are no longer met, or if the Holder otherwise has
knowledge that the public information requirements of Rule 144 are no longer
met, the Holder shall cease sales of the Shares and promptly return the Shares
to the Company to be re-issued pursuant to the legending requirements
above.  Upon the Company again meeting the public information requirements under
Rule 144, the Company agrees that it will, no later than three Trading Days
following the delivery by the Holder to the Company or the Company’s transfer
agent of a certificate representing Shares with a restrictive legend and an
opinion of counsel to the Holder reasonably acceptable to the Company that any
such legend may be removed, transmit or cause to be transmitted to the Holder
the Shares, free from all restrictive and other legends, by crediting the DTC
account of the Holder’s prime broker as directed by the Holder.  Notwithstanding
anything herein to the contrary, the Holder shall have the right to provide a
reasonably acceptable legal opinion of counsel reasonably acceptable to the
Company (the law firms of [Ellenoff Grossman & Shole LLP and Shulte Roth & Zabel
LLP] shall be approved law firms) to the effect that the Shares may be resold
pursuant to an exemption from registration under the Securities Act.
 
4.2           Current Reports.  Until July 1, 2012, the Company covenants to use
commercially reasonable efforts to maintain the registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
periodic reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act.  The Company knows of no reasons or circumstances
as to why it will not be able to timely file its Quarterly Report on Form 10-Q
for the period ended June 30, 2011.

 
ARTICLE V.
MISCELLANEOUS
 
5.1           Termination.  This Agreement may be terminated by any Holder, as
to the Holder’s obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Holder, by written notice to
the other parties, if the Closing has not been consummated on or before July 15,
2011; provided, however, that such termination will not affect the right of any
party to sue for any breach by the other party (or parties).
 
5.2           Fees and Expenses.  Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement.  The Company shall pay
all transfer agent fees and stamp taxes levied in connection with the delivery
of any Shares to the Holder.
 
 
6

--------------------------------------------------------------------------------

 
 
5.3           Entire Agreement.  This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
 
5.4           Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (c) the second (2nd)  Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or (d)
upon actual receipt by the party to whom such notice is required to be
given.  The address for such notices and communications shall be as set forth on
the signature pages attached hereto.
 
5.5           Amendments; Waivers.  No provision of this Agreement may be
waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Holder.  No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.
 
5.6           Headings.  The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
 
5.7           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Holder (other than by
merger).  Any Holder may assign any or all of its rights under this Agreement to
any Person to whom the Holder assigns or transfers any Shares, provided that
such transferee agrees in writing to be bound, with respect to the transferred
Shares, by the provisions of this Agreement that apply to the “Holder.”
 
5.9           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.  Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of this Agreement), 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 improper or is an  inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law.  If either party shall commence an action or proceeding
to enforce any provisions of  this Agreement, then, in addition to the
obligations of the Company under Section 4.10, the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
 
 
7

--------------------------------------------------------------------------------

 
 
5.10           Survival.  The representations and warranties contained herein
shall survive the Closing and the delivery of the Shares.
 
5.11           Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart.  In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.
 
5.12           Severability.  If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
 
5.14           Replacement of Shares.  If any certificate or instrument
evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Shares.
 
 
8

--------------------------------------------------------------------------------

 
 
5.20           Saturdays, Sundays, Holidays, etc.   If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
 
5.21           Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise this Agreement
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments hereto. In addition,
each and every reference to share prices and shares of Common Stock in any
Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.
 
5.22           WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.
 

 
(Signature Pages Follow)
 
 
9

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties hereto have caused this Securities Exchange
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 

CYALUME TECHNOLOGIES HOLDINGS, INC.
 
 
Address for Notice:
96 Windsor Street
West Springfield MA 01089
By:
/s/ Michael Bielonko
 
Fax:  413-788-4817
 
Name: Michael Bielonko
Title: Chief Financial Officer
 
With a copy to (which shall not constitute notice):
   

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR HOLDER FOLLOWS]
 
 
10

--------------------------------------------------------------------------------

 
 
[HOLDER SIGNATURE PAGES TO CYLU SECURITIES EXCHANGE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Exchange
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Holder: Rodman Principal Investments
Signature of Authorized Signatory of Holder: /s/ David Horin
Name of Authorized Signatory: David Horin
Title of Authorized Signatory: Chief Financial Officer
Email Address of Authorized Signatory: dhorin@rodm.com
Facsimile Number of Authorized Signatory:
Address for Notice of Holder:

DTC Account:  0443

[SIGNATURE PAGES CONTINUE]

 
11

--------------------------------------------------------------------------------