Execution Version

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into
as of November 19, 2013, by and between Cyalume Technologies Holdings, Inc., a
Delaware corporation (the “Company”), and US VC Partners, L.P., a Delaware
limited partnership (the “Purchaser”).

 

WHEREAS, the Company and the Purchaser are parties to the Securities Purchase
Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to
which the Purchaser is purchasing one hundred and twenty-three thousand,
seventy-seven (123,077) units of Securities (as defined in the Purchase
Agreement); and

 

WHEREAS, in connection with the consummation of the transactions contemplated by
the Purchase Agreement, and pursuant to the terms of the Purchase Agreement, the
parties desire to enter into this Agreement in order to grant certain rights to
the Holders (as defined below) as set forth below.

 

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 Purchaser agree
as follows:

 

1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

 

“Advice” has the meaning set forth in Section 9(c).

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person, as such terms are used in and
construed under Rule 405 under the Securities Act. With respect to the
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager (or any Affiliate thereof) as
the Purchaser will be deemed to be an Affiliate of the Purchaser.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Board” has the meaning set forth in Section 4(a)i.

 

“Business Day” means any day, except Saturday, 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.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any securities into which such common stock may hereinafter be
reclassified.

 

“Common Stock Warrants” has the meaning set forth in the Purchase Agreement.

 

“Company” has the meaning set forth in the Preamble.

 

“Convertible Securities” means any securities of the Company or any of its
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, directly or indirectly, upon the conversion, exchange or
reclassification of such security including, without limitation, any debt,
preferred stock, rights, or any other instrument that is at any time convertible
into or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock, but excluding Options.

 

 

 

 

“Demand Registration” has the meaning set forth in Section 2(b).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities. As of the date of this Agreement, the sole
Holder is the Purchaser.

 

“Indemnified Party” has the meaning set forth in Section 6(c).

 

“Indemnifying Party” has the meaning set forth in Section 6(c).

 

“Long-Form Registration” has the meaning set forth in Section 2(a).

 

“Losses” has the meaning set forth in Section 6(a).

 

“Options” means any warrants or other rights or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

“Other Securities” has the meaning set forth in Section 3(a).

 

“Participating Holder” means, any Holder that has submitted a Registration
Request or notified the Company that it desires to participate in a Demand
Registration pursuant to Section 2.

 

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Preferred Stock Warrants” has the meaning set forth in the Purchase Agreement.

 

“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading, which, as of the date hereof, shall
be the OTC Bulletin Board.

 

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

 

“Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

 

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“Purchase Agreement” has the meaning set forth in the Recitals.

 

“Purchaser” has the meaning set forth in the Preamble.

 

“Qualified Offering” has the meaning set forth in the Purchase Agreement.

 

“Registrable Securities” means (i) Common Stock issued or issuable upon
conversion of the Shares, (ii) Common Stock issued or issuable upon exercise of
the Warrants, and (iii), any securities issued or issuable in respect of the
shares described in clauses (i) and (ii) above in connection with any stock
split, dividend or other distribution, recapitalization, share combination,
reorganization, merger, consolidation or similar event (it being understood that
for purposes of this Agreement, a Person shall be deemed to be a holder of
Registrable Securities whenever such Person has the right to then acquire or
obtain from the Company Registrable Securities, whether or not such acquisition
has actually been effected) provided, that with respect to a particular Holder,
such securities shall cease to be Registrable Securities upon the sale of such
shares pursuant to a Registration Statement or Rule 144 under the Securities Act
(in which case, only such security sold by such Holder shall cease to be a
Registrable Security).

 

“Registration Request” has the meaning set forth in Section 2(a).

 

“Registration Statements” means any one or more registration statements of the
Company filed under the Securities Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, including
(in each case) the amendments and supplements to such Registration Statements,
including pre- and post-effective amendments thereto, all exhibits and all
material incorporated by reference or deemed to be incorporated by reference in
such Registration Statements.

 

“Regulation D” means Regulation D, as promulgated by the Commission under the
Securities Act.

 

“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.

 

“Selling Holder” has the meaning set forth in Section 3(a).

 

“Shares” means shares of the Series A Convertible Preferred Stock of the
Company, par value $0.001 per share, having the rights, preferences, powers,
restrictions and limitations set forth in the Certificate of Designation filed
by the Company with the Secretary of State of Delaware on November 18, 2013
issued or issuable to the Purchaser (or any subsequent transferee) pursuant to
the Purchase Agreement or upon exercise of the Preferred Stock Warrants, and any
securities into which such Series A Convertible Preferred Stock may hereinafter
be reclassified or exchanged.

 

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“Short-Form Registration” has the meaning set forth in Section 2(b).

 

“Subsidiary” means, with respect to any Person, any other Person of which a
majority of the outstanding shares of capital stock or other equity interests
having the power to vote for directors or comparable managers are owned,
directly or indirectly, by the first Person.

 

“Suspension Period” has the meaning set forth in Section 4(a)i.

 

“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market, or (ii) if the Common Stock is not
listed on its Principal Trading Market, a day on which the Common Stock is
traded on any Trading Market, or (iii) if the Common Stock is not quoted on any
Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported in the “pink sheets” by OTC Markets Group
Inc. (formerly Pink Sheets LLC), or any similar organization or agency
succeeding to its functions of reporting prices; provided, that in the event
that the Common Stock is not listed or quoted as set forth in (i), (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT
LLC (formerly the American Stock Exchange), the NASDAQ Global Select Market, the
NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on
which the Common Stock is listed or quoted for trading on the date in question.

 

“Transaction Documents” has the meaning set forth in the Purchase Agreement.

 

“Transfer Agent” has the meaning set forth in the Purchase Agreement.

 

“Underwritten Offering” has the meaning set forth in Section 2(a).

 

“Warrants” means the Common Stock Warrants and Preferred Stock Warrants issued
pursuant to the Purchase Agreement.

 

2. Demand Registration.

 

(a) Upon the request of the Purchaser (a “Registration Request”) that the
Company file a Form S-1 registration statement (or such other form available to
register for resale such Registrable Securities as a secondary offering) with
respect to any Registrable Securities (a “Long-Form Registration”), the Company
shall promptly (but in no event later than ten (10) days following receipt
thereof) deliver notice of such request to all other Holders, who shall then
have ten (10) days from the date such notice is given to notify the Company in
writing of their desire to be included in such Long-Form Registration. Each
Registration Request shall also specify the expected method or methods of
disposition of the applicable Registrable Securities, including whether such
Registrable Securities are to be distributed by means of an underwritten
offering (each such offering, an “Underwritten Offering”). The Company shall use
its reasonable best efforts to as soon as practicable, and in any event within
sixty (60) days after the date of the first Registration Request (and within
forty-five (45) days after any subsequent Registration Request), prepare and
file with the Commission a Registration Statement covering the resale of all of
the Registrable Securities that the Participating Holders requested to be
registered. The Company shall not be obligated to effect more than four (4)
Long-Form Registrations in the aggregate, provided, that a Long-Form
Registration shall not be counted under the immediately preceding clause unless
and until it has become effective and the Participating Holders are able to
register and sell at least 75% of the Registrable Securities requested to be
included in such registration. Notwithstanding anything to the contrary
contained herein, no request may be made under this Section 2(a) within ninety
(90) days after the effective date of a Registration Statement filed by the
Company covering a firm commitment underwritten public offering. Subject to
Section 4(a), the Company shall use its reasonable best efforts to cause each
such Registration Statement to be declared effective by the Commission as soon
as practicable.

 

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(b) If at any time when it is eligible to use a Form S-3 registration statement,
the Company receives a request from the Purchaser that the Company file a Form
S-3 registration statement with respect to any Registrable Securities (a
“Short-Form Registration” and, together with each Long-Form Registration, a
“Demand Registration”), the Company shall promptly (but in no event later than
ten (10) days following receipt thereof) deliver notice of such request to all
other Holders, who shall then have ten (10) days from the date such notice is
given to notify the Company in writing of their desire to be included in such
registration. The Company shall use its reasonable best efforts to as soon as
practicable, and in any event within thirty (30) days after the date such
request is given by the Purchaser, cause a Registration Statement on Form S-3
(or any successor form) to be filed covering the sale of all Registrable
Securities that the Participating Holders requested to be included in such
registration. Subject to Section 4(a), the Company shall use its reasonable best
efforts to cause each such Registration Statement to be declared effective by
the Commission as soon as practicable. With respect to any Short-Form
Registration, the Purchaser may request the Company to effect a registration of
the Registrable Securities under a Registration Statement pursuant to Rule 415
under the Securities Act or any successor rule thereto.

 

(c) If a Registration Request specifies that the Registrable Securities covered
by such Registration Request are intended to be sold by means of an Underwritten
Offering, the Company shall so advise the Holders in the notice to Holders
delivered pursuant to Section 2(a) or 22(b), as applicable. In such event, the
right of any Holder to include such Holder’s Registrable Securities in such
registration shall be conditioned upon such Holder’s participation in such
Underwritten Offering. The underwriter(s) will be selected by the Purchaser,
subject only to the reasonable approval of the Company. All Participating
Holders shall enter into an underwriting agreement in customary form with the
underwriter(s) selected for such Underwritten Offering. Notwithstanding any
other provision of this Section 22(c), if the underwriter advises the
Participating Holders in writing that marketing factors require a limitation on
the number of shares to be underwritten, then the number of Registrable
Securities that may be included in such Underwritten Offering shall be allocated
first to the Purchaser and to security holders in connection with the Qualified
Offering, and thereafter, among the Participating Holders, in each case, in
proportion (as nearly as practicable) to the number of Registrable Securities or
shares of Common Stock, as applicable, owned or held, or underlying Convertible
Securities owned or held, by each Participating Holder or other security holder,
as applicable, or in such other proportion as shall mutually be agreed to by all
Participating Holders.

 

3. Piggyback Registration.

 

(a) The Company shall notify all Holders in writing at least fifteen (15) days
prior to the filing of any registration statement under the Securities Act for
purposes of a public offering of securities (such securities, “Other
Securities”) of the Company of the same type and class as the Registrable
Securities including, but not limited to, registration statements relating to
secondary offerings of securities of the Company (other than a registration
statement (i) on Form S-4, Form S-8 or any successor forms thereto, (ii) filed
solely in connection with any employee benefit or dividend reinvestment plan or
(iii) for the purpose of effecting a rights offering relating to the Common
Stock), and will afford each Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder. Each Holder desiring to include in any such registration statement all
or any part of the Registrable Securities held by it (a “Selling Holder”) shall,
within ten (10) days after the above-described notice from the Company, so
notify the Company in writing. If a Selling Holder decides not to include all of
its Registrable Securities in any registration statement thereafter filed by the
Company, such Selling Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.

 

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(b) Underwriting. If a registration statement of which the Company gives notice
under this Section 3 is for an underwritten offering, the Company shall so
advise the Holders by written notice. In such event, the right of any such
Holder to include Registrable Securities in a registration pursuant to this
Section 3 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities in the
underwriting to the extent provided herein. All Selling Holders shall enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated as follows: (i) first, all Other Securities being sold by the
Company or by any Person (other than the Holders) exercising a contractual right
to demand registration pursuant to which such registration statement was filed,
(ii) second, to the Purchaser and to security holders in connection with the
Qualified Offering, in proportion (as nearly as practicable) to the number of
Registrable Securities or shares of Common Stock, as applicable, owned or held,
or underlying Convertible Securities owned or held, by each Participating Holder
or other security holder, as applicable, (iii) third, among any other Selling
Holders requesting such registration, pro rata, based on the aggregate number of
Registrable Securities owned by each such Selling Holder, and (iv) fourth, among
any other holders of Other Securities requesting such registration, pro rata,
based on the aggregate number of Other Securities owned by each such holder. If
any Selling Holder disapproves of the terms of any such underwriting, such
Selling Holder may elect to withdraw therefrom by written notice to the Company
and the underwriter, delivered at least ten (10) Business Days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.

 

(c) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 3
whether or not any Holder has elected to include Registrable Securities in such
registration, and shall promptly notify any Selling Holder of such termination
or withdrawal. The registration expenses of such withdrawn registration shall be
borne by the Company in accordance with Section 5.

 

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4. Registration Procedures.

 

(a) Whenever the Purchaser requests the Company to effect the registration of
any Registrable Securities or the Company is otherwise required to effect the
registration of any Registrable Securities pursuant to the terms hereof, the
Company shall use its reasonable best efforts to effect the registration and
sale of such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto, the Company shall as expeditiously as
reasonably possible:

 

i. Prepare and file with the Commission a Registration Statement with respect to
such Registrable Securities and use all reasonable best efforts to cause such
Registration Statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
Registration Statement effective until the Participating Holders have completed
the distribution related thereto; and before filing a Registration Statement or
Prospectus or any amendment or supplements thereto, furnish to the Holders and
the underwriter or underwriters, if any, copies of all such documents proposed
to be filed, including documents incorporated by reference in the Prospectus,
which are not yet publicly available and, if requested by the Holders, the
exhibits incorporated by reference, which are not yet publicly available, and
the Holders shall have the opportunity to object to any information pertaining
to the Holders that is contained therein and the Company will make the
corrections reasonably requested by the Holders with respect to such information
prior to filing any registration statement or amendment thereto or any
prospectus or any supplement; provided, however, that at any time, upon written
notice to the Participating Holders and for a period not to exceed sixty (60)
days thereafter (the “Suspension Period”), the Company may delay the filing or
effectiveness of any Registration Statement or suspend the use or effectiveness
of any Registration Statement (and the Holders hereby agree not to offer or sell
any Registrable Securities pursuant to such Registration Statement during the
Suspension Period) if the Company reasonably believes in the good faith judgment
of the board of directors of the Company (the “Board”) that there is or may be
in existence material nonpublic information or events involving the Company, the
failure of which to be disclosed in the prospectus included in the registration
statement could result in a violation or alleged violation by the Company of the
Securities Act, the Exchange Act or any state securities law or any rule or
regulation thereunder. In the event that the Company shall exercise its right to
delay or suspend the filing or effectiveness of a registration hereunder, the
applicable time period during which the registration statement is to remain
effective shall be extended by a period of time equal to the duration of the
Suspension Period. The Company may extend the Suspension Period for an
additional consecutive sixty (60) days with the consent of the Holders of a
majority of the Registrable Securities registered under the applicable
Registration Statement, which consent shall not be unreasonably withheld. No
more than two (2) such Suspension Periods shall occur in any twelve (12) month
period, and the Company shall not file a registration statement with respect to
any Other Securities held by any other holder other than the Purchaser during
each such Suspension Period. In no event shall any Suspension Period, when taken
together with all prior Suspension Periods, exceed 120 days in the aggregate. If
so directed by the Company, all Holders registering Registrable Securities under
such Registration Statement shall (i) not offer to sell any Registrable
Securities pursuant to the Registration Statement during the period in which the
delay or suspension is in effect after receiving notice of such delay or
suspension; and (ii) use their reasonable best efforts to deliver to the Company
(at the Company’s expense) all copies, other than permanent file copies then in
such Holders’ possession, of the Prospectus relating to such Registrable
Securities current at the time of receipt of such notice.

 

ii. Prepare and file with the Commission such amendments and supplements to such
Registration Statement and the Prospectus (and all amendments and supplements
thereto) used in connection with such Registration Statement as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such Registration
Statement.

 

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iii. Furnish to the Holders selling such Registrable Securities such number of
copies of a Prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

 

iv. Use its reasonable best efforts to register and qualify the Registrable
Securities covered by such Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by any
Holder selling any such Registrable Securities; provided that the Company shall
not be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions.

 

v. In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter(s) of such offering and take all such other customary
actions as the Holders participating in such offering or the managing
underwriters of such offering reasonably request in order to expedite or
facilitate the disposition of the securities covered by such registration
statement (including, without limitation, making members of senior management of
the Company reasonably available to participate in “road-show” and other
customary marketing activities (including one-on-one meetings with prospective
purchasers of the securities)). Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.

 

vi. Notify each Holder of Registrable Securities covered by such Registration
Statement at any time when a Prospectus relating thereto is required to be
delivered under the Securities Act of the occurrence of any event as a result of
which the Prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing. The Company will
use reasonable best efforts to amend or supplement such Prospectus in order to
cause such Prospectus not to include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances then
existing.

 

vii. Furnish to each selling Holder of Registrable Securities and each
underwriter, if any, with (i) a legal opinion of the counsel representing the
Company for the purposes of such registration, dated the effective date of such
Registration Statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting agreement)
in form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and (ii) a letter from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters
and covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the Holders participating in such sale, lead
underwriters or managing underwriters reasonably request.

 

viii. To the extent not prohibited by applicable law or pre-existing applicable
contractual restrictions, (i) make available, for inspection by the Holders and
any underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney retained by any such underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, (ii)
cause the Company’s officers and employees to supply all information reasonably
requested by such Holders or such underwriter or attorney in connection with
such Registration Statement, and (iii) make the Company’s independent
accountants available for any such underwriter’s due diligence, in each case, as
necessary or advisable to verify the accuracy of the information in such
Registration Statement and to conduct appropriate due diligence in connection
therewith.

 

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ix. Provide a transfer agent and registrar for all such Registrable Securities
not later than the effective date of such Registration Statement.

 

x. Make generally available to its stockholders a consolidated earnings
statement (which need not be audited) for the 12 months beginning after the
effective date of such Registration Statement as soon as reasonably practicable,
and in any event no later than thirty (30) days after the end of such period,
which earnings statement shall satisfy the requirements of an earnings statement
under Section 11(a) of the Securities Act and Rule 158 thereunder.

 

xi. Promptly respond to any and all comments received from the Commission, with
a view towards causing the Registration Statement or any amendment thereto to be
declared effective by the Commission as soon as reasonably practicable and shall
file an acceleration request as soon as reasonably practicable following the
resolution or clearance of all Commission comments or, if applicable, following
notification by the Commission that any such registration statement or any
amendment thereto will not be subject to review.

 

xii. At all times after the Company has filed a registration statement with the
Commission pursuant to the requirements of the Securities Act, the Company shall
use its reasonable best efforts to file all reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder, and use its reasonable best efforts to
take such further action as the Holders may reasonably request, all to the
extent required to enable the Holders to be eligible to sell Registrable
Securities pursuant to Rule 144 (or any similar rule then in effect).

 

xiii. Promptly notify the Holders participating in a sale and the underwriter or
underwriters by written notice, if any:

 

(1) when the Registration Statement, any pre-effective amendment, the Prospectus
or any Prospectus supplement or post-effective amendment to the Registration
Statement has been filed and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective;

 

(2) of the notification to the Company by the Commission of its initiation of
any proceeding with respect to the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement; and

 

(3) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the
applicable securities or blue sky laws of any jurisdiction.

 

xiv. Permit any Holder which Holder, in its sole and exclusive judgment, might
be deemed to be an underwriter or a controlling person of the Company, to
participate in the preparation of such Registration Statement and to require the
insertion therein of language, furnished to the Company in writing, which in the
reasonable judgment of such Holder and its counsel should be included.

 

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xv. Make such representations and warranties to Holders participating in a sale
of Registrable Securities and the underwriters as are customarily made by
issuers to selling stockholders and underwriters, as the case may be, in primary
underwritten public offerings.

 

xvi. Use reasonable best efforts to prevent the issuance of any stop order
suspending the effectiveness of such Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the lifting thereof at the earliest reasonable time.

 

xvii. Use its reasonable best efforts to comply with all applicable rules and
regulations of the Commission.

 

(b) Participating Holders and Selling Holder Obligations. In connection with any
offering under any Registration Statement under this Agreement, the Company may
require that each seller of Registrable Securities, (i)  furnish to the Company
in writing such information with respect to such seller of Registrable
Securities (A) as may be required by law or regulations for use in connection
with any related Registration Statement or Prospectus (or amendment or
supplement thereto) and all information required to be disclosed in order to
make the information previously furnished to the Company by such seller of
Registrable Securities not contain a material misstatement of fact or necessary
to cause such Registration Statement or Prospectus (or amendment or supplement
thereto) not to omit a material fact with respect to such seller of Registrable
Securities necessary in order to make the statements therein not misleading and
(B) the intended method of disposition of its Registrable Securities; and
(ii) shall comply with the Securities Act and the Exchange Act and all
applicable state securities laws and comply with all applicable regulations in
connection with the registration and the disposition of the Registrable
Securities. If any seller of Registrable Securities fails to provide such
information in a timely manner after written request therefor, the Company may
exclude such seller’s Registrable Securities from a registration under
Sections 2 or 3 hereof.

 

5. Registration Expenses. All fees and expenses incident to the Company’s
performance of or compliance with its obligations under this Agreement
(excluding any underwriting discounts and selling commissions) shall be borne by
the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed or quoted for trading, and (B) with respect to compliance with applicable
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the Holders of a majority of the
Registrable Securities included in a Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) reasonable fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, (vi) fees and expenses of counsel to Purchaser, and
(vii) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible for any
underwriting, broker or similar fees or commissions of any Holder or, except to
the extent provided for in the Transaction Documents, any legal fees or other
costs of the Holders.

 

10

 

 

6. Indemnification.

 

(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify, defend and hold harmless each Holder
and its Affiliates and its and their respective officers, directors, agents,
partners, members, managers, stockholders, Affiliates and employees of each of
them, each underwriter, broker or any other Person acting on behalf of such
Holder, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, managers, stockholders, agents and employees of
each such controlling Person and its Affiliates, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, actions,
damages, liabilities, costs (including, without limitation, reasonable costs of
preparation and investigation and reasonable attorneys' fees) and expenses,
joint or several (collectively, “Losses”) to which any of the foregoing Persons
may become subject under the Securities Act or otherwise, as and when incurred,
insofar as such Losses arise out of or are based upon (i) any untrue or alleged
untrue statement of a material fact contained in any Registration Statement, any
Prospectus or any form of prospectus, free writing prospectus (as defined in
Rule 405 under the Securities Act) or in any amendment or supplement thereto or
in any preliminary prospectus, or arising out of or relating to any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, or (ii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act or any state securities law
or any rule or regulation thereunder, in connection with the performance of its
obligations under this Agreement, except to the extent, but only to the extent,
that (A) such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and approved
in writing by such Holder expressly for use in such Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (B) in the case of an occurrence of an event of the type specified in Section
4(m)(ii)-(iii), related to the use by a Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated and defined in Section 9(c) below, to the extent that
following the receipt of the Advice the misstatement or omission giving rise to
such Loss would have been corrected The Company shall promptly notify the
Holders by written notice of the institution, threat or assertion of any
Proceeding arising from or in connection with the transactions contemplated by
this Agreement of which the Company is aware. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 6(c)) and shall survive the transfer of
the Registrable Securities by the Holders.

 

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(b) Indemnification by Holders. Each selling Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising out of or are based solely upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus, or any
form of prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading (i) to the extent that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein or
(ii) to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
approved in writing by such Holder expressly for use in a Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.

 

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all reasonable fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have materially
and adversely prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest exists if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party); provided, that
the Indemnifying Party shall not be liable for the fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, delayed or conditioned. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding, and in no
event shall such settlement include any non-monetary limitation on the actions
of any Indemnified Party or any of its Affiliates or any admission of fault or
liability on behalf of any such Indemnified Party.

 

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Subject to the terms of this Agreement, all fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner
not inconsistent with this Section 6) shall be paid to the Indemnified Party, as
incurred, within twenty (20) Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is finally
judicially determined to not be entitled to indemnification hereunder). The
failure to deliver written notice to the Indemnifying Party within a reasonable
time of the commencement of any such action shall not relieve such Indemnifying
Party of any liability to the Indemnified Party under this Section 6, except to
the extent that the Indemnifying Party is materially and adversely prejudiced in
its ability to defend such action.

 

(d) Contribution. If a claim for indemnification under Section 6(a) or Section
6(b) is unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless for any Losses, then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in this Agreement, any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section 6 was available to
such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6(d), (A) no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission and (B) no
contribution will be made under circumstances where the maker of such
contribution would not have been required to indemnify the Indemnified Party
under the fault standards set forth in this Section 6. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

 

13

 

 

The indemnity and contribution agreements contained in this Section 6 are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties and are not in diminution or limitation of the
indemnification provisions under the Purchase Agreement.

 

7. Rule 144 Compliance. With a view to making available to the Holders the
benefits of Rule 144 and any other rule or regulation of the Commission that may
at any time permit a Holder to sell securities of the Company to the public
without registration, the Company shall:

 

(a) make and keep public information available, as those terms are understood
and defined in Rule 144 or any similar or analogous rule promulgated under the
Securities Act;

 

(b) file with the Commission in a timely manner all reports and other documents
required of the Company under the Exchange Act; and

 

(c) furnish to any Holder, promptly upon request, a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company filed with the Commission, and such other
reports and documents as such Holder may reasonably request in connection with
availing itself of any rule or regulation of the Commission allowing it to sell
any such Registrable Securities without registration.

 

8. Information Rights.

 

(a) Information to be Delivered. The Company shall provide the Purchaser with
(i) as soon as available, but in any event within forty-five (45) days after the
end of each of the first three quarters of each fiscal year of the Company,
consolidated unaudited financial statements of the Company and its Subsidiaries
consisting of an unaudited income statement for such quarter, statement of cash
flows for such quarter and balance sheet as of the end of such quarter and, in
each case, prepared in accordance with GAAP; and (ii) as soon as available, but
in any event within ninety (90) days after the end of each fiscal year of the
Company, consolidated audited financial statements of the Company and its
Subsidiaries consisting of an audited income statement for such fiscal year,
statement of cash flows for such fiscal year and balance sheet as of the end of
such fiscal year and, in each case, prepared in accordance with GAAP; provided
that any documents or other information that is filed with the Commission need
not be separately provided by the Company to the Purchaser.

 

(b) Suspension or Termination. Notwithstanding anything else in this Section 8
to the contrary, the Company may cease providing the information set forth in
this Section 8 during the period starting with the date sixty (60) days before
the Company’s good-faith estimate of the date of filing of a registration
statement if it reasonably concludes it must do so to comply with the Commission
rules applicable to such registration statement and related offering; provided
that the Company’s covenants under this Section 8 shall be reinstated at such
time as the Company is no longer actively employing its reasonable best efforts
to cause such registration statement to become effective.

 

(c) Inspection. The Company shall permit the Purchaser, at the Purchaser’s
expense, and on the Purchaser’s written request, to visit and inspect the
Company’s properties; examine its books of account and records; and discuss the
Company’s affairs, finances, and accounts with its officers, during normal
business hours of the Company as may be reasonably requested by the Purchaser;
provided, however, that the Company shall not be obligated pursuant to this
Section 8(c) to provide access to any information that it reasonably and in good
faith believes that the disclosure of such information would adversely affect
the attorney-client privilege between the Company and its counsel.

 

14

 

 

(d) Confidentiality. The Purchaser agrees that it will keep confidential and
will not disclose, divulge, or use for any purpose (other than to monitor its
investment in the Company) any confidential information obtained from the
Company pursuant to the terms of this Section 8 unless such confidential
information (a) is known or becomes known to the public in general (other than
as a result of a breach of this Section 8(d) by the Purchaser), (b) is or has
been independently developed or conceived by the Purchaser without use of the
Company’s confidential information, (c) is or has been made known or disclosed
to the Purchaser by a third party without a breach of any obligation of
confidentiality such third party may have to the Company, or (d) is possessed by
the Purchaser on a non-confidential basis from a source not subject to an
obligation of confidentiality to the Company before receipt of such confidential
information from the Company; provided, however, that the Purchaser may disclose
confidential information (i) to its attorneys, accountants, consultants, and
other professionals to the extent necessary to obtain their services in
connection with monitoring its investment in the Company; (ii) to any existing
Affiliate, partner, member, stockholder, or wholly owned subsidiary of the
Purchaser in the ordinary course of business, but only if the Purchaser informs
such Person that such information is confidential and directs such Person to
maintain the confidentiality of such information; or (iii) as may otherwise be
required by law if the Purchaser promptly notifies the Company of such
disclosure and takes reasonable steps to minimize the extent of any such
required disclosure.

 

9. Miscellaneous.

 

(a) Remedies. In the event of a breach by the Company or by a Holder of any of
their obligations under this Agreement, each Holder or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for specific
performance in respect of such breach, (i) it shall waive the defense that a
remedy at law would be adequate, and (ii) no Holder will be required to post a
bond or other security to maintain such action.

 

(b) Piggyback on Registrations. The Company’s security holders (other than (i)
the Holders in such capacity pursuant hereto, and (ii) security holders in
connection with the Qualified Offering ) may not include securities of the
Company in a Registration Statement other than the Registrable Securities
without the consent of the Purchaser. The Company shall not enter into any
agreement providing any such right to any of its security holders other than in
connection with the Qualified Offering. The Company shall not enter into any
agreement precluding the Purchaser from including Registrable Securities
pursuant to the terms of Section 3 hereof in in a registration statement filed
by the Company pursuant to any registration rights agreement entered into with
respect to Other Securities. Notwithstanding anything to the contrary set forth
herein, the Company shall not be prohibited from preparing and filing with the
Commission a registration statement relating to an offering of Common Stock by
existing stockholders of the Company under the Securities Act pursuant to the
terms of registration rights held by such stockholder or from filing amendments
to registration statements filed prior to the date of this Agreement.

 

15

 

 

(c) Discontinued Disposition. By its acquisition of Registrable Securities, each
Holder agrees that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 4(m)(ii)-(iii), such Holder will
forthwith discontinue disposition of such Registrable Securities under a
Registration Statement until it is advised in writing (the “Advice”) by the
Company that the use of the applicable Prospectus (as it may have been
supplemented or amended) may be resumed. The Company will use its reasonable
best efforts to ensure that the use of the Prospectus may be resumed as promptly
as is practicable.

 

(d) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries
has entered, as of the date hereof, nor shall the Company or any of its
Subsidiaries, on or after the date hereof, enter into any agreement with respect
to its securities, that would have the effect of impairing the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.

 

(e) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, or
waived unless the same shall be in writing and signed by the Company and the
Purchaser, provided that any party may give a waiver as to itself.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of all of the Registrable Securities to which
such waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.

 

(f) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be delivered as set forth in the
Purchase Agreement.

 

(g) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each 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. Each Holder may
assign its respective rights (but only with all related obligations) with
respect to any or all of its Registrable Securities hereunder to a transferee of
such Registrable Securities; provided in each case that (i) such Holder agrees
in writing with such transferee to assign such rights and related obligations
under this Agreement, and for such transferee to assume such obligations, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of the name and address of
such transferee and the Registrable Securities with respect to which such
registration rights are being transferred or assigned, (iii) at or before the
time the Company received the written notice contemplated by clause (ii) of this
sentence, the transferee agrees in writing with the Company to be bound by all
of the provisions contained herein and (iv) the transferee is an “accredited
investor,” as that term is defined in Rule 501 of Regulation D.

 

(h) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute 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 were the original thereof.

 

16

 

 

(i) 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.

 

(j) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any other remedies provided by law.

 

(k) 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 good faith 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.

 

(l) Headings. The headings in this Agreement are for convenience only and shall
not limit or otherwise affect the meaning hereof.

 

 

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

  

  CYALUME TECHNOLOGIES HOLDINGS, INC.       By:  /s/ Zivi R. Nedivi     Name:
Zivi R. Nedivi
Title: Chief Executive Officer

   

 

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

  US VC PARTNERS, L.P.       By:  /s/ Andrew Intrater     Name: Andrew Intrater
Title: Chief Executive Officer

 

 

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