EMPLOYMENT
AGREEMENT


 


This Employment Agreement
(the “Agreement”) is made and entered into, effective April 29, 2013 (the “Effective Date”),
by and between Cyalume Technologies, Inc., a Delaware corporation (the “Company”), and Michael Pellicci (“Employee”).


 


WHEREAS, the Company
desires to employ Employee as Chief Financial Officer (CFO) of the Company, and Employee desires to be employed by the Company
upon the terms and conditions set forth herein.


 


NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:


 


		1.	TERM.
                                                                                                              This
                                                                                                              Agreement
                                                                                                              shall be for an
                                                                                                              initial term of
                                                                                                              three (3) years,
                                                                                                              beginning on the
                                                                                                              Effective
                                                                                                              Date.
                                                                                                              The
                                                                                                              Agreement
                                                                                                              shall continue for
                                                                                                              successive one-year
                                                                                                              periods thereafter
                                                                                                              unless and until
                                                                                                              terminated by either
                                                                                                              party upon thirty
                                                                                                              (30) days’
                                                                                                              written notice prior
                                                                                                              to the Agreement’s
                                                                                                              anniversary/expiration
                                                                                                              date, or until terminated
                                                                                                              pursuant to Section
                                                                                                              8 of this Agreement.



 


		2.	DUTIES OF EMPLOYEE.



 


		(a)	Duties. Employee shall be employed as the Chief Financial Officer (“CFO”)
of the Company. Employee’s duties shall be such executive, managerial, administrative, and professional duties as are commensurate
with the position of CFO, and as shall be assigned by the Chief Executive Officer or the Board of Directors of the Company, or
by their authorized designees. Employee may delegate duties to other employees of the Company as he reasonably determines is in
the best interest of the Company, consistent with the general authority and power given to him hereunder. The principal place of
employment of Employee shall be at the Company’s executive offices, which executive offices initially shall be located in
West Springfield, Massachusetts until such time as the Company’s executive offices are relocated to Fort Lauderdale, Florida.



 


		(b)	Exclusive Employment. Employee shall devote the whole of his business time, attention and
abilities to carrying out his duties hereunder.



 


		(c)	Loyal and Conscientious Performance. Employee agrees that to the best of his ability and
experience, and in compliance with all applicable laws and the Company’s policies, Certificate of Incorporation and Bylaws,
as they may be amended from time to time, he will at all times loyally and conscientiously perform all the duties and obligations
required of him by the terms of this Agreement. Employee further agrees he shall use his best efforts to promote the interests
and reputation of the Company and its affiliates and not do anything which is to the detriment of the Company or its affiliates.



 


		3.	COMPENSATION AND BENEFITS.



 


		(a)	Salary. For all the services to be rendered by Employee in any capacity hereunder, the Company
shall pay Employee, in equal installments consistent with the Company’s practices for its employees, salary and compensation
as set forth in Schedule 1 attached to this Agreement and incorporated herein. The Company shall have the ability to withhold
from the compensation otherwise due to Employee under this Agreement any amounts required to be withheld from compensation from
time to time under applicable law.



 



    	 



    	 



    







 


		(b)	Severance Benefits.



 


		(i)	In the event Employee’s employment with the Company is terminated by the Company (including,
for the avoidance of doubt, through the Company’s election not to renew this Agreement at the end of the initial term or
any successive one-year term pursuant to Section 1) other than as a result of death, disability (as defined in Section 8(a)(ii)),
retirement or for “cause” (as defined in Section 8(a)(iii)), or if Employee’s employment with the Company is
terminated by Employee for the reason set forth in Section 8(d), and upon execution by Employee of a separation agreement prepared
by the Company within thirty (30) days of the date of termination of Employee’s employment, the Company will pay Employee,
at normal payroll intervals for twelve (12) months, a sum equal to Employee’s annual Base Salary in effect at the time of
termination hereunder, less applicable deductions and withholdings.



 


		(ii)	In the event that Employee elects to terminate this Agreement (including, for the avoidance of
doubt, through Employee’s election not to renew this Agreement at the end of the initial term or any successive one-year
term pursuant to Section 1) for any reason other than that set forth in Section 8(d), or in the event that this Agreement is terminated
due to Employee’s death, disability or for “cause” (as defined in Section 8(a)(iii)), the Company shall not be
obligated to pay to Employee any severance payments whatsoever and Employee shall be entitled only to that Base Salary and those
benefits which he has earned through the date of such termination.



 


		(c)	Fringe Benefits. So long as Employee remains in the employ of the Company, Employee shall
be provided those benefits set forth in Schedule 1 to this Agreement. Employee shall also receive such additional benefits
as may be authorized from time to time by the Company’s Board of Directors.



 


		4.	NONCOMPETITION BY EMPLOYEE.



 


		(a)	During the term of this Agreement and for a period of two (2) years after Employee has ceased to
be employed by Company for any reason, Employee shall not, without the prior written consent of a duly authorized officer of Company,
directly or indirectly (i) engage in the business of, or (ii) assist or have an interest in (whether as proprietor, partner, investor,
stockholders, officer, director or any type of principal whatsoever), or (iii) enter the employment of or act as an agent, advisor,
or consultant to any person, firm, partnership, association, corporation, business organization, entity or enterprise that is,
or is to become, directly or indirectly, engaged in any business actually or potentially competitive with that of Company in any
area or territory in which Company offers its services or products.



 



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		(b)	During the term of this Agreement, and for a period of two (2) years after Employee has ceased
to be employed by Company for any reason, Employee shall not, without the prior written consent of a duly authorized officer of
Company, solicit from any person, company, firm or organization, or any affiliate of the foregoing, which was or is a client or
associated firm of Company or which Company was soliciting as a client or associated firm of Company during any of the twelve (12)
months immediately preceding the termination or expiration of the Agreement, any business substantially similar to that done by
Company, including but not limited to any business Employee was soliciting or on which he worked while employed by Company.



 


		5.	CONFIDENTIALITY. Employee acknowledges, understands and agrees that all trade secrets and
information relating to the business of the Company and/or its affiliates, including without limitation, procedures, product information,
manufacturing techniques or processes, expertise, records, customer or prospect lists and information, vendor lists and information,
supplier lists and information, internal operating forms, financial information or accounting methods, systems, books, manuals,
employee information, any confidential information concerning the business, the Company, its affiliates, or the business, policies
or operations of the business, the Company or its affiliates which Employee may have learned, possessed or controlled on or prior
to the date hereof or which Employee may learn, possess or control during the term of Employee’s continued employment by
the Company or any of its affiliates (as an employee, consultant, agent or otherwise) (collectively, “Trade Secrets”)
are confidential and shall remain the sole and exclusive property of the Company and its affiliates. Trade Secrets include both
written information and information not reduced to writing. Except as may be required pursuant to any law or the order of a court,
or except as may be public knowledge (which shall not have become public knowledge as a result of any action of Employee), Employee
shall not, at any time, retain, duplicate, remove from the business premises of Company or any of its affiliates, make use of,
other than in the ordinary course of fulfilling his duties as an employee of the Company, divulge or otherwise disclose, directly
or indirectly, any Trade Secrets. Employee shall not publish or disclose, and shall exercise his best efforts to prevent others
from publishing or disclosing, any Trade Secrets and he shall not use or attempt to use any such knowledge or information which
he may have or acquire in any manner which may injure or cause loss, whether directly or indirectly, to the Company or its affiliates
or use his personal knowledge or influence over any customers, clients, suppliers or contractors of the Company or its affiliates
so as to take advantage of the Company’s or its affiliate’s trade or business connections or utilize information confidentially
obtained by him.



 


		6.	non-solicitation. Employee hereby covenants and agrees that, at all times during his employment
with the Company and for a period of two (2) years immediately following his termination for any reason, Employee shall not employ
or seek to employ any person employed at the time by the Company or any of its affiliates, or otherwise engage or entice, either
directly or indirectly, such person to leave such employment.



 


		7.	violation of agreement.



 


		(a)	The restrictions set forth in Sections 4, 5 and 6 shall extend to any and all activities of Employee,
whether alone or together with or on behalf of or through any other person or entity.



 



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		(b)	Employee’s obligations under Sections 4, 5 and 6 shall survive termination of this Agreement
and of Employee’s employment with the Company.



 


		(c)	Employee acknowledges that the restrictions contained in Sections 4, 5 and 6, in view of the nature
of the business in which Company is engaged, are reasonable and necessary to protect the legitimate interests of Company. Employee
understands that the remedies at law for his violation of any of the covenants or provisions of Sections 4, 5 and 6 will be inadequate,
that such violations will cause irreparable injury within a short period of time, and that Company shall be entitled to preliminary
injunctive relief and other injunctive relief against such violation. Such injunctive relief shall be in addition to, and in no
way in limitation of, any and all other remedies that Company shall have in law and equity for the enforcement of those covenants
and provisions. Employee further acknowledges that should he violate any of the covenants or provisions of Sections 4, 5 and 6,
he will reimburse Company for its reasonable costs and attorneys’ fees incurred to enforce the terms of this Agreement.



 


		8.	TERMINATION.



 


		(a)	Employee’s employment hereunder may be terminated by the Company immediately upon the occurrence
of any of the following events, and the Company shall have no obligations to Employee for any period after the effective date of
such termination, except vested benefits or as otherwise provided in Section 3 herein:



 


		(i)	The death of Employee.



 


		(ii)	A mental or physical illness or injury that prevents Employee from performing his duties hereunder
for a period of 90 consecutive days or for 120 days in any 360 day period, or Employee has been declared by a court of competent
jurisdiction to be mentally incompetent or incapable of managing his affairs.



 


		(iii)	For “cause” which, for the purposes of this Section, shall mean:



 


		(A)	Continued neglect or failure to perform his duties and responsibilities; or



 


		(B)	Formally being charged, either criminally or civilly, with committing fraud, misappropriation or
embezzlement, whether or not in the performance of Employee’s duties as an employee of the Company; or



 


		(C)	Violations of any law which violation materially affects Employee’s performance of his duties
to the Company; or



 


		(D)	The conviction of, or plea of guilty or nolo contendere to, a felony or crime involving moral turpitude;
or



 


		(E)	Willfully engaging in conduct materially injurious to the Company or its affiliates; or



 



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		(F)	Diverting any business opportunity of the Company or its affiliates for Employee’s direct
or indirect personal gain; or



 


		(G)	Failure to observe or perform the covenants and agreements contained in this Agreement, including
but not limited to those contained in Sections 4, 5 and 6 of this Agreement.



 


		(b)	Employee’s employment hereunder may be terminated at any time upon the mutual written agreement
of Employee and the Company.



 


		(c)	Employee’s employment hereunder may be terminated by either party with thirty (30) days of
written notice thereof. Notwithstanding the foregoing, if Employee’s employment hereunder is terminated without “cause”,
Employee shall be paid any applicable severance benefits as set forth in Section 3(b), less applicable deductions and withholdings.



 


		(d)	Employee may terminate his employment hereunder for Good Reason. For purposes of this Agreement,
“Good Reason” shall mean (i) a material diminution in Employee’s title or duties, (ii) a material reduction in
Employee’s Base Salary except for reductions applicable to all management, (iii) excluding the relocation of the Company’s
headquarters to Fort Lauderdale, FL, a relocation of Employee’s principal place of employment of a distance in excess of
fifty (50) miles unless such relocation is effected at the request of Employee or with Employee’s approval or (iv) a material
breach by the Company of a material term of this Agreement. Notwithstanding the foregoing, Good Reason shall not be deemed to exist
unless Employee’s termination of employment for Good Reason occurs within ninety (90) days following the initial existence
of one of the conditions specified in clauses (i) through (iii) above, Employee provides the Company with written notice of the
existence of such condition within ninety (90) days after the initial existence of the condition, and the Company fails to remedy
the condition within thirty (30) days after its receipt of such notice.



 


		(e)	Except as may otherwise be set forth herein, in the event of termination of Employee’s employment
by the Company as permitted under clause (a) of this Section, Employee shall be entitled only to his Base Salary and other compensation
and benefits earned through the date of termination.



 


		(f)	Upon the termination of his employment hereunder for any
reason whatsoever, Employee shall immediately deliver to the Company all documents, statistics, accounts, records, programs and
other items of whatever nature or description (the “Documents”)
which may be in his possession or under his control which relate in any way to the Trade Secrets or the business or affairs of
the Company or of any of its affiliates, and no copies of any such Documents or any part thereof shall be retained by him.



 


		(g)	In the event of the termination of Employee’s employment under this Agreement, Employee shall
be deemed to have resigned from all positions held in the Company. Upon request of the Company, Employee shall promptly sign any
and all documents reflecting such resignations as of the date of termination of his employment.



 






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		9.	REPRESENTATIONS. Employee hereby represents and warrants that this Agreement constitutes
his valid and binding obligation enforceable in accordance with its terms and the execution, delivery and performance of this Agreement
does not violate any agreement, arrangement or restriction of any kind to which Employee is a party or by which he is bound.



 


		10.	MISREPRESENTATION. Neither party hereto shall knowingly at any time make any untrue statement
in relation to the other or any of their affiliates and in particular Employee shall not after the termination of his employment
hereunder wrongfully represent himself as being employed by or connected with the Company or any affiliate of the Company.



 


		11.	REIMBURSEMENT OF EXPENSES. The Company shall reimburse Employee for all ordinary and necessary
out-of-pocket expenses reasonably incurred by Employee on behalf of the business of the Company in accordance with the Company’s
normal reimbursement and travel policies, including, for the avoidance of doubt, such out-of-pocket expenses reasonably incurred
in connection with Employee working from the Company’s West Springfield, MA headquarters until such headquarters is relocated
to Fort Lauderdale, FL (including, air/ground transportation to and from West Springfield and lodging and meals while working in
West Springfield). Employee agrees that expense reports must be submitted to obtain reimbursement of expenses as well as presentation
of such supporting documentation as the Company may reasonably require. Employee further agrees to submit with expense reports
such records and logs as may be required by the relevant taxing authorities for the substantiation of each such business expense
as a deduction on the Company’s income tax returns. Any reimbursements by the Company to Employee of any eligible expenses
under this Agreement that are not excludable from Employee’s income for Federal income tax purposes (the “Taxable
Reimbursements”) shall be made by no later than the earlier of the date on which they would be paid under the Company’s
normal policies and the last day of the taxable year of Employee following the year in which the expense was incurred. The amount
of any Taxable Reimbursements to be provided to Employee, during any taxable year of Employee shall not affect the expenses eligible
for reimbursement in any other taxable year of Employee. The right to Taxable Reimbursement shall not be subject to liquidation
or exchange for another benefit.



 


		12.	INVENTIONS, ETC.



 


		(a)	It shall be part of the normal duties of Employee at all times to consider in what manner and by
what new methods or devices the products, services, processes, equipment or systems of the Company or any of its affiliates with
which he is concerned or for which he is responsible might be improved, and promptly to give to the President of the Company or
Board of Directors full details of any invention or improvement which he may from time to time make or discover in the course of
his duties, and to further the interests of the Company with regard thereto. Subject only to any contrary provisions of the laws
of the United States or the Commonwealth of Massachusetts, all such materials, inventions, improvements, methods, products, services,
equipment or systems shall be deemed to be “works made for hire”, and to the extent such items are not works made for
hire, Employee hereby irrevocably grants and assigns such materials, inventions, improvements, methods, products, services, equipment
or systems to the Company which shall be entitled, free of charge, to the sole ownership of any such invention or improvement.



 






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		(b)	Employee shall, if and when required so to do by the Company, at the expense of the Company, apply
or join with the Company in applying for patents or other protection in any part of the world for any such discovery, invention
or process as aforesaid and shall at the expense of the Company, execute and do or cause to be done all instruments and things
reasonably necessary for vesting the said patent or other protection when obtained and all right, title and interest to and in
the same in the Company or in such other person as the Company may designate.



 


		(c)	For the purpose of this clause Employee hereby irrevocably authorizes the company as his attorney
in his name to execute any documents or take any actions which are required in, order to give effect to the provisions of this
Section and the Company is hereby empowered to appoint and remove at its pleasure any person as agent and substitute for and on
behalf of the Company in respect of all or any of the matters aforesaid.



 


		13.	NOTICES. Any notices to be given hereunder by either party to the other may be effectuated
either by personal delivery in writing, by electronic facsimile transmission, by commercial overnight courier or by mail, postage
prepaid, with return receipt requested. Notices shall be addressed to the parties as follows:



 


If to the Company:


 


Cyalume Technologies, Inc.


96 Windsor Street


West Springfield, MA, 01089


Attention: President


 


with a copy to:


 


Greenberg Traurig, P.A.


401 East Las Olas Blvd., Suite 2000


Fort Lauderdale, FL 33301


Attention: Bruce I. March, Esq.


 


If to Employee:


 


Michael Pellicci


____________


____________


 


or to such other addresses as either the Company or
Employee may designate by written notice to each other. Notices delivered personally shall be deemed duly given on the date of
actual receipt; mailed notices shall be deemed duly given as of the fifth (5th) day after the date so mailed. Notices
hereunder may be delivered by electronic facsimile transmission (fax) if confirmation by sender is made within three (3) business
days by mail or personal delivery.


 






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		14.	ATTORNEYS’ FEES. If any party shall bring an action to enforce this Agreement, each
party will bear her/his/its own attorneys’ fees and costs.



 


		15.	WAIVER OF BREACH. The waiver by any party to a breach of any provision in this Agreement
cannot operate or be construed as a waiver of any subsequent breach by a party.



 


		16.	SEVERABILITY. The invalidity or unenforceability of any particular provision in this Agreement
shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if the invalid or unenforceable
provision were omitted.



 


		17.	ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and thereof and supersedes and cancels any and all previous agreements, written and oral,
regarding the subject matter hereof between the parties hereto, including but not limited to the Original Agreement. Employee hereby
acknowledges that any compensation or benefits Employee otherwise may have been entitled to under the Original Agreement are hereby
waived. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties
hereto.



 


		18.	GOVERNING LAW. This Agreement shall be interpreted, construed and governed according to
the laws of Delaware, without giving effect to principles of conflicts or choice of laws of Delaware or of any other jurisdiction.



 


		19.	CONSENT TO JURISDICTION. Employee hereby irrevocably submits to the jurisdiction of any
court of Delaware or any federal court sitting in the State of Delaware over any suit, action or proceeding arising out of or relating
to this Agreement. Employee hereby agrees that a final judgment in any such suit, action or proceeding brought in any such court,
after all appropriate appeals, shall be conclusive and binding upon him.



 


		20.	SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors, permitted assigns, legal representatives and heirs, but neither this Agreement nor any
rights hereunder shall be assignable by any of its parties except as permitted by this Section. Employee agrees that this Agreement
may be assigned or transferred by operation of law by the Company upon a sale, merger, reorganization or other business combination
of or involving the Company; provided, however, that (i) such assignee or other successor to the Company shall assume all obligations
of the Company hereunder and (ii) that Employee shall perform all services required pursuant to this Agreement for any such assignee
or successor.



 


		21.	MISCELLANEOUS. The Section headings of this Agreement are for convenience of reference only
and do not form a part hereof and do not in any way modify, interpret, or construe the intentions of the parties. This Agreement
may be executed in one or more counterparts and all such counterparts shall constitute one and the same instrument.



 


		22.	RIGHT OF SET-OFF. The Company may at any time offset against any compensation or other remuneration
due or to become due to Employee, or anyone claiming through or under Employee, any debt or debts due or to become due from Employee
to the Company.



 






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		23.	SECTION 409A COMPLIANCE.



 


		(a)	General. It is the intention of both the Company and Employee that the benefits and rights
to which Employee could be entitled pursuant to this Agreement comply with Section 409A of the Code and the Treasury Regulations
and other guidance promulgated or issued thereunder (“Section 409A”), to the extent that the requirements of Section
409A are applicable thereto, and the provisions of this Agreement shall be construed in a manner consistent with that intention.
If Employee or the Company believes, at any time, that any such benefit or right that is subject to Section 409A does not so comply,
it shall promptly advise the other and shall negotiate reasonably and in good faith to amend the terms of such benefits and rights
such that they comply with Section 409A (with the most limited possible economic effect on Employee and on the Company).



 


		(b)	Distributions on Account of Separation from Service. If and to the extent required to comply
with Section 409A, no payment or benefit required to be paid under this Agreement on account of termination of Employee’s
employment shall be made unless and until Employee incurs a “separation from service” within the meaning of Section
409A.



 


		(c)	6 Month Delay for Specified Employees.



 


		(i)	If Employee is a “specified employee”, then no payment or benefit that is payable on
account of Employee’s “separation from service”, as that term is defined for purposes of Section 409A, shall
be made before the date that is six months after Employee’s “separation from service” (or, if earlier, the date
of Employee’s death) if and to the extent that such payment or benefit constitutes deferred compensation (or may be nonqualified
deferred compensation) under Section 409A and such deferral is required to comply with the requirements of Section 409A. Any
payment or benefit delayed by reason of the prior sentence shall be paid out or provided in a single lump sum at the end of such
required delay period in order to catch up to the original payment schedule.



 


		(ii)	For purposes of this provision, Employee shall be considered to be a “specified employee”
if, at the time of his or her separation from service, Employee is a “key employee”, within the meaning of Section
416(i) of the Code, of the Company (or any person or entity with whom the Company would be considered a single employer under Section
414(b) or Section 414(c) of the Code) any stock of which is publicly traded on an established securities market or otherwise.



 


		(d)	No Acceleration of Payments. Neither the Company nor Employee, individually or in combination,
may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions
of this Agreement, and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid
without violating Section 409A.



 


		(e)	Treatment of Each Installment as a Separate Payment. For purposes of applying the provisions
of Section 409A to this Agreement, each separately identified amount to which Employee is entitled under this Agreement shall be
treated as a separate payment. In addition, to the extent permissible under Section 409A, any series of installment payments under
this Agreement shall be treated as a right to a series of separate payments.



 


 


 


 


 


[signatures
appear on following page]


 






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IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the day and year first above written.


 


 


	 	CYALUME TECHNOLOGIES, INC., a Delaware corporation	 
	 	 	 	 
	 	 	 	 
	 	By:
	
         /s/ Zivi Nedivi

        
	 
	 	Name:	Zivi Nedivi	 
	 	Title:	CEO	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	MICHAEL PELLICCI	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 /s/ Michael Pellici	 


 






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SCHEDULE 1


 


TO EMPLOYMENT AGREEMENT OF


Michael Pellicci


 


 


		1.	Salary. The Company shall pay Employee an annual base salary (“Base Salary”)
of two hundred thirty-five thousand dollars ($235,000.00), at normal payroll intervals and less applicable deductions and withholdings,
which shall be subject to annual adjustments at the sole discretion of the Board of Directors of the Company.



 


		2.	Cash Bonus. Employee shall be eligible for an annual bonus for each fiscal year of the Company
(“Bonus”), subject to the terms and conditions of this Section. The payment and amount of any Bonus for a given
fiscal year shall be based on performance targets mutually agreed by the Parties in writing for such fiscal year (the “Annual
Performance Targets”). The Annual Performance Targets for the fiscal year in which the Effective Date occurs shall be
the same as such Annual Performance Targets previously established for the Chief Executive Officer and Chief Operating Officer
of the Company for such fiscal year, and the Annual Performance Targets for each subsequent year shall be the same as such Annual
Performance Targets applicable to the Chief Executive Officer and Chief Operating Officer of the Company which are established
within forty-five (45) days after the beginning of each such year. If the Company’s performance meets, but does not exceed,
the Annual Performance Targets for a given fiscal year, the amount of the Bonus for such fiscal year shall equal 50% of the annualized
rate of the Base Salary in effect as of the end of such fiscal year. If the Company’s performance exceeds the Annual Performance
Targets for a given fiscal year, the amount of the Bonus for such fiscal year shall equal 50% of the annualized rate of the Base
Salary in effect as of the end of such fiscal year, plus an additional 1% of such annualized rate for each 1% by which the Company’s
performance exceeds the Annual Performance Targets for such fiscal year. If the Company’s performance fails to meet the Annual
Performance Targets for a given fiscal year, the amount of the Bonus for such fiscal year shall equal 50% of the annualized rate
of Base Salary in effect at the end of such fiscal year, less 2% of such annualized rate for each 1% by which the Company’s
performance failed to meet the Annual Performance Targets for such fiscal year, provided, however, that Employee shall not be eligible
for any Bonus for a given fiscal year in which the Company’s performance was less than or equal to 70% of the Annual Performance
Targets for such fiscal year. Provided Employee has not been terminated under Section 8(a) (for “cause” by the Company)
prior to payment thereof, Employee shall be eligible for (i) a Bonus for each fiscal year on the last day of which Employee is
employed hereunder and (ii) if Employee’s employment hereunder is terminated other than on the last day of a fiscal year,
a pro-rated bonus for the fiscal years during which Employee’s employment hereunder is terminated, based on the number of
full calendar months Employee was employed hereunder during such fiscal year. Any Bonus earned for any full or partial fiscal year
shall be paid in the following fiscal years within 30 days after the Company’s audited financial statements are issued, but
in no event later than June 30th of such following fiscal year regardless of whether such audited financial statement
are issued by such date. For the avoidance of doubt, the Bonus with respect to the fiscal year in which the Effective Date occurs
shall be pro-rated based on the number of full calendar months Employee was employed hereunder during such fiscal year.



 



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		3.	Stock Options. Employee will be granted stock options
to purchase 200,000 shares of common stock of Cyalume Technologies Holdings, Inc. (the “Stock Options”),
upon the approval by the shareholders of the currently proposed amendment to the Cyalume Technologies Holdings, Inc. 2009 Omnibus
Securities and Incentive Plan (as may be amended from time to time, the “Plan”).
The Stock Options shall be granted under, and shall be subject to, the Plan and shall be subject to such other terms and conditions
as shall be reflected in a stock option agreement to be executed by the Company and Employee (the “Option Agreement”).
The Option Agreement shall provide that (a) twenty percent (20%) of the Stock Options shall vest each year on the anniversary of
the Effective Date of this Agreement over a period of five years, and (b) in the event that, prior to the date that the Stock Options
are fully vested and exercisable, (i) there is a Change of Control (as defined in the Plan), or (ii) Employee’s engagement
with the Company is terminated by the Company other than due to death, disability or “cause” (as set forth in Section
8(a)) or by Employee for Good Reason (as defined in Section 8(d)), the Stock Options shall become fully vested and exercisable
as to the remaining shares (“Change of Control Shares”) as of
the date of such Change of Control (as defined in the Plan) or termination; provided, however, that, if termination of Employee’s
engagement occurs under Sections 8(b), (c) or (d) as described in Section 3(b)(ii) of this Schedule 1 within the first eighteen
(18) months after the Effective Date, then only two-fifths (2/5) of the Change of Control Shares shall become exercisable as of
the date of such termination. 



 


		4.	Benefits. Employee shall be provided with health, life, and disability insurance coverage
and other similar benefits substantially equivalent to those provided to employees of the Company from time to time, all in accordance
with the standard policies of the Company; provided, that such health insurance coverage shall not commence until
January 1, 2014, at which time the Company shall pay one hundred percent (100%) of such monthly health insurance premium. Employee
shall be permitted to participate in the Company’s 401(k) Retirement Plan.



 


		5.	Paid Time Off (PTO)/Sick Days. Employee shall be provided with three (3) weeks of PTO, accrued
on a monthly basis, and with sick days in accordance with the standard policies of the Company. Employee shall be permitted to
carry over any unused PTO into any subsequent period up to a maximum of five (5) weeks. Upon termination of employment, Employee
shall not be paid for unused sick days, but will be paid for accrued, unused PTO.



   



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