Document:

This
Subordinated Guaranty Agreement is subject to the terms and provisions of the
Intercreditor and Subordination Agreement by and between GRANITE CREEK PARTNERS
AGENT, LLC,
as Junior Agent on behalf of itself and the Junior Lenders, and TD BANK,
N.A. dated as of July 29, 2010 (as amended, restated, supplemented or
otherwise modified from time to time, the "Subordination Agreement") and each
holder of the Loans, by its acceptance hereof, shall be bound by the provisions
of the Subordination Agreement.

       

      SUBORDINATED
GUARANTY AGREEMENT

       

      THIS
SUBORDINATED GUARANTY AGREEMENT (this "Agreement") is made as of this
29th day of July, 2010, by CYALUME TECHNOLOGIES HOLDINGS, INC., a Delaware
corporation ("Guarantor"), to GRANITE CREEK
PARTNERS AGENT, LLC, as agent (the "Agent") under the Subordinated
Loan Agreement dated as of the date hereof (as amended, restated, modified,
supplemented and in effect from time to time, the "Loan
Agreement").  Capitalized terms used in this Agreement and not
otherwise defined shall have the same meanings herein as in the Loan
Agreement.

       

      WITNESSETH:

       

      WHEREAS,
Guarantor owns one hundred percent (100%) of the outstanding capital stock of
CYALUME TECHNOLOGIES, INC., a Delaware corporation (the "Borrower");
and

       

      WHEREAS,
Guarantor, the Borrower, the Agent and the other Lenders from time to time party
thereto have entered into the Loan Agreement, pursuant to which the Lenders have
agreed, subject to the terms and conditions set forth therein, to make Loans to
the Borrower (collectively, the "Loans"); and

       

      WHEREAS,
the making of the Loans to the Borrower pursuant to the Loan Agreement will be
beneficial to Guarantor because of its direct ownership interest in the
Borrower; and

       

      WHEREAS,
the obligations of the Agent and the Lenders to enter into the Loan Agreement,
and the obligations of the Lenders to make the Loans, are subject to the
condition, among others, that Guarantor execute and deliver this
Agreement.

       

      NOW,
THEREFORE, in consideration of the willingness of the Agent and Lenders to enter
into the Loan Agreement and of the Lenders to make the Loans to the Borrower
thereunder, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Guarantor, Guarantor hereby
agrees as follows:

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      1.            Guaranteed Obligations;
Limitation.

       

      (a)          Guarantor
does hereby irrevocably, unconditionally guarantee, as if a primary obligor and
not merely as surety, the due and punctual payment and performance by the
Borrower of the following obligations to the Lenders (individually, a "Guaranteed Obligation" and
collectively the "Guaranteed
Obligations"):

       

      (i)           principal
of and premium, if any, and interest on the Loans (including, without
limitation, the payment of interest, and other amounts that would accrue and
become due but for the filing of a petition in bankruptcy or the operation of
the automatic stay under Section 362(a) of Title 11 of the United States Code,
as amended (the "Bankruptcy
Code")); and

       

      (ii)          any
and all other Obligations, and any and all other obligations of the Borrower to
the Agent and the Lenders under the Loan Agreement or the other Loan Documents
including, without limitation, under the Term Loan Notes and the Delayed Draw
Notes, all as amended from time to time and whether executed on or after the
date hereof, whether for principal, interest, fees, premiums, expenses,
indemnification or otherwise.

       

      2.            Payment Under
Guaranty.  Upon failure by the Borrower punctually to pay or
perform any Guaranteed Obligation when due (whether at maturity, at a date fixed
for any payment or prepayment thereof or upon acceleration or otherwise), after
the expiration of any applicable grace period, the Agent may make written demand
upon Guarantor for the full payment and/or performance of the Guaranteed
Obligations, and Guarantor binds and obliges itself to make such payment or
performance forthwith upon such demand.

       

      GUARANTOR
ACKNOWLEDGES THAT ALL GUARANTEED OBLIGATIONS SHALL, TO THE FULLEST EXTENT
PERMISSIBLE UNDER ANY LAW NOW OR HEREAFTER APPLICABLE HERETO, BE CONCLUSIVELY
PRESUMED TO HAVE BEEN CREATED IN RELIANCE ON THIS AGREEMENT.

       

      3.            Waiver of Demands, Notices,
Diligence, etc.  Guarantor hereby assents to all of the terms
and conditions of the Guaranteed Obligations and waives, to the extent permitted
by applicable law:

       

      (a)          each
of:

       

      (i)           demand
for the payment of the principal of any Guaranteed Obligation or of any claim
for interest or any part thereof (other than the demand provided for in Section 2
hereof);

       

      (ii)           notice
of (A) the occurrence of a default or an event of default under any Loan
Document, and (B) any forbearance or waiver by the Lenders of any Guaranteed
Obligation;

       

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

       

      (iii)         protest
of the nonpayment of the principal of any Guaranteed Obligation or of any claim
for interest or any part thereof;

       

      (iv)         notice
of presentment, demand (other than the demand provided for in Section 2 hereof) and
protest;

       

      (v)          notice
of any indulgences or extensions granted to the Borrower or any successor to the
Borrower or any person or party which shall have assumed the obligations of the
Borrower;

       

      (vi)    
   any requirement of diligence or promptness on the part of the
Agent or Lenders in the enforcement of any of its or their rights under the
provisions of any Guaranteed Obligation or any Loan Document or this
Agreement;

       

      (vii)        any
enforcement of any Guaranteed Obligation;

       

      (viii)      any
right which Guarantor might have to require the Agent or the Lenders to marshal
or proceed against any other guarantor of the Guaranteed Obligations or to
realize on any Collateral therefor; and

       

      (ix)         any
and all notices of every kind and description which may be required to be given
by any statute or rule of law in any jurisdiction.

       

      (b)          all
rights and benefits under any applicable law purporting to reduce a guarantor's
obligations in proportion to the obligation of the principal or providing that
the obligation of a surety or guarantor must neither be larger nor in any other
respect more burdensome than that of the principal; provided, however,
that nothing contained herein shall operate as a waiver of any defense that the
Borrower may assert on the underlying debt directly;

       

      (c)          the
benefit of any statute of limitations affecting the Guaranteed Obligations or
Guarantor's liabilities hereunder or under any other law now or hereafter
applicable hereto;

       

      (d)          any
rights, defenses and other benefits that Guarantor may have by reason of (i) any
failure of the Agent to hold a commercially reasonable public or private
foreclosure sale or to otherwise comply with applicable law in connection with a
disposition of any Collateral for the Guaranteed Obligations; (ii) any election
of remedies made by the Agent under the Uniform Commercial Code, as adopted in
the State of Illinois or in another State in which Collateral may be located or
whose laws are otherwise deemed to govern the terms of this Agreement; or (iii)
any protection afforded pursuant to the anti deficiency or similar other laws of
the State of Illinois, any other State in which Collateral may be located or any
other state limiting or discharging the Borrower's indebtedness or purporting to
limit the amount of any deficiency judgment; and

       

      (e)          any
rights, defenses, claims or benefits waived in Section 4
hereof.  The waivers and other provisions set forth in this Section 3 and in
Section 4 shall
be effective notwithstanding the fact that the Borrower ceases to exist by
reason of its liquidation, merger, consolidation, voluntary or involuntary
dissolution or otherwise.

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

       

      4.            Obligations of Guarantor
Unconditional; Continuing and Irrevocable Guaranty.

       

      (a)          All
payments hereunder shall be made free and clear of any and all deductions,
withholdings or setoffs, including any and all deductions, withholdings or
setoffs on account of taxes.  The liability of Guarantor hereunder is
independent of and not in consideration of or contingent upon the liability of
the Borrower to the Lenders and a separate action or actions may be brought and
prosecuted against Guarantor, whether or not any action is brought or prosecuted
against the Borrower and regardless of whether the Borrower is joined in any
such action or actions.  This Agreement shall be construed as a
continuing, absolute and unconditional guaranty of payment (and not merely of
collection) without regard, to the extent permitted by applicable law,
to:

       

      (i)           the
legality, validity or enforceability of the Loan Agreement or any other Loan
Document or any of the other Guaranteed Obligations, any lien of the Agent on
any item of Collateral or any other guaranty;

       

      (ii)          any
defense (other than payment), deduction (including deductions for taxes),
withholding, setoff or counterclaim that may now or at any time hereafter be
available to the Borrower, Guarantor or other obligor against, and any right of
setoff at any time held by, the Agent or the Lenders;

       

      (iii)         any
claim arising out of or relating to any amendment (including amendments which
increase the amount of Loans made or available to the Borrower thereunder),
extension or other modification of the Loan Agreement or any other Loan Document
consented to by the Agent or Lenders, and Guarantor acknowledges and agrees that
the Agent and Lenders shall be entitled to amend, extend, forbear under, waive
any Default or Event of Default or take any other action deemed advisable in the
sole discretion of the Agent and Lenders with respect to the Loan Agreement and
the other Loan Documents; or

       

      (iv)        any
other circumstance whatsoever, legal or equitable, (with or without notice to or
knowledge of Guarantor), whether or not similar to any of the foregoing, that
constitutes, or might be construed to constitute, an equitable or legal
discharge of or defense to payment available to the Borrower, Guarantor or other
obligor under the Loan Agreement or other Loan Documents or under applicable
law, including the Bankruptcy Code, or in any other instance.

       

      Any
payment or other circumstance that operates to toll any statute of limitations
applicable to any Guaranteed Obligations shall also operate to toll the statute
of limitations applicable to Guarantor.  The obligations of Guarantor
under this Agreement shall not be affected by any action taken under any
Guaranteed Obligation in the exercise of any right or remedy therein conferred,
or by any failure or omission on the part of the Agent to enforce any right
given thereunder or hereunder or any remedy conferred thereby or hereby, or by
any release of any security or any other guaranty at any time existing for the
benefit of any Guaranteed Obligation, or by the merger or consolidation of the
Borrower, or by the sale, lease or transfer by the Borrower to any Person of any
or all of its respective properties.

       

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

       

      (b)          This
is a continuing guaranty of the Guaranteed Obligations and may not be revoked
and shall not otherwise terminate until the date on which the Guaranteed
Obligations have been paid and performed in full in cash, and the obligations of
the Lenders to make Loans under the Loan Agreement shall have
terminated.

       

      5.            Subordination of Claims of
Guarantor; Waiver of Subrogation and Certain Other Rights.  Any
claims against the Borrower or any other guarantor under the Loan Agreement or
any other Person from time to time party to the Loan Agreement as "Borrower" or "Guarantor"
(collectively, the "Loan
Parties" and each a "Loan Party") to which
Guarantor may be or become entitled (including, without limitation, claims by
subrogation or otherwise by reason of any payment or performance by Guarantor in
satisfaction and discharge, in whole or in part, of its obligations under this
Agreement) shall be and hereby are made subject and subordinate to the prior
payment in full in cash and performance in full of the Guaranteed Obligations.
WITHOUT LIMITING THE FOREGOING, GUARANTOR WAIVES ANY AND ALL RIGHTS OF
SUBROGATION, INDEMNITY, CONTRIBUTION OR REIMBURSEMENT, AND ANY AND ALL BENEFITS
OF AND RIGHT TO ENFORCE ANY POWER, RIGHT OR REMEDY THAT THE LENDER MAY NOW OR
HEREAFTER HAVE IN RESPECT OF THE GUARANTEED OBLIGATIONS AGAINST THE BORROWER,
GUARANTOR OR ANY OTHER OBLIGOR, ANY AND ALL BENEFITS OF AND RIGHTS TO
PARTICIPATE IN ANY COLLATERAL, NOW OR HEREAFTER HELD BY THE AGENT OR THE
LENDERS, AND ANY AND ALL OTHER RIGHTS AND CLAIMS (AS DEFINED IN THE BANKRUPTCY
CODE) GUARANTOR MAY HAVE AGAINST THE AGENT, THE LENDERS, THE BORROWER, ANY OTHER
LOAN PARTY OR ANY OTHER OBLIGOR, UNDER APPLICABLE LAW OR OTHERWISE, AT LAW OR IN
EQUITY, BY REASON OF ANY PAYMENT HEREUNDER OR OTHERWISE, UNLESS AND UNTIL THE
GUARANTEED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL IN
CASH.  If, notwithstanding the foregoing, any amount shall be paid to
Guarantor on account of any such rights at any time, such amount shall be held
in trust for the benefit of the Agent and Lenders and shall forthwith be paid to
the Agent to be credited and applied in reduction of the Guaranteed Obligations
in accordance with the terms of the Loan Agreement.

       

      6.            Representations and
Warranties of Guarantor.  In order to induce the Agent and
Lenders to enter into the Loan Agreement and to induce the Lenders to make the
Loans to the Borrower thereunder, Guarantor represents and warrants
that:

       

      (a)          This
Agreement constitutes the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforceability of creditors' rights
generally.

       

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

       

      (b)          Guarantor
hereby acknowledges that it has reviewed and caused its counsel to review copies
of, and is fully familiar with, this Agreement, the Loan Agreement, the other
Security Documents and each of the other Loan Documents executed and delivered
by the Borrower and the other Loan Parties.  Guarantor warrants and
agrees that each representation, warranty and waiver set forth in this Agreement
is made with Guarantor having full knowledge of its significance and
consequences and after having consulted with counsel of its own choosing and
that, under the circumstances, each such waiver is in the best interest of
Guarantor in furtherance of its business plan, is reasonable and should not be
found contrary to public policy or law.

       

      Guarantor
acknowledges and agrees that any breach of any representation, warranty or
covenant of Guarantor in this Agreement may constitute an Event of Default under
the Loan Agreement and under each of the other Loan Documents.

       

      7.            Set-off.  In
addition to any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of an Event of Default, the Agent is hereby authorized, to the
extent not prohibited by applicable law, without prior notice to Guarantor or to
any other Person, any such notice being expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by the Lender to or for the credit or the
account of Guarantor, against and on account of the obligations and liabilities
of Guarantor to the Agent under this Agreement then due and payable,
irrespective of whether the Lender shall have made any demand
hereunder.  The Agent agrees to promptly notify Guarantor after any
such set off and application, provided, however, that the failure to give such
notice shall not affect the validity of such set off and
application.

       

      8.            Reinstatement.  This
Agreement shall continue to be effective, or be reinstated, as the case may be,
if at any time any amount received by the Lenders in respect of the Guaranteed
Obligations is rescinded or must otherwise be restored or returned by the
Lenders upon the insolvency, bankruptcy, dissolution (voluntary or involuntary),
liquidation or reorganization of the Borrower, Guarantor or any other Loan
Party, or upon the appointment of an intervenor or conservator of, or trustee or
similar official for, the Borrower, Guarantor or any other Loan Party or any
substantial part of any of their respective properties, or otherwise, all as
though said payments had not been made.

       

      9.           Notices.  All
notices and other communications to Guarantor or the Agent hereunder shall be in
writing and shall be personally delivered or mailed by telegraphic, telex or
facsimile transmission, reputable overnight courier or first class mail, postage
prepaid, as follows:

       

      
        
          	
                  If
      to the Agent:

                	
                  Granite
      Creek Partners Agent, LLC

                  222
      W. Adams St., Suite 1980

                  Chicago,
      Illinois  60606

                  Attention:        Brian
      Boorstein

                

        

      

       

      
        
          
             

          

          
            -6-

            
              

            

          

          
             

          

        

      

       

      
        
          
            
              
                	
                        with
      a copy to:

                      	
                        Goldberg
      Kohn Ltd.

                        55
      East Monroe Street

                        Suite
      3300

                        Chicago,
      Illinois  60603

                        Attention:        Denise
      Caplan

                        Telephone:      (312)
      201-4000

                        Telecopy:        (312)
      332-2196

                      
	 	 
	
                        If
      to Guarantor:

                      	
                        Cyalume
      Technologies Holdings, Inc.

                        65
      Challenger Road

                        Ridgefield
      Park, New Jersey 07660

                        Attention:        Yaron
      Eitan

                      
	 	 
	
                        with
      a copy to:

                      	
                        Loeb
      & Loeb LLP

                        345
      Park Avenue

                        New
      York, New York  10154

                        Attention:        Mitch
      Nussbaum, Esq.

                        Telephone:      212-407-4159

                        Facsimile:       212-407-4990

                      

              

            

          

        

      

       

      or to
such other address or addresses as the party to whom such notice is directed may
have designated in writing to the other parties hereto.  A notice
shall be deemed to have been duly given and made and to have become effective
(i) if delivered by hand, overnight courier or facsimile to a responsible
officer of the party to which it is directed, at the time of the receipt thereof
by such officer or the sending of such facsimile and (ii) if sent by registered
or certified first-class mail, postage prepaid, on the third Business Day
following the mailing thereof.

       

      10.           Miscellaneous; Successors;
Counterparts; Severability.

       

      (a)           This
Agreement shall inure to the benefit of and be binding upon the Agent, the
Lenders and Guarantor and their respective successors and assigns, and the term
"Lender" shall be deemed
to include any other holder or holders of any of the Guaranteed
Obligations.  In case any provision in this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired
thereby.  This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.  References herein to this "Agreement" shall be deemed
references to this Agreement as amended, modified and/or supplemented from time
to time.

       

      (b)           All
covenants under this Agreement shall be given independent effect so that if a
particular action or condition is not permitted by any such covenant, the fact
that it would be permitted by another covenant, by any exception thereto, or
otherwise within the limitations thereof, shall not avoid the occurrence of a
Default or Event of Default if such action is taken or such condition
exists.

       

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

      (c)           None
of the parties to this Agreement shall be deemed to be the drafter of this
Agreement, and this Agreement shall not be interpreted in favor of or against
any party hereto on such basis.

       

      (d)           No
claim shall be made by Guarantor against the Agent, any Lender or their
respective Affiliates, directors, officers, employees or agents for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or under any other theory of liability arising out of or related to
the transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and Guarantor waives, releases and agrees not
to sue upon any claim for any such damages.

       

      11.           Governing Law; Jurisdiction;
Waiver of Jury Trial. THIS AGREEMENT, INCLUDING THE VALIDITY HEREOF AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS. GUARANTOR, TO
THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF ILLINOIS AND THE UNITED STATES DISTRICT COURT FOR THE
STATE OF ILLINOIS, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN
APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR
OTHER PROCEEDING ARISING OUT OF ANY OF ITS OBLIGATIONS HEREUNDER OR WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY SUCH COURTS. GUARANTOR FURTHER AGREES
THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN ANY OF SUCH
COURTS SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED
PERSONALLY OR BY CERTIFIED MAIL TO IT AT ITS ADDRESS AS PROVIDED IN SECTION 9
HEREOF OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF ILLINOIS.
GUARANTOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR
OTHER PROCEEDING INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS
HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.

       

      12.           Subordination
Agreement.  Notwithstanding any provision to the contrary in
this Agreement, this Agreement, the Liens and security interests granted to the
Agent and Lenders, at law or equity, pursuant to this Agreement and the other
Loan Documents, and the exercise of any right or remedy by the Agent or any
Lender hereunder are subject to the provisions of the Subordination
Agreement.  Agent and Lenders acknowledge and agree to be bound by the
Subordination Agreement.  In the event of any conflict between the
terms of the Subordination Agreement and this Agreement or the other Loan
Documents, the terms of the Subordination Agreement shall govern.

       

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

       

      Guarantor
acknowledges that the Subordination Agreement and the rights and benefits
thereof (as specific references thereto herein) inure only to the benefit of the
holders of the Senior Debt and that no other Person, including the Borrower and
Guarantor, shall have or be entitled to assert any rights or benefits hereunder
arising under the Subordination Agreement or by virtue of the existence of the
specific references thereto herein.

       

      [remainder
of page left intentionally blank]

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

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

       

      
        	 
      	
                CYALUME
      TECHNOLOGIES HOLDINGS, INC.

              
	 
      	 
      
	 
      	
                By:

              	
                /s/ Derek Dunaway

              
	 
      	
                Name:

              	
                 
      Derek Dunaway

              
	 
      	
                Title

              	
                 
      Chief Executive Officer

              

      

       

      
        Signature
Page to Subordinated Guaranty Agreement

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	
                The
      foregoing Agreement is hereby accepted:

              	 
      
	 
      	 
      
	
                GRANITE CREEK PARTNERS AGENT,
      LLC, as Agent

              	 
      
	 
      	 
      
	
                By:

              	
                /s/ Brian B. Boorstein

              	 
      
	
                Name:

              	
                Brian
      B. Boorstein

              	 
      
	
                Title:

              	
                Managing
      Member

              	 
      

      

       

      
        Signature
Page to Subordinated Guaranty AgreementThis
Subordinated Stock Pledge Agreement is subject to the terms and provisions of
the Intercreditor and Subordination Agreement by and between GRANITE CREEK
PARTNERS AGENT, LLC, as Junior Agent on behalf of itself and the Junior Lenders,
and TD BANK, N.A. dated as of July 29, 2010 (as amended, restated,
supplemented or otherwise modified from time to time, the "Subordination
Agreement") and each holder of the Loans, by its acceptance hereof, shall be
bound by the provisions of the Subordination Agreement.

     

    SUBORDINATED
STOCK PLEDGE AGREEMENT

     

    SUBORDINATED
STOCK PLEDGE AGREEMENT dated as of July 29, 2010 made by CYALUME
TECHNOLOGIES HOLDINGS, INC., a Delaware corporation with a place of business at
65 Challenger Road, Ridgefield Park, NJ 07660 (the "Stockholder"), in
favor of GRANITE CREEK PARTNERS AGENT, LLC, a Delaware limited liability
company, as Agent under the Loan Agreement (defined below), with offices at 222
W. Adams St., Suite 1980, Chicago, Illinois 60606 (the "Secured
Party").

     

    WHEREAS,
the Stockholder, the Corporation, the Secured Party and various financial
institutions and other entities from time to time party thereto (the "Lenders") are parties
to a Subordinated Loan Agreement of even date herewith (as amended, supplemented
or otherwise modified on the date hereof and as may be further amended,
supplemented or otherwise modified from time to time, the "Loan Agreement"),
pursuant to which the Secured Party may from time to time make financial
accommodations available to the Corporation;

     

    WHEREAS,
pursuant to a certain Guaranty, Stockholder has guaranteed payment and
performance of the Obligations;

     

    WHEREAS,
as a condition precedent to the Secured Party and the Lenders entering into the
Loan Agreement and making loans available to the Corporation, and in
consideration of all loans and other financial accommodations which may in the
future be provided to the Corporation by Secured Party and the Lenders, the
Stockholder has agreed to execute and deliver this Subordinated Stock Pledge
Agreement as security for the performance of its Obligations under the
Guaranty;

     

    NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Stockholder
hereby agrees for the benefit of the Secured Party as follows:

     

    1.           Defined
Terms.

     

    A.           Capitalized
terms not otherwise defined herein shall have the meaning given such term in the
Loan Agreement.

     

    B.           Unless
otherwise defined herein, the following terms shall have the respective meanings
set forth below:

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    "Collateral" has the
meaning specified in Section 2 hereof.

     

    "Corporation" means
Cyalume Technologies, Inc., a Delaware corporation.

     

    "Guaranty" means that
certain Subordinated Guaranty Agreement dated the date hereof made by
Stockholder in favor of the Secured Party for the benefit of the Lenders, as the
same may be amended, modified or supplemented from time to time.

     

    "Obligations" means
any and all indebtedness, obligations and liabilities of the Stockholder under
the Guaranty, whether existing on the date hereof or arising or incurred
hereafter, direct or indirect, joint or several, absolute or contingent, matured
or unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of the law or otherwise.

     

    "Pledge Agreement"
shall mean this Subordinated Stock Pledge Agreement as it may be amended,
supplemented or otherwise modified.

     

    "Pledged Stock" or
"Pledged
Shares" shall mean, collectively, all of the shares of any class of
capital stock of the Corporation, now owned, legally or beneficially or
hereafter acquired by Stockholder, controlled directly or indirectly by the
Stockholder and all of the rights in and to such stock, including, without
limitation, the right to vote such stock, together with any and all additions
thereto, whether through stock dividends, stock splits or otherwise, and any and
all income therefrom, whether through cash dividends or any other payments or
Distributions and any and all proceeds derived from all of the
foregoing.

     

    2.           Pledge.  The
Stockholder hereby (a) pledges, hypothecates, assigns and transfers to the
Secured Party all of the Pledged Stock and hereby grants to the Secured Party a
lien on, and security interest in, the Pledged Stock and all proceeds thereof
(which shall be a second lien, subordinate only to the liens securing the Senior
Debt) and (b) delivers to the Secured Party, the stock certificates
evidencing the Pledged Stock, together with appropriate undated stock powers
duly executed in blank, all as collateral security for the payment and
performance of the Obligations.  All property at any time pledged to
the Secured Party hereunder (whether described herein or not) and all income
therefrom and proceeds thereof are herein sometimes collectively called the
"Collateral".

     

    3.           Dividends, Distributions,
etc.  If, while this Pledge Agreement is in effect, the
Stockholder becomes entitled to receive or receives any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or issued in connection with any reorganization), option or rights,
whether as an addition to, in substitution of, or in exchange for, any shares of
Pledged Stock or otherwise, the Stockholder agrees to accept the same as agent
for the Secured Party, to hold the same in trust on behalf of and for the
benefit of the Secured Party and to deliver the same forthwith to the Secured
Party in the exact form received, with the endorsement of the Stockholder when
necessary and/or appropriate undated stock or other powers duly executed in
blank, to be held by the Secured Party, subject to the terms hereof, as
additional collateral security for the Obligations.  Any sums paid on
or in respect of the Pledged Stock on the liquidation or dissolution of the
issuer thereof shall be paid over to the Secured Party, to be held by the
Secured Party, subject to the terms and conditions hereof, as additional
collateral security for the Obligations; and if any non-cash dividend or any
other non-cash distribution is made on or in respect of the Pledged Stock or any
property is distributed on or with respect to the Pledged Stock, the property so
distributed shall be delivered to the Secured Party, to be held by the Secured
Party, subject to the terms and conditions hereof, as additional collateral
security for the Obligations.  All property so paid or distributed in
respect of the Pledged Stock that is received by the Stockholder shall, until
paid or delivered to the Secured Party, be held by the Stockholder in trust as
additional collateral security for the Obligations.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    4.           Voting
Rights.  The Stockholder shall be entitled to vote the Pledged
Stock and to give consents, waivers and ratifications in respect of the Pledged
Stock, provided, however, that if an Event of Default has occurred and is
continuing, the Secured Party, by written notice, may terminate the
Stockholder's right to vote the Pledged Stock and to give consents, waivers and
ratifications in respect thereof.

     

    5.           Rights of the Secured
Party.

     

    (a)           The
Secured Party shall not be liable for failure to collect or realize upon the
Obligations or any collateral security or guaranty thereof, or any part thereof,
or for any delay in so doing, nor shall Secured Party be under any obligation to
take any action whatsoever with regards thereto.  Any or all shares of
the Pledged Stock held by the Secured Party hereunder may, if an Event of
Default has occurred and is continuing, and upon written notice by the Secured
Party, be registered in the name of the Secured Party or its nominee, for the
benefit of the Secured Party, and the Secured Party or its nominee may at any
time thereafter, without notice, exercise all voting and corporate rights of any
issuer of any and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the Pledged Stock as
if the Secured Party were the absolute owner thereof, including (without
limitation) the right to exchange, at its discretion, any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other
readjustment of any issuer of any such shares or upon the exercise by any such
issuer or the Secured Party of any right, privilege or option pertaining to any
shares of the Pledged Stock and, in connection therewith, to deposit and deliver
any and all of the Pledged Stock with any committee, depository, transfer agent,
registrar or other designated agency on such terms and conditions as the Secured
Party may determine, all without liability except to account for property
actually received by it, but the Secured Party shall have no duty to exercise
any of the aforesaid rights, privileges or options and shall not be responsible
for any failure to do so or delay in so doing.

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    (b)           The
Secured Party is hereby appointed the attorney-in-fact of the Stockholder for
the purpose of carrying out the provisions of this Pledge Agreement and taking
any action and executing any instruments, in the name of the Stockholder or
otherwise, that the Secured Party may deem necessary or advisable to accomplish
the purposes hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest.  Without limiting the generality of the
foregoing, the Secured Party shall, to the extent permitted under Section 4
hereof, have the right and power, upon the Secured Party's good faith
determination in its sole discretion that such action is necessary or desirable
to preserve and protect its interest in the Collateral, to receive, endorse and
collect all checks and other orders for the payment of money made payable to the
Stockholder representing any dividend, interest payment or other distribution
payable or distributable with respect to the Collateral or any part thereof and
to give full discharge for the same.

     

    (c)           The
Secured Party shall not have any obligation to protect, secure, perfect or
insure any such Collateral at any time held as security for the Obligations,
other than an obligation not to engage in willful misconduct or act in a grossly
negligent manner with respect to the Collateral.

     

    6.           Unconditional
Obligations.  The obligations and liabilities of the
Stockholder hereunder shall not be conditioned or contingent upon the pursuit by
the Secured Party or any other Person at any time of any right or remedy against
any other Person that may be or become liable in respect of all or any part of
the Obligations or against any collateral security or guaranty therefor or right
of offset with respect thereto.

     

    7.           Performance by Secured Party
of Stockholder's Obligations.  If the Stockholder fails to
perform or comply with any of its agreements contained herein and the Secured
Party, as provided for by the terms of this Pledge Agreement, itself performs or
complies, or otherwise causes performance or compliance, with such agreement,
the out-of-pocket expenses of the Secured Party incurred in connection with such
performance or compliance shall be borne and paid by the Stockholder on demand
and until so paid shall be added to the principal amount of the Obligations and
shall bear interest (calculated on the basis of a 360-day year for the actual
days elapsed) from the date incurred until paid at the highest rate applicable
to any of the Obligations.

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    8.           Remedies.  If
an Event of Default has occurred and is continuing, then, and in any such event,
the Secured Party may exercise, in addition to all other rights and remedies
granted to it in this Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of
a secured party under the Uniform Commercial Code or other applicable
law.  Without limiting the generality of the foregoing, the
Stockholder expressly agrees that in any such event, the Secured Party, without
demand of performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or private sale)
to or on the Stockholder or any other Person (all and each of which demands,
advertisements and/or notices are hereby expressly waived), forthwith collect,
receive, appropriate and realize on the Collateral, or any part thereof, and
forthwith sell, assign, give option or options to purchase, contract to sell or
otherwise dispose of and deliver the Collateral, or any part thereof, in one or
more units, parcels, or lots at one or more public or private sales, at any
exchange or broker's board or at any of the Secured Party's offices or
elsewhere, on such terms and conditions as it may deem advisable and at such
prices as it may deem appropriate, for cash or on credit or for future delivery
without assumption of any credit risk, with the right to the Secured Party upon
any such sale or sales, public or private, to purchase the whole or any part of
said Collateral so sold.  Any purchaser at any such sale or sales
shall acquire the property sold absolutely free from any claim or right on the
part of Stockholder, and Stockholder hereby waives (to the extent permitted by
applicable law) all rights, redemptions, stays and appraisal rights which
Stockholder now has, or may at any time in the future have, under any rule of
law or statute now existing or hereafter enacted.  The net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable out-of-pocket costs and expenses of every kind
incurred therein or incidental to the care, safekeeping or otherwise of any and
all of the Collateral or in any way relating to the rights of the Secured Party
hereunder, including reasonable out-of-pocket attorneys' fees and legal
expenses, shall be applied to the payment of the Obligations in such order as
the Secured Party may determine, and, after all of the Obligations have been
paid in full and after payment of any other amount required by any provision of
law, including (without limitation) Section 9-504(1)(c) of the Uniform
Commercial Code, the balance (if any) of such proceeds shall be remitted to the
Stockholder or as otherwise required by a court of competent
jurisdiction.  To the extent permitted by applicable law, the
Stockholder waives all claims, damages and demands against the Secured Party
arising out of the retention or sale of the Collateral unless resulting from
such Secured Party's willful misconduct or gross negligence.  The
Stockholder agrees that the Secured Party need not give more than ten (10)
days' notice (which notice shall be deemed given on the earlier of mailing or
receipt) of the time and place of any public sale or of the time after which a
private sale or other intended disposition is to take place and that such notice
is reasonable notification of such matters.  No notification need be
given to the Stockholder if it has signed after default a statement renouncing
or modifying any right to notification of sale or other intended
disposition.  The Secured Party may, without notice or publication,
adjourn any public or private sale, or cause such sale to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which such sale is so
adjourned Stockholder shall remain liable for any deficiency if the net proceeds
of any sale or disposition of the Collateral are insufficient to pay all
Obligations.

     

    9.           Representations and
Warranties.  The Stockholder represents and warrants to the
Secured Party that:

     

    (a)           Stockholder
is a corporation, duly organized, validly existing and in good standing under
the laws of the state of its incorporation, is duly qualified to do business as
a foreign corporation and in good standing in each jurisdiction in which the
character of its properties or the transaction of its business makes such
qualification necessary and has full corporate power to own its properties, to
carry on its business as now conducted and to execute, deliver and perform this
Pledge Agreement, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect;

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    (b)           the
execution, delivery and performance of this Pledge Agreement and the granting of
liens pursuant hereto (i) have been duly authorized by all requisite
corporate action on its part, (ii) do not require the consent of any party
(including, without limitation, its stockholders and creditors) other than any
consent that has been obtained, (iii) will not (A) violate any law or
regulation or its Certificate of Incorporation or By-Laws, (B) violate any
order of any court, tribunal or governmental agency binding on it or any of its
properties, except where such violation could not reasonably be expected to have
a Material Adverse Effect, (C) violate or constitute (after due notice or
lapse of time or both) a default under any indenture, agreement, license or
other instrument or contract to which it is a party or by which it or any of its
properties is bound, except where such violation or default could not reasonably
be expected to have a Material Adverse Effect or (D) result in the creation
or imposition of any lien of any nature whatsoever on any of its assets (except
liens created hereby) and (iv) do not require any filing or registration with,
or any permit, license, consent or approval of, any governmental agency or
regulatory authority;

     

    (c)           this
Pledge Agreement has been duly executed and delivered by the Stockholder and is
a legal, valid and binding obligation, enforceable against the Stockholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforceability of creditors' rights generally or by general
principles of equity;

     

    (d)           there
are no actions, suits, proceedings (including proceedings by or before any
arbitrator or administrative agency) or claims pending or, to the Stockholder's
knowledge, threatened against or affecting the Stockholder that relate to the
transactions contemplated by this Pledge Agreement;

     

    (e)           the
Stockholder is the record and beneficial owner of, and has good and valid title
to, the Pledged Stock described on Annex I hereto,
and it will be owner of, and have such title to, all other Pledged Stock
described in Section 3 hereof owned by it subject to no lien whatsoever
(except the liens created hereby and Permitted Liens);

     

    (f)           all
the shares of Pledged Stock described on Annex I hereto
have been, and all shares of Pledged Stock described in Section 3 hereof
will be, duly and validly issued for good and valuable consideration and are, or
will be, fully paid and non-assessable;

     

    (g)           the
pledge, assignment and delivery of the Pledged Stock described on Annex I hereto
creates, and the delivery of any Pledged Stock described in Section 3
hereof will create, a valid lien on, and perfected security interest in, such
Pledged Stock and the proceeds thereof, subject to no prior lien or option or
any agreement purporting to grant to any third party a prior lien on the
Stockholder's property or assets that would include such Pledged Stock (other
than the liens securing the Senior Debt); and

     

    (h)           none
of the Pledged Stock is "margin stock", as such term is defined in
Section 221.2 of Regulation U of the Board of Governors of the Federal
Reserve System.

     

    10.         Covenants.  The
Stockholder covenants and agrees with the Secured Party that so long as any
Obligations are outstanding:

     

    (a)           it
will, upon the Secured Party's written request, defend the Secured Parties'
right, title and second priority (subordinate only to the liens securing the
Senior Debt) security interest in and to the Pledged Stock and the proceeds
thereof against the claims and demands of all Persons
whomsoever;

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (b)           it
will have or obtain promptly good title (subject to no lien whatsoever, except
the liens created by this Pledge Agreement and Permitted Liens) to and right to
pledge any other property at any time hereafter pledged to the Secured Party as
collateral security hereunder and will likewise defend the Secured Party's right
and title thereto and liens thereon;

     

    (c)           it
will not sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to any of the Collateral, nor will it create, incur or
permit to exist any lien with respect to any of the Collateral, any interest
therein or any proceeds thereof (except for the liens created by this Pledge
Agreement and Permitted Liens); and

     

    (d)           it
will not vote to enable any issuer of any Pledged Stock, and will not otherwise
agree to permit any issuer of any Pledged Stock, to merge or consolidate with,
or into, any other corporation other than the Stockholder or issue any stock or
other securities of any nature in addition to or in exchange or substitution for
any Pledged Stock.

     

    11.         Registration
Rights.

     

    (a)           reserved.

     

    (b)           The
Stockholder recognizes that the Secured Party may be unable to effect a public
sale of any or all of the Pledged Stock by reason of certain prohibitions
contained in the Securities Act of 1933 ("Securities Act") and
applicable state securities laws and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for their own accounts for
investment and not with a view to the distribution or resale
thereof.  The Stockholder acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that the private (rather than public) nature of such sale shall be deemed
to be commercially reasonable.  The Secured Party shall be under no
obligation to delay a sale of any of the Pledged Stock for the period of time
necessary to permit the issuer thereof to register such securities for public
sale under the Securities Act or under applicable state securities laws, even if
such issuer would agree to do so.

     

    (c)           The
Stockholder further agrees to do or cause to be done all such other acts and
things required to be done by it to make such sale or sales of any portion or
all of the Pledged Stock valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at the
Stockholder's expense.  The Stockholder further agrees that a breach
of any of the covenants contained in this Section 11 will cause irreparable
injury to the Secured Party, that the Secured Party has no adequate remedy at
law in respect of such breach and, as a consequence, agrees that each and every
covenant contained in this Section 11 shall be specifically enforceable
against the Stockholder, and the Stockholder hereby waives (to the extent
permitted by applicable law) and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    12.         Further
Assurances.  The Stockholder agrees that at any time and from
time to time, on the written request of the Secured Party, the Stockholder will
execute and deliver such further documents and do such further acts and things
as the Secured Party may reasonably request in order to effectuate the purposes
of this Pledge Agreement.

     

    13.         Limitation on Secured
Party's Duty in Respect of Collateral.  Beyond handling the
Pledged Shares in the same manner as if the Secured Party owned such shares, the
Secured Party shall not have any duty as to any Collateral in its possession or
control or in the possession or control of any agent or nominee of it or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.

     

    14.         Notices.  Except
as otherwise specified herein, all notices, requests, demands or other
communications related to this Pledge Agreement to or on the Stockholder or the
Secured Party shall be in writing (including teletransmissions), and shall be
given or made in accordance with the notice provisions set forth in the Loan
Agreement.

     

    15.         Severability.  Any
provision of this Pledge Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     

    16.         No Waiver, Cumulative
Remedies.  The Secured Party shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by the Secured
Party, and then only to the extent therein set forth.  A waiver of any
right or remedy hereunder on any occasion shall not be construed as a bar to any
right or remedy that the Secured Party would otherwise have on any future
occasion.  No failure to exercise nor any delay in exercising, on the
part of the Secured Party, any right, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.  The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.

     

    17.         No Oral Modification,
Successors, Governing Law.  None of the terms or provisions of
this Pledge Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Secured Party and the
Stockholder.  This Pledge Agreement and all obligations of the
Stockholder hereunder shall be binding on its successors and assigns and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party and its respective successors and
assigns.  This Pledge Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of
Illinois.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    18.         Submission to Jurisdiction,
Waiver of Trial by Jury.

     

    (a)           For
purposes of any action or proceeding involving this Pledge Agreement or any
other agreement or document referred to herein, the Stockholder hereby expressly
submits to the jurisdiction of the state courts located in the State of Illinois
and courts of the United States District Court for the Northern District of
Illinois and consents that any order, process, notice of motion or other
application to or by any of said courts or a judge thereof may be served within
or without such court's jurisdiction by registered mail or by personal service,
provided a reasonable time for appearance is allowed.

     

    (b)           EACH
PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE
EXTENT PERMITTED BY APPLICABLE LAW) (i) ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS PLEDGE AGREEMENT OR ANY
OTHER DOCUMENT OR AGREEMENT REFERRED TO HEREIN, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY and (ii) ANY RIGHT TO
CONTEST THE APPROPRIATENESS OF ANY ACTION BROUGHT WITHIN THE JURISDICTION
MENTIONED IN PARAGRAPH (a) OF THIS SECTION 18 BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.

     

    19.         Fees and
Expenses.  Any and all out-of-pocket fees, costs and expenses
of whatever kind or nature, including the reasonable attorneys' fees and legal
expenses incurred by the Secured Party in connection with the payment or
discharge of any taxes, counsel fees, maintenance fees, encumbrances or
otherwise protecting, maintaining or preserving the Collateral, or in defending
or prosecuting any actions or proceedings arising out of or related to the
Collateral, shall be borne and paid by the Stockholder on demand and until so
paid shall be added to the principal amount of the Obligations and shall bear
interest (calculated on the basis of 360-day year for the actual days elapsed)
from the date incurred until paid at the highest rate applicable to any of the
Obligations.

     

    20.         Counterparts.  This
Pledge Agreement may be executed in any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.

     

    21.         Descriptive
Headings.  The captions in this Pledge Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.

     

    22.         Termination.  Upon
full payment in cash and performance of the Obligations other than if a
realization of remedies hereunder has occurred, this Pledge Agreement shall
automatically be and become void and of no effect and the security interests and
liens granted herein shall be automatically released, without any further action
required by any party hereto, and, in that event, upon the request of the
Stockholder, the Secured Party covenants and agrees to promptly execute and
deliver to the Stockholder, at Stockholder's expense, instruments, documents or
agreements effective to evidence the termination of this Pledge Agreement and
the reassignment to the Stockholder of the certificates evidencing the Pledged
Stock, the undated stock powers delivered to the Secured Party and the other
Collateral held by or on behalf of the Secured Party and the rights, title,
interest, power and authority assigned herein

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    23.         Subordination
Agreement.  Notwithstanding any provision to the contrary in
this Pledge Agreement, this Pledge Agreement, the Liens and security interests
granted to the Secured Party and Lenders, at law or equity, pursuant to this
Pledge Agreement and the other Loan Documents, and the exercise of any right or
remedy by the Secured Party or any Lender hereunder are subject to the
provisions of the Subordination Agreement.  Secured Party and Lenders
acknowledge and agree to be bound by the Subordination Agreement.  In
the event of any conflict between the terms of the Subordination Agreement and
this Pledge Agreement or the other Loan Documents, the terms of the
Subordination Agreement shall govern.  Without limiting the generality
of the foregoing, and notwithstanding anything herein to the contrary, all right
and remedies of the Secured Party and Lenders shall be subject to the terms of
the Subordination Agreement, and until the Senior Debt is paid in full, any
obligation of Corporation or any Guarantor (including, without limitation,
Stockholder) hereunder with respect to the delivery or control of any
Collateral, the notation of any lien on any certificate of title, bill of lading
or other document, the giving of any notice to any bailee or other Person, the
provision of voting rights or the obtaining of any consent of any Person shall
be deemed to be satisfied if the Corporation or such Guarantor (including,
without limitation, Stockholder) complies with the requirements of the similar
provision of the Senior Loan Agreement or the applicable Senior Debt
Document.

     

    The
Stockholder acknowledges that the Subordination Agreement and the rights and
benefits thereof (as specific references thereto herein) inure only to the
benefit of the holders of the Senior Debt and that no other Person, including
the Corporation and Guarantors (including, without limitation, Stockholder),
shall have or be entitled to assert any rights or benefits hereunder arising
under the Subordination Agreement or by virtue of the existence of the specific
references thereto herein.

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Stockholder has caused this Pledge Agreement to be duly
executed and delivered as of the date first written above.

     

    
      
        	
                CYALUME
      TECHNOLOGIES

                HOLDINGS,
      INC.

              
	 
      
	
                By: 

              	
                /s/ Derek Dunaway

              
	
                Name: Derek
      Dunaway

              
	
                Title:   Chief
      Executive Officer

              

      

    

     

    Signature
Page to Subordinated Stock Pledge Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    ANNEX I

     

    PLEDGED
STOCK

     

    
      
        	
                Issuer

              	 
      	
                Class

                of Stock

              	 
      	
                Stock

                Certificate No.

              	 
      	
                Number

                of Shares

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                Cyalume
      Technologies, Inc.

              	
                  

              	
                Class
      A Common

              	
                  

              	
                CA-51

              	
                  

              	
                1,155.5331

              

      

    

    

    Annex
I

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