Document:

AMENDMENT AGREEMENT

 

This AMENDMENT AGREEMENT
(this “Agreement”), effective as of December 27, 2012 (the “Effective Date”), is entered
into by and among Cyalume Technologies Holdings, Inc., a Delaware corporation (“Parent”), Cyalume Specialty
Products, Inc., a Delaware corporation (“Company”), JFC Technologies, LLC, a New Jersey limited liability company
(“Seller”), and James G. Schleck (“Representative”), individually and in his capacity as
Representative on behalf of the Selling Members under the Purchase Agreement (as defined below). Parent, Company, Seller and Representative
are sometimes referred to in this Agreement individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

A.            The
Parties are parties to the Asset Purchase Agreement, dated as of August 31, 2011 (as may be amended, modified, restated or supplemented
from time to time, the “Purchase Agreement”), pursuant to which the Company purchased substantially all of
the assets of the Seller.

 

B.            In
connection with the consummation of the transactions contemplated by the Purchase Agreement, the Company entered into Employment
Agreements with each of Representative, Hemant Desai, and A. Thomas Cornelson (collectively, the “Employment Agreements”).

 

C.            The
Parties desire to amend certain terms of the Purchase Agreement and the Employment Agreements, and to provide for certain other
matters, all as set forth herein.

 

TERMS OF AGREEMENT

 

In consideration of
the premises and further valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree
as follows:

 

1.            Defined Terms.
Unless otherwise specified in this Agreement, capitalized terms used and not otherwise defined in this Agreement shall have
the meanings given to them in the Purchase Agreement.

 

2.            Earnout
Payments. The Parties acknowledge and agree that the Earnout Payment and the Additional Earnout Payment shall have been
settled in full as of December 31, 2012 (the “Earnout Settlement Date”). Accordingly, on the Earnout Settlement
Date, Parent shall pay the Earnout Payment and the Additional Earnout Payment to Seller, as follows: (a) Parent shall issue to
Seller a total of Two Million Four Hundred and Fifty Thousand (2,450,000) shares (the “Shares”) of Parent Common
Stock, which Shares shall be delivered to [American Stock Transfer & Trust Company, LLC], as escrow agent (the “Escrow
Agent”), to be held in escrow pursuant to the terms of an Escrow Agreement in substantially the form of Exhibit A
attached hereto (the “Earnout Stock Escrow Agreement”), and (b) Parent shall issue and deliver to Seller a subordinated,
unsecured promissory note in the original principal amount of Two Million One Hundred Thousand Dollars ($2,100,000), in the form
of Exhibit B attached hereto (the “Note”).

 

    	 

    	 

    
 

3.            Repurchase
Right.

 

(a)            Parent may elect,
by providing notice to Seller at any time and from time to time on or prior to January 10, 2014 (the “Repurchase Period”),
to repurchase all or any percentage of the Shares at a price equal to the $2.00 per share (subject to appropriate adjustment in
the event of any stock dividend, stock split, combination or other similar recapitalization affecting the Parent Common Stock)
(the “Call Purchase Price”).

 

(b)            If at any time
during the Repurchase Period Parent wishes to exercise its right to purchase any Shares pursuant to this Section 3, Parent shall
deliver to Seller and the Escrow Agent a written notice (the “Repurchase
Notice”) specifying the number of Shares to be repurchased by the Company (the “Repurchased
Stock”). The closing of any sale and purchase of Shares pursuant to this Section 3 shall take place on the Business
Day specified in the Repurchase Notice (which day shall be no earlier than January 10, 2014 and no later than January 31, 2014),
so long as the Note has been repaid in full prior to the closing of the purchase, and not otherwise.

 

(c)            At the closing
of any sale and purchase pursuant to this Section 3, (i) the Escrow Agent shall, pursuant to the terms of the Earnout Stock Escrow
Agreement, deliver to Parent a certificate or certificates representing the Shares to be sold, accompanied by stock powers, against
receipt of the Call Purchase Price; and (ii) Seller shall represent and warrant to Parent in writing, in form and substance reasonably
satisfactory to Parent, that (A) Seller has full right, title and interest in and to the Repurchased Stock (subject to the terms
of the Earnout Stock Escrow Agreement), (B) Seller has all the necessary power and authority and has taken all necessary action
to sell such Repurchased Stock as contemplated by this Section 3, and (C) the Repurchased Stock is free and clear of any and all
Liens other than those arising as a result of or under the terms of this Agreement or the Earnout Stock Escrow Agreement.

 

(d)            Seller shall,
on the Earnout Settlement Date, deliver to the Escrow Agent two stock powers duly executed in blank, in form and substance reasonably
satisfactory to Parent, to be delivered by the Escrow Agent to Parent in connection with any purchase of Repurchased Stock pursuant
to this Section 3 and/or any forfeiture of Shares pursuant to Section 4(b) hereof. Seller shall take all further actions as may
be reasonably necessary to consummate any sale contemplated by this Section 3, including, without limitation, executing and delivering
instructions to the Escrow Agent and such other documents and instruments as may be reasonably deemed necessary or appropriate
by Parent.

 

4.            Share Adjustments.

 

(a)            If Parent shall
have repurchased all of the Shares on or before January 31, 2014 (the “Latest Repurchase Closing Date”) pursuant
to the provisions of Section 3, then none of the provisions of this Section 4 shall apply.

 

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(b)            If on or before
the Latest Repurchase Closing Date, Parent has not repurchased any Shares under Section 3 above, then as used herein, “Flex
Parent Shares” means 350,000 shares of Parent Common Stock.

 

(c)            If on or before
the Latest Repurchase Closing Date, Parent has repurchased some but not all of the Shares under Section 3 above, then as used herein,
“Flex Parent Shares” means that number of shares of Parent Common Stock as equals 350,000 multiplied by the
quotient of (A) 2,450,000 minus that number of Shares repurchased by Parent under Section 3 above and (B) 2,450,000.

 

(d)            If Parent shall
not have repurchased all of the Shares on or before the Latest Repurchase Closing Date pursuant to the provisions of Section 3,
and if the December Closing Price (as defined below) is less than $2.00, then Parent shall, by no later than February 2, 2014,
issue additional shares of Parent Common Stock to Seller, as follows:

 

(i)            If the December
Closing Price is $1.75 or less, then Parent shall issue to Seller the Flex Parent Shares; and

 

(ii)           If the December
Closing Price is less than $2.00 but greater than $1.75, then Parent shall issue to Seller that number of shares of Parent Common
Stock calculated as the number of the Flex Parent Shares multiplied by the quotient of (A) the difference between $2.00 and the
December Closing Price divided by (B) 0.25.

 

(e)            If Parent shall
not have repurchased all of the Shares on or before the Latest Repurchase Closing Date pursuant to the provisions of Section 3,
and if the December Closing Price (as defined below) is greater than $2.25, then Seller shall surrender and forfeit, for no consideration,
a portion of the Shares, as follows:

 

(i)            If the December
Closing Price is $2.50 or greater, then Seller shall surrender and forfeit all of the Flex Parent Shares; and

 

(ii)           If the December
Closing Price is greater than $2.25 but less than $2.50, then Seller shall surrender and forfeit that number of Shares calculated
as the number of the Flex Parent Shares multiplied by the quotient of (A) the difference between the December Closing Price and
$2.25 divided by (B) 0.25.

 

(f)            As used herein,
“December Closing Price” means the volume weighted average trading price of the Parent Common Stock calculated
based on each individual trade occurring during December 2013.

 

(g)            If any of the
Shares are to be surrendered and forfeited by Seller pursuant to the provisions of this Section 4, then the Escrow Agent shall,
pursuant to the terms of the Earnout Stock Escrow Agreement, deliver to Parent a certificate or certificates representing the Shares
to be surrendered and forfeited, accompanied by stock powers. Seller shall take all actions as may be reasonably necessary to effect
any surrender and forfeiture of Shares contemplated by this Section 4, including, without limitation, executing and delivering
instructions to the Escrow Agent and such other documents and instruments as may be reasonably deemed necessary or appropriate
by Parent.

 

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(h)            In the event that
the outstanding shares of Parent Common Stock are changed into or exchanged for a different number or kind of shares or other securities
of Parent or of another entity by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock, appropriate adjustment shall be made in the number and
kind of Shares to the end that the proportionate interest of Seller shall be maintained as before the occurrence of such event.

 

5.            Release of
Escrow Shares. On the Earnout Settlement Date, Company and Representative shall execute and deliver to JP Morgan Chase
Bank, N.A. Joint Written Instructions to distribute and deliver the Stock Certificate representing all of the Escrow Shares (as
such capitalized terms are defined in the Escrow Agreement) to Seller. Thereafter, Company and Representative shall take all such
further actions as may be reasonably necessary to terminate the Escrow Agreement, including, without limitation, executing and
delivering such other documents and instruments as may be reasonably required by JP Morgan Chase Bank, N.A.

 

6.            Amendments
to Employment Arrangements.

 

(a)            On the Effective
Date, Company and Representative shall execute and deliver an amendment, in the form of Exhibit C attached hereto, to the
Employment Agreement between Company and Representative.

 

(b)            On the Effective
Date, Company shall execute and deliver to each of Hemant Desai and A. Thomas Cornelson an amendment, in the form of Exhibit
D attached hereto, to the Employment Agreement between Company and such employee.

 

(c)            Effective as of
the Effective Date (or, if later, the date on which Representative executes and delivers to Company the amendment to Employment
Agreement referred to in paragraph (a) of this Section 6), Parent shall grant to Representative (in his individual capacity, and
not as a representative of Seller) options to purchase 200,000 shares of Parent Common Stock, and effective as of such date on
or after the Effective Date as Parent grants stock options to one or more of its executives, but in any event by January 31, 2013
(or, if later, the date on which Hemant Desai or A. Thomas Cornelson executes and delivers to Company the applicable amendment
to Employment Agreement referred to in paragraph (b) of this Section 6), Parent shall grant to Hemant Desai and A. Thomas Cornelson
options to purchase 50,000 shares each of Parent Common Stock (collectively, the “Options”), in each case pursuant
to Parent’s 2009 Omnibus Securities and Incentive Plan (the “Plan”), but subject to the approval of Parent’s
stockholders, at Parent’s 2013 annual meeting of stockholders or otherwise within 12 months after the grant date of the Options
(in either case, “Stockholder Approval”), of an amendment to the Plan to increase the number of shares of Parent
Common Stock subject to the Plan. Each of the Options (i) shall have a term of ten years, (ii) shall vest in five equal annual
installments commencing on the first anniversary of the grant date, (iii) shall be designated as incentive stock options (to the
extent permitted under applicable law), (iv) shall be otherwise subject to the applicable terms and conditions of the Plan, and
(v) shall vest in full upon a Change of Control (as such term is defined in the Plan). Representative’s Options shall have
a per-share exercise price equal to the greater of $1.50 or the volume weighted average closing stock price of the Parent Common
Stock for the 30-day period immediately preceding the date of grant. The Options awarded to Hemant Desai and A. Thomas Cornelson
shall have a per-share exercise price equal to the Fair Market Value of the Parent Common Stock on the grant date, consistent with
option grants awarded on the same date to other executives of Parent. If Stockholder Approval is not obtained within 12 months
after the grant date of the Options, then the Options shall remain valid and outstanding on the terms set out in this Section 6(c),
without reference to the Plan.

 

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7.            Board Designation.
On or promptly after the Effective Date, Parent shall take all action necessary or appropriate to increase the size of Parent’s
board of directors (the “Board”) by one member, and to appoint Representative to fill the vacancy on the Board
arising therefrom. Thereafter, for so long as Seller and/or Representative collectively own at least 10% of the total number of
outstanding shares of Parent Common Stock, Representative shall have the right to be named by Parent to present to Parent’s
stockholders as a nominee for election to the Board each time Parent solicits a vote of its stockholders relating to the election
of directors. At any time on or after such date on which Seller and Representative cease to collectively own at least 10% of the
total number of outstanding shares of Parent Common Stock, Representative shall, upon receipt of a written request from Parent,
immediately resign from the Board.

 

8.            Certain Acknowledgments
and Waivers. 

 

(a)            On the Effective
Date, upon Parent’s satisfaction of its obligations under Section 2 hereof, Parent and Company shall be deemed to have fully
satisfied all of their obligations under the Purchase Agreement with respect to the payment of the Purchase Price, including the
Earnout Payment and the Additional Earnout Payment, and neither Parent nor Company shall have any further obligations or liabilities
to Seller, Representative or any other Person with respect thereto.

 

(b)            As of the Effective
Date, Representative acknowledges that Section 3 of Schedule 1 to the Employment Agreement between Company and Representative shall
be of no force or effect, and Representative irrevocably waives any right to receive any options pursuant to such Schedule 1.

 

9.            Representations
and Warranties.

 

(a)            By Parent and
Company. Each of Parent and Company hereby represents and warrants to Seller and Representative that (i) each of Parent and
Company is duly incorporated and in good standing under the laws of the State of Delaware, and (ii) this Agreement, the Note,
the Earnout Shares Escrow Agreement and the amendments to the Employment Agreements contemplated hereby (A) have been duly approved
by Parent and Company by all necessary corporate action, (B) do not violate Parent’s or Company’s certificate of incorporation
or bylaws, and (C) shall be binding on Parent and Company in accordance with their terms (except as may be limited by bankruptcy
laws and the availability of equitable remedies).

 

(b)            By Seller and
Representative. Each of Seller and Representative hereby represents and warrants to Parent and Company that (i) Seller is
duly organized and in good standing under the laws of the State of New Jersey, and (ii) this Agreement and the Earnout Shares
Escrow Agreement (A) have been duly approved by Seller by all necessary limited liability company action, (B) do not violate Seller’s
articles of organization or limited liability company operating agreement, and (C) shall be binding on Seller and Representative,
as applicable, in accordance with their terms (except as may be limited by bankruptcy laws and the availability of equitable remedies).

 

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10.            Miscellaneous.

 

(a)            Governing Law;
Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in Wilmington, Delaware, for the adjudication of any dispute under or in connection with this
Agreement or the other documents or agreements contemplated hereby or with any transaction contemplated hereby or thereby or discussed
herein or therein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(b)            Counterparts.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a
facsimile signature and a signature delivered electronically (including by delivery via electronic mail of a signature page in
“pdf” format) shall be considered due execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile or electronic signature.

 

(c)            Headings.
The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

(d)            Severability.
If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

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(e)            Entire Agreement;
Amendments. This Agreement and the other agreements contemplated hereby supersede all other prior oral or written agreements
between the Parties, their Affiliates and Persons acting on their behalf, and contain the entire understanding of the Parties,
with respect to the matters discussed herein; provided, however, that except as expressly modified pursuant to this Agreement
or the other agreements contemplated hereby, the Purchase Agreement and the Additional Agreements shall remain in effect in accordance
with their respective terms. No provision of this Agreement may be amended other than by an instrument in writing signed by the
Parties. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement
is sought.

 

(f)            Notices. Any
notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent
by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications shall be:

 

 

If to Parent or Company:

 

Cyalume Technologies Holdings,
Inc.

96
Windsor Street

West
Springfield, MA 01089

Facsimile:     (413) 788-4817

Attention:    Chief Executive
Officer

 

With a copy (for informational
purposes only) to:

 

Greenberg Traurig, LLP

401 East Las Olas Blvd.

Suite 2000

Fort Lauderdale, FL 33301

Facsimile:     (954) 759-5535

Attention:    Bruce I. March, Esq.

 

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If to Seller or Representative:

 

JFC Technologies, LLC

P.O.
Box 266

Bound
Brook, NJ 08805

Attention:    James G. Schleck

 

with a copy (for informational
purposes only) to:

 

Law Offices of Susan S. Kleiner,
LLC

227 Main Street

Metuchen, NJ 08840

Facsimile:     (732) 289-6129

Attention:    Susan S. Kleiner, Esq.

 

or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other
party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(g)           Assignment;
Successors and Assigns. No Party may assign its rights or obligations hereunder without the written consent of the other Parties.
This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.

 

(h)           No
Third Party Beneficiaries. This Agreement is intended for the benefit of the Parties and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

(i)            Further Assurances.
Each Party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as any other Party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(j)            No Strict Construction.
The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and
no rules of strict construction will be applied against any Party.

 

[Signature
Page Follows]

 

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

 

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

 

 

 

	 	
        COMPANY:
	 
	 	 	 
	 	CYALUME SPECIALTY PRODUCTS, INC.	 
	 	 	 

 

	 	By:	/s/ Michael Bielonko	 
	 	Name:	Michael Bielonko	 
	 	Title:	Chief Financial Officer and Secretary	 

 

 

 

	 	
        SELLER:
	 
	 	 	 
	 	JFC TECHNOLOGIES, LLC	 

 

 

	 	By:	/s/ James G. Schleck	 
	 	Name:	James G. Schleck	 
	 	Title:	Chief Executive Officer	 

 

 

 

	 	REPRESENTATIVE:	 
	 	 	 

 

	 	By:	/s/ James G. Schleck	 
	 	Name:	James G. Schleck	 

 

    	 

    	 

    

 

Exhibit A

 

Earnout Stock Escrow Agreement

 

    	 

    	 

    
 

Exhibit B

 

Promissory Note

 

    	 

    	 

    
 

Exhibit C

 

Amendment to Schleck Employment Agreement

 

    	 

    	 

    
 

Exhibit D

 

Amendment to Cornelson and Desai Employment
AgreementsTHIS
PROMISSORY NOTE AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH HEREIN
TO PAYMENTS OF CERTAIN SENIOR INDEBTEDNESS OF MAKER. THE PAYEE OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, AND THE MAKER OF THIS NOTE,
BY MAKING THIS NOTE, IRREVOCABLY AGREES TO BE BOUND BY THE TERMS OF THIS PROMISSORY NOTE.

 

 

PROMISSORY NOTE

 

	
        Amount: $2,100,000

         

        Effective Date: December 31, 2012
	 
	 	 

 

	PAYEE:	MAKER:
	
        JFC Technologies, LLC

        P.O. Box 266

        Bound Brook, NJ 08805
	
        Cyalume Technologies Holdings, Inc.

        96 Windsor Street

West Springfield, MA 01089 

 

 

FOR VALUE RECEIVED,
the undersigned Maker promises to pay to the order of Payee, at the location indicated at the beginning of this Note,
or at such other place as may be designated by Payee, the principal amount of TWO MILLION ONE HUNDRED THOUSAND DOLLARS ($2,100,000)
(the “Principal Amount”), together with interest on the outstanding Principal Amount hereunder, all in accordance
with the provisions set forth herein. This Note is issued pursuant to that certain Amendment Agreement, dated December 27, 2012,
by and among Payee, Maker, Cyalume Specialty Products, Inc., and James G. Schleck (the “Amendment Agreement”).
Capitalized terms used and not otherwise defined in this Note shall have the meanings given to them in the Amendment Agreement.

 

1.            Interest
Rate. Interest shall accrue and be payable on the unpaid Principal Amount from the Effective Date until paid in full at
the rate of 5% per annum; provided that such interest rate shall increase to the following rate, as applicable, on the following
dates, and the total amount of interest accrued and payable hereunder shall be re-computed on each such date, based on the then-outstanding
unpaid Principal Amount, retroactive to the Effective Date: (a) on January 1, 2014, 6%; (b) on February 1, 2014, 7%; (c) on March
1, 2014, 8%; (d) on April 1, 2014, 9%; (e) on May 1, 2014, 10%; and (f) on June 1, 2014, 11%. Interest shall not be compounded,
and shall be calculated on the basis of a 365 day year.

 

2.             Repayment
Terms.

 

(a)            The entire unpaid
Principal Amount and all accrued and unpaid interest shall be due and payable in full on the earlier of (i) June 30, 2014, or (ii)
a Refinancing (as defined in Section 2(b) below) in full of the Existing Senior Debt (as defined in Section 7(a) below), provided
that in the case of clause (ii) only, Maker shall have at least $5,000,000 in Available Funds (as defined in Section 2(c) below),
after giving effect to the payment in full of all amounts hereunder (the “Maturity Date”).

 

    	 

    	 

    
 

(b)            As used herein,
“Refinancing” means any form of refinancing, including paying off existing debt with proceeds from new debt,
whether from an existing lender or a new lender, extending the maturity date of existing debt, or changing the amount of debt or
available credit available.

 

(c)            As used herein,
“Available Funds” means the sum of cash, cash equivalents, and available credit under any indebtedness of Parent
or Subsidiaries (as defined in Section 5(b) below) without violating covenants in the written signed loan agreements entered into
by Parent or Subsidiaries in connection with the Senior Debt.

 

3.            Prepayments.
Maker may prepay this Note without penalty in part or in full at any time and from time to time prior to the Maturity Date.
There shall be no prepayment penalty as a result of any prepayment of the Principal Amount made in accordance with the terms of
this Note.

 

4.             Application
of Payments. All payments received hereunder shall be applied first to the payment of any and all expenses and/or charges
payable hereunder, then to interest due and payable, with the balance applied to the Principal Amount.

 

5.             Events
of Default. For purposes of this Note, the term “Event of Default” shall mean the occurrence of any
of the following:

 

(a)            The failure of
Maker to make any payment of the Principal Amount or interest on this Note when the same shall become due and payable;

 

(b)            An Insolvency
Proceeding (as defined in Section 5(g) below) is commenced by Parent or any direct or indirect subsidiary of Parent (“Subsidiary”);

 

(c)            An Insolvency
Proceeding is commenced against Parent or any Subsidiary, and any of the following events occur: (i) Parent or Subsidiary consents
to the institution of such Insolvency Proceeding against it, (ii) the petition commencing the Insolvency Proceeding is not timely
controverted, (iii) the petition commencing the Insolvency Proceeding is not dismissed within sixty (60) calendar days of the date
of the filing or presentation thereof; (iv) an interim trustee is appointed to take possession of all or any substantial portion
of the properties or assets of, or to operate all or any substantial portion of the business of, Parent or any Subsidiary, or (v)
an order for relief shall have been issued or entered therein;

 

(d)            A material portion
of Parent’s or any Subsidiaries’ assets is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any third person and the same is not discharged before the earlier of thirty (30) days after
the date it first arises or five (5) days prior to the date on which such property or asset is subject to forfeiture by Parent
or the applicable Subsidiary;

 

(e)            Parent or any
Subsidiary is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part
of its business affairs; or

 

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(f)            The indictment
of Parent or any Subsidiaries under any criminal statute, or commencement of criminal or civil proceedings against Parent or any
Subsidiaries, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture to any
governmental authority of a substantial portion of the property of Parent or any Subsidiaries.

 

(g)            “Insolvency
Proceeding” means any proceeding commenced under any provision of the Bankruptcy Code (Title 11 of the United States
Code, as in effect from time to time) or under any other state or federal bankruptcy or insolvency law, assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

 

6.            Remedies
Upon Default. Upon the occurrence of an Event of Default, at the option of Payee, the entire balance outstanding hereunder
and all other obligations of Maker to Payee hereunder shall become immediately due and payable, and Payee shall have all rights
and remedies available at law or in equity.

 

7.            Subordination.

 

              (a)            As used
in this Note, “Existing Senior Debt” means all indebtedness of Maker arising under any credit agreement, loan
agreement, note or other document, agreement or instrument existing as of the date hereof (as the same may be amended subsequent
to the date hereof) with TD Bank, NA or Granite Creek Partners Agent, LLC; “Senior Debt” means
the principal of, premium, if any, interest (including interest, to the extent allowable, accruing subsequent to the filing of
a petition initiating any proceeding under any state, federal or foreign bankruptcy law, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or termination payment with respect to or in connection
with, and all fees, costs, expenses, reimbursement amounts, indemnities and other amounts accrued or due on or in connection with,
indebtedness for borrowed money of Maker, whether outstanding on the date of this Note or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by Maker (including all deferrals, renewals, extensions or refundings of, or amendments, modifications
or supplements to, the foregoing), including the Existing Senior Debt, except for: (i) any liability for federal, state, local
or other taxes owed or owing by Maker, (ii) any indebtedness of Maker owed to any of its subsidiaries; (iii) any trade payables,
or (iv) any indebtedness that is, by its express terms, subordinated in right of payment to any other indebtedness of Maker (collectively,
“Junior Debt”); and “Subordinated Debt” means all
obligations of Maker now or hereafter existing under or in connection with this Note (whether created directly or acquired by assignment
or otherwise), whether for principal, interest (including, without limitation, interest, to the extent allowable, accruing subsequent
to the filing of a petition initiating any proceeding under any state, federal or foreign bankruptcy law, whether or not a claim
for post-petition interest is allowable as a claim in any such proceeding), fees, costs, expenses, indemnities or otherwise.

 

(b)            Payee, by acceptance
of this Note, agrees that the Subordinated Debt is and shall be subordinate, to the extent and in the manner hereinafter set forth,
to the prior payment in full of all Senior Debt of Maker, including Senior Debt of Maker incurred, created, assumed or guaranteed
after the date hereof, and that the subordination is for the benefit of and enforceable by the holders of such Senior Debt.

 

    	3

    	 

    
 

(c)            The holders of
Senior Debt of Maker shall first be entitled to receive payment in full of all amounts due on or in respect of such Senior Debt
(including interest after commencement of any bankruptcy proceeding at the rate specified in the documentation for the applicable
Senior Debt of the Company) or provision shall be made for such amount in cash, or other payments satisfactory to the holders of
Senior Debt, before Payee shall be entitled to receive any payment with respect to the Subordinated Debt, in the event of any distribution
to creditors of Maker in (i) any liquidation or dissolution of Maker; (ii) any bankruptcy, reorganization, insolvency, receivership
or similar proceeding relating to Maker or its property; (iii) any assignment by Maker for the benefit of its creditors; or (iv)
any marshalling of Maker’s assets and liabilities.

 

(d)            On the Maturity
Date (or if earlier, upon the occurrence of an Event of Default), after payments to the holders of Senior Debt in accordance with
Section 7(c) above to the extent payments are then due, the holder of this Note shall be entitled to payment in full of all amounts
due on or in respect of this Note (including interest after commencement of any bankruptcy proceeding at the rate specified in
this Note) before the holders of any Junior Debt shall be entitled to receive payment with respect to the Junior Debt.

 

8.            Applicable
Law, Venue and Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Note
shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in Wilmington, Delaware, for the adjudication of any dispute under or in connection with this
Note or the other documents or agreements contemplated hereby or with any transaction contemplated hereby or thereby or discussed
herein or therein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at
the address for such notices to it under this Note (by certified mail or by reputable express courier, such as FedEx) and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. 

 

9.            Partial Invalidity.
The unenforceability or invalidity of any provision of this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of this Note as to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to other persons or circumstances.

 

    	4

    	 

    
 

10.            Binding Effect.
This Note shall be binding upon and inure to the benefit of Maker and Payee and their respective heirs, personal representatives
and permitted assigns.

 

11.            Costs/Attorneys
Fees. Maker shall pay on demand all costs of collection and reasonable attorneys fees incurred or paid by Payee in enforcing
the terms hereof or with respect to collection hereunder, provided that Payee substantially prevails in enforcing the terms of
this Note.

 

12.            Manner
and Method of Payment. All payments called for in this Note shall be made in lawful money of the United States of America.
If made by check, or other payment instrument, such check, draft, or other payment instrument shall represent immediately available
funds. Should any payment date fall on a non-banking day, Maker shall make the payment on the next succeeding banking day. If
requested in writing or by email to Parent’s Chief Financial Officer (or his delegate), Parent shall make all payments called
for in this Note by wire transfer of immediately available funds to such bank account as the holder of this Note may request at
least one business day before the Maturity Date (or if earlier, as soon as reasonably practical following the occurrence of an
Event of Default).

 

13.            Notices.
 Any notice or demand required by or in connection with this Note shall be given by facsimile (with confirmation), first class
mail, or hand delivery to the parties at their addresses specified on the first page of this Note, as such address may be modified
by written notice of the parties. All notices and demands for payment from the Payee or a holder actually received in writing
by the Maker shall be considered to be effective upon the receipt thereof by the Maker regardless of the procedure or method utilized
to accomplish delivery thereof to the Maker.

 

14.            Assignability.
This Note may not be assigned, sold, transferred or mortgaged by Payee at any time without the prior written consent of the Maker.

 

15.            Tense; Gender;
Defined Terms; Section Headings. As used herein, the singular includes the plural and the plural includes the singular. A reference
to any gender also applies to any other gender. Defined terms are capitalized throughout this Note. The section headings are for
convenience only and are not part of this Note.

 

 

	 	 	MAKER:	 
	 	 	 	 
			CYALUME TECHNOLOGIES HOLDINGS, INC.	 

 

	 	By:	/s/ Zivi Nedivi	 
	 	Name:	Zivi Nedivi	 
	 	Title:	Chief Executive Officer	 

 

    	5

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