Document:

Execution Version

 

REGISTRATION
RIGHTS AGREEMENT

 

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

 

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

 

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

 

NOW, THEREFORE, IN CONSIDERATION
of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Company and the Purchaser agree as follows:

 

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

 

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

 

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

 

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

 

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

 

“Business Day”
means any day, except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Commission”
means the Securities and Exchange Commission.

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2. Demand Registration.

 

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

 

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

 

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

 

3. Piggyback Registration.

 

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

 

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

 

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

 

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4. Registration
Procedures.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	10

    	 

    

 

6. Indemnification.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	13

    	 

    

 

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

 

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

 

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

 

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

 

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

 

8. Information Rights.

 

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

 

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

 

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

 

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

 

9. Miscellaneous.

 

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

 

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

 

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

 

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

 

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

 

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

 

(g) Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each
of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. Each Holder may assign its respective rights (but only with all related obligations)
with respect to any or all of its Registrable Securities hereunder to a transferee of such Registrable Securities; provided
in each case that (i) such Holder agrees in writing with such transferee to assign such rights and related obligations under
this Agreement, and for such transferee to assume such obligations, and a copy of such agreement is furnished to the Company within
a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such
registration rights are being transferred or assigned, (iii) at or before the time the Company received the written notice
contemplated by clause (ii) of this sentence, the transferee agrees in writing with the Company to be bound by all of the
provisions contained herein and (iv) the transferee is an “accredited investor,” as that term is defined in Rule 501
of Regulation D.

 

(h) Execution
and Counterparts. This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed
to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign
the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or “.pdf” signature were the original thereof.

 

    	16

    	 

    

 

(i) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. 

 

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

 

(k) Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their good faith reasonable
efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.

 

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

 

 

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

  

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

   

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

    	 

    	 

    

  

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

 

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

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]EXECUTION VERSION

 

RELEASE
AND ESCROW AGREEMENT

 

THIS RELEASE AND ESCROW
AGREEMENT (this “Agreement”), dated as of November 19, 2013, is made and entered into by and between Cyalume
Technologies Holdings, Inc., a Delaware corporation (“Cyalume”), Cyalume Technologies, Inc., a Delaware corporation
(“CTI”), Cova Small Cap Holdings, LLC (“Depositor”) and US VC Partners, L.P., a Delaware
limited partnership (“Purchaser” and together with Cyalume, CTI and Depositor, the “Parties”
and each a “Party”).

 

WHEREAS, Cyalume
and Purchaser are parties to that certain Securities Purchase Agreement (“Purchase Agreement”), dated as of
the date hereof, pursuant to which Purchaser is making a $4,000,000 investment in the Company; and

 

WHEREAS, in
connection with and as a condition to the Parties entering into the Purchase Agreement and the agreement of Purchaser to consummate
the investment contemplated therein, the Parties desire to enter into this Agreement on the terms set forth herein.

 

NOW, THEREFORE,
in consideration of the mutual covenants set forth herein, and other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:

 

1.                 
Release of Claims. Cyalume and CTI, on behalf of itself, and all of its affiliates and agents and each of their respective
predecessors, successors, assigns and transferees and any person or entity claiming by, through or under any such party (the “Releasors”),
hereby fully and forever releases, acquits and forever discharges and covenants not to sue any of GMS Acquisition Partners Holdings,
LLC, a Delaware limited liability company and an affiliate of Purchaser (“GMS”), Depositor, their respective
equity holders and affiliates, and each of their respective officers, directors, employees, members, partners and agents (collectively,
the “Releasees”), of and from any and all claims, allegations, requests for relief, and causes of action, whether
based on any federal, state or foreign law or right of action, direct, indirect or representative in nature, foreseen or unforeseen,
matured or unmatured, known or unknown, contingent or fixed (collectively, “Claims”) which any Releasor has,
had or may have had (or that might be brought by, through, or on behalf of any such Releasor) against the Releasees, or any of
them, with respect to (i) that certain Stock Purchase Agreement dated February 14, 2008 by and among Cyalume, GMS, Vector Intersect
Acquisition Corporation, Cyalume Acquisition Corp, as amended (the “Acquisition Agreement”), (ii) the transactions
contemplated thereby or referenced therein or (iii) any indemnification obligations which GMS or any other Releasee may have, under
the Acquisition Agreement or otherwise, with respect to any losses, payments, demands, penalties, liabilities, judgment damages,
diminution in value, claim or expenses which Cyalume or any of its subsidiaries is subjected to as a result of any of the following
lawsuits or any appeal thereof (together, the “Subject Lawsuits”): (a) Randye M. Holland, et al. v. Emil Jachmann
and Cyalume Technologies, Inc., Civil Action No. 06-706 (Mass. Super. Ct.)(the “Omniglow Lawsuit”) or (b) Cyalume
Technologies, Inc. v. Ira Leemon, et al., Index No. 603512/06 (N.Y. Sup. Ct.) (the “NY Lawsuit”) (collectively,
the “Released Claims”), other than the obligation of Depositor to place the Escrowed Shares and the Proceeds
thereof, each as defined below, into escrow with Cyalume, as described and subject to the terms and conditions set forth herein.

 

    	 

    	 

    

 

2.                 
Escrow of Shares in respect of Subject Lawsuits. In consideration of CTI releasing GMS, Depositor and the other Releasees
from the Released Claims, Depositor hereby agrees to place in escrow with Cyalume 625,139 shares of Cyalume’s common stock,
par value $0.001 per share (the “Escrowed Shares”) to provide Cyalume and CTI a source of recovery with respect
to any loss, liability or expense incurred by Cyalume, CTI or any of their respective subsidiaries or affiliates in respect of
the Subject Lawsuits (the “Covered Losses”). For the avoidance of doubt, none of the assets or property of any
of the Releasees, other than the Escrowed Shares, shall be available to any of the Releasors to satisfy any Claims, liabilities,
losses or damages of any kind with respect to the Subject Lawsuits or any other Released Claims.

 

3.                 
Escrow. The Depositor confirms and grants to Cyalume a sole and exclusive right to hold the Escrowed Shares in escrow
as escrow agent (“Escrow Agent”), and apply the Proceeds of the Escrowed Shares to satisfy the Covered Losses,
in accordance with and subject to the terms of this Agreement.

 

4.                 
Administration of the Escrowed Shares. The following provisions shall govern the administration of the Escrowed Shares:

 

i.      Depositor shall promptly
deliver certificates representing the Escrowed Shares, together with assignments separate from such certificates in a form reasonably
satisfactory to the Escrow Agent, and such shares shall be held during the term of this Agreement by the Escrow Agent.

 

ii.    Until such time as Escrow
Agent is entitled to dispose of the Escrowed Shares for purposes of satisfying any Covered Loss in accordance with Section 5, Depositor
shall be entitled to (A) receive and retain for its own account any cash dividend in respect of the Escrowed Shares, (B) retain
the power to control the direction, management and policies of Cyalume and to retain all other corporate rights with respect to
the Escrowed Shares to the same extent as Depositor would have if the Escrowed Shares were not placed in escrow with Escrow Agent
pursuant to this Agreement and (C) to vote or consent with respect to the Escrowed Shares in any manner not inconsistent with this
Agreement, or any document or instrument delivered or to be delivered pursuant to or in connection herewith, and Escrow Agent shall
not have any right to sell, dispose, transfer, convey or in any way encumber the Escrowed Shares.

 

iii.   Any
and all distributions made on or in respect of the Escrowed Shares (and all Proceeds thereof) while subject to this Agreement,
whether resulting from a subdivision, combination or reclassification, shall be held by the Escrow Agent
to provide a source of recovery with respect to Covered Losses and, if received by Depositor, shall be received in trust for benefit
of Cyalume, be segregated from the other property and funds of Depositor, and shall forthwith be delivered to the Escrow
Agent to be held subject to the terms of this Agreement.

 

    	 

    	 

    

 

5.                 
Right to Dispose of Escrowed Shares. Upon the occurrence of a full and final resolution by a court of competent jurisdiction
(including any and all appeals) (a “Final Resolution”) of the Omniglow Lawsuit or the settlement of the Omniglow
Lawsuit which results in any Covered Losses, and thereafter, upon the occurrence of a Final Resolution of the NY Lawsuit or the
settlement of the NY Lawsuit which results in any Covered Losses, Cyalume shall notify Depositor,
and upon provision of such notice together with written documentation evidencing such Covered Losses, Escrow
Agent shall have the right to sell all or such a portion of the Escrowed Shares and apply the proceeds thereof, including
any and all amounts receivable or received when the Escrowed Shares or any proceeds thereof are sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary (the “Proceeds”) as is necessary to satisfy
such Covered Losses. For the avoidance of doubt, the Escrow Agent shall continue to hold all of the Escrowed Shares in escrow and
shall not have any right to sell, dispose, transfer, convey or in any way encumber the Escrowed Shares until the occurrence of
a Final Resolution of the Omniglow Lawsuit or the settlement of the Omniglow Lawsuit which results in any Covered Losses, regardless
of whether there has previously been a Final Resolution of the NY Lawsuit or a settlement of the NY Lawsuit which results in any
Covered Losses. Proceeds actually received from the sale or other disposition or collection of any Escrowed Shares, and any other
amounts received in respect of the Escrowed Shares shall be applied to the payment of any Covered Losses. Any surplus Proceeds
or Escrowed Shares remaining on deposit with Escrow Agent after payment and performance in full of such Covered Losses shall be
promptly paid over to Depositor. Upon the Final Resolution of the Subject Lawsuits and
either (i) the satisfaction of all Covered Losses from the Escrowed Shares (or the Proceeds thereof) pursuant to this Agreement
or (ii) such Final Resolution of the Subject Lawsuits resulted in no Covered Loss to any of Cyalume, CTI or any of their respective
subsidiaries or affiliates, then the Escrow Agent will promptly redeliver the remaining Escrowed Shares (or the Proceeds thereof)
to Depositor, the escrow created hereby will terminate and all rights of Cyalume in the Escrowed Shares (and any remaining Proceeds
thereof) created hereunder shall terminate. Upon the termination of the escrow, the Parties shall promptly execute and deliver
to Depositor such documents and instruments reasonably requested by Depositor as shall be necessary to evidence termination and
release of all such interests given by Depositor to Escrow Agent, CTI or any other Party hereunder.

 

6.                 
Sole Recourse. The Parties acknowledge and agree that the sole and exclusive recourse of Cyalume and CTI with respect
to any Claims, liabilities, losses (whether or not such losses are Covered Losses) or damages of any kind with respect to the Subject
Lawsuits shall be the right to apply the Proceeds of the Escrowed Shares to satisfy Covered Losses. For the avoidance of doubt,
Cyalume and CTI each acknowledges and agrees no Releasor shall have or otherwise be entitled to have, with respect to the Subject
Lawsuits, any recourse or right of set-off against Depositor, Purchaser, the Releasees or any of their respective affiliates, or
any security interest or encumbrance of any kind with respect to, any securities of Cyalume that Depositor, Purchaser or any of
the Releasees or any of its affiliates holds, or may hold, from time to time, other than the Escrowed Shares (and the Proceeds
thereof), regardless of whether the Escrowed Shares (or the Proceeds thereof) are sufficient to satisfy the Covered Losses.

 

    	 

    	 

    

 

7.                 
Binding Upon Successors. All rights of the Parties under this Agreement shall inure to the benefit of such Parties
and their successors and assigns, and all obligations of the Parties hereunder shall bind their respective successors and assigns.

 

8.                 
Entire Agreement; Severability. This Agreement contains the entire agreement between the Parties with respect to
the subject matter hereof. If any of the provisions of this Agreement shall be held invalid or unenforceable, this Agreement shall
be construed as if not containing those provisions, and the rights and obligations of the Parties shall be construed and enforced
accordingly.

 

9.                 
Choice of Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State
of New York, without regard to the principles of conflicts of law thereof. Each Party agrees that any action, claim, suit, investigation
or proceeding (“Proceeding”), whether commenced or threatened in writing proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective
affiliates, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each Party hereby irrevocably submits to the exclusive jurisdiction
of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees
not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or
that such Proceeding has been commenced in an improper or inconvenient forum. Each Party hereby irrevocably waives personal service
of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such Party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE OTHER TRANSACTIONS CONTEMPLATED HEREBY.

 

10.             
Amendments. This Agreement may not be amended or modified except by a writing signed by
each of the Parties.

 

11.             
Notices. All notices, requests, demands, claims and other communications required or permitted to be delivered, given
or otherwise provided under this Agreement must be in writing and must be delivered, given or otherwise provided:

 

(a)               
by hand (in which case, it will be effective upon delivery); or

 

(b)              
by overnight delivery by a nationally recognized courier service (in which case, it will be effective on the business day
after being deposited with such courier service);

 

    	 

    	 

    

 

in each case, to the address listed below:

 

If to Cyalume or CTI, to it at:

 

Cyalume Technologies Holdings,
Inc.

96 Windsor Street

West Springfield, Massachusetts 01089

Attention: Zivi Nedivi

 

Telephone No.: (413) 858-2500

Facsimile No.: (413) 736-5737

E-mail: znedivi@cyalume.com

 

With a copy (which
shall not constitute notice) to:

 

Greenberg Traurig,
P.A.

401 East Las Olas Boulevard, Suite 2000

Fort Lauderdale, Florida 33301

Telephone No.: (954) 765-0500

Facsimile No.: (954) 765-1477

Attention: Bruce I. March, Esq.

E-mail: marchb@gtlaw.com

 

If to Purchaser
or Depositor:

 

Cova Small Cap
Holdings, LLC

US VC Partners, L.P.

c/o Columbus Nova

900 Third Avenue, 19th Floor

New York, New York 10022

Attention: Andrew Intrater

Telephone No.: (413) 858-2500

Facsimile No.:(413) 736-5737

E-mail: aintrater@columbusnova.com

 

With a copy (which
shall not constitute notice) to:

 

Cadwalader Wickersham & Taft LLP

1 World Financial Center

New York, New York 10281

Telephone No.: (212) 504-6000

Facsimile No.: (212) 504-6666

Attention: Geoffrey Levin, Esq.

E-mail: Geoffrey.levin@cwt.com

 

The Parties may specify a different address
by giving notice in accordance with this Section to the appropriate counterparty.

 

    	 

    	 

    

 

12.             
Further Assurances. The Parties agrees to take such further actions and execute and deliver such other documents
and agreements as may be reasonably required to effect the intent and purpose of this Agreement.

 

13.             
Miscellaneous. This Agreement may be executed in any number of counterparts (including via fax or PDF signatures),
each of which shall be an original but all of which taken together shall constitute one and the same instrument.

 

[Signature Page to Follow]

 

    	 

    	 

    

 

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

 

	 	CYALUME TECHNOLOGIES HOLDINGS, INC.
	 	 
	 	 
	 	By:  /s/ Michael Bielonko
	 	Name:  Michael Bielonko
	 	Title:    Chief Financial Officer
	 	 
	 	 
	 	CYALUME TECHNOLOGIES, INC.
	 	 
	 	 
	 	By:  /s/ Michael Bielonko
	 	Name:  Michael Bielonko
	 	Title:    Chief Financial Officer
	 	 
	 	 
	 	COVA SMALL CAP HOLDINGS, LLC
	 	 
	 	 
	 	By:  /s/ Andrew Intrater
	 	Name: Andrew Intrater
	 	Title:   Chief Executive Officer
	 	 
	 	 
	 	US VC PARTNERS, L.P.
	 	 
	 	 
	 	By:  /s/ Andrew Intrater
	 	Name: Andrew Intrater
	 	Title:   Chief Executive Officer

 

    	 

    	 

    

 

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

 

	 	CYALUME TECHNOLOGIES HOLDINGS, INC., 

in its capacity as Escrow Agent
	 	 
	 	 
	 	By:  /s/ Michael Bielonko
	 	Name:  Michael Bielonko
	 	Title:    Chief Financial Officer

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