Document:

Unassociated Document

    
       

      Exhibit
10.1

       

    

    FIRST
AMENDMENT TO CREDIT

    AGREEMENT
AND LIMITED WAIVER

     

    This
FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER (this “First Amendment”)
dated as of September 11, 2009 made by and among CYALUME TECHNOLOGIES, INC., a
Delaware corporation (the “Borrower”), CYALUME TECHNOLOGIES HOLDINGS, INC., a
Delaware corporation (the “Holding Company”) and TD BANK, N.A., as
Administrative Agent and as the Lender (the “Agent”).

     

    Background

     

    The
Borrower, the Holding Company and the Agent entered into a credit agreement (the
“Original Credit Agreement”) dated as of December 19, 2008.  The
Borrower has requested a waiver of the Senior Leverage Ratio and the Total Debt
Service Coverage Ratio each for the quarter ending June 30, 2009.  In
addition, the Borrower has requested an amendment to the Senior Leverage
Ratio.

     

    NOW,
THEREFORE, in consideration of the promises and the agreements, provisions and
covenants herein contained, the Borrower, the Holding Company and the Agent
hereby agree as follows:

     

    1.           Limited
Waiver.  Subject to the terms and conditions herein contained
and in reliance on the representations and warranties of the Borrower herein
contained, effective upon the satisfaction of the conditions precedent set forth
in section 3 below, the Agent hereby waives the requirement that the
Borrower be in compliance with the Total Debt Service Ratio contained in
section 12.1(b) of the Original Credit Agreement for the quarter ending
June 30, 2009, and the Agent hereby waives the requirement that the Borrower be
in compliance with the Senior Leverage Ratio contained in section 12.2 of the
Original Credit Agreement for the quarter ending June 30, 2009.  The
foregoing limited waivers are limited to the waivers of the specific Total Debt
Service Ratio and Senior Leverage Ratio for the specific time period referred to
in this section 1 and is not a commitment or agreement to grant any waiver in
the future.

     

    2.           Amendment.  Subject
to the terms and conditions herein contained and in reliance on the
representations and warranties of the Borrower herein contained, effective upon
satisfaction of the conditions precedent contained in section 3
below:

     

    (a)           Section 1.1  “Definitions” of the Original
Credit Agreement is hereby amended by deleting the text of the defined terms
below and inserting the following in lieu thereof is hereby amended as
follows:

     

    (1)           Adjusted
EBITDA.  With respect to any period, an amount equal to EBITDA
for such period plus to the extent
accounted for in EBITDA and without duplication, the sum of (i) Acquired
EBITDA and (ii) legal and professional fees related to Permitted
Acquisitions to the extent included in Consolidated Net Income.  For
purposes of calculating trailing twelve (12) month Adjusted EBITDA for a portion
of the first twelve months following Closing, the following shall
apply:  $1,193,000 of restructuring expenses for the quarter ending
March 31, 2008 are added, $700,000 of the Holding Company transaction expenses,
and $443,000 of one time Acquisition expenses are added, and $2,751,000 of gains
on settlement of lawsuit are subtracted.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2)           Applicable
Margin.  Effective as of August 1, 2009, so long as no Event of
Default exists and subject to the terms of this definition, the applicable per
annum percentage set forth below; provided, that if any
Event of Default exists the applicable per annum percentage shall be that
specified for Level II.

     

    
      	
              Level

            	
              Senior Leverage
      Ratio

            	
              LIBOR Rate
      Margin

            	
              Base Rate
      Margin

            
	 
      	 
      	 
      	 
      
	
              I

            	
              less
      than 2.0:1.0

            	
              5.00%

            	
              5.00%

            
	 
      	 
      	 
      	 
      
	
              II

            	
              greater
      than or equal to 2.0:1.0

            	
              5.50%

            	
              5.50%

            

    

     

    Any
change in the Applicable Margin required pursuant to the foregoing shall become
effective on the fifth (5th) Business
Day after the Agent receives the Borrower’s officer’s certificate under Section
10.4 for the Borrower’s fiscal quarter or year-end, as the case may be, in
question; provided that
interest rate reductions shall become final only on the basis of Borrower’s
annual audited financial statements and (a) in the event that such annual
audited financial statements establish that the Borrower was not entitled to a
rate reduction which was previously granted, the Borrower shall, upon written
demand by the Agent, repay to the Agent an amount equal to the excess of
(i) interest at the rate which should have been charged based on such
annual audited financial statement(s) to (ii) the rate actually
charged on the basis of the Borrower’s quarterly financial statement(s) and
(b) in the event that such annual audited financial statements establish
the Borrower was entitled to a rate reduction which was previously not granted,
the Agent shall, upon written demand by the Borrower, apply the excess of
(i) the rate actually charged on the basis of the Borrower’s quarterly
financial statement(s) to (ii) interest at the rate which should have
been charged based on such annual audited financial statement(s), to the payment
of principal outstanding under the Term A Note and if no amounts are outstanding
thereunder, under the Term B Note, in inverse order of maturity without the
payment of any premium of penalty and if not amounts are outstanding thereunder
to the payments of the Revolving Credit Loans and if no Revolving Credit Loans
are outstanding such excess shall be remitted to the Borrower; provided, that in the
event of a dispute as to the appropriate fiscal quarter as to which any
adjustment should be allocated, the decision of the independent accountants of
the Borrower shall be made in accordance with GAAP and shall be binding upon the
Agent and the Borrower absent manifest error; and, provided further, that in the
event that the Borrower fails to provide any financial statements or officer’s
certificate on a timely basis in accordance with Section 10.4, any interest
rate increase payable as a result thereof shall be retroactively effective to
the date on which the financial statements or officer’s certificate, as the case
may be, should have been received by the Agent in accordance with Section 10.4
and the Borrower shall pay any amount due as a result thereof upon written
demand from the Agent .  The Agent shall send the Borrower a written
acknowledgement of each change in the Applicable Margin in accordance with the
Agent’s customary procedures as in effect from time to time, but the failure to
send such acknowledgement shall have no effect on the effectiveness or
applicability of the foregoing provisions of this definition or the Borrower’s
obligations with respect to payment and calculation of interest on the
Loans.

     

    
      
        
        

      

      
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    (3)           Borrowing
Base.  At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base Report
delivered to the Agent pursuant to §10.4(h), as adjusted pursuant to the
provisions below, which is equal to the sum of:  80% of Eligible
Accounts Receivable plus the lesser of
(i) $2,500,000 which amount will decrease in the amount of $100,000 on the
last day of each month with the first such reduction occurring on August 31,
2009 until December 31, 2009 (when the amount of this subsection (i) will be
$2,000,000 or (ii) 50% of Eligible Raw Material  and Finished
Goods Inventory.

     

    The
Required Lenders may, in their reasonable discretion, from time to time, in
accordance with §2.7:  (x) reduce the lending formula with
respect to any Eligible Accounts Receivable to the extent that the Required
Lenders reasonably determine that:  (i) the dilution with respect
of the Accounts Receivable for any period has increased in any material respect
or may be reasonably anticipated to increase in any material respect above
historical levels, or (ii) the general creditworthiness of account debtors
or other obligors of the Borrower has declined materially or (y) reduce the
lending formula with respect to any Eligible Raw Material and Finished Goods
Inventory to the extent that the Required Lenders determine
that:  (i) the number of days of the turnover of the inventory
owned by Borrower for any period has changed in any material adverse respect,
(ii) the liquidation value of any Eligible Raw Material and Finished Goods
Inventory, or any category thereof, has materially decreased, or (iii) the
nature and quality of the inventory has changed materially and
adversely.  In determining whether to reduce the lending formula(s),
the Required Lenders may consider events, conditions, contingencies or risks
which are also considered in determining Eligible Accounts Receivable and
Eligible Raw Material and Finished Goods Inventory.

     

    
      
        
        

      

      
        - 3
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    (4)           EBITDA.  With
respect to any period, an amount equal to the Consolidated Net Income of the
Borrower and its Subsidiaries for such period, plus to the extent
accounted for in Consolidated Net Income during such period and without
duplication the sum of:  (i) depreciation and amortization,
(ii) Consolidated Total Interest Expense for such period,
(iii) non-cash expenses, (iv) income tax expense and
(v) extraordinary losses (net of tax effects) approved by the Agent in
writing, all as determined in accordance with GAAP minus the sum
of:  (a) interest and dividend income during such period,
(b) gain on the sale of assets other than the sale of inventory in the
ordinary course of business during such period, (c) extraordinary gains
during such period, and (d) any non-cash components of income during such
period.

     

    (5)           Revolving
Credit Loan Maturity Date.  December 31, 2010, unless sooner
occurring following acceleration.

     

    (6)           Total
Debt Service Coverage Ratio.  The ratio of (i) EBITDA for
the two fiscal quarters then ending (including deductions for any Restricted
Payments during the period) to (ii) Consolidated Total Debt Service for the
same period.

     

    (b)           Section
6.2  “Interest on
Loans” of the Original Credit Agreement is hereby amended by deleting the
text contained therein and inserting the following in lieu thereof:

     

    Section
6.2                                Interest
on Loans.

     

    (a)           Unless
an Event of Default shall have occurred and the Default Rate applies, the
outstanding principal of the Term Loans shall bear interest at (x) the Reserve
Adjusted LIBOR plus the Applicable Margin for the LIBOR Rate Loans or the Base
Rate plus the Applicable Margin for the Base Rate Loans.

     

    (b)           Unless
an Event of Default shall have occurred and the Default Rate applies, the
outstanding principal of the Revolving Credit Loans shall bear interest at a
rate per annum selected by the Borrower equal to:

     

    (i)           the
Base Rate plus the Applicable Margin for the Base Rate Loans; or

     

    
      
        
        

      

      
        - 4
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    (ii)           Reserve
Adjusted LIBOR plus the Applicable Margin for the LIBOR Rate Loans.

     

    (c)           The
Borrower promises to pay interest on the outstanding amount of each Revolving
Credit Loan, in arrears, on the first day of each calendar month commencing with
the payment to be made on September 1, 2009 (subject to the Following
Business Day Convention).

     

    (d)           The
Borrower promises to pay interest on the outstanding amount of each of the Term
Loans, in arrears, on the first day of each calendar month commencing with the
payment to be made on September 1, 2009 (subject to the Following
Business Day Convention).

     

    (c)           Section
11.4  “Restricted
Payments” contained in the Original Credit Agreement is hereby amended by
deleting the text contained therein and inserting the following in lieu
thereof:

     

    Section
11.4  Restricted
Payments.  The Borrower will not and will not permit any of its
Subsidiaries to make any Restricted Payment:

     

    (i)           provided, that: the
Borrower may make a Distribution to the Holding Company to allow the Holding
Company to make a payment of the Management Fee under the Management Agreement
in the amount of such Management Fees upon such payment, so long as:
(x) the aggregate amount of all of such payments made pursuant to this
clause (a) shall not exceed $21,000 in any calendar month and (y) both
at the time of and after giving effect to each such payment no Default or Event
of Default shall have occurred and be continuing or would be caused if such
payment were made;

     

    (ii)           provided, that so
long as no Default or Event of Default has occurred and is continuing, the
Borrower may make a Distribution to the Holding Company to allow the Holding
Company to pay out-of-pocket expenses for accounting, board of director fees and
expenses, investor relations, legal, SEC reporting and other operating costs
(excluding such costs and expenses incurred in connection with closing the
Acquisition and this financing transaction) in an amount not to exceed $500,000
in any fiscal year of the Borrower;

     

    (iii)           provided, that any
Subsidiary of the Borrower may make a Distribution to the Borrower;

     

    
      
        
        

      

      
        - 5
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    (iv)           provided, that the
Borrower may make payments on Subordinated Debt permitted under an Agent
Approved Subordination Agreement;

     

    (v)           provided, that the
Borrower may pay to the Seller under the Purchase Agreements net cash proceeds
actually received which it is required to pay to such Sellers from the
litigation described in Section 8.12 of the Purchase Agreement in effect on the
date hereof; or

     

    (vi)           provided, that the
Borrower may make a Distribution to the Holding Company to allow the Holding
Company to pay costs and expenses, including, without limitation, legal fees,
incurred in connection with closing the Acquisition and this financing
transaction so long as:  (x) the aggregate amount of such payments
made pursuant to this clause (f) shall not exceed $150,000 in any fiscal quarter
and (y) both at the time of and after giving effect to each such payment no
Default or Event of Default shall have occurred and be continuing or would be
caused if such payment were made.

     

    (d)           Section
12.2  “Leverage
Ratio” contained in the Original Credit Agreement is deleted in its
entirety and the following is hereby inserted in lieu thereof:

     

    Section
12.2                                Leverage Ratio.  At
any time during the periods set forth below, the Senior Leverage Ratio shall not
be more than the ratio set forth below during such period:

     

    
      	
              Period

            	
              Ratio

            
	 
      	 
      
	
              The
      date hereof through and including September 30, 2009

            	
              3.60:1.00

            
	 
      	 
      
	
              October
      1, 2009, through and including December 31, 2009

            	
              3.00:1.00

            
	 	 
	
              January
      1, 2010, through and including September 30, 2010

            	
              2.50:1.00

            
	 
      	 
      
	
              October
      1, 2010, through and including September 30, 2011

            	
              2.00:1.00

            
	 	 
	
              October
      1, 2011, and thereafter

            	
              1.50:1.00

            

    

     

    
      
        
        

      

      
        - 6
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    (e)           The
original Credit Agreement is hereby amended by adding the following new Section
12.5 “Minimum Quarterly
EBITDA”:

     

    Section
12.5 Minimum Quarterly EBITDA.  At any time during the periods set
forth below the minimum EBITDA of the Borrower and its subsidiaries for the
fiscal quarter then ending shall not be less than the amount set forth
below:

    
       

      
        	
                Quarterly
      Date

              	
                Minimum
      EBITDA for Quarter

              
	 
      	 
      
	
                September
      30, 2009   

              	
                $1,700,000

              
	 
      	 
      
	
                December
      31, 2009  

              	
                $1,700,000

              
	 	 
	
                March
      31, 2010 and the last day of each quarter thereafter

              	
                $2,000,000

              

      

                                  

    

    3.           Conditions
Precedent.  The provisions of this First Amendment shall be
effective as of the date on which all of the following conditions shall be
satisfied:

     

    (a)           the
Borrower shall have delivered to the Agent a fully executed counterpart of this
first amendment;

     

    (b)           the
Borrower shall have paid all fees, costs and expenses owing to the Agent and its
counsel on or before the date hereof;

     

    (c)           the
Agent shall have indicated its consent and agreement by executing this First
Amendment;

     

    (d)           the
Borrower shall have delivered certified copies of the resolutions of its Board
of Directors approving the execution of this First Amendment and the actions
contemplated herein, in form and substance satisfactory to the Agent;
and

     

    (e)           the
Borrower shall have paid the Agent $75,000 for this First
Amendment.

     

    4.           Miscellaneous.

     

    (a)           Ratification.  The
terms and provisions set forth in this First Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the Original Credit
Agreement and except as expressly modified and superseded by this First
Amendment, the terms and provisions of the Original Credit Agreement and the
other Loan Documents are ratified and confirmed and shall continue in full force
and effect. The Borrower and the Agent agree that the Original Credit Agreement
as amended hereby and the other Loan Documents shall continue to be legal,
valid, binding and enforceable in accordance with their respective terms. For
all matters arising prior to the effective date of this First Amendment, the
Original Credit Agreement (as unmodified by this Amendment) shall
control.  The Borrower hereby acknowledges that, as of the date
hereof, the security interests and liens granted to the Agent under the Credit
Agreement and the other Loan Documents are in full force and effect, are
properly perfected and are enforceable in accordance with the terms of the
Credit Agreement and the other Loan Documents.

     

    
      
        
        

      

      
        - 7
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    (b)           Representations
and Warranties.  The Borrower hereby represents and warrants to
the Agent that the representations and warranties set forth in the Loan
Documents, after giving effect to the waiver contained in this First Amendment,
are true and correct in all material respects on and as of the date hereof, with
the same effect as though made on and as of such date except with respect to any
representations and warranties limited by their terms to a specific
date.  The Borrower further represents and warrants to the Agent that
the execution, delivery and performance by the Borrower of this consent letter
(i) are within the Borrower’s power and authority; (ii) have been duly
authorized by all necessary corporate and shareholder action; (iii) are not in
contravention of any provision of the Borrower’s certificate or articles of
incorporation or bylaws or other organizational documents; (iv) do not violate
any law or regulation, or any order or decree of any Governmental Authority; (v)
do not conflict with or result in the breach or termination of, constitute a
default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which the
Borrower is a party or by which the Borrower or any of its property is bound;
(vi) do not result in the creation or imposition of any Lien upon any of the
property of the Borrower other than in favor of Agent; (vii) do not require the
consent or approval of any Governmental Authority.  All
representations and warranties made in this First Amendment shall survive the
execution and delivery of this First Amendment, and no investigation by the
Agent shall affect the representations and warranties or the right of the Agent
to rely upon them.

     

    (c)           Release.  In
addition, to induce the agent to agree to the terms of this first amendment, the
borrower represents and warrants that as of the date of its execution of this
first amendment there are no claims or offsets against or rights of recoupment
with respect to or defenses or counterclaims to its obligations under the loan
documents and in accordance therewith it:

     

    (i)           Waives
any and all such claims, offsets, rights of recoupment, defenses or
counterclaims, arising prior to the date of its execution of this amendment
and

     

    (ii)           Releases
and discharges the agent and its officers, directors, employees, agents and
affiliates (collectively the "released parties") from any and all liabilities,
claims, causes of action, in law or equity, which the borrower or any guarantor
may have against any released party arising prior to the date hereof in
connection with the loan documents or the transactions contemplated
thereby.

     

    (d)           Reference
to Agreement.  Each of the Loan Documents, including the
Original Credit Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Original Credit Agreement as amended hereby, are
hereby amended so that any reference in such Loan Documents to the Original
Credit Agreement shall mean a reference to the Original Credit Agreement as
amended hereby.

     

    (e)           Expenses
of the Agent.  As provided in the Credit Agreement, the
Borrower agrees to pay all reasonable costs and expenses incurred by the Agent
in connection with the preparation, negotiation, and execution of this First
Amendment, including without limitation, the reasonable costs and fees of the
Agent’s legal counsel.

     

    
      
        
        

      

      
        - 8
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    (f)           Severability.  Any
provision of this First Amendment held by a court of competent jurisdiction to
be invalid or unenforceable shall not impair or invalidate the remainder of this
First Amendment and the effect thereof shall be confined to the provision so
held to be invalid or unenforceable.

     

    (g)           Applicable
Law.  This Amendment shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts and the applicable
laws of the United States of America.

     

    (h)           Successors
and Assigns.  This First Amendment is binding upon and shall
inure to the benefit of the Agent, the Holding Company and the Borrower, and
their respective successors and assigns, except the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Agent.

     

    (i)           Counterparts.  This
First Amendment may be executed in one or more counterparts and on facsimile
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
agreement.

     

    (j)           Effect
of Waiver.  No consent or waiver, express or implied, by the
Agent to or for any breach of or deviation from any covenant, condition or duty
by the Borrower shall be deemed a consent or waiver to or of any other breach of
the same or any other covenant, condition or duty.

     

    (k)           Headings.  The
headings, captions, and arrangements used in this Amendment are for convenience
only and shall not affect the interpretation of this Amendment.

     

    (l)           Entire
Agreement.  This First
Amendment embodies the entire agreement among the parties hereto with respect to
the subject matter thereof, and supersedes any and all prior representations and
understandings, whether written or oral, relating to this
Amendment.  There are no oral agreements among the parties hereto with
respect to the subject matter hereof.

     

    
      
        
        

      

      
        - 9
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    IN
WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the
date first above written.

     

    
      
        	 	BORROWER	 
	 	 	 
	 	CYALUME
      TECHNOLOGIES, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Michael
      Bielonko	 
	 	 	Name:
      Michael Bielonko	 
	 	 	Title:
      Chief Financial Officer	 
	 	 	 	 

      

       

      
        
          	 	HOLDING
      COMPANY	 
	 	 	 
	 	CYALUME
      TECHNOLOGIES HOLDINGS, INC.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Derek
      Dunaway	 
	 	 	Name:
      Derek Dunaway	 
	 	 	Title:
      Chief Executive Officer	 
	 	 	 	 

        

         

        
          
            	 	AGENT	 
	 	 	 
	 	TD
      BANK, N.A.	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	/s/ Greg
      Spurr 	 
	 	 	Name:
      Gregory W. Spurr	 
	 	 	Title:
      Senior Vice President	 
	 	 	 	 

          

        
          
            
            

          

          
            - 10
-crockettagreement.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EMPLOYMENT
AGREEMENT

     

    

     

    THE AGREEMENT is made as of
the 21st day of September, 2009 (the “Effective Date”) by and between Ecology
Coatings, Inc., a Nevada corporation (the "Company"), and Robert
G. Crockett (the "Executive").

     

    1. Employment:  The
Company hereby agrees to employ the Executive as its Chief Executive Officer and
the Executive hereby accepts such employment upon the terms and conditions set
forth in the Agreement.

     

    2. Duties.

     

    2.1 During
the term of the Agreement, the Executive shall diligently perform all services
consistent with his position as may be assigned to his by or under the direction
of the Board of Directors of the Company and such other members of senior
management designated by the Board.  The Executive's duties shall
include overall responsibility for the affairs of the Company, attainment of new
revenue sources and compliance with SEC and other requirements of a public
company.  In the performance of his duties, the Executive shall report
to the Board of Directors.

     

    2.2 The
Executive shall devote his full working time and attention to the business and
affairs of the Company, render such services in a competent and efficient
manner, and use his reasonable and appropriate best efforts to faithfully
promote the interests of the Company.

     

    3. Term
of Employment.

     

    3.1 Term.  The term of
employment shall begin upon execution of the Agreement and extend for a period
of three (3) years (the "Initial
Term").

     

    3.2 Termination Without
Cause.  The Company shall have the right to terminate the
Executive's employment under the Agreement by written notice to the Executive at
any time;
provided,
however, that, upon such termination without Cause or termination by
Executive for Good Reason, the Company shall pay to Executive 50% of unpaid
compensation and benefits based on the remaining term of Executive’s
employment.  The Company shall be deemed to have terminated the
Executive's employment if such employment is terminated:  (i) by the
Company without Cause; or (ii) by the Executive voluntarily for "Good
Reason."  For purposes of the Agreement, "Good Reason" means
any breach by the Company of any of the terms or provisions of the Agreement
which is not cured within thirty (30) business days of written notice by the
Executive.  Any termination which occurs within one year of a change
in control shall be presumed to be a termination without Cause.

     

    3.3 Termination for
Cause.  The Company may terminate the Agreement and the
Executive's employment hereunder immediately upon written notice to the
Executive for "Cause" (as hereinafter defined).  For purposes of the
Agreement, the term "Cause" shall mean (i)
the repeated failure or refusal of the Executive to perform the duties or render
the services reasonably assigned to his from time to time by the Board of
Directors (except during reasonable vacation periods or sick leave); (ii) the
charging or indictment of the Executive in connection with a felony or willful
misfeasance or nonfeasance; (iii) the association, directly or indirectly, of
the Executive, for his profit or financial benefit, with any person, firm,
partnership, association, entity or corporation that competes, in any material
way, with the Company; (iv) the disclosing or using of any material
"Confidential Information", "Trade Secrets"  or “Material, Non-Public
Information” (as those terms are defined in Section 9) of the Company at any
time by the Executive, except as required in connection with his duties to the
Company, (v) the breach by the Executive of his fiduciary duty or duty of trust
to the Company, including the commission by the Executive of an act of fraud or
embezzlement against the Company, (vi) trading, directly or indirectly, in the
Company’s securities while in possession of material, non-public information
(vii) any other material breach by the Executive of any of the terms or
provisions of the Agreement or any other agreement between the Company and the
Executive, which other material breach is not cured within thirty (30) business
days of notice by the Company; or (vii) any other action by the Executive,
which, in the good faith and reasonable determination of all of the members of
the Company's Board of Directors, has the effect of materially injuring the
reputation or business of the Company.  If the Executive is terminated
for Cause, the Executive shall have no further rights or entitlements under the
Agreement, the Company shall have no further obligations to the Executive, and
the Agreement shall be null and void, provided, however, that the
Executive shall be entitled to be receive all unpaid, earned salary, wages and
benefits, including accrued vacation pay and reimbursement for reasonable
business expenses incurred prior to the date of termination, to the date of
termination.  It shall be the Company's burden to show that good
"Cause" existed for termination under the Section by clear and convincing
evidence, and any failure by the Company to carry the burden shall convert the
termination into a termination without "Cause."  Any termination which
occurs within one year of a change in control shall be presumed to be a
termination without Cause.

     

    4. Compensation.

     

    4.1 Base Salary.  The
Company shall pay the Executive an annual salary for his services under the
Agreement shall be $200,000 for calendar year 2009.  Such salary shall
be payable semi-monthly, subject to applicable withholding and other
taxes.  For calendar year 2010 and beyond, the Executive’s salary
shall be annually reviewed by the Compensation Committee or the Board of
Directors for possible increase.

     

    4.2 Bonus and Other
Compensation.  Executive shall be entitled to participate on
the same terms as other officers in any applicable bonus, stock option,
restricted stock, pension or profit sharing plan, or any other type of plan
adopted by the Company for the benefit of its officers, directors and
employees.

     

    5. Grant of Stock
Options:  The Company will alter stock options previously
granted to Executive to purchase Company’s common stock at a price per share
equal to the closing price of the Company’s stock on the date the Company’s
Board of Directors approves this Agreement in the amounts and with vesting from
Executive’s initial date of employment (September 15, 2008) as
follows:  (i) 110,000 stock options vest at 12 months, (ii) 110,000
stock options vest at 18 months, and (iii) 110,000 vest at 24
months.  In addition, the Company will grant Executive 670,000
additional stock options to purchase the Company’s common stock at a price per
share equal to the closing price of the Company’s stock on the date the
Company’s Board of Directors approves this Agreement, one-quarter of which shall
vest on 30 months, 36 months, 42 months and 48 months from the date of
Executive’s initial date of employment (September 15, 2008)
respectively.  The Company shall provide in its stock option plan
and/or stock option agreements with Executive that all of Executive’s stock
options shall vest upon a “Change in Control” of the ownership or composition of
the Board of Directors.

     

    6. Place of
Employment:  The Executive's regular place of work shall be
2701 Cambridge Ct., Auburn Hills, MI 48326, or such other place in the Detroit
metropolitan area that it may designate from time to time.  However,
if the Company desires to move its office out of such area, or any other area it
thereafter designates, the Company shall provide Executive with no less than one
(1) year’s time to complete his relocation.  The Company shall pay the
Executive's reasonable moving expenses.

     

    7. Executive
Benefits.

     

    7.1 Holidays.  The
Executive shall be entitled to seven (7) paid holidays annually.  The
Company will notify the Executive as much in advance as practical with respect
to the holiday schedule to be observed by the Company.

     

    7.2 Vacations.  During the term
of the Agreement, the Executive shall be entitled to three (3) weeks of paid
vacation annually.  The Executive agrees not to utilize vacation
and/or compensatory time at a time when to do so could adversely affect the
Company's business.

     

    7.3 Personal Insurance
Benefits.  The Executive shall be entitled to participate in
all medical, dental and hospitalization, group life insurance, and any and all
other such plans as are presently and hereafter provided by the Company to its
executives.

     

    8. Expenses:  During
the term of the Executive's employment hereunder, the Company, upon the
submission of proper substantiation by the Executive, shall reimburse the
Executive for all reasonable expenses actually and necessarily paid or incurred
by the Executive in the course of and pursuant to the business of the
Company.  The payments will be made within fifteen (15) days after the
Executive provides the Company with an itemized statement of all
charges.

     

    9. Confidentiality.

     

    9.1 The
Executive shall not divulge, communicate, use to the detriment of the Company or
for the benefit of any other person or persons, or misuse in any way, any
"Confidential Information" pertaining to the Company or its
affiliates.  Any confidential information or data now known or
hereafter acquired by the Executive with respect to the Company or its
affiliates shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in confidence and as a fiduciary, and the
Executive shall remain a fiduciary to the Company with respect to all of such
information.  For purposes of the Agreement, the following terms when
used in the Agreement have the meanings set forth below:

     

    9.1.1                      "Confidential
Information" means confidential data and confidential information
relating to business of the Company or its affiliates, including the
nano-engineered, ultraviolet curable coatings and technology owned or developed
by the Company, (which does not rise to the status of a Trade Secret under
applicable law) which is or has been disclosed to the Executive or of which the
Executive became aware as a consequence of or through his employment with the
Company and which the Executive knows or has reason to know has value to the
Company or its affiliates and is not generally known to the competitors of the
Company.  Confidential Information shall not include any data or
information that (i) has been voluntarily disclosed to the general public by the
Company or its affiliates, (ii) has been independently developed and disclosed
to the general public by others, or (iii) otherwise enters the public domain
through lawful means.

     

    9.1.2                      "Trade Secrets" means
information of the Company or its affiliates including, but not limited to,
technical or non-technical data, formulas, patterns, compilations, programs,
financial data, financial plans, product or service plans or lists of actual or
potential customers or suppliers which (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.

     

    9.1.3  “Material, Non-Public
Information” means financial, business or strategic information that may
have a material effect on the Company and which has not been previously publicly
disclosed by the Company.  “Material Non-Public Information” includes
“Confidential Information” and “Trade Secrets”.

     

    9.2 In
addition, during the Initial Term and during the periods described in the last
sentence of this Section 9.2, the Executive (i) will receive and hold all
Confidential Information and Trade Secrets (collectively, the "Company Information")
in trust and in strictest confidence, (ii) will take reasonable steps to protect
the Company Information from disclosure and will in no event knowingly or
wrongfully take any action causing, or fail to take any action reasonably
necessary to prevent, any Company Information to lose its character as Company
Information, and (iii) except as required by the Executive's duties in the
course of his employment by the Company, will not, directly or indirectly, use,
disseminate or otherwise disclose any Company Information to any third party
without the prior written consent of the Company, which may be withheld in the
Company's absolute discretion.  The provisions of this Section 9 shall
survive the termination of the Executive's employment for a period of two (2)
years with respect to Confidential Information, and, with respect to Trade
Secrets, for so long as any such information qualifies as a Trade Secret under
applicable law.

     

    10. Restrictive
Covenants.

     

    10.1 Non-competition.  The
Executive agrees that, at all times during the term of the Agreement, any
subsequent one-year extension term and for a period of one (1) year after
termination of his employment under the Agreement, howsoever brought about, he
will not, directly or indirectly, (whether as owner, principal, agent,
shareholder, employee, partner, lender, venture with or consultant to any
person, firm, partnership, corporation, limited liability company or other
entity), whether or not compensation is received:  (i) engage or
participate in the development, design and production of nano-engineered,
ultraviolet curable coatings which compete with the products of the Company; or
(ii) engage or participate in any activity for any business or entity which is
or plans to engage in the marketing and sale of any products or services which
are under active development or are marketed or sold by the Company, or other
business in which the Company is engaged, during the term of the Agreement
anywhere in the United States.  In the event that the provisions of
the Section 10 ever be deemed to exceed the time, geographic or occupational
limitations permitted by the applicable laws, then such provisions shall be
reformed to the maximum time, geographic or occupational limitations by the
applicable laws.

     

    10.2 Non-solicitation of
Clients.  The Executive agrees that, during the term of the
Agreement, any subsequent one-year extension term, and for a period of one (1)
year after termination of his employment under the Agreement, howsoever brought
about, he will not directly or indirectly, for himself or for any other person,
firm, corporation partnership, association or other entity:  (i)
induce any person who is an actual client or a known targeted prospective client
of the Company to patronize any competing firm; (ii) canvass, solicit or accept
any business relationship from any person who is an actual client or a known
targeted prospective client of the Company; (iii) directly or indirectly request
or advise any person who is an actual client or a known targeted prospective
client of the Company to withdraw, curtail or cancel such business with the
Company; or (iv) directly or indirectly disclose to any other person, firm or
corporation the names or addresses of any of the actual clients or known
targeted prospective clients of the Company.

     

    10.3 Non-solicitation of
Employees.  The Executive agrees that, during the term of the
Agreement, any subsequent one-year extension term, and for a period of two (2)
years after termination of his employment under the Agreement, howsoever brought
about, he will not, directly or indirectly, for himself or for any other person,
firm, corporation, partnership, association or other entity, attempt to employ
or enter into any contractual arrangement with any person known by the Executive
to be an employee or former employee of the Company, unless such employee or
former employee has not been employed by the Company for a period in excess of
six months.

     

    10.4 Books and
Records.  All books, records, reports, writings, notes,
notebooks, computer programs, sketches, drawings, blueprints, prototypes,
formulas, photographs, negatives, models, equipment, chemicals, reproductions,
proposals, flow sheets, supply contracts, customer lists and other documents
and/or things relating in any manner to the business of the Company (including
but not limited to any of the same embodying or relating to any Confidential
Information or Trade Secrets), whether prepared by the Executive or otherwise
coming into the Executive's possession, shall be the exclusive property of the
Company and shall not be copied, duplicated, replicated, transformed, modified
or removed from the premises of the Company except pursuant to the business of
the Company and shall be returned immediately to the Company on termination of
the Executive's employment hereunder or on the Company's request at any
time.

     

    10.5 No Conflict.  The
Executive represents to the Company that his execution and performance of the
Agreement does not violate the provisions of any employment, non-competition,
confidentiality or other material agreement to which he is a party or by which
he is bound.  The Executive also agrees to indemnify and hold harmless
the Company from any and all damages and other obligations or liabilities
incurred by the Company in connection with any breach of the foregoing
representation.

     

    11. Remedies for Breach of
Agreement:  In the event of the breach or threatened breach of
any provision of the Agreement by either party, the other party shall be
entitled to injunctive relief, both preliminary and final, enjoining and
restraining such breach or threatened breach.  Such remedies shall be
in addition to all other remedies available at law or in equity, including the
Company's right to recover from the Executive any and all damages that may be
sustained as a result of Executive's breach of the Agreement.

     

    12. Intellectual
Property.

     

    12.1 Inventions.  Executive
hereby assigns and agrees to assign to Company, its subsidiaries, successors and
assigns, all intellectual property rights, in all countries of the world, in and
to any invention, patent, trademark, copyright, trade secret, confidential
information and technology developed, authored, conceived, or reduced to
practice solely by the Executive or jointed with others during the term of the
Agreement, which is related to Company's present or prospective business
interests.  The Executive will, without charge to Company, but at its
expense, sign all papers, take all rightful oaths, and do all acts which may be
necessary, desirable, or convenient for securing and maintaining intellectual
property rights in any and all countries and for vesting title thereto with
Company, his successors, assigns, and legal representatives or
nominees.

     

    12.2 Prior
Inventions.  Executive shall disclose to Company in writing any
of his inventions, discoveries and technology that occurred prior to the
execution of the Agreement but during his employment with the Company, which
inventions, discoveries and technology Executive also hereby assigns to the
Company.  The disclosure shall contain sufficient detail to permit
Company to evaluate and quantify the scope of Executive's work prior to the date
of this Agreement.

     

    13. Miscellaneous.

     

    13.1 Severability.  If
any of the provisions of the Agreement shall be invalid or unenforceable, such
invalidity shall not invalidate or render unenforceable the entire Agreement,
but rather the entire Agreement shall be construed as if not containing the
particular invalid or unenforceable provisions, and the rights and obligations
the Company and the Executive shall be construed and enforced
accordingly.

     

    13.2 Notices.  All
communications and notices required by or relating to the Agreement shall be
deemed to have been duly given upon receipt in writing by the addressee
addressed as indicated below:

     

    Ecology Coatings,
Inc.                                                                Robert
G. Crockett

    Attn:
Chairman                                                                Ecology
Coatings, Inc.

    2701 Cambridge Ct., Suite
100                                                                2701
Cambridge Ct., Suite 100

    Auburn
Hills, MI
48326                                                                Auburn
Hills, MI 48326

    

     

    The
address to which notices or communications may be given by either party may be
changed by written notice given by such party to the other pursuant to the
Article.  The mailing or transmittance of any notice shall be deemed
complete upon the mailing or transmission of the notice to the address stated
above or any subsequent amended address.

     

    13.3 Law.  The Agreement
shall be governed by and construed in accordance with the laws of the State of
Michigan in all respects, including matters of construction, validity, and
performance.  The parties irrevocably agree that, all actions of
proceedings in any way, manner or respect arising out of or from or related to
the Agreement shall be litigated only in courts located  in the State
of Michigan and hereby consent and submit to the jurisdiction of any local,
State, or Federal court located in the State of Michigan.

     

    13.4 Non-Waiver.  No
course of dealing or failure of either party to strictly enforce any term, right
or condition of the Agreement shall be construed as a waiver of such terms,
right or condition.

     

    13.5 Entire
Agreement.  The Agreement constitutes the entire Agreement
between the parties and may not be modified or amended other than by a written
instrument executed by both parties.  All agreements, oral or written,
entered into by or on behalf of the parties prior to the Agreement are revoked
and superseded hereby.  No representations, warranties, inducements or
oral agreements have been made by any of the parties except as expressly set
forth herein.

     

    13.6 Assignment.  Any
assignment of the Agreement by either party must be approved in writing by the
other party and the assignee must agree in writing to be bound by the terms of
the Agreement.

     

    IN WITNESS WHEREOF, the
foregoing Agreement has been executed by the parties hereto to be effective as
of the day and year first above written.

     

     

    

     

     

    

     

     

    

     

     

    Ecology
Coatings,
Inc.                                                                                                           Executive

     

    

    /s/ JB
Smith                                                      /s/ Robert G.
Crockett

    JB
Smith                                                                                                     Robert G.
Crockett

    

    Its:
Board Member

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