EMPLOYMENT AGREEMENT

AGREEMENT, effective January 23, 2006, by and between Cyalume Technologies, Inc., a Delaware corporation with principal executive offices at 96 Windsor Street, West Springfield, Massachusetts 01089 (the “ Company ”), and Michael Bielonko, residing at 68 Wilks Pond Road, Berlin, CT  06037 (“ Employee ”).

WHEREAS the Company is presently engaged in the business of developing, manufacturing and selling luminescent chemical devices and materials for sale primarily to customers in the government, military and safety fields of use (the “ Business ”); and

WHEREAS Employee shall serve as the Vice President and Chief Financial Officer (CFO) of the Company, and Employee and the Company are desirous of formalizing their understanding for Employee’s employment, all upon the terms and subject to the conditions hereinafter provided.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, agree as follows:

The Company agrees to employ Employee, and Employee agrees to be employed by the Company, upon the terms and subject to the conditions of this Agreement.

The term of this Agreement shall be for a period of three (3) years commencing on the date hereof (the “Commencement Date”).  At the end of the second year, an additional one year shall be added to the term of this Agreement and shall continue automatically for successive one-year periods thereafter unless terminated by the Company by written notice in advance of the commencement of the one year renewal.  In no event will the employee receive notice of termination with less than one year notice.

(a)           Employee shall serve as Vice President and CFO of the Company, and shall report directly to the Company CEO.  Employee shall be responsible for managing the financial, accounting and treasury related affairs of the Company’s worldwide business, including managing all financial managers and financial employees of the Company, setting financial strategy, managing the cash of the Company, relationships with banks and investors, preparing financial reports, audit oversight and conformance with GATT and other appropriate accounting standards.  During the Term, Employee shall also have such other powers and duties as may be from time to time prescribed by the Board or its designees which are consistent with Employee’s position and duties hereunder.

(b)           Employee shall perform his duties, responsibilities and functions to the Company to the best of his abilities and in a manner consistent with the office of a CFO and shall comply with the lawful policies and procedures of the Company.  In performing his duties and exercising his authority under this Agreement, Employee shall support and implement the lawful business and strategic plans approved from time to time by the Board and shall support and cooperate with the Company’s efforts to expand its businesses and operate profitably and in conformity with law and the business and strategic plans approved by the Board.  Employee shall devote all of his business time, attention and energies, on a full time and exclusive basis, to the business and affairs of the Company and shall not during the Term be engaged in any other business activities, whether or not such business activities are pursued for gain, profit or other pecuniary advantage, without Board consent; provided, however, that, it shall not be a violation of this Agreement for Employee to (i) serve on corporate, civic or charitable boards or committees including serving on the board of Omni Facility Services Canada Corp. that may require a physical presence in Canada of up to two days per month during 2006, or (ii) manage passive personal investments, in either case so long as any such activities do not interfere with the performance of his responsibilities as an employee of the Company in accordance with this Agreement or adversely affect or negatively reflect upon the Company.

(c)           The Executive acknowledges and agrees that, at all times during the Term, the Executive owes fiduciary duties to the Company, including, but not limited to, fiduciary duties of the highest loyalty, fidelity and allegiance, to act at all times in the best interests of the Company.

(d)           The Executive agrees that he reports to and will be supervised by the Company CEO.

(e)           Notwithstanding the requirements of 3(b) and 3(c), during the first 60 days of this agreement Company will permit Employee reasonable time to effect a smooth transition from Employee’s current employer.

(a)           The Company shall pay to Employee a base salary (the “Base Salary”) at a rate of 165,000 per annum, to be increased to $175,000 effective January 1, 2007, payable in accordance with the Company’s payroll practices for its executive employees.  The Board will review the Base Salary for possible increase not less than annually during the Term, but the Employee shall be entitled to receive at least the amount of any cost-of-living increases granted to the Company’s employees in general.

(b)           Employee may, at the discretion of the Board of Directors of the Company, be granted stock and/or stock options, share appreciation rights or bonuses under plans adopted by the Board for the benefit of the executives and key management personnel of the Company.  Specifically, the Employee’s participation in the initial executive stock plan will be at a rate equal to 1.5% of the company stock.  In addition to a base salary, the Employee shall be entitled to payment of the following annual bonus compensation, paid after the final closing of the fiscal year and verification of the financial results by the Board

i.      If the Company achieves at least 85% but less than 100% of its budgeted EBITDA, the amount of such bonus shall be 15% of the Employee’s Base Salary.

ii.      If the Company achieves at least 100% but less than 120% of its budgeted EBITDA, the amount of such bonus shall be 30% of the Employee’s Base Salary.

iii.     If the Company achieves at least 120% of its budgeted EBITDA, the amount of such bonus shall be 40% of the Employee’s Base Salary.

iv.     If the Company achieves percentages of its budgeted EBITDA between those limits listed above, bonus will be awarded pro rata at the lower of the two rates until the next level is achieved.

(c)           Employee shall be entitled to participate in or receive benefits under any pension plan, health, dental and accident plan or any other employee benefit plan or arrangement made available now or in the future by the Company as determined by the Board.  In lieu of such health, dental or accident plan, the Employee may elect to receive an amount equal to one-half of the Company’s cost of such plan.

(d)           The Company shall promptly pay to Employee the approved reasonable expenses incurred by him in the performance of his duties hereunder in accordance with the Company’s policies in effect from time to time, including, without limitation, those incurred in connection with business related travel or entertainment, or if such expenses are paid directly by Employee, shall promptly reimburse him for such payment, provided the Employee provides proper documentation thereof in accordance with the Company’s policy.  Employee will be paid $100.00 per week allowance for the use of his personal car for Company business.

(e)           Employee shall be entitled to paid vacation days in each calendar year determined by the Company from time to time, but not less than fifteen (15) days in any calendar year, subject to the Company’s vacation policies for its key management personnel.  (Vacation shall be prorated in any calendar year of the Term during which Employee is employed hereunder for less than an entire year in accordance with the number of days in such year during which he is so employed.)  Employee shall be entitled to carry over unused vacation to successive calendar years, with a maximum accrual of 30 vacation days.  Employee shall also be entitled to all paid holidays given by the Company to its key management employees.

(f)           The Company may, at its discretion, subscribe for and maintain, on behalf of the Company, life insurance, key-man insurance and long-term disability insurance with respect to Employee, in such amount and upon such terms or conditions as the Company may deem reasonable.  Employee shall cooperate with the Company in connection with the obtaining of any such policies, including the submission to physical examination and blood testing.

(g)           In support of the Employee’s CPA designation, the Company will allow up to 40 hours per annum for professional development/training and shall reimburse Employee up to $2,500 per annum for actual costs incurred for such training.

Employee’s employment hereunder shall be terminated upon Employee’s death or Disability or Employee’s voluntarily leaving the employ of the Company, and may be terminated by the Company as follows:

(a)            For Cause.   The Company shall have the right to terminate Employee’s employment for “Cause.”  A termination for “Cause” is a termination evidenced by a resolution adopted by the Board finding that Employee has:

i.       breached or failed to comply with any of the material terms of this Agreement, including, without limitation, Sections 3, 7, 8, 9 or 12 of this Agreement;

ii.      failed to perform his duties under this Agreement, including refusing to carry out the instructions of the Board or its designees, or disregarding the lawful instructions from the Board or its designees, in any case which instructions are consistent with the responsibilities and duties of Employee contemplated by this Agreement;

iii.     engaged in negligence or misconduct in connection with or arising out of the performance of his duties hereunder;

iv.     been under the influence of drugs (other than prescription medicine or other medically-related drugs to the extent that they are taken in accordance with their directions) or alcohol during the performance of his duties under this Agreement, or while under the influence of drugs or alcohol, engages in inappropriate conduct;

v.      engaged in behavior that would constitute grounds for liability for sexual harassment (as proscribed by the U.S. Equal Employment Opportunity Commission Guidelines, the Massachusetts Commission Against Discrimination and/or any other applicable state regulatory body) or, in the reasonable opinion of the Board, other egregious conduct violative of laws governing the workplace; or

vi.     committed any act of fraud, larceny, misappropriation of funds or embezzlement or been convicted of a felony or a crime of moral depravity;

provided, however , that any act or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interests of the Company.

(b)            For Disability.   The Company shall have the right to terminate Employee’s employment as a result of Employee’s “Disability.”  For purposes of this Agreement, a termination for “Disability” shall occur:

i.       immediately after the Board has provided a written termination notice to Employee supported by a written statement from a reputable independent physician selected by the Company to the effect that Employee shall have become so incapacitated as to be unable to resume, within 90 days, his employment hereunder by reason of physical or mental illness or injury, or

ii.      upon rendering of a written termination notice by the Company after Employee has been unable to substantially perform his duties hereunder for 90 consecutive days or for 90 days in any 360 day period by reason of any physical or mental illness or injury.

(c)           Employee agrees to make himself available and to cooperate in any reasonable examination by a reputable independent physician selected by the Company for the purpose of determining disability pursuant to Section 5(b)(i).

(a)            Death or Disability.   In the event of the termination of Employee’s employment as a result of his death or Disability, the Company shall:

i.       pay to Employee or his estate, as the case may be, the Base Salary plus accrued and unpaid bonus, if any, in accordance with Section 4(b) through the date of his death or Disability (pro rated for any partial month); and

ii.      reimburse Employee, or his estate, as the case may be, for any expenses pursuant to Section 4(d) (the amounts payable pursuant to the foregoing clauses (i) and (ii) are hereafter referred to as the “Accrued Obligations”).

(b)            For Cause by the Company, by Employee voluntarily or upon expiration of the Term.   In the event that Employee’s employment is terminated by the Company for Cause or by Employee voluntarily (other than as a result of the Company’s material breach of this Agreement) or upon expiration of the Term, the Company shall pay to Employee the Accrued Obligations and Employee shall have no further entitlement to any other compensation or benefits from the Company, except as set forth herein.

(c)            Other than as a result of Employee’s death or Disability, or by the Company otherwise than for Cause .  In the event th