EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is made and entered into between Cyalume Specialty Products, Inc., a Delaware Corporation (the “Company”), and James G. (Jamie) Schleck, (the “Employee”).

 

WHEREAS, the Company desires to employ Employee as President of the Company, and Employee desires to accept such employment upon the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

 

1.

TERM.

 

This Agreement shall be for an initial term, beginning on the date of the Acquisition (estimated to be September 1, 2011) and ending December 31, 2013. Thereafter, the Agreement shall renew for a period of one year unless and until terminated by either party upon thirty days’ written notice prior to the Agreement’s anniversary/expiration date, or until terminated pursuant to Section 8 of this Agreement.

 

2.

DUTIES OF EMPLOYEE.

 

(a)           Duties.   Employee shall be employed as President. Employee’s duties shall be such executive, managerial, administrative, and professional duties as are commensurate with the position of President, and as assigned by the President of Cyalume Technologies Holdings, Inc., or the Board of Directors of the Company, or by their authorized designees. The Employee may delegate duties to other employees of the Company as he reasonably determines is in the best interest of the Company, consistent with the general authority and power given to him hereunder.

 

(b)          Exclusive Employment.   Employee shall devote the whole of his business time, attention and abilities to carrying out his duties hereunder, with the exception of a limited amount of executive’s time devoted to winding down activities at JFC Technologies and activities of the landlord, Brook Industrial Park and activities listed in Schedule 3.8 of the Asset Purchase Agreement.

 

(c)          Loyal and Conscientious Performance.   Employee agrees that to the best of his ability and experience, and in compliance with all applicable laws and the Company’s policies, Certificate of Incorporation and Bylaws, as they may be amended from time to time, he will at all times loyally and conscientiously perform all the duties and obligations required of him by the terms of this Agreement. Employee further agrees he shall use his best efforts to promote the interests and reputation of the Company and its affiliates and not do anything which is to the detriment of the Company or its affiliates.

 

3.

COMPENSATION AND BENEFITS.

 

(a)          Salary.   For all the services to be rendered by Employee in any capacity hereunder, the Company shall pay Employee, in equal installments consistent with the Company’s practices for its employees, salary and compensation as set forth in Schedule 1 attached to this Agreement and incorporated herein. Upon providing timely notice, the Company shall have the ability to withhold from the compensation otherwise due to Employee under this Agreement any amounts required to be withheld from compensation from time to time under applicable law. Tax withholding will occur automatically and benefit costs are withheld according to Employee selections made during each open enrollment period and/or during amendments made during the year.

 

 

(b)

Severance Benefits.

 

(i)

In the event Employee’s employment with the Company is terminated by the Company other than as a result of death, disability (as defined in Section 8(a)(ii)), retirement or for “cause” (as defined in Section 8(a)(iii)), and upon execution by Employee of a separation agreement prepared by the Company, the Company will pay Employee, at normal payroll intervals for six (6) months, a sum equal to the Employee’s annual Base Salary in effect at the time of termination hereunder, less applicable deductions and withholdings.

 

(ii)

In the event that Employee elects to terminate this Agreement for any reason, or in the event that this Agreement is terminated due to Employee’s death or disability, the Company shall not be obligated to pay to Employee any severance payments whatsoever and Employee shall be entitled only to that Base Salary and those benefits which he has earned through the date of such termination.

 

(c)          Fringe Benefits. So long as Employee remains in the employ of the Company, Employee shall be provided those benefits set forth in Schedule 1 to this Agreement. Employee shall also receive such additional benefits as may be authorized from time to time by the Company’s Board of Directors.

 

4.

NONCOMPETITION BY EMPLOYEE.

 

(a)

During the term of this Agreement and for a period of two (2) years after Employee has ceased to be employed by Company for any reason, Employee shall not, without the prior written consent of a duly authorized officer of Company, directly or indirectly (i) engage in the business of, or (ii) assist or have an interest in (whether as proprietor, partner, investor, stockholders, officer, director or any type of principal whatsoever), or (iii) enter the employment of or act as an agent, advisor, or consultant to any person, firm, partnership, association, corporation, business organization, entity or enterprise that is, or is to become, directly or indirectly, engaged in any business actually or potentially competitive with that of Company in any area or territory in which Company offers its services or products.

 

(b)

During the term of this Agreement, and for a period of two (2) years after Employee has ceased to be employed by Company for any reason, Employee shall not, without the prior written consent of a duly authorized officer of Company, solicit from any person, company, firm or organization, or any affiliate of the foregoing, which was or is a client or associated firm of Company or which Company was soliciting as a client or associated firm of Company during any of the twelve (12) months immediately preceding the termination or expiration of the Agreement, any business substantially similar to that done by Company, including but not limited to any business Employee was soliciting or on which he worked while employed by Company.

 

 

5.

CONFIDENTIALITY.

 

Employee acknowledges, understands and agrees that all trade secrets and information relating to the business of the Company and/or its affiliates, including without limitation, procedures, product information, manufacturing techniques or processes, expertise, records, customer or prospect lists and information, vendor lists and information, supplier lists and information, internal operating forms, financial information or accounting methods, systems, books, manuals, employee information, any confidential information concerning the business, the Company, its affiliates, or the business, policies or operations of the business, the Company or its affiliates which Employee may have learned, possessed or controlled on or prior to the date hereof or which Employee may learn, possess or control during the term of Employee’s continued employment by the Company or any of its affiliates (as an employee, consultant, agent or otherwise) (collectively, “Trade Secrets”) are confidential and shall remain the sole and exclusive property of the Company and its affiliates. Trade Secrets include both written information and information not reduced to writing. Except as may be required pursuant to any law or the order of a court, or except as may be public knowledge (which shall not have become public knowledge as a result of any action of Employee), Employee shall not, at any time, retain, duplicate, remove from the business premises of Company or any of its affiliates, make use of, other than in the ordinary course of fulfilling his duties as an employee of the Company, divulge or otherwise disclose, directly or indirectly, any Trade Secrets. Employee shall not publish or disclose, and shall exercise his best efforts to prevent others from publishing or disclosing, any Trade Secrets and he shall not use or attempt to use any such knowledge or information which he may have or acquire in any manner which may injure or cause loss, whether directly or indirectly, to the Company or its affiliates or use his personal knowledge or influence over any customers, clients, suppliers or contractors of the Company or its affiliates so as to take advantage of the Company’s or its affiliate’s trade or business connections or utilize information confidentially obtained by him.

 

6.

non-solicitation.

 

Employee hereby covenants and agrees that, at all times during his employment with the Company and for a period of two (2) years immediately following his termination for any reason, Employee shall not employ or seek to employ any person employed at the time by the Company or any of its affiliates, or otherwise engage or entice, either directly or indirectly, such person to leave such employment.

 

7.

violation of agreement.

 

(a)

The restrictions set forth in Sections 4, 5 and 6 shall extend to any and all activities of the Employee, whether alone or together with or on behalf of or through any other person or entity.

 

(b)

Employee’s obligations under Sections 4, 5 and 6 shall survive termination of this Agreement and of Employee’s employment with the Company.

 

(c)

Employee acknowledges that the restrictions contained in Sections 4, 5 and 6, in view of the nature of the business in which Company is engaged, are reasonable and necessary to protect the legitimate interests of Company. Employee understands that the remedies at law for his violation of any of the covenants or provisions of Sections 4, 5 and 6 will be inadequate, that such violations will cause irreparable injury within a short period of time, and that Company shall be entitled to preliminary injunctive relief and other injunctive relief against such violation. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other remedies that Company shall have in law and equity for the enforcement of those covenants and provisions. Employee further acknowledges that should he violate any of the covenants or provisions of Sections 4, 5 and 6, he will reimburse Company for its reasonable costs and attorneys’ fees incurred to enforce the terms of this Agreement.

 

 

8.

TERMINATION.

 

(a)

The Employee’s employment hereunder may be terminated by the Company immediately upon the occurrence of any of the following events, and the Company shall have no obligations to the Employee for any period after the effective date of such termination, except vested benefits or as otherwise provided in Section 3 herein:

 

(i)

The death of Employee.

 

(ii)

A mental or physical illness or injury that prevents Employee from performing his duties hereunder for a period of 90 consecutive days or for 120 days in any 360 day period, or the Employee has been declared by a court of competent jurisdiction to be mentally incompetent or incapable of managing his affairs.

 

(iii)

For “cause” which, for the purposes of this Section, shall mean:

 

(A)

Continued neglect or failure to perform his duties and responsibilities; or

 

(B)

Formally being charged, either criminally or civilly, with committing fraud, misappropriation or embezzlement, whether or not in the performance of Employee’s duties as an employee of the Company; or

 

(C)

Violations of any law which violation materially affects the Employee’s performance of his duties to the Company; or

 

(D)

The conviction of, or plea of guilty or nolo contendere to, a felony or crime involving moral turpitude; or

 

(E)

Willfully engaging in conduct materially injurious to the Company or its affiliates; or

 

(F)

Diverting any business opportunity of the Company or its affiliates for Employee’s direct or indirect personal gain; or

 

(G)

Failure to observe or perform the covenants and agreements contained in this Agreement, including but not limited to those contained in Sections 4, 5 and 6 of this Agreement.

 

 

(b)

The Employee’s employment hereunder may be terminated at any time upon the mutual written agreement of the Employee and the Company.

 

(c)

The Employee’s employment hereunder may be terminated by either party with thirty (30) days of written notice thereof. Notwithstanding the foregoing, if Employee’s employment hereunder is terminated without “cause” during the initial term of this Agreement, Employee shall only be paid any applicable severance benefits as set forth in Section 3(b) less applicable deductions and withholdings.

 

(d)

Except as may otherwise be set forth herein, in the event of termination of the Employee’s employment by the Company as permitted under clause (a) of this Section, Employee shall be entitled only to his Base Salary and other compensation and benefits earned through the date of termination.

 

(e)

Upon the termination of his employment hereunder for any reason whatsoever, Employee shall immediately deliver to the Company all documents, statistics, accounts, records, programs and other items of whatever nature or description (the “Documents”) which may be in his possession or under his control which relate in any way to the Trade Secrets or the business or affairs of the Company or of any of its affiliates, and no copies of any such Documents or any part thereof shall be retained by him.

 

(f)

In the event of the termination of Employee’s employment under this Agreement, Employee shall be deemed to have resigned from all positions held in the Company. Upon request of the Company, Employee shall promptly sign any and all documents reflecting such resignations as of the date of termination of his employment.

 

9.

REPRESENTATIONS.

 

Employee hereby represents and warrants that this Agreement constitutes his valid and binding obligation enforceable in accordance with its terms and the execution, delivery and performance of this Agreement does not violate any agreement, arrangement or restriction of any kind to which Employee is a party or by which he is bound.

 

10.

MISREPRESENTATION.

 

 Neither party hereto shall knowingly at any time make any untrue statement in relation to the other or any of their affiliates and in particular Employee shall not after the termination of his employment hereunder wrongfully represent himself as being employed by or connected with the Company or any affiliate of the Company.

 

11.

REIMBURSEMENT OF EXPENSES.

 

The Company shall reimburse Employee for all ordinary and necessary out-of-pocket expenses reasonably incurred by Employee on behalf of the business of the Company. Employee agrees that expense reports must be submitted to obtain reimbursement of expenses as well as presentation of such supporting documentation as the Company may reasonably require. Employee further agrees to submit with expense reports such records and logs as may be required by the relevant taxing authorities for the substantiation of each such business expense as a deduction on the Company’s income tax returns.

 

 

12.

INVENTIONS, ETC.

 

(a)

It shall be part of the normal duties of Employee at all times to consider in what manner and by what new methods or devices the products, services, processes, equipment or systems of the Company or any of its affiliates with which he is concerned or for which he is responsible might be improved, and promptly to give to the President of the Company or Board of Directors full details of any invention or improvement which he may from time to time make or discover in the course of his duties, and to further the interests of the Company with regard thereto. Subject only to any contrary provisions of the laws of the United States or the Commonwealth of Massachusetts, all such materials, inventions, improvements, methods, products, services, equipment or systems shall be deemed to be “works made for hire”, and to the extent such items are not works made for hire, the Employee hereby irrevocably grants and assigns such materials, inventions, improvements, methods, products, services, equipment or systems to the Company which shall be entitled, free of charge, to the sole ownership of any such invention or improvement.

 

(b)

Employee shall, if and when required so to do by the Company, at the expense of the Company, apply or join with the Company in applying for patents or other protection in any part of the world for any such discovery, invention or process as aforesaid and shall at the expense of the Company, execute and do or cause to be done all instruments and things reasonably necessary for vesting the said patent or other protection when obtained and all right, title and interest to and in the same in the Company or in such other person as the Company may designate.

 

(c)

For the purpose of this clause Employee hereby irrevocably authorizes the company as his attorney in his name to execute any documents or take any actions which are required in, order to give effect to the provisions of this Section and the Company is hereby empowered to appoint and remove at its pleasure any person as agent and substitute for and on behalf of the Company in respect of all or any of the matters aforesaid.

 

13.

NOTICES.

 

Any notices to be given hereunder by either party to the other may be effectuated either by personal delivery in writing, by electronic facsimile transmission, by commercial overnight courier or by mail, postage prepaid, with return receipt requested. Notices shall be addressed to the parties as follows:

 

If to the Company:

 

Cyalume Specialty Products, Inc.

96 Windsor Street

West Springfield, MA, 01089

Attention: CFO

 

with a copy to:

 

Cyalume Specialty Products, Inc.

96 Windsor Street

West Springfield, MA, 01089

Attention: VP, Human Resources

 

 

If to Employee:

 

James G. Schleck

15 Washington Place

Metuchen, NJ 08840

 

or to such other addresses as either the Company or Employee may designate by written notice to each other. Notices delivered personally shall be deemed duly given on the date of actual receipt; mailed notices shall be deemed duly given as of the fifth (5^th) day after the date so mailed. Notices hereunder may be delivered by electronic facsimile transmission (fax) if confirmation by sender is made within three (3) business days by mail or personal delivery.

 

14.

ATTORNEYS’ FEES.

 

 If any party shall bring an action to enforce this Agreement, each party will bear her/his/its own attorneys’ fees and costs.

 

15.

WAIVER OF BREACH.

 

The waiver by any party to a breach of any provision in this Agreement cannot operate or be construed as a waiver of any subsequent breach by a party.

 

16.

SEVERABILITY.

 

The invalidity or unenforceability of any particular provision in this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if the invalid or unenforceable provision were omitted.

 

17.

ENTIRE AGREEMENT.

 

Except as otherwise provided herein, this Agreement covers the entire understanding of the parties as to the employment of Employee, superseding all prior understandings and agreements, and no modification or amendment of its terms and conditions shall be effective unless in writing and signed by the parties or their respective duly authorized agents.

 

18.

GOVERNING LAW.

 

This Agreement shall be interpreted, construed and governed according to the laws of Delaware, without giving effect to principles of conflicts or choice of laws of Delaware or of any other jurisdiction.

 

19.

CONSENT TO JURISDICTION.

 

Employee hereby irrevocably submits to the jurisdiction of any court of Delaware or any federal court sitting in the State of Delaware over any suit, action or proceeding arising out of or relating to this Agreement. Employee hereby agrees that a final judgment in any such suit, action or proceeding brought in any such court, after all appropriate appeals, shall be conclusive and binding upon him.

 

20.

SUCCESSORS AND ASSIGNS.

 

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, permitted assigns, legal representatives and heirs, but neither this Agreement nor any rights hereunder shall be assignable by any of its parties except as permitted by this Section. Employee agrees that this Agreement may be assigned or transferred by operation of law by the Company upon a sale, merger, reorganization or other business combination of or involving the Company; provided, however, that (i) such assignee or other successor to the Company shall assume all obligations of the Company hereunder and (ii) that Employee shall perform all services required pursuant to this Agreement for any such assignee or successor.

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	CYALUME SPECIALTY PRODUCTS, Inc.
	By	/s/ David Mantoni
	Name:	David Mantoni
	Title:	Assistant Treasurer and Assistant Secretary

 

 

 

 

	Employee:
	/s/ James G. Schleck
	James G. Schleck

 

 

SCHEDULE 1

 

TO EMPLOYMENT AGREEMENT OF

James G. (Jamie) Schleck

 

1.            Salary.   The Company shall pay Employee an annual base salary (“Base Salary”) of One-hundred fifty thousand ($150,000.00), at normal payroll intervals and less applicable deductions and withholdings, which shall be subject to annual adjustments at the sole discretion of the Board of Directors of the Company.

 

2.

Cash Bonus and Equity Bonus Awards

 

Cash Bonus.   For purposes of this Section, cash bonuses shall include all payments under all bonus, incentive or other similar programs maintained by the Company for which the Employee qualifies.

 

The following bonus plan is effective as of January 1, 2012.

  

Cash Bonus (Up to 20% of Base Pay)
Criteria		Maximum % of Total Award				Award
Revenue goals			25			100% if the Company achieves 100% of Revenue goal; 80% if the Company achieves 80% of Revenue goal.  If the Company achieves percentages of its budgeted Revenue between the limits above, the bonus will be awarded pro rata.
EBITDA* goals			25			100% if the Company achieves 100% of EBITDA goal; 80% if the Company achieves 80% of EBITDA goal.  If the Company achieves percentages of its budgeted EBITDA between the limits above, the bonus will be awarded pro rata.
Specific objectives			50			Percentage determined by CEO, Cyalume Technologies Holdings, Inc., based on specific objective accomplishments
Additional Cash Bonus (Equal to 20% of Base Pay)
Criteria			Maximum % of Total Award			Award
Core Business Ebitda Goal			100	%		If the EBITDA for the Core Business (as defined in the Asset Purchase Agreement) is greater than $1.3 mm and less than $1.8mm.

 

*EBITDA is determined based on actual results of the Company and irrespective of any “carve-out criteria” contained in the Asset Purchase Agreement.

 

 

If the Employee’s employment is terminated by the Employer other than for “cause”, the Employee shall be entitled to receive a prorated bonus for the calendar year in which the Employee terminated employment and, if applicable, the prior calendar year, based on the number of full calendar months such Employee was employed by the Employer during such calendar year.

 

 

3.

Options

 

Security:   Options to purchase Cyalume common stock

 

Amount:   The number of options equal to 50% of the amount of shares that would have been earned based on JFC’s performance in 2012 according to the Earn-Out schedule.

 

Conversion:   The options can be converted on a cashless basis

 

Strike Price:   Average closing price for the 30 days prior to 12/31/2012

 

Exercise Date:   The options will be exercisable during the month of December, 2013

 

Expiration Date:   12/31/2013

 

The following schedule illustrates the number of options that will be granted at the various EBITDA levels based on a $5.00 strike price: Assumptions:

 

	Assumed Avg 30 Day Price (12/31/12)												$5.00
	% of Stock Earn-Out Shares												50%
2012 Option Calculation
	2012 EBITDA Threshold				Earn-Out Payment				% Stock				Stock Value				Implied # of Shares				# of Options
$	1,300,000			$	5,000,000				70	%		$	3,500,000				700,000				350,000
	1,100,000				3,000,000				70	%		$	2,100,000				420,000				210,000
	1,000,000				2,200,000				70	%		$	1,540,000				308,000				154,000
	900,000				1,500,000				70	%		$	1,050,000				210,000				105,000
	800,000				800,000				70	%		$	560,000				112,000				56,000
	700,000				400,000				70	%		$	280,000				56,000				28,000

 

4.

Benefits. Employee shall be provided with health, life, and disability insurance coverages and other similar benefits substantially equivalent to those provided to employees of the Company from time to time, all in accordance with the standard policies of the Company. Employee shall be permitted to participate in the Company’s 401(k) Retirement Plan, and shall be entitled to all other benefits outlined in the annual Benefit Grid.