LUNA INNOVATIONS INC
AMENDED AND RESTATED STOCK SALE RESTRICTION AGREEMENT  (KENT A. MURPHY)
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<DESCRIPTION>AMENDED AND RESTATED STOCK SALE RESTRICTION AGREEMENT  (KENT A. MURPHY)
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.1 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B><U>AMENDED AND RESTATED STOCK SALE RESTRICTION AGREEMENT </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">This Amended and Restated Stock Sale
Restriction Agreement (this &#147;<B>Agreement</B>&#148;) is entered into as of January&nbsp;23, 2007 (the &#147;<B>Effective Date</B>&#148;) by and between Luna Innovations Incorporated, a Delaware corporation (the &#147;<B>Company</B>&#148;) and
Kent A. Murphy (&#147;<B>Employee</B>&#148;). The Company and Employee are referred to herein as the &#147;<B>Parties</B>&#148; and each as a &#147;<B>Party</B>.&#148; </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B><U>RECITALS </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">WHEREAS, the Parties entered into a certain letter agreement dated on or about
February&nbsp;1, 2006 (the &#147;<B>Stock Sale Restriction Agreement</B>&#148;) whereby Employee agreed to certain restrictions on the sale and transfer of (i)&nbsp;any outstanding shares of the Company&#146;s Common Stock, par value $0.001 per
share (&#147;<B>Common Stock</B>&#148;) (excluding shares that were received upon exercise of options prior to December&nbsp;31, 2005) and (ii)&nbsp;any shares of Common Stock to be received upon exercise of options to purchase Common Stock, whether
vested or unvested, that Employee held and acquired from the Company prior to the Company&#146;s initial public offering; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">WHEREAS, as of
the Effective Date, Employee beneficially held an aggregate of 2,750,208 shares of Common Stock, which consisted of 2,637,161 outstanding shares of Common Stock and 113,047 shares of Common Stock issuable upon exercise of outstanding options
(collectively, the &#147;<B>Subject Securities</B>&#148;), excluding any shares that were received upon exercise of options or warrants prior to December&nbsp;31, 2005; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">WHEREAS, the Parties agree and acknowledge that it is in the interests of the Company and its stockholders to amend and restate the Stock Sale Restriction Agreement to provide for additional restrictions on the number
of Subject Securities which Employee can sell, with the expectation that such additional restrictions may help to prolong the Company&#146;s eligibility for Small Business Innovation Research (&#147;<B>SBIR</B>&#148;) grants; and </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">WHEREAS, the Parties desire to amend and restate the Stock Sale Restriction Agreement pursuant to the terms and conditions provided herein. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">NOW, THEREFORE, in consideration of the premises and covenants set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as follows: </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>AGREEMENT </U></B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">1. Employee hereby irrevocably agrees that he or she will not, directly or indirectly, (i)&nbsp;sell, offer for sale, pledge or otherwise dispose of (except as otherwise
provided herein) greater than zero percent (0%) of Employee&#146;s Subject Securities in calendar year 2007 and ten percent (10%)&nbsp;of Employee&#146;s Subject Securities in calendar year 2008 (each such amount the &#147;<B>Annual Limit</B>&#148;)
or (ii)&nbsp;enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of greater than the Annual Limit in any given year of the Employee&#146;s Subject
Securities, whether any such transaction described in clause (i)&nbsp;or (ii)&nbsp;above is to be settled by delivery of Common Stock or other securities, in cash </FONT>
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<FONT FACE="Times New Roman" SIZE="2">or otherwise. For purposes of this Agreement, gifts or transfers of Subject Securities to immediate family members or trusts for which Employee or his or her
immediate family members are the sole primary beneficiaries shall be exempt from the restrictions of this Paragraph 1; <I>provided</I>, that the recipient of such Subject Securities shall become subject to the terms and conditions of this Agreement,
shall assume Employee&#146;s obligations hereunder and shall sign an agreement of joinder to that effect. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">2. Notwithstanding anything in this Agreement to
the contrary, if Employee does not sell or transfer the full Annual Limit of the undersigned&#146;s Subject Securities in calendar year 2007, the unsold portion of the Annual Limit (the &#147;<B>Carryover Amount</B>&#148;) shall be carried over to
calendar year 2008 such that the Annual Limit for such calendar year shall be increased by the Carryover Amount. Notwithstanding anything in this Agreement to the contrary, the Company hereby agrees to waive the Annual Limit to the extent reasonably
necessary (i)&nbsp;to allow Employee to sell Subject Securities to cover a tax liability that Employee may incur as a result of an exercise of vested options for Subject Securities, and (ii)&nbsp;in the event of Employee&#146;s termination by death
or disability, to allow for the sale of Subject Securities solely to the extent necessary to pay the exercise price and related costs in connection with an exercise of vested stock options pursuant to a Company approved cashless exercise program.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">3. This Agreement and the restrictions contained herein will terminate on the earliest to occur of the following: (i)&nbsp;the date on which the Company
is no longer eligible for Small Business Innovation Research (SBIR) grants, as evidenced by an opinion of counsel mutually acceptable to the Company and Employee; (ii)&nbsp;the effective date of a termination of Employee&#146;s employment with the
Company, provided that such termination is initiated by the Company and not by the Employee and that such termination is without Cause (as defined in the Employment Agreement between the Company and Employee, as amended from time to time);
(iii)&nbsp;a date determined by the Company in its sole discretion at any time upon written notice to the Employee; (iv)&nbsp;December&nbsp;31, 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>4. Employee acknowledges that by signing this Agreement he or she may suffer adverse consequences, including without limitation, an inability to sell Subject Securities during a time in which the Company&#146;s Common Stock is trading at
a historically high price and (notwithstanding paragraph 2 above) an inability to sell Subject Securities to cover a tax liability that the undersigned may incur as a result of an exercise of vested options. The Company encourages Employee to speak
with his or her personal financial, legal and/or tax advisors before signing this Agreement and also prior to any sale of shares of Common Stock or the exercise of stock options for Subject Securities. </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">5. This Agreement constitutes the entire understanding of the Parties with regard to the subject matter stated herein and revokes and supersedes all prior agreements
between the Parties, including the Stock Sale Restriction Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">6. This Agreement may be modified or amended only in writing signed by the Company
and Employee; <I>provided, however</I>, that the Company may, in its sole discretion, amend or waive the provisions of Paragraph 1 above to increase the Annual Limit from time to time. No waiver of any provision of this Agreement shall be deemed a
waiver of other provisions of this Agreement. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">7. Employee&#146;s obligations hereunder shall be binding upon Employee&#146;s heirs, personal representatives,
successors and assigns. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">8. This Agreement shall be governed in accordance with the laws of the Commonwealth of Virginia, without application of conflicts
of laws provisions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">9. This Amended and Restated Agreement may be executed in one or more counterparts, each of which shall constitute an original, but
taken together shall constitute one and the same document. A facsimile signature shall have the same force and effect as an original signature. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><I>[Signature page follows] </I></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">IN WITNESS WHEREOF, the Parties hereto have each caused a duly authorized officer to execute this
Agreement with the intent to be legally bound as of the Effective Date. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2"><B>COMPANY</B></FONT></TD>
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<TD VALIGN="bottom" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2"><B>EMPLOYEE</B></FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Kent A. Murphy</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
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<TD VALIGN="bottom"> <P STYLE="margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Kent A. Murphy</FONT></P></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Kent A. Murphy</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Kent A. Murphy</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></P></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">President and CEO</FONT></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Title:</FONT></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">President and CEO</FONT></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Date:</FONT></P></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">01/23/07</FONT></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Date:</FONT></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">01/23/07</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>[Signature Page to Amended and Restated Stock Sale Restriction Agreement] </B></FONT></P>
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