Exhibit 10.6

AMENDED AND RESTATED STOCK SALE RESTRICTION AGREEMENT

This Amended and Restated Stock Sale Restriction Agreement (this “Agreement”) is
entered into as of January 23, 2007 (the “Effective Date”) by and between Luna
Innovations Incorporated, a Delaware corporation (the “Company”) and Michael
Gunther (“Employee”). The Company and Employee are referred to herein as the
“Parties” and each as a “Party.”

RECITALS

WHEREAS, the Parties entered into a certain letter agreement dated on or about
February 1, 2006 (the “Stock Sale Restriction Agreement”) whereby Employee
agreed to certain restrictions on the sale and transfer of (i) any outstanding
shares of the Company’s Common Stock, par value $0.001 per share (“Common
Stock”) (excluding shares that were received upon exercise of options prior to
December 31, 2005) and (ii) 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’s initial
public offering;

WHEREAS, as of the Effective Date, Employee beneficially held an aggregate of
196,701 shares of Common Stock, which consisted of 196,701 outstanding shares of
Common Stock and no shares of Common Stock issuable upon exercise of outstanding
options (collectively, the “Subject Securities”), excluding any shares that were
received upon exercise of options or warrants prior to December 31, 2005;

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’s eligibility for Small Business
Innovation Research (“SBIR”) grants; and

WHEREAS, the Parties desire to amend and restate the Stock Sale Restriction
Agreement pursuant to the terms and conditions provided herein.

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:

AGREEMENT

1. Employee hereby irrevocably agrees that he or she will not, directly or
indirectly, (i) sell, offer for sale, pledge or otherwise dispose of (except as
otherwise provided herein) greater than zero percent (0%) of Employee’s Subject
Securities in calendar year 2007 and ten percent (10%) of Employee’s Subject
Securities in calendar year 2008 (each such amount the “Annual Limit”) or
(ii) 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’s Subject
Securities, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or other securities, in cash

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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; provided, that the recipient of such
Subject Securities shall become subject to the terms and conditions of this
Agreement, shall assume Employee’s obligations hereunder and shall sign an
agreement of joinder to that effect.

2. Notwithstanding anything in this Agreement to the contrary, if Employee does
not sell or transfer the full Annual Limit of the undersigned’s Subject
Securities in calendar year 2007, the unsold portion of the Annual Limit (the
“Carryover Amount”) 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) 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) in the event of Employee’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.

3. This Agreement and the restrictions contained herein will terminate on the
earliest to occur of the following: (i) 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) the effective date of a termination of Employee’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; (iii) a date
determined by the Company in its sole discretion at any time upon written notice
to the Employee; (iv) December 31, 2008.

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’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.

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.

6. This Agreement may be modified or amended only in writing signed by the
Company and Employee; provided, however, 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.

 

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7. Employee’s obligations hereunder shall be binding upon Employee’s heirs,
personal representatives, successors and assigns.

8. This Agreement shall be governed in accordance with the laws of the
Commonwealth of Virginia, without application of conflicts of laws provisions.

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.

[Signature page follows]

 

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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.

 

COMPANY

    EMPLOYEE By:  

/s/ Kent A. Murphy

    By:  

/s/ Michael Gunther

Name:   Kent A. Murphy     Name:   Michael Gunther Title:   President and CEO  
  Title:   VP, Patents and Licensing Date:   01/23/07     Date:   01/22/07

[Signature Page to Amended and Restated Stock Sale Restriction Agreement]