Exhibit 10.1

FOURTH LOAN MODIFICATION AGREEMENT

This Fourth Loan Modification Agreement (this “Loan Modification Agreement”) is
entered into as of March 21, 2013, by and between (i) SILICON VALLEY BANK, a
California corporation with a loan production office located at 8020 Towers
Crescent Drive, Suite 475, Vienna, Virginia 22182 (“Bank”), and (ii) LUNA
INNOVATIONS INCORPORATED, a Delaware corporation and LUNA TECHNOLOGIES, INC., a
Delaware corporation, each with offices located at 1 Riverside Circle, Suite
400, Roanoke, Virginia 24016 (individually and collectively, jointly and
severally, the “Borrower”).

1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of February 18, 2010,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of February 18, 2010, between Borrower and Bank, as amended by a certain
First Loan Modification Agreement, dated as of March 7, 2011, as further amended
by a certain Second Loan Modification Agreement, dated as of May 18, 2011, and
as further amended by a certain Third Loan Modification Agreement, dated as of
June 1, 2012 (as amended, the “Loan Agreement”). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and in certain Intellectual
Property Security Agreements executed by each Borrower in favor of Bank
(collectively, the “IP Agreements”, and together with any other collateral
security granted to Bank, the “Security Documents”).

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the “Existing
Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

 

  A. Modifications to Loan Agreement.

 

  1 The Loan Agreement shall be amended by deleting the following text appearing
as Section 6.6 thereof:

“6.6 Access to Collateral; Books and Records. After completion of the Initial
Audit, at reasonable times, on one (1) Business Day’s notice (provided no notice
is required if an Event of Default has occurred and is continuing), Bank, or its
agents, shall have the right, up to two times per year (or more frequently as
Bank shall determine necessary, in its sole discretion), to inspect the
Collateral and the right to audit and copy Borrower’s Books. The foregoing
inspections and audits (including, without limitation, the Initial Audit) shall
be at Borrower’s expense, and the charge therefor shall be $850 per person per
day (or such higher amount as shall represent Bank’s then-current standard
charge for the same), plus reasonable out-of-pocket expenses. In the event
Borrower and Bank schedule an audit more than ten (10) days in advance, and
Borrower cancels or seeks to reschedule the audit with less than ten (10) days
written notice to Bank, then (without limiting any of Bank’s rights or
remedies), Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket
expenses incurred by Bank to compensate Bank for the anticipated costs and
expenses of the cancellation or rescheduling.”

and inserting in lieu thereof the following:

6.6 Access to Collateral; Books and Records. After completion of the Initial
Audit, at reasonable times, on one (1) Business Day’s notice (provided no notice
is

--------------------------------------------------------------------------------

required if an Event of Default has occurred and is continuing), Bank, or its
agents, shall have the right, up to one (1) time per year (or more frequently as
Bank shall determine necessary, in its sole discretion), to inspect the
Collateral and the right to audit and copy Borrower’s Books. The foregoing
inspections and audits (including, without limitation, the Initial Audit) shall
be at Borrower’s expense, and the charge therefor shall be $850 per person per
day (or such higher amount as shall represent Bank’s then-current standard
charge for the same), plus reasonable out-of-pocket expenses. In the event
Borrower and Bank schedule an audit more than ten (10) days in advance, and
Borrower cancels or seeks to reschedule the audit with less than ten (10) days
written notice to Bank, then (without limiting any of Bank’s rights or
remedies), Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket
expenses incurred by Bank to compensate Bank for the anticipated costs and
expenses of the cancellation or rescheduling.”

 

  2 The Loan Agreement shall be amended by deleting the following text appearing
as Section 6.9(a) thereof:

“(a) Liquidity. Borrower’s (i) unrestricted cash at Bank plus (ii) the lesser of
(x) thirty percent (30%) of net billed accounts receivable (including, without
limitation, unbilled but contractually due accounts receivable) or (y) Three
Million Dollars ($3,000,000), of not less than Six Million Dollars
($6,000,000).”

and inserting in lieu thereof the following:

“(a) Minimum Cash. Borrower’s unrestricted cash at Bank of not less than Five
Million Dollars ($5,000,000).”

 

  3 The Loan Agreement shall be amended by deleting the following text appearing
as Section 6.9(b) thereof:

“(b) Adjusted EBITDA. Achieve, as of the end of each fiscal quarter, measured on
a trailing three month basis, Adjusted EBITDA of at least One Hundred Thousand
Dollars ($100,000).”

and inserting in lieu thereof the following:

“(b) Reserved.”

 

  4 The loan Agreement shall be amended by inserting the following definitions
in Section 13.1 thereof, each in its appropriate alphabetical order:

“Fourth Loan Modification Effective Date” is March 21, 2013.”

 

  5 The Compliance Certificate appearing as Exhibit B to the Loan Agreement is
hereby replaced with the Compliance Certificate attached as Exhibit A hereto.

4. FEES. Borrower shall reimburse Bank for all legal fees and expenses incurred
in connection with this amendment to the Existing Loan Documents.

5. RATIFICATION OF IP AGREEMENTS. Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and conditions of the IP Agreements, and
acknowledges, confirms and agrees that said IP Agreements, as modified by
certain disclosures made by Borrower to Bank through and including the date
hereof, contain an accurate and complete listing of all Intellectual Property
Collateral as defined in each respective IP Agreement, and each remains in full
force and effect. Notwithstanding the terms and conditions of any of the IP
Agreements, Borrower shall not register any Copyrights or Mask Works in the
United States Copyright Office

--------------------------------------------------------------------------------

unless it: (i) has given at least fifteen (15) days’ prior written notice to
Bank of its intent to register such Copyrights or Mask Works and has provided
Bank with a copy of the application it intends to file with the United States
Copyright Office (excluding exhibits thereto); (ii) executes a security
agreement or such other documents as Bank may reasonably request in order to
maintain the perfection and priority of Bank’s security interest in the
Copyrights proposed to be registered with the United States Copyright Office;
and (iii) records such security documents with the United States Copyright
Office contemporaneously with filing the Copyright application(s) with the
United States Copyright Office. Borrower shall promptly provide to Bank a copy
of the Copyright application(s) filed with the United States Copyright Office,
together with evidence of the recording of the security documents necessary for
Bank to maintain the perfection and priority of its security interest in such
Copyrights or Mask Works. Borrower shall provide written notice to Bank of any
application filed by Borrower in the United States Patent Trademark Office for a
patent or to register a trademark or service mark within thirty (30) days of any
such filing.

6. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in certain
Perfection Certificates, each dated as of February 18, 2010, each as modified by
written disclosures made by Borrower to Bank through and including the date
hereof, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in each such Perfection Certificate, as modified
through the date hereof, remains true and correct in all material respects as of
the date hereof.

7. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file UCC financing
statements without notice to Borrower, with all appropriate jurisdictions, as
Bank deems appropriate, in order to further perfect or protect Bank’s interest
in the Collateral, including a notice that any disposition of the Collateral, by
either the Borrower or any other Person, shall be deemed to violate the rights
of the Bank under the Code.

8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

9. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of the Loan Agreement (as modified by this
Loan Modification Agreement), and all security or other collateral granted to
the Bank, and confirms that the indebtedness secured thereby includes, without
limitation, the Obligations.

10. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.

11. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank’s agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

12. JURISDICTION/VENUE. Section 11 of the Loan Agreement is hereby incorporated
by reference in its entirety.

13. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Loan Modification
Agreement to be executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first above written.

 

BORROWER: LUNA INNOVATIONS INCORPORATED By  

/s/ Dale E. Messick

Name:   Dale E. Messick Title:   Chief Financial Officer LUNA TECHNOLOGIES, INC.
By  

/s/ Scott A. Graeff

Name:   Scott A. Graeff Title:   President BANK: SILICON VALLEY BANK By:  

/s/ Alicia Fuller

Name:   Alicia Fuller Title:   Vice President

--------------------------------------------------------------------------------

Exhibit A to Fourth Loan Modification Agreement

COMPLIANCE CERTIFICATE

 

TO:    SILICON VALLEY BANK    Date:                      FROM:    LUNA
INNOVATIONS INCORPORATED       LUNA TECHNOLOGIES, INC.   

The undersigned authorized officer of Luna Innovations Incorporated, a Delaware
corporation, and Luna Technologies, Inc., a Delaware corporation (individually
and collectively, jointly and severally, the “Borrower”) certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower and
Bank (the “Agreement”), (1) Borrower is in complete compliance for the period
ending                      with all required covenants except as noted below,
(2) there are no Events of Default, (3) all representations and warranties in
the Agreement are true and correct in all material respects on this date except
as noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date,
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries, if any, relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Bank. Attached are
the required documents supporting the certification. The undersigned certifies
that these are prepared in accordance with GAAP consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.
The undersigned acknowledges that no borrowings may be requested at any time or
date of determination that Borrower is not in compliance with any of the terms
of the Agreement, and that compliance is determined not just at the date this
certificate is delivered. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

Monthly financial statements with Compliance Certificate    Monthly within 30
days    Yes    No Annual financial statement (CPA Audited) + CC    FYE within
120 days    Yes    No 10-Q, 10-K and 8-K    Within 5 days after filing with SEC
   Yes    No A/R & A/P Agings, Deferred Revenue/billings in excess of cost
report/project identifiers for Assignments of Claim tracking purposes    Monthly
within 15 days    Yes    No Transaction Reports    Bi-weekly (monthly with 30
days during a Streamline Period) and with each request for an advance   
Yes    No Projections    FYE within 30 days, and as amended    Yes    No

The following Intellectual Property was registered after the Effective Date (if
no registrations, state “None”)

 

 

 

Financial Covenant

   Required      Actual      Complies

Maintain as indicated:

        

Minimum Cash

   $ 5,000,000       $                    Yes    No

 

1

--------------------------------------------------------------------------------

The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

 

 

 

 

 

 

LUNA INNOVATIONS INCORPORATED

LUNA TECHNOLOGIES, INC.

By:  

 

Name:  

 

Title:  

 

BANK USE ONLY Received by:  

 

  AUTHORIZED SIGNER Date:  

 

Verified:  

 

  AUTHORIZED SIGNER Date:  

 

Compliance Status:            Yes        No

 

 

2

--------------------------------------------------------------------------------

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                     

 

I. Minimum Cash (Section 6.9(a))

 

Required: Borrower shall maintain at all times unrestricted cash at Bank of not
less than Five Million Dollars ($5,000,000).

Actual:

 

A.

  

Aggregate value of Borrower’s unrestricted cash at Bank

   $                

Is line A equal to or greater than $5,000,000?

 

             No, not in compliance

                  Yes, in compliance

1534466.3

 

3