Exhibit 10.15

 

LEASE

 

RIVERSIDE CENTER

 

ROANOKE, VIRGINIA

 

THIS LEASE is made this 30th day of December 2005, by CARILION MEDICAL CENTER
(hereinafter referred to as “Landlord”) and LUNA INNOVATIONS INCORPORATED
(hereinafter referred to as “Tenant”).

 

WITNESSETH

 

In consideration of the mutual agreements hereinafter set forth, the parties
hereto mutually agree as follows:

 

1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, for the term and upon the conditions hereinafter provided, that
certain space in Suites 300 & 400, located on the 3rd and 4th floors of the
office building to be constructed by Landlord at Phase 1 of Building #1 -
Riverside Center, Roanoke, Virginia, 24014, (hereinafter referred to as the
“Building”), which space shall consist of the entire 4th floor of the Building
and the portion of the 3rd floor identified by Tenant in writing to Landlord on
or before June 1, 2006, provided that the total leased space shall consist of
approximately 20,000 net rentable square feet (such space being hereinafter
referred to as the “Premises”). The parties agree that a floor plan showing the
Premises shall be attached hereto as Exhibit A once the space has been
identified by Tenant.

 

1A. Tenant’s Option and Right of First Refusal. If at any time hereafter,
Landlord receives from a ready, willing and able prospective tenant an
acceptable bona fide offer, or makes a bona fide offer to such a prospective
tenant, to lease all or a portion of the space on the third floor of the
Building not leased to Tenant, Landlord shall give Tenant written notice
thereof, specifying term, rent of the proposed lease, accompanied by Landlord’s
affidavit that such offer to lease is in good faith. Tenant shall thereupon have
the prior option to lease the space at the rent rate covered by the offer, which
option Tenant may exercise by giving Landlord written notice within fifteen
(15) days after Tenant’s receipt of Landlord’s notice of the offer. Should
Tenant fail to exercise the right of first refusal within the time limits set
forth above or elect not to exercise said right, Landlord may lease the space to
such third party and Tenant’s right of first refusal for space shall terminate.
Notwithstanding the foregoing, Tenant shall have the option, at any time prior
to receiving notice from Landlord that Landlord has made or received a bona fide
offer to lease all or a portion of the third floor of the Building not leased to
Tenant, to lease all or a portion of such additional space. In the event Tenant
notifies Landlord in writing of its election to lease additional space on the
third floor, the additional space shall be leased by Landlord to Tenant pursuant
to the terms and conditions set forth herein and the parties agree to execute an
amendment to this Lease reflecting the lease of the additional space.

 

2. Term and Renewal. The term of this Lease shall be for five years and commence
on the later of: (i) the 1st day of September 2006 or (ii) the day the Landlord
delivers to Tenant of a

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certificate of occupancy issued by the appropriate governmental authorities
(provided the Building and Tenant’s Improvements are substantially complete),
permitting Tenant to take possession of the Premises. Landlord shall provide at
least thirty (30) days prior notice to the Tenant of the anticipated
Commencement Date and Landlord shall give Tenant access to the Premises during
such thirty (30) day period. In the event the Landlord has not substantially
completed the Building, including Tenant’s Improvements, and delivered a
certificate of occupancy to Tenant by January 1, 2007, Tenant may terminate this
Lease upon written notice to Landlord.

 

Landlord agrees that in the event Tenant notifies Landlord in writing at least
twelve (12) months prior to the end of the initial five year term that Tenant
would like to renew this Lease for an additional five years, Landlord shall
negotiate with Tenant in good faith for a five year extension of this Lease.

 

3. Rent. Tenant shall pay as base rent for the Premises at the rate of Twenty
Four Dollars ($24.00) per square foot for the first year of the term, payable in
advance, in equal monthly installments. The first monthly installment is to be
made by Tenant within two business days following the Commencement Date, and the
second and all subsequent monthly payments to be made on the first day of each
and every calendar month during the term hereof, beginning with the second full
calendar month after the Commencement Date. If the Commencement Date is a date
other than the first day of a month, the rent from the Commencement Date until
the first day of the following month shall be prorated at the rate of
one-thirtieth (1/30th) or one-thirty first (1/31st), as applicable, of the base
monthly rental for each day and that amount plus rent for the first full
calendar month shall be paid by Tenant to Landlord within two business days
following the Commencement Date. Tenant shall pay rent to Landlord, or to such
other party or at such other address as Landlord may designate from time to time
by written notice to Tenant, without demand and without deduction, set-off or
counterclaim, except as expressly set forth herein. If Landlord shall at any
time or times accept said rent after it shall become due and payable, such
acceptance shall not excuse delay upon subsequent occasions, or constitute, or
be construed as, a waiver of any or all of Landlord’s rights hereunder. As
reflected in the table set forth below, rent for the third, fourth and fifth
years of the term shall increase by two percent (2%) over the rent paid during
the preceding lease year (numbers based on 20,000 net rentable square feet).

 

Year One

   $40,000.00 per month    $480,000.00 annually

Year Two

   $40,000.00 per month    $480,000.00 annually

Year Three

   $40,800.00 per month    $489,600.00 annually

Year Four

   $41,616.00 per month    $499,392.00 annually

Year Five

   $42,448.32 per month    $509,379.84 annually

 

3A. Rent Adjustment. Notwithstanding the provisions of Article 3, and after
taking into account the various terms of each lease, Landlord agrees that the
rent paid by Tenant shall never exceed the rent paid to Landlord by any other
tenant in the Building. In the event any space in the Building is leased to one
or more third parties for less than Twenty Four Dollars ($24.00) per square
foot, Landlord shall give immediate notice to Tenant. Tenant and Landlord shall
jointly choose a MIA real estate appraiser. The two leases and all relevant
information including the cost of the tenant improvements shall be submitted to
the appraiser for his review. Without sharing the details of the information
submitted with Tenant, the appraiser shall then be requested to evaluate

 

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the relative financial value of the two landlord/tenant arrangement and then
report back to Landlord and Tenant whether the new tenant is receiving a better
financial arrangement on a square foot basis. If the appraiser determines that
the new tenant is receiving a better financial arrangement he shall then inform
the Landlord and Tenant what adjustment would need to be made in Tenant’s rent
to make the two financial arrangements equivalent. That adjustment would then be
implemented and the rent for the subsequent years of Tenant’s Term shall also be
adjusted accordingly. Tenant acknowledges and agrees that the terms and
conditions set forth in this Article 3A shall not be triggered by, or apply to,
any leased space containing less than 1,000 square feet, or wherein the tenant
is Carilion Health System, its subsidiaries or the Carilion Biomedical
Institute, and that this Article 3A only applies to the Building and not any
other buildings that may be constructed by Landlord in Riverside Center.

 

4. Use of Premises. Tenant will use and occupy the Premises following the
Commencement Date solely for the conduct of Tenant’s business and in accordance
with the uses permitted under applicable zoning regulations. Tenant will not use
or occupy the Premises for any unlawful purpose, and will comply with all
present and future laws, ordinances, regulations, and orders of the United
States of America, State of Virginia, and any other public authority having
jurisdiction over the Premises. It is expressly understood that if any present
or future law, ordinance, regulation or order requires an occupancy permit for
the Premises, Tenant will obtain such permit at Tenant’s own expense. Tenant
will have, together with other tenants in the Building, access to and use of all
common areas and facilities of the Building.

 

5. Assignment and Subletting. Tenant will not assign, transfer or encumber this
Lease or the Premises without obtaining the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed, nor shall any
assignment or transfer of this Lease be effectuated by operation of law or
otherwise without prior written consent of the Landlord, which consent shall not
be unreasonably withheld or delayed. If Tenant merges with a third party or if
Tenant sells substantially all its assets Tenant may assign and/or transfer this
Lease after obtaining the written consent of the Landlord, which consent shall
not be unreasonably withheld or delayed. Tenant may sublet or rent the Premises
or any portion thereof only with the prior written consent of the Landlord,
which consent shall not be unreasonably withheld or delayed. In the event that
Tenant defaults hereunder, Tenant hereby assigns to Landlord the rent due from
any assignee or subtenant of Tenant and hereby authorizes each such subtenant to
pay said rent directly to Landlord.

 

6. Building and Improvements. Landlord, at its sole cost and expense, shall
cause the Building, of which the Premises are a part, to be constructed in
accordance with the plans and specifications, including finishes, resubmitted to
the Building Department of the City of Roanoke on December 28, 2005, which plans
and specifications are incorporated herein by reference (the “Plans and
Specifications”). Landlord warrants to Tenant that the Building shall be
constructed in a good and workmanlike manner, substantially free of defects in
workmanship and substantially in accordance with the Plans and Specifications;
it being acknowledged by Tenant that Landlord may substitute materials of
like-kind and quality without obtaining Tenant’s prior written consent. Landlord
shall promptly repair and replace any defects or deficiencies noted by Tenant to
Landlord which arises as a result of the construction of the Building and not as
a result of Tenant’s use of the Premises.

 

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Prior to the Commencement Date, Landlord shall complete construction of all
requested Tenant improvements according to Tenant’s plans and specifications as
approved by Landlord, which approval shall be unreasonably withheld or delayed
(“Tenant’s Improvements”). Landlord agrees that it shall pay an amount up to
$25.00 per sq. ft. for the construction of Tenant’s Improvements. Landlord
agrees to contract directly with the party constructing the Building to complete
Tenant’s Improvements, and Tenant shall be named as a third party beneficiary to
such contract. Landlord shall inform Tenant of any cost of Tenant’s Improvements
that shall exceed the square foot allowance and Landlord will not begin the
construction of Tenant’s Improvements without Tenant’s written approval.
Landlord shall not make any modifications to Tenant’s Improvements that would
result in an additional cost in excess of the square foot allowance without the
prior written consent of Tenant. In the event the cost of Tenant’s Improvements
exceed the square foot allowance paid by Landlord, Tenant shall reimburse
Landlord the additional costs following Tenant’s receipt of written notice from
Landlord evidencing that the additional costs have been paid. Tenant shall be
free to make, with Landlord’s consent, provided such consent shall not be
unreasonably withheld or delayed, additional alterations, redecorations, or
improvements in and to the Premises provided all of such alterations,
redecorations, additions or improvements conform to all applicable Building
Codes of the City of Roanoke. If any mechanic’s lien is filed against the
Premises, or the real property of which the Premises are a part, for work
claimed to have been done directly for, or materials claimed to have furnished
directly to, Tenant, such mechanic’s lien shall be discharged by Tenant within
twenty (20) days thereafter, at Tenant’s sole cost and expense, by the payment
thereof or by filing any bond permitted by law. If Tenant shall fail to
discharge any such mechanic’s lien, Landlord may, at its option, discharge the
same and treat the cost thereof as additional rent payable with the monthly
installment of rent next becoming due; it being hereby expressly covenanted and
agreed that such discharge by Landlord shall not be deemed to waive, or release,
the default of Tenant in not discharging the same. It is understood and agreed
that in the event Landlord shall give its written consent to Tenant’s making any
alterations, decorations, or improvements, such written consent shall not be
deemed to be an agreement or consent by Landlord to subject Landlord’s interest
in the Premises, the Building or the real property upon which the Building is
situated to any mechanic’s liens which may be filed in respect of any such
alterations, decorations, additions, or improvements made by or on behalf of
Tenant. All alterations, decorations, additions or improvements, in or to the
Premises or the Building made by either party shall remain upon and be
surrendered with the Premises as a part thereof at the end of the term hereof
without disturbance, molestation or injury; provided, however, that if Tenant is
not in default in the performance of any of its obligations under this Lease,
Tenant shall have the right to remove, prior to the expiration or termination of
the term of this Lease, all movable furniture, furnishings, or equipment
installed in the Premises at the expense of Tenant (except carpeting which
Tenant has installed, which shall become property of Landlord), and if such
property of Tenant is not removed by Tenant prior to the expiration or
termination of this Lease the same shall become the property of Landlord and
shall be surrendered with the Premises as a part thereof.

 

7. Maintenance and Repair. Tenant shall suffer no waste or injury to the
Premises or the fixtures and equipment therein, and shall, at the expiration or
other termination of the term of this Lease, surrender up the Premises in the
same order and condition in which they are on the Commencement Date, ordinary
wear and tear and damage by the elements, fire or other casualties excepted.
Landlord, at its sole cost, shall diligently and as soon as practicable perform
all necessary maintenance and make all repairs, service, maintenance and/or
replacement necessary (including, but

 

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not limited to, all plumbing, piping, heating and air conditioning systems,
electrical and lighting facilities and equipment, wiring, fixtures, elevators,
windows, door glass, plate glass, showcases, skylights and entrances) to keep
the Premises in good condition and in proper working order. Landlord shall also
provide and install all original and replacement fluorescent tubes and light
bulbs within the Premises necessary to provide adequate lighting. Landlord shall
promptly cause the removal, at no expense to Tenant, of all snow and ice from
the sidewalks and parking areas serving the Leased Premises and shall maintain,
at its sole cost, the landscaping, sidewalks and parking areas in good repair
and condition.

 

8. Signs; Furnishings. No sign, advertisement or notice shall be inscribed,
painted, affixed or displayed on any part of the inside of the Building except
on the directories, the doors of offices and corridor walls, and then only in
such place, number, size, color and style as is approved by Landlord, which
approval shall not be unreasonably withheld or delayed, and at Tenant’s cost and
expense, and if such sign, advertisement or notice is nevertheless exhibited by
Tenant without Landlord’s consent, Landlord shall have the right to remove the
same and Tenant shall be liable for any and all expenses incurred by Landlord by
said removal. Tenant shall be entitled, at Tenant’s expense, to construct
signage on the exterior of the Building based on a prorated share of the
allowable space for signage on the side of Building. Said proration shall be
calculated based on the percentage of square footage of the Premises over the
total net rentable square footage with in the Building. The signs shall comply
with all local rules, regulations and ordinances promulgated by the local
governing body where the Building is located. Landlord shall have the right to
prescribe the weight and position of safes and other heavy equipment or
fixtures, which shall, if considered necessary by the Landlord, stand on plank
strips to distribute the weight. Any and all damage or injury to the Premises or
the Building caused by moving the property of Tenant into, in or out of the
Premises, or due to the same being on the Premises shall be repaired by, and at
the sole cost of, Tenant. No deliveries of any matter of any description will be
received into the Building or carried in the elevators except as approved by
Landlord, which approval shall not be unreasonably withheld or delayed, and all
deliveries shall be made only through entrances of the Building designated for
this purpose. All moving of furniture, equipment and other material shall be
coordinated with, and under the supervision of, Landlord who shall, however, not
be responsible for any damage to or charges for moving same.

 

9. Access to Premises. Tenant shall permit Landlord, or its representatives to
enter the Premises during Tenant’s normal business hours provided Tenant
receives at least twenty four (24) hours prior written notice (except in the
case on an emergency when no such notice is necessary), without charge therefore
to Landlord and without diminution of the rent payable by Tenant, to examine,
inspect and protect the same, and to make such alterations and/or repairs as in
the judgment of Landlord may be deemed reasonably necessary. Upon receipt of
written prior notice, Tenant shall also permit Landlord or its representatives
such access to Premises to exhibit the same to prospective Tenants during the
last one hundred twenty (120) days of the term of this Lease.

 

10. Insurance Rating. Tenant will not conduct or permit to be conducted any
activity, or place any equipment in or about the Premises, which will, in any
way, increase the rate of fire insurance or other insurance on the Building, and
if any increase in the rate of fire insurance or other insurance is stated by
any insurance company or by the applicable Insurance Rating Bureau to be due to
activity or equipment in or about the Premises, such statement shall be
conclusive evidence

 

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that the increase in such rate is due solely to such activity or equipment and,
as a result thereof, Tenant shall be liable for such increase and shall
reimburse Landlord therefore.

 

11. Tenant’s Equipment. Tenant may not install or operate in the Premises any
electrically operated equipment or other machinery, other than radios,
televisions, clocks, copying machines, paper shredders, computers, fax machines,
printers or other equipment and machinery used in Tenant’s ordinary business
without first obtaining the prior consent of Landlord, which consent shall not
be reasonably withheld or delayed, provided that such consent may be conditioned
upon the payment by Tenant of additional rent in compensation for such excess
consumption of utilities and for the cost of additional wiring as may be
occasioned by the operation of said equipment or machinery. Tenant shall not
install any other equipment of any kind or nature whatsoever which will or may
necessitate any changes, replacements or additions to, or in the use of, the
water system, heating system, plumbing system, air-conditioning system, or
electrical system of the Premises or the Building without first obtaining the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Business machines and mechanical equipment belonging to
Tenant which cause noise or vibration that may be transmitted to the structure
of the Building or to any space therein to such a degree as to be reasonably
objectionable to Landlord or to any tenant in the Building shall be installed
and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other
devices sufficient to eliminate such noise and vibration.

 

12. Indemnity and Liability and Casualty Insurance. Tenant shall indemnify and
hold harmless Landlord, Carilion Medical Center and its respective parents,
subsidiaries, affiliates, related corporations, agents, officers, directors, and
employees, from and against any and all claims, liabilities, losses and causes
of action of whatever kind or nature which are suffered by or asserted against
Landlord arising out of Tenant’s use of the Premises, provided Tenant shall not
be responsible for damages and injury caused by the negligence or wrongful act
of Landlord, its employees, agents or representatives; and Tenant further agrees
to defend all such claims at its own cost and expense without reimbursement from
Landlord. Tenant further covenants and agrees to indemnify Landlord resulting
from any action or failure to act by any and all of Tenant’s employees on the
Premises.

 

Tenant does hereby covenant and agree to obtain and keep in full force and
effect insurance as set forth below and to furnish Landlord with certificates of
insurance evidencing such coverage, which insurance shall name Carilion Medical
Center as additional named insured and shall contain a forty-five (45) day
cancellation or material change in coverage clause. To the extent reasonably
available, such policies shall contain a waiver of subrogation in favor of
Carilion Medical Center. Tenant agrees that the insurance coverages set out
below shall be primary coverage as between Landlord and Tenant. Except as set
forth herein, such insurance coverages do not limit the liability of Tenant to
Landlord for any damages.

 

12A. Comprehensive General Liability. Tenant shall obtain commercial general
liability insurance with minimum limits of $1,000,000 Each Occurrence,
$2,000,000 General Aggregate, $2,000,000 Products & Completed Operations
Aggregate, $1,000,000 Personal & Advertising Injury, $1,000,000 Fire Damage (any
one fire) and $10,000 Medical Expense (any one person).

 

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12B. Additional Insured Endorsement CG2010 11/85 or equivalent in favor of
Carilion Medical Center and all affiliates (copy of endorsement(s) must
accompany standard ACORD certificate of insurance).

 

It is understood and agreed that the furnishing by Tenant of such policies of
insurance and the acceptance of same by Landlord is not intended to and shall
not, limit, affect, or modify the obligations or responsibilities otherwise
assumed or owed by Tenant.

 

Tenant agrees to take out and maintain at all times during the term of this
Lease a policy of all risk property insurance including, but not limited to,
improvements and betterments coverage, on its improvements, alterations, and
other personal property placed at the Premises, whether or not placed there by
Tenant.

 

Tenant will not engage in any activity or business which would cause Landlord’s
all risk property insurance to be canceled or which would result in higher
premiums. Should the nature or conduct of Tenant’s business in the Premises
result in increased all risk property premiums for the Premises and/or the
adjoining and surrounding improvements owned by Landlord, Tenant will pay
Landlord during the term thereof an amount equal to such increase so long as it
shall continue in effect, following Tenant’s receipt of written evidence that
the increase arises directly and solely from Tenant’s business in the Premises.

 

Landlord, at its sole cost and expense, shall obtain at all times during the
term of this Lease hazard insurance, in an amount equal to the replacement cost
of the Building, against loss or damage by fire or other casualty. Landlord
hereby indemnifies Tenant and its respective parents, subsidiaries, affiliates,
related corporations, agents, officers, directors, and employees (collectively,
“Tenant Affiliates”) and holds Tenant and Tenant’s Affiliates harmless from and
against any claims, liabilities, losses and causes of action of whatever kind or
nature which are suffered by or asserted against Tenant and/or Tenant’s
Affiliates by any person and which claims, liabilities, losses and causes of
action arise out of, or in connection with or are based upon any wrongful acts,
omissions, or failures of Landlord, its employees, servants or invitees under
this Lease, unless due to Tenant’s negligence, or wrongful acts or omissions.

 

13. Services and Utilities. It is agreed that Landlord will furnish heat and air
conditioning, during the seasons of the year when heat and air conditioning are
required, between the hours of 8:00 a.m. and 8:00 p.m., Monday through Saturday,
government holidays excepted. It is agreed that Landlord will provide reasonably
adequate electricity, water, exterior window cleaning service and Monday through
Friday only (except government holidays), janitorial service after 6:00 p.m.
Landlord will also provide elevator service between the hours of 8:00 a.m. and
8:00 p.m., Monday through Saturday (except government holidays), and at least
one (1) elevator with code access on a twenty-four hour basis, provided,
however, that Landlord shall have the right to remove elevators from service as
the same shall be required for moving freight, or for servicing or maintaining
the elevators and/or the Building, provided that so far as is reasonably
practical, at least one elevator shall be available at all times. Landlord shall
maintain the public restrooms in the Building and shall furnish, without charge
therefore, all soap, paper towels, and toilet tissue necessary for the efficient
use of such rooms. It is understood and agreed that Landlord shall not be liable
for failure to furnish, or for delay or suspension in furnishing, any of the
services (required to

 

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be performed by Landlord) caused by breakdown, maintenance, repairs, strikes,
scarcity of labor or materials, act of God or from any other cause. For purposes
of this Lease, a “government holiday” shall be determined by reference to Public
Law, as the same may be amended from time to time.

 

14. Insolvency or Bankruptcy of Tenant. In the event Tenant makes an assignment
for the benefit of creditors, or a receiver of Tenant’s assets is appointed; or
Tenant files a voluntary petition in any bankruptcy or insolvency proceeding, or
an involuntary petition in any bankruptcy or insolvency proceeding is filed
against Tenant and the same is not discharged within sixty (60) days, or Tenant
is adjudicated as bankrupt, Landlord shall have the option of terminating this
Lease by sending written notice to Tenant of such termination and, upon such
written notice being given by Landlord to Tenant, the term of this Lease shall,
at the option of Landlord, end and Landlord shall be entitled to immediate
possession of the Premises and to recover damages from Tenant in accordance with
the provisions of Article 17 hereof.

 

15. Limitation of Liability of Landlord. Landlord shall not be liable to Tenant,
its employees, agents, business invitees, licensees, customers, clients, family
members, guests or trespassers for any damage, compensation or claim arising
from the necessity of repairing any portion of the Building, the interruption in
the use of the Premises, accident or damage resulting from the use or operation
(by Landlord, Tenant, or any other person or persons whatsoever) of elevators,
or heating, cooling, electrical or plumbing equipment or apparatus, or the
termination of this Lease by reason of the destruction of the Premises, or from
any fire, robbery, theft, and/or any other casualty, or from any leakage in any
part or portion of the Premises, or the Building, or from water, rain or snow
that may leak into, or flow from, any part of the Premises or the Building. Any
goods, property or personal effects, stored or placed by Tenant in or about the
Premises or Building, shall be at the risk of Tenant, and Landlord shall not in
any manner be held responsible therefore.

 

16. Damage to the Premises. If the Premises shall be partially damaged by fire
or other cause without the fault or neglect of Tenant, its agents, employees or
invitees, Landlord shall diligently and as soon as practicable after such damage
occurs (taking into account the time necessary to effectuate a satisfactory
settlement with any insurance company) repair such damage at the expense of
Landlord, provided, however, that if the Building is damaged by fire or other
cause to such extent that the damage cannot be fully repaired within ninety
(90) days from the date of such damage, Landlord upon written notice to the
Tenant, in which event the rent shall be apportioned and paid to date of such
damage. During the period that Tenant is deprived of the use of the damaged
portion of the Premises, Tenant shall be required to pay rental covering only
that part of the Premises that Tenant is able to occupy and the rent for such
space shall be that portion of the total rent which the amount of square foot
area remaining that can be occupied by Tenant bears to the total square foot
area of the Premises. All injury or damage to the Premises or the Building
caused by Tenant or its agents, employees and invitees, shall be repaired by
Landlord, and any cost so incurred by Landlord not covered by insurance shall be
paid by Tenant in which event such cost shall become additional rent payable
with the installment of rent next becoming due under the terms of this Lease.
Notwithstanding the foregoing, in the event the Premises are damaged following
the second anniversary of the Commencement Date and the repair of the same shall
take longer than ninety (90) days, Tenant shall have the right to terminate this
Lease upon written notice to Landlord provided Tenant shall remain responsible
for the payment of rent through the date of the damage.

 

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17. Default of Tenant and Landlord. If Tenant shall fail to pay any monthly
installment of rent as aforesaid and/or as otherwise required By Article 23
hereof (although no legal or formal demand has been made therefore), or shall
violate or fail to perform any of the other conditions, covenants or agreements
on its part contained in this or in any other lease of space in the Building,
and such failure to pay rent or such violation or failure shall continue for a
period of fifteen (15) days after Tenant’s receipt of written notice from
Landlord, then and in any of said events Tenant shall be deemed in default
(provided in the event of a non-monetary breach, Tenant shall not be deemed in
default if it has begun to cure the same within fifteen (15) days following
receipt of such notice and diligently proceeds to cure the same) and this Lease
shall, at the option of Landlord, cease and terminate upon at least thirty
(30) days prior written notice of such election to Tenant by Landlord, and if
such failure to pay rent or such violation or failure shall continue to the date
set forth in such notice of termination, then this Lease shall cease and
terminate without further notice to quit or of Landlord’s intention to re-enter,
the same being hereby waived, and Landlord may proceed to recover possession
under and by virtue of the provisions of the laws of Virginia, or by such other
proceedings, including re-entry and possession, as may be applicable. If
Landlord elects to terminate this Lease everything herein contained on the part
of Landlord to be done and performed shall cease without prejudice, however, to
the right of Landlord to recover from Tenant all rental accrued up to the time
of termination or recovery of possession by Landlord, whichever is later. Should
this Lease be terminated before the expiration of the term of this Lease by
reason of Tenant’s default as herein provided, or if Tenant shall abandon or
vacate the Premises before the expiration or termination of the term of this
Lease, the Premises may be relet by Landlord for such rent and upon such terms
as are not unreasonable under the circumstances and, if the full rental
hereinabove provided shall not be realized by Landlord, Tenant shall be liable
for all damages sustained by Landlord, including, without limitation, deficiency
in rent, reasonable attorneys’ fees, brokerage and leasing fees and expenses of
placing the Premises in first class rentable condition. Any damage or loss of
rental sustained by Landlord may be recovered by Landlord, at Landlord’s option,
at the time of the relettings, or in separate actions, from time to time, as
said damage shall have been made more easily ascertainable by successive
relettings, or, at Landlord’s option, may be deferred until the expiration of
the term of this Lease in which event the cause of action shall not be deemed to
have accrued until the date of expiration of said term. The provisions contained
in this paragraph shall be in addition to and shall not prevent the enforcement
of any claim Landlord may have against Tenant for anticipatory breach of the
unexpired term of this Lease. In the event that Tenant continues to occupy the
Premises after the expiration of the term of this Lease, with the express or
implied consent of Landlord, such tenancy shall be from month to month and shall
not be renewal of the term of this Lease or a tenancy from year to year. All
rights and remedies of Landlord under this Lease shall be cumulative and shall
not be exclusive of any other rights and remedies provided to Landlord under
applicable law.

 

If Landlord breaches any of its covenants and obligations contained in this
Lease and the breach shall continue for a period of fifteen (15) days after
written notice of such violation is received by Landlord from Tenant, Landlord
shall be deemed to be in default (provided Landlord shall not be deemed in
default if it has begun to cure the same within fifteen (15) days following
receipt of notice from Tenant and diligently proceeds to cure the same). In the
event of a default by Landlord related to its maintenance and repair obligations
hereunder, Tenant shall have the right to cure such default on behalf of the
Landlord and deduct the cost of the same from the monthly rent owed by Tenant
hereunder until Tenant is reimbursed in full for the cost thereof. In the event
of any

 

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other default by Landlord under this Lease, Tenant shall have the right to seek
any remedy available under applicable law.

 

18. Waiver. If under the provisions hereof Landlord shall institute proceedings
and a compromise or settlement thereof shall be made, the same shall not
constitute a waiver of any covenant herein contained nor of any of Landlord’s
rights hereunder. No waiver by Landlord of any breach of any covenant, condition
or agreement herein contained shall operate as a waiver of such covenant,
condition or agreement itself, or of any subsequent breach thereof. No payment
by Tenant or receipt by Landlord of a lesser amount than the monthly
installments of rent herein stipulated shall be deemed to be other that on
account of the earliest stipulated rent or shall any endorsement or statement on
any check or letter accompanying a check for payment of rent be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the balance of such rent or to pursue
any other remedy provided in this Lease. No re-entry by Landlord, and no
acceptance by Landlord of keys from Tenant, shall be considered an acceptance of
a surrender of the Lease.

 

19. Subordination. This Lease is subject and subordinate to the lien of all and
any mortgages (which term “mortgages” shall include both construction and
permanent financing and shall include deeds of trust and similar security
instruments) which may now or hereafter encumber or otherwise affect the real
estate (including the Building) of which the Premises form a part, or Landlord’s
leasehold interest therein, and to all and any renewals, extensions,
modifications, recastings or refinancings thereof. Notwithstanding the foregoing
Landlord shall obtain from any holder of a mortgage, deed of trust or other
security instrument a non-disturbance agreement from such third parties
acknowledging and agreeing that Tenant’s possession of the Premises will not be
disturbed so long as Tenant performs its obligations hereunder. In confirmation
of such subordination, Tenant shall, at Landlord’s request, promptly execute any
requisite or appropriate certificate or other document and if Tenant fails to
execute the same within fifteen (15) days following receipt of request from
Landlord, Tenant agrees that Landlord shall be authorized to execute the
certificate or other document as Tenant’s attorney-in-fact. Tenant agrees that
in the event that any proceedings are brought for the foreclosure of any such
mortgage, Tenant shall attorn to the purchaser at such foreclosure sale and
recognize such purchaser as the Landlord under this Lease, and Tenant waives the
provisions of any statute or rule of law, now or hereinafter in effect, which
may give or purport to give Tenant any right to terminate or otherwise adversely
affect this Lease and the obligations of Tenant hereunder in the event that any
such foreclosure proceeding is prosecuted or completed; provided, however, that
such attornment and recognition shall be conditioned upon Tenant’s receiving
from such purchaser, reasonable assurances that Tenant may remain in quiet and
peaceable possession of the Premises for the unexpired term at the rents herein
provided and that purchaser shall otherwise keep and perform all of the
covenants and conditions herein contained on the part of Landlord to be kept and
performed.

 

20. Condemnation. If the whole or a substantial part of the Premises shall be
taken or condemned by any governmental authority for any public or quasi-public
use or purpose (including sale under threat of such a taking), then the term of
this Lease shall cease and terminate as of the date when title vests in such
governmental authority, and the annual rental shall be abated on the date when
such title vests in such governmental authority. If less than a substantial part
of the Premises is taken or condemned by any governmental authority for any
public or quasi-public use or

 

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purpose, the rent shall be equitably adjusted on the date when title vests in
such governmental authority and the Lease shall otherwise continue in full force
and effect. Tenant shall have no claim against Landlord (or otherwise) for any
portion of the amount that may be awarded as damages as a result of any
governmental taking or condemnation (or sale under threat of such taking or
condemnation) or for the value of any unexpired term of the Lease. For purposes
of this Article 20, a substantial part of the Premises shall be considered to
have been taken if more than fifty percent (50%) of the Premises are unusable by
Tenant and, if the Premises are on more than one floor of the Building, then
this Article shall apply as if separate leases were made in respect of the
Premises on each such floor.

 

21. Rules and Regulations. Tenant, its agents and employees shall abide by and
observe the rules and regulations attached hereto as Exhibit B. Tenant, its
agent and employees, shall abide by and observe such other reasonable rules and
regulations as may be promulgated from time to time by Landlord, with copy sent
to Tenant, for the operation and maintenance of the Building, provided that the
same are in conformity with common practice and usage in similar buildings and
are not inconsistent with the provisions of this Lease. Nothing contained in
this Lease shall be construed to impose upon Landlord any duty or obligation to
enforce such rules and regulations, or the terms, conditions or covenants
contained in any other Lease, as against any other Tenant, and Landlord shall
not be liable to Tenant for violation of the same by other Tenant, its
employees, agents, business invitees, licensees, customers, clients, family
members or guests.

 

22. Covenants of Landlord. Landlord covenants that it has the right to make this
Lease for the term aforesaid, and that if Tenant shall pay the rental and
perform all of the covenants, terms and conditions of this Lease to be performed
by Tenant, Tenant shall, during the term hereby created, freely, peaceably and
quietly occupy and enjoy the full possession of the Premises without molestation
or hindrance by Landlord or any party claiming through or under Landlord.

 

23. Increases in Real Estate Taxes. Beginning on January 1, 2009, and for each
year thereafter, Tenant shall be responsible for paying, for the Term year, its
prorata share of the increase in real estate taxes paid by Landlord over the
“Base Year Amount”, as defined below, within thirty (30) days following Tenant’s
receipt of evidence of the increase and confirmation that such amount has been
paid by Landlord. Tenant’s prorata share for purposes of this Article 23 shall
be a fraction, the numerator of which is the net rentable square footage of the
Premises and the denominator of which shall be the total net rentable square
footage of all the buildings situated on the land which the Premises are
located. The “Base Year Amount” shall be defined as the real estate taxes levied
upon the land and Building for the first full calendar year following the
Commencement Date.

 

24. No Partnership. Nothing contained in this Lease shall be deemed or construed
to create a partnership or joint venture of or between Landlord and Tenant, or
to create any other relationship between the parties hereto other than that of
Landlord and Tenant.

 

25. No Representations by Landlord. Neither Landlord nor any agent or employee
of Landlord has made any representations or promises with respect to the
Premises or the Building except as herein expressly set forth, and no rights,
privileges, easements or licenses are acquired by Tenant except as herein
expressly set forth. The Tenant, by taking possession of the Premises, shall

 

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accept the same “as is,” and such taking of possession shall be conclusive
evidence that the Premises and the Building are in good and satisfactory
condition at the time of such taking of possession.

 

26. Brokers. Landlord recognizes Edwin C. Hall Associates as the broker
negotiating this Lease and shall pay said broker a leasing commission therefore
pursuant to a separate agreement between said broker and Landlord. Landlord and
Tenant each represent and warrant one to another that except as immediately
hereinabove set forth neither of them has employed any broker in carrying on the
negotiations relating to this Lease. Landlord shall indemnify and hold Tenant
harmless, and Tenant shall indemnify and hold Landlord harmless, from and
against any claim or claims for brokerage or other commission arising from or
out of any breach of the foregoing representation and warrant by the respective
indemnitors.

 

27. Notices. All notices or other communications hereunder shall be in writing
and shall be deemed duly given when received if delivered in person or by
certified or registered mail, return receipt requested, first-class postage
prepaid, (i) if to Landlord addressed at c/o Hall Associates Inc. 213 S.
Jefferson St., Suite 1007, Roanoke, VA 24011 and if to Tenant addressed at Luna
Innovations, Attn: Scott Graeff, Riverside Center, Suite 300, Roanoke, VA 24014,
unless notice of a change of address is given pursuant to the provisions of this
Article.

 

28. Estoppel Certificates. Tenant agrees, at any time and from time to time,
upon not less than five (5) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that the Lease is in full force and effect as modified and
stating the modifications), (ii) stating the dates to which the rent and other
charges hereunder have been paid by Tenant, (iii) stating whether or not to the
best knowledge of Tenant, Landlord is in default in the performance of any
covenant, agreement or condition contained in this Lease, and, if so, specifying
each such default of which Tenant may have knowledge, and (iv) stating the
address to which notices to Tenant should be sent pursuant to Article 27 hereof.
Any such statement delivered pursuant hereto may be relied upon by any owner of
the Building, any prospective purchaser of the Building, any mortgagee or
prospective mortgagee of the Building or of Landlord’s interest, or any
prospective assignee of any such mortgage.

 

29. Holding Over. In the event that Tenant shall not immediately surrender the
Premises on the date of expiration of the term hereof, Tenant shall, by virtue
of the provisions hereof, become a Tenant by the month at the monthly rental in
effect during the last month of the term of this Lease, which said monthly
tenancy shall commence with the first day next after the expiration of the term
of this Lease. Tenant as a monthly tenant shall be subject to all of the
conditions and covenants of this Lease, including the additional rent provisions
of Article 23. Tenant shall give to Landlord at least sixty (60) days’ prior
written notice of any intention to quit the Premises, and Tenant shall be
entitled to thirty (30) days’ written notice to quit the Premises, except in the
event of nonpayment of rent in advance or of the breach of any other covenant by
the Tenant, in which event Tenant shall not be entitled to any notice to quit,
the usual notice to quit being hereby expressly waived. Notwithstanding the
foregoing provisions of this Article 29, in the event that Tenant shall hold
over after the expiration of the term hereby created, and if Landlord shall
desire to regain possession of the Premises promptly at the expiration of the
term of this Lease, then at any time prior to Landlord’s acceptance of rent from
Tenant as a monthly tenant hereunder, Landlord, at its option, may forthwith

 

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re-enter and take possession of the Premises without process, or by any legal
process in force in Virginia.

 

30. Right of Landlord to Cure Tenant’s Default. If Tenant defaults in the making
of any payment or in the doing of any act herein required to be made or done by
Tenant, then Landlord may, but shall not be required to, make such payment or do
such act, and the amount of the expense thereof, if made or done by Landlord,
with interest thereon at the annual rate of one percent (1%) above the New York
City prime rate of interest in effect at and accruing from the first day of the
first calendar month following the date such payment was made by Landlord, shall
be paid by Tenant to Landlord and shall constitute additional rent hereunder due
and payable with the next monthly installment of rent; but the making of such
payment or the doing of such act by Landlord shall not operate to cure such
default or to estop Landlord from the pursuit of any remedy to which Landlord
would otherwise be entitled. If Tenant fails to pay any installment of rent on
or before the tenth (10th) day of the calendar month when such installment
becomes due and payable, Tenant shall pay to Landlord a late charge of five
percent (5%) of the amount of such installment. Such late charge shall
constitute additional rent hereunder due and payable with the next monthly
installment rent.

 

31. Lien on Personal Property. Landlord shall have a lien upon all the personal
property of Tenant moved into the Premises, as and for security for the rent and
other Tenant obligations heretofore provided. In order to perfect and enforce
said lien, Landlord may at any time after default in the payment of rent or
default of other obligations, seize and take possession of any and all personal
property belonging to Tenant which may be found in and upon the Premises. Should
Tenant fail to redeem the property so seized, by payment of whatever sum may be
due Landlord under and by virtue of the provisions of this Lease, then and in
that event, Landlord shall have the right, after ten (10) days’ written notice
to Tenant of its intention to do so, to sell such property so seized at public
or private sale and upon such terms and conditions as to Landlord may appear
advantageous, and after the payment of all property charges incident to such
sale, apply the proceeds thereof to the payment of any balance due on account of
rent or other obligations as aforesaid. In the event there shall then remain in
the hands of Landlord any balance realized from the sale of said property, as
aforesaid, the same may be retained by Landlord and applied against accruing
rents or paid over to or for the account of Tenant.

 

32. Benefit and Burden. The provisions of this Lease shall be binding upon, and
shall inure to the benefit of, the parties hereto and, subject to the provisions
of Article 5, each of their respective representatives, successors and assigns.
Landlord may freely and fully assign its interest hereunder.

 

33. Gender and Number. Feminine or neuter pronouns shall be substituted for
those of the masculine form, and the plural shall be substituted for the
singular number, in any place or places herein which the context may require
such substitution.

 

34. Entire Agreement. This Lease, together with the Exhibits attached hereto,
contains and embodies the entire agreement or the parties hereto, and no
representations, inducements or agreements, oral or otherwise, between the
parties not contained, in this Lease and exhibits, shall be of any force or
effect. This Lease may not be modified, changed or terminated in whole or in
part in any manner other than by an agreement in writing duly signed by both
parties hereto.

 

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35. Invalidity of Particular Provisions. If any provision of this Lease or the
application thereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provisions to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.

 

36. Miscellaneous Additional Provisions.

 

36A. Notwithstanding anything herein to the contrary, and so long as the Tenant
is current in the payment of the Rent, the parties agree that any dispute
arising out of or related to this Lease shall be resolved exclusively by
arbitration in Roanoke, Virginia, provided however that neither Landlord nor
Tenant shall commence an arbitration proceeding unless and until such party
shall first give a written notice (a “Dispute Notice”) to the other party
setting forth the nature of the dispute. The parties shall first attempt in good
faith to resolve the dispute without resorting to arbitration. If the dispute
has not been resolved by the parties within thirty (30) days after delivery of a
Dispute Notice, then either party may proceed with the filing of a demand for
arbitration. The arbitration shall be initiated and administered according to
the Commercial Arbitration Rules of the American Arbitration Association (“AAA”)
in effect on the date of the Dispute Notice, and the parties agree that a single
arbitrator, mutually selected by the parties, will preside over the proceeding.
The arbitration will be initiated by the certified mailing of a Demand for
Arbitration by one party to the other. If the parties cannot agree upon an
arbitrator within thirty (30) days after a Demand for Arbitration has been made,
the parties shall seek appointment of an arbitrator by the Circuit Court for the
City of Roanoke. The arbitrator shall base the award on applicable law and
judicial precedent and, unless both parties agree otherwise, shall include in
such award the findings of fact and conclusions of law upon which the award is
based. The ruling of the arbitrator shall be final and binding on the parties,
and any judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The losing party shall pay the costs of the
arbitration, the legal fees and all other reasonable costs incurred by the
winning party.

 

36B. This Lease shall be construed in accordance with the laws of the
Commonwealth of Virginia.

 

36C. To the extent any terms and conditions set forth in the Rules and
Regulations attached hereto as Exhibit C conflict with the provisions set forth
in any Article of this Lease, the provisions contained in the Articles shall
control.

 

36D. In consideration of the payment of rent, Tenant shall also be entitled to
select and have the exclusive use of its prorata share of the parking spaces
under the Building and such spaces shall be marked as reserved.

 

36E. Tenant agrees that it shall not disclose the terms and conditions of this
Lease to any third party, provided Tenant may disclose the same to its
accountants, attorneys and other third parties engaged by Tenant.

 

36F. This Lease may be executed in counterparts and facsimile signatures shall
be deemed originals for purposes of this Lease.

 

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Landlord and Tenant have each executed this Lease under seal on the day and year
hereinabove written.

 

LANDLORD:       CARILION MEDICAL CENTER             By   /s/ Edward G. Murphy  
              Edward G. Murphy    Pres/CEO TENANT:      
LUNA INNOVATIONS INCORPORATED             By   /s/ Scott A. Graeff              
  Scott A. Graeff    CFO

 

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EXHIBIT A

 

[Attach Floor Plans]

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EXHIBIT B

RULES AND REGULATIONS

RIVERSIDE CENTER

ROANOKE, VIRGINIA

 

The following rules and regulations have been formulated for the safety and
well-being of all the Tenants of the Building. Strict adherence to these rules
and regulations is necessary to guarantee that each and every tenant will enjoy
a safe and unannoyed occupancy in the Building. Any repeated or continuing
violation of these rules and regulations by Tenant after notice from Landlord
shall be sufficient cause for termination of this Lease at the option of
Landlord.

 

The Landlord may, upon request by any Tenant, waive the compliance by such
Tenant of any of the foregoing rules and regulations, provided that (i) no
waiver shall be effective unless signed by Landlord or Landlord’s authorized
agent, (ii) any such waiver shall not relieve such Tenant from the obligation to
comply with such rule or regulation in the future unless expressly consented to
by Landlord, and (iii) no waiver granted to any Tenant shall relieve any other
Tenant from the obligation of complying with the foregoing rules and regulations
unless such other Tenant has received a similar waiver in writing from Landlord.

 

1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways,
corridors or halls or other parts of the Building not occupied by any Tenant
shall not be obstructed or encumbered by any Tenant or used for any purpose
other than ingress and egress to and from the Premises and if the Premises are
situated on the ground floor of the Building the Tenant thereof shall, at said
Tenant’s own expense, keep the sidewalks of said Premises clean and free from
ice and snow. Landlord shall have the right to control and operate the public
portions of the Building, and the facilities furnished for the common use of the
Tenants, in such manner as Landlord deems best for the benefit of the Tenants
generally. No Tenant shall permit the visit to the Premises of persons in such
numbers or under such conditions as to interfere with the use and enjoyment by
other Tenants of the entrances, corridors, elevators and other public portions
or facilities of the Building. No smoking in building.

 

2. No awnings or other projections shall be attached to the outside walls of the
Building without the prior written consent of the Landlord.

 

3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside or inside
of the Premises or building without the prior consent of the Landlord. In the
event of the violation of the foregoing by any Tenant, Landlord may remove same
without any liability, and may charge the expense incurred by such removal to
the Tenant or Tenants violating this rule. Interior signs on doors and directory
tablet shall be inscribed, painted or affixed for each Tenant by the Landlord at
the expense of such Tenant, and shall be of a size, color and style acceptable
to the Landlord.

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4. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors or
vestibules without the prior written consent of the Landlord.

 

5. The water and wash closets and other plumbing fixtures shall not be used for
any purposes other than those for which they were constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. All damages
resulting from any misuse of the fixtures shall be borne by the Tenant who, or
whose servants, employees, agents, visitors or licensees, shall have caused the
same.

 

6. There shall be no defacing any part of the Premises or the Building. No
boring, cutting or stringing of wires shall be permitted. Tenant shall not
construct, maintain, use or operate within the Premises or elsewhere within or
on the outside of the Building, any electrical device, wiring or apparatus in
connection with a loud speaker system or other sound system.

 

7. No vehicles or animals, birds or pets of any kind shall be brought into or
kept in or about the premises, and no cooking of food shall be done or permitted
by any Tenant on said premises. No Tenant shall cause or permit any unusual or
objectionable odors to be produced upon or permeate from the Premises.

 

8. No Tenant shall make, or permit to be made, any unseemingly or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises of those having business with them whether by the use of any musical
instrument, radio, talking machine, unmusical noise, whistling, singing, or in
any other way. No Tenant shall throw anything out of the doors or windows or
down the corridors or stairs.

 

9. Any inflammable, combustible or explosive fluid, chemical or substance kept
or brought in to the building must be stored and monitored and meet all
conditions and standards that are applicable.

 

10. Each Tenant, shall, upon the termination of this tenancy, restore to
Landlord all keys of stores, offices, storage, and toilet rooms either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to the Landlord the cost thereof.

 

11. No additional locks or bolts of any kind shall be placed upon any of the
doors, or windows by any Tenant, nor shall any changes be made in existing locks
or the mechanism thereof. The doors leading to the corridors or main halls shall
be kept closed during business hours except as they may be used for ingress or
egress. Each Tenant, shall, upon the termination of this tenancy, restore to
Landlord all keys of stores, offices, storage, and toilet rooms either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to the Landlord the cost thereof.

 

12. All removals, or the carrying in or out of any matter of any description
must take place during the hours which the Landlord or its Agent may determine
from time to time. The Landlord reserves the right to inspect all freight to be
brought into the Building and to exclude from

 

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the Building all freight which violates any of these Rules and Regulations or
the Lease of which these Rules and Regulations are a part.

 

13. Any person employed by any Tenant to do janitorial work within the Premises
must obtain Landlord’s consent and such person shall, while in the Building and
outside of said Premises, comply with all instructions issued by Building
Management.

 

14. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord’s opinion, tends to impair the reputation of the Building or
its desirability as a building for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.

 

15. Landlord reserves the right to exclude from the Building at all times any
person who is not known or does not properly identify himself to the Building
Management. Each Tenant shall be responsible for all persons for whom he
authorizes entry into or exit from the Building, and shall be liable to the
Landlord for all acts of such persons.

 

16. The premises shall not be used for lodging or sleeping or for any immoral or
illegal purpose.

 

17. No Tenant shall occupy or permit any portion of the Premises to be used or
occupied as an office for the possession, storage, manufacture, or sale of
narcotics, nitroglycerin, illegal drugs, fertilizer, tobacco in any form, or a
barber or manicure shop, or as an employment bureau, unless said Tenant’s Lease
expressly grants permission to do so. No Tenant shall engage or pay any
employees on the Premises, except those actually working for such Tenant on said
premises, nor advertise for laborers giving an address at said premises.

 

18. Each Tenant, before closing and leaving the Premises at any time, shall see
that all suite entry doors are closed and all lights turned off.

 

19. The requirements of Tenants will be attended to only upon application at the
office of the Building. Employees shall not perform any work or do anything
outside of the regular duties, unless under special instruction from the
management of the Building.

 

20. Canvassing or soliciting in the Building is prohibited and each Tenant shall
cooperate to prevent the same.

 

21. No water cooler, plumbing or electrical fixtures shall be installed by any
Tenant, unless expressly authorized by Landlord.

 

22. There shall not be used in any space, or in the public halls of the
Building, either by any Tenant or others, in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and side
guards.

 

23. Access plates to underfloor conduits shall be left exposed. Where carpet is
installed, carpet shall be cut around access plates.

 

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24. Mats, trash or other objects shall not be placed in the public corridors.

 

25. Landlord does not maintain suite finishes which are nonstandard; such as
kitchens, bathrooms, wallpaper, special lights, etc. However, should the need
for repairs arise, the Landlord will arrange for the work to be done at Tenant’s
expense.

 

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AMENDED LEASE RIVERSIDE CENTER

 

This is an amendment to a certain Lease (the “Lease”) entered into between
CARILION MEDICAL CENTER, a Virginia nonprofit corporation (the “Landlord”) and
LUNA INNOVATOINS INCORPORATED, a Virginia corporation (the “Tenant”) dated the
30th day of December, 2005.

 

WHEREAS, Landlord and Tenant desire to amend said Lease.

 

NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and those terms and conditions set out in the Lease, the parties hereby
agree to amend the numbered Articles in said lease with the following
replacement Articles of the same number, amend and replace Exhibit A attached to
the Lease with that attached hereto, and to add to the Lease the other numbered
Articles set forth herein and Exhibit C and Exhibit D attached hereto.

 

1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, for the term and upon the conditions hereinafter provided, that
certain space located on the 4th  floors of the office building to be
constructed by Landlord of Building #1 – Riverside Center, Roanoke, Virginia,
24014, (hereinafter referred to as the “Building”), which space shall consist of
the entire 4th floor of the Building with approximately 24,057 net rentable
square feet (such space being hereinafter referred to as (the “Premises”). The
Building, including the Premises, is being constructed in two phases: upon
completion of Phase 1 of the Building the 4th floor will contain approximately
13,740 net rentable square feet and upon completion of Phase 2 of the Building
the 4th floor will contain an additional 10,317 net rentable square feet. The
parties agree that a floor plan showing the Premises is attached hereto as
Exhibit A.

 

2. Term and Renewal. Initially this Lease shall be for 13,740 sq. ft. of the
Premises with a rental rate of $24.00 per square foot and Tenant’s obligation to
pay rent shall commence on the later of: (i) the 1st day of September 2006 or
(ii) the day the Landlord delivers to Tenant a certificate of occupancy issued
by the appropriate governmental authorities (provided Phase 1 of the Building
and Tenant’s Improvements for such space are substantially complete) permitting
Tenant to take possession of the first 13,740 net rentable square feet of the
Premises as reflected on Exhibit A (the “Commencement Date”) Landlord shall
provide at least thirty (30) days prior notice to Tenant of the anticipated
Commencement Date for Phase 1 and Landlord shall give Tenant access to the
Premises being part of Phase I during such thirty (30) day period.

 

The “term” of this Lease shall commence on the later of: (i) the 1st day of
January, 2007, or (ii) the day the Landlord delivers to Tenant of a certificate
of occupancy issued by the appropriate governmental authorities (provided Phase
2 of the Building and Tenant’s Improvements for such space are substantially
complete) permitting Tenant to take possession of the remaining 10,317 net
rentable square feet of the Premises as reflected on Exhibit A and shall
terminate seven years thereafter, unless sooner terminated as provided herein.
In the event the a certificate of occupancy for Phase 2 of the Building and
Tenant’s Improvements for such space are not substantially complete by April 1,
2007, Tenant may terminate the Lease. Beginning on the first day of the term,
Tenant shall pay an annual rent at the rate of $24.00 per square foot on the
entire square footage in the Premises, subject to the increases described in
Article 5 hereinbelow.

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

Landlord agrees that in the event Tenant notifies Landlord in writing at least
twelve (12) months prior to the end of the initial seven year term that Tenant
would like to renew this Lease for an additional five years, Landlord shall
negotiate with Tenant in good faith for a five year extension of this Lease.

 

2A. Tenant’s Right to Terminate the Lease. In addition to the other provisions
set forth herein, Tenant shall have the option to terminate this Lease after the
5th year of the Term if it provides Landlord with notice of the exercise of such
option and at the same time pays to Landlord a termination fee of $275,362 (as
reflected on Exhibit C attached hereto) plus interest from January 1, 2007 based
on the increase by the percentage that the Consumer Price Index increases
between the beginning of the first month of that Year and the end of the last
month of the that Year. For every year thereafter an additional increase shall
be calculated in a similar fashion. The Consumer Price Index refers to the
Consumer Price Index entitled “All Urban Consumers – (1967=100) – All Items,” as
promulgated by the Bureau of Labor Statistics of the United States Department of
Labor. In the event that this price index or a successor or substitute index is
not available, a similar governmental or other nonpartisan agency index shall be
chosen by the Tenant to cover the increased cost of build out. To be effective
said notice of termination must be accompanied with the payment of said
termination fee and must be given during the month of July, 2011.

 

5. Rent. The first monthly installment of rent in accordance with the terms of
Article 2 shall be made by Tenant within two business days following the
Commencement Date, and the second and all subsequent monthly payments to be made
on the first day of each and every calendar month until the end of the term,
unless sooner terminated as provided herein, beginning with the second full
calendar month after the Commencement Date. If the Commencement Date is a date
other than the first day of a month, the rent from the Commencement Date until
the first day of the following month shall be prorated at the rate of
one-thirtieth (1/30th) or one-thirty first (1/31st), as applicable, of the base
monthly rental for each day and that amount plus rent for the first full
calendar month. Tenant shall pay rent to Landlord, or to such other party or at
such other address as Landlord may designate from time to time by written notice
to Tenant, without demand and without deduction, set-off or counterclaim, except
as expressly set forth herein. If Landlord shall at any time or times accept
said rent after it shall become due and payable, such acceptance shall not
excuse delay upon subsequent occasions, or constitute, or be construed as, a
waiver of any or all of Landlord’s rights hereunder. As reflected in the table
set forth below, rent for the third, fourth, fifth, sixth and seventh years of
the term shall increase by two percent (2%) over the rent paid during the
preceding lease year.

 

Rent Schedule

 

Pro-rated for 2006 – (13,740 sq. ft.)

   $ 27,480.00 per month

Year One Jan. 1, 2007 – Dec. 31, 2007 – (24,057sq. ft.)

   $ 48,114.00 per month      $ 577,368.00 annually Year Two       

Jan. 1, 2008 – Dec. 31, 2008

   $ 48,114.00 per month      $ 577,368.00 annually

 

-22-

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

Year Three

      

Jan. 1, 2009 – Dec. 31, 2009

   $ 49,076.28 per month      $ 588,915.36 annually Year Four       

Jan. 1, 2010 – Dec. 31, 2010

   $ 50,057.81 per month      $ 600,693.72 annually Year Five       

Jan. 1, 2011 – Dec. 31, 2011

   $ 51,058.97 per month      $ 612,707.64 annually Year Six       

Jan. 1, 2012 – Dec. 31, 2012

   $ 52,080.14 per month      $ 624,961.78 annually Year Seven       

Jan. 1, 2013 – Dec. 31, 2013

   $ 53,121.75 per month      $ 637,461.01 annually

 

** The dates are to be adjusted if the term does not begin on January 1, 2007.

 

6. Building and Improvements. Landlord, at its sole cost and expense, shall
cause the Building, of which the Premises are a part, to be constructed in
accordance with the plans and specifications, including finishes, resubmitted to
the Building Department of the City of Roanoke on December 28, 2005, which plans
and specifications are incorporated herein by reference (the “Plans and
Specifications”). Landlord warrants to Tenant that the Building shall be
constructed in a good and workmanlike manner, substantially free of defects in
workmanship and substantially in accordance with the Plans and Specifications;
it being acknowledged by Tenant that Landlord may substitute materials of
like-kind and quality without obtaining Tenant’s prior written consent. Landlord
shall promptly repair and replace any defects or deficiencies noted by Tenant to
Landlord which arises as a result of the construction of the Building and not as
a result of Tenant’s use of the Premises.

 

Prior to the Commencement Date Landlord shall complete construction of all
requested Tenant improvements in Phase 1 according to Tenant’s plans and
specifications attached hereto as Exhibit D, and prior to the beginning of the
term Landlord shall complete construction of all request Tenant Improvements in
the Premises (all the requested Tenant improvements are referred to herein as
the “Tenant’s Improvements” ). Landlord agrees that it shall pay for all of
Tenant’s Improvements as shown on the plans and specifications attached hereto
as Exhibit D, provided Tenant agrees to pay the Landlord, within five
(5) business days following the Commencement Date, $79,247 for a portion of the
Tenant’s Improvements.

 

Landlord agrees to contract directly with the party constructing the Building to
complete Tenant’s Improvements, and Tenant shall be named as a third party
beneficiary to such contract. Tenant shall be free to make, with Landlord’s
consent, provided such consent shall not be

 

-23-

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

unreasonably withheld or delayed, additional alterations, redecorations, or
improvements in and to the Premises provided all of such alterations,
redecorations, additions or improvements conform to all applicable Building
Codes of the City of Roanoke. In the event Tenant requests alterations,
redecorations or additional improvements not reflected on the plans and
specification attached hereto as Exhibit D, Tenant agrees that it shall be
responsible for the cost of the same if the alterations, redecoration or
improvements cause the total amount to be incurred by Landlord for the
construction of Tenant’s Improvements to increase. Tenant shall reimburse
Landlord for any additional costs paid by Landlord arising from Tenant’s
requested alterations, redecorations or improvements not shown on the plans and
specification attached hereto as Exhibit D within thirty (30) days following
Tenant’s receipt of written notice from Landlord that the additional costs have
been paid. If any mechanic’s lien is filed against the Premises, or the real
property of which the Premises are a part, for work claimed to have been done
directly for, or materials claimed to have furnished directly to, Tenant, such
mechanic’s lien shall be discharged by Tenant within twenty (20) days
thereafter, at Tenant’s sole cost and expense, by the payment thereof or by
filing any bond permitted by law. If Tenant shall fail to discharge any such
mechanic’s lien, Landlord may, at its option, discharge the same and treat the
cost thereof as additional rent payable with the monthly installment of rent
next becoming due; it being hereby expressly covenanted and agreed that such
discharge by Landlord shall not be deemed to waive, or release, the default of
Tenant in not discharging the same. It is understood and agreed that in the
event Landlord shall give its written consent to Tenant’s making any
alterations, decorations, or improvements, such written consent shall not be
deemed to be an agreement or consent by Landlord to subject Landlord’s interest
in the Premises, the Building or the real property upon which the Building is
situated to any mechanic’s liens which may be filed in respect of any such
alterations, decorations, additions, or improvements made by or on behalf of
Tenant. All alterations, decorations, additions or improvements, in or to the
Premises or the Building made by either party shall remain upon and be
surrendered with the Premises as a part thereof at the end of the term hereof
without disturbance, molestation or injury; provided, however, that if Tenant is
not in default in the performance of any of its obligations under this Lease,
Tenant shall have the right to remove, prior to the expiration or termination of
the term of this Lease, all movable furniture, furnishings, or equipment
installed in the Premises at the expense of Tenant (except carpeting which
Tenant has installed, which shall become property of Landlord), and if such
property of Tenant is not removed by Tenant prior to the expiration or
termination of this Lease the same shall become the property of Landlord and
shall be surrendered with the Premises as a part thereof.

 

“Exhibit C” in subparagraph C in Article 36 is changed to “Exhibit B”.

 

Except as modified herein, all other terms and provisions of the Lease remain
unchanged and are hereby ratified and affirmed.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

-24-

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WITNESS the following signatures and seals as of the 20 day of July, 2006.

 

LANDLORD:

      CARILION MEDICAL CENTER            

By:   

  /s/ Curtis E. Mills SVP                

Curtis E. Mills, Jr.

               

Senior Vice President

 

TENANT:

      LUNA INNOVATIONS INCORPORATED            

By:

 

/s/ Scott A. Graeff

           

Title:

 

CFO

 

-25-

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

LOGO [g13236img_1.jpg]

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

EXHIBIT C

 

   

LUNA Inovations Tenant Upfit

       

Riverside Corporate Centre

       

Office Building #1

   

 

Scope of Work Changes

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

   COSTS TO BE
PAID BY LUNA AT
OCCUPANY

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

      

1. Rough Carpentry

   $ 6,114.06       

2. Board Room Trim

   $ 5,304.00       

3. Finish Carpentry

   $ 4,613.72       

4. Reception Area

   $ 18,494.32       

5. Caulking

    
  SEE
ADDITIONAL       

6. Security Hardware

   $ 19,884.80       

7. Metal Studs & Drywall

   $ 15,722.72       

8. Acoustical Wall Panels

   $ 820.56       

9. Delete Toilet Accessories

     ($689.52)       

10. Decorative Lighting

   $ 20,800.00       

11. Alt. Light Fix Type F

     ($990.00)       

12. Alt. Light Fix Type X

     ($1,103.00)       

13. Motorized Sun Shades

   $ 9,615.00       

14. Allowance for S.C.I.F. Room

   $ 20,057.00            

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

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

      

Sub Total

   $ 118,643.66            

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

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

      

Skanska Fee

   $ 4,449.14    3.75 %      

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

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

      

Total Construction Scope Changes

   $ 123,092.80       

HSMM Design Fee

   $ 6,154.64    5.00 %      

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

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

      

Project Total Scope Changes

   $ 129,247.44            

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

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

                                      

Deduct-Luna Takes All of 4th Fl 1/1/07

     -$50,000.00            

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

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

      

Net Due Carilion @ 9/1/07

   $ 79,247.44            

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

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

      

ADDITIONAL COSTS ABOVE THE UPFIT ALLOWANCE

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

   COSTS TO LUNA
IF ONLY A
FIVE YR LEASE

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

      

1. Fire Extinguishers & Cabt.

   $ 4,350.32       

2. Electrical

   $ 15,811.12       

3. Caulking

   $ 3,120.00            

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

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

      

Sub Total

   $ 23,281.44            

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

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

      

Skanska Fee

   $ 873.05    3.75 %      

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

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

      

Total Construction Scope Changes

   $ 24,154.49       

HSMM Design Fee

   $ 1,207.72    5.00 %      

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

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

      

Total Addl. Upfit Costs

   $ 25,362.22            

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

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

      

Previous Overage of Upfit Costs

   $ 250,000.00            

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

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

      

Total Due-Lease Terminated at Five Yrs.

   $ 275,362.22            

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

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

      

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

Exhibit D

 

[Attached Plans and Specifications for Tenant’s Improvements]

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

SECOND AMENDMENT TO LUNA INNOVATIONS

LEASE OF RIVERSIDE CENTER

 

This is the Second Amendment to a certain Lease (the “Lease”) entered into
between CARILION SERVICES, INC., a Virginia nonprofit corporation (the
“Landlord”) and LUNA INNOVATIONS INCORPORATED, a Virginia corporation (the
“Tenant”) dated the 30th day of December, 2005.

 

WHEREAS, Landlord and Tenant desire to amend the Lease as provided herein below.

 

NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and those terms and conditions set out in the Lease, the parties hereby
agree to delete Section 1A. Tenant’s Option and Right of First Refusal in the
Lease and to replace it with the following:

 

  1A.

Tenant’s Option and Right of First Refusal. If at any time hereafter, Landlord
receives from a ready, willing and able prospective tenant an acceptable bona
fide offer, or makes a bona fide offer to such a prospective tenant, to lease
all or a portion of the space on the second floor of the Building not leased to
Tenant, Landlord shall give Tenant written notice thereof, specifying term, rent
of the proposed lease, accompanied by Landlord’s affidavit that such offer to
lease is in good faith. Tenant shall thereupon have the prior option to lease
the space at the rent rate covered by the offer, which option Tenant may
exercise by giving Landlord written notice within fifteen (15) days after
Tenant’s receipt of Landlord’s notice of the offer. Should Tenant fail to
exercise the right of first refusal within the time limits set forth above or
elect not to exercise said right, Landlord may lease the space to such third
party and Tenant’s right of first refusal for space shall terminate.
Notwithstanding the foregoing, Tenant shall have the option, at any time prior
to receiving notice from Landlord that Landlord has made or received a bona fide
offer to lease all or a portion of the second floor of the Building not leased
to Tenant, to lease all or a portion of such additional space. In the event
Tenant notifies Landlord in writing of its election to lease additional space on
the second floor, the additional space shall be leased by Landlord to

 

CONFIDENTIAL - SUBJECT    

TO PROTECTIVE ORDER        

 

CC 08225                    

 

Page 1

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

 

Tenant pursuant to the terms and conditions set forth herein and the parties
agree to execute an amendment to this Lease reflecting the lease of the
additional space.

 

Except as modified herein and by the first amendment, all other terms and
provisions of the Lease remain unchanged and are hereby ratified and affirmed.

 

WITNESS the following signatures and seals as of the 5th day of October, 2007.

 

Date: October 5, 2007   LANDLORD;     CARILION MEDICAL CENTER     By:  

/s/ Curtis E. Mills, Jr.

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

    Curtis E. Mills, Jr.     Senior Vice President Date: 10/5, 2007   TENANT:  
  LUNA INNOVATIONS INCORPORATED     By:  

/s/ Scott A. Graeff

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

    Scott A. Graeff     Chief Commercialization Officer

 

CONFIDENTIAL - SUBJECT    

TO PROTECTIVE ORDER        

 

CC 08226                    

 

Page 2

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THIRD AMENDMENT

TO

LEASE

 

RIVERSIDE CENTER

 

This is an amendment having an effective date of April 1, 2010 to a certain
lease entered into between CARILION MEDICAL CENTER, a Virginia nonprofit
corporation (the “Landlord”) and LUNA INNOVATIONS INCORPORATED, a Delaware
corporation (the “Tenant”) dated the 30th day of December, 2005, as amended by
the Amended Lease Riverside Center dated July 20th, 2006 with an effective date
of September 1, 2006 (the “First Amendment”), and the Second Amendment to Luna
Innovations Lease of Riverside Center dated on or about October 5, 2007 (as thus
amended, the “Lease”)

 

WHEREAS, Landlord and Tenant desire to amend the Lease and find that the below
amendments are mutually beneficial for the effective continuation of the Lease,

 

NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and those terms and conditions set out in the Lease, the parties hereby
agree to delete Article 2.A of the First Amendment and declare it null and void
from this time forth, to amend the numbered Articles in the Lease with the
following replacement articles of the same number.

 

2 Term and Renewal. The Term of this Lease shall extend until and end on
December 31, 2015.

 

Page 1

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

5 Rent. Monthly payments are to be made on the first day of each and every
calendar month until the end of the Term. Tenant shall pay rent to Landlord, or
to such other party or at such other address as Landlord may designate from
time-to-time by written notice to Tenant, without demand and without deduction,
set-off or counterclaim, except as expressly set forth herein. If Landlord shall
at any time or times accept said rent after it shall become due and payable,
such acceptance shall not excuse delay upon subsequent occasions, or constitute,
or be construed as, a wavier of any or all of Landlord’s rights hereunder. As
reflected in the table set forth below, rent for the third, fourth, fifth,
sixth, seventh, eight and ninth years of the Term shall increase by two percent
(2%) over the rent paid during the preceding lease year.

 

Rent Schedule

Pro-rated for 2006 – (13,740 sq. ft.)

   $ 27,480.00 per month

Year One

   $ 48,114.00 per month

Jan. 1, 2007 – Dec. 31, 2007 – (24,057 sq. ft.)

   $ 577,368.00 annually

Year Two

   $ 48,114.00 per month

Jan. 1, 2008 – Dec. 31, 2008

   $ 577,368.00 annually

Year Three

   $ 49,076.28 per month

Jan. 1, 2009 – Dec. 31, 2009

   $ 588,915.36 annually

Year Four

   $ 50,057.81 per month

Jan. 1, 2010 – Dec. 31, 2010

   $ 600,693.72 annually

Year Five

   $ 51,058.97 per month

Jan. 1, 2011 – Dec. 31, 2011

   $ 612,707.64 annually

Year Six

   $ 52,080.14 per month

Jan. 1, 2012 – Dec. 31, 2012

   $ 624,961.78 annually

 

Page 2

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Year Seven

   $ 53,121.75 per month

Jan. 1, 2013 – Dec. 31, 2013

   $ 637,461.01 annually

Year Eight

   $ 54,184.19 per month

Jan. 1, 2014 – Dec. 31, 2014

   $ 650,210.28 annually

Year Nine

   $ 55,267.87 per month

Jan. 1, 2015 – Dec. 31, 2015

   $ 663,214.44 annually

 

Except as expressly amended above, the Lease shall remain in full force and
effect

 

EXECUTED as of the date first herein specified.         Landlord: CARILION
MEDICAL CENTER Date: April 12, 2010       By:  

    /s/ Briggs W. Andrews

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

                Briggs W. Andrews                 Secretary Date: April 13, 2010
  Tenant: LUNA INNOVATIONS INCORPORATED         By: /s/ Kent A. Murphy        
Title: CEO

 

Page 3