Document:

Exhibit

EXHIBIT 10.13

LUNA INNOVATIONS INCORPORATED
NON-EMPLOYEE DIRECTORS’ DEFERRED COMPENSATION PLAN
As Amended and Restated Through December 2017

TABLE OF CONTENTS

	
			
	 
	 
	Page

	ARTICLE 1
	INTRODUCTION
	1

	ARTICLE 2
	ELIGIBILITY
	1

	ARTICLE 3
	DEFERRAL ELECTIONS
	1

	ARTICLE 4
	DEFERRED COMPENSATION ACCOUNTS
	2

	ARTICLE 5
	DISTRIBUTION OF DEFERRED COMPENSATION
	2

	ARTICLE 6
	UNFUDED STATUS
	3

	ARTICLE 7
	DESIGNATION OF BENEFICIARY
	4

	ARTICLE 8
	ADMINISTRATION
	4

	ARTICLE 9
	TAXES
	4

	ARTICLE 10
	SECURITIES LAWS COMPLIANCE
	5

	ARTICLE 11
	GENERAL PROVISIONS
	5

	ARTICLE 12
	DEFINITIONS
	6

 

  

ARTICLE 1

INTRODUCTION
1.1Establishment.  Luna Innovations Incorporated (the “Company”) established this Non-Employee Directors’ Deferred Compensation Plan (the “Plan”) for those members of the Company’s Board of Directors who are not employees of the Company or any of its subsidiaries or affiliates.  The Plan allows such Eligible Directors to defer the receipt of their Director Fees and to receive settlement of the right to receive payment of such amounts in the form of an issuance of Company Shares.  Capitalized terms used in the Plan have the definitions set forth in Article 12.
1.2Purpose.  This Plan is intended to advance the interests of the Company and its stockholders by providing a means to attract and retain qualified persons to serve as Eligible Directors and to promote Company equity ownership by Eligible Directors, thereby aligning such Eligible Directors’ interests more closely with the interests of the stockholders of the Company.
1.3Effective Date.  This Plan originally became effective as of August 9, 2007 (the “Effective Date”).  This amendment and restatement of the Plan is effective December 28, 2017.

ARTICLE 2

ELIGIBILITY
2.1Effective Date Eligibility.  Each person who was an Eligible Director on the Effective Date became eligible to participate in the Plan on the Effective Date.  
2.2Initial Board Appointment Eligibility.  Each person who becomes an Eligible Director following the Effective Date shall become eligible on the date of his or her initial appointment to the Board.  
2.3Change in Employment Status.  If any Participant subsequently becomes an employee of the Company or any of its subsidiaries or affiliates such Participant shall not be eligible to defer any Director Fees earned during any calendar year that commences following such change in status, if applicable.  Such change in status shall not otherwise impact the Participant’s Stock Unit Account, which will continue to be administered in accordance with the terms of the Plan and the Participant’s Deferral Election.

ARTICLE 3

DEFERRAL ELECTIONS

3.1Deferral Elections.  Each Eligible Director may elect to defer a whole percentage (in increments of 1%) of up to 100% of his or her Cash Director Fees and/or Stock Director Fees by submitting a completed Deferral Election form to the Administrator in accordance with the procedures set forth in this Article 3.
3.2Timing of Deferral Election.  An Eligible Director may make a Deferral Election within thirty (30) days after the date on which he or she initially becomes eligible to participate in the Plan (the “Initial Election Period”).  An Eligible Director who does not make a Deferral Election within the Initial Election Period may make a Deferral Election in accordance with administrative procedures established by the Administrator.  
3.3Effect and Duration of Deferral Election.  A Deferral Election shall apply only to Director Fees earned after the date such election is made and is irrevocable consistent with the requirements of Section 409A.  Any Deferral Election made within the Initial Election Period will be irrevocable upon expiration of the Initial Election Period and will apply to any Director Fees earned during calendar quarters that commence following expiration of such Initial Election Period, including calendar quarters in any subsequent calendar year.  Any Deferral Election made after expiration of the Initial Election Period will be irrevocable as of December 31st of the calendar year in which it was made and will apply to any Director Fees earned in any subsequent calendar year.  Deferral Elections shall evergreen so that they will continue in effect and will be applicable to Director Fees earned in all subsequent calendar years, unless and until such Deferral Election is modified as provided in Section 3.4.

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3.4Modifications to Deferral Elections.  A Participant may revoke or modify a prior Deferral Election by submitting a new Deferral Election to the Administrator at such time before the first day of any subsequent calendar year in accordance with procedures established by the Administrator.  Any modified Deferral Election will commence effectiveness with respect to such subsequent calendar year and will evergreen and remain effective for calendar years commencing thereafter. 
3.5Form of Deferral Election.  A Deferral Election shall be made in a form approved by the Administrator (including in the form attached to the Plan as Appendix I).  

ARTICLE 4

DEFERRED COMPENSATION ACCOUNTS

4.1Establishment of Stock Unit Account.  The Company shall establish a Stock Unit Account for each Participant.  All Director Fees deferred pursuant to Article 3 shall be converted to Stock Units which are credited to the Participant’s Stock Unit Account on the Deferral Date.  Stock Director Fees deferred under the Plan will have the number of Shares subject to such deferral election converted into an equivalent number of Stock Units credited to the Participant’s Stock Unit Account.  With respect to any Cash Director Fees deferred under the Plan, the number of Stock Units credited to a Participant’s Stock Unit Account as of a Deferral Date shall equal the amount of the deferred Director Fees divided by the Fair Market Value of a Share on such Deferral Date, with fractional Stock Units calculated to three decimal places.  Fractional Stock Units shall be credited cumulatively, but any fractional Stock Unit credited to a Participant’s Stock Unit Account at the time of a distribution under Article 5 shall be converted into the right to receive a cash amount equal to the Fair Market Value of a corresponding fractional Share on the date of distribution.
4.2Crediting of Dividend Equivalents.  As of each dividend payment date with respect to Shares, if any, each Participant shall have credited to his or her Stock Unit Account a dollar amount equal to the amount of cash dividends that would have been paid on the number of Shares equal to the number of Stock Units credited to the Participant’s Stock Unit Account as of the close of business on the record date for such dividend.  Such dollar amount shall then be converted into a number of Stock Units equal to the number of whole and fractional Shares that could have been purchased with such dollar amount at Fair Market Value on the dividend payment date.  
4.3Adjustment Provisions.  In the event of a reorganization, recapitalization, stock split, stock dividend, spin off, combination, corporate exchange, merger, consolidation or other change in the Shares that does not qualify as a Change in Control, or any distribution to holders of Shares other than cash dividends or any transaction determined in good faith by the Administrator to be similar to the foregoing but, the Administrator shall make appropriate equitable changes in the number of Stock Units credited to the Participant’s Stock Unit Account.

ARTICLE 5

DISTRIBUTION OF DEFERRED COMPENSATION

5.1Share Settlement and Source of Shares.  Settlement of a Participant’s Stock Unit Account will be effected by delivering to the Participant a number of Shares equal to the number of whole Stock Units credited to the Participant’s Stock Unit Account.  The source of Shares distributed pursuant to this Plan shall be the Company’s 2016 Equity Incentive Plan or any successor equity incentive plan adopted by the Company.  Any fractional Stock Units credited to a Participant’s Stock Unit Account at the time of a distribution shall be paid in cash at the time of such distribution.
5.2Timing and Form of Distribution.  The Participant shall specify on the Deferral Election form the timing of distribution in settlement of the Participant’s Stock Unit Account as specified on the Deferral Election form, which may commence on any of the following permissible distribution events, with such distribution to be made in either (i) a lump sum, or (ii) substantially equal annual installments over a period not to exceed five (5) years:   
		
	(a)
	The Participant’s Separation from Service; 

		
	(b)
	Change in Control; or  

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	(c)
	A Specified Date. 

5.3Default Form of Distribution.  If a Participant submits a Deferral Election form but fails to specify a distribution event or form of distribution on the Deferral Election form, the Participant’s Stock Unit Account will be distributed in a single lump sum upon Separation from Service.
5.4Specified Employee Delay in Distribution Upon Separation from Service.  The provisions of this Section 5.4 shall apply to the extent necessary to avoid adverse tax consequences to a Participant under Section 409A of the Code.  If a Participant is a Specified Employee no distribution to such Participant which is triggered by a Separation from Service will be made any earlier than six months and one day following the date of the Separation from Service.  If a Participant is a Specified Employee and is scheduled to receive payments in the form of annual installments upon a Separation from Service, the first annual installment payment will be made six months and one day following the date of the Separation from Service, and the remaining annual installment payments shall be made as originally scheduled.  
5.5Distribution upon Death.  In the event of a Participant’s death at any time prior to distribution of the Participant’s entire Stock Unit Account, whether before or after such distribution had commenced, as soon as administratively feasible after the Participant’s death the entire balance of the Participant’s Stock Unit Account shall be immediately settled in an issuance of Shares with a cash payment for any fractional Stock Unit to the beneficiary designated by the Participant under Article 7.
5.6Unforeseeable Emergency.  In the event the Participant experiences an unforeseeable emergency as defined in Treas. Reg. § 1.409A-3(i)(3), the Administrator may, at the request of the Participant, make a distribution from the Participant’s Stock Unit Account equivalent to the amount reasonably necessary to satisfy the emergency need. The balance of the Stock Unit Account will not be distributed until the occurrence of the earliest distribution event as provided in the Participant’s Deferral Election.  Unforeseeable emergency distributions will be administered in manner compliant with the requirements of Section 409A.
5.7Specified Date Distribution Downstream Election Changes. A Participant who had elected to receive distribution in settlement of his or her Stock Unit Account on a Specified Date is permitted to elect to delay a distribution or change the form of a distribution in accordance with procedures established by the Administrator so long as the following conditions are met: 
		
	(a)
	Such election does not take effect until at least twelve (12) months after the date on which the election is made; 

		
	(b)
	Such election must defer the distribution for a period of at least five (5) years from the date such distribution would otherwise have been made; and

		
	(c)
	If the distribution is scheduled to begin at specified time or pursuant to a fixed schedule, then such election must be made no less than twelve (12) months before the date the distribution is scheduled to be made. 

Any subsequent deferral election shall become irrevocable as of the last permissible date for making such subsequent deferral election.

ARTICLE 6

UNFUNDED STATUS

6.1General.  The interest of each Participant in any Director Fees deferred under the Plan (and any Stock Units or Stock Unit Account relating thereto) shall be that of a general creditor of the Company.  Stock Unit Accounts, and Stock Units credited thereto, shall at all times be maintained by the Company as bookkeeping entries evidencing unfunded and unsecured general obligations of the Company.  Except as provided in Section 6.2, no money or other assets shall be set aside for any Participant.
6.2Trust.  To the extent determined by the Board, the Company may, but shall not be required to, transfer funds necessary to fund all or part of the payments under the Plan to a trust; provided, the assets held in such trust shall remain at all times subject to the claims of the general creditors of the Company.  No participant or beneficiary shall have any interest in the assets held in such trust or in the general assets of the Company other than as a general, 

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unsecured creditor.  Accordingly, the Company shall not grant a security interest in the assets held by the trust in favor of any Participant, beneficiary or creditor.

ARTICLE 7
DESIGNATION OF BENEFICIARY

7.1Beneficiary Designation.  Each Participant may designate one or more beneficiaries to receive settlement of the Participant’s Stock Unit Account in the event of such Participant’s death.  The Company may rely upon the beneficiary designation filed with the Administrator, provided that such form was executed by the Participant or his or her legal representative and filed with the Administrator prior to the Participant’s death.  If a Participant has not designated a beneficiary, or if the designated beneficiary is not surviving when a payment is to be made to such person under the Plan, the beneficiary with respect to such payment shall be the Participant’s surviving spouse, or if there is no surviving spouse, the Participant’s estate.

ARTICLE 8

ADMINISTRATION

8.1Administrator.  The Plan shall be administered by the Administrator appointed by the Board.  Unless the Board determines otherwise, the Administrator shall be a committee of Company employees consisting of the Company’s Chief Financial Officer, Corporate Secretary and one or more Company employees selected by the Chief Financial Officer.  The Administrator shall have the authority to make all determinations it deems necessary or advisable for administering the Plan, subject to the express provisions of the Plan, and to delegate its authority to one or more Company employees.  
8.2Binding Effect of Decisions.  The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon the Participants and any other persons having any interest in the Plan.
8.3Indemnification of Administrator.  The Company shall indemnify and hold harmless the members of the committee comprising the Administrator, and any Company employee to whom the duties of the Administrator are delegated, against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct.

ARTICLE 9

TAXES

9.1Withholding Taxes. By electing to make a deferral under this Plan, each Participant authorizes any required withholding from, at the Company’s election, distributions and any other amounts payable to the Participant, and the Participant otherwise agrees to make adequate provision for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company if any, which arise in connection with payments or distributions from this Plan.  Unless the tax withholding obligations of the Company are satisfied, the Company shall have no obligation to make distributions under this Plan.  Any tax withholding obligation triggered by a distribution of Shares will be satisfied by an automatic reduction in the number of Shares issued to the Participant or the Participant’s beneficiary.
9.2409A Savings.  This Plan is intended to comply with the requirements of Section 409A of the Code.  The Administrator shall interpret the Plan provisions in a manner consistent with the requirements of Section 409A of the Code. To the extent one or more provisions of this Plan do not comply with Section 409A of the Code, such provision shall be automatically and immediately voided, and shall be amended as soon as administratively feasible and shall be administered to so comply.  Notwithstanding the foregoing or anything else to the contrary in the Plan, the Company 

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shall have no liability to any Participant should any provision of the Plan fail to satisfy the requirements of Section 409A.

ARTICLE 10

SECURITIES LAWS COMPLIANCE

10.1Action by Administrator.  With respect to any Participant who is then subject to Section 16 of the Exchange Act, notwithstanding anything to the contrary set forth herein, any function of the Administrator under the Plan relating to such Participant shall be performed solely by the Board or its Compensation Committee, if and to the extent required to ensure the availability of an exemption under Section 16 of the Exchange Act for any transaction relating to such Participant under the Plan.
10.2Compliance with Section 16.  Notwithstanding any other provision of the Plan or any rule, instruction, election form or other form, the Plan and any such rule, instruction or form shall be subject to any additional conditions or limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law, such provision, rule, instruction or form shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

ARTICLE 11

GENERAL PROVISIONS

11.1No Stockholder Rights Conferred.  Nothing contained in the Plan will confer upon any Participant or beneficiary any rights of a stockholder of the Company, unless and until Shares are in fact issued or transferred to such Participant or beneficiary in accordance with Article 5.
11.2Changes to The Plan.  The Administrator may amend, alter, suspend, discontinue, extend, or terminate the Plan without the consent of Participants; provided, no action taken without the consent of an affected Participant may materially impair the rights of such Participant with respect to any Stock Units credited to his or her Stock Unit Account at the time of such change or termination except that the Administrator may without the consent of any Participant terminate the Plan and distribute Shares in settlement of Stock Units then credited to Participant’s Stock Unit Account upon a Change in Control.
11.3Compliance With Laws and Obligations.  The Company will not be obligated to issue or deliver Shares in connection with the Plan in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law, any requirement under any listing agreement between the Company and any national securities exchange or automated quotation system or any other laws, regulations, or contractual obligations of the Company, until the Company is satisfied that such laws, regulations and other obligations of the Company have been complied with in full.  Certificates representing Shares delivered under the Plan will be subject to such restrictions as may be applicable under such laws, regulations and other obligations of the Company.
11.4Limitations on Transferability.  Stock Units and other rights under the Plan may not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the claims of creditors of any Participant.
11.5Governing Law.  The validity, construction and effect of the Plan and any agreement hereunder will be determined in accordance with laws of the State of Delaware.
11.6Plan Termination.  The Administrator reserves the right to terminate the Plan at any time to the extent such termination is in compliance with the requirements of Section 409A.  Unless earlier terminated by action of the Board, the Plan will remain in effect until such time as the Company and the Participants have no further rights or obligations under the Plan.

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11.7Acceleration of Plan Distributions.  The Administrator reserves the right to accelerate the distribution of Shares in settlement of Stock Unit Accounts to the extent compliant with the requirements of Section 409A, including any accelerated distribution permitted by Treas. Reg. § 1.409A-3(j)(4).

ARTICLE 12

DEFINITIONS

Wherever used herein, the following terms shall have the meanings set forth below:
“Administrator” means the committee appointed to administer the Plan under Article 8.
“Board” means the Board of Directors of the Company.
“Cash Director Fees” means all or part of any annual or quarterly retainer or meeting fees payable in cash to a Non-Employee Director as consideration for services provided as a Director in the form of cash.  
“Change in Control” means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as defined in Section 409A(a)(2)(A)(v) of the Code.  Whether a Change in Control has occurred will be determined in manner consistent with the requirements of Section 409A.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” means Luna Innovations Incorporated, a Delaware corporation, or any successor thereto.
“Deferral Date” means the date Director Fees would otherwise have been paid to the Participant in the absence of a Deferral Election.
“Deferral Election” means a written election by a Participant to defer Director Fees under the Plan.
“Director” means any individual who is a member of the Board.
“Director Fees” means Cash Director Fees and/or Stock Director Fees. Director Fees shall not include any expenses paid directly or through reimbursement.  
“Eligible Director” means a Director who is not an employee of the Company or any of its subsidiaries or affiliates.  
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” of a Share means on a given date (a) if the principal market for the Shares is the Nasdaq stock market, a national securities exchange or other recognized national market or service reporting sales, the closing price of a Share on the date of the determination on the principal market on which the Shares are then listed or admitted to trading, (b) if the Shares are not listed on the Nasdaq stock market, a national securities exchange or other recognized national market or service reporting sales, the closing price of a Share on the date of the determination as reported by the system then regarded as the most reliable source of such quotations, (c) if Shares are listed on a domestic stock exchange or market or quoted in a domestic market or service, but there are not reported sales or quotations, as the case may be, on the given date, the value determined pursuant to (a) or (b) above using the reported sale prices or quotations on the last previous day on which so reported, or (d) if none of the foregoing clauses apply, the fair market value of a Share as determined in good faith by the Administrator.
“Specified Employee” means a “specified employee” as defined in Treas. Reg. § 1.409A-1(i).  
“Participant” means an Eligible Director who elects to defer Director Fees under the Plan.

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“Section 409A” shall mean Section 409A of the Code and the regulations and other guidance thereunder.
“Separation from Service” means the termination of an individual’s service as a Director for any reason within the meaning of Treas. Reg. § 1.409A-1(h).  Whether a Separation from Service has occurred will be determined in manner consistent with the requirements of Section 409A.
“Shares” means shares of the Company’s common stock, par value $0.001 per share, or, in the event that the outstanding shares of the Company’s common stock are recapitalized, converted into or exchanged for different stock or securities of the Company, such other stock or securities..
“Specified Date” means the date elected by the Participant on the Deferral Form for commencement of distribution of Shares in settlement of the Participant’s Stock Unit Account.
“Stock Units” means the credits made to a Participant’s Stock Unit Account under Article 4 of the Plan.  Each Stock Unit represents the right to receive one Share upon settlement of the Stock Unit Account.
“Stock Unit Account” means the bookkeeping account established by the Company pursuant to Section 4.1.
“Stock Director Fees” means all or part of any award providing for an issuance of Shares granted to a Non-Employee Director as consideration for services provided as a Director, but excluding any stock option.

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APPENDIX I

FORM OF NOTICE OF ELECTION TO DEFER DIRECTOR FEES

[Date]
Corporate Secretary
Luna Innovations Incorporated 
301 1st Street, SW Suite 200
Roanoke, VA 24011
RE:  Notice of Election to Defer Board of Director Compensation
Dear Mr. Graeff:
Pursuant to the Luna Innovations Incorporated Non-Employee Directors' Deferred Compensation Plan, as amended (the "Plan"), I hereby elect to defer receipt of my Director fees that I earn in future periods, whether otherwise payable to me in cash (“Cash Director Fees”) or in an issuance of shares of common stock or restricted stock units (“Stock Director Fees” and, collectively with the Cash Director Fees, the “Director Fees”), commencing with the Director Fees that I earn on or after January 1, 2018 in accordance with my elections below.  I understand that this election will remain in effect with respect to any Director Fees that I earn in future taxable years unless and until changed by me in a manner permitted by Section 409A of the Internal Revenue Code.
I elect to have my Director Fees credited as follows (fill in appropriate percentages for options a, b, c and d below):
Cash Director Fees (percentages should total to 100%):
		
	(a)
	_____% of my aggregate Cash Director Fees shall be credited to my Stock Unit Account as provided for in the Plan;

		
	(b)
	_____% of my aggregate Cash Director Fees shall not be deferred;

Stock Director Fees (percentages should total to 100%):
		
	(c)
	_____% of my aggregate Stock Director Fees shall be credited to my Stock Unit Account as provided for in the Plan; and

		
	(d)
	_____% of my aggregate Stock Director Fees shall not be deferred.

I understand that application of any elected deferral percentage to Stock Director Fees will be rounded up the nearest whole share to avoid any fractional share deferral.
Further, I elect to receive any future payments to be made from my Stock Unit Account under the Plan in the following method (check one desired method below):
࿽    in one lump sum; or
࿽    in ______ (insert number) of equal annual installments.

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I elect to receive (in the case of a lump sum) or begin to receive (in the case of installments) payment from my Stock Unit Account on the first day of the month next following the earlier of the following to occur:
		
	(a)
	My Separation of Service (as defined by the Plan);

		
	(b)
	My _______ birthday, which is ____________, 20___ (indicate the age you would like to trigger the distribution and the date upon which you will be that age);

		
	(c)
	____________ (indicate date that you would like to trigger distribution);  or

		
	(d)
	A Change in Control (as defined by the Plan).

I understand an election to defer my Director Fees is irrevocable as of each December 31 with respect to fees earned for services performed in the immediately following calendar  year.

In the event of my death prior to the receipt of all or any amount of the balance of my Stock Unit Account so accumulated. I designate the following one or more individuals; _________________________________________________________; as my beneficiary or beneficiaries to receive any accumulated but unpaid funds from my Stock Unit Account.

Sincerely,

____________________________________
Signature of Director

____________________________________
Printed Name of Director

____________________________________
Date

9Exhibit

EXHIBIT 10.25

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered into effective as of December 5, 2017 (the “Effective Date”), by and between Scott A. Graeff (the “Employee”) and Luna Innovations Incorporated (the “Company”) and amends and restates in its entirety the Employment Agreement between the Company and Employee that was effective as of March 28, 2012.
The Company desires to continue to employ the Employee and, in connection therewith, to compensate the Employee for Employee’s personal services to the Company; and 
The Employee wishes to continue to be employed by the Company and provide personal services to the Company in return for certain compensation.
This Agreement supersedes any and all prior and contemporaneous oral or written employment agreements or arrangements between Employee and the Company or any predecessor thereof.
Accordingly, in consideration of the mutual promises and covenants contained herein, the parties agree to the following:
1.EMPLOYMENT BY THE COMPANY.
1.1    At-Will Employment. Employee shall continue to be employed by the Company on an “at-will” basis, meaning either the Company or Employee may terminate Employee’s employment at any time, with or without cause or advanced notice.  Any contrary representations that may have been made to Employee shall be superseded by this Agreement.  This Agreement shall constitute the full and complete agreement between Employee and the Company on the “at-will” nature of Employee’s employment with the Company, which may be changed only in an express written agreement signed by Employee and a duly authorized officer of the Company. Employee’s rights to any compensation following a termination shall be only as set forth in Section 6.
1.2    Position; Board Role.  Subject to the terms set forth herein, the Company agrees to continue to employ Employee, in the position of President and Chief Executive Officer, and Employee hereby accepts such continued employment.  During the term of Employee’s employment with the Company, and excluding periods of vacation and sick leave to which Employee is entitled, Employee shall devote all business time and attention to the affairs of the Company necessary to discharge the responsibilities assigned hereunder, and shall use commercially reasonable efforts to perform faithfully and efficiently such responsibilities.  Employee shall further serve as a Director of the Company’s Board of Directors (the “Board”) during the term of his employment
1.3    Duties.  Employee will report to Board will render such business and professional services in the performance of his duties, consistent with Employee’s position as President and Chief Executive Officer, as shall reasonably be assigned to him by the Board, subject to the oversight and direction of the Board.  Employee shall perform his duties under this Agreement principally out of the Company’s corporate headquarters, or such other location as assigned.  In addition, the Employee shall make such business trips to such places as may be reasonably necessary or advisable for the efficient operations of the Company.
1.4    Company Policies and Benefits.  The employment relationship between the parties shall also be subject to the Company’s personnel policies and procedures as they may be adopted, revised or deleted from time to time in the Company’s sole discretion.  The Employee will continue to be eligible to participate on the same basis as similarly situated employees in the Company’s benefit plans in effect from time to time during his employment.  All matters of eligibility for coverage or benefits under any benefit plan shall be determined in accordance with the provisions of such plan.  The Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion. Notwithstanding the foregoing, in the event that the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
		
	2.
	COMPENSATION.

2.1    Salary.  Effective as of October 1, 2017, Employee shall receive for Employee’s services to be rendered hereunder an initial annualized base salary of $325,000, subject to review and adjustment from time to time by the Company in its sole discretion, payable subject to standard federal and state payroll withholding requirements in accordance with Company’s standard payroll practices (“Base Salary”).  This increase will be reflected in the Company’s first regularly scheduled payroll date after the Effective Date. 
2.2    Bonus.  
(a)    During Employment. Employee shall continue to be eligible to earn an annual performance bonus with a target of  50%, with a maximum potential of 75% of the actual salary received in the year in which the bonus is being measured (an “Annual Bonus” and the target amount of an Annual Bonus, the “Target Bonus” and the maximum amount of an Annual Bonus, the “Maximum Target Bonus).  The Annual Bonus will be based upon the Board’s assessment of the Employee’s performance and the Company’s attainment of targeted goals as set by the Board in its reasonable good faith discretion.  The Annual Bonus, if any, will be subject to applicable payroll deductions and withholdings.  Following the close of each calendar year, the Board will determine whether the Employee has earned the Annual Bonus, and the amount of any Annual Bonus, based on the set criteria.  No amount of the Annual Bonus is guaranteed, and the Employee must be an employee in good standing through December 31 of the year in which the Annual Bonus is being measured to be eligible to receive an Annual Bonus.  No partial or prorated bonuses will be provided.  The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year immediately following the applicable calendar year for which the Annual Bonus is being measured.  The Employee’s eligibility for an Annual Bonus is subject to change in the discretion of the Board (or any authorized committee thereof).  Employee acknowledges that if the Company adopts an incentive compensation plan the terms of any such plan may supersede and replace the provisions of this Section 2.2, as determined by the Company in its sole discretion
(b)    Upon Termination.  Subject to the provisions of Section 6.1(a)(iii), in the event Employee leaves the employ of the Company for any reason prior to December 31 of the year in which the Annual Bonus is being measured, he is not eligible for such Annual Bonus, prorated or otherwise.
2.3    Equity Incentive Awards.  
(a)    Prior Equity Incentive Awards.  The parties acknowledge that Exhibit A is a complete and accurate list of Employee’s options to purchase shares of the Company’s common stock (the “Prior Options”) and restricted shares of the Company’s common stock (“Prior Restricted Stock Awards”) granted by the Company to Employee prior to the Effective Date of this Agreement. The Prior Options and Prior Restricted Stock Awards are subject to the Company’s 2006 Equity Incentive Plan (the “2006 Plan”) or the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) and individual stock option and restricted stock grant notices and agreements (“Award Agreements”), as applicable, including but not limited to the vesting schedules set forth therein. 
(b)    Restricted Stock Award.  Subject to approval by the Board at its next regularly scheduled meeting following the Effective Date, the Company will grant Employee fifty thousand (50,000) restricted shares of the Company’s Common Stock (the “Restricted Stock Award”).  The Restricted Stock Award will be subject to the terms of the 2016 Plan and a restricted stock grant notice and agreement.  The Restricted Stock Award will vest subject to Employee’s continued employment in annual installments over a three-year period, whereby one third of the shares will vest on each of the first, second and third anniversaries of October 1, 2017, in each case subject to Employee’s continued employment through the applicable vesting dates.
(c)    Acceleration.  The Prior Options, Prior Restricted Stock Awards and Restricted Stock Award may be subject to accelerated vesting in accordance with Section 6 of this Agreement. 
2.4    Expense Reimbursement.  The Company will reimburse Employee for reasonable business expenses in accordance with the Company’s standard expense reimbursement policy.  For the avoidance of doubt, to the extent that any reimbursements payable to Employee are subject to the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”): (a) any such reimbursements will be paid no later than December 31 of the year following the year in which the expense was incurred, (b) the amount of expenses reimbursed in one year will not affect the amount eligible for reimbursement in any subsequent year, and (c) the right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.  
3.PROPRIETARY INFORMATION, INVENTIONS, AND NON-SOLICITATION OBLIGATIONS.  Contemporaneously with this Agreement and as a condition of continued employment, the parties hereto have entered into a Confidential Information, Inventions, Non-Competition and Non-Solicitation Agreement (the “Confidential Information Agreement”), which may be amended by the parties from time to time without regard to this Agreement.  The Confidential Information Agreement contains provisions that are intended by the parties to survive and do survive termination or expiration of this Agreement.  
  
4.OUTSIDE ACTIVITIES.  Except with the prior written consent of the Board, , Employee will not, while employed by the Company, undertake or engage in any other employment, occupation or business enterprise that would interfere with Employee’s responsibilities and the performance of Employee’s duties hereunder except for (i) reasonable time devoted to volunteer services for or on behalf of such religious, educational, non-profit and/or other charitable organization as Employee may wish to serve, (ii) reasonable time devoted to activities in the non-profit and business communities consistent with Employee position with the Company; or (iii) reasonable time serving as trustee, director or advisor to any family companies or trusts. This restriction shall not, however, preclude the Employee (x) from owning (A) less than one percent (1%) of the total outstanding shares of a publicly traded company or (B) equity in real estate holding or management companies, or (y) from employment or service in any capacity with Affiliates of the Company.  As used in this Agreement, “Affiliates” means an entity under common management or control with the Company.  
5.NO CONFLICT WITH EXISTING OBLIGATIONS.  Employee represents that Employee’s performance of all the terms of this Agreement and as an employee of the Company do not and will not breach any agreement or obligation of any kind made prior to Employee’s employment by the Company, including agreements or obligations Employee may have with prior employers or entities for which Employee has provided services.  Employee has not entered into, and Employee agrees that Employee will not enter into, any agreement or obligation, either written or oral, in conflict herewith.

6.TERMINATION OF EMPLOYMENT. The parties acknowledge that Employee’s employment relationship with the Company is at-will.  Either Employee or the Company may terminate the employment relationship at any time, with or without cause.  The provisions in this Section govern the amount of compensation, if any, to be provided to Employee upon termination of employment and do not alter this at-will status.

6.1    Termination by the Company or Resignation by Employee.
(a)    The Company shall have the right to terminate Employee’s employment with the Company pursuant to this Section 6.1 at any time with or without Cause (as defined below), by giving notice as described in Section 7.1 of this Agreement.  Likewise, Employee can resign from employment with the Company with or without Good Reason (as defined below), by giving notice as described in Section 7.1 of this Agreement.  If Employee is terminated by the Company (with or without Cause) or resigns from employment with the Company (with or without Good Reason), then Employee shall be entitled to the Accrued Obligations (as defined below), and in addition, if Employee is terminated without Cause or resigns for Good Reason, and provided that such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from Service”), and further provided that the Employee executes and allows to become effective a separation agreement that includes, among other terms, a general release of claims in favor of the Company and its affiliates and representatives, in a reasonable form presented by the Company (the “Release”), and subject to Section 6.1(b) (the date that the Release becomes effective and may no longer be revoked by the Employee is referred to as the “Release Date”), then the Employee shall be eligible to receive the following severance benefits (collectively the “Severance Benefits”):  
(i)    An amount equal to twelve (12) months of Employee’s then current Base Salary, less standard payroll deductions and withholdings, paid in installments on the Company’s regular payroll dates;
(ii)    provided Employee timely elects continued coverage under COBRA under the Company’s group health plans following such termination, the portion of the COBRA premiums that the Company was previously paying, to continue Employee’s health insurance coverage in effect on the termination date until the earliest of: (1) twelve (12) months following the termination date (the “COBRA Severance Period”); (2) the date when Employee  becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (3) the date Employee ceases to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the termination date through the earlier of (1)-(3), (the “COBRA Payment Period”).  Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on Employee’s behalf would result in a violation of applicable law (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section, the Company shall pay Employee on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding (such amount, the “Special Severance Payment”), for the remainder of the COBRA Payment Period.  Nothing in this Agreement shall deprive Employee of his rights under COBRA or ERISA for benefits under plans and policies arising under his employment by the Company; 
(iii)    A lump sum cash payment in an amount equal to the Target Bonus for the year in which the termination occurs (the “Bonus Severance Payment”), subject to standard payroll deductions and withholdings, which will be paid when annual bonuses are otherwise paid, which in no event will be later than March 15 of the year following the year in which the termination date occurs; and
(iv)    A lump cash payment equal to the value of any unvested 401(k) Company match amount.
(b)    Employee shall not receive the Severance Benefits pursuant to Section 6.1(a) unless he executes the Release within the consideration period specified therein, which shall in no event be more than 45 days, and until the Release becomes effective and can no longer be revoked by Employee under its terms.  Employee’s ability to receive benefits pursuant to Section 6.1(a) is further conditioned upon his: returning all Company property; complying with his post-termination obligations under this Agreement and the Confidential Information Agreement; complying with the Release including without limitation any non-disparagement and confidentiality provisions contained therein; and resignation from any other positions he holds with the Company, effective no later than his Employee’s date of termination (or such other date as requested by the Board).

(c)    The Company will not make any payments to Employee with respect to any of the benefits pursuant to Section 6.1(a) prior to the 60th day following Employee’s date of termination.  On the 60th day following Employee’s date of termination, and provided that Employee has delivered an effective Release, the Company will make the first payments to Employee under Section 6.1(a)(i) in a lump sum equal to the aggregate amount of payments that the Company would have paid Employee through such date had the payments commenced on the Employee’s date of termination through such 60th day, with the balance of the payments paid thereafter on the schedule described above, subject to any delay in payment required by Section 6.7.

(d)    For purposes of this Agreement, “Accrued Obligations” are (i) Employee’s accrued but unpaid salary and accrued but unused vacation through the date of termination (which, for purpose of clarity, shall be paid in cash), (ii) any unreimbursed business expenses incurred by Employee payable in accordance with the Company’s standard expense reimbursement policies, (iii) benefits owed to Employee under any qualified retirement plan or health and welfare benefit plan in which Employee was a participant in accordance with applicable law and the provisions of such plan; and (iv) any Annual Bonus earned but unpaid for the prior fiscal year.
(e)    For purposes of this Agreement, “Good Reason” means any of the following actions taken by the Company without Employee’s consent: (i) a reduction of Employee’s Base Salary (unless such reduction is made in connection with an across the board reduction in base salaries of the Company’s senior executives); (ii) material reduction in Employee’s authority, duties or responsibilities as President and Chief Executive Officer, provided, however, that the acquisition of the Company and subsequent conversion of the Company to a division or unit of the acquiring company will not by itself result in a diminution of Employee’s position; (iii) a material change in the geographic location of Employee’s primary work facility or location; provided, that a relocation of fifty (50) or more miles from downtown Roanoke, Virginia, will be considered a material change in geographic location; (iv) any material breach by the Company of any of its obligations hereunder; or (v) a change so that Employee is no longer eligible to receive an Annual Bonus as described in the first two sentences of Section 2.2(a).  In order to resign for Good Reason, Employee must provide written notice of the event giving rise to Good Reason to the Board within thirty (30) days after the condition first arises, allow the Company thirty (30) days to cure such condition, and if the Company fails to cure the condition within such period, Employee’s resignation from all positions Employee then holds with the Company must be effective not later than sixty (60) days after the end of the Company’s cure period.

(f)    For purposes of this Agreement, “Cause” means first, the Employee’s conviction of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof (which, for purpose of clarity, would exclude traffic offenses).  Second, “Cause” means, as reasonably determined in good faith by the Board, Employee’s willful and material acts or omissions that constitute the following conduct: (i) commission or attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (ii) material violation of any contract or agreement between the Employee and the Company or of any statutory duty owed to the Company after Employee is provided with a reasonable opportunity of not less than thirty (30) days to cure from the date written notice (in reasonable detail) thereof is given to Employee by the Company; (iii) unauthorized use or disclosure of the Company’s confidential information or trade secrets; (iv) gross misconduct or gross negligence causing material injury to the Company; (v) breach of fiduciary duty, including without limitation concealing information relevant to the Company from the Board of a nature that senior executives should disclose to boards of directors in fulfilling such duty; or (vii) refusal to comply with a lawful directive of the Board after Employee is provided with a reasonable opportunity of not less than ten (10) days to cure from the date notice thereof is given to Employee by the Company.
(g)    The benefits provided to Employee pursuant to this Section 6.1 are in lieu of, and not in addition to, any benefits to which Employee may otherwise be entitled under any Company severance plan, policy or program.

(h)    Any damages caused by the termination of Employee’s employment without Cause or for Good Reason would be difficult to ascertain; therefore, the Severance Benefits for which Employee is eligible pursuant to Section 6.1(a) above in exchange for the Release is agreed to by the parties as liquidated damages, to serve as full compensation, and not a penalty.

(i)    If the Company terminates the Employee’s employment for Cause or Employee resigns from employment with the Company without Good Reason, regardless of whether or not such termination is in connection with a Change in Control (as defined below), then Employee shall be entitled to the Accrued Obligations, but Employee will not receive the Severance Benefits or any other severance compensation or benefit.

6.2    Resignation by the Employee for Good Reason or Termination by the Company without Cause (in connection with a Change in Control).
(a)    In the event that the Company terminates Employee’s employment without Cause or Employee resigns for Good Reason within three months prior to or twelve (12) months following the effective date of a Change in Control (“Change in Control Termination Date”), then Employee shall be entitled to the Accrued Obligations and, subject to Employee’s compliance with Section 6.1(b) above, including but not limited to the Release requirement and Employee’s continued compliance with his obligations to the Company under his Confidential Information Agreement, then:
(i)    Employee shall be eligible to receive the Severance Benefits under the terms and conditions described in Section 6.1; provided that (A)    the amounts set forth in clauses (i) and (iv) of Section 6.1(a) shall be paid in lump sums in accordance with the timing set forth in Section 6.1(a) and not deferred per such clauses (i) and (iv) and (B) the Bonus Severance Payment shall be equal to the Maximum Target Bonus as opposed to the Target Bonus; and  
(ii)    Effective as of the later of Employee’s Change in Control Termination Date or the effective date of the Change in Control, the vesting and exercisability of all outstanding stock options and other stock awards covering the Company’s Common Stock that are held by Employee as of immediately prior to the Change in Control Termination Date shall be accelerated (and lapse, in the case of reacquisition or repurchase rights) in full.  Employee’s stock options and stock awards shall remain outstanding following Employee’s Change in Control Termination Date if and to the extent necessary to give effect to this Section 6.2(a)(ii) subject to earlier termination under the terms of the equity plan under which such awards were granted and the original maximum term of the award (without regard to Employee’s termination). 
(b)    As used in this Agreement, “Change in Control” means “Change in Control” as defined in the Company’s 2016 Equity Incentive Plan.

6.3    Termination by Virtue of Death or Disability of the Employee. 
(a)    In the event of Employee’s death while employed pursuant to this Agreement, all obligations of the parties hereunder and Employee’s employment shall terminate immediately, and the Company shall, pursuant to the Company’s standard payroll policies, pay to the Employee’s legal representatives the Accrued Obligations due to Employee, but the Company will not provide the Severance Benefits, or any other severance compensation or benefit.  
(b)    Subject to applicable state and federal law, the Company shall at all times have the right, upon written notice to the Employee, to terminate this Agreement based on the Employee’s Disability (as defined below).  Termination by the Company of the Employee’s employment based on “Disability” shall mean termination because the Employee is unable due to a physical or mental condition to perform the essential functions of his position with or without reasonable accommodation for six (6) months in the aggregate during any twelve (12) month period or based on the written certification by two licensed physicians of the likely continuation of such condition for such period.  This definition shall be interpreted and applied consistent with the Americans with Disabilities Act, the Family and Medical Leave Act, and other applicable law. In the event Employee’s employment is terminated based on the Employee’s Disability, Employee will be entitled to the Accrued Obligations, but will not receive the Severance Benefits, or any other severance compensation or benefit.  
6.4    Termination Due to Discontinuance of Business.  Anything in this Agreement to the contrary notwithstanding, in the event the Company’s business is discontinued because rendered impracticable by substantial financial losses, lack of funding, legal decisions, administrative rulings, declaration of war, dissolution, national or local economic depression or crisis or any reasons beyond the control of the Company, then this Agreement shall terminate as of the day the Company determines to cease operation with the same force and effect as if such day of the month were originally set as the termination date hereof.  In the event this Agreement is terminated pursuant to this Section 6.4, Employee will be entitled to the Accrued Obligations, but will not receive the Severance Benefits, or any other severance compensation or benefit.  
6.5    Cooperation With Company After Termination of Employment. Following termination of Employee’s employment for any reason, Employee shall  reasonably cooperate with the Company in all matters relating to the winding up of Employee’s pending work including, but not limited to, any litigation in which the Company is involved, and the orderly transfer of any such pending work to such other Employees as may be designated by the Company; provided, however, that the obligations hereunder shall not interfere with Employee’s efforts to obtain subsequent employment and/or his obligations to and responsibilities for a subsequent employer and the obligations hereunder shall end six months after the termination of the Employee’s employment; and provided further that the Employee will be paid for his efforts hereunder at an hourly rate determined by dividing his last Annual Salary by 1,800 hours and that Employee shall be reimbursed his reasonable expenses. 
6.6    Effect of Termination.  Employee agrees that should his employment be terminated for any reason, he shall be deemed to have resigned from any and all positions with the Company, including, but not limited, to a position on the Board and all positions with any and all subsidiaries and Affiliates of the Company.   
6.7    Application of Section 409A.  It is intended that all of the severance payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) provided under Treasury Regulations Sections 1.409A-1(b)(4) and 1.409A-1(b)(9), and this Agreement will be construed in a manner that complies with Section 409A.  If not so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A, and incorporates by reference all required definitions and payment terms.  No severance payments will be made under this Agreement unless Employee’s termination of employment constitutes a Separation from Service.  For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii)), Employee’s right to receive any installment payments under this Agreement (whether severance payments or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  To the extent that any severance payments are deferred compensation under Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Employee may consider and sign the Release spans two calendar years, the severance payments will not begin until the second calendar year. If the Company determines that the severance benefits provided under this Agreement constitutes “deferred compensation” under Section 409A and if Employee is a “specified employee” of the Company, as such term is defined in Section 409A(a)(2)(B)(i) of the Code at the time of Employee’s Separation from Service, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance will be delayed as follows: on the earlier to occur of (a) the date that is six months and one day after Employee’s Separation from Service, and (b) the date of Employee’s death (such earlier date, the “Delayed Initial Payment Date”), the Company will pay to Employee a lump sum amount equal to the sum of the severance benefits that Employee would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the severance benefits had not been delayed pursuant to this Section 6.7 and (ii) commence paying the balance of the severance benefits in accordance with the applicable payment schedule set forth in Section 6.1. No interest shall be due on any amounts deferred pursuant to this Section 6.7. 
6.8    Excise Tax Adjustment. Notwithstanding any of the foregoing to the contrary in the event that the severance and other benefits provided for in this Agreement or otherwise payable to Employee (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section, would be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then Employee’s severance benefits under this Agreement shall be payable either (A) in full, or (B) as to such lesser amount which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Employee on an after-tax basis, of the greatest amount of severance benefits under this Agreement, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Employee otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon Employee and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Employee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section. Any reduction in payments and/or benefits required by this Section shall occur in the following order: (1) reduction of cash payments; (2) reduction in vesting acceleration of equity awards; and (3) reduction of other benefits paid or provided to Employee. In the event that acceleration of vesting of equity awards is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant for Employee’s equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. 
7.GENERAL PROVISIONS.
7.1    Notices.  Any notices required hereunder to be in writing shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail or confirmed facsimile if sent during normal business hours of the recipient, and if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the Company at its primary office location and to Employee at Employee’s address as listed on the Company payroll or to Employee’s Company-issued email address, or at such other address as the Company or Employee may designate by ten (10) days advance written notice to the other.
7.2    Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.
7.3    Waiver.  If either party should waive any breach of any provisions of this Agreement, Employee or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
7.4    Complete Agreement.  This Agreement constitutes the entire agreement between Employee and the Company with regard to the subject matter hereof.  This Agreement is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter and supersedes any prior oral discussions or written communications and agreements.  This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in writing signed by Employee and an authorized officer of the Company.  The parties have entered into a separate Confidential Information Agreement and have or may enter into separate agreement related to stock awards.  These separate agreements govern other aspects of the relationship between the parties, have or may have provisions that survive termination of the Employee’s employment under this Agreement, may be amended or superseded by the parties without regard to this Agreement and are enforceable according to their terms without regard to the enforcement provision of this Agreement.
7.5    Counterparts.  This Agreement may be executed by electronic transmission and in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
7.6    Headings.  The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.
7.7    Successors and Assigns.  The Company shall assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any company or other entity with or into which the Company may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in any such case said company or other entity shall by operation of law or expressly in writing assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Employee may not assign or transfer this Agreement or any rights or obligations hereunder, other than to his estate upon his death. 
7.8    Choice of Law.  All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the Commonwealth of Virginia.  
7.9    Resolution of Disputes.  The parties recognize that litigation in federal or state courts or before federal or state administrative agencies of disputes arising out of the Employee’s employment with the Company or out of this Agreement, or the Employee’s termination of employment or termination of this Agreement, may not be in the best interests of either the Employee or the Company, and may result in unnecessary costs, delays, complexities, and uncertainty.  The parties agree that any dispute between the parties arising out of or relating to the negotiation, execution, performance or termination of this Agreement or the Employee’s employment, including, but not limited to, any claim arising out of this Agreement, claims under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil Rights Act of 1966, as amended, the Family Medical Leave Act, the Employee Retirement Income Security Act, and any similar federal, state or local law, statute, regulation, or any common law doctrine, whether that dispute arises during or after employment, shall be settled by binding arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association; provided however, that this dispute resolution provision shall not apply to any separate agreements between the parties that do not themselves specify arbitration as an exclusive remedy. The location for the arbitration shall be the Roanoke, Virginia area.  Any award made by such panel shall be final, binding and conclusive on the parties for all purposes and shall be kept confidential, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitrators’ fees and expenses and all administrative fees and expenses associated with the filing of the arbitration shall be borne by the Company; provided however, that at the Employee’s option, Employee may voluntarily pay up to one-half the costs and fees. The parties acknowledge and agree that their obligations to arbitrate under this Section survive the termination of this Agreement and continue after the termination of the employment relationship between Employee and the Company. The parties each further agree that the arbitration provisions of this Agreement shall provide each party with its exclusive remedy, and each party expressly waives any right it might have to seek redress in any other forum, except as otherwise expressly provided in this Agreement.  By election arbitration as the means for final settlement of all claims, the parties hereby waive their respective rights to, and agree not to, sue each other in any action in a Federal, State or local court with respect to such claims, but may seek to enforce in court an arbitration award rendered pursuant to this Agreement.  The parties specifically agree to waive their respective rights to a trial by jury, and further agree that no demand, request or motion will be made for trial by jury.         
                
IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the day and year first written above.
      Luna Innovations Incorporated

By: /s/ Richard W. Roedel    
Richard W. Roedel
Chairman of the Board of Directors

Employee:

/s/ Scott A. Graeff                
 Scott A. Graeff

    
Prior Option and Prior Restricted Stock Awards
(see attached)

1

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