Document:

Exhibit 10.31

 Exhibit 10.31 
 EXECUTION COPY 

 LUNA INNOVATIONS INCORPORATED

 CLASS C COMMON STOCK AND NOTE PURCHASE AGREEMENT 
 December 30, 2005 
  

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page
	SECTION 1 Authorization, Sale and Issuance of the Notes and the Class C Common Stock	  	2
			
	 1.1
	  	Authorization	  	2
	 1.2
	  	Sale and Issuance of Notes and Class C Shares	  	2
		
	SECTION 2 Closing Date and Delivery of the Notes and the Class C Common Stock	  	3
	 2.1
	  	Closing	  	3
	 2.2
	  	Delivery	  	3
	 2.3
	  	Termination of Prior Agreement	  	3
		
	SECTION 3 Representations and Warranties of the Company	  	3
			
	 3.1
	  	Organization, Good Standing and Qualification	  	3
	 3.2
	  	Subsidiaries	  	4
	 3.3
	  	Capitalization	  	4
	 3.4
	  	Authorization	  	5
	 3.5
	  	Financial Statements	  	6
	 3.6
	  	Changes	  	6
	 3.7
	  	Material Contracts	  	6
	 3.8
	  	Intellectual Property	  	7
	 3.9
	  	Proprietary Information and Invention Assignment	  	7
	 3.10
	  	Title to Properties and Assets; Liens	  	7
	 3.11
	  	Compliance with Other Instruments	  	8
	 3.12
	  	Litigation	  	8
	 3.13
	  	Consents	  	8
	 3.14
	  	Permits	  	8
	 3.15
	  	Registration and Voting Rights	  	8
		
	SECTION 4 Representations and Warranties of the Investor	  	9
			
	 4.1
	  	No Registration	  	9
	 4.2
	  	Investment Intent	  	9
	 4.3
	  	Investment Experience	  	9
	 4.4
	  	Speculative Nature of Investment	  	9
	 4.5
	  	Access to Data	  	9
	 4.6
	  	Accredited Investor	  	10
	 4.7
	  	Residency	  	10
	 4.8
	  	Rule 144	  	10
	 4.9
	  	No Public Market	  	11
	 4.10
	  	Authorization	  	11
	 4.11
	  	Brokers or Finders	  	11
	 4.12
	  	Tax Advisors	  	11
	 4.13
	  	Legends	  	11
	 4.14
	  	Due Diligence	  	12

  

 -i- 

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	  	Page
	SECTION 5 Conditions to Investor’s Obligation to Close	  	12
			
	 5.1
	  	Representations and Warranties	  	12
	 5.2
	  	Repayment of Outstanding Indebtedness	  	12
	 5.3
	  	Covenants	  	12
	 5.4
	  	Blue Sky	  	12
	 5.5
	  	Restated Certificate	  	12
	 5.6
	  	Closing Deliverables	  	12
	 5.7
	  	Consents and Waivers	  	13
	 5.8
	  	Market Standoff Agreements	  	13
	 5.9
	  	Amended & Restated Investor Rights Agreement	  	13
	 5.10
	  	Employee Agreements	  	13
	 5.11
	  	Board of Directors	  	13
	 5.12
	  	Proceedings	  	13
	 5.13
	  	Due Diligence	  	13
		
	SECTION 6 Conditions to Company’s Obligation to Close	  	13
			
	 6.1
	  	Representations and Warranties	  	13
	 6.2
	  	Covenants	  	14
	 6.3
	  	Purchase Price	  	14
		
	SECTION 7 Miscellaneous	  	14
			
	 7.1
	  	Amendment	  	14
	 7.2
	  	Notices	  	14
	 7.3
	  	Governing Law	  	15
	 7.4
	  	Brokers or Finders	  	15
	 7.5
	  	Expenses	  	15
	 7.6
	  	Survival	  	15
	 7.7
	  	Successors and Assigns	  	15
	 7.8
	  	Entire Agreement	  	15
	 7.9
	  	Delays or Omissions	  	15
	 7.10
	  	Severability	  	16
	 7.11
	  	Counterparts	  	16
	 7.12
	  	Telecopy Execution and Delivery	  	16
	 7.13
	  	Jurisdiction; Venue	  	16
	 7.14
	  	Further Assurances	  	16
	 7.15
	  	Attorney’s Fees	  	16
	 7.16
	  	Jury Trial	  	16

  

 -ii- 

 EXHIBITS 
  

			
	A	    	Form of Note
	B	    	Amended and Restated Certificate of Incorporation
	C	    	Schedule of Notes and Class C Common Stock Investments
	D	    	Schedule of Exceptions
	E	    	Schedule of Common Stock Outstanding
	F	    	Form of Amended & Restated Investor Rights Agreement
	G	    	Compliance Certificate
	H	    	Opinion of Counsel to the Company

  

 -iii- 

 LUNA INNOVATIONS INCORPORATED 
 CLASS C COMMON STOCK AND NOTE PURCHASE AGREEMENT 
 This Class C Common Stock and
Note Purchase Agreement (this “Agreement”) is made as of December 30, 2005, by and between Luna Innovations Incorporated, a Delaware corporation (the “Company”), and Carilion Health System, a Virginia
non-profit, non-stock corporation (the “Investor”). 
 WHEREAS, the Company and the Investor are parties to that certain Class C
Common Stock Purchase Agreement dated as of August 2, 2005 (the “Prior Agreement”), pursuant to which the Investor purchased, and the Company sold and issued to the Investor, 2,639,688 shares (the “Original Class C
Shares”) of the Company’s Class C Common Stock, par value $0.001 per share (the “Class C Common Stock”) at the First Closing (as defined in the Prior Agreement); 
 WHEREAS, the Prior Agreement contemplated the sale and issuance of (i) an additional 1,885,491 shares of Class C Common Stock (the “Second
Tranche Shares”), subject to the satisfaction of certain conditions precedent, at a Second Closing (as defined in the Prior Agreement) and (ii) an additional 1,131,294 shares of Class C Common Stock (the “Third Tranche
Shares”), subject to the satisfaction of certain conditions precedent, at a Third Closing (as defined in the Prior Agreement); 
 WHEREAS,
the Company and the Investor have determined, among other things, that (i) the sale and issuance of the Second Tranche Shares at a Second Closing (as defined in the Prior Agreement) shall not occur and (ii) the sale and issuance of the
Third Tranche Shares at a Third Closing (as defined in the Prior Agreement) shall occur on modified terms as set forth in this Agreement; 
 WHEREAS,
the Company and the Investor desire to terminate the Prior Agreement and enter into this Agreement; 
 WHEREAS, the Company and the Investor are
parties to that certain Investor Rights Agreement dated as of August 2, 2005 (the “Prior Investor Rights Agreement”) and that certain Right of First Refusal, Co-Sale and Voting Agreement dated as of August 2, 2005 (the
“Right of First Refusal, Co-Sale and Voting Agreement”); and 
 WHEREAS, the Company and the Investor desire that (i) the Prior
Investor Rights Agreement be amended and restated as of the date hereof to reflect certain changes and (ii) the Right of First Refusal, Co-Sale and Voting Agreement survive Closing (as defined below) without modification or amendment.

 NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and conditions set forth below, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, the parties hereto, intending to be legally bound, hereby agree as follows: 

 SECTION 1 
 Authorization, Sale and Issuance of the Notes and the Class C Common Stock. 
 1.1
Authorization. The Company will, prior to the Closing (as defined below), authorize the sale and issuance, pursuant to the terms of this Agreement, of five (5) convertible promissory notes, each in the principal amount of one
million dollars ($1,000,00.00), and each in substantially the form attached hereto as Exhibit A (each a “Note” and collectively the “Notes”) and 1,131,294 shares (the “Class C Shares”) of the
Company’s Class C Common Stock, par value $0.001 per share (the “Class C Common Stock”), having the rights, privileges, preferences and restrictions set forth in the Amended and Restated Certificate of Incorporation of the
Company, in substantially the form attached hereto as Exhibit B (the “Restated Certificate”). The Company will, prior to the Closing (as defined below), authorize and reserve: (i) 1,885,490 shares of Class C Common
Stock for issuance upon conversion of the principal amount of the Notes prior to the Company’s IPO (as defined in the Notes) in accordance with their terms (the “Class C Note Conversion Shares”); (ii) 905,035 shares of
Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”) for issuance upon conversion of the maximum amount of accrued interest under the Notes prior to the Company’s IPO in accordance with their terms (the
“Class B Note Conversion Shares”); (iii) 2,790,525 shares of Common Stock, par value $0.001 per share (the “Common Stock”) for issuance upon conversion of the principal and maximum amount of accrued interest
under the Notes on or after the date of the Company’s IPO in accordance with their terms (the “Common Note Conversion Shares” and together with the Class C Note Conversion Shares and the Class B Note Conversion Shares, the
“Note Conversion Shares”); (iv) 1,131,294 shares of Class C Common Stock for sale and issuance of the Class C Shares under this Agreement; (v) 2,149,145 shares of Class A Common Stock, par value $0.001 per share (the
“Class A Common Stock”) and 3,507,327 shares of Class B Common Stock for issuance upon conversion of the Class C Shares, the Class C Note Conversion Shares and the Original Class C Shares (such shares of Class A Common Stock
and Class B Common Stock collectively, the “Conversion Shares”) and (vi) 5,656,472 shares of Common Stock for issuance upon the conversion of the Class B Note Conversion Shares and the conversion of the Conversion Shares.

 1.2 Sale and Issuance of Notes and Class C Shares. Subject to the terms and conditions of this Agreement, the Investor
agrees to purchase, and the Company agrees to sell and issue to the Investor, (i) the Notes in the principal amounts set forth on Exhibit C attached hereto (the “Note Purchase Prices”) and (ii) the number of Class C
Shares for the aggregate purchase price set forth on Exhibit C attached hereto (the “Class C Shares Purchase Price” and together with the Note Purchase Prices the “Aggregate Purchase Price”). 

 

 -2- 

 SECTION 2 
 Closing Date and Delivery of the Notes and the Class C Common Stock. 
 2.1 Closing. The
purchase, sale and issuance of the Notes and the Class C Shares shall take place at a closing (the “Closing”) at the offices of Woods Rogers PLC, 10 South Jefferson Street, Suite 1400, Roanoke, Virginia 24011, at 10:00 a.m. local
time on the date of this Agreement or such other date and time as the Company and the Investor mutually agree. 
 2.2
Delivery. At the Closing, the Company will deliver to the Investor (i) the Notes to be purchased by such Investor and (ii) a certificate registered in such Investor’s name representing the number of Class C Shares that
such Investor is purchasing in such Closing, against payment of the Aggregate Purchase Price therefor as set forth on Exhibit C, by (a) check payable to the Company, (b) wire transfer in accordance with the Company’s
instructions, (c) cancellation of indebtedness or (d) any combination of the foregoing. In the event that payment by the Investor is made, in whole or in part, by cancellation of indebtedness, then such Investor shall surrender to the
Company for cancellation at the Closing any evidence of indebtedness or shall execute an instrument of cancellation in form and substance acceptable to the Company. 
 2.3 Termination of Prior Agreement. Effective upon the Closing, the Prior Agreement (except for the representations and warranties of the Company and Investor contained in Sections 3 and 4,
respectively, which shall survive until August 4, 2007) is hereby terminated and of no further force or effect. For purposes of clarity, the Prior Investor Rights Agreement shall be amended and restated as of the date hereof and the Right of
First Refusal, Co-Sale and Voting Agreement shall survive the Closing without modification or amendment. 
 SECTION 3 
 Representations and Warranties of the Company. 
 A Schedule of Exceptions is attached hereto as Exhibit D (the “Schedule of Exceptions”). Except as set forth on the Schedule of Exceptions, the Company hereby represents and warrants to
the Investor, effective as of each Closing (unless otherwise set forth herein), as follows: 
 3.1 Organization, Good Standing and
Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power and authority to own and operate its properties and
assets, to carry on its business as presently conducted, to execute and deliver this Agreement and the Notes (collectively, together with the exhibits and schedule hereto and thereto, the “Agreements”), to issue and sell the Notes,
the Class C Shares, the Note Conversion Shares and the Conversion Shares and to perform its obligations pursuant to the Agreements, the Company’s Amended and Restated Bylaws (the “Bylaws”) and the Restated Certificate. The
Company is presently qualified to do business as a foreign corporation in each jurisdiction where the failure to be so qualified would have a material adverse effect on the Company’s financial condition or business as presently conducted (a
“Material Adverse Effect”). 
  

 -3- 

 3.2 Subsidiaries. The Company does not own or control, directly or indirectly, any
interest in any corporation, partnership, limited liability company, association or other business entity, except as set forth on the Schedule of Exceptions. 
 3.3 Capitalization.
 (a) Immediately prior to the Closing, the authorized capital stock of the
Company will consist of 7,164,463 shares of Class A Common Stock (of which 5,015,318 shares are issued and outstanding), 13,707,297 shares of Class B Common Stock, (of which 1,732,477 shares are issued and outstanding), 5,656,472 shares of
Class C Common Stock (of which 2,639,688 shares are issued and outstanding), and 23,257,094 shares of Common Stock (none of which are issued and outstanding). The Class A Common Stock, Class B Common Stock, Class C Common Stock and Common Stock
shall have the rights, preferences, privileges and restrictions set forth in the Restated Certificate. 
 (b) The outstanding shares have
been duly authorized and validly issued in compliance with applicable laws, and are fully paid and nonassessable. 
 (c) The Company has
reserved as of the Closing: 
 (i) 1,131,294 shares of Class C Common Stock for issuance at Closing pursuant to this Agreement; 

(ii) 1,885,490 shares of Class C Common Stock for issuance upon conversion of the principal amount of the Notes prior to the Company’s IPO (as
defined in the Notes) in accordance with their terms; 
 (iii) 905,035 shares of Class B Common Stock for issuance upon conversion of the
maximum amount of accrued interest under the Notes prior to the Company’s IPO in accordance with their terms; 
 (iv) 2,790,525 shares
of Common Stock for issuance upon conversion of the principal and maximum amount of accrued interest under the Notes on or after the date of the Company’s IPO in accordance with their terms; 
 (v) 2,149,145 shares of Class A Common Stock and 3,507,327 shares of Class B Common Stock for issuance upon conversion of the Class C Shares, the
Class C Note Conversion Shares and the Original Class C Shares; 
 (vi) 5,656,472 shares of Common Stock for issuance upon the conversion of
the Class B Note Conversion Shares and the conversion of the Conversion Shares; and 
  

 -4- 

 (vii) 8,000,000 shares of Class B Common Stock authorized for issuance to employees, consultants
and directors pursuant to the Company’s 2003 Stock Plan (the “Stock Plan”), of which options to purchase 7,154,084 shares of Class B Common Stock are issued and outstanding as of the date of this Agreement and options to
purchase 518,123 shares of Class B Common Stock have previously been exercised. 
 (d) The outstanding shares of Class A Common Stock,
Class B Common Stock, Class C Common Stock and Common Stock are owned by the stockholders and in the numbers specified in Exhibit E attached hereto. 
 (e) All options granted and outstanding vest as follows: twenty-five percent (25%) of the shares vest one (1) year following the vesting commencement date, with the remaining seventy-five percent
(75%) vesting in equal monthly installments over the next three (3) years. No stock plan, stock purchase, stock option or other agreement or understanding between the Company and any holder of any equity securities or rights to purchase
equity securities provides for acceleration or other changes in the vesting provisions or other terms of such agreement or understanding as the result of (i) termination of employment (whether actual or constructive); (ii) any merger,
consolidated sale of stock or assets, change in control or any other transaction(s) by the Company; or (iii) the occurrence of any other event or combination of events. 
 (f) The Class C Shares, when issued and delivered and paid for in compliance with the provisions of this Agreement, will be validly issued, fully paid
and nonassessable. The Conversion Shares have been duly and validly reserved and, when issued in compliance with the provisions of this Agreement, the Restated Certificate and applicable law, will be validly issued, fully paid and nonassessable. The
Class C Shares and the Conversion Shares will be free of any liens or encumbrances, other than any liens or encumbrances created by or imposed upon the Investor; provided, however, that the Class C Shares and the Conversion Shares are
subject to restrictions on transfer under U.S. state and/or federal securities laws and as set forth herein and in that Amended and Restated Investor Rights Agreement by and among the Company, the Investor and certain stockholders of the Company of
even date herewith in substantially the form attached hereto as Exhibit F (the “Investor Rights Agreement”). Except as set forth in the Right of First Refusal, Co-Sale and Voting Agreement by and among the Company and certain
of the Company’s stockholders dated August 2, 3005 (the “ROFR, Co-Sale and Voting Agreement”), the Class C Shares and the Conversion Shares are not subject to any preemptive rights or rights of first refusal. 

(g) Except for the rights provided pursuant to the Investor Rights Agreement and the ROFR, Co-Sale and Voting Agreement, or as otherwise described in
this Agreement, there are no options, warrants or other rights to purchase any of the Company’s authorized and unissued capital stock. 
 3.4 Authorization. All corporate action on the part of the Company and its directors, officers and stockholders necessary for the authorization, execution and delivery of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Notes, the Class C Shares, the Note Conversion Shares and the Conversion Shares, and the performance of all of the Company’s obligations under the Agreements, the Restated Certificate and Bylaws has been taken
or will be 
  

 -5- 

 taken prior to the Closing. The Agreements, when executed and delivered by the Company, shall constitute valid and
binding obligations of the Company, enforceable in accordance with their terms, except (i) as limited by laws of general application relating to bankruptcy, insolvency and the relief of debtors, (ii) as limited by rules of law governing
specific performance, injunctive relief or other equitable remedies and by general principles of equity, and (iii) to the extent the indemnification provisions contained in the Agreements may further be limited by applicable laws and principles
of public policy. 
 3.5 Financial Statements. The Company has delivered to the Investor the unaudited balance sheet and
statement of operations of the Company as of and for the 12-month period ended December 31, 2004 and unaudited balance sheet and statement of operations of the Company as of the nine-month period ended September 30, 2005 (the
“Financial Statements”). The Financial Statements have been prepared in accordance with the books and records of the Company, have been prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”) applied on a consistent basis throughout the periods indicated and are correct in all material respects and present fairly the financial condition and operating results of the Company as of the date(s) and during the
period(s) indicated therein. Except as disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person. The Company maintains and will continue to maintain a standard system of accounting
established and administered in a manner to produce financial reports in accordance with GAAP. 
 3.6 Changes. Since
September 30, 2005, there has not been: 
 (a) any change in the assets, liabilities, financial condition or operating results of the
Company from that reflected in the Financial Statements, except changes in the ordinary course of business, that has had a Material Adverse Effect; 
 (b) any damage, destruction or loss, whether or not covered by insurance, that has had a Material Adverse Effect; 
 (c) any change
or amendment to an agreement by which the Company or any of its assets or properties is bound or subject that has had a Material Adverse Effect; 
 (d) any resignation or termination of any executive officer or key employee of the Company; 
 (e) any sale, assignment or transfer
of any patents, trademarks, copyrights, trade secrets or other material intangible assets; or 
 (f) any mortgage, pledge, transfer of a
security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable. 
 3.7 Material Contracts. Except for the agreements explicitly contemplated hereby, there are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders,

  

 -6- 

 writs or decrees to which the Company is a party or by which it is bound which may involve (i) obligations of, or
payments to, the Company in excess of $50,000 (other than obligations of, or payments to, the Company arising from purchase or sale agreements entered into in the ordinary course of business), (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, or (iii) the grant of rights to manufacture, produce, assemble, license, market or sell the Company’s products or affect the Company’s exclusive right to develop, manufacture,
assemble, distribute, market or sell its products (each, a “Material Contract”, collectively the “Material Contracts”). All of the Material Contracts are valid, binding and in full force and effect in all material
respects, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies and to general principles of equity. The
Company is not in default under any of such Material Contracts. 
 3.8 Intellectual Property. The Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights (“Intellectual Property”)
necessary to the business of the Company as presently conducted, the lack of which would have a Material Adverse Effect. The Schedule of Exceptions contains a complete list of the Company’s patents, trademarks, copyrights and domain names and
pending patent, trademark and copyright applications. Except for agreements with its own employees or consultants, standard end-user license agreements, support/maintenance agreements and agreements entered in the ordinary course of the
Company’s business, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of
any other person or entity. The Company has not violated any of the Intellectual Property of any other person or entity. 
 3.9
Proprietary Information and Invention Assignment. Each current or former employee of the Company, and each current consultant or independent contractor used by the Company has executed a confidential information and invention assignment
agreement, substantially in the form(s) delivered to the Investor. 
 3.10 Title to Properties and Assets; Liens. The
Company has good and marketable title to its properties and assets, and has good title to all its leasehold interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (i) liens for current taxes not
yet due and payable, (ii) liens imposed by law and incurred in the ordinary course of business for obligations not past due, (iii) liens in respect of pledges or deposits under workers’ compensation laws or similar legislation, and
(iv) liens, encumbrances and defects in title which do not in any case materially detract from the value of the property subject thereto or have a Material Adverse Effect, and which have not arisen otherwise than in the ordinary course of
business. With respect to the property and assets it leases, the Company is in compliance with such leases in all material respects and holds a valid leasehold interest free of any liens, claims or encumbrances, subject to clauses (i)-(iv) above.

  

 -7- 

 3.11 Compliance with Other Instruments. The Company is not in violation of any term of
its Certificate of Incorporation or Bylaws, each as amended to date, or of any term or provision of any mortgage, indebtedness, indenture, contract, agreement, instrument, judgment, order or decree to which it is party or by which it is bound which
would or could reasonably be expected to have a Material Adverse Effect. The Company is not in violation of any federal or state statute, rule or regulation applicable to the Company the violation of which would have a Material Adverse Effect. The
execution and delivery of the Agreements by the Company, the performance by the Company of its obligations pursuant to the Agreements, the Restated Certificate and the Bylaws and the issuance of the Notes, the Class C Shares, the Note Conversion
Shares and the Conversion Shares, will not result in any violation of, or conflict with, or constitute a default under, the Company’s Certificate of Incorporation or Bylaws, each as amended to date, or any of its agreements, nor result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company. 
 3.12
Litigation. All pending or threatened litigation involving the Company or its assets or properties is listed on the Schedule of Exceptions. There are no actions, suits, proceedings or investigations pending against the Company or its
properties (nor has the Company received written notice of any threat thereof) before any court or governmental agency that questions the validity of the Agreements or the right of the Company to enter into them, or the right of the Company to
perform its obligations contemplated thereby, or that, either individually or in the aggregate, if determined adversely to the Company, would or could reasonably be expected to have a Material Adverse Effect or result in any change in the current
equity ownership of the Company. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. 
 3.13 Consents. No consent, approval or authorization of or designation, declaration or filing with any governmental authority is
required in connection with the valid execution and delivery of this Agreement, or the offer, sale or issuance of the Notes, the Class C Shares, the Note Conversion Shares and the Conversion Shares, or the consummation of any other transaction
contemplated by this Agreement, except (i) filing of the Restated Certificate with the office of the Secretary of State of the State of Delaware, (ii) the filing of such notices as may be required under the Securities Act of 1933, as
amended (the “Securities Act”) and (iii) such filings as may be required under applicable state securities laws, all of which shall be undertaken by the Company in a timely manner. 
 3.14 Permits. The Company has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business
as now being conducted by it, the lack of which would have a Material Adverse Effect, and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as presently planned to be conducted. The
Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority. 
 3.15
Registration and Voting Rights. Except as set forth in the Investor Rights Agreement and the Schedule of Exceptions, the Company is presently not under any obligation and has not 
  

 -8- 

 granted any rights to register under the Securities Act any of its presently outstanding securities or any of its
securities that may hereafter be issued. To the Company’s knowledge, except as contemplated in the ROFR, Co-Sale and Voting Agreement, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of
the Company. 
 SECTION 4 
 Representations and Warranties of the Investor. 
 The Investor hereby represents and warrants to the Company as follows:

 4.1 No Registration. Such Investor understands that the Notes, the Class C Shares, the Note Conversion Shares and the
Conversion Shares have not been, and will not be (except pursuant to the Investor Rights Agreement), registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Investor’s representations as expressed herein or otherwise made pursuant hereto. 
 4.2 Investment Intent. Such Investor is acquiring the Notes, the Class C Shares, the Note Conversion Shares and the Conversion Shares
for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof, and that such Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. Such Investor further represents that it does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or entity or to any third
person or entity with respect to any of the Notes, the Class C Shares, the Note Conversion Shares or the Conversion Shares. 
 4.3
Investment Experience. Such Investor has substantial experience in evaluating and investing in private placement transactions of securities in companies in the development stage and has such knowledge and experience in financial and
business matters so that such Investor is capable of evaluating the merits and risks of its investment in the Company.  
 4.4
Speculative Nature of Investment. Such Investor understands and acknowledges that the Company has a limited financial and operating history and that an investment in the Company is highly speculative and involves substantial risks. Such
Investor can bear the economic risk of such Investor’s investment and is able, without impairing such Investor’s financial condition, to hold the Notes, the Class C Shares, the Note Conversion Shares and the Conversion Shares for an
indefinite period of time and to suffer a complete loss of such Investor’s investment. 
 4.5 Access to Data. Such
Investor has had an opportunity to ask questions of, and receive answers from, the officers of the Company concerning the Agreements, the exhibits and schedules attached hereto and thereto and the transactions contemplated by the Agreements, as well
as the Company’s business, management and financial affairs, which questions were answered to its satisfaction. Such Investor believes that it has received all the information such Investor considers 
  

 -9- 

 necessary or appropriate for deciding whether to purchase the Notes, the Class C Shares, the Note Conversion Shares and
the Conversion Shares. Such Investor acknowledges that any business plans prepared by the Company have been, and continue to be, subject to change and that any projections included in such business plans or otherwise are necessarily speculative in
nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. Such Investor also acknowledges that it is relying solely on its own counsel and not
on any statements or representations of the Company or its agents for legal advice with respect to this investment or the transactions contemplated by the Agreements. 
 4.6 Accredited Investor. The Investor is an “accredited investor” within the meaning of Regulation D, Rule 501(a), promulgated by the Securities and Exchange Commission under the
Securities Act and shall submit to the Company such further assurances of such status as may be reasonably requested by the Company. 
 4.7 Residency. The residency of the Investor (or, in the case of a partnership or corporation, such entity’s principal place of business) is the Commonwealth of Virginia. 
 4.8 Rule 144. Such Investor acknowledges that the Notes, the Class C Shares, the Note Conversion Shares and the Conversion Shares
must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. Such Investor is aware of the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including among other things, in certain situations, the existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a “broker’s transaction” or in transactions directly
with a “market maker” and the number of shares being sold during any three-month period not exceeding specified limitations. Such Investor understands that the current public information referred to above is not now available and the
Company has no present plans to make such information available. Such Investor acknowledges and understands that notwithstanding any obligation under the Investor Rights Agreement, the Company may not be satisfying the current public information
requirement of Rule 144 at the time the Investor wishes to sell the Notes, the Class C Shares, the Note Conversion Shares and the Conversion Shares, and that, in such event, the Investor may be precluded from selling such securities under
Rule 144, even if the other requirements of Rule 144 have been satisfied. Such Investor acknowledges that, in the event all of the applicable requirements of Rule 144 are not met, registration under the Securities Act or an exemption
from registration will be required for any disposition of the Notes, the Class C Shares, the Note Conversion Shares, the Conversion Shares or the underlying Common Stock. Such Investor understands that, although Rule 144 is not exclusive, the
Securities and Exchange Commission has expressed its opinion that persons proposing to sell restricted securities received in a private offering other than in a registered offering or pursuant to Rule 144 will have a substantial burden of proof
in establishing that an exemption from registration is available for such offers or sales and that such persons and the brokers who participate in the transactions do so at their own risk. 
  

 -10- 

 4.9 No Public Market. Such Investor understands and acknowledges that no public market
now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Company’s securities. 
 4.10 Authorization. 
 (a) Such
Investor has all requisite power and authority to execute and deliver the Agreements, to purchase the Notes and the Class C Shares hereunder and to carry out and perform its obligations under the terms of the Agreements. All action on the part of
the Investor necessary for the authorization, execution, delivery and performance of the Agreements, and the performance of all of the Investor’s obligations under the Agreements, has been taken or will be taken prior to the Closing.

 (b) The Agreements, when executed and delivered by the Investor, will constitute valid and legally binding obligations of the Investor,
enforceable in accordance with their terms except: (i) to the extent that the indemnification provisions contained in the Investor Rights Agreement may be limited by applicable law and principles of public policy, (ii) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (iii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies or by general principles of equity. 
 (c) No consent, approval, authorization, order, filing,
registration or qualification of or with any court, governmental authority or third person is required to be obtained by the Investor in connection with the execution and delivery of the Agreements by the Investor or the performance of the
Investor’s obligations hereunder or thereunder. 
 4.11 Brokers or Finders. Such Investor has not engaged any
brokers, finders or agents, and neither the Company nor any other Investor has, nor will, incur, directly or indirectly, as a result of any action taken by the Investor, any liability for brokerage or finders’ fees, agents’ commissions or
any similar charges in connection with the Agreements. 
 4.12 Tax Advisors. Such Investor has reviewed with its own tax
advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Agreements. With respect to such matters, such Investor relies solely on such advisors and not on any statements or
representations of the Company or any of its agents, written or oral. The Investor understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions
contemplated by the Agreements. 
 4.13 Legends. Such Investor understands and agrees that the certificates evidencing the
Class C Shares, the Note Conversion Shares and the Conversion Shares, or any other securities issued in respect of the Class C Shares, the Note Conversion Shares or the Conversion Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, until such securities are registered, shall bear the legends required by the Investor Rights Agreement and the ROFR, Co-Sale and Voting Agreement (in addition to any legend required under applicable state
securities laws). 
  

 -11- 

 4.14 Due Diligence. The Investor has completed its due diligence investigation on the
Company to its full satisfaction. 
 SECTION 5 
 Conditions to Investor’s Obligation to Close. 
 The Investor’s obligation to purchase the
Notes and the Class C Shares at the Closing is subject to the fulfillment on or before such Closing of each of the following conditions, unless waived by the Investor: 
 5.1 Representations and Warranties. The representations and warranties made by the Company in Section 3 (except to the extent such representations and warranties address matters as of a
particular date or period, in which case such representations and warranties shall be true and correct as of such date or period, and except as otherwise modified by the Schedule of Exceptions) shall be true and correct in all material respects as
of the date of such Closing. 
 5.2 Repayment of Outstanding Indebtedness. The Company shall have repaid all outstanding
principal and interest on the Company’s line of credit facility with First National Bank and no principal and interest amount shall be outstanding on such line of credit as of the Closing Date. 
 5.3 Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the
Closing shall have been performed or complied with in all material respects. 
 5.4 Blue Sky. The Company shall have
obtained, or have the availability of exemptions from, all necessary Blue Sky law permits and qualifications required by any state for the offer and sale of the Notes, the Class C Shares, the Note Conversion Shares and the Conversion Shares.

 5.5 Restated Certificate. The Restated Certificate shall have been duly authorized, executed and filed with and
accepted by the Secretary of State of the State of Delaware. 
 5.6 Closing Deliverables. The Company shall have delivered
to counsel to the Investor the following: 
 (a) a certificate executed by the Chief Executive Officer or President of the Company on behalf
of the Company, in substantially the form attached hereto as Exhibit G, certifying the satisfaction of the conditions to closing listed in Sections 5.1, 5.3 and 5.4. 
  

 -12- 

 (b) a certificate of the Secretary of State of the State of Delaware, dated as of a date within five days
of the date of such Closing, with respect to the good standing of the Company. 
 (c) an opinion from Wilson Sonsini Goodrich &
Rosati, Professional Corporation, counsel to the Company, dated as of the Closing, in substantially the form attached hereto as Exhibit H. 
 5.7 Consents and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for the performance by the Company of its obligations pursuant to the Agreements, the Restated
Certificate and the Bylaws. 
 5.8 Market Standoff Agreements. All holders of the Company’s Common Stock and all
holders of options and warrants to purchase the Company’s Common Stock shall have entered into market standoff agreements with the Company containing provisions substantially similar to the market standoff agreement provisions contained in
Section 2.10 of the Investor Rights Agreement. 
 5.9 Amended & Restated Investor Rights Agreement. The
Company and the Investor shall have executed and delivered the Investor Rights Agreement. 
 5.10 Employee Agreements. The
Company shall have entered into non-compete, confidentiality, non-solicitation, intellectual property assignment and stock repurchase agreements with its employees in form or forms reasonably satisfactory to the Investor. 
 5.11 Board of Directors. Effective upon the Closing, the size of the Board shall be set at seven (7) members. 
 5.12 Proceedings. This Agreement and the transactions contemplated hereby shall have been approved by the Executive Committee of the
Board of Directors of the Investor. 
 5.13 Due Diligence. The Investor shall have completed due diligence on the
Company to their reasonable satisfaction. 
 SECTION 6 
 Conditions to Company’s Obligation to Close. 
 The Company’s obligation to sell and issue
the Notes and the Class C Shares at the Closing is subject to the fulfillment on or before such Closing of the following conditions, unless waived by the Company: 
 6.1 Representations and Warranties. The representations and warranties made by the Investor in Section 4 shall be true and correct when made and shall be true and correct as of the date
of such Closing. 
  

 -13- 

 6.2 Covenants. All covenants, agreements and conditions contained in the Agreements to
be performed by Investor on or prior to the date of such Closing shall have been performed or complied with as of the date of such Closing. 
 6.3 Purchase Price. The Investor shall have delivered payment of the applicable purchase price as specified in Section 2.2. 
 SECTION 7 
 Miscellaneous. 
 7.1 Amendment. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument referencing this Agreement and signed by the Company and the Investor. Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including securities into which such securities have been converted or exchanged or for which such securities have been exercised) and each future holder of all such securities.

 7.2 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be
mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, by messenger, or by recognized national overnight courier; or by facsimile with a copy sent via United States Postal Service, hand delivery, or recognized
national overnight courier addressed: 
 (a) if to the Investor, to Carilion Health System, Carilion Roanoke Memorial Hospital, First Floor,
Roanoke, Virginia 24033, Facsimile (540) 981-7670, Attention: Edward G. Murphy, M.D., President, or at such other address as shown in the Company’s records, as shall be furnished by the Investor to the Company or as may be updated in
accordance with the provisions hereof, with a copy to Briggs W. Andrews, General Counsel, 213 S. Jefferson Street, 7th Floor, Suite 720, Roanoke, Virginia 24011; or 
 (b) if to the Company, to Luna Innovations Incorporated 2851 Commerce
Street Southeast, Blacksburg, Virginia 24060, Facsimile (540) 951-0760, Attention: Dr. Kent Murphy, or at such other address as the Company shall have furnished to the Investors, with a copy to Trevor J. Chaplick, Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 11921 Freedom Drive, Suite 600, Reston, Virginia 20190, Facsimile (703) 734-3199. 
 Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally or via overnight courier, or, if sent via fax, upon delivery as evidenced
by a confirmation (unless sent after 5:00 pm on a business day, in which case such delivery shall be deemed to have occurred at 9:00 am on the following business day), or if sent by mail, at the earlier of its receipt or three business days after
the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. 
  

 -14- 

 7.3 Governing Law. This Agreement shall be governed in all respects by the internal
laws of the State of Delaware as applied to agreements entered into among Delaware residents to be performed entirely within Delaware, without regard to principles of conflicts of law. 
 7.4 Brokers or Finders. The Investor agrees to indemnify and hold harmless the Company from any liability for any commission or
compensation in the nature of a brokerage or finder’s fee or agent’s commission (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its constituent partners, members,
officers, directors, employees or representatives is responsible to the extent such liability is attributable to any inaccuracy or breach of the representations and warranties contained in Section 4.11. 
 7.5 Expenses. The Company and the Investor shall each pay their own expenses in connection with the transactions contemplated
by this Agreement. 
 7.6 Survival. The representations, warranties, covenants and agreements made in this Agreement shall
survive the execution and delivery of this Agreement and the closing of the transactions contemplated hereby for a period of two years following the Closing. 
 7.7 Successors and Assigns. Except as otherwise provided herein, the provisions of this Agreement shall inure only to the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto (including transferees of the Notes or any Class C Shares, Note Conversion Shares or Conversion Shares). 
 7.8 Entire Agreement. This Agreement, including the exhibits attached hereto, constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. No party shall be
liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein or therein. 
 7.9 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to
any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative. 
  

 -15- 

 7.10 Severability. If any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or
unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement
shall be enforceable in accordance with its terms. 
 7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. 
 7.12 Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto and delivered by such party by facsimile or any
similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all
parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof. 
 7.13 Jurisdiction; Venue. With respect to any disputes arising out of or related to this Agreement, the parties consent to the jurisdiction of, and venue in, the state courts in the Commonwealth of Virginia (or in the
event of federal jurisdiction, the courts of the Western District of Virginia). 
 7.14 Further Assurances. Each party
hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary
to more fully effectuate this Agreement. 
 7.15 Attorney’s Fees. In the event that any suit or action is instituted
to enforce any provisions in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, all fees, costs and expenses of appeals. 
 7.16 Jury Trial. Each party to this
Agreement hereby waives a trial by jury in any legal action or proceeding relating to this Agreement. 
 (The remainder of this page is
left intentionally blank.) 
  

 -16- 

 IN WITNESS WHEREOF, this Agreement is executed as of the date first written above. 
  

			
	 “COMPANY”

	
	 LUNA INNOVATIONS INCORPORATED

	 a Delaware corporation

		
	 By:
	 	 /s/ Kent A. Murphy

	 Name:
	 	 Kent A. Murphy

	 Title:
	 	 CEO

 SIGNATURE PAGE TO CLASS C COMMON STOCK AND NOTE PURCHASE AGREEMENT 

			
	 “INVESTOR”

	
	 CARILION HEALTH SYSTEM

		
	 By:
	 	 /s/ Edward G. Murphy

	 Name:
	 	 Edward G. Murphy, M.D.

	 Title:
	 	 Pres./CEO

 SIGNATURE PAGE TO CLASS C COMMON STOCK AND NOTE PURCHASE AGREEMENT 

 EXHIBIT A 
 FORM OF NOTE 

 EXHIBIT B 
 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION 

 EXHIBIT C 
 SCHEDULE OF NOTES AND CLASS C COMMON STOCK INVESTMENTS 
  

				
	 Description of Security
	  	Aggregate
Purchase Price
	 Senior Convertible Promissory Note
	  	$	1,000,000.00
	 Senior Convertible Promissory Note
	  	$	1,000,000.00
	 Senior Convertible Promissory Note
	  	$	1,000,000.00
	 Senior Convertible Promissory Note
	  	$	1,000,000.00
	 Senior Convertible Promissory Note
	  	$	1,000,000.00
	 1,131,294 Shares of Class C Common Stock
	  	$	2,999,999.37
		  	 	 
		  	$	7,999,999.37

 EXHIBIT D 
 SCHEDULE OF EXCEPTIONS 

 EXHIBIT E 
 SCHEDULE OF COMMON STOCK OUTSTANDING 

 EXHIBIT F 
 FORM OF AMENDED & RESTATED INVESTOR RIGHTS AGREEMENT 

 EXHIBIT G 
 LUNA INNOVATIONS INCORPORATED 
 COMPLIANCE CERTIFICATE 
 Pursuant to Section 5.7 of the Class C Common Stock and Note Purchase Agreement (the “Agreement”), dated as of
December 30, 2005, by and among Luna Innovations Incorporated, a Delaware corporation (the “Company”) and Carilion Health System, the undersigned certifies on behalf of the Company as follows: 
 1. He is the President and Chief Executive Officer of the Company; 
 2. Except as set forth in or modified by the Schedule of Exceptions, the representations and warranties of the Company set forth in Section 3 of the Agreement are true and correct in all material respects as of
the date hereof; 
 3. The Company has repaid all outstanding principal and interest on the Company’s line of credit facility with First
National Bank and no principal and interest amount is outstanding on such line of credit as the date hereof; and 
 4. The Company has
performed or complied with all covenants, agreements and conditions contained in the Agreement to be performed by the Company on or prior to the Closing in all material respects. 
 Capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement. 
 (The remainder of this page is left intentionally blank.) 

 IN WITNESS WHEREOF, the undersigned has executed this certificate as of December 30, 2005.

  

			
	LUNA INNOVATIONS INCORPORATED
		
	By:	 	 /s/ Kent A. Murphy

		 	Dr. Kent A. Murphy
		 	President and Chief Executive Officer

 EXHIBIT H 
 OPINION OF COUNSEL TO THE COMPANYExhibit 10.32

 Exhibit 10.32 
 EXECUTION VERSION 
  

 MEMBER INTEREST PURCHASE AGREEMENT 
  

 By and Between 
 LUNA INNOVATIONS
INCORPORATED 
 (Seller) 
 and 
 BAKER HUGHES OILFIELD OPERATIONS, INC. 
 (Buyer) 
 Covering the Acquisition of shares of Luna Energy LLC 
 December 17, 2004 

 TABLE OF CONTENTS 
  

					
	  	  	Page
	 ARTICLE I DEFINITIONS AND INTERPRETATIONS
	  	1
			
	 1.01
	  	 Definitions
	  	1
	 1.02
	  	 Interpretation
	  	7
		
	 ARTICLE II SALE AND PURCHASE OF SELLER SHARES
	  	8
			
	 2.01
	  	 Agreement to Sell and Purchase
	  	8
	 2.02
	  	 Transfer of Seller Shares
	  	8
	 2.03
	  	 Payment of Purchase Price
	  	8
	 2.04
	  	 Place and Time
	  	9
	 2.05
	  	 Transactions and Deliveries at the Closing
	  	9
		
	 ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING SELLER AND SELLER SHARES, AND CERTAIN REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
	  	10
			
	 3.01
	  	 Organization and Standing
	  	10
	 3.02
	  	 Authority and Binding Obligations
	  	11
	 3.03
	  	 Consents and Approvals; No Violations
	  	11
	 3.04
	  	 Litigation
	  	11
	 3.05
	  	 Title to the Seller Shares
	  	12
	 3.06
	  	 Brokers; Finders and Fees
	  	12
	 3.07
	  	 Capitalization
	  	12
	 3.08
	  	 Employee Options
	  	12
	 3.09
	  	 Intellectual Property
	  	12
	 3.10
	  	 Employee Benefits
	  	15
		
	 ARTICLE IV
	  	15
			
	 4.01
	  	 Organization and Standing
	  	15
	 4.02
	  	 Authority and Binding Obligations
	  	16
	 4.03
	  	 Consents and Approvals; No Violations
	  	16
	 4.04
	  	 Litigation
	  	16
	 4.05
	  	 Financial Information
	  	16
	 4.06
	  	 Undisclosed Liabilities
	  	17
	 4.07
	  	 Contracts and Commitments
	  	17
	 4.08
	  	 Changes
	  	17
	 4.09
	  	 Compliance with Laws
	  	19
	 4.10
	  	 Taxes
	  	19
	 4.11
	  	 Title to Assets
	  	19
	 4.12
	  	 Guaranties
	  	19
	 4.13
	  	 Employee Matter
	  	19

  

 -i- 

 TABLE OF CONTENTS 
 (Continued) 
  

					
	  	  	Page
	 4.14
	  	 Environmental Matters
	  	20
	 4.15
	  	 Permits and Licenses
	  	20
	 4.16
	  	 Intellectual Property
	  	21
		
	 ARTICLE V REPRESENTATIONS AND WARRANTIES CONCERNING BUYER
	  	23
			
	 5.01
	  	 Organization and Standing
	  	23
	 5.02
	  	 Authority and Binding Obligations
	  	23
	 5.03
	  	 Consents and Approvals; No Violations
	  	23
	 5.04
	  	 Litigation
	  	24
	 5.05
	  	 Brokers; Finders and Fees
	  	24
	 5.06
	  	 No Registration
	  	24
	 5.07
	  	 Investment Intent
	  	24
	 5.08
	  	 Investment Experience
	  	24
	 5.09
	  	 Speculative Nature of Investment
	  	24
	 5.10
	  	 Access to Data
	  	25
	 5.11
	  	 Accredited Investor
	  	25
	 5.12
	  	 Residency
	  	25
	 5.13
	  	 Restriction on Resales
	  	25
	 5.14
	  	 Rule 144
	  	25
	 5.15
	  	 No Public Market
	  	25
	 5.16
	  	 Reliance
	  	25
		
	 ARTICLE VI COVENANTS AND AGREEMENTS OF SELLER
	  	26
			
	 6.01
	  	 ATP Project
	  	26
	 6.02
	  	 Covenant Not to Compete
	  	26
	 6.03
	  	 Non-Hiring of Employees
	  	26
	 6.04
	  	 Services and Employee Benefit
	  	27
	 6.05
	  	 Licenses and Permits
	  	27
		
	 ARTICLE VII TAX MATTERS
	  	27
			
	 7.01
	  	 Tax Indemnity
	  	27
	 7.02
	  	 Allocation of Certain Taxes
	  	28
	 7.03
	  	 Preparation of Tax Returns
	  	28
	 7.04
	  	 Tax Contests
	  	29
	 7.05
	  	 Cooperation
	  	29
	 7.06
	  	 Nature of Payments
	  	30
	 7.07
	  	 Survival
	  	30
	 7.08
	  	 Tax Consequences of Purchase and Sale
	  	30
	 7.09
	  	 Conflict
	  	30

  

 -ii- 

 TABLE OF CONTENTS 
 (Continued) 
  

					
	  	  	Page
	 ARTICLE VIII INDEMNIFICATION; SURVIVAL
	  	30
			
	 8.01
	  	 Indemnification
	  	30
	 8.02
	  	 Limitations on Indemnification
	  	31
	 8.03
	  	 Survival
	  	32
	 8.04
	  	 Notification and Third Party Claims
	  	32
	 8.05
	  	 Coordination of Indemnification Rights
	  	33
	 8.06
	  	 Right to Cure
	  	34
		
	 ARTICLE IX DISPUTE RESOLUTION
	  	34
			
	 9.01
	  	 Negotiation
	  	34
	 9.02
	  	 Arbitration
	  	35
	 9.03
	  	 Arbitration Proceeding
	  	35
	 9.04
	  	 Consent to Jurisdiction
	  	36
	 9.05
	  	 Confidentiality
	  	36
	 9.06
	  	 Joinder
	  	36
	 9.07
	  	 Survival
	  	36
		
	 ARTICLE X MISCELLANEOUS
	  	36
			
	 10.01
	  	 Entire Agreement; Amendments
	  	36
	 10.02
	  	 Business Day Actions
	  	37
	 10.03
	  	 Invalidity
	  	37
	 10.04
	  	 Joint Drafting
	  	37
	 10.05
	  	 Effect of Waiver or Consent
	  	37
	 10.06
	  	 Limitation on Benefits of this Agreement
	  	37
	 10.07
	  	 Notices
	  	37
	 10.08
	  	 Binding Effect
	  	38
	 10.09
	  	 Additional Actions and Documents
	  	38
	 10.10
	  	 Choice of Law
	  	39
	 10.11
	  	 Publicity
	  	39
	 10.12
	  	 Costs Mid Expenses
	  	39
	 10.13
	  	 Assignment
	  	39
	 10.14
	  	 Confidentiality
	  	40
	 10.15
	  	 Counterparts
	  	41

  

 -iii- 

 TABLE OF CONTENTS 
 (Continued) 
  

							
	 	  	 	  	 	  	Page
		
	EXHIBITS	  	
				
	Exhibit A	  	–	  	 Form of Assignment of Seller Shares
	  	
				
	Exhibit B	  	–	  	 Form of Noncompetition and Confidentiality Agreement – Kent Murphy
	  	
				
	Exhibit C	  	–	  	 Form of Bill of Sale
	  	
				
	Exhibit D	  	–	  	 Form of Technology Amendment
	  	
				
	Exhibit E	  	–	  	 Form of Mutual Release – Seller, Kent Murphy, Buyer and the Company
	  	
				
	Exhibit F	  	–	  	 Supply Agreement
	  	

							
		
	SCHEDULES	  	
	 Schedule 1.01A
	  	–	  	 Knowledge Individuals
	  	
	 Schedule 3.07
	  	–	  	 Capitalization
	  	
	 Schedule 3.08
	  	–	  	 Employee Options
	  	
	 Schedule 3.09(a)(ii)
	  	–	  	 Applications Relating to Innovations IP
	  	
	 Schedule 3.09(a)(iii)
	  	–	  	 Use of Third Party IP–Seller
	  	
	 Schedule 3.09(a)(iv)
	  	–	  	 Use of Third Party IP–Company
	  	
	 Schedule 3.09(a)(v)
	  	–	  	 Other Innovations Owned IP
	  	
	 Schedule 3.09(a)(vi)
	  	–	  	 License Rights
	  	
	 Schedule 3.09(c)(ii)
	  	–	  	 Claims
	  	
	 Schedule 3.10(a)
	  	–	  	 Benefit Plans
	  	
	 Schedule 4.07
	  	–	  	 Commitments
	  	
	 Schedule 4.08
	  	–	  	 Changes
	  	
	 Schedule 4.11
	  	–	  	 Liens
	  	
	 Schedule 4.13(a)
	  	–	  	 Employees
	  	
	 Schedule 4.16(a)(ii)
	  	–	  	 Applications Relating to Company IP
	  	
	 Schedule 4.16(a)(iii)
	  	–	  	 Use of Third Party IP – Company
	  	
	 Schedule 4.16(a)(iv)
	  	–	  	 Other Company Owned IP
	  	

  

 -iv- 

 MEMBER INTEREST PURCHASE AGREEMENT 
 This MEMBER INTEREST PURCHASE AGREEMENT (the “Agreement”) is entered into this 17th day of December, 2004, by and between
LUNA INNOVATIONS INCORPORATED, a Delaware corporation (“Seller”), and BAKER HUGHES OILFIELD OPERATIONS, INC., a California corporation (“Buyer”). 
 W I T N E S S E T H: 
 WHEREAS, Seller is the record and beneficial owner of 15,000,000 Common Shares (defined below) of LUNA ENERGY, LLC, a Delaware limited liability company (the “Company”),
which represents 60% of the issued and outstanding equity interests of the Company; 
 WHEREAS, Buyer is the record and
beneficial owner of 10,000,000 Common Shares of the Company which represents 40% of the issued and outstanding equity interest of the Company; 
 WHEREAS, Seller and Buyer are parties to that certain Purchase and Sale Agreement dated February 19,2002 by and among Seller, Buyer and certain of their, respective affiliates (the
“Original Purchase Agreement”), pursuant to which Buyer acquired its 10,000,000 Common Shares; 
 WHEREAS, Seller desires to sell and Buyer desires to buy Seller’s 15,000,000 Common Shares (the “Seller Shares”), subject to the terms and conditions of this Agreement;

 NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter
set forth and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 
 ARTICLE I 
 DEFINITIONS AND INTERPRETATIONS 
 1.01 Definitions. Terms which are defined in Sections other than Article I of this Agreement, shall have the meanings
attributed to them where defined. As used in this Agreement, the following terms shall have the meanings set forth below, unless the context otherwise requires: 
 “Affiliate” shall mean, with respect to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control
with, the Person specified. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise. 

 “Applicable Law” shall mean any applicable order, writ, injunction, decree,
judgment, statute, ordinance, rule, code (including the Code) or regulation of any Governmental Authority. 
 “Benefit
Plan” shall mean (a) any employee welfare benefit plan or employee pension benefit plan as defined in sections 3(1) and 3(2) of ERISA, including, but not limited to, a plan that provides retirement income or results in deferrals of
income by employees for periods extending to their terminations of employment or beyond, and a plan that provides medical, surgical, or hospital care benefits or benefits in the event of sickness, accident, disability, death or unemployment and
(b) any other material employee benefit agreement or arrangement that is not an ERISA plan, including without limitation, any deferred compensation plan, incentive plan, bonus plan or arrangement, stock option plan, stock purchase plan, stock
award plan, golden parachute agreement, severance pay plan, dependent care plan, cafeteria plan, employee assistance program, scholarship program, employment contract, retention incentive agreement, noncompetition agreement, consulting agreement,
confidentiality agreement, vacation policy, or other similar plan or agreement or arrangement that has been sponsored, maintained or adopted by the Company at any time during the past three (3) years, or has been approved by the Company before
this date but is not yet effective, for the benefit of directors, officers, employees or former employees (or their beneficiaries) of the Company, or with respect to which the Company may have any liability. 
 “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Houston, Texas are
authorized by law to close. 
 “Buyer Indemnified Part(ies)” shall have the meaning specified in
Section 8.01(a). 
 “Claim” shall mean a dispute, claim, or controversy whether based on contract, tort,
strict liability, statute or other legal or equitable theory (including any claim of fraud, misrepresentation or fraudulent inducement or any question of validity or effect of an agreement). 
 “Claim Notice” shall have the meaning set forth in Section 8.04. 
 “Closing” shall have the meaning set forth in Section 2.04. 
 “Closing Date” shall mean the time and date established for the Closing pursuant to Section 2.04. 
 “Code” shall mean the Internal Revenue Code of 1986, as amended. 
 “Combined IP” shall mean the Company Owned IP, the Innovations Owned IP and the Third Party IP. 
 “Commitments” shall have the meaning set forth in Section 4.07. 
 “Common Shares” shall have the meaning given such term in the Company Agreement. 
  

 -2- 

 “Company Agreement” shall mean that certain Second Amended and Restated Limited
Liability Company Agreement dated February 19, 2002 by and between Seller and Buyer. 
 “Company Owned IP” shall
mean the Intellectual Property owned by the Company. 
 “Contracts” shall mean all contracts, commitments,
arrangements, agreements, leases or any other obligations, understandings, responsibilities, liabilities, costs and expenses of whatever kind and nature (whether written or oral). 
 “Damages” shall mean any and all obligations, liabilities, damages, fines, penalties, deficiencies, losses, Judgments,
settlements, costs and reasonably incurred expenses, interest, bonding and appellate costs and attorneys’, accountants’, consultants’ and investigators’ reasonable fees and disbursements, in each case after the application of any
and all amounts actually recovered by the Indemnified Party under insurance contracts or similar arrangements (but excluding self-insurance arrangements) except to the extent such amounts have been subrogated to an insurance carrier by the Person
claiming indemnity. 
 “Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101
et seq. 
 “Employee Options” shall have the meaning set forth in
Section 3.08. 
 “Environmental Claim” shall mean any administrative, regulatory or judicial action,
suit, order, demand, directive, Claim, lien, investigation, proceeding or written or oral notice of noncompliance or violation by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs
of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief)
arising out of, based on or resulting from (i) the presence or release of, or exposure to, any Hazardous Substances; or (ii) the failure to comply, with any Environmental Laws. 
 “Environmental Laws” shall mean any applicable legal requirement or common law relating to pollution, protection or cleanup of
the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or protection of human health including CERCLA; RCRA; the Toxic Substance Control Act, 15 U.S.C. Section 2601 et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42
U.S.C. Section 300F et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq. and any
other federal, state and local legal requirements, including those related to natural resources damages, relating to: (i) a release or the containment, removal, remediation, response, cleanup or abatement of a Hazardous Substance; (ii) the
manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce, use, treatment, handling, storage, or transportation of a Hazardous Substance; (iii) exposure of persons, including employees, to a Hazardous
Substance; (iv) occupational safety or health matters; and (v) the physical structure or condition of a building, 

  

 -3- 

 
facility, fixture or other structure, including, without limitation, those relating to the management, use, storage, disposal, cleanup or removal of
asbestos, asbestos-containing materials, polychlorinated biphenyls or any other Hazardous Substance. 
 “Environmental
Permit” shall mean any approval, registration, authorization, certificate, certificate of occupancy, consent, license, order, permit, variance or other similar authorization of any applicable Governmental Authority required by
Environmental Laws in effect on or prior to the Closing for the current ownership, operation or use of the assets of the Company. 
 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended. 
 “Field” shall mean sensors for oil and gas exploration, production, transportation and refining. 
 “Final Determination” shall mean the first to occur of (a) a Judgment by a court or other tribunal with appropriate jurisdiction, which has become final and non-appealable; (b) a final and binding
settlement or compromise with any Taxing Authority, including, but not limited to, a closing agreement under Section 7121 of the Code; or (c) any final disposition by reason of the expiration of all applicable statutes of limitations.

 “Governmental Authority” shall mean any federal, state, local or foreign government or any provincial,
departmental or other political subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory, administrative or other governmental functions, including any court, department, commission, board,
bureau, agency, instrumentality or administrative body. 
 “Hazardous Substance” shall mean any toxic substance or
waste, pollutant, hazardous substance or waste, contaminant, special waste, industrial substance or waste, petroleum or petroleum-derived substance or waste, or any toxic or hazardous constituent of any such substance or waste including any
substance regulated under or defined as hazardous by Environmental Laws. 
 “Indemnified Party” shall refer to the
Person or Persons indemnified, or entitled, or claiming to be entitled to be indemnified, held harmless or defended pursuant to this Agreement including a Buyer Indemnified Party and a Seller Indemnified Party. 
 “Indemnifying Party” shall refer to the Party having the obligation to indemnify, hold harmless or defend pursuant to this
Agreement. 
 “Innovations Owned IP” shall mean the Intellectual Property that is owned by the Seller. 
 “Intellectual Property” shall mean any or all of the following and all intellectual Property Rights therein, arising therefrom,
or associated therewith, only insofar as each such item or Intellectual Property Right is applicable to or useable in the Field: (A) all United States and foreign patents and applications therefor and all reissues, divisions, renewals,
extensions, provisional, continuations and continuations-in-part thereof; (B) all inventions (whether patentable or not), 

  

 -4- 

 
invention disclosures, improvements, works of authorship, trade secrets, proprietary information, know how, processes and technology; (C) all
copyrights, copyright registrations and applications therefor and all other rights corresponding thereto throughout the world; (D) all industrial designs and any registrations and applications therefor throughout the world; (E) all trade
names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world; and (F) all tangible embodiments of the foregoing in this
definition, including drawings, schematics, notebooks, instruction manuals and software (including both source code and object code). 
 “Intellectual Property Rights” shall mean all proprietary or other rights throughout the world only insofar as such right is applicable to or useable in the Field and provided under (A) patent law,
(B) copyright law, (C) trademark and service mark law, (D) design patent or industrial design law, (E) semi-conductor chip or mask work law, (F) trade secret law, and (G) any other statutory provision, common law
principle or principle of law under any jurisdiction hi the world that provides protective or other intellectual property rights in the Intellectual Property. 
 “Judgments” shall mean all judgments, orders, decisions, injunctions, decrees or awards of any federal, state, local or foreign court, arbitrator or administrative or Governmental Authority,
bureau or agency. 
 “Known” “Knowledge” or “To the Knowledge of”or
“Within the knowledge of” shall mean with respect to Seller, the actual knowledge after reasonable investigation and due inquiry of the individuals listed as “Seller Knowledge Individuals” on Schedule 1.01
A, and with respect to Buyer, the actual knowledge of the individuals listed as “Buyer Knowledge Individuals” on Schedule 1.01A. 
 “Liens” shall mean with respect to any property or other asset of any Person (or any revenues, income or profits of that Person therefrom) (in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or otherwise), (a) any mortgage, lien, security interest, pledge, attachment, levy or other charge or encumbrance of any kind thereupon or in respect thereof or (b) any
other arrangement under which the same is transferred, sequestered or otherwise identified with the intention of subjecting the same to, or making the same available for, the payment or performance of any liability in priority to the payment of the
ordinary, unsecured creditors of that Person. For purposes of this Agreement, a Person will be deemed to own subject to a Lien any asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease, synthetic lease or other title retention agreement relating to that asset. 
 “Material Adverse
Effect” shall mean, with respect to any Person, a material adverse change in, or effect on, the business, financial condition or results of operations of such Person, taken as a whole on a consolidated basis with such Person’s
subsidiaries; provided, that the effects of changes that are generally applicable to the industries or the economies of the countries in which such Person operates shall be excluded from such determination. In addition to the foregoing, the
determination of the dollar value or impact of any change or event pursuant to the preceding sentence shall be 

  

 -5- 

 
based solely on the actual dollar value of such change or effect, on a dollar-for-dollar basis, and (except as expressly provided in this Agreement) shall
not take into account (i) any multiplier valuations, including any multiple based on earnings or other financial indicia or (ii) any consequential damages or other consequential valuation. 
 “Non-Exclusive Identified Support Services” shall mean support of Solomon financial reporting, including reasonable transitional
use of the software, insurance/benefits continuation, network connections, internet services, exchange email service, maintenance of the Company’s website, file storage and backup, telecom, helpdesk, system and peripheral purchasing and
security audits, facilities management, government compliance with hazardous and chemical waste requirements, lab training, safety training, facilities maintenance, communications, phone system and security monitoring and maintenance. 
 “Obligations” shall mean duties, liabilities and obligations, whether vested, absolute or contingent, primary or secondary,
direct or indirect, known or unknown, asserted or unassorted, accrued or unaccrued, liquidated or unliquidated, due or to become due, and whether contractual, statutory or otherwise. 
 “Party” and “Parties” shall mean each of Seller and Buyer and collectively Seller and Buyer. 

“Person” shall mean any individual, foreign or domestic general partnership, limited partnership, limited liability company,
corporation, joint enterprise, trust, business trust, employee benefit plan, cooperative or association, and any heir, executor, administrator, legal representative, successor or assign thereof where the context so permits. 
 “Prime Rate” means, at the time any determination thereof is to be made, the fluctuating rate per annum of interest then reported
in The Wall Street Journal as the “Prime Rate” (the base rate on corporate loans at large U.S. money center commercial banks), provided that, if the “Prime Rate” is reported as a range, the Prime Rate shall be the
midpoint of the range. In the event that The Wall Street Journal ceases to report the Prime Rate, then “Prime Rate” shall mean the fluctuating interest rate per annum announced from time to time by Morgan Guaranty Trust Company of
New York as its “prime rate” (or, if otherwise denominated, such bank’s reference rate for interest rate calculations on general commercial loans), which rate is not necessarily the lowest or best rate which such bank may at any time
or from time to time charge any of its customers. 
 “Related Agreements” shall mean the agreements listed in
Section 2.05 and any other agreements or documents executed in connection with or as required under this Agreement. 
 “Securities Act” shall mean the Securities Act of 1933, as amended. 
 “Seller Indemnified
Party(ies)” shall have the meaning specified in Section 8.01(b). 
 “Seller Tax Threshold
Amount” shall have the meaning specified in Section 7.01. 
  

 -6- 

 “Taxes” shall mean all United States federal, state, local or foreign income,
profits, gross receipts, windfall profits, severance, real or personal property, intangible property, occupation, production, franchise, capital gains, employment, withholding, social security (or similar), disability, registration, stamp, payroll,
goods and services, alternative or add-on minimum tax, or any other taxes, charges, fees, imposts, duties, levies, withholdings or other assessments imposed by any governmental entity, including environmental taxes imposed pursuant to Chapter 38 of
the Code, and similar state laws, excise taxes, customs duties, utility, property, sales, use, value added, transfer and fuel taxes, or other like assessment or charge of any kind whatsoever, together with any interest, fines, penalties or additions
to tax attributable to or imposed on or in respect thereof imposed by any Governmental Authority, whether or not disputed, including all applicable sales, use, excise, business, occupation or other tax, if any, relating to this or any other service,
supply or operating agreement. 
 “Taxing Authority” shall mean, with respect to any Tax, the Governmental Authority
or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such Governmental Authority or subdivision. 
 “Tax Return” shall mean any return, declaration, report or similar statement required to be filed with respect to any Taxes (including any attached schedules) including any information return,
claim for refund, amended return and declaration of estimated Tax. 
 “Technology Amendment and Restatement” shall
have the meaning specified in Section 2.05(ii). 
 “Technology Agreement” shall mean that certain Amended
and Restated Technology Transfer and License Agreement dated February 19, 2002, by and among Seller, Buyer and the Company. 
 “Third Party Claims” shall have the meaning specified in Section 8.04. 
 “Third
Party IP” shall mean the Intellectual Property that is owned by a Person other than a Party or the Company. 
 “Transfer Instrument” shall have the meaning specified in Section 2.05(a)(i). 
 “Treasury Regulations” shall mean the income tax regulations, including temporary regulations, promulgated under the Code, as those regulations may be amended from time to time. Any reference herein to a specific
section of the Treasury Regulations shall include any corresponding provisions of succeeding, similar, substitute, proposed or final Treasury Regulation. 
 1.02 Interpretation. Unless expressly provided for elsewhere in this Agreement, this Agreement shall be interpreted in accordance with the following provisions: 
 (a) The headings of the Articles, Sections and subsections of this Agreement and the headings contained in the Exhibits and Schedules
hereto are inserted for convenience of 

  

 -7- 

 
reference only and shall not in any way define or affect the meaning, construction, or scope of any of the provisions hereof or thereof; 
 (b) Except where specifically stated otherwise, any reference to any statute, regulation, rule, or agreement shall be a reference to the
same as amended, supplemented or re-enacted from time to time; 
 (c) Whenever the words “include,”
“including,” or “includes” appear in this Agreement, they shall be read to be followed by the words “without limitation” or words having similar impart; 
 (d) A reference to any agreement or document (including a reference to this Agreement) is to the agreement or document as amended, varied,
supplemented, novated or replaced, except to the extent prohibited by this Agreement or that other agreement or document; 
 (e) The words “hereof” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement;

 (f) All references to “day” or “days” shall mean calendar days unless specified as a “Business
Day.” 
 ARTICLE II 
 SALE AND PURCHASE OF SELLER SHARES 
 2.01 Agreement to Sell and Purchase. In reliance upon
the representations, warranties and covenants of Buyer, and on the terms and subject to the conditions herein set forth, Seller agrees that at Closing it will convey, transfer, sell and assign the Seller Shares to the Buyer, or its designee, free
and clear of all Liens. In reliance upon the representations, warranties and covenants of Seller contained herein, and on the terms and subject to the conditions herein set forth, Buyer agrees that at Closing it will purchase from Seller the Seller
Shares. In consideration of the sale to it of the Seller Shares, Buyer agrees to pay to Seller nine hundred ninety thousand dollars ($990,000) in cash at Closing (the “Purchase Price”). 
 2.02 Transfer of Seller Shares. At the Closing, Seller shall execute and deliver the Transfer Instrument to Buyer and shall
execute and deliver any additional documents of transfer or conveyance that Buyer shall reasonably request Seller to execute to more effectively evidence the conveyance, sale, transfer and assignment of the Seller Shares to Buyer at the Closing.

 2.03 Payment of Purchase Price. At the Closing, Buyer shall deliver nine hundred ninety thousand dollars
($990,000) in cash to Seller in immediately available funds by wire transfer to an account or accounts designated in writing by Seller at least three (3) Business Days prior to the Closing Date. 
  

 -8- 

 2.04 Place and Time. The consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place at the offices of Fulbright & Jaworski L.L.P. at 1301 McKinney Avenue, Suite 5100, Houston, Texas 77010-3095, simultaneously with the execution of this Agreement, such date being
herein called the “Closing Date”. At the Closing, all transactions contemplated by this Agreement to be consummated at the Closing shall be deemed to have occurred simultaneously. 
 2.05 Transactions and Deliveries at the Closing.
 (a) At the Closing, Seller shall deliver or caused to be delivered to Buyer the following: 
 (i) an Assignment of Common Shares in the form of Exhibit A (the “Transfer Instrument”) to evidence the
conveyance of the Seller Shares; 
 (ii) a Noncompetition and Confidentiality Agreement executed by Kent Murphy in the form of
Exhibit B; 
 (iii) a Resignation from the Board of Directors of the Company by Kent Murphy, Robert Martinet and
Doug Juanarena all to be effective as of the Closing; 
 (iv) copies of the resolutions of Seller, certified as being correct
and complete and then in full force and effect, authorizing the execution of this Agreement and the Related Agreements to which it is a party and the consummation of the transactions contemplated under this Agreement and the Related Agreements to
which it is a party; 
 (v) certificates of incumbency and specimen signatures of the signatory officers of Seller;

 (vi) a Good Standing Certificate issued by the Secretary of State for the State of Delaware in respect of Seller,

 (vii) a short-form Good Standing Certificate issued by the Secretary of State for the State of Delaware in respect of the
Company; 
 (viii) any other documents, instruments or agreements contemplated hereby or reasonably necessary or appropriate
to consummate the transactions contemplated hereby; and 
 (ix) a certificate of non-foreign status dated as of the Closing
Date, sworn under penalties of perjury and in form and substance required by the Treasury Regulations promulgated under Section 1445 of the Code, stating that Seller is not a “foreign person” as defined in Section 1445 of the
Code. 
 (b) At the Closing, Buyer shall deliver to Seller: 
 (i) the Purchase Price; 
  

 -9- 

 (ii) copies of the resolutions of Buyer, certified as being correct and complete and then
in full force and effect, authorizing the execution of this Agreement and the Related Agreements to which it is a party and the consummation of the transactions contemplated under this Agreement and the Related Agreements to which it is a party;

 (iii) certificates of incumbency and specimen signatures of the signatory officers of Buyer; and 
 (iv) any other documents, instruments or agreements contemplated hereby or reasonably necessary or appropriate to consummate the
transactions contemplated hereby. 
 (c) At the Closing, Seller and Buyer shall enter into the following agreements:

 (i) a Bill of Sale to be executed by Seller and Buyer in the form of Exhibit C: 
 (ii) an Amended and Restated Technology Agreement in the form of Exhibit D (the “Technology Amendment and
Restatement”); 
 (iii) a Mutual Release to be executed by Seller, Kent Murphy, Buyer and the Company in the form of
Exhibit E; and 
 (iv) a Supply Agreement related to specialty fiber to be in the form of Exhibit F.

 ARTICLE III 
 REPRESENTATIONS AND WARRANTIES CONCERNING SELLER AND SELLER 
 SHARES, AND CERTAIN REPRESENTATIONS AND WARRANTIES
CONCERNING 
 THE COMPANY 
 Seller represents and warrants to Buyer, as follows: 
 3.01 Organization and
Standing. Seller (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) has all requisite power and authority to own, lease and operate all of its properties and
assets and to carry on its business substantially as now being conducted and (c) is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership, operation or leasing of its
properties makes such qualification necessary, except where the failure to have such power or authority or to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect with respect to Seller. 
  

 -10- 

 3.02 Authority and Binding Obligations. Seller has the power and authority to
execute and deliver this Agreement and the Related Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, as applicable. The execution, delivery and
performance of this Agreement and the Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Seller. This
Agreement has been, and at Closing the Related Agreements to which it is a party will be, duly executed and delivered by Seller and, assuming that this Agreement has been, and at Closing the Related Agreements to which it is a party will be, duly
authorized, executed and delivered by Buyer, as applicable, this Agreement constitutes, and at Closing the Related Agreements to which it is a party will constitute, valid and binding agreements of Seller enforceable against Seller in accordance
with their respective terms, except that (a) such enforcement may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereafter in effect, relating to or limiting creditors’
rights generally and (b) enforcement of this Agreement and Related Agreements, including the remedy of specific performance and injunctive and other forms of equitable relief, may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. 
 3.03 Consents and Approvals; No Violations. Neither
the execution and delivery by Seller of this Agreement or any Related Agreement nor the consummation by Seller of the transactions contemplated hereby and thereby, or the fulfillment and performance by Seller of its obligations hereunder and
thereunder, respectively, will (a) conflict with or result in any breach of any provision of the applicable governing documents of Seller, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or require any consent under, any indenture, mortgage, deed of bust, license, contract, lease, agreement or other instrument or obligation to which
Seller is a party or by which it or any of its properties or assets may be bound, (c) violate any Applicable Law applicable to Seller or any of its properties or assets or (d) require any filing with, or the obtaining of any permit,
authorization, consent or approval of, any Governmental Authority, except in the case of clauses (b), (c), and (d) of this Section 3.03 for any such violations, breaches, defaults, rights of termination, cancellation or acceleration
or requirements that, individually or in the aggregate, would not have a Material Adverse Effect with respect to Seller. 
 3.04
Litigation.
 (a) there is no Claim, action, suit, demand, proceeding, arbitration, grievance, citation,
summons, subpoena or, to Seller’s Knowledge, any inquiry or investigation, of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending, or to Seller’s Knowledge, threatened against Seller involving or affecting
the Seller Shares, and there are no Judgments outstanding against Seller involving or affecting the Seller Shares; and 
 (b)
no Claim, action, suit, demand, proceeding, arbitration, grievance, citation, summons, subpoena or to Seller’s Knowledge any inquiry or investigation, of any nature, civil, criminal, regulatory or otherwise, in law or in equity, that is
pending, or to Seller’s Knowledge, 

  

 -11- 

 
threatened seeking to restrain or prohibit this Agreement, the Related Agreements or any agreement, instrument or transaction contemplated hereby or thereby,
or to obtain damages, a discovery order or other relief in connection with this Agreement, the Related Agreements or the transactions contemplated hereby and thereby. 
 3.05 Title to the Seller Shares. Seller owns good and marketable title to the Seller Shares free and clear of any Liens. The Seller Shares constitute sixty percent (60%) of all of the
issued and outstanding Common Shares of the Company. The Seller Shares have been duly authorized, and are validly issued and fully paid and non-assessable. Seller is not a party to any voting trust, proxy, or other agreement or understanding with
respect to voting any of the Seller Shares except as provided pursuant to the Company Agreement. The Seller Shares represent Seller’s entire right, title and interest in and to the equity of the Company. 
 3.06 Brokers; Finders and Fees. Seller has not employed any investment banker, broker or finder or incurred any liability for any
investment banking, financial advisory or brokerage fees, commissions or finders’ fees in connection with this Agreement or the transactions contemplated hereby. 
 3.07 Capitalization. The authorized capital of the Company consists of 29,000,000 Common Shares. All of the issued and outstanding Common Shares (i) have been duly authorized, and are validly
issued, fully paid and nonassessable, (ii) are owned of record and beneficially by the shareholders and in the respective amounts as indicated on Schedule 3.07 and (iii) were issued in compliance with all Applicable Laws
including the Securities Act. No Person other than Seller and Buyer has any record or beneficial interest in any Common Shares (other than the holders of the Employee Options) or any other limited liability company interests (as such term is defined
in the Delaware Act) in the Company. The Company does not have outstanding any convertible securities, options (other than the Employee Options) or warrants. The Company and has not entered into any Contracts, and there are no restrictions by which
it is bound directly or indirectly, to issue any additional Common Shares, membership interests or limited liability company interests (as such term is defined in the Delaware Act) or other securities. 
 3.08 Employee Options. Four million (4,000,000) Common Shares are reserved for issuance pursuant to the Company’s
Option Plan. Schedule 3.08 is a true, correct and complete list of all options outstanding of the Company indicating the record holders thereof, the amount of vested Common Shares, the grant dates of the options and the exercise prices
(collectively, the “Employee Options”). The Company has provided Buyer with true, correct and complete copies of all agreements and correspondence related to the Employee Options. 
 3.09 Intellectual Property.
 (a) Identification and Ownership. 
 (i) Seller owns, legally and beneficially, free
from all Liens, the Innovations Owned IP and has legally enforceable license rights for or otherwise possesses legally 

  

 -12- 

 
enforceable rights to the Third Party IP used by Seller pursuant to a license, sublicense or other agreement, except to the extent that such enforceability
may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights and other laws of equity. 
 (ii)
Schedule 3.09(ii) lists all Innovations Owned IP for which an application has been filed with any Governmental Authority, including patents, trademarks/service marks and copyrights, issued or registered, or for which any application for
issuance or registration thereof has been filed. 
 (iii) Schedule 3.09(a)(iii) lists all licenses, sublicenses or
other agreements as to which Seller is a party and pursuant to which Seller is authorized to use any Third Party IP. 
 (iv)
Schedule 3.09(a)(iv) lists all licenses, sublicenses or other agreements as to which the Company is a party and pursuant to which the Company is authorized to use any Innovations Owned IP or any Third Party IP licensed to Seller.

 (v) Schedule 3.09(a)(v) lists all trademarks, service marks and other trade designations that are Innovations
Owned IP and not otherwise identified in Schedule 3.09(a)(ii). 
 (vi) Except as set forth in
Schedule 3.09(a)(vi), Seller has, and at Closing will have, all rights necessary to grant the licenses and other rights granted to Baker Hughes under the Technology Amendment and Restatement in respect of the Innovations Owned IP and the
Third Party IP licensed to Seller. 
 (vii) Seller has not granted any right, license or interest in or to any of the Combined
IP that conflicts with the rights granted in the Technology Agreement. 
 (viii) All necessary documents and certificates in
connection with the Innovations Owned IP listed in Schedule 3.09(a)(ii), have been properly filed with the relevant patent, trademark, copyright or intellectual property offices of the countries where such rights are filed, or
registered, or both. 
 (ix) No present or former employee or independent contractor of Seller or any of its Affiliates owns
or to the Knowledge of Seller claims to own any of the Company Owned IP or Innovations Owned IP. 
 (x) Seller has secured a
written assignment of the rights to any contribution from all independent contractors and employees who contributed to the creation of the Innovations Owned IP. 
 (xi) No Claim has been asserted, nor to the Knowledge of Seller are there any Claims that could be asserted, alleging that the licenses
that have been granted to Seller or any of its Affiliates with respect to Third Party IP have been terminated or otherwise diminished. 
 (b) Validity and Enforceability 
 (i) The Innovations Owned IP is valid and
enforceable, and has not been adjudged to be invalid or unenforceable in whole or in part. 
  

 -13- 

 (ii) Each license of the Third Party IP granted to Seller or any of its Affiliates is
valid and enforceable, is binding on all parties to such license, and is in full force and effect. 
 (iii) No act or omission
by Seller has taken place that may give rise to revocation, invalidation, unenforceability or non-renewal of any Company Owned IP or Innovations Owned IP or that might prejudice any application for the registration or grant of it. 
 (iv) No act or omission by Seller has taken place that constitutes, would constitute, or to the Knowledge of Seller, has been alleged to
constitute a breach or permit termination of any of the licenses, sublicenses or other agreements related to the Third Party IP granted to Seller or any of its Affiliates. 
 (c) Violation of Combined IP. 
 (i) Seller has not brought, and is not aware of, any action, suit or proceeding against any third party for infringement, misappropriation or other violation of the Company Owned IP or the Innovations Owned IP or for
breach of any license or agreement involving the Combined IP or made any allegation to this effect. 
 (ii) Except as set
forth in Schedule 3.09(c)(ii). there are no pending (with service of process having been made or written notice having been served on Seller), or, to Seller’s Knowledge, threatened Claims, suits, demands or actions against Seller
affecting any of the Combined IP. 
 (iii) Seller has not entered into any agreement to defend, hold harmless or indemnify and
does not otherwise owe a duty to defend, hold harmless or indemnify any entity against any charge of infringement or misappropriation of any of the Innovations Owned IP or Third Party IP licensed to Seller, other than hold harmless, defense or
indemnification provisions with the Company, Buyer or their Affiliates arising in the ordinary course of business. 
 (iv)
Seller has taken all commercially reasonable and appropriate steps to protect and preserve the confidentiality of any confidential information related to the Combined IP disclosed to it by a third party pursuant to an obligation of confidentiality.

 (v) All software that is a part of the Innovations Owned IP or Third Party IP licensed to Seller, but not including any
commercially available off-the-shelf software, used by the Company for its business is properly and validly licensed to or owned by the Company, and, if licensed, the Company has secured or obtained a sufficient number of licenses to cover all
authorized use of such software by the Company. 
  

 -14- 

 (d) Other Existing IP Issues. 
 (i) Seller has the power and authority to license to Baker Hughes the Innovations Pre-Existing IP, Innovations Newly-Developed Technology
and Innovations Background Technology (as such terms are defined in the Technology Amendment and Restatement) in the Field and the Innovations Third Party IP (as such term is defined in the Technology Amendment and Restatement) in the Field in
accordance with the Technology Amendment and Restatement, to the extent Seller has rights to the Innovations Third Party IP (as such term is defined in the Technology Amendment and Restatement) as of the Closing Date, to be licensed pursuant to the
Technology Amendment and Restatement. 
 (ii) Seller will not be, as a result of the execution and delivery of this Agreement
or any of the documents contemplated hereby or thereby or the performance by Seller hereunder or thereunder, in breach of any license, sublicense or other agreement relating to the Combined IP. 
 3.10 Employee Benefits. 
 (a) Schedule 3.10(a) contains a true, complete and accurate list and brief description of all Benefit Plans. Seller has made available to Buyer prior to Closing, as applicable, true, complete and correct
copies of all plan documents, summary plan descriptions, financial statements, funding vehicles, agreements pursuant to which the Company may be obligated to indemnify any person, determination letters issued by the IRS and filings with all
applicable Governmental Authorities for the past three (3) years relating to the Benefit Plans. 
 (b) (i) Each of
the Benefit Plans complies with all Applicable Laws (including ERISA) and (ii) the Company has complied with all such laws and regulations in administering each of such plans. 
 ARTICLE IV 
 REPRESENTATIONS AND WARRANTIES CONCERNING SELLER’S
KNOWLEDGE 
 ABOUT CERTAIN MATTERS CONCERNING THE COMPANY 
 Seller represents and warrants to Buyer, to Seller’s Knowledge, as follows: 
 4.01 Organization and Standing. The Company (a) is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware, (b) has all requisite power and authority to own, lease and operate all of its properties and assets and to carry on its business substantially as now being conducted and (c) is duly
qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership, operation or leasing of its properties makes such qualification necessary, except where the failure to have such power or
authority or to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect with respect to Seller. 
  

 -15- 

 4.02 Authority and Binding Obligations. The Company has the power and authority
to execute and deliver the Related Agreements to which it is a party, to perform its obligations thereunder and to consummate the transactions contemplated thereby, as applicable. The execution, delivery and performance of the Related Agreements to
which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all requisite corporate action on the part of the Company. At the Closing the Related Agreements to which the Company is a party will be,
duly executed and delivered by the Company and, assuming that at the Closing the Related Agreements to which the Company is a party will be, duly authorized, executed and delivered by the other parties thereto, will constitute, valid and binding
agreements of the Company enforceable against the Company in accordance with their respective terms, except that (a) such enforcement may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws,
now or hereafter in effect, relating to or limiting creditors’ rights generally and (b) enforcement of Related Agreements, including the remedy of specific performance and injunctive and other forms of equitable relief, may be subject to
equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 
 4.03 Consents and
Approvals; No Violations. Neither the execution and delivery by the Company of any Related Agreement nor the consummation by the Company of the transactions contemplated thereby, or the fulfillment and performance by the Company of its
obligations thereunder, will (a) conflict with or result in any breach of any provision of the applicable governing documents of the Company, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of
tune or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or require any consent under, any indenture, mortgage, deed of trust, license, contract, lease, agreement or other instrument or obligation to
which the Company is a party or by which it or any of its properties or assets may be bound, (c) violate any Applicable Law applicable to the Company or any of its properties or assets or (d) require any filing with, or the obtaining of
any permit, authorization, consent or approval of, any Governmental Authority. 
 4.04 Litigation. There is no
Claim, action, suit, demand, proceeding, arbitration, grievance, citation, summons, subpoena or any inquiry or investigation, of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or threatened against or involving
the Company and there are no Judgments outstanding against the Company. 
 4.05 Financial Information. The Company
has delivered to Buyer true, correct, and complete copies of the following financial statements of the Company (collectively, the “Financial Statements”): 
 (a) the audited Balance Sheets of the Company as of December 31, 2002 and 2003 and the related Statements of Operations,
Member’s Equity, and Cash Flows of the Company all for the fiscal years ended on such dates and for the period from inception through December 31, 2002 and 2003, including the schedules and/or notes related thereto, and 
 (b) the unaudited Balance Sheet of the Company as of November 26, 2004 and the related Statement of Operations, Member’s Equity,
and Cash Flows of the Company for the period 

  

 -16- 

 
ended on such date (subject to normal recurring year-end audit adjustments as prepared by the Company) (collectively, the “Interim Financial
Statement”). As used herein, the term “Balance Sheet Date” shall mean November 26, 2004. 
 The
Financial Statements (taken together and including the related schedules and/or notes thereto) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis and are complete and correct in all material
respects and fairly present (i) the financial position of the Company as of the respective dates as such statements and (ii) the results of the operations and the changes in financial position of the Company for the fiscal period ended on
such dates, all applied on a consistent basis (except as otherwise stated therein or in the notes thereto throughout the periods involved). 
 4.06 Undisclosed Liabilities. All material obligations and liabilities, contingent or otherwise, of the Company arising from events which have occurred on or before the Balance Sheet Date have been fully accrued or
reserved for in the Interim Financial Statement and the Company has not incurred any material obligation or liability, contingent or otherwise, subsequent to the Balance Sheet Date except for accounts payable incurred in die ordinary course of
business consistent with past practice. 
 4.07 Contracts and Commitments. Schedule 4.07 contains an
accurate and complete list of each Contract as of the date of this Agreement to which the Company is a party (the “Commitments”), Except as specified in Schedule 4.07, the Company is not, nor is any other party thereto, in
default under any of the Commitments where such defaults would result in a Material Adverse Effect. Except as specified in Schedule 4.07, the Company has not received written notice of cancellation or termination of any Commitment from
any party thereto. 
 4.08 Changes. Except as set forth in Schedule 4.08. since the Balance Sheet Date
there has not been: 
 (a) Any change in the condition (financial or other) or properties, assets, liabilities, business
operating results or prospects of the Company from that reflected in the Interim Financial Statement, except changes in the ordinary course of business; 
 (b) Any damage, destruction, or loss (whether or not covered by insurance) materially and adversely affecting the properties, assets, or business of the Company as presently or proposed to be conducted; 
 (c) Any material increase in the compensation or rate of compensation or commissions payable or to become payable by the Company to any of
its directors, officers, employees, or agents, or any hiring of any employee, or any payment of any bonus, profit-sharing amount or other extraordinary compensation to any director, officer, employee, salesperson or agent, or any material change in
any bonus, profit-sharing, retirement or other similar plan, agreement or arrangement or any adoption of or entry into of any new bonus, profit-sharing, group life or health insurance, or other similar plan, agreement or arrangement; 
  

 -17- 

 (d) Any material change in the accounting methods or practices followed by the Company;

 (e) Any material debt, obligation or liability (whether absolute or contingent) incurred by the Company (whether or not
presently outstanding) except current liabilities incurred, and obligations under agreements entered into, in the ordinary course of business; 
 (f) Any sale, lease, abandonment or other disposition by the Company of any real property or, in each case other than in the ordinary course of business, of any equipment or other operating properties or any sale,
assignment, transfer, license or other disposition by the Company of any Intellectual Property or other intangible asset; 
 (g) Any labor trouble, strike or any other occurrence, event or condition of any similar character that materially and adversely affects or may materially and adversely affect the assets, properties, business or prospects of the Company;

 (h) Any change, except in the ordinary course of business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty, or otherwise; 
 (i) Any waiver by the Company of a valuable right or a material debt owed
to it except in the ordinary course of business; 
 (j) Any direct or indirect loans made by the Company to any member,
employee, officer, or director of the Company, other than advances made in the ordinary course of business; 
 (k) Any
declaration or payment of any dividend or other distribution of the assets of the Company; 
 (l) Any satisfaction or
discharge of any Lien, Claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and that is not material to the business, properties, prospects or financial condition of the Company (as such
business is presently conducted and proposed to be conducted); 
 (m) Any material change to a material contract or agreement
by which the Company or any of its assets is bound or subject; 
 (n) Any resignation or termination of employment of any
officer or key employee of the Company; and the Company, to Seller’s Knowledge, does not know of any impending resignation or termination of employment of any such officer or key employee; 
 (o) Any other event or condition of any character that materially and adversely affects the business (as such business is presently
conducted and is proposed to be conducted), properties, prospects or financial condition of the Company; or 
  

 -18- 

 (p) Any arrangement or commitment by the Company to do any of the things described in
this Section 4.08. 
 4.09 Compliance with Laws. The Company is in compliance with all Applicable Laws.

 4.10 Taxes. There are no claims for unpaid Taxes, pending against or threatened against the Company or its
assets. The Company has filed all Tax Returns that are required to be filed by the Company with respect to all periods ending prior to the Closing Date, and such Tax Returns are true, correct and complete in all material respects and were prepared
in conformity with all Applicable Law. 
 4.11 Title to Assets. Except as set forth in Schedule 4.11,
the Company has good and marketable title to, or a valid leasehold interest in, all of its assets free and clear of any Liens, except for assets sold, consumed or otherwise disposed of in the ordinary course of business consistent with past
practices. 
 4.12 Guaranties. The Company does not have outstanding (a) any guaranty (whether direct or
indirect) whereby the Company is or may become liable for an indebtedness or obligation of any other Person, (b) any indemnification obligations in favor of any Person, or (c) any investment in the securities, obligations or other
ownership interest of, or loans or advances to (excluding employee/contractor loans or advances) any Person. 
 4.13 Employee
Matter.
 (a) Schedule 4.13(a) contains a true, complete and accurate list of each person employed by the
Company as of the date hereof, together with such individual’s title or job description and date of hire by the Company, such individual’s salary and incentive compensation arrangements with the Company. Except as set forth in
Schedule 4.13(a), the Company does not use the services of independent contractors or consultants. Except as set forth on Schedule 4.13(a), none of the employees of the Company are employed pursuant to a written employment
agreement. As of the date prior to the date hereof, neither the Company nor the Seller has received notification that any of the current employees of the Company presently plans to terminate his employment during the 2004 calendar year, whether by
reason of the transactions contemplated by this Agreement or otherwise. 
 (b) The Company is, and during the last three
(3) years has been, in, material compliance with all Applicable Laws in respect of employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, and has not engaged in any
unfair labor practices as defined in the National Labor Relations Act. No charges with respect to or relating to the Company are pending before the Equal Employment Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices. There are no Claims, complaints, lawsuits or other proceedings pending or threatened in any forum against the Company by or on behalf of any present or former employee of the Company, any applicant for employment or
classes of the foregoing, alleging breach of any express or implied 

  

 -19- 

 
contract of employment, any Applicable , governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection
with the employment relationship. No event has occurred and no circumstance exists that could give rise to or serve as a basis for the commencement of any such any action, arbitration, audit, hearing, litigation, proceeding or investigation
described in the preceding sentence. 
 4.14 Environmental Matters.
 (a) The Company has at all times operated in compliance with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations of Environmental Laws and related orders of any court or other Governmental Authority. 
 (b) There are no existing, pending or threatened Environmental Claims related to the Company or any of its assets or properties. 
 (c) All Environmental Permits required to be obtained or filed by the Company under all applicable Environmental Laws in connection with its operation or use of the assets or properties or the conduct of its business
have been duly obtained or filed and are in full force and effect and will remain in full force and effect following the transfer of the Seller Shares to Buyer. 
 (d) The Company has not received notice that any Environmental Permit is to be revoked or suspended by any Governmental Authority and the
Company is not currently operating or required to be operating under any compliance order, schedule, decree or agreement, any consent decree, order or agreement, or corrective action decree, order or agreement issued or entered into under, or
pertaining to matters regulated by, any Environmental Law. 
 (e) The Company does not own or operate any underground storage
tanks and has not polluted with any Hazardous Substances the soil or groundwater of any past or present premises of the Company. 
 (f) No portion of the assets or properties currently or previously leased or owned by the Company is part of any type of site designated as an environmental site under Environmental Laws nor is part of a decontamination schedule or plan of
any Governmental Authority. 
 (g) All Hazardous Substances generated by the Company have been transported, stored, treated
and disposed of in compliance with all applicable Environmental Laws. 
 4.15 Permits and Licenses. The Company has
duly obtained and maintained all permits, licenses, concessions, warrants, franchises and other authorizations and approvals of all third parties and Governmental Authorities required or necessary for the Company to carry on its business in the
places and in the manner currently conducted (collectively, the “Permits”). The Permits are in mil force and effect. No violations, defaults or breaches are in existence or have been recorded with respect to the Permits and
no proceeding is pending or, to Seller’s Knowledge, threatened with respect to the revocation or limitation of any of the Permits. 
  

 -20- 

 4.16 Intellectual Property.
 (a) Identification and Ownership. 
 (i) The Company owns, legally and beneficially, free from all Liens, the Company Owned IP and has legally enforceable license rights for or otherwise possesses legally enforceable rights to the Third Party IP used by
the Company pursuant to a license, sublicense or other agreement, except to the extent that such enforceability may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights and other laws of equity. 
 (ii) Schedule 4.16(a)(ii) lists all Company Owned IP for which an application has been filed with any Governmental Authority,
including patents, trademarks/service marks and copyrights, issued or registered, or for which any application for issuance or registration thereof has been filed. 
 (iii) Schedule 4.16(a)(iii) lists all licenses, sublicenses or other agreements as to which the Company is a party and
pursuant to which the Company is authorized to use any Third Party IP. 
 (iv) Schedule 4.16(a)(iv) lists all
trademarks, service marks and other trade designations that are Company Owned IP and not otherwise identified in Schedule 4.16(a)(ii). 
 (v) The Intellectual Property listed in Schedules 3.09(a)(ii), 3.09(a)(iii), 3.09(a)(iv), 3.09(a)(v), 4.16(a)(ii), 4.16(a)(iii) and 4.16(a)(iv) is all the Intellectual
Property necessary for the operation of the business of the Company as it is currently conducted. 
 (vi) All necessary
documents and certificates in connection with the Company Owned IP listed in Schedule 4.16(a)(ii) have been properly filed with the relevant patent, trademark, copyright or intellectual property offices of the countries where such rights
are filed, or registered, or both. 
 (vii) No present or former employee or independent contractor of the Company or any of
its Affiliates owns or claims to own any of the Company Owned IP or Innovations Owned IP. 
 (viii) The Company has secured a
written assignment of the rights to any contribution from all independent contractors and employees who contributed to the creation of the Company Owned IP. 
 (ix) No Claim has been asserted, nor are there any Claims that could be asserted, alleging that the licenses that have been granted to the
Company or any of its Affiliates with respect to Third Party IP have been terminated or otherwise diminished. 
  

 -21- 

 (b) Validity and Enforceability 
 (i) The Company Owned IP is valid and enforceable, and has not been adjudged to be invalid or unenforceable in whole or in part.

 (ii) No act or omission by the Company has taken place mat may give rise to revocation, invalidation, unenforceability or
non-renewal of any Company Owned IP or Innovations Owned IP or that might prejudice any application for the registration or grant of it. 
 (iii) No act or omission by the Company has taken place that constitutes, would constitute, or has been alleged to constitute a breach or permit termination of any of the licenses, sublicenses or other agreements
related to the Third Party IP. 
 (c) Violation of Combined IP. 
 (i) There is no unauthorized use, disclosure, infringement, threatened infringement, misappropriation or other violation of any of the
Combined IP by any third party, including any employee, former employee or independent contractor of Seller or any of its Affiliates or any material breach of any Contract involving the Combined IP. 
 (ii) Except as set forth in Schedule 4.16(c)(ii), there are no pending (with service of process having been made or written
notice having been served on the Company or Seller) or threatened Claims, suits, demands or actions against the Company affecting any of the Combined IP. 
 (iii) No part of the business conducted by the Company or related to the Combined IP, infringes, misappropriates or otherwise violates or has been alleged to infringe, misappropriate or otherwise violate any
Intellectual Property Rights of any third party. 
 (iv) The Company has not entered into any agreement to defend, hold
harmless or indemnify and does not otherwise owe a duty to defend, hold harmless or indemnify any entity against any charge of infringement or misappropriation of any of the Combined IP, other than hold harmless, defense or indemnification
provisions arising in the ordinary course of business. 
 (v) None of the Company, Seller, nor any of Seller’s
Affiliates, is in breach of any obligation of confidence related to the Combined IP. 
 (vi) All software that is a part of
the Combined IP, but not including any commercially available off-the-shelf software, used by the Company for its business is properly and validly licensed to or owned by the Company, and, if licensed, the Company has secured or obtained a
sufficient number of licenses to cover all authorized use of such software by the Company. 
  

 -22- 

 (d) Other Existing IP Issues. 
 (i) The Company will not be, as a result of the execution and delivery of this Agreement or any of the documents contemplated hereby or
thereby or the performance by Seller hereunder or thereunder, in breach of any license, sublicense or other agreement relating to the Combined IP. 
 ARTICLE V 
 REPRESENTATIONS AND WARRANTIES CONCERNING BUYER 
 Buyer represents and warrants to Buyer, as follows: 
 5.01 Organization and Standing. Buyer (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of California, (b) has all requisite power and authority to
own, lease and operate all of its properties and assets and to carry on its business substantially as now being conducted and (c) is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or
the ownership, operation or leasing of its properties makes such qualification necessary, except where the failure to have such power or authority or to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect with
respect to Buyer. 
 5.02 Authority and Binding Obligations. Buyer has the power and authority to execute and
deliver this Agreement and the Related Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, as applicable. The execution, delivery and performance
of this Agreement and the Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been,
and at Closing the Related Agreements to which it is a party will be, duly executed and delivered by Buyer and, assuming that this Agreement has been, and at Closing the Related Agreements to which it is a party will be, duly authorized, executed
and delivered by Buyer, as applicable, this Agreement constitutes, and at Closing the Related Agreements will constitute, valid and binding agreements of Buyer enforceable against Buyer in accordance with their respective terms, except that
(a) such enforcement may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereafter in effect, relating to or limiting creditors’ rights generally and (b) enforcement of
this Agreement and Related Agreements, including the remedy of specific performance and injunctive and other forms of equitable relief, may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may
be brought. 
 5.03 Consents and Approvals; No Violations. Neither the execution and delivery by Buyer of this
Agreement or any Related Agreement nor the consummation by Buyer of the transactions contemplated hereby and thereby, or the fulfillment and performance by Buyer of its 

  

 -23- 

 
obligations hereunder and thereunder, respectively, will (a) conflict with or result in any breach of any provision of the applicable governing
documents of Buyer, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or require any consent
under, any indenture, mortgage, deed of trust, license, contract, lease, agreement or other instrument or obligation to which Buyer is a party or by which it or any of its properties or assets may be bound, (c) violate any Applicable Law
applicable to Buyer or any of its properties or assets or (d) require any filing with, or the obtaining of any permit, authorization, consent or approval of, any Governmental Authority, except in the case of clauses (b), (c), and (d) of
this Section 5.03 for any such violations, breaches, defaults, rights of termination, cancellation or acceleration or requirements that, individually or in the aggregate, would not have a Material Adverse Effect with respect to Buyer.

 5.04 Litigation. There is no Claim, action, suit, demand, proceeding, arbitration, grievance, citation, summons,
subpoena or to Buyer’s Knowledge any inquiry or investigation, of any nature, civil, criminal, regulatory or otherwise, in law or in equity, that is pending, or to Buyer’s Knowledge, threatened seeking to restrain or prohibit this
Agreement, the Related Agreements or any agreement, instrument or transaction contemplated hereby or thereby, or to obtain damages, a discovery order or other relief in connection with this Agreement, the Related Agreements or the transactions
contemplated hereby and thereby. 
 5.05 Brokers; Finders and Fees. Buyer has not employed any
investment banker, broker or finder or incurred any liability for any investment banking, financial advisory or brokerage fees, commissions or finders’ fees in connection with this Agreement or the transactions contemplated hereby. 

5.06 No Registration. Seller understands that the Seller Shares have not been, and may not be, registered under the
Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent of Buyer, the investment experience of
Buyer and the financial sophistication of Buyer. 
 5.07 Investment Intent. Buyer is acquiring the Seller Shares
for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. 
 5.08 Investment Experience. Buyer has the requisite sophistication related to evaluating and investing in private placement transactions of securities so that it is capable of evaluating the
merits and risks of its investment in the Company and has the capacity to protect its own interests. 
 5.09 Speculative Nature
of Investment. Buyer acknowledges that its investment in the Seller Shares is highly speculative and entails a substantial degree of risk, and Buyer is in a position to lose the entire amount of such investment. 
  

 -24- 

 5.10 Access to Data. Buyer has had an opportunity to discuss the Company’s
business, management and financial affairs with the Company’s management. Buyer also has had an opportunity to ask questions of management of the Company, which questions were answered to its satisfaction. Buyer understands that such
discussions, as well as any information issued by the Company, were intended to describe certain aspects of the Company’s business and prospects, but were not necessarily a thorough or exhaustive description. 
 5.11 Accredited Investor. Buyer is an “accredited investor” within the meaning of Regulation D, Rule 501 (a),
promulgated by the Securities and Exchange Commission. 
 5.12 Residency. The principal place of business of Buyer
is Texas. 
 5.13 Restriction on Resales. Buyer acknowledges that the Seller Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption from such registration is available. The Company has no present intention of registering the Seller Shares. Buyer further understands that there is no assurance that any
exemption from registration under the Securities Act will be available or, if available, that such exemption will allow Buyer to dispose of or otherwise transfer any or all of the Seller Shares under the circumstances, in the amounts or at the times
the Buyer might propose, provided that Buyer may dispose of or otherwise transfer any or all of the Seller Shares in accordance with the Company Agreement. 
 5.14 Rule 144. Buyer is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions. Buyer understands that the current public information referred to in Rule 144 above is not now available and the Company has no present plans to make such information available. Buyer acknowledges that, in the
event all of the requirements of Rule 144 are not met, registration under the Securities Act or an exemption from registration will be required for any disposition of the Seller Shares. 
 5.15 No Public Market. Buyer understands and acknowledges that no public market now exists for any of the Seller Shares and
that the Company has made no assurances that a public market will ever exist for the Seller Shares. 
 5.16
Reliance. Buyer acknowledges that it has had the opportunity to review with its legal counsel and tax advisors this Agreement and the Related Agreements, the exhibits and schedules attached hereto and thereto (including the U.S.
federal, state, local and foreign tax consequences of this investment and the transactions contemplated herein and therein). With respect to this investment and the transactions contemplated by this Agreement and the Related Agreements, Buyer is
relying on (i) such counsel and advisors for legal and tax advice, (ii) the statements, representations and warranties of Seller in this Agreement and the Related Agreements and (iii) the due diligence materials made available to
Buyer. 
  

 -25- 

 ARTICLE VI 
 COVENANTS AND AGREEMENTS OF SELLER 
 Seller covenants and agrees as follows: 
 6.01 ATP Project. With respect to rights or assets arising out of the ATP project, Seller will use its commercially reasonable
efforts to secure the same from NIST and to transfer same to Buyer; provided, however, that any additional consideration necessary to acquire such rights from NIST shall be the responsibility of Buyer to fund. 
 6.02 Covenant Not to Compete. For a period of five (5) years from and after the Closing Date, Seller will not engage (and
will prohibit its Affiliates from engaging) directly or indirectly in any business anywhere in the world that competes with Buyer or the Company in the development, marketing or sale of single point measurement or distributed measurement fiber optic
technology in the Field, anywhere in the world; provided, however, ownership of less than 3% of the outstanding equity of any entity shall not be deemed to be engaging in any business solely by reason thereof. 
 If a court of competent jurisdiction or the Tribunal pursuant to Article IX hereof declares or intends to declare that any term or provision of
this Section 6.02 is invalid or unenforceable, the Parties agree that such court/Tribunal making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified. 
 In the event of breach or threatened breach of the provisions of this
Section 6.02 it is understood and agreed that Buyer and the Company shall be entitled to injunctive relief (without bond or other security being required) as well as any and all other applicable remedies at law and inequity. 

Seller acknowledges that its agreement in this Section 6.02 forms an essential part of the consideration received by Buyer hereunder.

 6.03 Non-Hiring of Employees. For a period of two (2) years from and after the Closing Date, Seller agrees
not to solicit, offer employment to or employ in any capacity (and shall prohibit its Affiliates from such activities) any employee of the Company or Buyer without the prior written consent of Buyer or the Company; provided, however,
such limitations shall not apply to any Employee whose employment is terminated by the Company. Seller acknowledges that its agreement in this Section 6.03 forms an essential part of the consideration received by Buyer hereunder.

  

 -26- 

 6.04 Services and Employee Benefit. 
 (a) Seller shall assist Buyer and the Company in an orderly transition and will cooperate with Buyer and the Company to ensure appropriate
transition of services provided by Seller to the Company can be made to Buyer. In this regard, Seller will continue to provide the same services and support, including the Non-Exclusive Identified Support Services, that Seller is currently providing
to the Company for a period of one hundred twenty (120) days after the Closing or such earlier period as the Company may notify Seller that such services are not required. Seller will provide all such services and support in substantially the
same manner, nature and quality as such service and support is currently being provided to the Company. 
 (b) Without in any
way limiting the generality of the foregoing, Seller will continue to provide such Employee Benefits including insurance coverage on the same basis that Seller currently provides such services until the Company is able to confirm its own coverage is
in place; provided Seller shall not be required to continue such services beyond such 120-day period. 
 (c) Seller will
promptly invoice the Company $2,500 per month to provide the services and support described in this Section 6.04 for so long as such services and support are being provided; provided, however, that the amount due for the month in which the
services and support cease to be provided shall be equal to the product of $85 times the number of days the services and support were provided in such month. Payment will be made by the Company promptly after receipt of such invoice, but in no event
more than thirty (30) days after receipt. 
 6.05 Licenses and Permits. Seller shall use (and shall cause Kent
Murphy to use) its commercially reasonable efforts to secure for the Company or Buyer all licenses, sublicenses, assignments or other suitable rights in and to any intellectual property and any contracts or leases necessary for the operation of the
business of the Company as currently conducted and related to the Field and not already held by the Company as well as such rights that are impaired, terminated, or otherwise adversely affected as a result of the change of control contemplated by
this Agreement; provided, however, that to the extent such rights are held by a third party, it shall be the responsibility of the Company or Buyer to provide such funds as may be required by the third party to acquire such third party rights
for the Company. 
 ARTICLE VII 
 TAX MATTERS 
 Seller and Buyer covenant and agree as follows: 
 7.01 Tax Indemnity. Seller shall be responsible for, shall pay or cause to be paid, and shall indemnify, defend and hold harmless
Buyer and the Company and their respective Affiliates (all of such Persons indemnified by Seller under this Section 7.01 being collectively referred to 

  

 -27- 

 
herein as the “Tax Indemnitees” and individually referred to herein as a “Tax Indemnitee”) from and against:

 (a) 60% of any and all Taxes imposed on, or pertaining or attributable to, the Company with respect to any period or
portion thereof that ends on or before the Closing Date (a “Pre-Closing Period”) and any and all Taxes allocated to a Pre-Closing Period pursuant to the terms of this Article VII; and 
 (b) any and all income, sales, use, transfer and similar Taxes imposed in connection with the transfer of the Seller Shares contemplated
by this Agreement. 
 Notwithstanding anything to the contrary in this Section 7.01, Seller will not have any liability under
Section 7.01(a) unless and until the aggregate amount for which the Tax Indemnitees are entitled to recover under such Section 7.01 (a) exceeds in the aggregate an amount equal to Ten Thousand Dollars ($20,000) (the
“Seller Tax Threshold Amount”), in which case Seller shall be liable only for the portion of such amount in excess of the Seller Tax Threshold Amount consistent with Section 7.01(a). 
 7.02 Allocation of Certain Taxes. 
 (a) Seller and Buyer will, to the extent permitted by Applicable Law, elect with the appropriate Taxing Authorities to close the Taxable periods of the Company as of and including the Closing Date. In any case where
Applicable Law does not require or permit such a Taxable period of the Company to be closed as of and including the Closing Date, any Tax described in Section 7.01(a) and pertaining to a period that begins on or before the Closing Date
and ends after the Closing Date (a “Straddle Period”) shall be determined in accordance with the applicable provisions of Section 7.02(b) hereof. 
 (b) In the case of any Tax described in Section 7.01 (a) and pertaining to a Straddle Period and which is based on
income, sales, revenue, production or similar items, or other Taxes not described in the next sentence, the portion of such Tax pertaining or attributable to the Company for the Pre-Closing Period of such Straddle Period shall be determined on the
basis of an interim closing of the books as of and including the Closing Date. For purposes of this Section 7.02, the liability for any real or personal property Taxes or a flat minimum dollar Tax, the total amount of such Taxes
allocable to the Pre-Closing Period of a Straddle Period shall be the product of (i) such Tax for the entirety of such Straddle Period, multiplied by (ii) a fraction, the numerator of which is the number of days for such Tax period
included in the Pre-Closing Period and the denominator of which is the total number of days in such Tax period. 
 7.03
Preparation of Tax Returns. 
 (a) With respect to each Tax Return covering a Straddle Period which is required
to be filed for, by, on behalf of or with respect to the Company after the Closing Date, Buyer (i) shall cause to be prepared each such Tax Return and (ii) shall determine the portion of the Taxes shown as due on such Tax Return that is
allocable to a Pre-Closing Period, which determination shall be set 

  

 -28- 

 
forth in a statement (“Statement”) prepared by Buyer. Buyer shall deliver a copy of such Tax Return and the Statement related thereto
to Seller at least ten (10) days prior to the due date (including any extension thereof) for filing such Tax Return. 
 (b) In the case of each Tax Return described in Section 7.03(a), not later five (5) days before the due date for payment of Taxes with respect to such Tax Return, Seller shall pay to Buyer an amount equal to the total
amount of Taxes reflected on the Statement which are the responsibility of Seller under Section 7.01. 
 7.04 Tax
Contests. 
 (a) If a Tax Indemnitee receives any written or oral communication with respect to any question,
adjustment, assessment or pending or threatened audit, examination, investigation, or administrative, court or other proceeding which, if pursued successfully, could result in or give rise to, or could reasonably be expected to result in or give
rise to, a claim for indemnification of such Tax Indemnitee with respect to any Tax described in Section 7.01 (a “Tax Claim”), then such Tax Indemnitee shall promptly notify the Seller in writing of such Tax
Claim. 
 (b) The Tax Indemnitee shall have the right to control the defense, prosecution, settlement or compromise of the Tax
Claim, and the Seller shall take such action in connection with contesting such Tax Claim as the Tax Indemnitee shall reasonably request in writing from time to time. 
 (c) Seller shall reimburse the Tax Indemnitee for: (A) 60% of its costs (including accountant’s fees, investigatory fees and
fees and disbursements of tax counsel) (“Indemnification Expenses”) incurred in contesting any Tax Claim for items described in Section 7.01(a) and (B) 100% of its Indemnification Expenses incurred in
contesting any Tax Claim for Taxes described in Section 7.01(b). The Tax Indemnitee shall provide the Seller with a written statement (a “Reimbursement Statement”) periodically (but not more often than monthly)
that sets forth the amount of the Tax Indemnitee’s Indemnification Expenses since the most recent Reimbursement Statement and due hereunder. Within fifteen (15) days of the Seller’s receipt of each Reimbursement Statement, the Seller
shall pay to the Tax Indemnitee in immediately available funds the total amount of the Indemnification Expenses shown on such Reimbursement Statement. 
 (d) Promptly after a Final Determination of a Tax Claim, the Seller shall pay to the Tax Indemnitee in immediately available funds the amount of any Taxes and the Indemnification Expenses to which the Tax Indemnitee
is entitled under the provisions of this Article VII. 
 7.05 Cooperation. In connection with preparation of any
Tax Return or contesting a Tax Claim, Seller shall cooperate with the Buyer (or any Tax Indemnitee) in good faith in the preparation of such Tax Return or in order to contest effectively any such Tax Claim. Seller shall grant or cause to be granted
to Buyer or its representatives access at all reasonable times to all of the information, books and records relating to the Company within Seller’s possession or control (including, without limitation, Tax work papers, Tax Returns and
correspondence with Tax Authorities), including the 

  

 -29- 

 
right to take extracts therefrom and make copies thereof to the extent reasonably necessary in connection with Taxes and shall furnish the assistance and
cooperation of such personnel of the Seller as Buyer may reasonably request in connection therewith. 
 7.06 Nature of
Payments. Buyer and Seller agree that any indemnity payments made pursuant to this Agreement shall constitute an adjustment to the Purchase Price. 
 7.07 Survival. Notwithstanding any provision of this Agreement to the contrary, the Seller’s representations, warranties, covenants, agreements and obligations with respect to any Tax
covered by this Agreement shall survive the Closing and shall not terminate until 20 calendar days after the expiration of all statutes of limitations (including any and all extensions thereof) applicable to such Tax or the assessment thereof.

 7.08 Tax Consequences of Purchase and Sale. For U.S. federal income tax purposes, Buyer and Seller agree and
consent to treat the purchase of the Seller Shares as a transaction governed by Rev. Rul. 99-6,1999-1 C.B. 432 (Situation 1). Buyer and Seller shall report, act and file their U.S. federal income tax returns in all respects and for all purposes
consistent with such intent and treatment. Neither Buyer nor Seller shall take any position, whether in any Tax Return, audit, examination, claim, adjustment, litigation or other proceeding with respect to any Tax, which is inconsistent with such
intent and treatment, unless required to do so by Applicable Law. 
 7.09 Conflict. In the event of a conflict
between the provisions of this Article VII and any other provisions of this Agreement, the provisions of this Article VII shall control. 
 ARTICLE VIII 
 INDEMNIFICATION; SURVIVAL 
 8.01 Indemnification. 
 (a) Indemnification by Seller. Seller agrees to indemnify, hold harmless and defend Buyer, its Affiliates, the Company and their respective stockholders, members, owners, agents, officers, directors, partners,
employees, servants, consultants, representatives, successors and assigns (collectively called “Buyer Indemnified Parties”) from and against any and all claims or Damages (whether based on negligent acts or omissions,
statutory liability, strict liability or otherwise) asserted against or incurred by any Buyer Indemnified Party, to the extent arising out of the following: 
 (i) To the extent not Known to Buyer as of the Closing Date, any inaccuracy or breach of any representation or warranty of Seller
contained in this Agreement, the Related Agreements or any certificate delivered pursuant hereto and made on or as of the Closing Date; and 
  

 -30- 

 (ii) Any breach of any covenant or agreement of Seller contained in this Agreement or the
Related Agreements. 
 (b) Indemnification by Buyer. Buyer agrees to indemnify, hold harmless and defend Seller and its
Affiliates and their respective stockholders, members, owners, agents, officers, directors, partners, employees, servants, consultants, representatives, successors and assigns (collectively called “Seller Indemnified
Parties”) from and against any and all claims or Damages (whether based on negligent acts or omissions, statutory liability, strict liability or otherwise) asserted against or incurred by any Seller Indemnified Party, to the extent
arising out of the following: 
 (i) To the extent not Known to Seller as of the Closing Date, any inaccuracy or breach of any
representation or warranty of Buyer contained in this Agreement, the Related Agreements or any certificate delivered pursuant hereto and made on or as of the Closing Date; and 
 (ii) Any breach of any covenant or agreement of Buyer contained in this Agreement or the Related Agreements. 
 8.02 Limitations on Indemnification. 
 (a) The following limitations shall apply with regard to Seller’s obligations to indemnify the Buyer Indemnified Parties pursuant to Section 8.01(a)(i): 
 (i) Seller’s liability to indemnify pursuant to Section 8.01(a)(i) for any breach by Seller of any of its representations
or warranties herein shall never exceed, in the aggregate, an amount equal to One Million Three Hundred Thousand Dollars ($1,300,000); provided, however, such limitation on Seller’s indemnification obligations shall not apply to
Damages resulting from (y) any breach or default by Seller of Sections 3.01, 3.02, 3.03, 3.04(b), or 3.07 or (z) fraud or willful misconduct by Seller in the negotiation or execution of this
Agreement. 
 (ii) Seller will not have any liability for any Damages for any breach by Seller of any of its representations
or warranties herein unless and until the aggregate Damages for which the Buyer Indemnified Parties are entitled to recover under this Agreement and the Related Agreements for any breach by Seller of any of its representations or warranties
contained herein or therein, exceeds in the aggregate an amount equal to Five Thousand Dollars ($5,000) (the “Seller Threshold Amount”); provided, however, once such amounts exceed the Seller Threshold Amount,
the Buyer Indemnified Parties will be entitled to recover all such Damages to which they are entitled including expenditures incurred to reach the Seller Threshold Amount. 
 (b) The following limitations shall apply with regard to Buyer’s obligations to indemnify the Seller Indemnified Parties pursuant to
Section 8.01(b)(i): 
 (i) Buyer’s liability to indemnify pursuant to Section 8.01(b)(i) for any
breach by Buyer of any of its representations or warranties herein shall never exceed, in the 

  

 -31- 

 
aggregate, an amount equal to One Million Three Hundred Thousand Dollars ($1,300,000); provided, however, such limit on Buyer’s
indemnification obligations shall not apply to Damages resulting from (y) any breach or default by Buyer of Sections 5.01, 5.02 or 5.03 or (z) fraud or willful misconduct by Buyer in f the negotiation or execution
of this Agreement. 
 (ii) Buyer will not have any liability for any Damages for any breach by Buyer of any of its
representations or warranties herein unless and until the aggregate Damages for which the Seller Indemnified Parties are entitled to recover exceeds an amount equal to Five Thousand Dollars ($5,000) (the “Buyer Threshold
Amounts”), provided, however, once such amounts exceed the Buyer Threshold Amount, the Seller Indemnified Parties will be entitled to recover all such Damages to which they are entitled including expenditures incurred to
reach the Buyer Threshold Amount. 
 8.03 Survival. The representations and warranties of Seller and Buyer
contained in this Agreement shall survive the Closing for a period of eighteen (18) months after the Closing Date except for written claims that are made prior to such date. Notwithstanding the preceding sentence to the contrary, the
representations and warranties with respect to (i) Sections 3.01, 3.02, 3.03, 3.04(b), 3.07, 5.01, 5.02 or 5.03 shall continue and be in effect after the Closing Date without any time
limitation and (ii) Sections 3.10 and 4.14 and Article VII until twenty (20) calendar days after the expiration of the applicable statute of limitations with respect to such matters. 
 8.04 Notification and Third Party Claims. Within thirty (30) days following the determination thereof, an Indemnified
Party shall give the Indemnifying Party written notice of any matter that an Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement, stating the amount of the Damage, if known, and method of
computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises (“Claim Notice”), provided
that the failure of the Indemnified Party to provide such thirty (30) day notice shall only relieve the Indemnifying Party of its obligation to indemnify the Indemnified Party to the extent that the Indemnifying Party is actually prejudiced by
such failure. Any Claim between the Parties not resolved within this thirty (30) day period shall be handled pursuant to the dispute resolution provisions set forth in Article IX. The obligations and liabilities of an Indemnifying Party
under this Article VIII with respect to Damages arising from claims of any third party that are subject to the indemnification provisions of this Article VIII (“Third Party Claims”) shall be governed by and
contingent upon the following additional terms and conditions: 
 (a) Within fifteen (15) days of the receipt of a Claim
Notice of a Third Party Claim, the Indemnifying Party shall notify the Indemnified Party whether the Indemnifying Party elects to defend such Third Party Claim. If the Indemnifying Party so elects, it shall undertake the defense thereof by counsel
of its own choosing, which counsel shall be reasonably satisfactory to the Indemnified Party; provided that if, in the Indemnified Party’s and the Indemnifying Party’s reasonable judgment, a legal conflict of interest exists between the
Indemnified Party and the Indemnifying Party with respect to such Third Party Claim, or if the Indemnifying Party elects not to defend such Third Party Claim, or if the Indemnifying Party fails to notify the Indemnified Party 

  

 -32- 

 
within the fifteen (15) day notice period that it elects to defend such Claim, such Indemnified Party shall be entitled to select reasonable counsel of
its own choosing, in which event the Indemnifying Party shall be obligated to pay the reasonable fees and expenses of such counsel to the extent that the Indemnifying Party is finally determined to be obligated to indemnify the Indemnified Party
under this Agreement. The Claim Notice of the Third Party Claim by the Indemnified Party shall contain all material information known to the Indemnified Party with respect to the Third Party Claim and shall include copies of materials submitted to
the Indemnified Party by the relevant third party with respect to the Third Party Claim. 
 (b) If the Indemnifying Party
refuses or fails at any time to defend the Indemnified Party against any Third Party Claim, the Indemnified Party shall have the right to undertake the defense, and to compromise or settle such Third Party Claim on behalf of and for the account and
at the risk of the Indemnifying Party to the extent that the Indemnifying Party is finally determined to be obligated to indemnify the Indemnified Party under this Agreement with respect to such Third Party Claim. 
 (c) If the Indemnifying Party elects to undertake and diligently pursues the defense of a Third Party Claim hereunder, the Indemnifying
Party shall control all aspects of the defense and if the indemnifying Party acknowledges in writing its duty to provide full indemnification to the Indemnified Party regarding such Third Party Claim, the Indemnifying Party may enter into a
settlement of such Third Party Claim and may settle, compromise or enter into a judgment with respect to such Third Party Claim; provided that the Indemnifying Party shall not enter into any such settlement, compromise or judgment without the prior
written consent of the Indemnified Party if it would result in the imposition of any non-monetary liability or obligation on the Indemnified Party. Unless the Indemnified Party undertakes the defense of a Third Party Claim pursuant to Subsection
(b) hereof, it shall not settle, compromise or enter into any judgment with respect to a Third Party Claim for which it is seeking or shall seek indemnification hereunder without the prior written consent of the Indemnifying Party, that shall
not be unreasonably withheld, conditioned or delayed. 
 (d) If the Indemnifying Party elects to undertake and diligently
pursues the defense of a Third Party Claim hereunder, the Indemnified Party shall provide the Indemnifying Party with access to all reasonably requested witnesses, records and documents of the Indemnified Party relating to any Third Party Claim.

 (e) The Indemnified Party may participate in the defense of any Third Party Claim at its own expense. 
 8.05 Coordination of Indemnification Rights. 
 (a) A Claim Notice in connection with any Section of this Article VIII shall be deemed to be a Claim Notice in connection with
all Sections of this Article VIII, pursuant to which the Person asserting such claim has any right to be indemnified, defended or held harmless. 
  

 -33- 

 (b) In the event that an Indemnified Party has a right of recovery against any third
party with respect to any Damages in connection with which a payment is made to such Indemnified Party by an Indemnifying Party; then (i) such Indemnifying Party shall, to the extent of such payment, be subrogated to all of the rights of
recovery of such Indemnified Party against such third party with respect to such Damages; and (ii) such Indemnified Party shall execute all such documents as are necessary to enable such Indemnifying Party to bring suit to enforce such right.

 (c) An Indemnified Party shall take all commercially reasonable steps to mitigate damages in respect of any claim for which
it is seeking indemnification and shall use commercially reasonable efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof 
 (d) Except as provided in Section 7.09, in the event of any conflict between this Article VIII and any other provisions of
this Agreement or the Related Agreements, this Article VIII shall prevail. 
 8.06 Right to Cure. Any Party
that is obligated to indemnify, defend or hold harmless any Person pursuant to any provision of this Article VIII shall have the right to cure, within a reasonable time, not to exceed thirty (30) days after receipt of written notice, and
in a manner reasonably satisfactory to such Person, any matter giving rise to such obligation; provided, however, that any such cure shall not relieve or reduce any such obligation to the extent that such cure is inadequate.

 ARTICLE IX 
 DISPUTE RESOLUTION 
 9.01 Negotiation. The Parties shall attempt in good faith to resolve
any dispute, Claim, or controversy arising out of or relating to this Agreement, the Related Agreements or the performance, breach, validity, interpretation, application, or termination thereof (a “Dispute”) whether based on
contract, tort, statute or other legal or equitable theory (including any claim of fraud, misrepresentation or fraudulent inducement or any question of validity or effect of this Agreement including this section) promptly by negotiations between
executives of each Party who have authority to settle the controversy. Any Party may give the other parties written notice of any Dispute not resolved in the normal course of business (a “Notice of Dispute”). Within five
(5) days after the effective date of a Notice of Dispute, executives of the Parties shall agree upon a mutually acceptable time and place to meet and shall meet at that time and place, and thereafter as often as they reasonably deem necessary,
to exchange relevant information and to attempt to resolve the Dispute. The first of those meetings shall take place within thirty (30) days of delivery of the disputing Party’s Notice of Dispute. If the Dispute has not been resolved
within sixty (60) days of delivery of the Notice of Dispute, or if the Parties fail to agree on a time and place for an initial meeting within five (5) days of that notice, any Party may initiate arbitration of the controversy or claim as
provided hereinafter. If any negotiator intends to be accompanied at a meeting by an 

  

 -34- 

 
attorney, the other negotiators shall be given at least three (3) Business Days’ notice of that intention and may also be accompanied by an
attorney. All negotiations pursuant to this Section 9.01 shall be treated as compromise and settlement negotiations for the purposes of applicable rules of evidence and procedure. 
 9.02 Arbitration. Any Dispute that has not been resolved in a manner acceptable to all Parties by non-binding procedures as
provided in Section 9.01 within sixty (60) days of delivery of the Notice of Dispute, shall be finally settled by arbitration conducted expeditiously in accordance this Agreement and the American Arbitration Association
(“AAA”) arbitration rules for commercial disputes applying expedited procedures, as in effect on the date hereof (the “Rules”) and judgment on the award may be entered in any court having jurisdiction
thereof; provided that if one Party has requested the other parties to participate in a non-binding procedure and the other parties have failed to participate, the requesting Party may initiate arbitration before the expiration of me period.

 9.03 Arbitration Proceeding. Any Dispute shall be referred to and determined by binding arbitration, as the sole
and exclusive remedy of the parties as to the Dispute conducted in accordance with the Rules, which are incorporated by reference, except that in the event of any conflict between those rules and the arbitration provisions set forth below, the
provisions set forth below shall govern and control. The arbitral tribunal (the “Tribunal”) shall use the substantive laws of the State of Delaware, excluding conflicts of laws and choice of law principles, in construing and
interpreting the terms of this Agreement. The Tribunal shall be composed of three (3) arbitrators, with Seller appointing one (1) arbitrator and Buyer appointing one (1) arbitrator, and the two (2) arbitrators so appointed
appointing the third arbitrator who shall act as the presiding arbitrator of the Tribunal (the “Chairman”). The arbitrators selected shall be qualified by education, training, and experience to hear and determine matters in
the nature of the Dispute. The arbitrators shall be bound by and shall follow the then current ABA/AAA Rules of Ethics for Arbitrators. The language of the arbitration, the submission of all writings, the decision of the Tribunal, and the reasons
supporting such decision shall be in English. The arbitration shall be held in Washington, D.C., and the proceedings shall be conducted and concluded as soon as reasonably practicable, based upon the schedule established by the Tribunal, but in any
event the award of the Tribunal shall be rendered within one hundred twenty (120) days following the selection of the Chairman of the Tribunal. Any monetary award shall be made in U.S. Dollars, and shall include interest from the date of any
breach or other violation of the Agreement to the date paid in full at a per annum rate equal to the Prime Rate on the date one Business Day prior to the date of such award. The award of the Tribunal pursuant hereto shall be final and binding upon
the Parties, and judgment upon the award rendered by the Tribunal pursuant hereto may be entered in, and enforced by, any court of competent jurisdiction. Each Party shall bear the expense of the arbitrator specified to be selected by it, and the
fees of the Chairman of the Tribunal and other expenses incurred by the Tribunal shall be borne by the losing Party, unless the Tribunal shall determine that fairness requires that such fees and expenses be allocated among the Parties in a different
manner, including requiring the losing Party to pay all such expenses. Each Party shall bear its own expenses, including expenses of its counsel. Any attorney-client privilege and other protection against disclosure of privileged or confidential
information, including any protection afforded the work-product of any attorney, that could otherwise be claimed by any Party shall be available to, and may be claimed by, any such Party in 

  

 -35- 

 
any arbitration proceeding. No Party waives any attorney-client privilege or any other protection against disclosure of privileged or confidential
information by reason of anything contained in, or done pursuant to, the arbitration provisions hereof. It is the desire of the Parties that any Dispute be resolved quickly and at the lowest possible cost, and the Tribunal shall act in a manner
consistent with these intentions, including limiting discovery to only that necessary to enable the Tribunal to render a fair decision that reflects the Parties’ intent set forth in this Agreement. 
 9.04 Consent to Jurisdiction. The Parties hereby consent to the non-exclusive jurisdiction of the state or federal courts of
Delaware for the enforcement of any award rendered by the Tribunal. 
 9.05 Confidentiality. Unless the Parties
agree otherwise, the Parties, the arbitrator(s), and the AAA shall treat the dispute resolution proceedings provided for herein, any related disclosures, and the decisions of the Tribunal, as confidential, except in connection with judicial
proceedings ancillary to the dispute resolution proceedings, such as a judicial challenge to, or enforcement of, the arbitral award, and unless otherwise required by law to protect a legal right of a Party. 
 9.06 Joinder. If more than one Dispute exists, the Parties agree that any negotiation pursuant to Section 9.01 and
any arbitration proceeding pursuant to Section 9.02 shall address all existing disputes to the extent possible, hi addition, each Party shall, and shall use its best efforts to cause each of its Affiliates that is party to a Related
Agreement to, become subject to and bound by any resolution achieved or award rendered pursuant to this Article IX in respect of any dispute arising out of or relating to this Agreement or any Related Agreement; provided,
however, that no Party shall become subject to and bound by any resolution achieved or award rendered unless it was provided the opportunity to participate in such negotiation or arbitration. 
 9.07 Survival. The terms of this Article IX shall survive the Closing. 
 ARTICLE X 
 MISCELLANEOUS

 10.01 Entire Agreement; Amendments. This Agreement and the Related Agreements, including their Exhibits
and Schedules, and other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the Parties with respect to the subject matter hereof. There are no restrictions, agreements, promises,
warranties, covenants, or undertakings other than those expressly set forth herein or therein. This Agreement and the Related Agreements supersede any and all prior agreements and understandings between the Parties with respect to the subject matter
hereof including the provisions of that certain letter agreement dated October 27, 2004 by and between Seller and Buyer. This Agreement shall not be amended, altered, or modified except by an instrument in writing duly executed by the Parties.

  

 -36- 

 10.02 Business Day Actions. No action shall be required of the Parties except
on a Business Day and in the event an action is required on a day that is not a Business Day, such action shall be required to be performed on the next succeeding day which is a Business Day. 
 10.03 Invalidity. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any present or
future laws, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement
shall remain in full force and effect, unaffected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. In lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a part
of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 
 10.04 Joint Drafting. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. 
 10.05 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by any
other Party in the performance by such other Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other or subsequent breach or default in the performance by such other Party of the same or any other
obligations of such other Party hereunder. Failure on the part of a Party to exercise its rights or to complain of any act of the other Party or to declare the other Party in default, irrespective of how long such failure continues, shall not
constitute a waiver by such Party of its rights hereunder until the applicable statute of limitation period has run. 
 10.06
Limitation on Benefits of this Agreement. No person or entity other than the Parties (or their respective successors or assigns as permitted hereunder) is or shall be entitled to bring any action to enforce any provision of this
Agreement against either of the Parties, and the covenants, undertakings, and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the Parties (or their respective successors and assigns as
permitted hereunder). Notwithstanding the preceding to the contrary, the Company shall be a third party beneficiary to this Agreement to the extent the provisions herein apply to the Company. 
 10.07 Notices. All notices, requests, demands and other communications made in connection with this Agreement shall be in
writing and shall be deemed to have been duly given on the date delivered, if delivered personally, by reputable overnight delivery service that requires a signature on delivery or sent by facsimile machine with telephonic confirmation of receipt to
the Persons identified below, or three (3) Business Days after mailing in the U.S. Mail if mailed by certified or registered mail, postage prepaid, return receipt requested, addressed as follows: 
  

	 	(i)	If to Seller: 

 Luna Innovations Incorporated 

2851 Commerce Street 
 Blacksburg, VA 24060

 Attn: Kent Murphy, Ph.D. 
 Tel:
(540) 552-5128 
 Fax: (540) 951-0760 
  

 -37- 

 with a copy (which shall not constitute notice) to: 
 Wilson Sonsini Goodrich & Rosati, P.C. 
 Two Fountain Square, Reston Town Center 
 11921 Freedom Drive, Suite 600 
 Reston, Virginia 20190-56340 
 Attn: Trevor J.
Chaplick, Esq. 
 Tel: (703) 734-3100 
 Fax: (703) 734-3199 
  

	 	(ii)	If to Buyer: 

 Baker Hughes Oilfield Operations, Inc.

 3900 Essex Lane, 12th Floor 
 Houston, Texas 77027 
 Attn: Vice President, Business Development 
 Tel: (713) 439-8156 
 Fax:
(713) 439-8750 
 with a copy (which shall not constitute notice) to: 
 Baker Hughes Incorporated 
 3900 Essex Lane,
12th Floor Houston, 
 Texas 77027 
 Attn: Corporate Counsel 
 Tel: (713) 439-8543 
 Fax: (713) 439-8472 
 Each Party may designate by prior notice in writing a new address to which any
notice, demand, request, or communication may thereafter be so given, served, or sent. 
 10.08 Binding
Effect. Subject to the provisions hereof restricting assignment, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. 
 10.09 Additional Actions and Documents. Each of the Parties hereby agrees to take or cause to be taken such further actions to
execute, deliver and file or cause to be executed, delivered and filed such farther documents and instruments, and to use all reasonable efforts to obtain such 

  

 -38- 

 
consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement, whether
before, at or after the closing of transactions contemplated by this Agreement, provided that neither Party shall be obligated to make payments or incur obligations to third Parties or governmental agencies in connection therewith except to pay such
Party’s reasonable expenses or to pay normal fees to governmental agencies. 
 10.10 Choice of Law. This
Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles of Delaware, and applicable United States federal law. 
 10.11 Publicity. Seller and Buyer shall, and shall use their reasonable efforts to cause their Affiliates to, cooperate in the
development and distribution of all news releases and other public disclosures relating to the transactions described in this Agreement, and to ensure that no such releases or disclosures are made without prior notice to, and the consent of, the
other Party; provided, however, that no news release or other public disclosure whatsoever may disclose the terms of this Agreement unless both Parties agree to the form and content of such disclosure, each being under no obligation to
agree and having the right to withhold agreement for any reason; provided, however, that either Party may make all public disclosures which, in the written opinion of counsel, are required under applicable regulations of the Securities
and Exchange Commission with such Party giving the other Party as much advance notice thereof as is feasible. 
 10.12 Costs and
Expenses. All expenses incident to the transaction contemplated by this Agreement will be borne exclusively by the Party making the expenditure or incurring the expense for such Party or on its behalf, including any expenses incurred
prior to the date hereof other than expenses properly incurred on behalf of the Company including but not limited to a maximum of $15,000 in legal fees and expenses incurred in connection with the bridge loan from Buyer to Company. Subject to the
foregoing, all invoices and expenses of Wilson Sonsini Goodrich & Rosati not appropriately billed and outstanding as a liability of the Company as of October 27, 2004 will be borne exclusively by Seller and not by the Company.

 10.13 Assignment. Seller may upon notice to Buyer transfer or assign any of its rights but not directly or
indirectly its obligations under this Agreement without prior consent of Buyer, provided that, Seller may, assign its rights and obligations under this Agreement to an Affiliate of Seller upon delivery of a guaranty from Seller to Buyer, in form
reasonably satisfactory to Buyer. Even if consent is obtained, no Party may make an assignment or delegation unless such Party delivers to the other Party such written assumptions, affirmations or legal opinions as such other Party may reasonably
request to preserve their rights and remedies hereunder. Notwithstanding anything contained in this Agreement or the Related Agreements to the contrary, the obligations of any Indemnifying Party to indemnify, hold harmless and defend pursuant to
this Agreement shall not be assignable in whole or in part without the prior written consent of the Indemnifying Party. 
  

 -39- 

 10.14 Confidentiality.
 (a) Company and Buyer Confidential Information. 
 (i) Seller acknowledges that the information and material, in whatever form, including this Agreement and the Related Agreements relating
to the Company and Buyer and its Affiliates (collectively, the “Company Confidential Information”) and disclosed or made available to it prior to the Closing Date is confidential. Seller further agrees that it shall use its
(and shall cause its Affiliates to use their respective) commercially reasonable efforts not to make or permit disclosure of the Company Confidential Information to any Person, other than their Affiliates and their respective stockholders, members
or owners, officers, employees, advisers and representatives to whom such disclosure is necessary. Seller (and its respective Affiliates) shall appropriately notify each officer, employee, adviser and representative to whom any such disclosure is
made, that such disclosure is made in confidence and shall be kept in confidence and not to be used in any capacity except for the benefit of the Company. 
 (ii) Seller agrees to use (and cause its Affiliates to use) diligent efforts in accordance with customary and reasonable commercial practice, and at least with the same degree of skill and care that it would manifest
in protection of its own confidential information, to protect the Company Confidential Information. 
 (iii) Seller agrees to
notify Buyer promptly, in the event that Seller or any of its Affiliates becomes aware of the unauthorized possession or use of the Company Confidential Information (or any part thereof) by any third Person, including any of its officers, employees,
advisers or representatives. Seller agrees to cooperate (and cause its Affiliates to cooperate) with Buyer in connection with the Buyer’s efforts to terminate or prevent such unauthorized possession or use of the Company Confidential
Information. Seller shall pay Buyer’s reasonable out-of-pocket expenses in so cooperating in protecting the Company Confidential Information, unless the unauthorized possession or use of the Company Confidential Information resulted from the
willful misconduct or gross negligence of Buyer. 
 (b) Seller Confidential Information. 
 (i) Buyer acknowledges that the information and material, in whatever form, including this Agreement and the Related Agreements relating
to Seller (collectively, the “Seller Confidential Information”) and disclosed or made available to it prior to the Closing Date is confidential. Buyer further agrees that it shall use its (and shall cause its Affiliates to
use their respective) commercially reasonable efforts not to make or permit disclosure of the Seller Confidential Information to any Person, other than their Affiliates and their respective stockholders, members or owners, officers, employees,
advisers and representatives to whom such disclosure is necessary. Buyer (and its respective Affiliates) shall appropriately notify each officer, employee, adviser and representative to whom any such disclosure is made, that such disclosure is made
in confidence and shall be kept in confidence and not to be used in any capacity except for the benefit of Seller. 
 (ii)
Buyer agrees to use (and cause its Affiliates to use) diligent efforts in accordance with customary and reasonable commercial practice, and at least with the same degree of 

  

 -40- 

 
skill and care that it would manifest in protection of its own confidential information, to protect the Seller Confidential Information. 
 (iii) Buyer agrees to notify Seller promptly, in the event that Buyer or any of its Affiliates becomes aware of the unauthorized
possession or use of the Seller Confidential Information (or any part thereof) by any third Person, including any of its officers, employees, advisers or representatives. Buyer agrees to cooperate (and cause its Affiliates to cooperate) with Seller
in connection with Seller’s efforts to terminate or prevent such unauthorized possession or use of the Seller Confidential Information. Buyer shall pay Seller’s reasonable out-of-pocket expenses in so cooperating in protecting the Seller
Confidential Information, unless the unauthorized possession or use of the Seller Confidential Information resulted from the willful misconduct or gross negligence of Seller. 
 (c) Each of Seller and Buyer (and their respective Affiliates) acknowledges that the other will suffer injury for which the other will not
have an adequate remedy at law, in the event of a breach of the provisions of this Section 10.14, and that the other shall be entitled to injunctive relief as is reasonably necessary to prevent or curtail such breach, whether actual or
threatened; provided, that, in no event (including a willful breach of this Agreement by Seller or Buyer, respectively) shall Seller or Buyer (or their respective Affiliates) be prevented from exercising all of the rights granted to it hereunder.

 (d) The provisions of this Section 10.14 shall remain hi force for a period of seven (7) years from the
Closing Date. 
 (e) At the request of Buyer, Seller shall within twenty (20) days after receiving such request return to
Buyer or the Company all written Company Confidential Information including all photocopies of the same. 
 (f)
Notwithstanding anything to the contrary in this Section 10.14, in the event there is any conflict between the terms of this Section 10.14 and the confidentiality terms of any other agreement entered into between Buyer and
Seller with respect to Seller Confidential Information, the terms of such other agreement shall control. 
 10.15
Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but which together will constitute one and the same instrument. 
 [the balance of this page is intentionally left blank] 
  

 -41- 

 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers
or representatives of Buyer and Seller as of the day and year first above written. 
  

									
	SELLER:	 		 	LUNA INNOVATIONS INCORPORATED
					
		 		 		 	By:	 	  
		 		 		 		 	 Name:

		 		 		 		 	 Title:

			
	BUYER:	 		 	BAKER HUGHES OILFIELD OPERATIONS, INC.
					
		 		 		 	By:	 	  
		 		 		 		 	 Name:

		 		 		 		 	 Title:

 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers
or representatives of Buyer and Seller as of the day and year first above written. 
  

									
	SELLER:	 		 	LUNA INNOVATIONS INCORPORATED
					
		 		 		 	By:	 	  
		 		 		 		 	 Name:

		 		 		 		 	 Title:

			
	BUYER:	 		 	BAKER HUGHES OILFIELD OPERATIONS, INC.
					
		 		 		 	By:	 	  
		 		 		 		 	 Name:

		 		 		 		 	 Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]