LUNA INNOVATIONS INCORPORATED SENIOR MANAGEMENT INCENTIVE PLAN FISCAL YEAR 2014

Eligible Participants:

The initial participants are: Chief Executive Officer, Chief Financial Officer and Chief Strategy Officer. Others may be added from time to time with prior approval of the Chief Executive Officer or Compensation Committee, as appropriate. The target percentage awards for the initial participants are 50% of their respective annual base salaries as of December 31, 2014.

Metrics and Awards:

The 2014 Senior Management Incentive Plan (the “Senior Management Incentive Plan”) is structured as a percentage of each participant’s annual salary for 2014 and is triggered only if the company achieves a strategic goal approved by the Compensation Committee (the “Strategic Goal”) or achieves an adjusted operating income (loss) exceeding $[***] for the year ending December 31, 2014. If the bonus is based on the achievement of adjusted operating income (loss), the amount of bonus will range from 10% to 150% of target, with 10%, 100% and 150% payable upon achievement of adjusted operating income (loss) levels of $[***], [***] and [***], respectively. If the bonus is based on the achievement of the Strategic Goal, the payout will range from 100% to 150% of target, depending on the timing of achievement.

Payment:

Bonus awards under this plan will be paid annually following the approval of the Compensation Committee and, if the bonus is payable based achievement of adjusted operating income (loss), after the completion of an audit of the company’s financial statements for the year ending December 31, 2014.