JOINT COOPERATION AGREEMENT

This Joint Cooperation Agreement (the or this ?Agreement?) is made and entered into as of the 6 day of June, 2005 (the ?Effective Date?) by and between Luna Energy LLC, 309 North Knollwood Drive, Blacksburg Virginia, and its Affiliates (?LE?), and Luna Technologies, Inc., 2020 Kraft Drive, Blacksburg, Virginia (?LT?).

I. RECITALS

A. LE is a limited liability company owned by Baker Hughes Oilfield Operations, Inc., a California Corporation, that develops, manufactures, sells, and installs sensing systems for the oil and gas industry.

B. LE has developed and owns certain distributed sensing technology referred to by LE as distributed discrete sensing (?DDxS?).

C. LE intends to further develop DDxS for use in the oil and gas industry.

D. LT is a company that develops, manufacturers, and sells fiber optic instrumentation systems for use in the fiber optic telecommunications industry.

E. LT possess technology that is used for fiber optic telecommunication industry products, and has recently developed new fiber optic instrumentation technology that is applicable to both fiber optic telecommunication instrumentation and fiber optic sensing systems, all of which are applicable to both fiber Bragg grating-based (?FBG-based?) and Rayleigh backscatter-based distributed sensing applications (?RB-based?).

F. LE and LT desire to work together in order to develop and/or improve LT instrumentation products, new LT sensing products, and new LE DDxS products (the ?Project?).

NOW THEREFORE, in consideration of the premises and the mutual covenants and promises hereinafter set forth, LE and LT (referred to herein at times singularly as ?Party? or collectively as the ?Parties?) hereby agree as follows:

II. DEVELOPMENT

A. OBJECTIVE. The Parties, through this Agreement, will work together to:

1. Complete a DDxS instrument (optical frequency domain reflectometer (?OFDR?)-based) FBG sensing system that is insensitive to vibrations along the sensing fiber, has immunity to polarization fading, and can be successfully demonstrated at both 1 km and 6 km sensing lengths;

2. Develop methods to reduce data set sizes and signal processing algorithms;

PRIVILEGED AND CONFIDENTIAL

3. Investigate the use of low cost scanning lasers in the completed DDxS instrument;

4. Complete a prototype commercial DDxS instrument suitable for oil and gas industry sensing application and for LT test and measurement and sensing applications.

5. Develop the necessary related hardware and software associated with the foregoing; and

6. Investigate the use of the developed hardware and software to RB-based sensing.

B. LENGTH. The development phase under this Agreement shall commence on the Effective Date and shall end twelve (12) months thereafter, unless extended by mutual agreement of the Parties (?Development Term?). To guide the Parties through the Development Term, there are seven distinct milestones (singularly ?Milestone? and collectively ?Milestones?) that must be reached, each of which is described below. Certain payments (as described below) will be made by LE to LT when LE determines, in its sole reasonable discretion, that a Milestone has been met. In order for the Parties to move from one milestone to the next all earlier Milestones must be met (i.e., in order to move from Milestone two, all requirement of Milestone one must be met, and in order to move on to Milestone three, all requirements of Milestones one and two must be met, and so forth).

C. MILESTONE LENGTHS. Each Milestone will have a time limit set for completion, which may be extended up to two (2) months upon mutual agreement (except for Milestone 1), provided, however, the entire Development T m may not, without the express written permission of LE, be extended beyond fifteen (15) months. Should it be anticipated that a time limit for a Milestone may not be met, notice of such must be given by LT to LE as soon as practicable. The Milestone time limits are as follows:

1. Milestone 1: Within five (5) business days following the Effective Date (this milestone may not be extended);

2. Milestone 2: Within two (2) months after the Effective Date;

3. Milestone 3: Within one (1) month after the completion of Milestone 2;

4. Milestone 4: Within one (1) month after the completion of Milestone 3;

5. Milestone 5: Within two (2) months after the completion of Milestone 4;

6. Milestone 6: Within three (3) months after the completion of Milestone 5; and

7. Milestone 7: Within three (3) months after the completion of Milestone 6.

PRIVILEGED AND CONFIDENTIAL

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D. MILESTONE PAYMENTS. Once LE reasonably determines that a Milestone has been completed, LE will pay a non-recurring engineering fee to LT under the following schedule (no other payments shall be due from LE unless otherwise agreed in writing):

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