Exhibit 10.38

FIRST AMENDMENT TO THE SELLER WARRANT AGREEMENT

     THIS FIRST AMENDMENT TO THE SELLER WARRANT AGREEMENT (the “Amendment”) is
made effective as of December 16, 2004, between Alion Science and Technology
Corporation, a Delaware corporation (the “Company”), and Illinois Institute of
Technology, an Illinois not-for-profit corporation (“IIT”).

     WHEREAS, the Company, IIT Research Institute, an Illinois not-for-profit
corporation affiliated with and controlled by IIT (“IITRI”), and Alion Science
and Technology Corporation Employee Ownership, Savings and Investment Trust (the
“Trust”) entered into that certain Seller Warrant Agreement dated as of the 20th
day of December 2002 (the “Seller Warrant Agreement”), pursuant to which the
Company issued to IITRI warrants to purchase One Million Eighty Thousand Four
Hundred Thirty-Six and Eight-Tenths (1,080,436.8) shares of the Company’s $0.01
par value per share common stock (“Common Stock”);

     WHEREAS, as of July 1, 2004, IITRI transferred to IIT all its rights and
interests in the Seller Warrant Agreement;

     WHEREAS, the Company and IIT desire to amend Sections 3(l)(v) and 16(e) of
the Seller Warrant Agreement;

     WHEREAS, the Trust is a party to the Seller Warrant Agreement only for the
purposes of Sections 6, 7, 15 and 17 through 25 of the Seller Warrant Agreement,
and pursuant to Section 18 of the Seller Warrant Agreement, Sections 3(l)(v) and
16(e) may be amended by the mutual written agreement of the Company and IIT,
without the need to obtain the Trust’s consent; and

     WHEREAS, the Company and IIT desire to amend the Seller Warrant Agreement
as set forth herein.

     NOW, THEREFORE, in consideration of the premises set forth above and the
respective covenants and agreements contained in this Amendment, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
mutually acknowledged, and intending to be legally bound, the parties hereto
hereby agree as follows:

     1. Amendments to the Seller Warrant Agreement.

          (a) Section 3(l)(v) of the Seller Warrant Agreement is hereby amended
by deleting the entire text of Section 3(l)(v) and substituting in lieu thereof:

“interests or rights designated as phantom stock issued or granted by the
Company to employees, consultants, officers or directors of the Company or any
of its Subsidiaries in accordance with a phantom stock plan to be adopted by the
Company’s board of directors after the Effective Date, except for such amount of
phantom stock that, at the time of issuance or grant, would cause the aggregate

First Amendment to the Seller Warrant Agreement

 

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number of shares of phantom stock then outstanding (excluding any shares of
phantom stock that have (x) expired, terminated unexercised or become
unexercisable, or (y) been forfeited or otherwise terminated, surrendered or
cancelled) to be in excess of 225,000 shares of phantom stock.”

          (b) Section 16(e) of the Seller Warrant Agreement is hereby amended by
deleting the entire text of Section 16(e) and substituting in lieu thereof:

“The Company will not issue shares of phantom stock that cause the number of
shares of outstanding phantom stock (excluding any shares of phantom stock that
have expired, terminated unexercised, or become unexercisable, or that have been
forfeited or otherwise terminated, surrendered or cancelled), at the time of
issuance, to be in excess of 225,000 shares of phantom stock.”

     2. Waiver. IIT hereby irrevocably waives (i) any and all breaches by the
Company of the Company’s covenants set forth in Section 16(e) of the Seller
Warrant Agreement, and (ii) any and all adjustments to the Exercise Price (as
defined in the Seller Warrant Agreement), in each case based upon or arising out
of the issuance by the Company of shares of phantom stock on or before the
effective date of this Amendment, and hereby fully and forever, effective as of
the effective date of this Amendment, releases, discharges and acquits the
Company from any and all claims, demands, causes of action, and/or damages,
which IIT may now or hereafter have or claim to have against the Company, based
in whole or in part upon, or which may arise from the issuance by the Company of
shares of phantom stock on or before the effective date of this Amendment.

     3. Remainder of the Seller Warrant Agreement Not Affected. Except as set
forth in Section 1 hereof, the terms and provisions of the Seller Warrant
Agreement remain in full force and effect without change, amendment, waiver or
modification.

     4. Ratification. As modified hereby, the Seller Warrant Agreement and its
terms and provisions are hereby ratified for all purposes and in all respects.

     5. Counterparts. This Amendment may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.

     6. References. From and after the date provided above, all references to
the Seller Warrant Agreement shall be deemed to be references to the Seller
Warrant Agreement as modified hereby.

     7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws principles thereof.

     8. Conflict. In the event of any conflict between the terms of this
Amendment and the Seller Warrant Agreement, the terms of this Amendment shall
govern.

[Signatures follow on next page]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by its officers thereunto duly authorized as of the date hereof.

                      Alion Science and Technology Corporation   Illinois
Institute of Technology
 
                   
By: /s/ Bahman Atefi
  By:/s/ Lew Collens           Name: Bahman Atefi   Name: Lew Collens Title:
Chief Executive Officer   Title: President