Exhibit 10.37

THE FIRST AMENDMENT TO THE MEZZANINE WARRANT
AGREEMENT

     THIS FIRST AMENDMENT TO THE MEZZANINE 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 Mezzanine Warrant Agreement dated as of the
20th day of December 2002 (the “Mezzanine Warrant Agreement”), pursuant to which
the Company issued to IITRI warrants to purchase Five Hundred Twenty-Four
Thousand Two Hundred Twenty-Eight and Nine-Tenths (524,228.9) shares of the
Company’s $0.01 par value per share common stock (“Common Stock”), of which
warrants to purchase Five Hundred Four Thousand Nine Hundred One and Nine-Tenths
(504,901.9) shares of Common Stock remain outstanding as of the date of this
Amendment;

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

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

     WHEREAS, the Trust is a party to the Mezzanine Warrant Agreement only for
the purposes of Sections 6, 7, 15 and 17 through 25 of the Mezzanine Warrant
Agreement, and pursuant to Section 18 of the Mezzanine 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 Mezzanine 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 Mezzanine Warrant Agreement.

First Amendment to the Mezzanine Warrant Agreement

 

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          (a) Section 3(l)(v) of the Mezzanine 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
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 Mezzanine 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 Mezzanine
Warrant Agreement, and (ii) any and all adjustments to the Exercise Price (as
defined in the Mezzanine 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 Mezzanine Warrant Agreement Not Affected. Except as set
forth in Section 1 hereof, the terms and provisions of the Mezzanine Warrant
Agreement remain in full force and effect without change, amendment, waiver or
modification.

     4. Ratification. As modified hereby, the Mezzanine 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 Mezzanine Warrant Agreement shall be deemed to be references to the
Mezzanine Warrant Agreement as modified hereby.

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     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 Mezzanine 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