exv10w40



 






Exhibit 10.40




THIRD AMENDMENT TO THE

ALION SCIENCE AND TECHNOLOGY CORPORATION

PHANTOM STOCK PLAN



WHEREAS, Alion Science and Technology Corporation (“Alion”) adopted the Alion Science and
Technology Corporation Phantom Stock Plan (the “Plan”), effective February 11, 2003; and



WHEREAS, Alion amended the Plan by adoption of the First Amendment, effective November 11, 2003,
and the Second Amendment, effective June 25, 2004; and



WHEREAS, Alion desires to further amend the Plan to comply with the provisions of the new Section
409A of the Internal Revenue Code of 1986, as amended, by the enactment of the “American Jobs
Creation Act of 2004” on October 22, 2004;



NOW, THEREFORE, pursuant to the powers reserved in Article 8 of the Plan, Alion does hereby amend
the Plan, effective as of November 9, 2004:




Section 1



Article 2, Definitions, is hereby amended by restating Section 2.11 thereof to read:



“2.11 “Disability” of a Participant means the Participant (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to last for a continuous period of not less than 12 months, or (ii) is, by
reason of any medically determinable physical or mental impairment which can be expected to result
in death or can be expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than 3 months under an accident and health
plan covering employees of the Corporation.”




Section 2



Article 3, Administration, Definitions, is hereby amended by striking the following sections in the
Plan:



3.3(v), pertaining to power of Administrator to accelerate vesting or payment under the Plan.




Section 3



Article 7, Payment of Phantom Stock benefits, is hereby amended as follows:



Section 7.1 shall be retitled “Exercise of Phantom Stock Granted and Vesting On or Before December
31, 2004”.



Section 7.1 is further amended by inserting in the first sentence thereof after “Phantom Stock”
where it first appears in such sentence “granted and vesting on or before December 31, 2004,”.



Inserting a new section 7.1A to read as follows:




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“7.1A Payment of Awards granted on or before December 31, 2004, and Vesting on or after
January 1, 2005 A Participant, granted Phantom Stock under this Plan on or before December 31,
2004, but not vesting until on or after January 1, 2005, shall be entitled to a cash payment on the
Payment Date , which shall be the date on which the Participant becomes fully vested in the
original grant , equal to the number of shares of Phantom Stock multiplied by the Fair Market Value
as of the Valuation Date coincident with or immediately preceding the vesting date; provided,
however, that in the case of payment due to a Change in Control, the Fair Market Value as of the
date of the Change in Control or the immediately preceding Valuation Date, whichever is higher,
shall be used. Except as provided in Section 7.3, the Company shall make payment on a Payment Date
by the delivery to the participant of cash in a lump sum sixty (60) days after the Payment Date,
less any applicable withholdings required by the Code or other similar regulations.”



Section 7.2 is amended by inserting “or payment” after the word “exercise” wherever it appears.



Section 7.3 is amended by inserting “, granted and vesting on or before December 31, 2004,” after
“Phantom Stock” where it first appears in the first sentence of section 7.3.



Section 7.3 is further amended by striking “180 days”, wherever it appears, and inserting in lieu
thereof “twelve months”.



Section 7.3 is further amended by inserting at the end thereof:



“Participants having Phantom Stock granted on or before December 31, 2004, but vesting on or after
January 1, 2005, may elect to defer payment beyond the initial Payment Date, defined in section
7.1A hereof, for not less than five years from such Payment Date. Any election to defer must be
made not less than one year prior to fully vesting in Phantom Stock Shares, and must occur prior
to the initial and before the stated Payment Date, and may not take effect in less than twelve
months after the date such election is made. Any such election shall to defer will be made to defer
the affected payment into the Alion Science and Technology Executive Deferred Compensation Plan.
If a participant elects to defer payment beyond the initial Payment Date, such election to defer
payment is made, no accelerated payments, due to Termination or Change in Control shall be are
permitted.”



Except as amended by this instrument, the Plan, as previously stated, shall remain in full force
and effect for all grants made on or before October 2, 2004. On or after October 3, 2004, no
further grants shall be made under this Plan.




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IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed as of November 9,
2004, and certifies that the foregoing Plan Amendment was duly adopted by the Board of the Company
on November 9, 2004.




	 	 	 	 	 
	 	 	Alion Science and Technology Corporation
	 
	 	 	 	 
	

	 	By:
	 	/s/ Bahman Atefi
	

	 	 	 	Chief Executive Officer
	 
	 	 	 	 
	

	 	Attest:	 	 
	

	 	 	 	 
	

	 	 	 	Secretary







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