**EXHIBIT 10.31**
**EMPLOYMENT AGREEMENT**
     **THIS EMPLOYMENT AGREEMENT**(the “Agreement”) is made this 2nd day ofFebruary, 2004, by and between Alion Science and Technology Corporation, aDelaware corporation (the “Company”) and James C. Fontana (the “Employee”).
     WHEREAS, the Company and Employee desire to enter into this Agreement asof the date hereof and no other agreement concerning employment,except asprovided in the Employee’s Offer of Employment, dated January 15, 2004 (the“Offer Letter”), attached hereto and incorporated herein by reference.
     NOW THEREFORE, in consideration of the foregoing recitals and mutualpromises and conditions set forth herein, and other valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the Company and theEmployee agree as follows:
     **1. Employment.**Upon the terms and subject to the conditions containedherein, the Company hereby employs the Employee as Senior Vice President, andGeneral Counsel and Secretary, at will and terminable by either party at anytime for any reason, with or without prior notice, subject to the terms andprovisions of this Agreement.
     **3. Compensation.**The Employee’s salary (“Annual Base Salary”)and benefitsshall be as set forth in the Offer Letterinitial base salary during the term ofthis Agreement shall be Two Hundred and Twenty Five Thousand Dollars and No/100Cents ($225,000.00) per annum (“Annual Base Salary”). Commencing with theCompany’s first performance review cycle after the effective date ofemployment, the Employee shall participate in the Company’s annual performancereview process, at which time the Company may at its sole discretion increaseannual base salary as deemed appropriate by the Company, which shall become thenew Annual Base Salary when effective.
     **4. Term.**Unless terminated or extended in accordance with the provisionshereof, the term of this agreement shall commence on the Effective Date and endthe second anniversary of the Effective Date (“Term”).
     **Nondisclosure of Proprietary Company Information.**During the term of thisAgreement and for a period of two (2) years thereafter, Employee agrees: (a) totreat all Company Proprietary Information in a secret and confidential manner,take all reasonable steps to maintain such secrecy, and comply with allapplicable procedures established by the Company with respect to maintainingthe secrecy and confidentiality of Company Proprietary Information; (b) to useCompany Proprietary Information only as
 

 

necessary and proper in the performance of Employee’s duties as anemployee of the Company; and (c) except as required in this Section, to notdirectly or indirectly, without the written consent of the Company, reproduce,copy, disseminate, publish, disclose, provide or otherwise make available toany person, firm, corporation, agency or other entity, any Company ProprietaryInformation. Under no circumstances shall Employee use, directly orindirectly, any such Company Proprietary Information for his or her personalgain or profit.
     **5. Change of Control Benefits**.
          A. In the event of a Change of Control, as defined herein below, if theEmployee meets the Eligibility Requirements set forth in section 6 below, theCompany’s successor or assign shall pay Employee, in lieu of severancebenefits, a lump sum amount equal to the amount of Employee’s Annual BaseSalary as of the date of the Change of Control.
          B. In addition to the salary benefits provided in Section 5A, Employeeshall have continued eligibility to participate, for a period of one (1) yearfrom the Termination Date as defined herein (the “Post Termination Period”) ,inthe Company’s successor’s or assigns’ insured welfare benefit plans andpolicies (including, without limitation, health, dental, vision, disability andterm life insurance benefits) at the same level of employee cost and at thesame level of coverage provided to Employee as of the Termination Date, itbeing understood that the Company’s successor or assign has and reserves theright to amend, modify or replace such plans or policies to providesubstantially similar insured coverage during the Post Termination Period. Forpurposes of the Company’s successor or assigns welfare benefit plans andpolicies subject to the Consolidated Omnibus Budget Reconciliation Act of 1985,as amended (“COBRA”), Employee’s “qualifying event” for COBRA purposes shall bethe Termination Date.(The salary and other benefits specified in Sections 5Aand B hereof are collectively referred to as the “Severance Benefits”).Employee shall enjoy continued entitlement to such other accrued or earned andvested benefits provided under the Company’s successor’s or assign’s plans,programs, policies and practices as of the Termination Date.C. Notwithstandingany other provision under this Agreement, Employee shall not be entitled toreceive the Severance Benefits in the event that: (i) the Company’s successoror assign (or any of its respective affiliates) terminates Employee’semployment for Cause (as defined in Section 5D below); (ii) Employee dies (inwhich case the terms of Section 5E below shall apply); (iii) Employee isdetermined to be totally and permanently disabled (in which case the terms ofSection 5E shall apply); or (iv) Employee resigns other than for Good Reason.In any such event, Employee, in addition to any benefits payable in accordancewith this Agreement, shall be entitled only to his salary and benefits accruedor earned and vested under other plans, programs, policies, practices andcoverages of the Company’s successor or assign (or any of its respectiveaffiliates).
 

 

          D. For purposes of this Agreement, “Cause” is defined as the occurrence ofone of the following: (i) the Employee’s breach of any material provision ofthis Agreement; (ii) any act, failure to act, series of acts or failures toact, or course of conduct of Employee constituting reckless, willful, orcriminal misconduct in the performance of duties specified in this Agreement;(iii) any failure to perform, or gross negligence or incompetence in theperformance of, the duties specified in this Agreement; or (iv) the Employee’scommission of a crime involving conversion, misappropriation, larceny, theft,fraud, dishonesty, embezzlement, moral turpitude or any other felony,regardless of whether such crime involves the Company. Following an initialdetermination by the President that Cause exists, the President shall provideEmployee with written notice of the details of the alleged Cause andopportunity to a hearing before the Chairman of the Board of Directors tocontest the validity of the initial determination. The President, with theconcurrence of the Chairman of the Board of Directors, shall thereafter make afinal determination as to whether Cause exists.
          E. In the event of Employee’s death or total disability (as defined in theCompany’s long term disability insurance plan) at any time the Employee isentitled to benefits under this Section 5, the Company shall pay to Employee’sheir or personal representatives, as the case may be, six (6) monthly payments,each equal to one-twelfth (1/12) of Employee’s then-current salary, commencingwith the first calendar month after termination. In the event of theEmployee’s total disability at any time the Employee is entitled to benefitsunder this Section 5, the Company shall pay to Employee six (6) monthlypayments, each equal to one-twelfth (1/12) of Employee’s then-current salaryless any payments under the Company’s long term disability insurance plan thatEmployee receives or is entitled to receive in each such month, commencing withthe first calendar month after termination.
 **6.** **Eligibility for Change of Control Benefits.**If Employeeterminates employment with any successor or assign (or any of theirrespective affiliates) of the Company at any time during the twentyfour (24) month period beginning on the effective date of a Changein Control (the “Protection Period”), he shall be entitled to theChange of Control Benefits described in Section 5. If during theProtection Period, Employee terminates his employment for GoodReason (as defined below) by delivering to the successor or assignof the Company (or its respective affiliate), as applicable, each nolater than thirty (30) days after learning of the occurrence of anevent constituting Good Reason: (i) a Preliminary Notice of GoodReason (as defined below); and (ii) a Notice of Termination (asdefined below); Employee shall have the right, in his sole andreasonable discretion, to receive Change of Control Benefits. Forpurposes of this Agreement, the following terms shall have therespective meanings:
          A. “Good Reason” shall only result upon the occurrence, without Employee’sprior written consent, of one or more of the following events, as determined byEmployee in good faith, during the Protection Period: (i) Employee’s authorityor responsibility has materially diminished as compared to
 

 

Employee’s authority and responsibility in effect immediately prior to aChange in Control; (ii) Employee has been assigned permanent dutiesinconsistent with his position, responsibility and status with the Companyimmediately prior to the Protection Period; (iii) there has been an adversechange in Employee’s title or office as in effect immediately prior to theProtection Period; (iv) Employee’s base pay or incentive compensation has beenreduced; or (v) Employee’s principal work location is more than ten (10) milesaway from the principal work location as immediately prior to the ProtectionPeriod; provided, however, that “Good Reason” shall not include (x) acts nottaken in bad faith that are cured by the Company’s successor or assign in allrespects, including without limitation restoration of all back pay andincentive compensation through the Termination Date, not later than thirty (30)days from the date of receipt by the successor or assign of the Company (or itsrespective affiliate), as applicable, of a written notice from Employeeidentifying in reasonable detail the act or acts constituting “Good Reason” ina “Preliminary Notice of Good Reason”, or (y) acts for which Employee does notprovide a Preliminary Notice of Good Reason within thirty (30) days of learningof the occurrence of the event constituting Good Reason.
          B. “Notice of Termination” shall mean a notice that indicates inreasonable detail the facts and circumstances claimed to provide a basis fortermination of Employee’s employment.
          C. “Termination Date” shall mean the date specified in the Notice ofTermination for termination of Employee’s employment under this Agreement.
     **7. Change in Control.**For the purposes of this Agreement, a “Change ofControl” shall mean and shall be effective upon the closing date of: (i) thedissolution or liquidation of the Company; (ii) the merger or consolidation ofthe Company with any other corporation, foundation, association or other entitywhich results in the Company’s shareholders owning less than 51% of theresulting merged or consolidated entity; (iii) the amendment of the Company’scorporate documents to grant a party other than the Company’s Employee StockOwnership Plan, the right to designate, elect or remove a majority of theCompany’s voting directors; or (iv) the transfer to another corporation,foundation, association or other entity in a sale, lease, exchange or othersimilar transfer (in a single transaction or in a series of relatedtransactions) of all or substantially all of the assets of the Company.
     **8. Indemnification.**The Company shall indemnify, defend, hold and saveEmployee, his heirs, administrators or executors harmless from any and allactions and causes of actions, claims, demands, liabilities, losses, costs,damages or expenses of whatsoever kind of nature, including judgments, interestand attorney’s fees, that Employee, his heirs, administrators or executors maysustain or incur subsequent to the date of this Agreement or become subject toby reason of any claim or claims, resulting from Employee’s execution of theterms and conditions of this Agreement, except for Employee’s fraudulent orcriminal acts or omissions or gross negligence except as prohibited byapplicable law.
 

 

     **9. Miscellaneous.**
          A. Any notices required by this Agreement shall: (i) be delivered bymessenger or made in writing and mailed by certified mail, return receiptrequested, with adequate postage prepaid; (ii) be deemed given when sodelivered or mailed; and (iii) in the case of the Company, be delivered ormailed to its office at 1750 Tysons Boulevard, Suite 1300, McLean, Virginia22102-4213, Attn: Chief Executive Officer, or in the case of the Employee, bemailed to the last home address that the Employee has given to the Company.
          B. The obligations and duties of the Employee under this Agreement arepersonal and not assignable. This Agreement shall be binding upon and inure tothe benefit of, the parties, their successors, assigns, personalrepresentatives, distributes, heirs, and legatees.If any term or provision ofthis Agreement is held to be illegal or invalid, such illegality or invalidityshall not affect the remaining terms or provisions hereof, and each suchremaining term and provision of this Agreement shall be enforced to the fullestextent permitted by law.
          C. If any dispute arises under this Agreement, such dispute shall bereferred to a panel of three (3) arbitrators for resolution. Thethree-arbitrator panel shall be selected as follows: the Company willdesignate one arbitrator, the Employee will designate one arbitrator, and thetwo designees will mutually select the third. The American ArbitrationAssociation’s Voluntary Labor Arbitration Rules shall govern procedures for thearbitration, unless the three arbitrators unanimously agree to adopt adifferent rule or rules. The arbitration shall occur in the the City ofMcLean, Virginia. Notwithstanding the foregoing, and specifically in the eventof a dispute over the Employee’s termination by the Company, Employee may, athis or her option, elect to have a court rather than an arbitrator resolve thedispute.
          D This Agreement may be altered, amended or modified only by writtenagreement signed by both the Employee and the Company. No oral modification ofthis Agreement, or of any part of this Agreement including this paragraph,shall have any force or effect. No waiver by either of such parties of theirrights under this Agreement shall be deemed to constitute a waiver with respectto any subsequent occurrences or transactions hereunder unless such waiverspecifically states that it is to be construed as a continuing waiver.
          E. In any action or claim brought by either party against the other underor pursuant to this Agreement, the substantially prevailing party shall beentitled to an award of all actual attorney’s fees, costs and expenses incurredby the substantially prevailing party.
          F. This Agreement contains the entire understanding between the partiesand supersedes any prior written or oral agreement(s) between the Company andEmployee relating to the
 

 

subject matter contained herein. This Agreement shall not be modified orwaived except by written instrument signed by the parties.
          G. This Agreement shall be governed by, construed and enforced inaccordance with the laws of the Commonwealth of Virginia.
**ALION SCIENCE AND TECHNOLOGY CORPORATION**       By:/s/Katherine C. Madaleno           Name: Katherine C. Madaleno           Title: Corporate Vice President     Director Human Resources           **EMPLOYEE**           By:/s/James Fontana           Name: James Fontana           Title: Senior Vice President, General Counsel     and Corporate Secretary