##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2009
 Alion Science and Technology Corporation
  Delaware
    
    333-89756
    
    54-2061691(State or Other Jurisdiction of 
Organization)
    
    (Commission File Number)
    
    (IRS Employer Incorporation or Identification No.)
 
 
 
 
 o þ
 not required þ o
 o þ
 o o
 þ
  Large accelerated Filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



ALION SCIENCE AND TECHNOLOGY CORPORATION
FORM 10-K
  
 TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    16Item 1B. Unresolved Staff Comments
    
    
    26Item 2. Properties
    
    
    26Item 3. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27PART IIItem 5. Market for Registrants Common Equity, Related Stockholders Matters and Issuer
Purchases of Equity Securities
    
    
    28Item 6. Selected Financial Data
    
    
    28Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    53Item 8. Financial Statements and Supplementary Data
    
    
    54Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    99Item 9A (T). Controls and Procedures
    
    
    99Item 9B. Other Information
    
    
    100PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    101Item 11. Executive Compensation
    
    
    106Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders
Matters
    
    
    126Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    127Item 14. Principal Accountant Fees and Services
    
    
    128PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    128Exhibit 12Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I
 
 Item 1. Business
    Overview
    Revenue by Fiscal YearCore Business Area

    
    2009
    
    
    2008
    
    
    2007(In thousands)Naval Architecture and Marine
Engineering
    
    $
    365,917
    
    
    
    45.6
    %
    
    $
    325,611
    
    
    
    44.0
    %
    
    $
    313,128
    
    
    
    42.5
    %Defense Operations
    
    
    203,859
    
    
    
    25.4
    %
    
    
    220,298
    
    
    
    29.8
    %
    
    
    226,546
    
    
    
    30.7
    %Modeling and Simulation
    
    
    99,420
    
    
    
    12.4
    %
    
    
    67,119
    
    
    
    9.1
    %
    
    
    48,994
    
    
    
    6.6
    %Technology Integration
    
    
    50,762
    
    
    
    6.3
    %
    
    
    51,555
    
    
    
    7.0
    %
    
    
    54,580
    
    
    
    7.4
    %Information Technology and
Wireless Communications
    
    
    42,353
    
    
    
    5.3
    %
    
    
    37,791
    
    
    
    5.1
    %
    
    
    46,757
    
    
    
    6.3
    %Energy and Environmental Sciences
    
    
    39,914
    
    
    
    5.0
    %
    
    
    37,108
    
    
    
    5.0
    %
    
    
    47,582
    
    
    
    6.5
    %Total
    
    
    802,225
    
    
    
    100.0
    %
    
    
    739,482
    
    
    
    100.0
    %
    
    
    737,587
    
    
    
    100.0
    %
  3




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##### Table of Contents



Naval Architecture and Marine Engineering.
 
    
    We provide total ship design services for military and commercial customers including
defining requirements, analyzing concepts, and studying feasibility. We provide contract
design, detail design and production support.
 
    
    We provide systems engineering/design integration, hull form development and performance
analysis, structural design and analysis, weight engineering and intact and damage
stability analysis.
 
    
    We design and engineer ship systems including propulsion, electrical, fluids/piping,
auxiliary, HVAC, deck machinery, and machinery automation and control systems. We provide
expertise for machinery integration, test and trials, failure analysis, modeling and
simulation, and integrated logistics support.
 
    
    We provide mission and threat analysis, evaluate candidate warfare and combat systems,
and develop specifications and installation drawings for topside and below-deck interface
requirements, and ship modernizations.
 
    
    We furnish acquisition planning, business and financial management, configuration and
data management, test and evaluation support, and production analysis and management in all
life cycle phases of equipment, systems and ships.
 Defense Operations.
 
    
    We analyze major programs and issues related to joint warfare training, mission
rehearsal, experimentation and other transformational activities. We develop net-centric
initiatives and integrate C4I (command, control, communication, and computer intelligence)
initiatives.
 
    
    We support DoD strategic planning efforts and operational exercises. We analyze, plan
and implement base realignments and assess the defense industrial base.
 
    
    We help develop department-wide DoD education programs. We develop technology, compile
courseware and translate it into electronic and web-based distance learning media.
 
    
    We provide the tools and support to assess vulnerabilities and protect infrastructure
such as ports, power plants and communications nodes.
 
    
    We collaborate with DoD communities of interest and produce Joint Capabilities
Integration and Development System analysis and capabilities documents.
 
    
    We provide DoD requirements and concepts integration analysis (futures analysis).
 Modeling and Simulation.
 
    
    We design and conduct strategic and operations analytic war games to evaluate future
operational concepts and force transformation initiatives. We create and implement training
scenarios for multi-dimensional simulation systems. We support Joint Forces Commands
Multi-National Experiment series and Joint Conflict and Tactical Simulation scenarios.
 
    
    We manage the DoD Modeling and Simulation Information Analysis Center. We develop M&S
tools to support integration and federation of stand-alone simulator based training and
large scale distributed training events.
 
    
    We develop phenomenological models for nuclear, chemical, biological and electromagnetic
environments.
 
    
    We develop multi-dimensional visualization files to simultaneously display actual IED
events, terrain databases and scenario scripts to replay events and allow units to adjust
tactics, techniques, and procedures.
 
    
    We use current industry gaming technology to develop proprietary and open source
solutions for customers who use serious gaming for training and education.
 
    
    We maintain a threat generation library to support world-wide Air Force and Joint
training and mission rehearsal operations.
 
    
    We provide M&S, C4I and operational support for the U.S. Navys Fleet Synthetic Training
and its Continuous Training Environment which delivers distributed, on-demand training.
  4




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Technology Integration
 
    
    We use technology, re-engineering, and materials selection to enhance production,
improve performance, reduce cost, and extend the life of engineered systems.
 
    
    We develop and integrate processes and equipment for rapid prototype production and
flexible manufacturing and maintain our own rapid prototyping and limited production
manufacturing facilities.
 
    
    We provide engineering, architectural, construction management, logistics, design
oversight, and inspection services.
 
    
    We apply reliability engineering methods to improve system availability and enhance
maintainability and supportability.
 
    
    We support numerous research and development activities focused on taking advantage of
new and emerging technologies. These include the Armys Night Vision and Electronic Sensors
Directorate, the Army Research Laboratory, the Air Force Research Laboratory, the Navy
Research Laboratory, and system developers throughout the Defense Department.
 
    
    We develop Human Systems Integration products and provide technical services to ensure
Army, Air Force and Navy staff and force structures can operate, support and maintain their
complex integrated systems.
 Information Technology and Wireless Communications
 
    
    We provide management and information technology consulting services focused on
developing and implementing innovative business solutions and management services for
Defense, civilian and commercial customers.
 
    
    Our Management Solutions practice specializes in project management, Earned Value
Management, Change Management and Process Design and Improvement.
 
    
    Our Technology Solutions practice specializes in Information Management, Enterprise
Architecture, Service Oriented Architecture, Web Portals and Business Intelligence.
 
    
    We offer a full range of spectrum management, planning, and operational support services
to determine radio frequency propagation and coverage profiles for networks to operate free
of interference, cover desired geographic areas and perform as designed.
 
    
    We deliver optimized information systems designs through advanced wireless design and
evaluation techniques using modeling and simulation, prototyping, experimentation, and
field testing.
 
    
    We develop detailed data architectures and enhance data visualization to enable our
customers to design, document, test and deploy complex integrated systems that support
efficient data mining, data flow and knowledge management.
 
    
    We provide wireless security, logistics and asset tracking technologies to support and
maximize fielded systems operational capabilities.
 Energy and Environmental Sciences.
 
    
    We conduct, develop, and improve processes and equipment for generating power and
providing alternative energy sources.
 
    
    We provide nuclear safety and other performance-related analyses to the U.S. Department
of Energy, National Laboratories, and the commercial power industry.
 
    
    We develop and evaluate methods for detecting chemical, biological, and other toxic
agents.
  5




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
    
    We develop, test and implement methods for measuring air quality.
 
    
    We operate laboratory facilities that determine the constituents and properties of
wastes and effluents, develop and validate analytical methods and instruments, and
determine the potential health effects of various substances for the U.S. Environmental
Protection Agency and the National Institutes of Health.
 
    
    Our wholly-owned subsidiary, Human Factors Applications, Inc., remediates sites that
contain conventional explosive, toxic, radioactive, and chemical material; and
decontaminates and demolishes buildings and equipment contaminated with explosives.
 Recent Developments
       6




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Restatement
  Term B Senior Term Loan
    
    
    Revolving LoanFiscal Quarter
    
    Payable Balance
    
    
    Payable BalanceDecember 31, 2007
    
    $
    237,962
    
    
    $
    26,550March 31, 2008
    
    $
    237,567
    
    
    $
    22,850June 30, 2008
    
    $
    237,171
    
    
    $
    10,850December 31, 2008
    
    $
    229,684
    
    
    
    March 31, 2009
    
    $
    229,536
    
    
    $
    4,720June 30, 2009
    
    $
    229,387
    
    
    
    
  Corporate History
  The Alion ESOP
  
    
    rolling over an eligible retirement account balance from another plan into the ESOP
when initially hired;
 
    
    transferring funds to the ESOP from the non-ESOP component of the KSOP during
semi-annual election periods; and/or
 
    
    directing a portion of pre-tax earnings to the ESOP.
   7




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Business Strategy
  Broaden existing core competencies.
 Leverage experience and reputation to expand market share.
 Continue to improve financial performance and increase sales.
 Market and Industry Background
  Shift in Overall Federal Budget/Spending and Focus
  8




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Quadrennial Defense Review.
 
    
    Continue to better adapt the military to irregular war and institutionalize lessons
learned from ongoing wars.
 
    
    Deter and counter potential threats from proliferation of ballistic missiles and weapons
of mass destruction by utilizing anti-access weapons, anti-satellite weapons and long-range
anti-ship missiles.
 
    
    Adapt forward basing and presence to a changing world, and reduce duplicative efforts
among the services.
 
    
    Address inter-agency roles for domestic homeland security and foreign aid in concert
with efforts at the Departments of State and Homeland Security.
 
    
    Increase control over weapons system costs, by ensuring reasonable requirements and
adequately mature technology before programs go forward.
 
    
    Implement major reforms to control U.S. satellite program costs and mitigate delays to
support expanded ISR capabilities.
 
    
    Analyze and determine cyber security needs and projected investments in enterprise
architecture and offense- and defense-driven technology solutions.
  9




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Homeland Security Priorities.
 Continuing Impact of U.S. Government Procurement Reform.
  We are primarily a government contractor.
   Contract Types.
    10




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For the Years Ended September 30,Contract Type

    
    2009
    
    
    2008
    
    
    2007(In millions)Cost-reimbursement
    
    $
    567,294
    
    
    
    70.7
    %
    
    $
    517,692
    
    
    
    70.0
    %
    
    $
    512,587
    
    
    
    69.5
    %Fixed-price
    
    
    91,885
    
    
    
    11.5
    %
    
    
    70,146
    
    
    
    9.5
    %
    
    
    70,946
    
    
    
    9.6
    %Time-and-material
    
    
    143,046
    
    
    
    17.8
    %
    
    
    151,644
    
    
    
    20.5
    %
    
    
    154,054
    
    
    
    20.9
    %Total
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
    
    $
    737,587
    
    
    
    100.0
    %
    Government Oversight.
 Backlog.
  11




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September 30,2009
    
    
    2008
    
    
    2007(In millions)Backlog:Funded
    
    $
    376.5
    
    
    $
    340.5
    
    
    $
    360.0Unfunded
    
    
    6,008.4
    
    
    
    4,475.8
    
    
    
    4,669.0Total
    
    $
    6,384.9
    
    
    $
    4,816.3
    
    
    $
    5,029.0
   September 30,2009
    
    
    2008
    
    
    2007(In millions)In-process
    
    $
    361.0
    
    
    $
    529.0
    
    
    $
    250.0Submitted
    
    
    1,491.0
    
    
    
    1,057.0
    
    
    
    834.0Total
    
    $
    1,852.0
    
    
    $
    1,586.0
    
    
    $
    1,084.0
  12




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Corporate Culture, Employees and Recruiting
    Our Customers
  September 30,2009
    
    
    2008
    
    
    2007(In thousands)U.S. Department of Defense
    
    $
    736,625
    
    
    
    91.9
    %
    
    $
    660,270
    
    
    
    89.3
    %
    
    $
    659,601
    
    
    
    89.4
    %Other Federal
Civilian Agencies
    
    
    37,197
    
    
    
    4.6
    %
    
    
    34,107
    
    
    
    4.6
    %
    
    
    29,503
    
    
    
    4.0
    %Commercial and
International
    
    
    28,403
    
    
    
    3.5
    %
    
    
    45,105
    
    
    
    6.1
    %
    
    
    48,483
    
    
    
    6.6
    %Total
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
    
    $
    737,587
    
    
    
    100.0
    %
 Competition
    13




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S Corporation Status
     Business Development and Promotional Activities
    14




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Resources
  Patents and Proprietary Information
  Foreign Operations
  Company Information Available on the Internet
  Environmental Matters
    15




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Item 1A. Risk Factors
 Risks Related to Our Business
 We incurred a significant amount of debt; our debt load may limit our financial and operational
flexibility which could negatively affect the value of an investment in the ESOP component.
     
    
    make it more difficult for us to satisfy our debt-related obligations; any failure to
comply with any of our debt instrument obligations, including restrictive and financial
covenants, could result in an event of default under our debt agreements;
 
    
    make it more difficult for us to satisfy our repurchase obligations to ESOP
participants;
 
    
    increase our vulnerability to general adverse economic and industry conditions and make
it more difficult for us to react to changing conditions;
 
    
    limit our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, other business opportunities, new technologies or other general
corporate requirements;
 
    
    require a substantial portion of our operating cash flow to pay interest on our debt and
reduce our ability to use our cash flow for future business needs;
 
    
    expose us to interest rate fluctuation risks and higher interest expense for our $237
million in floating interest rate debt;
 
    
    limit our flexibility to plan for, or react to changes in our business and the
government contracting industry; and
 
    
    place us at a competitive disadvantage compared to less leveraged companies.
  16




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We could incur adverse effects from our prior disclosure relating to our compliance with our
financial covenants.
     Despite our current debt levels, we and our subsidiaries may still be able to incur more debt. This
could further aggravate risks associated with our substantial leverage.
   17




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Our Term B Senior Credit Agreement and the Senior Unsecured Note Indenture will restrict our
operations.
  
    
    incur additional debt other than permitted additional debt;
 
    
    pay dividends or distributions on our capital stock or purchase, redeem or retire
capital stock other than to satisfy ESOP repurchase obligations or pay certain amounts
required under our equity based compensation plans;
 
    
    make acquisitions and investments other than permitted acquisitions and permitted
investments;
 
    
    issue or sell preferred stock of subsidiaries;
 
    
    create liens on our assets;
 
    
    enter into certain transactions with affiliates;
 
    
    merge or consolidate with another company; or
 
    
    transfer or sell assets outside the ordinary course of business.
     We may not be able to obtain financing in the future, and the terms of any future financings may
limit our ability to manage our business. Difficulties in obtaining financing on favorable terms
would have a negative effect on our ability to execute our business strategy.
    18




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We may be required to amend the financial covenants of our Term B Senior Credit Agreement which
could materially impact our ability to finance our future operations, future acquisitions or
capital needs.
   We expect to experience net losses in at least our next four years of operation.
  Our ability to meet our financial and other future obligations depends on our future operating
results. We cannot be sure we will be able to meet these obligations as they come due.
  
    
    when and how much of our contract backlog our customers fund;
 
    
    how much time our customers take to pay us;
 
    
    when and whether we win new contracts and how we perform on our contracts;
 
    
    whether we can increase annual revenue and/or operating income;
 
    
    how much in payroll deferrals and rollovers our employees spend to purchase our common
stock ;
 
    
    how much we have to spend to repurchase our stock from current and former employees;
 
    
    interest rate changes;
  19




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
    
    current economic conditions and conditions in the defense contracting industry;
 
    
    U.S. government spending levels, both generally and by our particular customers;
 
    
    failure by Congress to timely approve budgets for federal departments and agencies we
support;
 
    
    operating difficulties, operating costs or pricing pressures;
 
    
    new legislation or regulatory developments that adversely affect us; and
 
    
    any delays in implementing strategic projects.
   We face intense competition from many companies that have greater resources than we do. This could
cause price reductions, reduced profitability, and loss of market share.
   Historically, a few contracts have provided most of our revenue. If we do not retain or replace
these contracts our operations will suffer.
  1.
    
    SeaPort Multiple Award Contract for the Naval Sea Systems Command (14.3% and 16.8%);2.
    
    Technical and Analytical Support for the U.S. Air Force (9.5 % and 9.0%);
 3.
    
    Engineering, Financial and Program Management Services to the Virtual SYSCOM for the
U.S. Navy (7.0% and 8.6%);
 4.
    
    Modeling and Simulation Information Analysis Center for the Defense Modeling and
Simulation Office (6.8% and 4.7%);
  20




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5.
    
    Weapons System Technology Information Analysis Center for the Defense Information
Systems Agency (5.5 % and 5.0%);
 6.
    
    Engineering, Technical and Program Management Services for U.S. Navy Surface Ship
Programs (5.2% and 2.5%); and
 7.
    
    Engineering, Financial and Program Management Services to Naval Sea Systems Command
(3.5 % and 4.5%).
  If we are unable to manage our growth, our business could be adversely affected.
  Acquisitions could increase our costs or liabilities or be disruptive.
  Due to the inherent danger involved in some of the businesses that we conduct, there are risks of
claims by clients and third parties that could have a substantial adverse economic impact upon us.
  We depend on key management and may not be able to retain those employees due to competition for
their services.
   21




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Our business could suffer if we fail to attract, train and retain skilled employees.
  In order to succeed, we will have to keep up with rapid technological changes in a number of
industries. Various factors could impact our ability to keep pace with these changes.
  An economic downturn could harm our business.
  Our employees may engage in misconduct or other improper activities, which could harm our business.
  The interests of the ESOP Trust may not be aligned with the interests of participants in the ESOP
component of the KSOP.
  Environmental laws and regulations and our use of hazardous materials may subject us to significant
liabilities.
   22




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Risks Related to Our Industry
 We depend on U.S. government contracts for substantially all of our revenue. Changes in the
contracting or fiscal policies of the U.S. government could adversely affect our business,
financial condition or results of operations.
  
    
    budgetary constraints affecting U.S. government spending generally, or specific
departments or agencies in particular;
 
    
    changes in U.S. government fiscal policies or available funding;
 
    
    changes in U.S. government programs or requirements;
 
    
    curtailment of the U.S. governments use of technology services firms;
 
    
    adoption of new laws or regulations;
 
    
    technological developments;
 
    
    U.S. government shutdowns (such as that which occurred during the U.S. governments
1996 fiscal year);
 
    
    Competition and consolidation in the information industry; and
 
    
    General economic conditions.
   Failure by Congress to timely approve budgets for the federal agencies we support could delay or
reduce spending and cause us to lose revenue.
  We may not realize the full amount of our backlog, which could lower future revenue.
   23




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Many of our U.S. government customers procure goods and services through ID/IQ, GWAC or GSA
Schedule contracts under which we must compete for post-award orders.
  U.S. government contracts contain termination provisions that are unfavorable to us.
  If we do not accurately estimate the expenses, time and resources necessary to meet our contractual
obligations, our contract profits will be lower than expected.
   Our operating margins and operating results may suffer if cost-reimbursement contracts increase in
proportion to our total contract mix.
  If our fixed-price contract revenue declines in total or as a proportion of our total business, or
if profit rates on these contracts deteriorate, our operating margins and operating results may
suffer.
  Our subcontractors failure to perform contractual obligations could damage our reputation as a
prime contractor and our ability to obtain future business.
   24




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Because U.S. government contracts are subject to government audits, contract payments are subject
to adjustment and repayment which may result in revenue attributed to a contract being lower than
expected.
  If we fail to recover at- risk contract costs, it may result in reduced fees or in losses.
  Actual or perceived conflicts of interest may prevent us from being able to bid on or perform
contracts.
  As a U.S. government contractor, we must comply with complex procurement laws and regulations and
our failure to do so could have a negative impact upon our business.
  We derive significant revenue from U.S. government contracts awarded through competitive bidding
which is an inherently unpredictable process.
  
    
    the frequent need to bid on programs in advance of the completion of their design,
which can result in unforeseen technological difficulties and/or cost overruns;
 
    
    the substantial time and effort, including design, development and promotional
activities, required to prepare bids and proposals for contracts that may not be
awarded to us; and
 
    
    the rapid rate of technological advancement and the design complexity of most of our
research offerings.
   25




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##### Table of Contents



Our failure to obtain and maintain necessary security clearances may limit our ability to carry out
confidential work for U.S. government customers, which could cause our revenue to decline.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
 Estate of Joseph Hudert vs. Alion Science and Technology Corporation; Estate of Frank Stotmeister
vs. Alion Science and Technology Corporation.
  26




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Item 4. Submission of Matters to a Vote of Security Holders
   27




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of
Equity Securities
  ShareValuation Date
    
    PriceSeptember 30, 2009
    
    $
    34.50March 31, 2009
    
    $
    34.30September 30, 2008
    
    $
    38.35March 31, 2008
    
    $
    41.00
   Dividend Policy
  
 Item 6. Selected Financial Data
   28




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##### Table of Contents



Selected Financial Data of Alion Science and Technology CorporationFor Years Ended September 30,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except share and per share data)Consolidated Operating Data:Contract revenue
    
    $
    802,225
    
    
    $
    739,482
    
    
    $
    737,587
    
    
    $
    508,628
    
    
    $
    369,231Direct contract expenses
    
    
    615,700
    
    
    
    566,408
    
    
    
    562,139
    
    
    
    381,467
    
    
    
    267,241Operating expenses
    
    
    148,960
    
    
    
    152,117
    
    
    
    161,283
    
    
    
    129,466
    
    
    
    104,081Operating income (loss)
    
    
    37,565
    
    
    
    20,957
    
    
    
    14,165
    
    
    
    (2,305
    )
    
    
    (2,091
    )Interest expense (a)
    
    
    (55,154
    )
    
    
    (47,382
    )
    
    
    (51,226
    )
    
    
    (29,691
    )
    
    
    (38,696
    )Net loss
    
    $
    (17,041
    )
    
    $
    (25,334
    )
    
    $
    (42,770
    )
    
    $
    (31,115
    )
    
    $
    (40,238
    )Basic and diluted loss per share
    
    $
    (3.25
    )
    
    $
    (5.01
    )
    
    $
    (8.35
    )
    
    $
    (6.19
    )
    
    $
    (9.50
    )Basic and diluted weighted-average
common shares outstanding
    
    
    5,246,227
    
    
    
    5,057,337
    
    
    
    5,121,033
    
    
    
    5,029,670
    
    
    
    4,235,947Consolidated Balance SheetData at End of Period:Net accounts receivable
    
    $
    180,157
    
    
    $
    168,451
    
    
    $
    186,660
    
    
    $
    150,412
    
    
    $
    80,898Total assets
    
    
    647,498
    
    
    
    655,946
    
    
    
    683,970
    
    
    
    650,969
    
    
    
    334,249Working capital(b)
    
    
    27,833
    
    
    
    (196,556
    )
    
    
    (186,726
    )
    
    
    (212,116
    )
    
    
    59,775Current portion of long-term debt (b)
    
    
    14,428
    
    
    
    241,763
    
    
    
    262,147
    
    
    
    267,216
    
    
    
    1,404Long-term debt, excluding
current portion (b)
    
    
    521,394
    
    
    
    287,011
    
    
    
    285,546
    
    
    
    199,343
    
    
    
    180,833Redeemable common stock warrants
    
    
    32,717
    
    
    
    39,996
    
    
    
    33,610
    
    
    
    35,234
    
    
    
    44,590Redeemable common stock
    
    
    187,137
    
    
    
    200,561
    
    
    
    200,768
    
    
    
    213,719
    
    
    
    184,828Accumulated deficit
    
    
    (274,559
    )
    
    
    (276,876
    )
    
    
    (260,147
    )
    
    
    (221,009
    )
    
    
    (164,354
    )Other Data:Depreciation and amortization
    
    $
    18,959
    
    
    $
    20,715
    
    
    $
    21,824
    
    
    $
    16,566
    
    
    $
    17,771Cash flows provided by (used in):Operating activities
    
    $
    8,995
    
    
    $
    29,320
    
    
    $
    (5,008
    )
    
    $
    (15,678
    )
    
    $
    35,140Investing activities
    
    
    (2,347
    )
    
    
    (12,152
    )
    
    
    (25,438
    )
    
    
    (284,423
    )
    
    
    (78,017
    )Financing activities
    
    
    (11,750
    )
    
    
    (12,565
    )
    
    
    39,375
    
    
    
    265,078
    
    
    
    75,938
 (a)
    
    Interest expense includes interest payable in cash and non-cash expenses for amortizing
original issue discount and debt issue costs, and changes in the fair value of redeemable stock
warrants.(b)
    
    Current and long-term debt include senior and subordinated debt and accrued interest, net of
unamortized debt issue costs and original issue discount. Balances payable under the Term B
Senior Credit Agreement have been restated and are now included in current portion of
long-term debt for fiscal years 2008, 2007 and 2006 based on the Companys failure to comply
with required affirmative and negative financial covenants for those years. The Company
reclassified $229,831 for 2008; $247,606 for 2007; and $264,400 for 2006. See Note 11 to the
accompanying audited financials statements.  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
   29




---



##### Table of Contents



About This Managements Discussion and Analysis
  Overview
  For the Years Ended September 30,2009
    
    
    2008
    
    
    2007(In thousands)Revenue
    
    $
    802,225
    
    
    $
    739,482
    
    
    $
    737,587Net loss
    
    $
    (17,041
    )
    
    $
    (25,334
    )
    
    $
    (42,770
    )
 For the Years Ended September 30,2009
    
    
    2008
    
    
    2007(In millions)Backlog:Funded
    
    $
    376.5
    
    
    $
    340.5
    
    
    $
    360.0Unfunded
    
    
    6,008.4
    
    
    
    4,475.8
    
    
    
    4,669.0Total
    
    $
    6,384.9
    
    
    $
    4,816.3
    
    
    $
    5,029.0
  For the Years Ended September 30,2009
    
    
    2008
    
    
    2007(In thousands)U.S. Department of Defense
    
    $
    736,625
    
    
    
    91.9
    %
    
    $
    660,270
    
    
    
    89.3
    %
    
    $
    659,601
    
    
    
    89.4
    %Other Federal Civilian
Agencies
    
    
    37,197
    
    
    
    4.6
    %
    
    
    34,107
    
    
    
    4.6
    %
    
    
    29,503
    
    
    
    4.0
    %Commercial and
International
    
    
    28,403
    
    
    
    3.5
    %
    
    
    45,105
    
    
    
    6.1
    %
    
    
    48,483
    
    
    
    6.6
    %Total
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
    
    $
    737,587
    
    
    
    100.0
    %
    30




---



##### Table of Contents



For the Years Ended September 30,Contract Type
    
    2009
    
    
    2008
    
    
    2007(In thousands)Cost-reimbursement
    
    $
    567,294
    
    
    
    70.7
    %
    
    $
    517,692
    
    
    
    70.0
    %
    
    $
    512,587
    
    
    
    69.5
    %Fixed-price
    
    
    91,885
    
    
    
    11.5
    %
    
    
    70,146
    
    
    
    9.5
    %
    
    
    70,946
    
    
    
    9.6
    %Time-and-material
    
    
    143,046
    
    
    
    17.8
    %
    
    
    151,644
    
    
    
    20.5
    %
    
    
    154,054
    
    
    
    20.9
    %Total
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
    
    $
    737,587
    
    
    
    100.0
    %
 Results of Operations
  Year ended September 30, 2009 Compared to Year ended September 30, 2008
   31




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##### Table of Contents



Year Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %Selected Financial Information
    
    
    
    
    
    Revenue
    
    
    
    
    
    
    Revenue(In thousands)Total revenue
    
    $
    802,225
    
    
    
    
    
    
    $
    739,482Total direct contract costs
    
    
    615,700
    
    
    
    76.7
    %
    
    
    566,408
    
    
    
    76.6
    %Direct labor costs
    
    
    272,148
    
    
    
    33.9
    %
    
    
    248,409
    
    
    
    33.6
    %Material and subcontract costs
    
    
    316,957
    
    
    
    39.5
    %
    
    
    295,122
    
    
    
    39.9
    %Other direct costs
    
    
    26,595
    
    
    
    3.3
    %
    
    
    22,877
    
    
    
    3.1
    %Gross profit
    
    
    186,525
    
    
    
    23.3
    %
    
    
    173,074
    
    
    
    23.4
    %Total operating expense
    
    
    148,960
    
    
    
    18.6
    %
    
    
    152,117
    
    
    
    20.6
    %Major components of operating expense:Indirect expenses including facilities costs
    
    
    68,457
    
    
    
    8.5
    %
    
    
    70,930
    
    
    
    9.6
    %General and administrative (excluding stock-
based compensation)
    
    
    66,082
    
    
    
    8.2
    %
    
    
    58,984
    
    
    
    8.0
    %Stock-based compensation
    
    
    (5,215
    )
    
    
    (0.6
    )%
    
    
    500
    
    
    
    0.1
    %Depreciation and amortization
    
    
    18,959
    
    
    
    2.4
    %
    
    
    20,715
    
    
    
    2.8
    %Income from operations
    
    $
    37,565
    
    
    
    4.7
    %
    
    $
    20,957
    
    
    
    2.8
    %
 Contract Revenue.
 Direct Contract Expenses and Gross Profit.
 Operating Expenses.
  32




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##### Table of Contents



Operating Income.
 Other Expense.
 Year Ended September 30,2009
    
    
    2008(In thousands)Cash Pay InterestRevolver
    
    $
    1,005
    
    
    $
    1,884Senior Term Loan
    
    
    22,925
    
    
    
    16,453Senior Unsecured Notes
    
    
    25,625
    
    
    
    25,625Subordinated Note
    
    
    2,447
    
    
    
    Other cash pay interest and fees
    
    
    447
    
    
    
    426Sub-total cash pay interest
    
    
    52,449
    
    
    
    44,388Deferred and Non-cash InterestDebt issue costs and other non-cash items
    
    
    5,067
    
    
    
    1,766Subordinated Note interest
    
    
    4,917
    
    
    
    3,978Redeemable warrants
    
    
    (7,279
    )
    
    
    (2,750
    )Sub-total non-cash interest
    
    
    2,705
    
    
    
    2,994Total interest expense
    
    $
    55,154
    
    
    $
    47,382
 Income Tax Expense.
 Net Loss.
 Year ended September 30, 2008 Compared to Year ended September 30, 2007
   33




---



##### Table of Contents



Year Ended September 30,2008
    
    
    2007%
    
    
    
    
    
    
    %Selected Financial Information
    
    
    
    
    
    Revenue
    
    
    
    
    
    
    Revenue(In thousands)Total revenue
    
    $
    739,482
    
    
    
    
    
    
    $
    737,587Total direct contract expenses
    
    
    566,408
    
    
    
    76.6
    %
    
    
    562,139
    
    
    
    76.2
    %Major components of direct contract expense:Direct labor expense
    
    
    248,409
    
    
    
    33.6
    %
    
    
    245,778
    
    
    
    33.3
    %Material and subcontract expense
    
    
    295,122
    
    
    
    39.9
    %
    
    
    295,099
    
    
    
    40.0
    %Other direct expense
    
    
    22,877
    
    
    
    3.1
    %
    
    
    21,261
    
    
    
    2.9
    %Gross profit
    
    
    173,074
    
    
    
    23.4
    %
    
    
    175,448
    
    
    
    23.8
    %Total operating expense
    
    
    152,117
    
    
    
    20.6
    %
    
    
    161,283
    
    
    
    21.9
    %Major components of operating expense:Indirect personnel and facilities
    
    
    70,930
    
    
    
    9.6
    %
    
    
    76,382
    
    
    
    10.4
    %General and administrative (excluding stock-
based compensation)
    
    
    58,984
    
    
    
    8.0
    %
    
    
    52,358
    
    
    
    7.1
    %Stock-based compensation
    
    
    500
    
    
    
    0.1
    %
    
    
    8,340
    
    
    
    1.1
    %Depreciation and amortization
    
    
    20,715
    
    
    
    2.8
    %
    
    
    21,824
    
    
    
    3.0
    %Income from operations
    
    $
    20,957
    
    
    
    2.8
    %
    
    $
    14,165
    
    
    
    1.9
    %
 Contract Revenue.
 Direct Contract Expenses and Gross Profit.
 Operating Expenses.
 Operating Income.
 Other Expense.
  34




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##### Table of Contents



Year Ended September 30,2008
    
    
    2007(In thousands)Cash Pay InterestRevolver
    
    $
    1,884
    
    
    $
    2,063Senior Term Loan
    
    
    16,453
    
    
    
    19,573Senior Unsecured Notes
    
    
    25,625
    
    
    
    16,585Bridge Loan
    
    
    
    
    
    
    6,810Other cash pay interest and fees
    
    
    426
    
    
    
    286Sub-total cash pay interest
    
    
    44,388
    
    
    
    45,317Deferred and Non-cash InterestDebt issue costs and other non-cash items
    
    
    1,766
    
    
    
    3,182Subordinated Note interest
    
    
    3,978
    
    
    
    3,381Redeemable warrants
    
    
    (2,750
    )
    
    
    (654
    )Sub-total non-cash interest
    
    
    2,994
    
    
    
    5,909Total interest expense
    
    $
    47,382
    
    
    $
    51,226
 Income Tax Expense.
 Net Loss.
 Liquidity and Capital Resources
  Cash Flows.
     35




---



##### Table of Contents



Cash flow effects and risks associated with equity-related obligations
    36




---



##### Table of Contents



Discussion of Debt Structure
  Term B Senior Credit Agreement
  
    
    a senior term loan in the approximate amount of $236.6 million;
 
    
    a $25.0 million senior revolving credit facility approximately $182 thousand of which
was allocated to letters of credit and deemed borrowed, but none of which was actually
drawn as of September 30, 2009; and
 
    
    a $110.0 million uncommitted incremental term loan accordion facility which the
Company may be able to access in the future subject to satisfying a leverage-based
incurrence test.
  
    
    In April 2005, the first amendment made certain changes and added $72.0 million in
senior term loans to the total Term B Senior Credit Agreement debt.
 
    
    In March 2006, the second amendment made certain changes, increased the senior term loan
commitment by $68.0 million (drawn in full) and increased the revolving credit commitment
from $30.0 million to $50.0 million.
 
    
    In June 2006, the third amendment made certain changes and added $50.0 million in senior
term loans to the total Term B Senior Credit Agreement debt.
 
    
    In January 2007, the fourth increment added $15.0 million in senior term loans to the
total Term B Senior Credit Agreement debt.
 
    
    In February 2007, the fourth amendment made certain changes, extended the senior term
loan maturity date to February 6, 2013, adjusted the principal repayment schedule to
require a balloon principal payment at maturity, and added an incurrence test as an
additional condition precedent to Alions ability to borrow additional funds.
 
    
    In July 2007, the fifth increment added $25.0 million in senior term loans to the Term B
Senior Credit Agreement.
 
    
    On September 30, 2008, the fifth amendment made certain changes.
 (a)
    
    It increased the interest rate by 350 basis points to a minimum Eurodollar
interest rate of 3.50% plus 600 basis points, and a minimum alternate base rate of
4.50% plus 500 basis points.
 (b)
    
    If the Company refinances, replaces or extends the maturity of its existing
revolving line of credit with an interest rate spread which is more than 50 basis
points higher than the then-current interest rate spread applicable to the Companys
senior term loan, Alions interest rate spread would increase by the difference between
the higher revolving credit facility interest rate spread and 50 basis points.
 (c)
    
    Alion is required to use all (formerly half) of excess annual cash flow to
prepay outstanding senior term loans.
 (d)
    
    It amended financial covenants to provide Alion flexibility through September
30, 2009.
 (e)
    
    It restricts the Companys ability to pay the CEO or COO for previously awarded shares of phantom stock.
 (f)
    
    It permits Alion to incur additional second lien debt, subject to certain
conditions.
  37




---



##### Table of Contents




    
    In July 2009, the sixth amendment extended the revolving credit facility maturity date
to September 25, 2009 (which by later amendment was extended to September 30, 2010) and
reduced the aggregate amount of the revolving credit commitments from $50 million to $40
million (which by later amendment was reduced to $25 million).
 
    
    In September 2009, the seventh amendment extended the revolving credit facility maturity
date to October 9, 2009.
 
    
    In October 2009, the ninth amendment extended the revolving credit maturity date to
September 30, 2010, added a liquidity condition requiring Alion to pay in kind an
additional 100 basis points in interest if Alion does not secure an additional $35 million
in revolving credit commitments by February 1, 2010, added a leverage reduction condition
requiring Alion to pay in kind an additional 100 basis points in interest if Alions Senior
Secured Leverage Ratio is more than 2.75 to 1.00 as of June 30, 2010 and the additional
interest increases by 50 basis points each quarter thereafter if the leverage ratio is not
met, afforded the senior lenders the opportunity to appoint a designee to Alions board of
directors if Alions Senior Secured Leverage Ratio is more than 2.75 to 1.00 as of June 30,
2010, added a $25 million uncommitted incremental revolving credit facility, removed a
requirement that Alion maintain its S-corporation status, limited Alions ability to make
capital expenditures from June 30, 2009 to September 30, 2010 to $8 million and made other
modifications to Alions negative covenants.
        38




---



##### Table of Contents



Use of Proceeds.
  Security.
 Interest and Fees.
   Federal Funds
    
    
    Prime RateEurodollar
    
    
    ABR
    
    
    ABRLeverage Ratio
    
    Spread
    
    
    Spread
    
    
    Spread(in basis points)Category 1
    
    
    275
    
    
    
    225
    
    
    
    175Greater than or equal to 3.00 to 1.00Category 2
    
    
    250
    
    
    
    200
    
    
    
    150Greater than or equal to 2.50 to
1.00 but less than 3.00 to 1.00Category 3
    
    
    225
    
    
    
    175
    
    
    
    125Greater than or equal to 2.00 to
1.00 but less than 2.50 to 1.00Category 4
    
    
    200
    
    
    
    150
    
    
    
    100Less than 2.00 to 1.00
  Interest Rate Swap.
  39




---



##### Table of Contents



Other Fees and Expenses.
  Financial Covenants.
    Period
    
    RatioJuly 1, 2009 through June 30, 2010
    
    
    4.00 to 1.00July 1, 2010 through December 31, 2010
    
    
    3.75 to 1.00Thereafter
    
    
    3.00 to 1.00
    40




---



##### Table of Contents



Period
    
    RatioJuly 1, 2009 through March 31, 2010
    
    
    1.10 to 1.00April 1, 2010 through June 30, 2010
    
    
    1.15 to 1.00July 1, 2010 through December 31, 2010
    
    
    1.25 to 1.00Thereafter
    
    
    1.35 to 1.00
  Twelve Months EndedSeptember 30,2009
    
    
    2008Senior Secured Leverage Ratio
    
    
    3.57
    
    
    
    4.15Interest Coverage Ratio
    
    
    1.17
    
    
    
    1.60
 Waiver Agreement
    Senior Secured Leverage Ratio
 Quarter Ended
    
    Required Ratio
    
    
    Actual PerformanceJune 30, 2006
    
    
    6.50
    
    
    
    6.87September 30, 2006
    
    
    6.50
    
    
    
    6.74December 31, 2006
    
    
    6.50
    
    
    
    6.84December 31, 2007
    
    
    3.75
    
    
    
    4.01March 31, 2008
    
    
    3.75
    
    
    
    4.07June 30, 2008
    
    
    3.75
    
    
    
    4.37September 30, 2008
    
    
    4.10
    
    
    
    4.56December 31, 2008
    
    
    4.10
    
    
    
    4.49March 31, 2009
    
    
    4.25
    
    
    
    4.58June 30, 2009
    
    
    4.25
    
    
    
    4.36
  41




---



##### Table of Contents



Interest Coverage Ratio
 Quarter Ended
    
    Required Ratio
    
    
    Actual PerformanceDecember 31, 2007
    
    
    1.35
    
    
    
    1.23March 31, 2008
    
    
    1.35
    
    
    
    1.34June 30, 2008
    
    
    1.35
    
    
    
    1.11September 30, 2008
    
    
    1.20
    
    
    
    1.19December 31, 2008
    
    
    1.10
    
    
    
    1.09March 31, 2009
    
    
    1.05
    
    
    
    0.97June 30, 2009
    
    
    1.05
    
    
    
    1.03September 30, 2009
    
    
    1.10
    
    
    
    1.07
       42




---



##### Table of Contents




    
    incur additional indebtedness other than permitted additional indebtedness after
satisfying a senior secured leverage-based incurrence test;
 
    
    consolidate, merge or sell all or substantially all of the Companys assets;
 
    
    make certain loans and investments including acquisitions of businesses, other than
permitted acquisitions;
 
    
    pay dividends or distributions other than distributions needed for the ESOP to satisfy
its repurchase obligations and certain payments required under the Companys equity based
incentive plans;
 
    
    enter into certain transactions with the Companys shareholders and affiliates;
 
    
    enter into certain transactions not permitted under ERISA;
 
    
    grant certain liens and security interests;
 
    
    enter into sale and leaseback transactions;
 
    
    change lines of business;
 
    
    repay subordinated indebtedness before it is due and redeem or repurchase certain
equity;
 
    
    pay certain earn-outs in connection with permitted acquisitions;
 
    
    spend more than $8 million on capital expenditures from June 30, 2009 to September 30,
2010;
 
    
    make payments to directors, officers, and employees of the Company or its subsidiaries
in connection with warrants, stock appreciation rights, phantom stock plans or similar
incentives or equity-based incentives in excess of $20 million in the aggregate; or
 
    
    use the proceeds of the Companys borrowings other than as permitted by the Term B
Senior Credit Agreement.
 Events of Default.
 
    
    payment default;
 
    
    breach of representations and warranties;
 
    
    uncured covenant breaches;
 
    
    default under certain other debt exceeding an agreed amount;
 
    
    bankruptcy and insolvency events;
 
    
    notice of debarment, suspension or termination under a material government contract;
 
    
    certain ERISA violations;
 
    
    unstayed judgments in excess of an agreed amount;
 
    
    failure of the subordinated note to remain subordinated to the Term B Senior Credit
Agreement;
 
    
    failure of any guarantee of the Term B Senior Credit Agreement to be in effect;
 
    
    failure of the security interests to be valid, perfected first priority security
interests in the collateral;
 
    
    failure of the Company to remain an S-corporation;
 
    
    imposition on the ESOP Trust of certain taxes in excess of an agreed amount;
 
    
    final determination the ESOP is not a qualified plan;
 
    
    incurrence of a civil or criminal liability in excess of $5 million of the Company or
any subsidiary arising from a government investigation;
 
    
    actual termination of a material contract due to alleged fraud, willful misconduct,
negligence, default or any other wrongdoing; or
 
    
    change of control (as defined below).
   43




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##### Table of Contents



Bridge Loan Agreement
  Subordinated Note  Redeemable Common Stock Warrants
 
     .
    44




---



##### Table of Contents



Senior Unsecured Notes
  Interest and Fees.
 Covenants.
  
    
    Indebtedness incurred pursuant to the Senior Credit Facility and certain other contracts
up to $360 million less principal repayments made under that indebtedness
 
    
    Permitted inter-company indebtedness
 
    
    The Companys 10.25% notes
 
    
    Indebtedness pre-existing the issuance of the Companys 10.25% notes
 
    
    Permitted Indebtedness of acquired subsidiaries
 
    
    Permitted refinancing Indebtedness
 
    
    Indebtedness under hedging agreements
 
    
    Performance, bid, appeal and surety bonds and completion guarantees
 
    
    Ordinary course insufficient funds coverage
 
    
    Guarantees in connection with permitted refinancing indebtedness
 
    
    Indebtedness of non-U.S. subsidiaries incurred for working capital purposes
 
    
    Indebtedness incurred for capital expenditure purposes and indebtedness for capital and
synthetic leases not exceeding in the aggregate $25 million and 2.5% of the Companys Total
Assets as defined in the Indenture
 
    
    Permitted subordinated indebtedness of the Company or any Restricted Subsidiary incurred
to finance a permitted acquisition, certain permitted transactions involving the ESOP and
refinancing indebtedness of acquired non-U.S. subsidiaries in an amount not exceeding in
the aggregate $35 million
 
    
    Reimbursement obligations with regard to letters of credit
 
    
    Certain agreements in connection with the acquisition of a business as long as the
liabilities incurred in connection therewith are not reflected on the Companys balance
sheet
 
    
    Certain deferred compensation agreements
 
    
    Certain other indebtedness not exceeding $35 million.
  45




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##### Table of Contents




    
    Restricted Payments out of substantially concurrent contributions of equity to the
Company and substantially concurrent incurrences of permitted indebtedness
 
    
    Certain limited and permitted dividends
 
    
    Certain repurchases of the Companys equity securities deemed to occur upon exercise of
stock options or warrants
 
    
    Cash payments in lieu of the issuance of fractional shares in connection with the
exercise of warrants, options or other securities convertible into or exchangeable for the
Companys equity securities
 
    
    The required premium payable on the Senior Unsecured Notes in connection with a change
of control of the Company
 
    
    Certain permitted inter-company subordinated obligations
 
    
    Certain repurchases and redemptions of subordination obligations of the Company or a
Subsidiary Guarantor from Net Available Cash (as defined in the Indenture)
 
    
    Repurchases of subordinated obligations in connection with an asset sale to the extent
required by the Indenture
 
    
    The redemption or repurchase for value of any Company equity securities for former
Company employees who were also former Joint Spectrum Center employees after voluntary or
involuntary termination of employment with the Company
 
    
    Certain permitted transactions with the ESOP not exceeding $25 million in the aggregate
 
    
    Certain other payments not exceeding $30 million in the aggregate.
  Events of Default.
 
    
    payment default;
 
    
    uncured covenant breaches;
 
    
    default under an acceleration of certain other debt exceeding $30 million;
 
    
    certain bankruptcy and insolvency events;
 
    
    a judgment for payment in excess of $30 million entered against the Company or any
material subsidiary that remains outstanding for a period of 60 days and is not discharged,
waived or stayed; and
 
    
    failure of any guarantee of the Senior Unsecured Notes to be in effect or the denial or
disaffirmation by any subsidiary guarantor of its guaranty obligations.
 Change of Control.
 
    
    subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the
beneficial owner, directly or indirectly, of more than 35% of the total voting power or
voting stock of Alion;
 
    
    individuals who constituted Alions board of directors on the date the Senior Unsecured
Notes were issued, cease for any reason to constitute a majority of the Companys board of
directors;
 
    
    the adoption of a plan relating to Alions liquidation or dissolution; and
 
    
    subject to certain exceptions, the merger or consolidation of the Company with or into
another person or the merger of another person with or into the Company, or the sale of all
or substantially all the assets of Alion to another person.
  46




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##### Table of Contents



Optional Redemption
   Period
    
    Redemption Price2011
    
    
    105.125
    %2012
    
    
    102.563
    %2013 and thereafter
    
    
    100.000
    %
  6-Fiscal Years ($ In thousands)2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Bank revolving credit facility- Interest(1)
    
    $
    1,357
    
    
    $
    1,148
    
    
    $
    940
    
    
    $
    728
    
    
    $
    178
    
    
    $
    178Senior Term Loan- Interest(2)
    
    
    22,701
    
    
    
    22,467
    
    
    
    22,598
    
    
    
    8,309
    
    
    
    
    
    
    
    - Principal(3)
    
    
    2,433
    
    
    
    2,433
    
    
    
    2,433
    
    
    
    229,297
    
    
    
    
    
    
    
    Senior Unsecured Notes- Interest
    
    
    25,625
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    12,813- Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Subordinated Note(4)- Interest
    
    
    3,223
    
    
    
    3,369
    
    
    
    3,594
    
    
    
    3,332
    
    
    
    
    
    
    
    - Principal
    
    
    3,000
    
    
    
    3,000
    
    
    
    2,000
    
    
    
    70,311
    
    
    
    
    
    
    
    Total cash  pay interest
    
    
    53,074
    
    
    
    52,977
    
    
    
    53,291
    
    
    
    38,497
    
    
    
    25,803
    
    
    
    12,991Total cash  pay principal
    
    
    5,433
    
    
    
    5,433
    
    
    
    4,433
    
    
    
    299,608
    
    
    
    
    
    
    
    250,000Total
    
    $
    55,339
    
    
    $
    55,042
    
    
    $
    55,190
    
    
    $
    337,602
    
    
    $
    25,803
    
    
    $
    262,991
 (1)
    
    Alion anticipates it will regularly utilize a $25.0 million revolving credit facility to meet
working capital needs. The present revolving credit facility matures in September 2010. The
Company expects to replace it with a similar facility at least through 2015. Alion estimates
the average utilized revolver balance will be $13.5 million for fiscal year 2010; $11.2
million for fiscal year 2011, $8.9 million for 2012, $6.6 for 2013 through 2015 and minimal
thereafter. Interest expense includes estimated fees for the unused balance of a $25.0 million
revolving credit facility. The Company estimates the effective average cash-pay interest
rate, excluding fees for the unused balance on the revolver, will be 9.5% for all periods
presented. Alion expects it will be able to meet existing Term B Senior Credit Agreement
financial covenants for the next 12 months. Therefore, the Company believes it will continue
to have access to its $25.0 million revolving credit facility.(2)
    
    Alion forecasts the average annual Term B Senior Credit Agreement senior term loan balance
will be:$235.7 million, $233.3 million, $230.8 million, and $81.0 million for fiscal years
2010 through 2013. The senior term loan matures February 2013. The Company expects it will need
to refinance the Term B senior term loan before it matures and forecasts
interest expense to continue at levels similar to prior years based on a forecast LIBOR rate
plus the Credit Suisse Eurodollar spread. If Alion does not meet certain financial covenants by
February 2010, interest on the Term B Senior Credit Agreement will increase beyond this rate by
100 basis points retroactive to the beginning of fiscal 2010. If Alion does not meet certain
additional financial covenants by June 2010, interest will increase by an additional 100 basis
points retroactive to the beginning of fiscal 2010. Each quarter that Alion continues not to
meet the June 2010 financial covenants, interest will increase by a further 25 basis points.
Alion estimates the effective annual interest rates for the fiscal years 2010 through 2013 will
be approximately 9.6%, 9.6%, 9.8%, and 10.1%. Interest expense includes estimated senior term
loan commitment fees. Alion expects it will be able to meet existing Term B Senior Credit
Agreement financial covenants for the next 12 months and that the senior term loan principal
will not be callable prior to maturity.  47




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##### Table of Contents



(3)
    
    The Term B Senior Credit Agreement requires Alion to repay approximately 1.0 percent of the
principal balance outstanding under the senior term loan annually. On a cumulative basis,
Alion will pay approximately 4.3% of the principal through the first quarter of fiscal year
2013. The remaining principal balance is due on February 6, 2013, the senior term loan
maturity date. The table reflects the balance drawn of $236.6 million as of September 30,
2009,payments of approximately $2.4 million in each fiscal year from 2010 through 2012,
approximately $0.6 million payable the first quarter of fiscal 2013, and payment of the
remaining principal (balance of $228.7 million) on February 2013. If Alion generates certain
excess cash flow in a given fiscal year, issues or incurs certain debt or sells certain
assets, the Term B Senior Credit Agreement requires the Company to prepay a portion of the
principal. As of September 30, 2009, no mandatory prepayments are due.(4)
    
    The Term B Senior Credit Agreement prohibits Alion from making cash payments for principal or
interest on the Subordinated Note. The Company and IIT modified the Subordinated Note to
defer cash interest payments due January 2010 to April 2010. Failure to timely pay
Subordinated Note principal is not an event of default; failure to pay Subordinated Note
interest is an event of default that can accelerate repayment of the Term B Senior Credit
Agreement. The Company expects to be able to either retire the Subordinated Note prior to
April 2010 or amend it to defer cash interest payments until after the Term B Senior Credit
Agreement expires. Contingent Obligations
 Earn-outs
  Other Contingent obligations which will impact the Companys cash flow
  Number of
    
    
    
    
    
    
    Total ValueDate
    
    Shares Repurchased
    
    
    Share Price
    
    
    Purchased(In thousands)October 2007
    
    
    90
    
    
    $
    40.05
    
    
    $
    4December 2007
    
    
    210
    
    
    
    40.05
    
    
    
    8February 2008
    
    
    648
    
    
    
    40.05
    
    
    
    26March 2008
    
    
    19,961
    
    
    
    40.05
    
    
    
    799March 2008
    
    
    10,011
    
    
    
    41.00
    
    
    
    410April 2008
    
    
    60
    
    
    
    40.05
    
    
    
    2July 2008
    
    
    306
    
    
    
    41.00
    
    
    
    13September 2008
    
    
    68,009
    
    
    
    41.00
    
    
    
    2,788December 2008
    
    
    233
    
    
    
    38.35
    
    
    
    9March 2009
    
    
    189,038
    
    
    
    38.35
    
    
    
    7,250April 2009
    
    
    122
    
    
    
    34.30
    
    
    
    4May 2009
    
    
    38
    
    
    
    34.30
    
    
    
    1July 2009
    
    
    100
    
    
    
    34.30
    
    
    
    3July 2009
    
    
    127
    
    
    
    38.35
    
    
    
    5August 2009
    
    
    178
    
    
    
    34.30
    
    
    
    6September 2009
    
    
    55,282
    
    
    
    34.30
    
    
    
    1,897Total
    
    
    344,913
    
    
    
    
    
    
    $
    13,225
  48




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##### Table of Contents



Payments Due by Fiscal YearTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterContractual Obligations:Long-term debt including
principal and interest
    
    $
    791,967
    
    
    $
    55,339
    
    
    $
    55,042
    
    
    $
    55,190
    
    
    $
    337,602
    
    
    $
    25,803
    
    
    $
    262,991Lease Obligations
    
    
    148,110
    
    
    
    27,350
    
    
    
    25,700
    
    
    
    21,731
    
    
    
    20,403
    
    
    
    13,979
    
    
    
    38,947Total contractual
obligations
    
    $
    940,077
    
    
    $
    82,689
    
    
    $
    80,742
    
    
    $
    76,921
    
    
    $
    358,005
    
    
    $
    39,782
    
    
    $
    301,938
 Off-Balance Sheet Financing Arrangements
 Leases
 Summary of Critical Accounting Policies
 Revenue Recognition
   49




---



##### Table of Contents



Revenue Recognition.
 Goodwill and Intangible Assets
  Intangibles, Goodwill and Other Assets
   50




---



##### Table of Contents



Purchased contracts
    
    1 - 13 yearsInternal use software and engineering designs
    
    2 - 3 yearsNon-compete agreements
    
    3 - 6 years
  51




---



##### Table of Contents



Redeemable Common Stock
    Recently Issued Accounting Pronouncements
 Business Combinations
 Consolidation
 Fair Value Disclosures
  52




---



##### Table of Contents



Subsequent Events
 
 Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest rate risk
   Foreign currency risk
  Risk associated with value of Alion common stock
    53




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 INDEX TO FINANCIAL STATEMENTS
 Consolidated Financial Statements of Alion Science and Technology Corporation
 Report of Independent Registered Public Accounting Firm
    
    
    55Consolidated Financial Statements:Consolidated Balance Sheets as of September 30, 2009 and 2008 (restated)
    
    
    56Consolidated Statements of Operations for the years ended September 30, 2009, 2008 and 2007
    
    
    57Consolidated Statements of Redeemable Common Stock and Accumulated Deficit for the years
ended September 30, 2009, 2008, and 2007
    
    
    58Consolidated Statements of Cash Flows for the years ended September 30, 2009, 2008, and 2007
    
    
    59Notes to Consolidated Financial Statements
    
    
    60Consolidated Financial Statement SchedulesSchedule II  Valuation and Qualifying Accounts
    
    
    128
  54




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/s/ DELOITTE & TOUCHE LLP
 
  55




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 September 30,2009
    
    
    2008(As RestatedSee Note 11)(In thousands, except share and pershare information)Current assets:Cash and cash equivalents
    
    $
    11,185
    
    
    $
    16,287Accounts receivable, net
    
    
    180,157
    
    
    
    168,451Stock subscriptions receivable
    
    
    
    
    
    
    2,669Prepaid expenses and other current assets
    
    
    3,795
    
    
    
    3,135Total current assets
    
    
    195,137
    
    
    
    190,542Property, plant and equipment, net
    
    
    14,474
    
    
    
    18,601Intangible assets, net
    
    
    28,680
    
    
    
    41,248Goodwill
    
    
    398,921
    
    
    
    398,871Other assets
    
    
    10,286
    
    
    
    6,684Total assets
    
    $
    647,498
    
    
    $
    655,946Current liabilities:Interest payable
    
    $
    9,039
    
    
    $
    6,543Current portion, senior term loan payable
    
    
    2,389
    
    
    
    232,220Interest rate swap liability
    
    
    
    
    
    
    4,629Current portion of subordinated note payable
    
    
    3,000
    
    
    
    3,000Current portion, acquisition obligations
    
    
    50
    
    
    
    50Trade accounts payable
    
    
    60,707
    
    
    
    57,164Accrued liabilities
    
    
    45,425
    
    
    
    39,227Accrued payroll and related liabilities
    
    
    43,033
    
    
    
    41,557Billings in excess of revenue earned
    
    
    3,661
    
    
    
    2,708Total current liabilities
    
    
    167,304
    
    
    
    387,098Senior term loan payable, excluding current portion
    
    
    229,221
    
    
    
    Senior unsecured notes
    
    
    245,241
    
    
    
    244,355Subordinated note payable
    
    
    46,932
    
    
    
    42,656Accrued compensation, excluding current portion
    
    
    5,740
    
    
    
    11,305Accrued postretirement benefit obligations
    
    
    717
    
    
    
    627Non-current portion of lease obligations
    
    
    7,286
    
    
    
    6,260Redeemable common stock warrants
    
    
    32,717
    
    
    
    39,996Commitments and contingencies
    
    
    
    
    
    
    Redeemable common stock, $0.01 par value,
8,000,000 shares authorized, 5,424,274 and
5,229,756 shares issued and outstanding at
September 30, 2009 and September 30, 2008
    
    
    187,137
    
    
    
    200,561Accumulated other comprehensive loss
    
    
    (238
    )
    
    
    (36
    )Accumulated deficit
    
    
    (274,559
    )
    
    
    (276,876
    )Total liabilities, redeemable common stock and
accumulated deficit
    
    $
    647,498
    
    
    $
    655,946
 See accompanying notes to consolidated financial statements.
  56




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 Year Ended September 30,2009
    
    
    2008
    
    
    2007(In thousands, except share and per shareinformation)Contract revenue
    
    $
    802,225
    
    
    $
    739,482
    
    
    $
    737,587Direct contract expense
    
    
    615,700
    
    
    
    566,408
    
    
    
    562,139Gross profit
    
    
    186,525
    
    
    
    173,074
    
    
    
    175,448Operating expenses:Indirect contract expense
    
    
    35,473
    
    
    
    40,050
    
    
    
    43,972Research and development
    
    
    677
    
    
    
    988
    
    
    
    2,379General and administrative
    
    
    60,867
    
    
    
    59,484
    
    
    
    60,698Rental and occupancy expense
    
    
    32,984
    
    
    
    30,880
    
    
    
    32,410Depreciation and amortization
    
    
    18,959
    
    
    
    20,715
    
    
    
    21,824Total operating expenses
    
    
    148,960
    
    
    
    152,117
    
    
    
    161,283Operating income
    
    
    37,565
    
    
    
    20,957
    
    
    
    14,165Other income (expense):Interest income
    
    
    91
    
    
    
    423
    
    
    
    319Interest expense
    
    
    (55,154
    )
    
    
    (47,382
    )
    
    
    (51,226
    )Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    (6,170
    )Other
    
    
    305
    
    
    
    655
    
    
    
    132Total other expenses
    
    
    (54,758
    )
    
    
    (46,304
    )
    
    
    (56,945
    )Loss before income taxes
    
    
    (17,193
    )
    
    
    (25,347
    )
    
    
    (42,780
    )Income tax benefit
    
    
    152
    
    
    
    13
    
    
    
    10Net loss
    
    $
    (17,041
    )
    
    $
    (25,334
    )
    
    $
    (42,770
    )Basic and diluted loss per share
    
    $
    (3.25
    )
    
    $
    (5.01
    )
    
    $
    (8.35
    )Basic and diluted weighted
average common shares
outstanding
    
    
    5,246,227
    
    
    
    5,057,337
    
    
    
    5,121,033
 See accompanying notes to consolidated financial statements.
  57




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK AND ACCUMULATED DEFICIT
 Redeemable CommonStock
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Income
    
    
    Deficit(In thousands, except share and per share information)Balances at October 1, 2006
    
    
    5,210,126
    
    
    $
    213,719
    
    
    $
    
    
    
    $
    (221,009
    )Issuance of redeemable common stock
    
    
    493,740
    
    
    
    20,265
    
    
    
    
    
    
    
    Retirement of redeemable common stock
    
    
    (690,932
    )
    
    
    (29,584
    )
    
    
    
    
    
    
    Reduction in common stock redemption value
    
    
    
    
    
    
    (3,632
    )
    
    
    
    
    
    
    3,632Net loss for year ended September 30, 2007
    
    
    
    
    
    
    
    
    
    
    (42,770
    )
    
    
    (42,770
    )Balances at September 30, 2007
    
    
    5,012,934
    
    
    $
    200,768
    
    
    $
    
    
    
    $
    (260,147
    )Issuance of redeemable common stock
    
    
    316,117
    
    
    $
    12,449
    
    
    
    
    
    
    
    Retirement of redeemable common stock
    
    
    (99,295
    )
    
    
    (4,051
    )
    
    
    
    
    
    
    Reduction in common stock redemption value
    
    
    
    
    
    
    (8,605
    )
    
    
    
    
    
    
    8,605Postretirement medical plan actuarial cost
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    Net loss for year ended September 30, 2008
    
    
    
    
    
    
    
    
    
    
    (25,334
    )
    
    
    (25,334
    )Comprehensive loss for year ended
September 30, 2008
    
    
    
    
    
    
    
    
    
    $
    (25,370
    )Balances at September 30, 2008
    
    
    5,229,756
    
    
    $
    200,561
    
    
    
    
    
    
    $
    (276,876
    )Issuance of redeemable common stock
    
    
    439,637
    
    
    $
    15,109
    
    
    $
    
    
    
    $Retirement of redeemable common stock
    
    
    (245,119
    )
    
    
    (9,175
    )
    
    
    Reduction in common stock redemption value
    
    
    
    
    
    
    (19,358
    )
    
    
    
    
    
    
    19,358Postretirement medical plan actuarial cost
    
    
    
    
    
    
    
    
    
    
    (202
    )
    
    
    Net loss for year ended September 30, 2009
    
    
    
    
    
    
    
    
    
    
    (17,041
    )
    
    
    (17,041
    )Comprehensive loss for year ended
September 30, 2009
    
    
    
    
    
    
    
    
    
    $
    (17,243
    )Balances at September 30, 2009
    
    
    5,424,274
    
    
    $
    187,137
    
    
    
    
    
    
    $
    (274,559
    )
 See accompanying notes to consolidated financial statements.
  58




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ALION SCIENCE AND TECHNOLOGY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended September 30,2009
    
    
    2008
    
    
    2007(In thousands)Cash flows from operating activities:Net loss
    
    $
    (17,041
    )
    
    $
    (25,334
    )
    
    $
    (42,770
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    18,959
    
    
    
    20,715
    
    
    
    21,824Bad debt expense (recovery)
    
    
    1,014
    
    
    
    (578
    )
    
    
    1,812Loss (gain) on sale of non-operating assets
    
    
    19
    
    
    
    (750
    )
    
    
    Accretion of debt to face value
    
    
    2,359
    
    
    
    1,146
    
    
    
    969Amortization of debt issuance costs
    
    
    2,708
    
    
    
    1,766
    
    
    
    2,768Change in fair value of redeemable common stock warrants
    
    
    (7,279
    )
    
    
    (3,895
    )
    
    
    (1,624
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    6,170Postretirement benefits curtailment gain
    
    
    
    
    
    
    
    
    
    
    (3,320
    )Stock-based compensation
    
    
    (5,215
    )
    
    
    500
    
    
    
    8,340Long term incentive compensation
    
    
    3,696
    
    
    
    
    
    
    
    Other
    
    
    (407
    )
    
    
    33
    
    
    
    (28
    )Loss on interest rate hedging agreements
    
    
    18
    
    
    
    295
    
    
    
    413Changes in assets and liabilities:Accounts receivable
    
    
    (12,718
    )
    
    
    18,941
    
    
    
    (37,583
    )Other assets
    
    
    (4,283
    )
    
    
    771
    
    
    
    (773
    )Trade accounts payable
    
    
    3,544
    
    
    
    11,059
    
    
    
    10,229Accrued liabilities
    
    
    14,340
    
    
    
    6,119
    
    
    
    10,734Interest payable
    
    
    2,496
    
    
    
    (5,568
    )
    
    
    11,871Other liabilities
    
    
    6,785
    
    
    
    4,100
    
    
    
    5,960Net cash provided by (used in) operating activities
    
    
    8,995
    
    
    
    29,320
    
    
    
    (5,008
    )Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (166
    )
    
    
    (7,946
    )
    
    
    (14,751
    )Capital expenditures
    
    
    (2,186
    )
    
    
    (4,986
    )
    
    
    (10,687
    )Proceeds from sale of non-operating assets
    
    
    5
    
    
    
    780
    
    
    
    Net cash used in investing activities
    
    
    (2,347
    )
    
    
    (12,152
    )
    
    
    (25,438
    )Cash flows from financing activities:Proceeds from Term B Senior Credit Agreement note payable
    
    
    
    
    
    
    
    
    
    
    40,000Proceeds from Senior Unsecured Notes
    
    
    
    
    
    
    
    
    
    
    250,000Cash (paid for) received from interest rate swap
    
    
    (4,647
    )
    
    
    4,333
    
    
    
    Payment of senior term loan principal
    
    
    (2,433
    )
    
    
    (6,474
    )
    
    
    (53,513
    )Payment of subordinated note principal
    
    
    (3,000
    )
    
    
    
    
    
    
    (170,000
    )Payment of debt issuance cost
    
    
    
    
    
    
    (500
    )
    
    
    (10,796
    )Revolver borrowings
    
    
    504,900
    
    
    
    450,505
    
    
    
    465,245Revolver payments
    
    
    (504,900
    )
    
    
    (459,755
    )
    
    
    (468,295
    )Proceeds from interest cap agreement
    
    
    
    
    
    
    
    
    
    
    360Loan to ESOP Trust
    
    
    (5,936
    )
    
    
    (3,369
    )
    
    
    ESOP loan repayment
    
    
    5,936
    
    
    
    3,369
    
    
    
    Redeemable common stock purchased from ESOP Trust
    
    
    (9,175
    )
    
    
    (4,051
    )
    
    
    (29,584
    )Redeemable common stock sold to ESOP Trust
    
    
    7,505
    
    
    
    3,377
    
    
    
    15,958Net cash (used in) provided by financing activities
    
    
    (11,750
    )
    
    
    (12,565
    )
    
    
    39,375Net (decrease) increase in cash and cash equivalents
    
    
    (5,102
    )
    
    
    4,603
    
    
    
    8,929Cash and cash equivalents at beginning of period
    
    
    16,287
    
    
    
    11,684
    
    
    
    2,755Cash and cash equivalents at end of period
    
    $
    11,185
    
    
    $
    16,287
    
    
    $
    11,684Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    49,953
    
    
    $
    49,909
    
    
    $
    33,695Cash paid (received) for taxes
    
    
    (152
    )
    
    
    28
    
    
    
    68Non-cash financing activities:Common stock issued to ESOP Trust in satisfaction of
employer contribution liability
    
    
    10,273
    
    
    
    9,781
    
    
    
    9,920
 See accompanying notes to consolidated financial statements.
  59




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Description and Formation of the Business
   (2) Summary of Significant Accounting Policies
 Basis of Presentation and Principles of Consolidation
  
    
    Human Factors Application, Inc. (HFA)  acquired November 1998
    
    Innovative Technology Solution Corporation (ITSC)  acquired October 2003
    
    Alion  IPS Corporation (IPS)  acquired February 2004
    
    Alion  METI Corporation (METI)  acquired February 2005
    
    Alion  CATI Corporation (CATI)  acquired February 2005
    
    Alion Canada (US) Corporation  established February 2005
    
    Alion Science and Technology (Canada) Corporation  established February 2005
    
    Alion  JJMA Corporation (JJMA)  acquired April 2005
    
    Alion Technical Services Corporation (Virginia)  established July 2005
    
    Alion  BMH Corporation (BMH)  acquired February 2006
    
    Washington Consulting, Inc. (WCI)  acquired February 2006
    
    Alion  MA&D Corporation (MA&D)  acquired May 2006
    
    Alion Technical Services Corporation (Delaware)  established May 2006
    
    Washington Consulting Government Services, Inc. (WCGS)  established July 2007
  60




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fiscal, Quarter and Interim Periods
  Use of Estimates
  Reclassifications
  Summary of Critical Accounting Policies
 Revenue Recognition
      61




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Revenue Recognition.
 Goodwill and Intangible Assets
  Intangibles, Goodwill and Other Assets
      62




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Purchased contracts
    
    1 - 13 yearsInternal use software and engineering designs
    
    2 - 3 yearsNon-compete agreements
    
    3 - 6 years
 Redeemable Common Stock
    63




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Income Taxes
   64




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Cash and Cash Equivalents
  Accounts Receivable and Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
  Property, Plant and Equipment
  Postretirement Benefits
 Compensation  Retirement Benefits.
 Fair Value of Financial Instruments
  Cash, cash equivalents, accounts payable and accounts receivable.
 Senior long-term debt.
 Redeemable common stock warrants.
  65




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Redeemable Alion Common Stock.
 Recently Issued Accounting Pronouncements
 Business Combinations
 Consolidation
 Fair Value Disclosures
 Subsequent Events
 (3) Business Combinations
 Fiscal Year 2008 Acquisition
 
 Fiscal Year 2007 Acquisitions
 LogConGroup, Inc.
  66




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4) Employee Stock Ownership Plan (ESOP) and Stock Ownership Trust
   (5) Postretirement Benefits
  Curtailment.
   67




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2009
    
    
    2008Accumulated postretirement benefit obligation as of
September 30:Retirees
    
    $
    717
    
    
    $
    627Total active plan participants
    
    $
    717
    
    
    $
    627
 2009
    
    
    2008Reconciliation of beginning and ending benefit obligation:Benefit obligation at beginning of year
    
    $
    627
    
    
    $
    1,175Interest cost
    
    
    38
    
    
    
    52Actuarial loss
    
    
    202
    
    
    
    36Benefits paid
    
    
    (150
    )
    
    
    (636
    )Benefit obligation at end of year
    
    $
    717
    
    
    $
    627
 2009
    
    
    2008Funded status of the plan:Obligation at September 30
    
    $
    (717
    )
    
    $
    (627
    )Accrued postretirement benefits included in the
consolidated balance sheet
    
    $
    (717
    )
    
    $
    (627
    )
 2009
    
    
    2008Amounts recognized in the statement of financial position
consist of:Noncurrent liabilities
    
    $
    717
    
    
    $
    627$
    717
    
    
    $
    627
 2009
    
    
    2008(In thousands)Components of net periodic postretirement benefit cost:Interest cost
    
    $
    38
    
    
    $
    52Net periodic postretirement benefit cost
    
    $
    38
    
    
    $
    52
 2009
    
    
    2008(In thousands)Accumulated Other Comprehensive Income
    
    $
    238
    
    
    $
    36$
    238
    
    
    $
    36
  68




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2009
    
    
    2008Accumulated post retirement benefit obligation at September 30
    
    
    5.12
    %
    
    
    7.00
    %Service and interest cost portions of net periodic postretirement benefit cost
    
    
    7.00
    %
    
    
    6.15
    %
  2009
    
    
    2008Health care cost trend rate assumed for next year
    
    
    10.0
    %
    
    
    10.0
    %Rate to which the cost trend rate is assumed to decline (ultimate trend rates)
    
    
    6.0
    %
    
    
    6.0
    %Year the rate reaches the ultimate trend rate
    
    
    2018
    
    
    
    2017
  One-Percentage-Point
    
    
    One-Percentage-PointIncrease
    
    
    Decrease(In Thousands)Effect on total service and interest cost
    
    $
    2
    
    
    $
    2Effect on accumulated postretirement benefit obligation
    
    $
    65
    
    
    $
    57
  (In thousands)2010
    
    $
    602011
    
    
    642012
    
    
    682013
    
    
    702014
    
    
    712015-2019
    
    $
    290
  (6) Loss Per Share
  (7) Redeemable common stock owned by ESOP Trust
   69




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (8) Accounts Receivable
  September 30,2009
    
    
    2008(In thousands)Billed receivables
    
    $
    108,566
    
    
    $
    99,794Unbilled receivables:Amounts currently billable
    
    
    22,954
    
    
    
    37,883Revenues recorded in excess of milestone billings on
fixed price contracts
    
    
    3,757
    
    
    
    2,651Revenues recorded in excess of estimated contract value or funding
    
    
    36,327
    
    
    
    18,925Retainages and other amounts billable upon contract completion
    
    
    12,972
    
    
    
    13,160Allowance for doubtful accounts
    
    
    (4,419
    )
    
    
    (3,962
    )Total Accounts Receivable
    
    $
    180,157
    
    
    $
    168,451
  (9) Property, Plant and Equipment
 September 30,2009
    
    
    2008(In thousands)Leasehold improvements
    
    $
    10,214
    
    
    $
    9,451Equipment and software
    
    
    32,807
    
    
    
    31,393Total cost
    
    
    43,021
    
    
    
    40,844Less: accumulated depreciation and amortization
    
    
    (28,547
    )
    
    
    (22,243
    )Net property, plant and equipment
    
    $
    14,474
    
    
    $
    18,601
  70




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (10) Goodwill and Intangible Assets
 Intangibles
 Goodwill and Other
 Total(In thousands)Balance as of September 30, 2007
    
    $
    395,926Adjustment to initial allocation (includes earn out obligations)
    
    
    2,945Balance as of September 30, 2008
    
    $
    398,871Adjustment to initial allocation (includes earn out obligations)
    
    
    50Balance as of September 30, 2009
    
    $
    398,921
  September 30,
    
    
    September 30,2009
    
    
    2008Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetPurchased contracts
    
    $
    111,635
    
    
    $
    (83,563
    )
    
    $
    28,072
    
    
    $
    111,635
    
    
    $
    (71,410
    )
    
    $
    40,225Internal use
software and
engineering designs
    
    
    2,155
    
    
    
    (1,568
    )
    
    
    587
    
    
    
    2,155
    
    
    
    (1,178
    )
    
    
    977Non-compete
agreements
    
    
    725
    
    
    
    (704
    )
    
    
    21
    
    
    
    725
    
    
    
    (679
    )
    
    
    46Total
    
    $
    114,515
    
    
    $
    (85,835
    )
    
    $
    28,680
    
    
    $
    114,515
    
    
    $
    (73,267
    )
    
    $
    41,248
  (In thousands)2010
    
    $
    10,9852011
    
    
    6,8432012
    
    
    5,7662013
    
    
    3,2462014
    
    
    879Thereafter
    
    
    961$
    28,680
  71




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (11) Long-Term Debt
 Term B Senior Credit Agreement
  
    
    In April 2005, the first amendment made certain changes and added $72.0 million in
senior term loans to the total Term B Senior Credit Agreement debt.
    
    In March 2006, the second amendment made certain changes, increased the senior term
loan commitment by $68.0 million (drawn in full) and increased the revolving credit
commitment from $30.0 million to $50.0 million.
    
    In June 2006, the third amendment made certain changes and added $50.0 million in
senior term loans to the total Term B Senior Credit Agreement debt.
    
    In January 2007, the fourth increment added $15.0 million in senior term loans to
the total Term B Senior Credit Agreement debt.
    
    In February 2007, the fourth amendment made certain changes, extended the senior
term loan maturity date to February 6, 2013, adjusted the principal repayment schedule
to require a balloon principal payment at maturity, and added an incurrence test as an
additional condition precedent to Alions ability to borrow additional funds.
    
    In July 2007, the fifth increment added $25.0 million in senior term loans to the
Term B Senior Credit Agreement.
    
    On September 30, 2008, the fifth amendment made certain changes.
 
    
    It increased the interest rate by 350 basis points to a minimum
Eurodollar interest rate of 3.50% plus 600 basis points, and a minimum alternate
base rate of 4.50% plus 500 basis points.
    
    If the Company refinances, replaces or extends the maturity of its
existing revolving line of credit with an interest rate spread which is more
than 50 basis points higher than the then-current interest rate spread
applicable to the Companys senior term loan, Alions interest rate spread would
increase by the difference between the higher revolving credit facility interest
rate spread and 50 basis points.
    
    Alion is required to use all (formerly half) of excess annual cash
flow to prepay outstanding senior term loans.
    
    It amended financial covenants to provide Alion flexibility through
September 30, 2009.
    
    It restricts the Companys ability to pay the CEO or COO for
previously awarded shares of phantom stock.
    
    It permits Alion to incur additional second lien debt, subject to
certain conditions.
 
    
    In July 2009, the sixth amendment extended the revolving credit facility maturity
date to September 25, 2009 (which by later amendment was extended to September 30,
2010) and reduced the aggregate amount of the revolving credit commitments from $50
million to $40 million (which by later amendment was reduced to $25 million).
    
    In September 2009, the seventh amendment extended the revolving credit facility
maturity date to October 9, 2009.
    
    In October 2009, the ninth amendment extended the revolving credit maturity date to
September 30, 2010, added a liquidity condition requiring Alion to pay in kind an
additional 100 basis points in interest if Alion does not secure an additional $35
million in revolving credit commitments by February 1, 2010, added a leverage reduction
condition requiring Alion to pay in kind an additional 100 basis points in interest if
Alions Senior Secured Leverage Ratio is more than 2.75 to 1.00 as of June 30, 2010 and
the additional interest increases by 50 basis points each quarter thereafter if the
leverage ratio is not met, afforded the senior lenders the opportunity to appoint a
designee to Alions board of directors if Alions Senior Secured Leverage Ratio is more
than 2.75 to 1.00 as of June 30, 2010, added a $25 million uncommitted incremental
revolving credit facility, removed a requirement that Alion maintain its S-corporation
status, limited Alions ability to make capital expenditures from June 30, 2009 to
September 30, 2010 to $8 million and made other modifications to Alions negative
covenants.
  72




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
    
    a senior term loan in the approximate amount of $236.6 million;
    
    a $25.0 million senior revolving credit facility only $182 thousand of which was
allocated to letters of credit and deemed borrowed, but none of which was actually
drawn as of September 30, 2009; and
    
    a $110.0 million uncommitted incremental term loan accordion facility for which
loans may be permitted subject to satisfying the leverage based incurrence test.
     Use of Proceeds.
  Security.
 Interest and Fees.
 Senior Term Loan.
 Senior Revolving Credit Facility.
  73




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Interest Rate Cap Agreements.
 Other Fees and Expenses.
  Financial Covenants and Waiver Agreement.
    74




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Restatement
   Senior Unsecured Notes
  Use of Proceeds .
 Security.
 Ranking .
  75




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Interest and Fees.
 Optional Redemption.
  Covenants.
 Exchange Offer; Registration Rights.
 Bridge Loan
  Interest Payable
  September 30,2009
    
    
    2008(In thousands)Senior Unsecured Notes
    
    $
    4,271
    
    
    $
    4,271Term B Senior Credit Agreement Note Payable
    
    
    3,975
    
    
    
    2,272Subordinated Note Payable
    
    
    793
    
    
    
    Total
    
    $
    9,039
    
    
    $
    6,543
  76




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Subordinated Note
     2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Total(In thousands)Senior Secured
Term B Loan(1)
    
    $
    2,433
    
    
    $
    2,433
    
    
    $
    2,433
    
    
    $
    229,297
    
    
    $
    
    
    
    $
    
    
    
    $
    236,596Senior Unsecured
Notes(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    250,000Subordinated Seller
Note(3)
    
    
    3,000
    
    
    
    3,000
    
    
    
    2,000
    
    
    
    70,312
    
    
    
    
    
    
    
    
    
    
    
    78,312Total Principal Payments
    
    $
    5,433
    
    
    $
    5,433
    
    
    $
    4,433
    
    
    $
    299,609
    
    
    $
    
    
    
    $
    250,000
    
    
    $
    564,908
 1.
    
    The table does not include any Term B Senior Credit Agreement principal pre-payments.
The timing and amount of such payments is uncertain. The total on the face of the balance
sheet for the Term B Senior Term Loan includes approximately $236.6 million in principal
and $5.0 million in unamortized debt issue costs as of September 30, 2009. Debt issue
costs for the original loan and subsequent modifications totaled $12.5 million through
September 2009. The Company estimates it will need to refinance the Term B Senior Credit
Agreement before it matures.2.
    
    The Senior Unsecured Notes on the face of the balance sheet include $250 million in
principal and $4.8 million in unamortized debt issue costs as of September 30, 2009
(originally $7.1 million).3.
    
    The Subordinated Note on the face of the balance sheet includes approximately $10.2
million of unamortized original issue discount for the fair value of the detachable
warrants Alion issued in December 2002 and the warrants Alion issued for the September 2008
amendment. The first set of Subordinated Note warrants had an initial fair value of
approximately $7.1 million The amendment to the first set of warrants had an initial fair
value of $1.3 million and the additional warrants had an initial fair value of
approximately $9.0 million. The Company recognized original issue discount for the fair
value of the warrants. The amounts presented do not reflect the anticipated effect of the
Companys agreement with IIT to retire the Subordinated Note and related Warrants for $25
million prior to April 2010.  77




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (12) Fair Value Measurement
 Fair Value Disclosures
     Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Redeemable common stock warrants
    
    $
    
    
    
    $
    
    
    
    $
    (32,717
    )
  78




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal Year EndedSeptember 30, 2009
    
    
    September 30, 2008Redeemable Common Stock WarrantsBalance, beginning of period
    
    $
    (39,996
    )
    
    $
    (33,610
    )Total realized and unrealized gains and (losses)Included in interest expense
    
    
    (7,279
    )
    
    
    (3,895
    )Issuances and settlements
    
    
    
    
    
    
    10,281Balance, end of period
    
    $
    (32,717
    )
    
    $
    (39,996
    )
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  (13) Interest Rate Swap
  (14) Redeemable Common Stock Warrants
      79




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (15) Leases
  Lease Payments for Fiscal Years Ending
    
    (In thousands)2010
    
    $
    27,3502011
    
    
    25,7002012
    
    
    21,7312013
    
    
    20,4032014
    
    
    13,979And thereafter
    
    
    38,947Gross lease payments
    
    $
    148,110Less: non-cancelable subtenant receipts
    
    
    (2,982
    )Net lease payments
    
    $
    145,128
 Composition of Total Rent Expense
 September 30,2009
    
    
    2008
    
    
    2007(In thousands)Minimum rentals
    
    $
    25,742
    
    
    $
    24,794
    
    
    $
    25,574Less: Sublease rental income
    
    
    (2,655
    )
    
    
    (3,559
    )
    
    
    (2,687
    )Total rent expense, net
    
    $
    23,087
    
    
    $
    21,235
    
    
    $
    22,887
 (16) Stock Appreciation Rights
 2002 SAR Plan
  2004 SAR Plan
    80




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock Compensation
 Stock-based Compensation Disclosure per ASC 718
Stock Appreciation Rights
As of September 30, 2009
 SharesGranted to
    
    
    Exercise
    
    
    Outstanding atDate of Grant
    
    Employees
    
    
    Price
    
    
    9/30/2008November 2003
    
    
    129,550
    
    
    $
    14.71
    
    
    
    68,335February 2004
    
    
    2,000
    
    
    $
    14.71
    
    
    
    2,000February 2005
    
    
    165,000
    
    
    $
    19.94
    
    
    
    89,162March 2005
    
    
    2,000
    
    
    $
    19.94
    
    
    
    2,000April 2005
    
    
    33,000
    
    
    $
    29.81
    
    
    
    20,250June 2005
    
    
    2,000
    
    
    $
    29.81
    
    
    
    2,000December 2005
    
    
    276,675
    
    
    $
    35.89
    
    
    
    203,774February 2006
    
    
    13,000
    
    
    $
    35.89
    
    
    
    7,750February 2006
    
    
    7,500
    
    
    $
    35.89
    
    
    
    3,750May 2006
    
    
    7,000
    
    
    $
    37.06
    
    
    
    6,000July 2006
    
    
    15,000
    
    
    $
    37.06
    
    
    
    10,500October 2006
    
    
    2,500
    
    
    $
    41.02
    
    
    
    2,500December 2006
    
    
    238,350
    
    
    $
    41.02
    
    
    
    201,083February 2007
    
    
    33,450
    
    
    $
    41.02
    
    
    
    24,700May 2007
    
    
    2,000
    
    
    $
    43.37
    
    
    
    2,000September 2007
    
    
    2,000
    
    
    $
    43.37
    
    
    
    2,000December 2007
    
    
    232,385
    
    
    $
    40.05
    
    
    
    210,310April 2008
    
    
    2,000
    
    
    $
    41.00
    
    
    
    2,000September 2008
    
    
    2,000
    
    
    $
    41.00
    
    
    
    2,000December 2008
    
    
    203,250
    
    
    $
    38.35
    
    
    
    April 2009
    
    
    1,000
    
    
    $
    34.30
    
    
    
    Total
    
    
    1,371,660
    
    
    
    
    
    
    
    862,114Weighted Average Exercise
Price
    
    $
    $33.91
  81




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock-based Compensation Disclosure per ASC 718
Stock Appreciation Rights
As of September 30, 2009
 Outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested at
    
    
    ExercisableDate of Grant
    
    at 9/30/09
    
    
    Forfeited
    
    
    Exercised
    
    
    Expired
    
    
    9/30/09
    
    
    at 9/30/09November 2003
    
    
    
    
    
    
    565
    
    
    
    67,770
    
    
    
    
    
    
    
    
    
    
    
    February 2004
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    February 2005
    
    
    71,150
    
    
    
    2,412
    
    
    
    15,600
    
    
    
    
    
    
    
    71,150
    
    
    
    March 2005
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    April 2005
    
    
    18,000
    
    
    
    
    
    
    
    2,250
    
    
    
    
    
    
    
    18,000
    
    
    
    June 2005
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    December 2005
    
    
    175,284
    
    
    
    9,607
    
    
    
    18,883
    
    
    
    
    
    
    
    131,505
    
    
    
    February 2006
    
    
    7,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,813
    
    
    
    February 2006
    
    
    2,500
    
    
    
    625
    
    
    
    625
    
    
    
    
    
    
    
    1,875
    
    
    
    May 2006
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,500
    
    
    
    July 2006
    
    
    10,000
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    7,500
    
    
    
    October 2006
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    December 2006
    
    
    171,500
    
    
    
    17,648
    
    
    
    11,935
    
    
    
    
    
    
    
    85,750
    
    
    
    February 2007
    
    
    21,700
    
    
    
    1,500
    
    
    
    1,500
    
    
    
    
    
    
    
    10,850
    
    
    
    May 2007
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    September 2007
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    December 2007
    
    
    187,740
    
    
    
    18,659
    
    
    
    3,911
    
    
    
    
    
    
    
    46,935
    
    
    
    April 2008
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    September 2008
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    December 2008
    
    
    189,875
    
    
    
    13,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April 2009
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    876,999
    
    
    
    64,391
    
    
    
    124,974
    
    
    
    
    
    
    
    392,128
    
    
    
    Weighted Average
Exercise Price
    
    $
    37.07
    
    
    $
    38.35
    
    
    $
    22.65
    
    
    $
    
    
    
    $
    34.47
    
    
    $
    
  82




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock-based Compensation Disclosures per ASC 718
Stock Appreciation Rights
As of September 30, 2009
 Risk Free Interest
    
    
    
    
    
    
    Expected
    
    
    Remaining LifeDate of Grant
    
    Rate
    
    
    Volatility
    
    
    Life
    
    
    (months)November 2003
    
    
    4.06% - 4.49%
    
    
    
    60
    %
    
    5 yrs
    
    
    February 2004
    
    
    4.06% - 4.49%
    
    
    
    60
    %
    
    5 yrs
    
    
    February 2005
    
    
    3.10% - 3.60%
    
    
    
    45
    %
    
    4 yrs
    
    
    March 2005
    
    
    3.10% - 3.60%
    
    
    
    45
    %
    
    4 yrs
    
    
    April 2005
    
    
    4.10% - 4.20%
    
    
    
    45
    %
    
    4 yrs
    
    
    June 2005
    
    
    4.10% - 4.20%
    
    
    
    45
    %
    
    4 yrs
    
    
    December 2005
    
    
    4.20% - 4.20%
    
    
    
    40
    %
    
    4 yrs
    
    
    2.7February 2006
    
    
    4.20% - 4.20%
    
    
    
    40
    %
    
    4 yrs
    
    
    4.4February 2006
    
    
    4.20% - 4.20%
    
    
    
    40
    %
    
    4 yrs
    
    
    4.8May 2006
    
    
    4.82% - 4.83%
    
    
    
    35
    %
    
    4 yrs
    
    
    7.6July 2006
    
    
    4.82% - 4.83%
    
    
    
    35
    %
    
    4 yrs
    
    
    9.0October 2006
    
    
    4.82% - 4.83%
    
    
    
    35
    %
    
    4 yrs
    
    
    12.8December 2006
    
    
    4.54% - 4.58%
    
    
    
    35
    %
    
    4 yrs
    
    
    14.7February 2007
    
    
    4.54% - 4.58%
    
    
    
    35
    %
    
    4 yrs
    
    
    16.8May 2007
    
    
    4.54% - 4.58%
    
    
    
    35
    %
    
    4 yrs
    
    
    19.6September 2007
    
    
    4.54% - 4.54%
    
    
    
    35
    %
    
    4 yrs
    
    
    23.1December 2007
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    4 yrs
    
    
    26.8April 2008
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    4 yrs
    
    
    30.9September 2008
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    4 yrs
    
    
    35.5December 2008
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    4 yrs
    
    
    38.8April 2009
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    4 yrs
    
    
    42.4Weighted Average
Remaining Life
(months)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18.5
  83




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (17) Phantom Stock Plans
  Initial Phantom Stock Plan
  Vesting
 Second Phantom Stock Plan
  Vesting
 Director Phantom Stock Plan
   84




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Stock Compensation
 Stock-based Compensation Disclosure per ASC 718
Phantom Stock
as of September 30, 2009
 Shares Granted
    
    
    Shares Granted
    
    
    Total Shares
    
    
    Grant Date
    
    
    Outstanding atDate of Grant
    
    to Employees
    
    
    to Directors
    
    
    Granted
    
    
    Share Price
    
    
    9/30/08November 2003
    
    
    52,685
    
    
    
    
    
    
    
    52,685
    
    
    
    
    
    
    $
    14.71
    
    
    
    11,897February 2005
    
    
    213,215
    
    
    
    
    
    
    
    213,215
    
    
    
    
    
    
    $
    19.94
    
    
    
    66,436February 2005
    
    
    98,399
    
    
    
    
    
    
    
    98,399
    
    
    
    
    
    
    $
    19.94
    
    
    
    16,696February 2005
    
    
    5,015
    
    
    
    
    
    
    
    5,015
    
    
    
    
    
    
    $
    19.94
    
    
    
    5,015August 2005
    
    
    2,960
    
    
    
    
    
    
    
    2,960
    
    
    
    
    
    
    $
    33.78
    
    
    
    2,960November 2005
    
    
    66,592
    
    
    
    
    
    
    
    66,592
    
    
    
    
    
    
    $
    35.89
    
    
    
    51,268November 2005
    
    
    
    
    
    
    7,808
    
    
    
    7,808
    
    
    
    
    
    
    $
    35.89
    
    
    
    5,531November 2005
    
    
    55,726
    
    
    
    
    
    
    
    55,726
    
    
    
    
    
    
    $
    35.89
    
    
    
    41,795November 2006
    
    
    
    
    
    
    5,978
    
    
    
    5,978
    
    
    
    
    
    
    $
    41.02
    
    
    
    5,409November 2006
    
    
    65,456
    
    
    
    
    
    
    
    65,456
    
    
    
    
    
    
    $
    41.02
    
    
    
    50,341November 2007
    
    
    
    
    
    
    6,993
    
    
    
    6,993
    
    
    
    
    
    
    $
    40.05
    
    
    
    6,993November 2007
    
    
    42,447
    
    
    
    
    
    
    
    42,447
    
    
    
    
    
    
    $
    40.05
    
    
    
    39,950January 2008
    
    
    2,497
    
    
    
    
    
    
    
    2,497
    
    
    
    
    
    
    $
    40.05
    
    
    
    2,497May 2008
    
    
    1,220
    
    
    
    
    
    
    
    1,220
    
    
    
    
    
    
    $
    41.00
    
    
    
    1,220Total
    
    
    606,212
    
    
    
    20,779
    
    
    
    626,991
    
    
    
    
    
    
    
    
    
    
    
    308,008Weighted Average
Grant Date Fair
Value Price Per
Share
    
    $
    26.58
    
    
    $
    38.77
    
    
    $
    26.98
    
    
    
    
    
    
    
    
    
    
    $
    32.10
  85




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock-based Compensation Disclosure per ASC 718
Phantom Stock
as of September 30, 2009
 Outstanding at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested at
    
    
    ExercisableDate of Grant
    
    9/30/09
    
    
    Forfeited
    
    
    Exercised
    
    
    Expired
    
    
    9/30/09
    
    
    at 9/30/09November 2003
    
    
    
    
    
    
    
    
    
    
    11,897
    
    
    
    
    
    
    
    
    
    
    
    February 2005
    
    
    
    
    
    
    10,328
    
    
    
    56,108
    
    
    
    
    
    
    
    
    
    
    
    February 2005
    
    
    
    
    
    
    
    
    
    
    16,696
    
    
    
    
    
    
    
    
    
    
    
    February 2005
    
    
    
    
    
    
    2,558
    
    
    
    2,457
    
    
    
    
    
    
    
    
    
    
    
    August 2005
    
    
    
    
    
    
    2,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    November 2005
    
    
    
    
    
    
    43,188
    
    
    
    8,080
    
    
    
    
    
    
    
    
    
    
    
    November 2005
    
    
    
    
    
    
    
    
    
    
    5,531
    
    
    
    
    
    
    
    
    
    
    
    November 2005
    
    
    
    
    
    
    41,795
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    November 2006
    
    
    4,839
    
    
    
    
    
    
    
    569
    
    
    
    
    
    
    
    2,847
    
    
    
    2,847November 2006
    
    
    
    
    
    
    46,684
    
    
    
    3,657
    
    
    
    
    
    
    
    
    
    
    
    November 2007
    
    
    5,994
    
    
    
    
    
    
    
    999
    
    
    
    
    
    
    
    1,332
    
    
    
    1,332November 2007
    
    
    
    
    
    
    34,956
    
    
    
    4,994
    
    
    
    
    
    
    
    
    
    
    
    January 2008
    
    
    
    
    
    
    2,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 2008
    
    
    
    
    
    
    1,220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    10,833
    
    
    
    186,186
    
    
    
    110,988
    
    
    
    
    
    
    
    4,179
    
    
    
    4,179Weighted Average
Grant Date Fair Value
Price Per Share
    
    $
    40.48
    
    
    $
    36.91
    
    
    $
    23.22
    
    
    $
    
    
    
    $
    40.71
    
    
    $
    40.71
 Stock-based Compensation Disclosures per ASC 718
Phantom Stock
as of September 30, 2009
 Risk Free Interest
    
    
    
    
    
    
    Expected
    
    
    Remaining LifeDate of Grant
    
    Rate
    
    
    Volatility
    
    
    Life
    
    
    (months)November 2003
    
    
    4.06% - 4.49%
    
    
    
    60
    %
    
    5 yrs
    
    
    February 2005
    
    
    3.10% - 3.60%
    
    
    
    45
    %
    
    3 yrs
    
    
    February 2005
    
    
    3.10% - 3.60%
    
    
    
    45
    %
    
    3 yrs
    
    
    February 2005
    
    
    3.10% - 3.60%
    
    
    
    45
    %
    
    4 yrs
    
    
    August 2005
    
    
    3.72% - 3.77%
    
    
    
    45
    %
    
    3 yrs
    
    
    November 2005
    
    
    4.20% - 4.20%
    
    
    
    40
    %
    
    3 yrs
    
    
    November 2005
    
    
    4.20% - 4.20%
    
    
    
    40
    %
    
    3 yrs
    
    
    November 2005
    
    
    4.20% - 4.20%
    
    
    
    40
    %
    
    5 yrs
    
    
    November 2006
    
    
    4.54% - 4.58%
    
    
    
    35
    %
    
    3 yrs
    
    
    1.4November 2006
    
    
    4.54% - 4.58%
    
    
    
    35
    %
    
    3 yrs
    
    
    November 2007
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    3 yrs
    
    
    13.4November 2007
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    3 yrs
    
    
    January 2008
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    3 yrs
    
    
    May 2008
    
    
    4.23% - 4.23%
    
    
    
    35
    %
    
    3 yrs
    
    
    Weighted Average
Remaining Life
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.0
  86




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (18) Long Term Incentive Plan
  (19) Segment Information and Customer Concentration
   For the Years EndedSeptember 30,Government Agency
    
    Contract
    
    2009
    
    
    2008
    
    
    2007DoD  Navy
    
    SeaPort Multiple Award Contract  NAVSEA
    
    
    14.3
    %
    
    
    16.8
    %
    
    
    14.2
    %DoD  Air Force
    
    Secretary of the Air Force
    
    
    9.5
    %
    
    
    9.0
    %
    
    
    8.7
    %DoD  Navy
    
    Seaport-e Multiple Award Contract
    
    
    7.0
    %
    
    
    8.6
    %
    
    
    6.7
    %
 (20) Guarantor/Non-guarantor Condensed Consolidated Financial Information
   87




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet Information at September 30, 2009
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    11,404
    
    
    $
    (143
    )
    
    $
    (76
    )
    
    $
    
    
    
    $
    11,185Accounts receivable, net
    
    
    174,456
    
    
    
    3,421
    
    
    
    2,280
    
    
    
    
    
    
    
    180,157Prepaid expenses and other
current assets
    
    
    3,659
    
    
    
    107
    
    
    
    29
    
    
    
    
    
    
    
    3,795Total current assets
    
    
    189,519
    
    
    
    3,385
    
    
    
    2,233
    
    
    
    
    
    
    
    195,137Property, plant and equipment, net
    
    
    14,346
    
    
    
    68
    
    
    
    60
    
    
    
    
    
    
    
    14,474Intangible assets, net
    
    
    28,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,680Goodwill
    
    
    398,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,921Investment in subsidiaries
    
    
    17,132
    
    
    
    
    
    
    
    
    
    
    
    (17,132
    )
    
    
    Intercompany receivables
    
    
    702
    
    
    
    12,534
    
    
    
    3,405
    
    
    
    (16,641
    )
    
    
    Other assets
    
    
    10,270
    
    
    
    13
    
    
    
    3
    
    
    
    
    
    
    
    10,286Total assets
    
    $
    659,570
    
    
    $
    16,000
    
    
    $
    5,701
    
    
    $
    (33,773
    )
    
    $
    647,498Current liabilities:Interest payable
    
    $
    9,039
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9,039Current portion, senior term loan
payable
    
    
    2,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,389Current portion, subordinated note
payable
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Current portion, acquisition
obligations
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Trade accounts payable
    
    
    59,742
    
    
    
    300
    
    
    
    665
    
    
    
    
    
    
    
    60,707Accrued liabilities
    
    
    43,984
    
    
    
    1,135
    
    
    
    306
    
    
    
    
    
    
    
    45,425Accrued payroll and related
liabilities
    
    
    41,642
    
    
    
    832
    
    
    
    559
    
    
    
    
    
    
    
    43,033Billings in excess of revenue
earned
    
    
    3,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,661Total current liabilities
    
    
    163,507
    
    
    
    2,267
    
    
    
    1,530
    
    
    
    
    
    
    
    167,304Intercompany payables
    
    
    15,939
    
    
    
    
    
    
    
    702
    
    
    
    (16,641
    )
    
    
    Senior term loan payable, excluding
current portion
    
    
    229,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229,221Senior unsecured Notes
    
    
    245,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245,241Subordinated note payable
    
    
    46,932
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,932Accrued compensation, excluding
current portion
    
    
    5,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,740Accrued postretirement benefit
obligations
    
    
    717
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    717Non-current portion of lease obligations
    
    
    7,216
    
    
    
    51
    
    
    
    19
    
    
    
    
    
    
    
    7,286Redeemable common stock warrants
    
    
    32,717
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,717Common stock of subsidiaries
    
    
    
    
    
    
    2,799
    
    
    
    1
    
    
    
    (2,800
    )
    
    
    Redeemable common stock
    
    
    187,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,137Accumulated other comprehensive loss
    
    
    (238
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )Accumulated surplus (deficit)
    
    
    (274,559
    )
    
    
    10,883
    
    
    
    3,449
    
    
    
    (14,332
    )
    
    
    (274,559
    )Total liabilities, redeemable
common stock and accumulated
deficit
    
    $
    659,570
    
    
    $
    16,000
    
    
    $
    5,701
    
    
    $
    (33,773
    )
    
    $
    647,498
  88




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet Information at September 30, 2008
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Current assets:Cash and cash equivalents
    
    $
    16,392
    
    
    $
    (62
    )
    
    $
    (43
    )
    
    $
    
    
    
    $
    16,287Accounts receivable, net
    
    
    161,519
    
    
    
    3,872
    
    
    
    3,060
    
    
    
    
    
    
    
    168,451Stock subscriptions receivable
    
    
    2,669
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,669Prepaid expenses and other
current assets
    
    
    3,024
    
    
    
    47
    
    
    
    64
    
    
    
    
    
    
    
    3,135Total current assets
    
    
    183,604
    
    
    
    3,857
    
    
    
    3,081
    
    
    
    
    
    
    
    190,542Property, plant and equipment, net
    
    
    18,419
    
    
    
    97
    
    
    
    85
    
    
    
    
    
    
    
    18,601Intangible assets, net
    
    
    41,248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,248Goodwill
    
    
    398,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,871Investment in subsidiaries
    
    
    10,831
    
    
    
    
    
    
    
    
    
    
    
    (10,831
    )
    
    
    Intercompany receivables
    
    
    
    
    
    
    8,038
    
    
    
    72
    
    
    
    (8,110
    )
    
    
    Other assets
    
    
    6,668
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    6,684Total assets
    
    $
    659,641
    
    
    $
    12,008
    
    
    $
    3,238
    
    
    $
    (18,941
    )
    
    $
    655,946Current liabilities:Interest payable
    
    $
    6,543
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,543Current portion, senior term loan
payable
    
    
    232,220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232,220Interest rate swap liability
    
    
    4,629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,629Current portion, subordinated note
payable
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Current portion, acquisition
obligations
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Trade accounts payable
    
    
    55,932
    
    
    
    467
    
    
    
    765
    
    
    
    
    
    
    
    57,164Accrued liabilities
    
    
    37,678
    
    
    
    1,007
    
    
    
    542
    
    
    
    
    
    
    
    39,227Accrued payroll and related
liabilities
    
    
    40,569
    
    
    
    696
    
    
    
    292
    
    
    
    
    
    
    
    41,557Billings in excess of revenue earned
    
    
    2,708
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,708Total current liabilities
    
    
    383,329
    
    
    
    2,170
    
    
    
    1,599
    
    
    
    
    
    
    
    387,098Intercompany payables
    
    
    7,543
    
    
    
    
    
    
    
    567
    
    
    
    (8,110
    )
    
    
    Senior term loan payable, excluding
current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior unsecured notes
    
    
    244,355
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    244,355Subordinated note payable
    
    
    42,656
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,656Accrued compensation, excluding
current portion
    
    
    11,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,305Accrued postretirement benefit
obligations
    
    
    627
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627Non-current portion of lease obligations
    
    
    6,181
    
    
    
    62
    
    
    
    17
    
    
    
    
    
    
    
    6,260Redeemable common stock warrants
    
    
    39,996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,996Common stock of subsidiaries
    
    
    
    
    
    
    2,799
    
    
    
    1
    
    
    
    (2,800
    )
    
    
    Redeemable common stock
    
    
    200,561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,561Accumulated other comprehensive loss
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )Accumulated surplus (deficit)
    
    
    (276,876
    )
    
    
    6,977
    
    
    
    1,054
    
    
    
    (8,031
    )
    
    
    (276,876
    )Total liabilities, redeemable
common
stock and accumulated deficit
    
    $
    659,641
    
    
    $
    12,008
    
    
    $
    3,238
    
    
    $
    (18,941
    )
    
    $
    655,946
  89




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Year Ended September 30, 2009
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    766,297
    
    
    $
    22,105
    
    
    $
    13,823
    
    
    $
    
    
    
    $
    802,225Direct contract expenses
    
    
    590,934
    
    
    
    14,389
    
    
    
    10,377
    
    
    
    
    
    
    
    615,700Gross profit
    
    
    175,363
    
    
    
    7,716
    
    
    
    3,446
    
    
    
    
    
    
    
    186,525Operating expenses:Indirect contract expense
    
    
    31,968
    
    
    
    2,979
    
    
    
    526
    
    
    
    
    
    
    
    35,473Research and development
    
    
    677
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    677General and administrative
    
    
    59,615
    
    
    
    970
    
    
    
    282
    
    
    
    
    
    
    
    60,867Rental and occupancy expense
    
    
    32,370
    
    
    
    297
    
    
    
    317
    
    
    
    
    
    
    
    32,984Depreciation and amortization
    
    
    18,907
    
    
    
    23
    
    
    
    29
    
    
    
    
    
    
    
    18,959Total operating expenses
    
    
    143,537
    
    
    
    4,269
    
    
    
    1,154
    
    
    
    
    
    
    
    148,960Operating income (loss)
    
    
    31,826
    
    
    
    3,447
    
    
    
    2,292
    
    
    
    
    
    
    
    37,565Other income (expense):Interest income
    
    
    72
    
    
    
    16
    
    
    
    3
    
    
    
    
    
    
    
    91Interest expense
    
    
    (55,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,154
    )Other
    
    
    (129
    )
    
    
    445
    
    
    
    (11
    )
    
    
    
    
    
    
    305Equity in net income of
subsidiaries
    
    
    6,300
    
    
    
    
    
    
    
    
    
    
    
    (6,300
    )
    
    
    Total other income (expense)
    
    
    (48,911
    )
    
    
    461
    
    
    
    (8
    )
    
    
    (6,300
    )
    
    
    (54,758
    )Income (loss) before income taxes
    
    
    (17,085
    )
    
    
    3,908
    
    
    
    2,284
    
    
    
    (6,300
    )
    
    
    (17,193
    )Income tax benefit (expense)
    
    
    44
    
    
    
    (2
    )
    
    
    110
    
    
    
    
    
    
    
    152Net income (loss)
    
    $
    (17,041
    )
    
    $
    3,906
    
    
    $
    2,394
    
    
    $
    (6,300
    )
    
    $
    (17,041
    )
  90




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Year Ended September 30, 2008
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    706,699
    
    
    $
    22,914
    
    
    $
    9,869
    
    
    $
    
    
    
    $
    739,482Direct contract expense
    
    
    542,674
    
    
    
    16,289
    
    
    
    7,445
    
    
    
    
    
    
    
    566,408Gross profit
    
    
    164,025
    
    
    
    6,625
    
    
    
    2,424
    
    
    
    
    
    
    
    173,074Operating expenses:Indirect contract expense
    
    
    34,779
    
    
    
    4,388
    
    
    
    883
    
    
    
    
    
    
    
    40,050Research and development
    
    
    944
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    988General and administrative
    
    
    58,582
    
    
    
    886
    
    
    
    16
    
    
    
    
    
    
    
    59,484Rental and occupancy expense
    
    
    30,869
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    30,880Depreciation and amortization
    
    
    20,572
    
    
    
    125
    
    
    
    18
    
    
    
    
    
    
    
    20,715Total operating expenses
    
    
    145,746
    
    
    
    5,399
    
    
    
    972
    
    
    
    
    
    
    
    152,117Operating income
    
    
    18,279
    
    
    
    1,226
    
    
    
    1,452
    
    
    
    
    
    
    
    20,957Other income (expense):Interest income
    
    
    412
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    423Interest expense
    
    
    (47,382
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,382
    )Other
    
    
    193
    
    
    
    471
    
    
    
    (9
    )
    
    
    
    
    
    
    655Equity in operations of subsidiaries
    
    
    3,151
    
    
    
    
    
    
    
    
    
    
    
    (3,151
    )
    
    
    Total other income (expenses)
    
    
    (43,626
    )
    
    
    482
    
    
    
    (9
    )
    
    
    (3,151
    )
    
    
    (46,304
    )Income (loss) before income taxes
    
    
    (25,347
    )
    
    
    1,708
    
    
    
    1,443
    
    
    
    (3,151
    )
    
    
    (25,347
    )Income tax benefit
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Net income (loss)
    
    $
    (25,334
    )
    
    $
    1,708
    
    
    $
    1,443
    
    
    $
    (3,151
    )
    
    $
    (25,334
    )
  91




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Year Ended September 30, 2007
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    709,980
    
    
    $
    27,375
    
    
    $
    232
    
    
    $
    
    
    
    $
    737,587Direct contract expense
    
    
    542,085
    
    
    
    19,904
    
    
    
    150
    
    
    
    
    
    
    
    562,139Gross profit
    
    
    167,895
    
    
    
    7,471
    
    
    
    82
    
    
    
    
    
    
    
    175,448Operating expenses:Indirect contract expense
    
    
    39,206
    
    
    
    4,629
    
    
    
    137
    
    
    
    
    
    
    
    43,972Research and development
    
    
    2,158
    
    
    
    8
    
    
    
    213
    
    
    
    
    
    
    
    2,379General and administrative
    
    
    59,379
    
    
    
    1,445
    
    
    
    (126
    )
    
    
    
    
    
    
    60,698Rental and occupancy expense
    
    
    32,098
    
    
    
    273
    
    
    
    39
    
    
    
    
    
    
    
    32,410Depreciation and amortization
    
    
    21,638
    
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    21,824Total operating expenses
    
    
    154,479
    
    
    
    6,541
    
    
    
    263
    
    
    
    
    
    
    
    161,283Operating income (loss)
    
    
    13,416
    
    
    
    930
    
    
    
    (181
    )
    
    
    
    
    
    
    14,165Other income (expense):Interest income
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319Interest expense
    
    
    (51,226
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51,226
    )Loss on extinguishment of debt
    
    
    (6,170
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,170
    )Other
    
    
    1,191
    
    
    
    (1,146
    )
    
    
    87
    
    
    
    
    
    
    
    132Equity in operations of
subsidiaries
    
    
    (300
    )
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    Total other income (expenses)
    
    
    (56,186
    )
    
    
    (1,146
    )
    
    
    87
    
    
    
    300
    
    
    
    (56,945
    )Income (loss) before income
taxes
    
    
    (42,770
    )
    
    
    (216
    )
    
    
    (94
    )
    
    
    300
    
    
    
    (42,780
    )Income tax benefit
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Net income (loss)
    
    $
    (42,770
    )
    
    $
    (206
    )
    
    $
    (94
    )
    
    $
    300
    
    
    $
    (42,770
    )
  92




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2009
 Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Consolidated(In thousands)Net cash provided by (used in) operating activities
    
    $
    9,083
    
    
    $
    (63
    )
    
    $
    (25
    )
    
    $
    8,995Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (166
    )
    
    
    
    
    
    
    
    
    
    
    (166
    )Capital expenditures
    
    
    (2,160
    )
    
    
    (18
    )
    
    
    (8
    )
    
    
    (2,186
    )Proceeds from sale of non-operating assets
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Net cash used in investing activities
    
    
    (2,321
    )
    
    
    (18
    )
    
    
    (8
    )
    
    
    (2,347
    )Cash inflows (outflows) from financing activities:Cash paid under interest rate swap
    
    
    (4,647
    )
    
    
    
    
    
    
    
    
    
    
    (4,647
    )Payment of senior term loan principal
    
    
    (2,433
    )
    
    
    
    
    
    
    
    
    
    
    (2,433
    )Payment of subordinated note principal
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Revolver borrowings
    
    
    504,900
    
    
    
    
    
    
    
    
    
    
    
    504,900Revolver payments
    
    
    (504,900
    )
    
    
    
    
    
    
    
    
    
    
    (504,900
    )Loan to ESOP Trust
    
    
    (5,936
    )
    
    
    
    
    
    
    
    
    
    
    (5,936
    )ESOP loan repayment
    
    
    5,936
    
    
    
    
    
    
    
    
    
    
    
    5,936Redeemable common stock purchased from
ESOP Trust
    
    
    (9,175
    )
    
    
    
    
    
    
    
    
    
    
    (9,175
    )Redeemable common stock sold to ESOP Trust
    
    
    7,505
    
    
    
    
    
    
    
    
    
    
    
    7,505Net cash used in financing activities
    
    
    (11,750
    )
    
    
    
    
    
    
    
    
    
    
    (11,750
    )Net decrease in cash and cash equivalents
    
    
    (4,988
    )
    
    
    (81
    )
    
    
    (33
    )
    
    
    (5,102
    )Cash and cash equivalents at beginning of period
    
    
    16,392
    
    
    
    (62
    )
    
    
    (43
    )
    
    
    16,287Cash and cash equivalents at end of period
    
    $
    11,404
    
    
    $
    (143
    )
    
    $
    (76
    )
    
    $
    11,185
  93




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2008
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Consolidated(In thousands)Net cash provided by (used in) operating activities
    
    $
    29,268
    
    
    $
    (9
    )
    
    $
    61
    
    
    $
    29,320Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (7,946
    )
    
    
    
    
    
    
    
    
    
    
    (7,946
    )Capital expenditures
    
    
    (4,863
    )
    
    
    (20
    )
    
    
    (103
    )
    
    
    (4,986
    )Proceeds from sale of non-operating assets
    
    
    780
    
    
    
    
    
    
    
    
    
    
    
    780Net cash used in investing activities
    
    
    (12,029
    )
    
    
    (20
    )
    
    
    (103
    )
    
    
    (12,152
    )Cash flows from financing activities:Cash received from interest rate swap
    
    
    4,333
    
    
    
    
    
    
    
    
    
    
    
    4,333Payment of debt issuance costs
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Payment of senior term loan principal
    
    
    (6,474
    )
    
    
    
    
    
    
    
    
    
    
    (6,474
    )Revolver borrowings
    
    
    450,505
    
    
    
    
    
    
    
    
    
    
    
    450,505Revolver payments
    
    
    (459,755
    )
    
    
    
    
    
    
    
    
    
    
    (459,755
    )Loan to ESOP Trust
    
    
    (3,369
    )
    
    
    
    
    
    
    
    
    
    
    (3,369
    )ESOP loan repayment
    
    
    3,369
    
    
    
    
    
    
    
    
    
    
    
    3,369Redeemable common stock purchased from
ESOP Trust
    
    
    (4,051
    )
    
    
    
    
    
    
    
    
    
    
    (4,051
    )Redeemable common stock sold to ESOP Trust
    
    
    3,377
    
    
    
    
    
    
    
    
    
    
    
    3,377Net cash used in financing activities
    
    
    (12,565
    )
    
    
    
    
    
    
    
    
    
    
    (12,565
    )Net increase (decrease) in cash and cash equivalents
    
    
    4,674
    
    
    
    (29
    )
    
    
    (42
    )
    
    
    4,603Cash and cash equivalents at beginning of year
    
    
    11,718
    
    
    
    (33
    )
    
    
    (1
    )
    
    
    11,684Cash and cash equivalents at end of year
    
    $
    16,392
    
    
    $
    (62
    )
    
    $
    (43
    )
    
    $
    16,287
  94




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2007
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Consolidated(In thousands)Net cash provided by (used in) operating activities
    
    $
    (4,986
    )
    
    $
    38
    
    
    $
    (60
    )
    
    $
    (5,008
    )Cash flows from investing activities:Cash paid for acquisitions, net of cash acquired
    
    
    (14,751
    )
    
    
    
    
    
    
    
    
    
    
    (14,751
    )Capital expenditures
    
    
    (10,648
    )
    
    
    (39
    )
    
    
    
    
    
    
    (10,687
    )Net cash used in investing activities
    
    
    (25,399
    )
    
    
    (39
    )
    
    
    
    
    
    
    (25,438
    )Cash flows from financing activities:Proceeds from Term B Senior Credit Agreement
note payable
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    40,000Proceeds from Senior Unsecured Notes
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    250,000Payment of Bridge Loan
    
    
    (170,000
    )
    
    
    
    
    
    
    
    
    
    
    (170,000
    )Payment of debt issuance costs
    
    
    (10,796
    )
    
    
    
    
    
    
    
    
    
    
    (10,796
    )Repayment of Term B Credit Facility note payable
    
    
    (53,513
    )
    
    
    
    
    
    
    
    
    
    
    (53,513
    )Revolver borrowings
    
    
    465,245
    
    
    
    
    
    
    
    
    
    
    
    465,245Revolver payments
    
    
    (468,295
    )
    
    
    
    
    
    
    
    
    
    
    (468,295
    )Proceeds from interest rate cap agreement
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    360Purchase of redeemable common stock from
ESOP Trust
    
    
    (29,584
    )
    
    
    
    
    
    
    
    
    
    
    (29,584
    )Cash received from issuance of redeemable
common stock to ESOP Trust
    
    
    15,958
    
    
    
    
    
    
    
    
    
    
    
    15,958Net cash provided by financing activities
    
    
    39,375
    
    
    
    
    
    
    
    
    
    
    
    39,375Net increase (decrease) in cash and cash equivalents
    
    
    8,990
    
    
    
    (1
    )
    
    
    (60
    )
    
    
    8,929Cash and cash equivalents at beginning of year
    
    
    2,728
    
    
    
    (32
    )
    
    
    59
    
    
    
    2,755Cash and cash equivalents at end of year
    
    $
    11,718
    
    
    $
    (33
    )
    
    $
    (1
    )
    
    $
    11,684
  95




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (21) Related Party Transactions
  (22) Commitments and Contingencies
 Earn-Out and Hold-Back Commitments
  Government Audits
  Legal Proceedings
 Estate of Joseph Hudert vs. Alion Science and Technology Corporation; Estate of Frank Stotmeister
vs. Alion Science and Technology Corporation.
      96




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (23) Interim Period (Unaudited, in thousands except per share information)
 2009 Quarters1st
    
    
    2nd
    
    
    3rd
    
    
    4thRevenue
    
    $
    188,796
    
    
    $
    195,429
    
    
    $
    204,160
    
    
    $
    213,840Gross profit
    
    $
    43,474
    
    
    $
    46,294
    
    
    $
    46,494
    
    
    $
    50,263Net income (loss)
    
    $
    (2,540
    )
    
    $
    39
    
    
    $
    (9,437
    )
    
    $
    (5,103
    )Income (loss) per share
    
    $
    (0.49
    )
    
    $
    0.01
    
    
    $
    (1.79
    )
    
    $
    (0.97
    )Current assets
    
    $
    183,275
    
    
    $
    188,135
    
    
    $
    183,013
    
    
    $
    195,137Current liabilities (restated) (1)
    
    $
    383,750
    
    
    $
    389,738
    
    
    $
    387,591
    
    
    $
    167,304
 2008 Quarters1st
    
    
    2nd
    
    
    3rd
    
    
    4thRevenue
    
    $
    183,145
    
    
    $
    189,243
    
    
    $
    185,876
    
    
    $
    181,218Gross profit
    
    $
    42,763
    
    
    $
    46,213
    
    
    $
    43,014
    
    
    $
    41,084Net income (loss)
    
    $
    (8,706
    )
    
    $
    (9,805
    )
    
    $
    (7,893
    )
    
    $
    1,070Income (loss) per share
    
    $
    (1.74
    )
    
    $
    (1.96
    )
    
    $
    (1.55
    )
    
    $
    0.23Current assets
    
    $
    231,610
    
    
    $
    243,068
    
    
    $
    211,763
    
    
    $
    190,542Current liabilities (restated) (1)
    
    $
    428,749
    
    
    $
    441,532
    
    
    $
    412,634
    
    
    $
    387,098
 2009 Quarters (Previously Reported)1st
    
    
    2nd
    
    
    3rd
    
    
    4thCurrent liabilities
    
    $
    154,066
    
    
    $
    155,482
    
    
    $
    158,204
    
    
    $
    N/A
 2008 Quarters (Previously Reported)1st
    
    
    2nd
    
    
    3rd
    
    
    4thCurrent liabilities
    
    $
    164,237
    
    
    $
    181,115
    
    
    $
    164,613
    
    
    $
    157,267
 (1)
    
    As a result of the Companys failure to comply with certain Term B Senior Credit Agreement
affirmative and negative covenants, all outstanding balances on the Companys Term B Senior
Credit Agreement for the first three quarters in 2009 and all periods in 2008 should have been
presented as current liabilities as these amounts were callable by the lenders. See Note 11.  97




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (24) Subsequent Events
    98




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A (T). Controls and Procedures
 Disclosure Controls and Procedure.
 Limitations on the Effectiveness of Controls
 Managements Report on Internal Control Over Financial Reporting
 Internal
Control  Integrated Framework Internal Control  Integrated Framework
 Changes in Internal Control Over Financial Reporting.
  Scope of the Assessment
  99




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Item 9B. Other Information
     100




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Information Regarding the Directors of the Registrant
  Term
    
    DirectorName
    
    Age
    
    Position
    
    Expires
    
    SinceBahman Atefi
    
    
    56
    
    
    President, Chief Executive Officer and Chairman
    
    
    2011
    
    
    
    2001Edward C. (Pete) Aldridge, Jr.
    
    
    71
    
    
    Director
    
    
    2012
    
    
    
    2003Leslie L. Armitage
    
    
    41
    
    
    Director
    
    
    2010
    
    
    
    2002Lewis Collens
    
    
    71
    
    
    Director
    
    
    2010
    
    
    
    2002Admiral (Ret.) Harold W. Gehman, Jr.
    
    
    66
    
    
    Director
    
    
    2010
    
    
    
    2002General (Ret.) George A. Joulwan
    
    
    69
    
    
    Director
    
    
    2011
    
    
    
    2002General (Ret.) Michael E. Ryan
    
    
    67
    
    
    Director
    
    
    2011
    
    
    
    2002David J. Vitale
    
    
    63
    
    
    Director
    
    
    2012
    
    
    
    2009
   Bahman Atefi
 Edward C. (Pete) Aldridge, Jr.
 Leslie L. Armitage
  101




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##### Table of Contents



Lewis Collens
 Admiral (Ret.) Harold W. Gehman, Jr.
 General (Ret.) George A. Joulwan
 General (Ret.) Michael E. Ryan
 David J. Vitale
  102




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##### Table of Contents



Establishment of Committees
  Committee
    
    Chairperson
    
    MembersAudit and Finance Committee
    
    Leslie Armitage
    
    Harold Gehman, Michael RyanCompensation Committee
    
    Harold Gehman
    
    Pete Aldridge, Leslie Armitage, Lewis Collens, George JoulwanGovernance and Compliance Committee
    
    Michael Ryan
    
    Bahman Atefi, George Joulwan, Harold Gehman
  Audit and Finance Committee
  
    
    professional services provided by our independent registered public accounting firm;
 
    
    independence of our independent registered public accounting firm from our
management;
 
    
    our quarterly and annual financial statements and our system of internal control
over financial reporting;
 
    
    our capital structure, including the issuance of equity and debt securities, the
incurrence of indebtedness, and related matters;
 
    
    general financial planning, including cash flow and working capital management,
capital budgeting and expenditures, tax planning and compliance and related matters;
 
    
    mergers, acquisitions and strategic transactions;
 
    
    investment policies, financial performance and funding of our employee benefit
plans; and
 
    
    other transactions or financial issues that the Board of Directors or management
presents to the committee to review.
  Compensation Committee
  
    
    determining the compensation of our Chief Executive Officer and reviewing and
approving the compensation of our other executive officers;
 
    
    exercising all rights, authority and functions under our KSOP, retirement and other
compensation plans;
 
    
    approving and making recommendations to the Board regarding non-employee director
compensation;
 
    
    preparing an annual report on executive compensation for inclusion in our annual
report on Form 10-K in accordance with the rules and regulations of the Securities and
Exchange Commission;
 
    
    establishing, implementing and monitoring adherence to the Companys compensation
philosophy;
 
    
    evaluating performance and compensation to ensure that the Company maintains its
ability to attract and retain superior employees in key positions and that compensation
provided to key employees remains competitive relative to the compensation paid to
similarly situated executives of other companies; and
 
    
    approving the selection of the independent compensation consultant.
   103




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##### Table of Contents



Corporate Governance and Compliance Committee
  Information Regarding the Executive Officers of the Registrant
  Name
    
    Age
    
    Office
    
    Position SinceBahman Atefi
    
    
    56
    
    
    President, Chief Executive Officer and Chairman of the Board of Directors (1)
    
    December 2001Stacy Mendler
    
    
    46
    
    
    Chief Operating Officer and Executive Vice President (1)
    
    September 2006Michael Alber
    
    
    52
    
    
    Chief Financial Officer, Senior Vice President and Treasurer (1)
    
    November 2008Scott Fry
    
    
    60
    
    
    Sector Senior Vice President  Engineering and Integration Solutions Sector (1)
    
    October 2005Walter (Buck) Buchanan
    
    
    59
    
    
    Sector Senior Vice President  Engineering and Information Technology Sector
    
    June 2007David Ohle
    
    
    65
    
    
    Senior Vice President  Defense Operations Integration Sector
    
    November 2008James Fontana
    
    
    52
    
    
    General Counsel
    
    January 2004
 (1)
    
    Member of the ESOP committee  Stacy Mendler
 Michael Alber
  104




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##### Table of Contents



Scott Fry
 Walter E. Buchanan III
 David H. Ohle
 James C. Fontana
  Code of Ethics
   105




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##### Table of Contents



Item 11. Executive Compensation
 Compensation Discussion and Analysis
 Objectives of Executive Compensation Program
   What Our Compensation Program is Designed to Reward
  Roles and Responsibilities for Our Compensation Program
 Role of the Compensation Committee
  Role of the Chief Executive Officer
  Role of the Compensation Consultant
   106




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##### Table of Contents



Elements of Companys Executive Compensation Plan
  Base Salary
   Named Executive Officer
    
    Fiscal 2009 Base SalaryBahman Atefi
    
    $
    650,000Stacy Mendler
    
    $
    375,000Michael Alber
    
    $
    300,000Rob Goff*
    
    $
    320,000Scott Fry
    
    $
    340,000James Fontana
    
    $
    280,000
 *
    
    Mr. Goff resigned as Sector Senior Vice President in October 2008.   
    
    market data provided by the Companys outside compensation consultant;
 
    
    the executives compensation, individually and relative to other officers;
 
    
    the executives individual performance; and
 
    
    Alions financial and operating results.
   107




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##### Table of Contents



Argon ST Inc.
    
    DynCorp International Inc.
    
    ManTech International Corp
    
    Stanley, Inc.CACI International Inc.
    
    Harris Corp
    
    Maximus Inc
    
    VSE CorpCIBER Inc.
    
    Heico Corp
    
    NCI, Inc.Cubic Corp
    
    ICF International, Inc.
    
    Orbital Sciences CorpDynamics Research Corp.
    
    IHS Inc.
    
    SRA International Inc
 Annual Bonus
   Long-term Incentives/Awards
  Long-Term Incentive Plan
   
    
    provide certain employees an incentive for excellence in achieving certain Company
and business unit or departmental goals;
 
    
    facilitate key employee retention and recruitment;
 
    
    provide award opportunities that are at-risk and contingent on achievement of
selected performance criteria over an extended period; and
 
    
    provide a meaningful incentive to achieve long-term growth and improve
profitability.
  
    
    selecting individuals to participate in the LTIP from certain of our key employees;
 
    
    determining the period during which a given participant must achieve his or her
performance goals, (performance period);
 
    
    setting each participants award opportunities with respect to a given performance
period; and
 
    
    establishing the conditions for vesting of awards.
  108




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##### Table of Contents



Form of Award
    
    
    
    
    
    Minimum/ MaximumAgreement
    
    Date of Grant
    
    Performance Cycles
    
    Award Amount
    
    
    Vesting DateCategory A
    
    November 1, 2008
    
    November 1, 2008
    
    N/A
    
    
    Date performance goals achieveduntil performancegoals achievedCategory B
    
    November 1, 2008
    
    November 1, 2008-
    
    80%/120%
    
    
    November 15, 2009October 31, 2009Category C
    
    November 1, 2008
    
    November 1, 2008-
    
    50%/150%
    
    
    November 15, 2010October 31, 2009November 1, 2009-October 31, 2010Category D
    
    November 1, 2008
    
    November 1, 2008-
    
    50%/150%
    
    
    November 15, 2011October 31, 2009November 1, 2009-October 31, 2010November 1, 2010-October 31, 2011Ongoing Category E
    
    November 1, 2008
    
    November 1, 2008-
    
    50%/150%
    
    
    November 15, 2011October 31, 2009November 1, 2009-October 31, 2010November 1, 2010-October 31, 2011Ongoing Category F
    
    November 1, 2009
    
    November 1, 2009-
    
    50%/150%
    
    
    November 15, 2011October 31, 2012
    109




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##### Table of Contents



Name
    
    Category A
    
    
    Category B
    
    
    Category C
    
    
    Category D
    
    
    Category E
    
    
    Category FBahman Atefi
    
    $
    998,223
    
    
    $
    934,910
    
    
    $
    1,738,830
    
    
    
    
    
    
    $
    800,000
    
    
    $
    1,000,000Stacy Mendler
    
    $
    479,559
    
    
    $
    411,360
    
    
    $
    725,782
    
    
    
    
    
    
    $
    300,000
    
    
    $
    350,000Scott Fry
    
    
    
    
    
    $
    233,125
    
    
    $
    191,511
    
    
    
    
    
    
    $
    250,000
    
    
    $
    250,000Michael Alber
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    94,646
    
    
    $
    150,000
    
    
    $
    200,000James Fontana
    
    
    
    
    
    $
    112,189
    
    
    $
    86,180
    
    
    
    
    
    
    $
    100,000
  Phantom Stock Plans
  Stock Appreciation Rights (SAR) Plan
 2002 SAR Plan.
 2004 SAR Plan.
  110




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##### Table of Contents



Severance/Change in Control and Provisions in Employment Agreements
  Change in Control
  Termination without Cause
  Health and Welfare Benefits
 .
 KSOP
   111




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##### Table of Contents



Summary Compensation Table Fiscal Year 2009
  Long-Term
    
    
    Non-EquityPhantom
    
    
    Incentive
    
    
    IncentiveName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Plan
    
    
    Plan
    
    
    All otherPrincipal Position
    
    Year
    
    
    Salary
    
    
    Bonus(1)
    
    
    Grants(2)
    
    
    Awards(3)
    
    
    Compensation(4)
    
    
    Compensation(5)
    
    
    TotalBahman Atefi
    
    
    2009
    
    
    $
    644,187
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    650,000
    
    
    $
    103,866
    
    
    $
    2,398,053Chief Executive Officer and PresidentStacy Mendler
    
    
    2009
    
    
    $
    367,307
    
    
    
    
    
    
    
    
    
    
    
    350,000
    
    
    
    250,000
    
    
    $
    84,838
    
    
    $
    1,052,145Chief Operating Officer and Executive Vice PresidentMichael Alber
    
    
    2009
    
    
    $
    303,000
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    200,000
    
    
    $
    44,277
    
    
    $
    747,277Senior Vice President and Chief Financial OfficerScott Fry
    
    
    2009
    
    
    $
    339,824
    
    
    $
    256,444
    
    
    
    
    
    
    
    250,000
    
    
    
    250,000
    
    
    $
    66,409
    
    
    $
    1,162,677Engineering and Integration Solutions Sector Senior Vice PresidentJames Fontana (6)
    
    
    2009
    
    
    $
    288,803
    
    
    $
    637,176
    
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    $
    74,987
    
    
    $
    1,090,966Senior Vice President, General Counsel and SecretaryRob Goff (6)
    
    
    2009
    
    
    
    351,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,563,155
    
    
    $
    1,914,800Defense Operations Integration Sector, Senior Vice President
 (1)
    
    This column includes non-incentive based cash bonuses, such as special performance bonuses,
paid to Named Executive Officers.(2)
    
    There were no phantom stock grants in fiscal 2009. In fiscal 2009, Named Executive Officers
forfeited previously vested phantom stock awards. The Company recognized the following
credits to stock-based compensation expense for forfeitures: Dr. Atefi $2,466,756; Ms. Mendler
$1,137,091; Mr. Alber $26,600; Mr. Fry $465,300; and Mr. Fontana $748,222.(3)
    
    This column reflects the grant date value of Long Term Incentive Plan grants issued this year
for future performance.(4)
    
    This column includes cash bonuses awarded to our named executive officers under the
Non-Equity Incentive Plan for fiscal 2009 service. (5)
    
    This column (and table below) includes the following amounts for our Named Executive Officers: 
    
    401(k) matching and profit sharing contributions under Alions KSOP;
    
    Company contributions for long and short term disability;
    
    Amounts paid for life insurance premiums;
    
    Amounts paid or reimbursed with respect to health and welfare;
    
    Amounts paid or reimbursed with respect to social club membership;
    
    Amounts paid or reimbursed with respect to leased cars; and
    
    Termination related payments for previously unreported vested Phantom Stock exercised.
 (6)
    
    Mr. Fontana resigned as Senior Vice President and Secretary on December 8, 2009. Mr. Goff
resigned as Sector Senior Vice President and Sector Manager of the Defense Operations
Integration Sector on October 23, 2008. He received $1,500,000 in payments for vested Phantom
Stock.  112




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##### Table of Contents



All Other Compensation Fiscal Year 2009
 CompanyMatching
    
    
    
    
    
    
    Long and Short
    
    
    
    
    
    
    Term LifeName and
    
    Contributions
    
    
    Health and
    
    
    Term Disability
    
    
    Club
    
    
    Insurance
    
    
    
    
    
    
    TerminationPrincipal
    
    Under
    
    
    Welfare
    
    
    Paid by
    
    
    Membership
    
    
    Paid by the
    
    
    Leased
    
    
    RelatedPosition
    
    Alions KSOP
    
    
    Benefits
    
    
    the Company
    
    
    Fees
    
    
    Company
    
    
    Cars
    
    
    Payment (1)
    
    
    TotalBahman Atefi
    
    $
    14,950
    
    
    $
    52,228
    
    
    $
    5,234
    
    
    $
    5,410
    
    
    $
    810
    
    
    $
    25,234
    
    
    $
    
    
    
    $
    103,866Stacy Mendler
    
    $
    14,950
    
    
    $
    37,572
    
    
    $
    3,574
    
    
    $
    1,647
    
    
    $
    598
    
    
    $
    26,497
    
    
    $
    
    
    
    $
    84,838Michael Alber
    
    $
    5,750
    
    
    $
    15,074
    
    
    $
    3,119
    
    
    $
    1,029
    
    
    $
    475
    
    
    $
    18,830
    
    
    $
    
    
    
    $
    44,277Scott Fry
    
    $
    14,242
    
    
    $
    19,107
    
    
    $
    3,385
    
    
    $
    
    
    
    $
    548
    
    
    $
    29,127
    
    
    $
    
    
    
    $
    66,409James Fontana
    
    $
    15,391
    
    
    $
    33,918
    
    
    $
    3,031
    
    
    $
    500
    
    
    $
    451
    
    
    $
    21,696
    
    
    $
    
    
    
    $
    74,987Rob Goff
    
    $
    13,965
    
    
    $
    28,793
    
    
    $
    252
    
    
    $
    
    
    
    $
    40
    
    
    $
    20,105
    
    
    $
    1,500,000
    
    
    $
    1,563,155
 (1)
    
    Mr. Goff received $1,500,000 in payments for vested Phantom Stock. Summary Compensation Table Fiscal Year 2008
  Non-EquityPhantom
    
    
    
    
    
    
    IncentiveName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    SAR
    
    
    Plan
    
    
    All OtherPrincipal Position
    
    Year
    
    
    Salary
    
    
    Bonus(1)
    
    
    Awards(2)
    
    
    Awards(2)
    
    
    Compensation(3)
    
    
    Compensation(4)
    
    
    TotalBahman Atefi
    
    
    2008
    
    
    $
    604,749
    
    
    
    
    
    
    $
    1,630,296
    
    
    
    
    
    
    $
    500,000
    
    
    $
    146,488
    
    
    $
    2,881,533Chief Executive Officer and PresidentStacy Mendler
    
    
    2008
    
    
    $
    333,185
    
    
    
    
    
    
    $
    759,346
    
    
    
    
    
    
    $
    200,000
    
    
    $
    100,071
    
    
    $
    1,392,602Chief Operating Officer and Executive Vice PresidentMichael Alber
    
    
    2008
    
    
    $
    220,000
    
    
    $
    95,000
    
    
    $
    15,836
    
    
    $
    3,000
    
    
    $
    150,000
    
    
    $
    29,910
    
    
    $
    513,746Senior Vice President and Chief Financial OfficerRob Goff
    
    
    2008
    
    
    $
    318,090
    
    
    
    
    
    
    $
    662,625
    
    
    
    
    
    
    
    
    
    
    $
    54,577
    
    
    $
    1,035,292Defense Operations Integration Sector Senior Vice PresidentScott Fry
    
    
    2008
    
    
    $
    316,171
    
    
    
    
    
    
    $
    183,937
    
    
    
    
    
    
    $
    225,000
    
    
    $
    51,263
    
    
    $
    776,371Engineering and Integration Solutions Sector Senior Vice President
 (1)
    
    This column includes non-incentive based cash bonuses, such as sign-on bonuses, paid to named
executive officers.(2)
    
    These columns reflect the fiscal year 2008 expense Alion recognized under SFAS 123(R) for
current and prior year phantom stock and SAR awards to named executive officers.  113




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##### Table of Contents



(3)
    
    This column includes cash bonuses awarded to our named executive officers under the
non-equity incentive plan for their service in fiscal year 2008.(4)
    
    This column includes the following amounts paid by Alion: 
    
    401(k) matching and profit sharing contributions under Alions KSOP;
 
    
    Company contributions for long and short term disability insurance;
 
    
    Alions portion of life insurance premiums;
 
    
    Amounts paid or reimbursed with respect to health and welfare;
 
    
    Amounts paid or reimbursed for social club membership; and
 
    
    Amounts paid or reimbursed for car leases and automotive expenses.
  All Other Compensation Fiscal Year 2008
 CompanyMatching
    
    
    
    
    
    
    Long and Short
    
    
    
    
    
    
    Term LifeContributions
    
    
    Health and
    
    
    Term Disability
    
    
    Club
    
    
    Insurance PaidName and Principal
    
    Under Alions
    
    
    Welfare
    
    
    Paid by the
    
    
    Membership
    
    
    by thePosition
    
    KSOP
    
    
    Benefits
    
    
    Company
    
    
    Fees
    
    
    Company
    
    
    Leased Cars
    
    
    TotalBahman Atefi
    
    $
    14,625
    
    
    $
    94,337
    
    
    $
    4,840
    
    
    $
    5,120
    
    
    $
    735
    
    
    $
    26,831
    
    
    $
    146,488Stacy Mendler
    
    $
    14,625
    
    
    $
    55,208
    
    
    $
    3,210
    
    
    
    
    
    
    $
    531
    
    
    $
    26,497
    
    
    $
    100,071Michael Alber
    
    
    
    
    
    
    12,530
    
    
    $
    2,421
    
    
    
    
    
    
    $
    356
    
    
    $
    14,603
    
    
    $
    29,910Rob Goff
    
    $
    14,625
    
    
    $
    12,812
    
    
    $
    3,120
    
    
    
    
    
    
    $
    512
    
    
    $
    23,508
    
    
    $
    54,577Scott Fry
    
    $
    10,228
    
    
    $
    13,748
    
    
    $
    3,108
    
    
    
    
    
    
    $
    512
    
    
    $
    23,667
    
    
    $
    51,263
 Summary Compensation Table Fiscal Year 2007
  Non-EquityPhantom
    
    
    IncentiveName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Plan
    
    
    All OtherPosition
    
    Year
    
    
    Salary
    
    
    Bonus(1)
    
    
    Awards(2)
    
    
    Compensation(3)
    
    
    Compensation(4)
    
    
    TotalBahman Atefi
    
    
    2007
    
    
    $
    532,997
    
    
    
    
    
    
    $
    976,353
    
    
    $
    490,000
    
    
    $
    87,119
    
    
    $
    2,086,469Chief Executive Officer and PresidentStacy Mendler
    
    
    2007
    
    
    $
    321,206
    
    
    
    
    
    
    $
    429,595
    
    
    $
    180,000
    
    
    $
    65,618
    
    
    $
    996,419Chief Operating Officer and Executive Vice PresidentRob Goff
    
    
    2007
    
    
    $
    308,562
    
    
    
    
    
    
    $
    146,453
    
    
    $
    160,000
    
    
    $
    45,119
    
    
    $
    660,134Defense Operations Integration Sector Senior Vice PresidentScott Fry

    
    
    2007
    
    
    $
    295,431
    
    
    
    
    
    
    $
    195,271
    
    
    $
    160,000
    
    
    $
    38,121
    
    
    $
    688,823Engineering and Integration Solutions Sector Senior Vice President
 (1)
    
    This column includes non-incentive based cash bonuses awarded to our named executive
officers, such as sign-on bonuses. None of our named executive officers received any
non-incentive bonuses in fiscal year 2007. See the column entitled Non-equity Incentive
Plan Compensation for other bonuses awarded for their service in fiscal year 2007.(2)
    
    These columns reflect the dollar amounts that were recognized in fiscal 2007 for financial
statement reporting purposes under SFAS 123(R) with respect to phantom stock and SAR awards
granted to our named executive officers in fiscal year 2007.  114




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(3)
    
    This column includes cash bonuses awarded to our named executive officers under the
Non-Equity Incentive Plan for their service in fiscal year 2007.(4)
    
    This column includes the following amounts with respect to our Named Executive Officers: 
    
    401(k) matching and profit sharing contributions under Alions KSOP;
 
    
    Company contributions for long and short term disability;
 
    
    Amounts paid for life insurance premiums;
 
    
    Amounts paid or reimbursed with respect to health and welfare;
 
    
    Amounts paid or reimbursed with respect to social club membership; and
 
    
    Amounts paid or reimbursed with respect to leased cars.
  All Other Compensation Fiscal Year 2007
 CompanyMatching
    
    
    
    
    
    
    Long and Short
    
    
    
    
    
    Term LifeContributions
    
    
    Health and
    
    
    Term Disability
    
    
    Club
    
    
    Insurance PaidName and
    
    Under Alions
    
    
    Welfare
    
    
    Paid by the
    
    
    Membership
    
    
    by the
    
    
    LeasedPrincipal Position
    
    KSOP
    
    
    Benefits
    
    
    Company
    
    
    Fees
    
    

Company
    
    
    Cars
    
    
    TotalBahman Atefi
    
    $
    14,869
    
    
    $
    43,758
    
    
    $
    3,921
    
    
    $
    4,920
    
    
    $
    486
    
    
    $
    19,165
    
    
    $
    87,119Stacy Mendler
    
    $
    14,300
    
    
    $
    29,262
    
    
    $
    2,644
    
    
    
    
    
    
    $
    486
    
    
    $
    18,926
    
    
    $
    65,618Rob Goff
    
    $
    14,300
    
    
    $
    15,168
    
    
    $
    2,565
    
    
    
    
    
    
    $
    486
    
    
    $
    12,600
    
    
    $
    45,119Scott Fry
    
    $
    10,341
    
    
    $
    13,075
    
    
    $
    2,491
    
    
    
    
    
    
    $
    481
    
    
    $
    11,733
    
    
    $
    38,121
 Phantom Stock Plans
 Initial Phantom Stock Plan
   Vested Amount for Grant inFebruary
    
    
    NovemberAnniversary from Grant Date
    
    2003
    
    
    20031st
    
    
    
    
    
    
    20
    %2nd
    
    
    
    
    
    
    20
    %3rd
    
    
    50
    %
    
    
    20
    %4th
    
    
    25
    %
    
    
    20
    %5th
    
    
    25
    %
    
    
    20
    %
  
    
    the numerator of which is the number of months from the date of grant of the phantom
stock through the end of the month of such termination; and
 
    
    the denominator of which is 60.
  115




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##### Table of Contents



Payments
 Amendment
  Second Phantom Stock Plan
  Vesting
 Payments
 Amendment
  116




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##### Table of Contents



Director Phantom Stock Plan
  Vesting
 Payments
   
    
    Date of grant;
 
    
    Number of shares of the phantom stock awarded; and
 
    
    Provisions governing vesting of the phantom stock awarded.
     117




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##### Table of Contents



Cumulative SharesShares Issued by
    
    
    Cumulative Shares Issued
    
    
    Authorized under allDate of Issuance
    
    Plan
    
    
    by Plan
    
    
    PlansFebruary 2003
    
    
    171,000
    (1)
    
    
    171,000
    (1)
    
    
    173,000
    (1)November 2003
    
    
    52,685
    (1)
    
    
    223,685
    (1)
    
    
    225,000
    (1)February 2005
    
    
    316,629
    (2)
    
    
    316,629
    (2)
    
    
    2,000,000
    (2)August 2005
    
    
    2,960
    (2)
    
    
    319,589
    (2)
    
    
    2,000,000
    (2)November 2005
    
    
    122,318
    (2)
    
    
    441,907
    (2)
    
    
    2,000,000
    (2)November 2006
    
    
    65,456
    (2)
    
    
    507,363
    (2)
    
    
    2,000,000
    (2)November 2007
    
    
    42,447
    (2)
    
    
    549,810
    
    
    
    2,000,000
    (2)January 2008
    
    
    2,497
    (2)
    
    
    552,307
    
    
    
    2,000,000
    (2)May 2008
    
    
    1,120
    (2)
    
    
    553,427
    
    
    
    2,000,000
    (2)November 2005
    
    
    7,808
    (3)
    
    
    7,808
    (3)
    
    
    2,000,000
    (3)November 2006
    
    
    5,978
    (3)
    
    
    13,786
    (3)
    
    
    2,000,000
    (3)November 2007
    
    
    6,993
    (3)
    
    
    20,779
    
    
    
    2,000,000
    (3)
 (1)
    
    Number of shares authorized under the Initial Phantom Stock Plan as periodically amended and
approved by the Compensation Committee of Alions Board of Directors.(2)
    
    Number of shares authorized under the Second Phantom Stock Plan as periodically amended and
approved by the Compensation Committee of Alions Board of Directors.(3)
    
    Number of shares authorized under the Director Phantom Stock Plan as periodically amended and
approved by the Compensation Committee of Alions Board of Directors.  118




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##### Table of Contents



Number ofName
    
    shares
    
    
    Grant Date
    
    Grant Type
    
    Full vesting period
    
    
    Period(s) until payoutBahman Atefi
    
    
    65,500
    (1)
    
    February 2003
    
    Retention
    
    February 2008 (2)
    
    February 2006, 2007, 2008 (3)18,695
    (1)
    
    November 2003
    
    Retention
    
    November 2008 (2)
    
    November 2006, 2007, 2008 (3)43,951
    
    
    February 2005
    
    Retention
    
    February 2008 (4)
    
    February 2008 (4)67,888
    (5)
    
    February 2005
    
    Performance
    
    February 2008 (4)
    
    February 2008 (4)22,290
    
    
    November 2005
    
    Retention
    
    November 2008 (4)
    
    November 2008 (4) (6)27,863
    
    
    November 2005
    
    Retention
    
    November 2010 (4)
    
    November 2010 (4) (6)24,378
    
    
    November 2006
    
    Retention
    
    November 2009 (4)
    
    November 2009 (4) (6)17,478
    
    
    November 2007
    
    Retention
    
    November 2010 (4)
    
    November 2010 (4) (6)Michael Alber
    
    
    1,248
    
    
    January 2008
    
    Retention
    
    January 2011(4)
    
    January 2011(4) (6)1,219
    
    
    May 2008
    
    Retention
    
    May 2011(4)
    
    May 2011(4) (6)Stacy Mendler
    
    
    28,500
    (1)
    
    February 2003
    
    Retention
    
    February 2008 (2)
    
    February 2006, 2007, 2008 (3)6,798
    (1)
    
    November 2003
    
    Retention
    
    November 2008(2)
    
    November 2006, 2007, 2008 (3)24,151
    
    
    February 2005
    
    Retention
    
    February 2008 (4)
    
    February 2008 (4)37,305
    (5)
    
    February 2005
    
    Performance
    
    February 2008 (4)
    
    February 2008 (4)11,145
    
    
    November 2005
    
    Retention
    
    November 2008 (4)
    
    November 2008 (4) (6)13,931
    
    
    November 2005
    
    Retention
    
    November 2010 (4)
    
    November 2010 (4) (6)10,726
    
    
    November 2006
    
    Retention
    
    November 2009 (4)
    
    November 2009 (4) (6)4,994
    
    
    November 2007
    
    Retention
    
    November 2010 (4)
    
    November 2010 (4) (6)Robert Goff
    
    
    3,399
    (1)
    
    November 2003
    
    Retention
    
    November 2008 (2)
    
    November 2008 (3)25,821
    (5)
    
    February 2005
    
    Performance
    
    February 2008 (4)
    
    November 2010 (4)8,080
    
    
    November 2005
    
    Retention
    
    November 2008 (4)
    
    November 2008 (4)3,657
    
    
    November 2006
    
    Retention
    
    November 2009 (4)
    
    November 2009 (4)4,994
    
    
    November 2007
    
    Retention
    
    November 2010 (4)
    
    November 2010 (4)Scott Fry
    
    
    2,507
    
    
    February 2005
    
    Retention
    
    February 2009 (4)
    
    February 2010 (4) (6)4,179
    
    
    November 2005
    
    Retention
    
    November 2008 (4)
    
    November 2008 (4) (6)4,876
    
    
    November 2006
    
    Retention
    
    November 2009 (4)
    
    November 2009 (4) (6)4,994
    
    
    November 2007
    
    Retention
    
    November 2010 (4)
    
    November 2010 (4) (6)James Fontana
    
    
    10,328
    
    
    February 2005
    
    Retention
    
    February 2008 (4)
    
    February 2010 (4) (6)5,573
    
    
    November 2005
    
    Retention
    
    November 2008 (4)
    
    November 2008 (4) (6)3,657
    
    
    November 2006
    
    Retention
    
    November 2009 (4)
    
    November 2009 (4) (6)2,497
    
    
    November 2007
    
    Retention
    
    November 2010 (4)
    
    November 2010 (4) (6)
 (1)
    
    The initial set of awards made in February 2003 was made solely to Alions executive
management team. The awards made in November 2003 were made to executives and Alion senior
management.(2)
    
    Pursuant to the Initial Phantom Stock Plan, recipients became fully vested on the fifth year
from the grant date, approximately February 2008 and November 2008.(3)
    
    Pursuant to the Initial Phantom Stock Plan, recipients were to be paid commencing on the
fifth year from the date of grant. In November 2005, the Initial Phantom Stock Plan was
amended to permit employees to make a one-time election to receive payment for phantom shares
as they vested each year or when fully vested. Dr. Atefi and Ms. Mendler made this election;
Mr. Goff did not.(4)
    
    Pursuant to the Second Phantom Stock Plan, recipients could be awarded performance-based or
retention-based phantom stock. Performance-based phantom stock fully vested three years from
the date of grant; retention-based phantom stock fully vested as specified in individual
agreements. Recipients of performance-based and retention-based phantom stock were paid as
specified in individual agreements for vested shares not forfeited.(5)
    
    Pursuant to the Second Phantom Stock Plan, performance awards were subject to change at the
vesting date. February 2005 performance-based grants were fixed based on the September 30,
2008 share price.(6)
    
    In December 2008, Dr. Atefi, Ms. Mendler, Mr. Fry and Mr. Fontana forfeited their right to
receive payment for certain vested, unpaid phantom stock awards. Along with Mr. Alber, they
also forfeited all phantom stock awards that had not yet vested.  119




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##### Table of Contents



Stock Appreciation Rights (SAR) Plans
 2004 SAR Plan
  Vesting
 Payments
  Amendment
   120




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##### Table of Contents



Grants of Plan-Based Awards
  Outstanding Equity Awards at Fiscal Year-End
  SAR AwardsNumber of
    
    
    Number ofsecurities
    
    
    securitiesunderlying
    
    
    underlyingunexercised
    
    
    unexercised
    
    
    SARSARs (#)
    
    
    SARs (#)
    
    
    exercise
    
    
    SARName
    
    Exercisable
    
    
    Unexercisable
    
    
    price ($)
    
    
    expiration dateScott Fry (1)
    
    
    1,000
    
    
    
    3,000
    
    
    $
    19.94
    
    
    
    12/01/10Michael Alber (2)
    
    
    1,250
    
    
    
    3,750
    
    
    $
    40.05
    
    
    
    12/13/13
 (1)
    
    In February 2005, Mr. Fry was awarded 4,000 SARs at the exercise price of $19.94 per share,
all of which were outstanding as of September 30, 2009.(2)
    
    In December 2007, Mr. Alber was awarded 5,000 SARs at the exercise price of $40.05 per
share, all of which were outstanding as of September 30, 2009. SAR Exercises
 The table below lists SARs exercised by the named executive officers during fiscal 2009. There
were no SAR or Phantom Stock grants to named executive officers in fiscal 2009.
 SAR AwardsNumber ofshares
    
    
    Value realizedacquired on
    
    
    onexercise
    
    
    exerciseName
    
    (#)
    
    
    ($)Rob Goff (1)
    
    
    500
    
    
    $
    11,820James Fontana (2)
    
    
    2,000
    
    
    $
    47,280
 (1)
    
    Mr. Goff exercised 500 SARs at $38.35 with an exercise price of $14.71 per share.(2)
    
    Mr. Fontana exercised 2,000 SARs at $38.35 with an exercise share price of $14.71 per share. Deferred Compensation Plans
     121




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##### Table of Contents



AggregateExecutive
    
    
    Registrant
    
    
    Earnings
    
    
    Aggregate
    
    
    AggregateContributions
    
    
    Contributions
    
    
    in
    
    
    Withdrawals/
    
    
    Balance atin Last FY
    
    
    in Last FY
    
    
    Last FY
    
    
    Distributions
    
    
    Last FYEName
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)James Fontana
    
    
    
    
    
    
    
    
    
    $
    (15,508
    )
    
    
    
    
    
    $
    210,167Scott Fry
    
    
    
    
    
    
    
    
    
    $
    (52,820
    )
    
    
    
    
    
    $
    321,215
 Other Potential Post-Termination Payments
  Employment Agreements.
 Long Term Incentive and Deferred Compensation Plans.
  Termination by the Company without Cause;
Termination by Executive based upon Constructive Termination;
Termination in the event of Death or Disability;
 Termination upon Expiration of the Employment Agreement due to Company Election Not to Extend;
Change in Control
 Severance
    
    
    Early Vesting ofName
    
    Amount
    
    
    LTIP Awards
    
    
    Other
    
    
    Total(a)
    
    
    (b)
    
    
    (c)
    
    
    (d)Bahman Atefi
    
    $
    2,700,000
    
    
    $
    2,737,053
    
    
    $
    25,000
    
    
    $
    5,462,053Stacy Mendler
    
    $
    975,000
    
    
    $
    1,205,341
    
    
    $
    25,000
    
    
    $
    2,205,341Michael Alber
    
    $
    525,000
    
    
    $
    94,646
    
    
    $
    25,000
    
    
    $
    644,646Scott Fry
    
    $
    600,000
    
    
    $
    210,662
    
    
    $
    25,000
    
    
    $
    835,662James Fontana
    
    $
    360,000
    
    
    $
    86,180
    
    
    $
    25,000
    
    
    $
    471,180
 (a)
    
    Represents payment of a percentage of the executives annual salary and a percentage of
the bonus the executive would have earned as of such date based upon the actual bonus paid
for fiscal 2009 performance. Name
    
    Salary
    
    
    BonusBahman Atefi
    
    
    200
    %
    
    
    200
    %Stacy Mendler
    
    
    150
    %
    
    
    150
    %Michael Alber
    
    
    100
    %
    
    
    100
    %Scott Fry
    
    
    100
    %
    
    
    100
    %James Fontana
    
    
    100
    %
    
    
    100
    %
  122




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##### Table of Contents



(b)
    
    Represents the value of the vested LTIP awards not yet payable and unvested LTIP awards
held by the executive as of September 30, 2009. This amount does not include any amounts
for unvested Category E and F LTIP awards as noNamed Executive Officer has as yet completed 18 months of post-award service. Amounts in
this column would be paid to the executive if termination were to occur within one year
following execution of a definitive change in control agreement where such transaction is
subsequently consummated.(c)
    
    Represents outplacement services in an amount not to exceed $25,000 with a firm
selected by the Company and at the reasonable expense of the Company; provided, however,
that under no circumstances shall such outplacement services be provided beyond the
December 31 of the second calendar year following the calendar year in which the
executives separation from service occurred.In addition, the Company is obligated to pay the executive, if he or she is eligible for and
elects to receive, medical and/or dental benefits pursuant to the provisions of COBRA for
himself and/or any qualifying beneficiaries. The Company shall pay on the executives
behalf the amount of the applicable COBRA that exceeds the amount of premium payable by the
executive for the same level of coverage immediately prior to the effective date of
termination.(d)
    
    Represents the maximum amount that the executive can receive, including payment for
accelerated LTIP award vesting in the event of a termination occurring within one year
following the execution of a definitive agreement for a change in control, which
transaction is subsequently consummated. Director Compensation
 Fees earnedor paid in
    
    
    All othercash
    
    
    compensationName
    
    ($) (1)
    
    
    ($) (2)
    
    
    TotalEdward C. Pete Aldridge, Jr.
    
    $
    51,500
    
    
    $
    3,963
    
    
    $
    55,463Leslie Armitage
    
    $
    45,000
    
    
    
    
    
    
    $
    45,000Lewis Collens
    
    $
    42,500
    
    
    $
    2,471
    
    
    $
    44,971Admiral (Ret.) Harold W. Gehman, Jr.
    
    $
    53,000
    
    
    $
    804
    
    
    $
    53,804General (Ret.) George A. Joulwan
    
    $
    50,000
    
    
    
    
    
    
    $
    50,000General (Ret.) Michael E. Ryan
    
    $
    52,000
    
    
    $
    3,108
    
    
    $
    55,108David Vitale
    
    $
    11,000
    
    
    $
    1,022
    
    
    $
    12,022
 (1)
    
    This column represents the total fees including the annual retainer fee to non-employee
directors. The Companys employee directors do not receive any additional compensation for
their services as members of the Board of Directors. For the year ended September 30,
2009, the Companys non-employee directors received an annual retainer of $30,000, payable
in quarterly installments, for their services as members of the Board of Directors. In
addition, each director receives a fee of $2,500 for in-person attendance at a Board of
Directors meeting, and $1,000 for telephone attendance at a Board of Directors meeting. The
chairman of the Audit and Finance Committee receives $7,500 per year for each year he or
she serves in such capacity. The other board committee chairmen receive $5,000 per year
for each year he or she serves in such capacity. Board committee members receive $1,000 per
committee meeting if the committee meeting occurs on a day other than the day of a full
Alion Board of Directors meeting. Alion reimburses directors for reasonable travel expenses
in connection with attendance at Board of Directors and board committee meetings.(2)
    
    The amounts included in this column represent the amount paid by the Company for travel expenses to attend Board of Directors meetings. Compensation Committee Interlocks and Insider Participation
   123




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##### Table of Contents



Compensation Committee Report
  
 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholders
Matters
  Amount and Natureof Beneficial
    
    
    PercentageName of Beneficial Owner
    
    Title of Class
    
    
    Ownership
    
    
    of Class(1)Five Percent Security Holders:Illinois Institute of Technology (2)
    
    Common stock
    
    
    1,630,437
    (3)
    
    
    23.1Directors(4)and Executive Officers:Bahman Atefi
    
    Common stock
    
    
    56,398
    (5)
    
    
    1.0Stacy Mendler
    
    Common stock
    
    
    74,278
    (5)
    
    
    1.4Michael Alber
    
    Common stock
    
    
    67
    (5)
    
    
    *Scott Fry
    
    Common stock
    
    
    4,753
    (5)
    
    
    *James Fontana
    
    Common stock
    
    
    5,132
    (5)
    
    
    *All Directors and Executive Officers as a Group
(5 Persons )
    
    Common stock
    
    
    140,628
    (5)
    
    
    2.6
 *
    
    less than 1%.(1)
    
    Percentages are based on 5,424,274, shares outstanding on September 30, 2009, including
common stock shares subject to warrants. Warrant related shares are deemed to be outstanding
in computing IITs percentage; they are not included when computing the ownership percentage
of any other person in this table. The table is based upon information that the Company
possesses and believes to be accurate. Unless indicated in the footnotes to this table and
subject to community property laws where applicable, the Company believes each of the
shareholders named in this table has sole voting and investment power with respect to the
shares indicated as beneficially owned.  124




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##### Table of Contents



(2)
    
    Illinois Institute of Technologys address is 3300 South Federal Street, Chicago, IL 60616.(3)
    
    The shares deemed to be beneficially held by IIT represents currently exercisable warrants
for 1,630,437 shares of common stock.(4)
    
    The Company does not believe any director other than Dr. Atefi beneficially owns any Alion
common stock.(5)
    
    Includes beneficial ownership of Alion common stock held by the Alion KSOP. Changes in Control
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
   Independent Directors
      125




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##### Table of Contents



Item 14.
    
    Principal Accountant Fees and Services
   Fee Category
    
    2009
    
    
    2008Audit Fees(1)
    
    $
    1,025,000
    
    
    $
    1,052,885Audit-Related Fees(2)
    
    
    158,515
    
    
    
    142,115Tax Fees
    
    
    196,088
    
    
    
    154,485Total Fees
    
    $
    1,379,603
    
    
    $
    1,349,485
 (1)
    
    Audit fees include fees for auditing Alions financial statements, reviewing interim
financial statements included in quarterly reports on Form 10-Q, and providing other
professional services in connection with statutory and regulatory filings or engagements.(2)
    
    Audit-related fees are fees for assurance and similar services for employee benefit plan
audits and services provided in conjunction with acquisitions and accounting consultations.
These services were approved by the Audit and Finance Committee. 
 Item 15.
    
    Exhibits and Financial Statement Schedules
 Consolidated Financial Statements of Alion Science and Technology Corporation
 Report of Independent Registered Public Accounting Firm
    
    
    55Consolidated Financial Statements:Consolidated Balance Sheets as of September 30, 2009 and 2008 (restated)
    
    
    56Consolidated Statements of Operations for the years ended September 30, 2009, 2008 and 2007
    
    
    57Consolidated Statements of Redeemable Common Stock and Accumulated Deficit for the years
ended September 30, 2009, 2008, and 2007
    
    
    58Consolidated Statements of Cash Flows for the years ended September 30, 2009, 2008, and 2007
    
    
    59Notes to Consolidated Financial Statements
    
    
    60
 
 Consolidated Financial Statement Schedules
 
 
 AdditionsBalance at
    
    
    Charged to
    
    
    Additions
    
    
    
    
    
    
    
    
    
    
    BalanceAllowance for Doubtful
    
    Beginning
    
    
    Costs and
    
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    at End ofAccounts Receivable
    
    of Year
    
    
    Expenses
    
    
    Revenue
    
    
    Deductions (1)
    
    
    Acquisitions
    
    
    YearFiscal year ended 2009
    
    $
    3,962
    
    
    $
    1,014
    
    
    $
    
    
    
    $
    (557
    )
    
    $
    
    
    
    $
    4,419Fiscal year ended 2008
    
    $
    5,272
    
    
    $
    (578
    )
    
    $
    
    
    
    $
    (732
    )
    
    $
    
    
    
    $
    3,962Fiscal year ended 2007
    
    $
    3,961
    
    
    $
    1,812
    
    
    $
    364
    
    
    $
    (865
    )
    
    $
    
    
    
    $
    5,272
 (1)
    
    Accounts receivable written off against the allowance for doubtful accounts.  126




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##### Table of Contents



(b) Exhibits
 ExhibitNo.
    
    Description3.2
    
    
    Amended and Restated By-laws of Alion Science and Technology Corporation. (24)3.3
    
    
    Third Amended and Restated Certificate of Incorporation of Alion Science and Technology Corporation. (15)4.1
    
    
    Indenture dated as of February 8, 2007, among Alion Science and Technology Corporation,
certain subsidiary guarantors and Wilmington Trust Company, as trustee. (27)4.2
    
    
    Form of 10.25% Senior Notes due 2015. (27)4.3
    
    
    Amended and Restated Alion Science and Technology Corporation Employee Ownership, Savings and
Investment Plan. (28)4.4
    
    
    First Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan. (30)4.5
    
    
    Second Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan. (39)10.1
    
    
    Seller Note Securities Purchase Agreement by and between IIT Research Institute and Alion
Science and Technology Corporation (Seller Note Agreement). (2)10.2
    
    
    Seller Warrant Agreement by and among Alion Science and Technology Corporation, IIT Research
Institute and Alion Science and Technology Employee Ownership, Savings and Investment Trust
(Seller Warrant Agreement). (3)10.3
    
    
    Rights Agreement by and among Alion Science and Technology Corporation, IIT Research
Institute and Alion Science and Technology Employee Ownership, Savings and Investment Trust.
(2)10.4
    
    
    Term B Senior Credit Agreement (the Term B Senior Credit Agreement) that includes a
revolving credit facility and Term B note, by and among Credit Suisse First Boston as
arranger, various lenders, and Alion Science and Technology Corporation. (8)10.5
    
    
    First Amendment to the Seller Warrant Agreement. (8)10.6
    
    
    Second Amendment to the Seller Warrant Agreement. (9)10.7
    
    
    Commitment letter agreement by and between Alion Science and Technology Corporation and
Credit Suisse First Boston. (10)10.8
    
    
    Third Amendment to the Seller Warrant Agreement. (11)10.9
    
    
    Stock Purchase Agreement by and among Alion Science and Technology Corporation, John J.
McMullen Associates, Inc., Marshall and Ilsley Trust Company, N.A. as Trustee to the John J.
McMullen, Inc. Employee Stock Ownership Trust and P. Thomas Diamant, Anthony Serro, and David
Hanafourde. (12)10.10
    
    
    Incremental Term Loan Assumption Agreement and Amendment No. 1 under the Term B Senior
Credit Agreement. (13)10.11
    
    
    Employment Agreement between Alion Science and Technology Corporation and Anthony Serro. (14)*10.12
    
    
    Employment Agreement between Alion Science and Technology Corporation and P. Thomas Diamant. (14)*10.13
    
    
    Alion Science and Technology Corporation Board of Directors Phantom Stock Plan. (16)*10.14
    
    
    Amended and Restated Alion Science and Technology Corporation Phantom Stock Plan. (16)*10.15
    
    
    Amended and Restated Alion Science and Technology Corporation Performance Shares and
Retention Phantom Stock Plan. (16)*10.16
    
    
    Amended and Restated Alion Science and Technology Corporation 2002 Stock Appreciation Rights
Plan. (16)*10.17
    
    
    Amended and Restated Alion Science and Technology Corporation 2004 Stock Appreciation Rights
Plan. (16)*10.18
    
    
    Amended and Restated Alion Science and Technology Corporation Executive Deferred
Compensation Plan. (16)*10.19
    
    
    Amended and Restated Alion Science and Technology Corporation Director Deferred Compensation
Plan. (16)*10.20
    
    
    Commitment letter by and between Alion Science and Technology Corporation, Credit Suisse and
Credit Suisse Securities (USA) LLC. (18)10.21
    
    
    Incremental Term Loan Assumption Agreement and Amendment No. 2 under the Term B Senior
Credit Agreement. (19)10.22
    
    
    Fourth Amendment to the Seller Warrant Agreement. (20)10.23
    
    
    Mezzanine Warrant Redemption Agreement by and between Alion Science and Technology
Corporation and Illinois Institute of Technology. (20)10.24
    
    
    Alion Mezzanine Warrant Redemption Agreement by and among Alion Science and Technology
Corporation, Alion Science and Technology Employee Ownership, Savings and Investment Trust and
Bahman Atefi. (20)10.25
    
    
    Asset Purchase Agreement dated as of June 4, 2006, by and between Anteon Corporation, Alion
Technical Services Corporation and Alion Science and Technology Corporation. (21)
  127




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##### Table of Contents



ExhibitNo.
    
    Description10.26
    
    
    Incremental Term Loan Assumption Agreement and Amendment No. 3 under the Term B Senior
Credit Agreement. (21)10.27
    
    
    Bridge Loan Agreement dated as of June 30, 2006, by and among Alion Science and Technology
Corporation, HFA, METI, CATI, JJMA, BMH, WCI, MA&D, CS, and the lenders party thereto (Bridge
Loan Agreement). (21)10.28
    
    
    Closing Letter Agreement dated as of June 30, 2006, by and among Alion Science and
Technology Corporation, Alion Technical Services Corporation and Anteon Corporation. (21)10.29
    
    
    First Amendment to Seller Note Agreement. (21)10.30
    
    
    Commitment letter by and between Alion Science and Technology Corporation, Credit Suisse and
Credit Suisse Securities (USA) LLC. (22)10.31
    
    
    Amendment No. 1 to Bridge Loan Agreement. (25)10.32
    
    
    Incremental Term Loan Assumption Agreement under the Term B Senior Credit Agreement. (26)10.33
    
    
    Purchase Agreement dated January 26, 2007 among Alion Science and Technology Corporation,
certain subsidiary guarantors and Credit Suisse Securities (USA) LLC. (27)10.34
    
    
    Amendment No. 4 to the Term B Senior Credit Agreement. (27)10.35
    
    
    Registration Rights Agreement dated February 8, 2007 among Alion Science and Technology
Corporation, certain subsidiary guarantors and Credit Suisse Securities (USA) LLC. (27)10.36
    
    
    Employment Agreement between Alion Science and Technology Corporation and Dr. Bahman Atefi. (29)*10.37
    
    
    Employment Agreement between Alion Science and Technology Corporation and Stacy Mendler. (31)*10.39
    
    
    Employment Agreement between Alion Science and Technology Corporation and James Fontana. (38)*10.40
    
    
    Employment Agreement between Alion Science and Technology Corporation and Rob Goff. (31)*10.41
    
    
    Employment Agreement between Alion Science and Technology Corporation and Scott Fry. (38) *10.42
    
    
    Employment Agreement between Alion Science and Technology Corporation and Buck Buchanan.(38)*10.43
    
    
    Incremental Term Loan Assumption Agreement under the Term B Senior Credit Agreement. (32)10.44
    
    
    Employment Agreement by and between Alion Science and Technology Corporation and Michael J.
Alber. * (34)10.46
    
    
    Third Amendment to the Seller Note Securities Purchase Agreement and First Amendment to
Rights Agreement dated as of August 29, 2008, by and between Alion Science and Technology
Corporation, Illinois Institute of Technology, Alion Science and Technology Corporation
Employee Ownership, Savings and Investment Trust, Bahman Atefi and Stacy Mendler. (36)10.47
    
    
    Junior Subordinated Second Amended and Restated Seller Note made by Alion Science and
Technology Corporation to the order of Illinois Institute of Technology dated as of August 29,
2008. (36)10.48
    
    
    Amended and Restated Seller Warrant Agreement dated as August 29, 2008, by and between Alion
Science and Technology Corporation, Illinois Institute of Technology and Alion Science and
Technology Corporation Employee Ownership, Savings and Investment Trust. (36)10.50
    
    
    Amendment No. 5 to the Term B Senior Credit Agreement. (37)10.51
    
    
    Separation Agreement and General Release with Leroy R. Goff, III.* (39)10.52
    
    
    Settlement Agreement and General Release with John M. Hughes.* (39)10.53
    
    
    Alion Science and Technology Corporation Long-Term Incentive Plan.* (39)10.54
    
    
    2008 Executive Bonus Agreement dated as of November 21, 2008, by and between Alion Science
and Technology Corporation and Scott Fry.* (39)10.55
    
    
    Form of Alion Science and Technology Corporation Category A Long Term Incentive Plan Award
Agreement.* (39)10.56
    
    
    Form of Alion Science and Technology Corporation Category B Long Term Incentive Plan Award
Agreement.* (39)10.57
    
    
    Form of Alion Science and Technology Corporation Category C Long Term Incentive Plan Award
Agreement.* (39)10.58
    
    
    Form of Alion Science and Technology Corporation Category D Long Term Incentive Plan Award
Agreement.* (39)10.59
    
    
    Form of Alion Science and Technology Corporation Ongoing Long Term Incentive Plan Award
Agreement.* (39)10.60
    
    
    Amendment No. 6 to the Term B Senior Credit Agreement. (40)10.61
    
    
    Amendment No. 7 to the Term B Senior Credit Agreement. (41)10.62
    
    
    Amendment No. 9 to the Term B Senior Credit Agreement. (42)10.63
    
    
    Waiver dated as of December 14, 2009, by and among the Company, HFA, METI, CATI, JJMA, BMH,
WCI. MA&D, WCGS, CS and the lenders party thereto, related to the Term B Senior Credit
Agreement. (43)10.64
    
    
    Note and Warrant Redemption Agreement, Fourth Amendment to Seller Note Securities Purchase
Agreement, First Amendment to the Second Amended and Restated Seller Note and Rights Agreement
Termination Agreement, dated as of December 18, 2009 between Alion Science and Technology
Corporation and Illinois Institute of Technology. (44)
  128




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##### Table of Contents



ExhibitNo.
    
    Description12
    
    
    Computation of Ratios14
    
    
    Fourth Edition of The Alion Code of Ethics, Conduct and Responsibility (33)21
    
    
    Subsidiaries of Alion Science and Technology Corporation are wholly-owned (either directly or
indirectly) by Alion Science and Technology Corporation:(i
    )
    
    Human Factors Applications, Inc., incorporated in the Commonwealth of Pennsylvania,(ii
    )
    
    Innovative Technology Solutions Corporation, incorporated in the State of New Mexico,(iii
    )
    
    Alion-IPS Corporation, incorporated in the Commonwealth of Virginia,(iv
    )
    
    Alion-METI Corporation, incorporated in the Commonwealth of Virginia,(v
    )
    
    Alion-CATI Corporation, incorporated in the State of California,(vi
    )
    
    Alion-JJMA Corporation, incorporated in the State of New York,(vii
    )
    
    Alion Technical Services Corporation, incorporated in the Commonwealth of Virginia,(viii
    )
    
    Alion Technical Services Corporation, incorporated in the State of Delaware,(ix
    )
    
    Alion Canada (U.S.), Inc., incorporated in the State of Delaware,(x
    )
    
    Alion Science and Technology (Canada) Corporation, incorporated in the Province of Nova Scotia,(xi
    )
    
    Alion-BMH Corporation, incorporated in the Commonwealth of Virginia,(xii
    )
    
    Washington Consulting, Inc., incorporated in the Commonwealth of Virginia,(xiii
    )
    
    Alion-MA&D Corporation, incorporated in the State of Colorado, and(xiv
    )
    
    Washington Consulting Government Services, Inc., incorporated in the Commonwealth of Virginia.31.1
    
    
    Certification of Chief Executive Officer of Alion Science and Technology Corporation pursuant
to Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.31.2
    
    
    Certification of Chief Financial Officer of Alion Science and Technology Corporation pursuant
to 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.32.1
    
    
    Certification of Chief Executive Officer of Alion Science and Technology Corporation,
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    
    Certification of Chief Financial Officer of Alion Science and Technology Corporation,
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 (1)
    
    Incorporated by reference from the Companys Pre-Effective Amendment No. 3 to the
Registration Statement on Form S-1 filed with the SEC on October 7, 2002.(2)
    
    Incorporated by reference from the Companys Post-Effective Amendment No. 3 to the
Registration Statement on Form S-1 filed with the SEC on March 24, 2003.(3)
    
    Incorporated by reference from the Companys December 2002 Form 10-Q filed with the SEC on
February 3, 2003.(4)
    
    Incorporated by reference from the Companys August 2003 Form 10-Q filed with the SEC on July
4, 2003.(5)
    
    Incorporated by reference from the Companys Registration Statement on Form S-8 filed with
the SEC on April 28, 2004.(6)
    
    Incorporated by reference from the Companys March 2004 Form 10-Q filed with the SEC on May
17, 2004.(7)
    
    Incorporated by reference from the Companys June 2004 Form 10-Q filed with the SEC on August
13, 2004.(8)
    
    Incorporated by reference from the Companys September 2004 Form 10-K filed with the SEC on
December 28, 2004.(9)
    
    Companys Post-effective Amendment No. 5 to the Registration Statement on Form S-1 filed with
the SEC on January 24, 2005.(10)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 9, 2005.(11)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 14, 2005.(12)
    
    Incorporated by reference from the Companys Form 8-K/A filed with the SEC on April 6, 2005.(13)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on April 6, 2005.(14)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on April 7, 2005.(15)
    
    Incorporated by reference from the Companys March 2005 Form 10-Q filed with the SEC on May
13, 2005.(16)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on December 2, 2005.(17)
    
    Incorporated by reference from the Companys September 2004 Form 10-K filed with the SEC on
January 31, 2006.(18)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on February 23,
2006.(19)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 29, 2006.(20)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 31, 2006.(21)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on June 7, 2006.(22)
    
    Incorporated by reference from the Companys June 2006 Form 10-Q filed with the SEC on August
14, 2006(23)
    
    Incorporated by reference from the Companys Form 8-K/A filed with the SEC on June 1, 2006.(24)
    
    Incorporated by reference from the Companys September 2006 Form 10-K filed with the SEC on
December 1, 2006.(25)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on December 14,
2006.  129




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##### Table of Contents



(26)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on January 10, 2007.(27)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on February 8, 2007.(28)
    
    Incorporated by reference from the Companys Form S-4 filed with the SEC on April 30, 2007.(29)
    
    Incorporated by reference from the Companys Form S-4 (8-K) filed with the SEC on June 21,
2007.(30)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on July 13, 2007.(31)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on July 20, 2007.(32)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on July 20, 2007.(33)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on November 9, 2009.(34)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on April 8, 2008.(35)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2008 filed with the SEC on August 13, 2008.(36)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on September 4,
2008.(37)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on October 6, 2008.(38)
    
    Incorporated by reference from the Companys Form 10-K filed with the SEC on December 28,
2007.(39)
    
    Incorporated by reference from the Companys Form 10-K filed with the SEC on December 23,
2008.(40)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on July 29, 2009.(41)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on September 30,
2009.(42)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on October 13, 2009.(43)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on December 16,
2009.(44)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on December 24, 2009*
    
    Denotes management contract and/or compensatory plan/arrangement.  130




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##### Table of Contents



SIGNATURES
  Date: December 24, 2009
    ALION SCIENCE AND TECHNOLOGY CORPORATION
(Registrant)By:
    /s/ BAHMAN ATEFIBahman AtefiChairman, Chief Executive Officer
and Director  Signature
    
    Title
    
    Date/s/ Bahman Atefi

Bahman Atefi
    
    Chairman, Chief Executive Officer

and Director
    
    December 24, 2009/s/ Michael J. Alber

Michael J. Alber
    
    Senior Vice President and 
Chief Financial Officer
    
    December 24, 2009/s/ Jeffrey L. Boyers

Jeffrey L. Boyers
    
    Corporate Vice President and 
Principal Accounting Officer
    
    December 24, 2009/s/ Leslie L. Armitage

Leslie Armitage
    
    Director
    
    December 24, 2009/s/ Lewis Collens

Lewis Collens
    
    Director
    
    December 24, 2009/s/ Harold W. Gehman, Jr.

Harold Gehman
    
    Director
    
    December 24, 2009David J. Vitale
    
    Director
    
    December 24, 2009/s/ George A. Joulwan
    
    Director
    
    December 24, 2009George A. Joulwan/s/ Michael E. Ryan

Michael E. Ryan
    
    Director
    
    December 24, 2009/s/ Edward C. Aldridge, Jr.

Edward C. (Pete) Aldridge, Jr.
    
    Director
    
    December 24, 2009
 Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the
Act by Registrants which Have Not Registered Securities Pursuant to Section 12 of the Act
   131