Document:

exv10w3

Exhibit 10.3

NON-EMPLOYEE DIRECTOR

RESTRICTED STOCK AWARD AGREEMENT

PIONEER DRILLING COMPANY

2007 INCENTIVE PLAN

     THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is made by and
between Pioneer Drilling Company, a Texas corporation (the “Company”), and
                    
(the “Recipient”) effective as of the
___ day of                     , 20___ (the
“Grant Date”), pursuant to the Pioneer Drilling Company 2007 Incentive Plan (the
“Plan”), which is incorporated by reference herein in its entirety.

RECITALS

     A. The Company desires to grant to the Recipient the shares of equity securities specified
herein (the “Shares”), subject to the terms and conditions of this Agreement.

     B. The Recipient desires to have the opportunity to hold Shares subject to the terms and
conditions of this Agreement.

     C. Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall
have the meaning assigned to such terms in the Plan.

     NOW, THEREFORE, the parties hereto agree as follows:

	1.	 	Definitions. For purposes of this Agreement, the following terms shall have the meanings
indicated:

	 	(a)	 	“Affiliate” means, with respect to any Person (as defined below), any
other Person that, directly or indirectly through one or more intermediaries, controls,
is controlled by or is under common control with the Person in question. As used
herein, the term “control” means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
	 
	 	(b)	 	“Associate” means, with reference to any Person, (i) any corporation,
firm, partnership, association, unincorporated organization or other entity (other than
the Company or any of its Affiliates) of which that Person is an officer or general
partner (or officer or general partner of a general partner) or is, directly or
indirectly, the beneficial owner of 10% or more of any class of its equity securities,
(ii) any trust or other estate in which that Person has a substantial beneficial
interest or for or of which that Person serves as trustee or in a similar fiduciary
capacity and (iii) any relative or spouse of that Person, or any relative of that
spouse, who has the same home as that Person.

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	 	(c)	 	“Change in Control” shall mean the occurrence of any of the following
after the Grant Date:

	 	i.	 	any Person (other than an Exempt Person) is or becomes the
beneficial owner of Voting Stock (not including any securities acquired
directly from the Company after the date the Plan first became effective)
representing 40% or more of the combined voting power of the Voting Stock then
outstanding; provided, however, that a Change of Control will not be deemed to
occur under this clause (i) if a Person becomes the beneficial owner of Voting
Stock representing 40% or more of the combined voting power of the Voting Stock
then outstanding solely as a result of a reduction in the number of shares of
Voting Stock outstanding which results from the Company’s repurchase of Voting
Stock, unless and until such time as that Person or any Affiliate or Associate
of that Person purchases or otherwise becomes the beneficial owner of
additional shares of Voting Stock constituting 1% or more of the combined
voting power of the Voting Stock then outstanding, or any other Person (or
Persons) who is (or collectively are) the beneficial owner of shares of Voting
Stock constituting 1% or more of the combined voting power of the Voting Stock
then outstanding becomes an Affiliate or Associate of that Person, unless, in
either such case, that Person, together with all its Affiliates and Associates,
is not then the beneficial owner of Voting Stock representing 40% or more of
the Voting Stock then outstanding; or
	 
	 	ii.	 	the following individuals cease for any reason to constitute a
majority of the number of Directors then serving on the Company’s Board of
Directors (the “Board”): (A) individuals who on the date the Plan first
became effective constitute the Board; and (B) any new Director (other than a
Director whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of Directors of the
Company) whose appointment or election by the Board or nomination for election
by the Company’s shareholders was approved or recommended by a majority vote of
the Directors then still in office who either were Directors on the date the
Plan first became effective or whose appointment, election or nomination for
election was previously so approved or recommended; or
	 
	 	iii.	 	there is consummated a merger or consolidation of the Company
or any parent or direct or indirect subsidiary of the Company with or into any
other corporation, other than: (A) a merger or consolidation which results in
the Voting Stock outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent thereof) at least
50% of the combined voting power of the securities which entitle the holder
thereof to vote generally in the election of members of the Board or similar
governing body of the Company or such surviving entity or any parent thereof
outstanding immediately after such

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	 	 	 	merger or consolidation; or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no Person (other than an Exempt Person) is or becomes the beneficial
owner of Voting Stock (not including, for purposes of this determination,
any Voting Stock acquired directly from the Company or its subsidiaries
after the date the Plan first became effective other than in connection with
the acquisition by the Company or one of its subsidiaries of a business)
representing 40% or more of the combined voting power of the Voting Stock
then outstanding; or

	 	iv.	 	the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company, or there is consummated an agreement
for the sale or disposition of all or substantially all of the Company’s
assets, unless (A) the sale is to an entity of which at least 50% of the
combined voting power of the securities which entitle the holder thereof to
vote generally in the election of members of the board of directors or similar
governing body of such entity (“New Entity Securities”) are owned by
shareholders of the Company in substantially the same proportions as their
ownership of the Voting Stock immediately prior to such sale; (B) no Person
other than the Company and any employee benefit plan or related trust of the
Company or of such corporation then beneficially owns 40% or more of the New
Entity Securities; and (C) at least a majority of the directors of such
corporation were members of the incumbent Board at the time of the execution of
the initial agreement or action providing for such disposition.

	 	(d)	 	“Disability” means the absence of the Recipient from the Recipient’s
duties as a Director of the Company for at least 180 consecutive days as a result of
incapacity due to mental or physical illness or injury which is determined by the
Committee in its sole discretion to be permanent.
	 
	 	(e)	 	“Exempt Person” means: (i) the Company; (ii) any Affiliate of the
Company; (iii) any employee benefit plan of the Company or of any Affiliate and any
Person organized, appointed or established by the Company for or pursuant to the terms
of any such plan or for the purpose of funding any such plan or funding other employee
benefits for employees of the Company or any Affiliate of the Company; or (iv) any
corporation or other entity owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of capital stock of
the Company.
	 
	 	(f)	 	“Forfeiture Restrictions” means any prohibitions and restrictions set
forth herein with respect to the sale or other disposition of Shares issued to the
Recipient hereunder and the obligation to forfeit and surrender such shares to the
Company.
	 
	 	(g)	 	“Person” has the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Sections 13(d) and 14(d) thereof.

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	 	(h)	 	“Restricted Shares” means the Shares that are subject to the Forfeiture
Restrictions under this Agreement.
	 
	 	(i)	 	“Voting Stock” means the Common Stock and any other securities issued
by the Company which entitle the holder thereof to vote generally in the election of
members of the Board.

	2.	 	Grant of Restricted Shares. Effective as of the Grant Date, the Company shall cause to be
issued in the Recipient’s name the following Shares as Restricted Shares:                      shares
of Common Stock. Subject to the Forfeiture Restrictions and other terms and conditions of
this Agreement, the Recipient shall have all the rights of a shareholder with respect to such
Restricted Shares, including the right to vote such Shares. Regular, ordinary dividends paid
with respect to the Restricted Shares in cash shall be paid to the Recipient currently. All
other dividends and distributions, whether paid in cash, equity securities of the Company,
rights to acquire equity securities of the Company or any other property shall be added to and
become a part of the Restricted Shares, unless the Committee, in its sole discretion,
determines that such other dividends or distributions shall be paid to the Recipient
currently.
	 
	3.	 	Evidence of Ownership.

	 	(a)	 	Evidence of the issuance of the Restricted Shares pursuant to this Agreement
may be accomplished in such manner as the Company or its authorized representatives
shall deem appropriate including, without limitation, electronic registration,
book-entry registration or issuance of a stock certificate or certificates in the name
of the Recipient. Any stock certificate issued for the Restricted Shares shall bear an
appropriate legend with respect to the Forfeiture Restrictions applicable to such
Restricted Shares. The Company may retain, at its option, the physical custody of any
stock certificate representing any Restricted Shares during the Restriction Period or
require that the certificates evidencing Restricted Shares be placed in escrow or
trust, along with a stock power endorsed in blank, until all Forfeiture Restrictions
are removed or lapse. In the event the issuance of the Restricted Shares is documented
or recorded electronically, the Company and its authorized representatives shall ensure
that the Recipient is prohibited from selling, assigning, pledging, exchanging,
hypothecating or otherwise transferring the Restricted Shares while such shares are
still subject to the Forfeiture Restrictions.
	 
	 	(b)	 	Upon the lapse of the Forfeiture Restrictions, the Company or, at the Company’s
instruction, its authorized representative shall release those Restricted Shares with
respect to which the Forfeiture Restrictions have lapsed. The lapse of the Forfeiture
Restrictions and the release of the Restricted Shares shall be evidenced in such a
manner as the Company and its authorized representatives deem appropriate under the
circumstances.
	 
	 	(c)	 	At the Company’s request, the Recipient shall execute and deliver, as
necessary, a blank stock power with respect to the Restricted Shares, and the Company
may,

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	 	 	 	as necessary, exercise such stock power in the event of forfeiture of the Restricted
Shares pursuant to this Agreement, or as may otherwise be required in order for the
Company to withhold the Restricted Shares necessary to satisfy any applicable
federal, state and local income and employment tax withholding obligations pursuant
to Section 6 of this Agreement.

	4.	 	Transfer Restrictions. Except as otherwise set forth in this Agreement or the Plan, the
Restricted Shares granted hereby may not be sold, assigned, pledged, exchanged, hypothecated
or otherwise transferred, disposed of or encumbered. Any such attempted sale, assignment,
pledge, exchange, hypothecation, transfer, disposition or encumbrance in violation of this
Agreement shall be void and the Company shall not be bound thereby. Further, the Shares
granted hereby that are no longer subject to Forfeiture Restrictions may not be sold or
otherwise disposed of in any manner which would constitute a violation of any applicable
federal or state securities laws, and the Recipient agrees (a) that the Company may refuse to
cause the transfer of the Shares to be registered on the applicable stock transfer records if
such proposed transfer would, in the opinion of counsel satisfactory to the Company,
constitute a violation of any applicable securities law and (b) that the Company may give
related instructions to the transfer agent, if any, to stop registration of the transfer of
the Shares.
	 
	5.	 	Vesting.

	 	(a)	 	Restricted Shares that are granted hereby shall be subject to the Forfeiture
Restrictions. All of the Forfeiture Restrictions shall lapse and the Restricted Shares
shall vest as follows (it being understood that the number of Restricted Shares as to
which all restrictions have lapsed and which have vested in the Recipient at any time
shall be the greatest of the number of vested Shares specified in subparagraph (i),
(ii) or (iii) below):

	 	i.	 	Except as otherwise provided herein, one-third of the
Restricted Shares shall vest on the first anniversary of the Grant Date, an
additional one-third of the Restricted Shares shall vest on the second
anniversary of the Grant Date, and the remaining Restricted Shares shall vest
on the third anniversary of the Grant Date.
	 
	 	ii.	 	In the event of death or Disability of the Recipient while
serving as a Director and before all of the Restricted Shares have vested, 100%
of the Restricted Shares shall vest and the Forfeiture Restrictions shall lapse
with respect to such shares.
	 
	 	iii.	 	If a Change in Control occurs and the Recipient is serving as a
Director immediately prior to such Change in Control, 100% of the Restricted
Shares shall vest and the Forfeiture Restrictions shall lapse with respect to
such Restricted Shares immediately prior such Change in Control.

	 	(b)	 	Restricted Shares that do not become vested pursuant to Paragraph (a) above
shall be forfeited and the Recipient shall cease to have any rights of a shareholder
with

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	 	 	 	respect to such forfeited Shares upon termination of the Recipient’s service as a
Director.

	6.	 	Tax Matters. The lapsing of the Forfeiture Restrictions with respect to the Restricted
Shares pursuant to Section 5 of this Agreement shall be subject to the satisfaction of
all applicable federal, state and local income and employment tax withholding requirements
(the “Required Withholding”), if any. By execution of this Agreement, the Recipient
shall be deemed to have authorized the Company, to the extent permissible, to withhold
Restricted Shares with respect to which the Forfeiture Restrictions have lapsed necessary to
satisfy the Recipient’s Required Withholding, if any. The amount of the Required Withholding
and the number of Restricted Shares required to satisfy the Recipient’s Required Withholding,
if any, as well as the amount reflected on tax reports filed by the Company, shall be based
upon the Fair Market Value of the Common Stock on the day the Forfeiture Restrictions lapse
pursuant to Section 5 of this Agreement. Notwithstanding the foregoing, the Company
may require that the Recipient satisfy the Recipient’s Required Withholding, if any, by any
other means the Company, in its sole discretion, considers reasonable. The obligations of the
Company under this Agreement shall be conditioned on such satisfaction of the Required
Withholding, if any.
	 
	7.	 	No Fractional Shares. All provisions of this Agreement concern whole Shares.
Notwithstanding anything contained in this Agreement to the contrary, if the application of
any provision of this Agreement would yield a fractional share, such fractional share shall be
rounded down to the next whole Share.
	 
	8.	 	No Obligation to Retain Services. This Agreement is not a services or employment agreement,
and no provision of this Agreement shall be construed or interpreted to create a services or
employment relationship between the Recipient, the Company or any of its Subsidiaries or
guarantee the Recipient the right to continued service as a Director for any specified term.
	 
	9.	 	Notices. Any notice, instruction, authorization, request or demand required hereunder shall
be in writing, and shall be delivered either by personal delivery, by facsimile transmission,
by electronic mail, by certified or registered mail, return receipt requested, or by courier
or delivery service, to the Company at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas
78209, Attention: Chief Financial Officer, facsimile number (210) 828-8228, and to the
Recipient at the Recipient’s address and facsimile number (if applicable) indicated beneath
the Recipient’s signature on the execution page of this Agreement, or at such other address
and facsimile number as a party shall have previously designated by written notice given to
the other party in the manner hereinabove set forth. Notices shall be deemed given (a) when
received, if by personal delivery; (b) upon confirmation of receipt, if sent by facsimile
transmission or electronic mail; and (c) when delivered (or upon the date of attempted
delivery where delivery is refused), if sent by certified or registered mail, return receipt
requested, or courier or delivery service.
	 
	10.	 	Amendment and Waiver. Except as otherwise provided in the Plan, this Agreement may be
amended, modified or superseded only by written instrument executed by the Company and the
Recipient. Only a written instrument executed and delivered by the

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	 	 	party waiving compliance hereof shall make any waiver of the terms or conditions effective.
Any waiver granted by the Company shall be effective only if executed and delivered by a
duly authorized executive officer of the Company. The failure of any party at any time or
times to require performance of any provisions hereof shall in no manner affect the right to
enforce the same. No waiver by any party of any term or condition, or of any breach of any
term or condition, contained in this Agreement, in one or more instances, shall be construed
as a continuing waiver of any such condition or breach, a waiver of any other term or
condition, or a waiver of any breach of any other term or condition.

	11.	 	Governing Law and Severability. This Agreement shall be governed by the laws of the State of
Texas without regard to its conflicts of law provisions. The invalidity of any provision of
this Agreement shall not affect any other provision of this Agreement, which shall remain in
full force and effect.
	 
	12.	 	Successors and Assigns. Subject to the limitations which this Agreement imposes upon the
transferability of the Shares granted hereby, this Agreement shall bind, be enforceable by and
inure to the benefit of the Company and its successors and assigns, and to the Recipient and
the Recipient’s executors, administrators, agents, and legal and personal representatives.
	 
	13.	 	Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be an original for all purposes but all of which taken together shall constitute but one
and the same instrument.
	 
	14.	 	Grant Subject to Terms of Plan and this Agreement. The Recipient acknowledges and agrees
that the grant of the Restricted Shares hereunder is made pursuant to and governed by the
terms of the Plan and this Agreement. In the case of a conflict between the terms of the Plan
and this Agreement, the terms of the Plan shall govern.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

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     IN WITNESS WHEREOF, the Company has caused this Restricted Stock Award Agreement to be duly
executed by an officer thereunto duly authorized, and the Recipient has executed this Agreement,
all effective as of the date first above written.

	 	 	 	 	 	 	 	 
	 	 	PIONEER DRILLING COMPANY:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	RECIPIENT:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Facsimile No.:	 	 	 	 

Signature Page to Restricted Stock Award Agreement

 

 

IRREVOCABLE STOCK POWER

     KNOW ALL MEN BY THESE PRESENTS, THAT the undersigned, FOR VALUE RECEIVED, has bargained, sold,
assigned and transferred and by these presents does bargain, sell, assign and transfer unto Pioneer
Drilling Company, a Texas corporation (the “Company”), the Shares transferred pursuant to
the Restricted Stock Award Agreement, dated effective as of                     , 20___, between the Company
and the undersigned; AND subject to and in accordance with such Restricted Stock Award Agreement,
the undersigned does hereby constitute and appoint the Secretary of the Company the undersigned’s
true and lawful attorney, IRREVOCABLY, to sell, assign, transfer, hypothecate, pledge and make over
all or any part of such Shares and for that purpose to make and execute all necessary acts of
assignment and transfer thereof, and to substitute one or more persons with like full power, hereby
ratifying and confirming all that said attorney or his or her substitutes shall lawfully do by
virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Stock Power effective the
                    
day of                     , 20___.

	 	 	 
	 
	 	 
	 

	 	 
	 

	 	Name:exv10w46

Exhibit 10.46

THIRD AMENDMENT TO THE SELLER NOTE SECURITIES PURCHASE

AGREEMENT AND FIRST AMENDMENT TO RIGHTS AGREEMENT

     THIS THIRD AMENDMENT TO THE SELLER NOTE SECURITIES PURCHASE AGREEMENT AND FIRST AMENDMENT TO
RIGHTS AGREEMENT (the “Amendment”) is made effective as of August 29, 2008 (the “Effective Date”)
between Alion Science and Technology Corporation, a Delaware corporation (the “Company”), and
Illinois Institute of Technology, an Illinois not-for-profit corporation (“IIT”). Individuals
Bahman Atefi and Stacy Mendler join this Amendment for purposes of Section 11 of this
Amendment only and for no other purpose. Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Trust (the “Trust”) joins this Amendment for purposes of Section
2 of this Amendment only and for no other purpose.

     WHEREAS, the Company and IIT Research Institute, an Illinois not-for-profit corporation
affiliated with and controlled by IIT (“IITRI”) entered into that certain Seller Note Securities
Purchase Agreement dated as of the 20th day of December 2002 (the “Original Seller Note
Securities Purchase Agreement”), pursuant to which, among other documents, the Company issued to
IITRI its 6% junior subordinated promissory note (the “Seller Note”) in the principal amount of
Thirty-Nine Million Nine Hundred Thousand United States Dollars ($39.9 million) and warrants to
purchase One Million Eighty Thousand Four Hundred Thirty-Six and Eight-Tenths (1,080,436.8) shares
of the Company’s $0.01 par value per share common stock (“Common Stock”);

     WHEREAS, as of July 1, 2004, IITRI transferred to IIT all its rights and interests in the
Seller Note Securities Purchase Agreement, and IIT and the Company amended the Original Seller Note
Securities Purchase Agreement as of that time;

     WHEREAS, the Company and IIT entered into an agreement captioned First Amendment to the Seller
Note Securities Purchase Agreement as of June 30, 2006 and another agreement captioned Second
Amendment to the Seller Note Securities Purchase Agreement as of January 9, 2008 (the Original
Seller Note Securities Purchase Agreement as so amended is hereinafter referred to as the “Seller
Note Securities Purchase Agreement”);

     WHEREAS, the Company and IIT desire to amend Section 2 and Section 10.1 of the Seller Note
Securities Purchase Agreement as set forth herein;

     WHEREAS, the Company, IITRI and the Trust entered into that certain Rights Agreement dated as
of the 20th day of December 2002 (the “Rights Agreement”), and

     WHEREAS, IIT is IITRI’s successor in interest under the Rights Agreement as a result of the
aforesaid transfer of IITRI’s rights in and to the Original Seller Note Securities Purchase
Agreement to IIT as of July 1, 2004, and the Company, the Trust and IIT desire to amend Section
2(c) of the Rights Agreement as set forth herein.

     NOW, THEREFORE, in consideration of the premises set forth above and the respective covenants
and agreements contained in this Amendment, and for other good and valuable

 

consideration, the receipt and sufficiency of which is hereby mutually acknowledged, and intending
to be legally bound, the parties hereto hereby agree as follows:

     1. Amendments to the Seller Note Securities Purchase Agreement.

          (a) Authorization of Securities Section 2 of the Seller Note Securities Purchase
Agreement is hereby deleted and replaced in its entirety with the following:

          “Authorization of Securities; etc.

     (a) The Company originally authorized the issue of its Junior Subordinated Notes due
December 20, 2010 (herein, together with any notes issued in exchange thereof or replacement
thereof, called the “Notes”) in the aggregate principal amount of $39,900,000 (the “Original
Principal Amount”). As of August 29, 2008, the Company amended and restated the Notes among
other things to modify the interest payable on the Notes beginning December 21, 2008 and to
extend the maturity date of the Notes, and the Company re-issued as of such date to the then
sole holder of the Notes, Illinois Institute of Technology, an Illinois not-for-profit
corporation (“IIT”), the amended and restated Notes which are due August 6, 2013. The
amended and restated Notes are to be substantially in the form of Exhibit 2(a)
attached hereto.

     (b) The Company has authorized the issue of its warrants evidencing rights to purchase
1,080,436.8 shares of its Common Stock (subject to adjustment) (herein, together with any
warrants issued in exchange therefor or replacement thereof, called the “Original
Warrants”). As of August 29, 2008, the Company authorized the issue of warrants evidencing
rights to purchase an additional 550,000 shares of its Common Stock (subject to adjustment)
(herein, together with any warrants issued in exchange therefor or replacement thereof,
called the “New Warrants”). The Original Warrants and the New Warrants are hereinafter
referred to collectively as the “Warrants”. The Original Warrants are to be substantially
in the form of Exhibit 2(b)(1) and the New Warrants are to be substantially in the
form of Exhibit 2(b)(2) attached hereto.

     (c) Interest on the amended and restated Notes shall be calculated in one of three
manners, with the applicable manner of calculation being dependent upon specific time
periods occurring between the Notes’ original issuance date and the Maturity Date of the
amended and restated Notes. Each manner of calculation and the time period to which it
applies is as follows. First, interest on the amended and restated Notes shall accrue at 6%
per annum computed on the actual number of days elapsed in any year (based on a year of
twelve 30-day months and a 360 day year). Beginning December 20, 2002 and through and
including the fourth anniversary of the Closing Date, interest on the Notes shall be payable
quarterly in arrears in the form of non-compounding payment-in-kind notes (“PIK Notes”).
The PIK Notes are to be substantially in the form of Exhibit 2(c)(1) attached
hereto. Interest paid in PIK Notes will not be compounded and PIK Notes will therefore be
non-interest bearing obligations, payable as provided in the PIK Notes. Second, during the
period beginning the day after the fourth anniversary of the Closing Date through and
including the day which is the sixth anniversary of the Closing Date, interest on the Notes
shall be payable quarterly in arrears in the form of

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compounding payment-in-kind notes (“Compounding PIK Notes”). The Compounding PIK Notes
are to be substantially in the form of Exhibit 2(c)(2) attached hereto. Interest
paid in Compounding PIK Notes during the period beginning after the fourth anniversary of
the Closing Date through and including the sixth anniversary of the Closing Date will be
compounded as follows:

          (i) Interest paid in Compounding PIK Notes during the period beginning the day
after the fourth anniversary of the Closing Date through and including the fifth
anniversary of the Closing Date (the “Fifth Year”) will be paid at a rate of 6% per
annum on the Original Principal Amount plus additional interest at a rate of 6% per
annum payable on the interest payable on the Original Principal Amount during the
immediately preceding twelve months (which yields an effective rate of interest
accrual of 6.36% during the Fifth Year); and

     (ii) Interest paid in Compounding PIK Notes during the period beginning the day
after the fifth anniversary of the Closing Date through and including the sixth
anniversary of the Closing Date (the “Sixth Year”) will be paid at a rate of 6% per
annum on the Original Principal Amount plus additional interest at a rate of 6% per
annum payable on the interest payable on the Original Principal Amount during the
immediately preceding twenty-four months (which yields an effective rate of Interest
accrual of 6.7416% during the Sixth Year).

     Third, provided the Company makes the first principal prepayment set forth in Section
2(d) below, then as of December 21, 2008 the aggregate principal amount of the amended and
restated Notes shall be increased to $51,703,538.40, which represents the net principal
amount after taking into account of such prepayment and the capitalization of PIK Notes and
Compounding PIK Notes to the principal of the Notes for the time period December 21, 2002
through and including December 20, 2008 (the “Capitalized Principal Amount”); provided,
however, that if the Company fails to make said first principal payment, then the aggregate
principal amount of the Notes shall be Fifty-Four Million Seven Hundred Three Thousand Five
Hundred Thirty-Eight and 40/100 DOLLARS ($54,703,538.40) and in such an event the
Capitalized Principal Amount shall be deemed to be Fifty-Four Million Seven Hundred Three
Thousand Five Hundred Thirty-Eight and 40/100 DOLLARS ($54,703,538.40). Beginning with the
day after the sixth anniversary of the Closing Date (the “Interest Adjustment Date”) through
and including the Maturity Date, interest on the Notes shall be payable quarterly in arrears
at a rate of 16% per annum on the Capitalized Principal Amount or the Revised Principal
Amount (as defined below) as applicable computed on the actual number of days elapsed in any
year (based upon a year of twelve 30-day months and a 360 day year). Five-Eighths of any
interest payable from the Interest Adjustment Date through and including the Maturity Date
shall be payable quarterly in arrears in the form of compounding PIK Notes substantially in
the form of Exhibit 2(c)(3) and the remaining Three-Eighths shall be payable
quarterly in arrears in cash. Accordingly, the Company shall pay during such time interest
quarterly in arrears in the amount of 10% per annum in compounding PIK Notes and pay during
such time interest quarterly in arrears in the amount of 6% per annum in cash. The first
installment of interest on the Notes for the Original Principal Amount was payable on March
31, 2003, and thereafter interest is payable on the Notes, quarterly in arrears on the last
Business Day of March, June, September and December of

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each year, commencing March 31, 2003; provided, however, that for all interest
payable after the Interest Adjustment Date, such quarterly payments of interest on the Notes
for the Capitalized Principal Amount shall be due and payable on October 1, January 2, April
1 and July 1 of each year, and the first payment of interest after the Interest Adjustment
Date shall be due and payable on April 1, 2009 (and such first payment of interest shall
include interest accrued during the months of January, 2009 through March, 2009 plus
interest accrued during the time December 21, 2008 through and including December 31, 2008).
Accrued and unpaid interest is due and payable on the Maturity Date. In no event shall the
amount paid or agreed to be paid by the Company as interest on any Note exceed the highest
lawful rate permissible under any law applicable thereto.

     (d) Subject to the Company being permitted to repay principal under the Notes pursuant
to Section 4.04(a) of the Company’s Indenture dated as of February 8, 2007 and under Section
6.09(c) (as the same section may be renumbered in the future) of the Company’s Senior Credit
Facility dated as of August 2, 2004 (the “Term B Senior Credit Facility”), as amended, the
Company shall prepay without premium principal on the Notes prior to the Maturity Date
according to the following schedule:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Principal Balance of Notes
	 	 	 	 	 	 	After Pre-Payment (as reduced
	Principal Repayment	 	Amount of Principal to Pre-	 	by each such payment, the
	Date	 	Pay	 	“Revised Principal Amount”)
	November 3, 2008
	 	$	3,000,000	 	 	$	36,900,000	 
	November 2, 2009
	 	$	3,000,000	 	 	$	48,703,538.40	 
	November 1, 2010
	 	$	3,000,000	 	 	$	45,703,538.40	 
	November 1, 2011
	 	$	2,000,000	 	 	$	43,703,538.40	 

     The applicable Revised Principal Amount (or the Capitalized Principal Amount if the
Company has not been permitted pursuant to Section 4.04(a) of the Indenture and Section
6.09(c) of the Term B Senior Credit Facility to reduce the aggregate principal amount of the
Notes to a Revised Principal Amount) is payable as provided in the Notes on the Maturity
Date.”

          (b) Definitions. Section 10.1 of the Seller Note Securities Purchase Agreement is
hereby amended by deleting the following defined terms in their entirety and replacing them with
the following:

          “Bank Credit Agreement” means the Term B Senior Credit Agreement dated as of August 2, 2004,
as amended pursuant to that certain Incremental Term Loan Assumption Agreement and Amendment No. 1
dated as of April 1, 2005, that certain Incremental Term Loan Assumption Agreement and Amendment
No. 2 dated as of March 24, 2006, that certain Incremental Term Loan Assumption Agreement and
Amendment No. 3 dated as of June 30, 2006, and that certain Amendment No. 4 dated as of February 6,
2007.”

4

 

          “Notes” shall mean the Company’s junior subordinated promissory note issued pursuant to this
Agreement, together with any notes issued in exchange therefor or replacement thereof, and the
non-compounding PIK Notes and the Compounding PIK Notes.”

          “Maturity Date” shall mean August 6, 2013.

     2. Amendment to Rights Agreement. Section 2(c) of the Rights Agreement is hereby
deleted and replaced in its entirety with the following:

“(c) Seller Notes Nomination Right. So long as any principal amount of the Seller
Notes remains outstanding and is held by Persons who are not officers or employee-directors
of the Company, the holders holding a majority of the outstanding principal amount of the
Seller Notes shall (i) be entitled to nominate one individual for election to the board of
directors of the Company, and (ii) once such director is elected, have the exclusive right
to (x) remove such director (other than removal for cause or for failure to satisfy the
required qualifications set forth in the Directors Qualification Policy of the Company, as
amended from time to time by the board of directors of the Company in good faith), and (y)
nominate an individual to replace such director or to fill the vacancy created by the
departure of such director from the Company’s board of directors; provided that if
for any reason the Company shall fail to pay any mandatory principal prepayment set forth in
Section 2(d) of the Seller Note Securities Purchase Agreement when the same shall be due and
payable, then, notwithstanding anything to the contrary set forth in this Section 2(c), the
holders holding a majority of the outstanding principal amount of the Seller Notes shall be
entitled to nominate a total of two individuals for election to the board of directors of
the Company and shall have the same aforesaid exclusive rights set forth in Section
2(c)(ii)(x) and Section 2(c)(ii)(y) with respect to both such nominated directors. For the
avoidance of doubt, should the Company fail to pay more than one such mandatory principal
prepayment when the same shall be due and payable, then, such holders shall not be entitled
to nominate additional directors after each such failed principal prepayment.

     3. Remainder of the Seller Note Securities Purchase Agreement and Rights Agreement Not
Affected. Except as set forth in Section 1 and Section 2 hereof respectively,
the terms and provisions of the Seller Note Securities Purchase Agreement and the Rights Agreement
remain in full force and effect without change, amendment, waiver or modification.

     4. Ratification. As modified hereby, the Seller Note Securities Purchase Agreement
and the Rights Agreement and their respective terms and provisions are hereby ratified for all
purposes and in all respects.

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

     6. References. From and after the date provided above, all references to the Seller
Note Securities Purchase Agreement and the Rights Agreement shall be deemed to be references to the
Seller Note Securities Purchase Agreement and the Rights Agreement, respectively, as modified
hereby.

5

 

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

     8. Conflict. In the event of any conflict between the terms of this Amendment and the
Seller Note Securities Purchase Agreement, and in the event of any conflict between the terms of
this Amendment and the Rights Agreement, the terms of this Amendment shall govern.

     9. Definitions. Initially capitalized words or terms used in this Amendment and not
defined herein shall have the meaning ascribed to the same in the Seller Note Securities Purchase
Agreement except that any initially capitalized words or terms used in Section 2 of this
Amendment and not defined therein shall have the meaning ascribed to the same in the Rights
Agreement.

     10. Recitals. The recitals above are incorporated by reference herein as if fully set
forth.

     11. Phantom Stock. The Company shall not pay Bahman Atefi and Stacy Mendler (or their
respective successors) (the “Officers”) any vested amounts which may be due to them under and
pursuant to any of the Company’s phantom stock plans except that:

     (a) if the Company shall have first paid the November 3, 2008 mandatory principal prepayment
scheduled to be paid pursuant to Section 2(d) of the Seller Note Securities Purchase
Agreement reflected in Section 1(a) of this Amendment, then the Company may pay the
Officers any amount which has vested pursuant to such phantom stock plans before November 3, 2008
and which may vest pursuant to such phantom stock plans prior to but not including November 2,
2009;

     (b) if the Company shall have first paid the November 2, 2009 mandatory principal prepayment
scheduled to be paid pursuant to Section 2(d) of the Seller Note Securities Purchase
Agreement reflected in Section 1(a) of this Amendment, then the Company may pay the
Officers any amount which may vest pursuant to such phantom stock plans prior to but not including
November 1, 2010;

     (c) if the Company shall have first paid the November 1, 2010 mandatory principal prepayment
scheduled to be paid pursuant to Section 2(d) of the Seller Note Securities Purchase
Agreement reflected in Section 1(a) of this Amendment, then the Company may pay the
Officers any amount which may vest pursuant to such phantom stock plans prior to but not including
November 1, 2011; and

     (d) if the Company shall have first paid the November 1, 2011 mandatory principal prepayment
scheduled to be paid pursuant to Section 2(d) of the Seller Note Securities Purchase
Agreement reflected in Section 1(a) of this Amendment, then the Company may pay the
Officers any amount which may vest thereafter pursuant to such phantom stock plans.

     Notwithstanding their contractual rights elsewhere set forth, Bahman Atefi and Stacy Mendler
each severally forbear their respective rights to receive payments under such phantom stock plans
consistent with the terms of this Section 11.

6

 

     12. Senior Credit Facility Amendment. Alion covenants to use commercially reasonable
efforts to cause an amendment to its Term B Senior Credit Facility to occur no later than March 31,
2009 such that Alion will be permitted to make the payments scheduled and contemplated by this
Amendment consistent with the terms and conditions of Alion’s Term B Senior Credit Facility.
Should (a) such an amendment fail to occur and (b) at the time of the written notice described in
this Section 12, Alion is not in compliance with the financial covenants set forth in
Section 6.12 and 6.13 of the Term B Senior Credit Facility, then the holders holding a majority of
the outstanding principal amount of the Seller Notes shall have the collective right to elect to
rescind this Amendment by written notice to the Company, such election to be made, if it is to be
made at all, no later than April 30, 2009, in which case the Seller Note Securities Purchase
Agreement shall read as if this Amendment had never been entered. Such rescission right terminates
at such time as such an amendment to the Term B Senior Credit Facility is executed and delivered
among the parties thereto.

     13. Effectiveness. This Amendment shall become effective as of the Effective Date
when the parties hereto shall have received counterpart signatures of this Amendment bearing the
signatures of each other such party.

     14. Amendment Fee. Alion shall pay to IIT, no later than 30 calendar days after the
date that this Amendment becomes effective pursuant to Section 13 of this Amendment, an
amendment fee equal to $500,000; provided, however, that should a rescission occur as
contemplated by Section 12 above, then such $500,000 shall not be a fee and shall be deemed
to have been a prepayment of principal and the Revised Principal Amounts set forth in Section 2(d)
of the Seller Note Securities Purchase Agreement shall be adjusted downward accordingly.

[Signatures follow on next page]

7

 

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

	 	 	 	 	 	 	 	 	 
	Alion Science and Technology Corporation	 	Illinois Institute of Technology	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 /s/ Michael Alber	 	By:	 	 /s/ Susan H. Wallace	 	 
	Name:

	 	 

Michael Alber
	 	Name:
	 	 
Susan H. Wallace
	 	 
	Title:

	 	Senior Vice President,
	 	Title:	 	Vice President and CFO	 	 

Acting Chief Financial Officer and Treasurer

AGREED AND ACCEPTED FOR PURPOSES OF SECTION 2 ABOVE ONLY:

Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust

	 	 	 	 	 	 	 	 	 
	By:

	 	 /s/ Monet Ewing	 	State Street Bank & Trust
Company, not in its individual or corporate capacity,
	 	 
	Name:

	 	 

Monet Ewing
	 	but solely as Trustee of the Alion Science and Technology Corporation Employee
	 	 
	Title:

	 	Vice President
	 	Ownership, Savings and Investment Trust
	 	 

AGREED AND ACCEPTED FOR PURPOSES OF SECTION 11 ABOVE ONLY:

	 	 	 	 	 	 	 
	/s/ Bahman Atefi	 	/s/ Stacy Mendler
	 	 	 	 	 
	Bahman Atefi	 	Stacy Mendler

 

 

Exhibit 2(c)(3)

Form of compounding PIK Note

THIS JUNIOR SUBORDINATED NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER
AND TO THE EXTENT SET FORTH IN THE SUBORDINATION AGREEMENT (AS SUCH TERM IS HEREINAFTER DEFINED) TO
THE SENIOR DEBT (AS DEFINED IN THE SUBORDINATION AGREEMENT) OWED BY THE COMPANY (AS HEREINAFTER
DEFINED) TO THE HOLDERS OF SENIOR DEBT ISSUED PURSUANT TO THE CREDIT AGREEMENT (AS SUCH TERM IS
HEREINAFTER DEFINED), AND EACH HOLDER OF THIS JUNIOR SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF,
SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY STATE SECURITIES LAWS, AND THEREFORE CANNOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
ASSIGNED UNLESS IT IS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER ALL
APPLICABLE STATE SECURITIES LAWS, OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.

ALIGN SCIENCE AND TECHNOLOGY CORPORATION

Junior Subordinated Note due August 6, 2013

			
	 	 	 
	$[   ]
	 	Dated as of December 31, 2009
	 
	 	(for the interest accrual period
	 
	 	beginning on December 21, 2008
	 
	 	and ending on December 31, 2009)

     ALION SCIENCE AND TECHNOLOGY CORPORATION, a Delaware corporation (the “Company”), for value
received, hereby promises to pay to ILLINOIS INSTITUTE OF TECHNOLOGY, an Illinois not-for-profit
corporation (“IIT”), or its registered assigns, an amount (the “Compound Amount”) of interest equal
to 10% per annum payable on the sum of (a) the lesser of the Capitalized Principal Amount or the
applicable Revised Principal Amount (each as defined in the Company’s Junior Subordinated Second
Amended and Restated Note due August 6, 2013 dated August [ ], 2008 (the “Seller Note”) plus (b)
the amount of accrued but unpaid in cash interest under the Seller Note for the period beginning on
December 21, 2008 through and including the Interest Calculation Date (as defined below). The
“Interest Calculation Date” shall be December 31 of each calendar year except (i) in the calendar
year 2008, in which case interest accrued in the stub time period December 21, 2008 through and
including December 31, 2008 will continue to accrue in calendar year 2009, and (ii) in the year in
which the Seller Note is fully paid and discharged, in which case the Interest Calculation Date
shall be the date the Seller Note is fully paid and discharged if it is a date other than December
31. For the avoidance of doubt, the Interest Calculation Date is [ ]. On August 6, 2013, the

 

 

Company shall pay the applicable Compound Amount in cash without interest except as provided
herein. Any overdue principal (including any overdue prepayment of principal) shall accrue
interest (computed on the basis of the actual number of days elapsed over a 360-day year) at a rate
equal to 19% per annum until paid, payable on demand and, upon acceleration of this Note; provided
that, and as further provided in the Seller Note, in no event shall the amount payable by the
Company as interest on this Note exceed the highest lawful rate permissible under any law
applicable hereto. Payments of principal and interest hereon shall be made in lawful money of the
United States of America by the method and at the address for such purpose specified in the Seller
Note, and such payments shall be overdue for purposes hereof if not made on the originally
scheduled date of payment therefor, without giving effect to any applicable grace period and
notwithstanding that such payment may be prohibited under that certain Second Amended and Restated
Subordination Agreement dated as of August [ ], 2008 with respect to the Seller Note (the
“Subordination Agreement”), which is by and between IIT and Credit Suisse (“CS”), as administrative
agent for itself and the other Senior Lenders (as defined in that certain Credit Agreement, dated
as of August 2, 2004, by and between the Company, CS and certain others (the “Credit Agreement”)).

     This Note is one of the Company’s compounding PIK Notes, issued pursuant to that certain
Seller Note Securities Purchase Agreement dated as of December 20, 2002, as amended by Alion and
IIT by that certain agreement captioned First Amendment to the Seller Note Securities Purchase
Agreement, dated as of June 30, 2006 and by that certain other agreement captioned Second Amendment
to the Seller Note Securities Purchase Agreement, dated as of January 9, 2008 and by that certain
other agreement captioned Third Amendment to the Seller Note Securities Purchase Agreement and
First Amendment to Rights Agreement, dated as of the date hereof (collectively, the “Seller Note
Securities Purchase Agreement”), and the holder hereof is entitled to the benefits, if any, of the
Seller Note Securities Purchase Agreement and the other Operative Documents referred to in the
Seller Note Securities Purchase Agreement, and may enforce the agreements contained therein and
exercise the remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the terms thereof, and shall otherwise be subject to the terms and conditions of
the Seller Note Securities Purchase Agreement including, without limitation, the provisions of
Section 22 thereof in respect of the source of funds provided by any holder hereof. For the
avoidance of doubt, in accordance with the Seller Note Securities Purchase Agreement, this Note
does not require the payment of interest on the face value hereof.

     This Note is subject to prepayment only as specified in the Seller Note Securities Purchase
Agreement.

     Payments on this Note and the rights of the holder of this Note are subordinated to the
payment of the Senior Debt and the rights of the holders of the Senior Debt upon the terms of
subordination set forth in the Subordination Agreement.

     This Note is in registered form and is transferable only by surrender hereof at the principal
executive office of the Company as provided in the Seller Note Securities Purchase Agreement. The
Company may treat the person in whose name this Note is registered on the Note register maintained
at such office pursuant to the Seller Note Securities Purchase

 

 

Agreement as the owner hereof for all purposes, and the Company shall not be affected by any
notice to the contrary.

     In case an Event of Default, as defined in the Seller Note Securities Purchase Agreement, with
respect to the Notes shall occur and be continuing, the unpaid balance of the principal of this
Note may be declared and become due and payable in the manner and with the effect provided in the
Seller Note Securities Purchase Agreement subject to the provisions of the Subordination Agreement.

     The parties hereto, including the makers and all guarantors and endorsers of this Note, hereby
waive presentment, demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance or enforcement of this Note.

     Capitalized terms used but not defined in this Note shall have the meanings ascribed to them
in the Seller Note Securities Purchase Agreement.

[The remainder of this page is intentionally left blank.]

 

 

     This Note shall be construed in accordance with and governed by the domestic substantive laws
of the State of Illinois without giving effect to any choice of law or conflicts of law provision
or rule that would cause the application of domestic substantive laws of any other jurisdiction.

	 	 	 	 	 
	 	 	ALION SCIENCE AND TECHNOLOGY
 CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

 

 

FORM OF ASSIGNMENT

(To be signed only upon transfer of Note)

     For value received, the undersigned hereby sells, assigns and transfers unto                      the
within Note, and appoints                      Attorney to transfer such Note on the books of ALION SCIENCE
AND TECHNOLOGY CORPORATION with full power of substitution in the premises.

Date:

	 	 	 
	 

	 	 
	 

	 	(Signature must conform in all respects to name of
	 

	 	Holder as specified on the face of the Note)
	 
	 	 
	Signed in the presence of

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