Document:

exv10w14

 

Exhibit 10.14

Employment Agreement

     This Employment Agreement (“Agreement’) is entered into this ______day of
______, 2002 (the “Effective Date”) by and between Alion Science and
Technology Corporation, a Delaware corporation (“Alion”), and Bahman Atefi of
McLean, Virginia (“Atefi”).

     WHEREAS, IIT Research Institute, an Illinois not for profit corporation
(“IITRI”), and Atefi entered into an Employment Agreement dated December 5,
2001 (the “Prior Employment Agreement’) to serve as President and Chief
Executive Officer of IITRI;

     WHEREAS, Alion, as of the Effective Date, acquired certain business
operations from IITRI and in connection therewith Atefi and IITRI terminated
the Prior Employment Agreement immediately prior to the Effective Date;

     WHEREAS, the Prior
Employment Agreement was terminated pursuant to a Termination of
Employment Agreement and Waiver of Payments Under Retention Incentive
and Deferred Compensation Agreements entered into between IITRI and
the Employee dated as of
                      ,
2002; and

     WHEREAS, Alion and Atefi desire to enter into this new Agreement as of the
date hereof.

     NOW THEREFORE, in consideration of the foregoing recitals and mutual
promises and conditions set forth herein, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Alion and Atefi agree
as follows:

     1.     Appointment
of Atefi as Chief Executive Officer. Atefi hereby acknowledges
and agrees that he has no right to receive benefits, payments or
other compensation in connection with his employment by IITRI or the
termination of the Prior Employment Agreement. Atefi further
acknowledges and agrees that the only benefits or compensation due
Atefi by either IITRI or Alion as of the date hereof are described in
this Agreement. Upon the terms and
subject to the conditions contained herein, Alion hereby appoints and employs
Atefi to serve as the Chief Executive Officer of Alion, and Atefi hereby
accepts such appointment and employment. Atefi shall provide services
hereunder in accordance with the goals, policies, supervision and direction of
Alion’s Board of Directors (the “Board”).

     2.     Commitment and Duties. Atefi agrees to faithfully, industriously, and
with maximum application of his experience, ability and talent, devote his full
working time, attention

 

 

and energy to performing his duties as Alion’s Chief Executive Officer and
such other duties as the Board may from time to time assign.

     Atefi shall be responsible for making the day to day operational decisions
for Alion. Atefi shall supervise and direct the other officers (except for the
Chairman of the Board) and employees of Alion.

     Atefi shall not, without the prior written permission of the Board, render
services of any professional nature to or for any person or firm for
remuneration other than Alion and shall absolutely not engage in any activity
that may be competitive with and adverse to the best interest of Alion. The
making of passive and personal investments and the conduct of private business
affairs shall not be prohibited hereunder.

     3.     Term of Appointment. Unless terminated or extended in accordance with
the provisions hereof, the term of this Agreement and of Atefi’s appointment
hereunder shall commence on the Effective Date and end on the fifth anniversary
of the Effective Date (the “Original Term”). The Original Term of this
Agreement shall automatically renew for successive one year intervals (each a
“Renewal Term”) unless, not later than six (6) months prior to the expiration
of the Original Term or any Renewal Term, Alion provides notice to Atefi of its
intent to not renew the Agreement.

     4. Annual Base Salary. As of the Effective Date, during Atefi’s
employment hereunder, and for all services rendered and all covenants made
hereunder, Alion shall pay Atefi an annual base salary of $390,000 (“Annual
Base Salary”), payable in equal biweekly installments. Atefi’s Annual Base
Salary shall be reviewed annually by the Board and may be increased at the sole
discretion of the Board. Such annual salary review will be in conjunction with
a review by the Board or a committee of the Board of Atefi’s performance.

 

 

     5.     Incentive Compensation.

         
  a. Annual Incentive Compensation. For each Alion fiscal year during
Atefi’s employment hereunder, shall use the goals
set forth on Exhibit A attached hereto and incorporated herein by reference as a guide in awarding annual incentive compensation (“Incentive Compensation”).

         
  Within thirty (30) days of the end of each fiscal year starting with the
fiscal year ending September 30, 2003, the Compensation Committee shall determine the Incentive
Compensation due to Atefi for such fiscal year
based on Alion’s annual internal financial statements, the goals on Exhibit A, and other factors as determined by the Compensation Committee in its sole discretion
(the “Estimated
Incentive Compensation”) and deliver notice of such amount to Atefi. Within
forty-five (45) days following the date of such notice Alion shall pay the
Estimated Incentive Compensation to Atefi.

        
   Upon receipt of Alion’s audited financial statements for the applicable
fiscal year, the Compensation Committee shall have the right to adjust the actual Incentive Compensation due to Atefi
with reference to the goals in Exhibit A and to such audited financial statements (the
“Actual Incentive Compensation”). Within thirty (30) days of receipt of the
audited financial statements, Alion shall compare the Estimated Incentive
Compensation to the Actual Incentive Compensation and provide notice of any
difference to Atefi. To the extent that the Actual Incentive Compensation
exceeds the Estimated Incentive Compensation, Alion shall pay any additional
amounts due and owing to Atefi within fifteen (15) days of delivery of such
notice. To the extent that the Estimated Incentive Compensation exceeds the
Actual Incentive Compensation, Atefi shall pay any such difference to Alion
within fifteen (15) days of delivery of such notice.

           b. Deferred Compensation Plan. Atefi will participate in Alion’s
deferred compensation plan, which will credit Atefi with ____________ ______($ __________________). Atefi has
elected to waive his right to payments to the net amount of

 

 

deferral in his accounts under IITRI’s deferred compensation programs
(that is, the net deferral amount of Atefi’s accounts in the Executive
Deferred Compensation Agreement, attached as Exhibit B to this Agreement, and
in the Retention Agreement, attached as Exhibit C to this Agreement), in
exchange for a corresponding credit of the same amount in the Alion deferred
compensation plan and such net amount, up to a maximum of one million dollars
($1,000,000.00), which shall be deemed invested in the Senior Subordinated
Note (the “Mezzanine Note(s)”) issued to IITRI in connection with the
acquisition and to be credited with the associated warrants. Interest at an
annual rate of twelve percent (12%) shall be deemed credited to Atefi’s
account in the Alion deferred compensation plan, as and when such interest
payments are made by Alion on the Mezzanine Note(s), and be deemed invested in
accordance with the provisions and investment options of the plan. Atefi will
be permitted, under rules provided by Alion, to elect in advance to receive
compensation currently in lieu of an equal amount of such 12% interest
credits. Notwithstanding the foregoing, if Alion terminates Atefi’s
employment with Just Cause or if Atefi terminates his employment with Alion
without Good Reason (as defined in Section 15.a. but, for purposes of this
sentence only, without regard to whether the occurrence of one of the events
is during the Protection Period), then no current payments of interest as
compensation shall be made available and all such interest shall instead be
credited to the Alion deferred compensation plan and paid to Atefi in
accordance with the terms of the Alion deferred compensation plan.

           Upon the later of the sixth anniversary of the Effective Date or the date
the holders of the Mezzanine Note(s) have been paid the principal of their
Mezzanine Note(s), and any accrued but unpaid interest thereon, the Alion
deferred compensation plan shall allow Atefi to withdraw all (but not less
than all) of the fair value of such deemed investment in the

 

 

Mezzanine Note(s) to be paid in the same manner as the holders and to
exercise the associated warrants.

           c. Long Term Incentive Plan. It is presently expected that the Board
will establish a long term incentive plan subject to a maximum limitation,
which may, but is not required to, include special provisions for accelerated
vesting and early payment in the event of termination of employment by Alion
without Just Cause or by Atefi for Good Reason.

     6.     Retention Payment. The parties acknowledge that Atefi has fully vested
in his right to receive the payments under the Retention Agreement entered into
by IITRI and Atefi, attached as Exhibit B to this Agreement, and has waived
receipt of such payments in exchange for a corresponding credit of the same
amount in the deferred compensation plan described in Section 5.b above.

     7.     Automobile Lease. Atefi shall lease an automobile for his use during
the term of his employment with Alion. Alion shall pay and/or reimburse Atefi
up to $1,500 per month maximum in automobile leasing costs for the leased
automobile. Atefi shall obtain and provide Alion with appropriate receipts and
supporting documentation for such fees and costs.

     8. Insurance, Retirement and other Fringe Benefits. During Atefi’s
employment hereunder, subject to Atefi’s qualification therefore, Atefi shall
be entitled to participate in the same health and life insurance plans,
retirement plans and other benefit plans which are or may be from time to time
provided by Alion to its senior officers. Atefi shall also be entitled to such
other fringe benefits, such as vacation and personal leave benefits, which are
or may be from time to time provided by Alion to its senior officers.

 

 

     9.     Club Membership. Alion shall pay the initiation fee (if not heretofore
paid) and membership dues for Atefi for a club chosen by Atefi for business
entertainment purposes, with the approval of the Board.

     10.     Corporate Headquarters. Alion’s corporate headquarters is and shall
remain in Virginia.

     11.     Termination by Alion.

           a. For Just Cause. Alion may terminate Atefi’s employment under this
Agreement at any time for “Just Cause.” If Alion terminates Atefi’s
employment for Just Cause, Atefi shall not be entitled to any further payments
under this Agreement, other than payment for any annual base salary which
Atefi earned prior to such termination but for which has not been paid, and
shall specifically be deemed to have forfeited any Incentive Compensation
which might otherwise be due to him. For purposes of this Agreement, “Just
Cause” means (i) Atefi’s material breach of this Agreement which is not cured
within thirty (30) days after receipt of notice thereof; (ii) Atefi’s theft or
embezzlement of any material property of Alion; (iii) Atefi’s gross negligence
or willful misconduct in performing his duties under this Agreement; (iv)
Atefi’s willful refusal to perform or substantial neglect of any duties under
this Agreement; (v) Atefi’s unauthorized use of Alion’s trade secrets or
Proprietary Information (as defined below); (vi) Atefi’s commission of a
felony which adversely affects Alion’s business, reputation or business
relations. If Atefi is terminated for Just Cause, Atefi shall be entitled to
no future compensation under Sections 4, 5 or 6 above.

           b. Upon Atefi’s Death. Atefi’s employment under this Agreement shall
terminate automatically if Atefi dies. If Atefi’s employment is terminated
due to Atefi’s death, Alion shall pay to Atefi’s heirs or personal
representatives, as the case may be, six monthly

 

 

payments, each equal to one-twelfth (1/12) of Atefi’s then current annual
base salary, beginning the first calendar month after Atefi’s employment
terminates.

           c. Upon Atefi’s Disability. Atefi’s employment under this Agreement
shall terminate automatically if Atefi becomes totally disabled in accordance
with the definition of total disability set forth in Alion’s long term
disability insurance plan. Alion reserves the right to require Atefi to
submit to a medical examination, either physical or mental, by a
fully-licensed physician selected by Alion, at Alion’s sole expense, to
determine whether Atefi is or has become so disabled. If Atefi’s employment
is terminated due to Atefi’s total disability, Alion shall pay to Atefi six
monthly payments, each equal to one-twelfth (1/12) of Atefi’s then current
annual base salary less any long-term disability insurance payments for which
Atefi is or becomes entitled to receive that month, beginning the first
calendar month after Atefi’s employment terminates.

           d. Without Cause. Alion may terminate Atefi’s employment hereunder
without cause, for any reason or no reason, by delivering to Atefi written
notice of the Board’s intent to terminate. If Alion terminates Atefi’s
employment without cause during the term of this Agreement, Alion shall make a
lump sum severance payment to Atefi equal to the greater of: (i) the amount of
Atefi’s Annual Base Salary as of the effective date of such termination over
the unexpired term of this Agreement up to a maximum of three years; or (ii)
an amount equal to Atefi’s Annual Base Salary plus one hundred thousand
dollars ($100,000.00)

     12.     Termination by Atefi. This Agreement may be terminated by Atefi by
giving Alion thirty (30) days advance written notice. If Atefi exercises his
right under this Section to terminate his employment with Alion, he shall
forfeit any right to any further payments under this Agreement other than
payment for any annual base salary which Atefi earned prior to such

 

 

termination but for which has not been paid, and shall specifically be
deemed to have forfeited any Incentive Compensation which might otherwise be
due to him and any future payments under Sections 4, 5 or 6 above.

     13.     Special Change of Control Severance Benefits.

           a. If eligibility for severance benefits from Alion’s successor or assign
(or any of its respective affiliates) is established pursuant to Section 15
below (the “Severance Benefits”), the Severance Benefits payable to Atefi
shall, in lieu of the benefits otherwise be payable under Section 11, consist
of the following: (i) a lump sum severance payment equal to the greater of (a)
Atefi’s base pay as of the Termination Date (as defined in Section 15 below)
over the unexpired term of this Agreement up to a maximum of three (3) years,
or (b) an amount equal to one (1) year base salary plus one hundred thousand
dollars ($100,000.00) minimum incentive compensation; and (ii) continued
eligibility to participate throughout the Severance Period (as defined below)
in Alion’s successor’s or assigns’ insured welfare benefit plans and policies
(including, without limitation, health, dental, vision, disability and term
life insurance benefits) at the same level of employee cost and at the same
level of coverage provided to Atefi as of the Termination Date, it being
understood that Alion’s successor or assign has and reserves the right to
amend, modify or replace such plans or policies to provide substantially
similar insured coverage during the Severance Period. For purposes of Alion’s
successor or assigns welfare benefit plans and policies subject to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”),
Atefi’s “qualifying event” for COBRA purposes shall be the Termination Date.

 

 

           b. Atefi shall enjoy continued entitlement to such other accrued or
earned and vested benefits provided under Alion’s successor or assigns’ plans,
programs, policies and practices as of the Termination Date.

     14.     Severance Period. The Severance Period shall begin on the effective
date of termination of Atefi’s employment under the conditions specified in
Section 15, and end on the last day of the thirty-six (36) month period
beginning on the Termination Date.

     15.     Eligibility for Severance Benefits. If Atefi terminates employment
(other than on account of circumstances described in Section 16 below) with any
successor or assign (or any of their respective affiliates) of Alion, other
than an entity which is owned in whole or in part by an employee stock
ownership plan, at any time during the twenty-four (24) month period beginning
on the effective date of a Change in Control, as defined in Section 18 of this
Agreement (the “Protection Period”), he shall be entitled to the Severance
Benefits described in Sections 13, 14 and this 15, as follows: If during the
Protection Period, Atefi terminates his employment for Good Reason (as defined
below) by delivering to the successor or assign of Alion (or its respective
affiliate), as applicable, each no later than thirty (30) days after learning
of the occurrence of an event constituting Good Reason: (i) a Preliminary
Notice of Good Reason (as defined below); and (ii) a Notice of Termination (as
defined below); Atefi shall have the right, in his sole and reasonable
discretion, to commence Severance Benefits. Any termination of Atefi’s
employment that qualifies for Severance Benefits under Sections 13, 14 and 15
of this Agreement shall supersede and take precedence over the provisions of
Section 12. For purposes of this Agreement, the following terms shall have the
respective meanings:

           a. “Good Reason” shall only result upon the occurrence, without Atefi’s
prior written consent, of one or more of the following events, as determined
by Atefi in good faith,

 

 

during the Protection Period: (i) Atefi’s authority or responsibility has
materially diminished as compared to Atefi’s authority and responsibility in
effect immediately prior to a Change in Control; (ii) Atefi has been assigned
duties inconsistent with his position, responsibility and status with Alion
immediately prior to the Protection Period; (iii) there has been an adverse
change in Atefi’s title or office as in effect immediately prior to the
Protection Period; (iv) Atefi’s base pay or incentive compensation has been
reduced; or (v) Atefi’s principal work location is more than ten (10) miles
away from the principal work location as immediately prior to the Protection
Period; provided, however, that “Good Reason” shall not include (x) acts not
taken in bad faith that are cured by Alion’s successor or assign in all
respects, including without limitation restoration of all back pay and
incentive compensation through the Termination Date, not later than thirty
(30) days from the date of receipt by the successor or assign of Alion (or its
respective affiliate), as applicable, of a written notice from Atefi
identifying in reasonable detail the act or acts constituting “Good Reason” (a
“Preliminary Notice of Good Reason”), or (y) acts for which Atefi does not
provide a Preliminary Notice of Good Reason within thirty (30) days of
learning of the occurrence of the event constituting Good Reason.

           b. “Notice of Termination” shall mean a notice that indicates the
specific termination provision relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of Atefi’s employment under the provision so indicated.

           c. “Termination Date” shall mean the date specified in the Notice of
Termination for termination of Atefi’s employment under this Agreement.

     16.     Ineligibility for Severance Benefits. Notwithstanding any other
provision under this Agreement, Atefi shall not be entitled to receive
Severance Benefits in the event that: (i) Alion’s

 

 

successor or assign (or any of its respective affiliates) terminates
Atefi’s employment for Just Cause (as defined in Section 11.a); (ii) Atefi dies
(in which case the terms of Section 11.b shall apply); (iii) Atefi is
determined to be totally and permanently disabled (in which case the terms of
Section 11.c shall apply); (iv) Alion’s successor or assign (or any of its
respective affiliates) terminates Atefi’s employment without cause (in which
case the terms of Section 11.d shall apply); or (v) Atefi resigns other than
for Good Reason (in which case Section 12 applies). In any such event, Atefi,
in addition to any benefits payable in accordance with this Agreement, shall be
entitled only to his salary and benefits accrued or earned and vested under
other plans, programs, policies, practices and coverages of Alion’s successor
or assign (or any of its respective affiliates).

     17.     Subsequent Employment. Following termination of employment, Atefi
shall not be required to perform any duties for Alion’s successor or assign (or
any of its respective affiliates). In the event that Atefi secures other
employment during the Severance Period following termination under the
circumstances outlined in Section 15, and such employment includes benefits
under insured welfare benefit plans and policies at the same levels as
described in Section 13.a (“Corresponding Benefits”), then any requirements
otherwise applicable under this Agreement to provide such benefits shall be
reduced by an amount equal to such Corresponding Benefits.

     18.     Change in Control. For purposes of this Agreement, a “Change of
Control” shall mean and shall be effective upon the closing date of: (i) the
dissolution or liquidation of Alion; (ii) the merger or consolidation of Alion
with any other corporation, foundation, association or other entity; (iii) the
amendment of Alion’s corporate documents to grant a party other than the Alion
Employee Stock Ownership Plan, the right to designate, elect or remove a
majority of

 

 

Alion’s voting directors; or (iv) the transfer to another corporation,
foundation, association or other entity in a sale, lease, exchange or other
similar transfer (in a single transaction or in a series of related
transactions) of all or substantially all of the assets of Alion.

     19.     Surrender of Property. Upon the termination of this Agreement or at
any time upon Alion’s request, Atefi shall promptly surrender to Alion all
property provided to him for use in performing his duties under this Agreement,
including, but not limited to, all documents, drafts, notes, memoranda,
research files, solicitation information and files, client or customer lists
and files, financial information, computer files, hardware, software, records
and any other materials relating in any way to Alion.

     20.     Representations and Warranties. Atefi represents and warrants to
Alion that he has had a recent physical examination and that either he is in
good health or he has disclosed any major health problems to Alion.

     21. Proprietary Information. Except as may be required by court order or
in connection with the good faith performance of his duties hereunder, Atefi
agrees to keep secret and confidential indefinitely and not to disclose to any
other person, firm or entity, or to use in any way, any Proprietary Information
of Alion which is acquired by or disclosed to Atefi during the course of his
employment with Alion. For purposes of this Agreement, the term “Proprietary
Information” means any non-public information concerning Alion or its
affiliates, including, without limitation, non-public information concerning
its client or customer lists, solicitation and contact lists, business plans
and strategies, marketing and solicitation techniques, research information,
project data and information, or any other information which gives or may give
Alion and advantage against its competitors.

 

 

     22.     Non-Competition; Non-Solicitation. Atefi acknowledges and recognizes
the highly competitive nature of the business of Alion and Alion’s subsidiaries
and accordingly agree as follows:

           a. During the Term and the Restricted Period (as defined in Section
22.f.), Atefi will not knowingly (after due inquiry), whether on Atefi’s own
behalf or on behalf of or in conjunction with any person, company, business
entity or other organization whatsoever, directly or indirectly solicit or
assist in soliciting in competition with Alion, the business of any customer
or prospective customer of Alion of which Atefi is aware at the time of such
termination.

           b. During the Restricted Period, Atefi will not directly or indirectly:
(i) engage in any services either individually or on behalf of any person that
compete with any material business of Alion or Alion’s subsidiaries as
conducted at the time Atefi ceases to be employed by Alion (including, without
limitation, businesses which Alion or Alion’s subsidiaries had at such time
specific plans to conduct in the future and as to which plans Atefi is aware
at the time Atefi ceases to be employed by Alion) in the United States (a
“Competitive Business”); (ii) acquire a financial interest in, or otherwise
become actively involved with, any Competitive Business, directly or
indirectly, as an individual, partner, shareholder, officer, director,
principal, agent, trustee or consultant, except to the extent that such
financial interest is a component of compensation or benefits payable pursuant
to subsequent employment not otherwise prohibited by this Agreement; or (iii)
interfere with, or attempt to interfere with, business relationships formed at
or prior to the time Atefi ceases to be employed by Alion between Alion or any
of Alion’s subsidiaries and customers, clients, suppliers of Alion or Alion’s
subsidiaries, as to which Atefi is aware at the time he ceases to be employed
by Alion.

 

 

           c. Notwithstanding anything to the contrary in this Agreement, Atefi may,
directly or indirectly own, solely as an investment, securities of any person
engaged in the business of Alion or Alion’s subsidiaries which are publicly
traded on a national or regional stock exchange or on the over-the-counter
market, or for which such person is required to file annual and quarterly
reports with the U.S. Securities and Exchange Commission in accordance with
the Securities Exchange Act of 1934, as amended, if Atefi (i) is not a
controlling person of, or a member of a group which controls, such person and
(ii) does not, directly or indirectly, own five percent (5%) or more of any
class of securities of such person.

           d. During the Restricted Period, Atefi will not, whether on Atefi’s own
behalf or on behalf of or in conjunction with any person, company, business
entity or other organization whatsoever, directly or indirectly: (i) solicit
or encourage any employee of Alion or any of Alion’s affiliates to leave the
employment of Alion or such affiliate, provided that such employee was
employed (or had an offer of employment) with Alion at the time Atefi ceases
to be employed by Alion; (ii) without Alion’s written permission, hire any
such employee who was employed by Alion or Alion’s affiliates as of the
effective date of Atefi’s termination of employment with Alion or who left
employment with Alion or Alion’s affiliates coincident with, or within three
(3) months prior to or after, the termination of Atefi’s employment with
Alion; or (iii) encourage to cease to work with Alion or Alion’s affiliates
any consultant then under contract with Alion or Alion’s affiliates.

           e. It is expressly understood and agreed that although Atefi and Alion
consider the restrictions contained in this Section 22(e) to be reasonable, if
a final judicial determination is made by a court of competent jurisdiction
that the time or territory or any other restriction

 

 

contained in this letter agreement is an unenforceable restriction
against you, the provisions of this Agreement will not be rendered void but
will be deemed amended to apply as to such maximum time and territory and to
such maximum extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction finds that
any restriction contained in this letter agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding will
not affect the enforceability of any of the other restrictions contained
herein.

           f. “Restricted Period” shall mean, following the date of Atefi’s
termination of Employment with Alion, the greater of: (i) the unexpired term
of this Agreement, up to a maximum of three (3) years; or (ii) one year;
provided, however, that if Atefi’s employment with Alion is terminated by
Alion for Just Cause, then the “Restricted Period” shall mean the two (2)
years following such termination.

     23. Reasonable Restrictions. Atefi understands that the provisions of
this Section 23 may limit Atefi’s ability to earn a livelihood in a business
competitive with the business of Alion and its subsidiaries but nevertheless
Atefi agrees and hereby acknowledges that: (i) such provisions do not impose a
greater restraint than is necessary to protect the goodwill or other business
interests of Alion and its subsidiaries; (ii) such provisions contain
reasonable limitations as to time and scope of activity to be restrained; (iii)
such provisions are not harmful to the general public; (iv) such provisions are
not unduly burdensome to you; and (v) the consideration provided hereunder is
sufficient to compensate Atefi for the restrictions contained in such
provisions. In consideration thereof and in light of Atefi’s education, skills
and abilities, Atefi agrees that Atefi will not assert in any forum that such
provisions prevents Atefi from earning a living.

 

 

     24.     Survival of Covenants. The covenants set forth in Sections 21 and 22
hereof, shall survive the termination of this Agreement according to each of
their express terms.

     25.     Remedies. Atefi acknowledges that compliance with the provisions of
Sections 21 and 22 hereof is necessary to protect the business and good will of
Alion, that Alion would be irreparably injured by a breach of Sections 21 or 22
and that money damages may not be an adequate remedy therefore. Consequently,
Atefi agrees that Alion, in addition to any other remedies available to it
shall be entitled to an injunction restraining Atefi from any actual or
threatened breach of Sections 21 or 22 or to any other appropriate equitable
remedy, without any bond or other security being required.

     26.     Arbitration. Any controversy or claim arising out of, or relating to
this Agreement, or its breach, shall be settled by arbitration in the City of
McLean, Virginia in accordance with the then governing rules of the American
Arbitration Association. Judgment upon the award rendered may be entered and
endorsed in any court of competent jurisdiction.

     27.     Severability; Enforceability. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid, unenforceable or void,
such provision shall be enforced to the fullest extend permitted by law or, if
necessary, severed in its entirety, and the remainder of this Agreement shall
continue in full force and effect as if that provision, or the offending
portion thereof, had never been included.

     28.     Notices. Any notice, demand or other communication hereunder shall be
effective upon delivery either personally (including delivery by messenger or
courier service) or by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:

           a. If to Alion:

	 
	Alion Science and Technology Corporation

 

 

	 
	1750 Tysons Boulevard, Suite 1300
	McLean, Virginia 22102
	Attn: General Counsel

           b. If to Atefi:

	 
	Bahman Atefi
	8745 Old Dominion Drive
	McLean, Virginia 22102

Or at any other address of which written notice has been provided pursuant to
this Section 28.

     29.     Amendments; Waivers. This Agreement may not be modified or amended
except in a writing signed by both parties. Either party may waive the other
party’s compliance with provision of this Agreement, but such waiver shall be
effective only if set forth in a writing signed by both parties. Any waiver of
a particular provision in any one or more instance shall not operate as a
waiver of, or estopped with respect to, any subsequent compliance or failure to
comply with that or any other provision hereof. Furthermore, any party’s
failure to exercise or delay in exercising any right, remedy or power
hereunder, in one or more instances, shall not preclude, waive or estop any
subsequent exercise of such right, remedy or power.

     30.     Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of Alion and its successors and assigns and upon
Atefi and his heirs, legatees and personal representatives. Atefi shall not
assign any of his interest in or obligations under this Agreement without
Alion’s prior written consent, which may be withheld for any reason in Alion’s
sole discretion.

     31. Governing Law. This Agreement shall be governed by and construed in
accordance with Virginia law. Alion and Atefi hereby consent to the Virginia’
courts jurisdiction over any disputes relating to or arising out of this
Agreement and Atefi’s employment and/or termination with Alion, and expressly
waive any objection to such forum based on jurisdiction or venue, including
forum non conveniens.

 

 

     32.     Entire Agreement. This Agreement constitutes the entire agreement and
understanding, oral or written, between Alion and Atefi relating to its subject
matters contained herein.

     33.     Expenses. Atefi shall be reimbursed for reasonable expenses that he
incurs in connection with Alion’s business. Such expenses shall be documented
by Atefi in accordance with procedures established by Alion.

     34. Indemnification. Alion shall indemnify, defend, hold and save Atefi,
his heirs, administrators or executors harmless from any and all actions and
causes of actions, claims, demands, liabilities, losses, costs, damages or
expenses of whatsoever kind of nature, including judgments, interest and
attorney’s fees, that Atefi, his heirs, administrators or executors may sustain
or incur subsequent to the date of this Agreement or become subject to by
reason of any claim or claims, resulting from Atefi’s execution of the terms
and conditions of this Agreement, except for Atefi’s fraudulent or criminal
acts or omissions or gross negligence except as prohibited by applicable law.

 

 

     IN WITNESS WHEREOF, the duly-authorized representative of Alion and Bahman
Atefi hereby execute this Agreement by their own free act and deed, as follows:

	 	 	 
	BAHMAN ATEFI	 	
ALION SCIENCE AND TECHNOLOGY
	 	 	
CORPORATION
	 	 	 
	 	 	 
	
	 	

 
	 	 	
Title: _______________________________

 

 

Exhibit A

CEO Annual Incentive Schedule

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Fiscal Year	 	 	 	 
	EBITDA ($M)	 	2002	 	2003	 	2004	 	2005
	
	 	

	11.0
	 	 	 	 	 	$	100,000	 	 	 	 	 	 	 	 	 
	11.5
	 	 	 	 	 	$	100,000	 	 	 	 	 	 	 	 	 
	12.0
	 	 	 	 	 	$	150,000	 	 	 	 	 	 	 	 	 
	12.5
	 	 	 	 	 	$	150,000	 	 	 	 	 	 	 	 	 
	13.0
	 	 	 	 	 	$	225,000	 	 	$	100,000	 	 	 	 	 
	13.5
	 	 	 	 	 	$	225,000	 	 	$	100,000	 	 	 	 	 
	14.0
	 	 	 	 	 	$	275,000	 	 	$	150,000	 	 	 	 	 
	14.5
	 	 	 	 	 	$	275,000	 	 	$	150,000	 	 	 	 	 
	15.0
	 	 	 	 	 	$	325,000	 	 	$	225,000	 	 	$	100,000	 
	15.5
	 	 	 	 	 	$	350,000	 	 	$	225,000	 	 	$	100,000	 
	16.0
	 	 	 	 	 	$	375,000	 	 	$	275,000	 	 	$	150,000	 
	16.5
	 	 	 	 	 	$	400,000	 	 	$	275,000	 	 	$	150,000	 
	17.0
	 	 	 	 	 	$	425,000	 	 	$	375,000	 	 	$	200,000	 
	17.5
	 	 	 	 	 	 	 	 	 	$	400,000	 	 	$	200,000	 
	18.0
	 	 	 	 	 	 	 	 	 	$	425,000	 	 	$	250,000	 
	18.5
	 	 	 	 	 	 	 	 	 	$	450,000	 	 	$	250,000	 
	19.0
	 	 	 	 	 	 	 	 	 	$	475,000	 	 	$	300,000	 
	19.5
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	300,000	 
	20.0
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	450,000	 
	20.5
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	475,000	 
	21.0
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	500,000	 

1.     
Annual incentive compensation awards and all interpretations and determinations thereunder
are administered and determined by the Compensation Committee of the Board (the “Committee”),
in its sole discretion. The Committee will have authority to determine EBITDA,
which will generally be determined in accordance with generally accepted
accounting principles but before taking into account expenses incurred by Alion
with respect to Alion’s Stock Appreciation Rights Plan. The Committee may
exclude (or include) extraordinary items or otherwise adjust the calculation of
EBITDA and/or the performance targets to take into account extraordinary events
(which might include for example, without limitation, dispositions or
acquisitions of business units, extraordinary gains or losses, etc.).

2.     
Annual incentive compensation payable may, in the sole discretion of the Compensation Committee, be made on a pro-rata basis,
according to the incremental difference between EBITDA target numbers for each
of the following:

	 	a.	 	For Fiscal Year 2003, EBITDA of the company below $15.0 million;
	 
	 	b.	 	For Fiscal Year 2004, EBITDA of the company below $17.0 million; and

 

 

	 	c.	 	For Fiscal Year 2005, EBITDA of the company below $20.0 million.

 

 

Exhibit B

[See attached copy of Executive Deferred Compensation Agreement]

 

 

Exhibit C

[See attached copy of Retention Agreement]exv10w15

 

Exhibit 10.15

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made
this ______day of ______, 2002, by and between Alion
Science and Technology Corporation, a Delaware corporation
(the “Company”) and Stacy Mendler (the “Employee”).

     WHEREAS, IIT Research Institute, an Illinois not-for-profit corporation
(“IITRI”) and Employee entered into an Employment Agreement dated December 31,
2001 (the “Prior Employment Agreement’) to serve as Senior Vice President and
Chief Administrative Officer of IITRI effective October 1, 2000;

     WHEREAS, the Company, as of the Effective Date, acquired certain business
operations of IITRI and in connection therewith Employee and IITRI terminated
the Prior Employment Agreement immediately prior to the Effective Date;

     WHEREAS, the Prior
Employment Agreement was terminated pursuant to a Termination of
Employment Agreement and Waiver of Payments entered into between
IITRI and the Employee dated as of
                          , 2002; and

     WHEREAS, the Company and Employee desire to enter into this new Agreement
as of the date hereof.

     NOW THEREFORE, in consideration of the foregoing recitals and mutual
promises and conditions set forth herein, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Employee agree as follows:

     1.      Employment.
The Employee hereby acknowledges and agrees that he/she has no
right to receive benefits, payments or other compensation in
connection with his/her employment by IITRI or the termination of the
Prior Employment Agreement. The Employee further acknowledges and
agrees that the only benefits or compensation due the Employee by
either IITRI or the Company as of the date hereof are described in
this Agreement. Upon the terms and subject to the conditions contained
herein, the Company hereby employs the Employee as Senior Vice President and
Chief Administrative Officer, and agrees to continue the Employee in that
position (or in any other position upon which the parties mutually agree)
during the term of this Agreement unless terminated earlier in accordance with
Sections 13 or 16 of this Agreement (“Term and Termination”).

     2.      Definitions.

             A.      “Company” means Alion Science and Technology Corporation, its
subsidiaries, affiliates, successors and assigns.

             B.      “Company Proprietary Information” means any information, data, computer
software, invention, design, idea, concept, specification, formula, device,
equipment, plan, process, document or material, whether tangible or intangible
(including without limitation information relating to marketing strategies or
plans, pricing policies or plans, proposals, lists of customers or clients and
any other information that, in any way whatsoever, pertains to marketing or
sales), which is a trade secret or proprietary in nature and which: (i) belongs
to or is in the possession of the Company or any client or customer of the
Company; or (ii) is learned or developed, in whole or in part, by Employee or
otherwise comes into Employee’s possession, control or knowledge in connection
with, or arising out of Employee’s employment by the Company.

 

 

             C.      “Client(s)” and/or “Customer(s)” means all entities with whom the
Company has a contract or is offering or proposing to enter into a contract,
including without limitation, federal government agencies, whether defense or
civil.

     3.      Compensation.

          
   A.      The Employee’s initial
base salary during the term of this Agreement
shall be Two Hundred Thousand Dollars and No/100 Cents ($200,000.00) per
annum (“Annual Base Salary”). During the term of this Agreement, the Company
shall not reduce Employee’s initial base salary without the consent of both
parties. Commencing with the Company’s first performance review cycle after
the effective date of employment, the Employee shall participate in the
Company’s annual performance review process, at which time the Company shall
review Employee’s performance and increase total annual compensation as deemed
appropriate by the Company. In addition, the Employee will be eligible to
participate in the Company’s Incentive Compensation Plan for each Company
fiscal year of employment to an extent consistent with similarly placed
management of the Company, and provided that Employee is an employee in good
standing of the Company at the time of each annual performance review.

             B.      The Employee shall also be eligible to participate in the Company’s
Stock Appreciation Rights Plan and the Deferred Compensation Plan to an extent
consistent with similarly placed management of the Company; provided, however,
that both adoption of the Stock Appreciation Rights Plan and the Deferred
Compensation Plan, and Employee’s participation therein, are subject to
approval by the Company’s Board of Directors.

             C.      The Company shall lease and insure, for the use and benefit of
Employee, an automobile for his or her use during the term of employment with
the Company. Any automobile lease provided and/or executed by Company shall
have a maximum monthly reimbursement allowance of one thousand dollars
($1,000).

     4.      Long-Term Incentive Plan. It is presently expected that the Board of
Directors of the Company will establish a long term incentive plan subject to a
maximum limitation, which may, but is not required to, include special
provisions for accelerated vesting and early payment in the event of
termination of employment by Company without Cause or by Employee for Good
Reason. The Employee shall also be eligible to participate in such long-term
incentive plan to an extent consistent with similarly placed management of the
Company; provided, however, that adoption of such long-term incentive plan, and
Employee’s participation therein, is subject to approval by the Company’s Board
of Directors.

     5.      Retention Payment. Company and Employee acknowledge that Employee has
fully vested in his or her right to receive payments under the Retention
Incentive Agreement dated September 1, 2001 entered into by IITRI and
Employee, attached as Exhibit A to this Agreement, and that such Retention
Incentive Agreement has been assigned to, and assumed by, the Company
and remains in effect in its original form and is incorporated
herein by reference.

     6.      Duties.

-2-

 

             A.      During the term of this Agreement, the Employee shall serve as the
Senior Vice President and Chief Administrative Officer of the Company. The
Employee shall report directly to the Chief Executive Officer of the Company.
He or she shall have such powers and shall perform such duties as are incident
and customary to his or her office. During the term of this Agreement, the
Employee shall serve in any additional offices or positions of the Company
which are pertinent and customary to his or her office, and to which he or she
may be elected or appointed by appropriate action of the Company.

             B.      The Employee shall devote his or her full time, attention, skill, and
energy to the performance of his or her duties under this Agreement, and shall
comply with all reasonable professional requests of the Company; provided,
however, that the Employee will be permitted to engage in and manage personal
investments (subject to the terms of Section 11 below) and to participate in
community and charitable affairs, so long as such activities do not interfere
with his or her duties under this Agreement. The Employee shall be
headquartered in the Company office currently located at 1750 Tysons Boulevard,
Suite 1300, McLean, Virginia 22102-4213.

             C.      The Company agrees to maintain Employee’s status as a Senior Vice
President as long as the Employee’s obligations under this Agreement are
fulfilled and subject to the continued approval by the Company’s Board of
Directors.

             D.      The Company shall not, during the Term of this Agreement, demote the
Employee or reduce his or her responsibilities as set forth in this Section 6,
or otherwise reduce his or her stature in the Company except as authorized
under this Agreement.

             E.      Employee shall conduct all assigned duties in compliance with the Alion
Science and Technology Corporation Code of Ethics, Conduct, and Responsibility
and all other Company policies and procedures then in effect, and shall
acknowledge and execute all documents necessary to comply and/or evidence
compliance with such codes, policies and procedures.

             F.      The Company shall maintain in force, at all times during the term of
this Agreement, Directors and Officers Liability insurance that covers Employee
against all legal liabilities that may arise and are incurred in the good faith
performance of duties as a member of the Company’s management.

     7.      Vacation, Holidays, and Sick Leave. The Employee shall be entitled to
paid vacations, holidays, and sick leave in accordance with the Company’s
policies, as in effect from time to time.

     8.      Expenses. The Company shall reimburse the Employee for all reasonable
business-related expenses incurred in connection with his or her duties on
behalf of the Company in a manner consistent with current Company policies and
procedures.

     9.      Fringe Benefits. During the term of this Agreement, the Employee shall
be entitled to participate in any and all fringe benefit plans, programs and
practices sponsored by the Company for the benefit of its employees, under the
normal conditions for all such employees (including contributions, if any, by
Employee, to the cost of such plans if contributions by the employee is normal)
and shall be

-3-

 

furnished with other services and perquisites appropriate to his or her
position, including without limitation life insurance, health insurance, vision
insurance, dental insurance, and disability insurance.

     10.      Nondisclosure of Proprietary Company Information. During the term of
this Agreement and for a period of two (2) years thereafter, Employee agrees:
(a) to treat all Company Proprietary Information in a secret and confidential
manner, take all reasonable steps to maintain such secrecy, and comply with all
applicable procedures established by the Company with respect to maintaining
the secrecy and confidentiality of Company Proprietary Information; (b) to use
Company Proprietary Information only as necessary and proper in the performance
of Employee’s duties as an employee of the Company; and (c) except as required
in this Section, to not directly or indirectly, without the written consent of
the Company, reproduce, copy, disseminate, publish, disclose, provide or
otherwise make available to any person, firm, corporation, agency or other
entity, any Company Proprietary Information. Under no circumstances shall
Employee use, directly or indirectly, any such Company Proprietary Information
for his or her personal gain or profit.

     11.      Non-Competition; Non-Solicitation. Employee acknowledges and
recognizes the highly competitive nature of the business of Alion and Alion’s
subsidiaries and accordingly agree as follows:

             A.      During the Term and the Restricted Period (as defined in Section
11.G), Employee will not knowingly (after due inquiry), whether on Employee’s
own behalf or on behalf of or in conjunction with any person, company,
business entity or other organization whatsoever, directly or indirectly
solicit or assist in soliciting in competition with Alion, the business of any
customer or prospective customer of Alion of which Employee is aware at the
time of such termination.

             B.      During the Restricted Period, Employee will not directly or
indirectly: (i) engage in any services either individually or on behalf of any
person that compete with any material business of Alion or Alion’s
subsidiaries as conducted at the time Employee ceases to be employed by Alion
(including, without limitation, businesses which Alion or Alion’s subsidiaries
had at such time specific plans to conduct in the future and as to which plans
Employee is aware at the time Employee ceases to be employed by Alion) in the
United States (a “Competitive Business”); (ii) acquire a financial interest
in, or otherwise become actively involved with, any Competitive Business,
directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant, except to the extent that
such financial interest is a component of compensation or benefits payable
pursuant to subsequent employment not otherwise prohibited by this Agreement;
or (iii) interfere with, or attempt to interfere with, business relationships
formed at or prior to the time Employee ceases to be employed by Alion between
Alion or any of Alion’s subsidiaries and customers, clients, suppliers of
Alion or Alion’s subsidiaries, as to which Employee is aware at the time he
ceases to be employed by Alion.

             C.      Notwithstanding anything to the contrary in this Agreement, Employee
may, directly or indirectly own, solely as an investment, securities of any
person engaged in the business of Alion or Alion’s subsidiaries which are
publicly traded on a national or regional stock exchange or on the
over-the-counter market, or for which such person is required to file annual
and quarterly reports with the

-4-

 

U.S. Securities and Exchange Commission in accordance with the Securities
Exchange Act of 1934, as amended, if Employee: (i) is not a controlling person
of, or a member of a group which controls, such person; and (ii) does not,
directly or indirectly, own five percent (5%) or more of any class of
securities of such person.

             D.      During the Restricted Period, Employee will not, whether on Employee’s
own behalf or on behalf of or in conjunction with any person, company,
business entity or other organization whatsoever, directly or indirectly: (i)
solicit or encourage any employee of Alion or any of Alion’s affiliates to
leave the employment of Alion or such affiliate, provided that such employee
was employed (or had an offer of employment) with Alion at the time Employee
ceases to be employed by Alion; (ii) without Alion’s written permission, hire
any such employee who was employed by Alion or Alion’s affiliates as of the
effective date of Employee’s termination of employment with Alion or who left
employment with Alion or Alion’s affiliates coincident with, or within three
(3) months prior to or after, the termination of Employee’s employment with
Alion; or (iii) encourage to cease to work with Alion or Alion’s affiliates
any consultant then under contract with Alion or Alion’s affiliates.

             E.      It is expressly understood and agreed that although Employee and Alion
consider the restrictions contained in this Section 11.E to be reasonable, if
a final judicial determination is made by a court of competent jurisdiction
that the time or territory or any other restriction contained in this letter
agreement is an unenforceable restriction against you, the provisions of this
Agreement will not be rendered void but will be deemed amended to apply as to
such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any
court of competent jurisdiction finds that any restriction contained in this
letter agreement is unenforceable, and such restriction cannot be amended so
as to make it enforceable, such finding will not affect the enforceability of
any of the other restrictions contained herein.

             F.      Throughout the Restricted Period, the Company shall continue to
furnish to Employee the pre-selected health, dental, vision, disability and
life insurance coverage through the Company’s insured welfare benefit plans
and policies, and shall pay the employer’s contribution for such coverages.

             G.      “Restricted Period” shall mean, following the date of Employee’s
termination of Employment with Alion, the greater of: (i) the unexpired term
of this Agreement, up to a maximum of two (2) years; or (ii) one year.

     12.      Reasonable Restrictions. Employee understands that the provisions of
this Section 12 may limit Employee’s ability to earn a livelihood in a business
competitive with the business of Alion and its subsidiaries but nevertheless
Employee agrees and hereby acknowledges that: (i) such provisions do not impose
a greater restraint than is necessary to protect the goodwill or other business
interests of Alion and its subsidiaries; (ii) such provisions contain
reasonable limitations as to time and scope of activity to be restrained; (iii)
such provisions are not harmful to the general public; (iv) such provisions are
not unduly burdensome to you; and (v) the consideration provided hereunder is
sufficient to compensate Employee

-5-

 

for the restrictions contained in such provisions. In consideration
thereof and in light of Employee’s education, skills and abilities, Employee
agrees that Employee will not assert in any forum that such provisions prevents
Employee from earning a living.

     13.      Term and Termination.

             A.      Term. Unless terminated or extended in accordance with the provisions
hereof, the term of this agreement shall commence on the Effective Date and end
the fifth anniversary of the Effective Date (“the Original Term”). The
Original Term of this Agreement shall automatically renew for successive
one-year intervals (“Renewal Term”) unless, not later than six (6) months prior
to the expiration of the Original Term or any Renewal Term, Alion provides
notice to Employee of its intent to not renew the Agreement.

             B.      Termination for Cause. Upon the issue of a written notice of
termination, the Company may terminate this Agreement for Cause and all
obligations of the Company to Employee shall cease on the date of termination.
For purposes of this Agreement, “Cause” is defined as the occurrence of one of
the following: (a) the Employee’s breach of any material provision of this
Agreement; (b) any act, failure to act, series of acts or failures to act, or
course of conduct of Employee constituting reckless, willful, or criminal
misconduct in the performance of duties specified in this Agreement; (c) any
failure to perform, or gross negligence or incompetence in the performance of,
the duties specified in this Agreement; or (d) the Employee’s commission of a
crime involving conversion, misappropriation, larceny, theft, fraud,
dishonesty, embezzlement, moral turpitude or any other felony, regardless of
whether such crime involves the Company. Following an initial determination by
the President that Cause exists, the President shall provide Employee with
written notice of the details of the alleged Cause and opportunity to a hearing
before the Chairman of the Board of Directors to contest the validity of the
initial determination. The President, with the concurrence of the Chairman of
the Board of Directors, shall thereafter make a final determination as to
whether Cause exists.

             C.      Termination Without Cause. The Company may terminate Employee’s
employment hereunder without cause, for any reason or no reason, by delivering
to Employee written notice of the Board’s intent to terminate. If the Company
terminates Employee’s employment without cause during the term of this
Agreement, the Company shall make a lump-sum severance payment to Employee
equal to the greater of: (i) the amount of Employee’s Annual Base Salary as of
the effective date of such termination over the unexpired Term of this
Agreement up to a maximum of two (2) years; or (ii) an amount equal to one
(1) year of Employee’s current Annual Base Salary. In addition, Employee shall
enjoy continued entitlement to such other accrued or earned and vested benefits
provided under the Company’s successor or assigns’ plans, programs, policies
and practices as of the effective date of termination without cause. Employee
shall have no further rights under this Agreement to future compensation or
benefits, including payments under the Company’s Incentive Compensation Plan,
Stock Appreciation Rights Plan and any long-term incentive plan (if established
by the Alion Board of Directors), except to extent provided for in such plans
or to the extent provided for in Section 11.F of this Agreement.

-6-

 

             D.      Voluntary Termination. Any resignation from employment submitted by
Employee to the Company, regardless of the reason for such resignation, shall
be deemed a Voluntary Termination. Employee shall give the Company not less
than thirty (30) days notice prior to the effective date of a Voluntary
Termination.

             E.      Payment Upon Termination for Cause or Voluntary Termination. In the
event of any Termination for Cause or Voluntary Termination, the Company shall
have no further obligations to Employee under this Agreement, including without
limitation payment of future compensation or benefits; provided, however, that
termination for Cause shall not affect the Company’s obligations to pay
Employee any salary and expense reimbursement, and provide any benefits,
accrued and unpaid by the Company as of the effective date of termination.

             F.      Death or Total Disability. In the event of Employee’s death or total
disability (as defined in the Company’s long term disability insurance plan),
Employee’s employment under this Agreement shall terminate immediately. If
terminated due to Employee’s death, the Company shall pay to Employee’s heir or
personal representatives, as the case may be, six (6) monthly payments, each
equal to one-twelfth (1/12) of Employee’s then-current salary, commencing with
the first calendar month after termination. If terminated due to Employee’s
total disability, the Company shall pay to Employee six (6) monthly payments,
each equal to one-twelfth (1/12) of Employee’s then-current salary less any
payments under the Company’s long term disability insurance plan that Employee
receives or is entitled to receive in each such month, commencing with the
first calendar month after termination.

     14.      Severance Benefits.

             A.      If eligibility for severance benefits from the Company’s successor or
assign (or any of its respective affiliates) is established (pursuant to
Section 16 below) (the “Severance Benefits”), the Severance Benefits payable to
Employee shall, in lieu of the benefits otherwise payable under Section 13,
consist of the following: (i) a lump sum severance payment equal to the greater
of (a) the amount of Employee’s Annual Base Salary as of the Termination Date
over the unexpired Term of this Agreement up to a maximum of two (2) years or
(b) an amount equal to one (1) year of Employee’s current Annual Base Salary;
and (ii) continued eligibility to participate throughout the Severance Period
in the Company’s successor’s or assigns’ insured welfare benefit plans and
policies (including, without limitation, health, dental, vision, disability and
term life insurance benefits) at the same level of employee cost and at the
same level of coverage provided to Employee as of the Termination Date, it
being understood that the Company’s successor or assign has and reserves the
right to amend, modify or replace such plans or policies to provide
substantially similar insured coverage during the Severance Period. For
purposes of the Company’s successor or assigns welfare benefit plans and
policies subject to the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“COBRA”), Employee’s “qualifying event” for COBRA purposes shall be
the Termination Date.

             B.      Employee shall enjoy continued entitlement to such other accrued or
earned and vested benefits provided under the Company’s successor or assigns’
plans, programs, policies and practices as of the Termination Date.

-7-

 

             C.      It is expressly understood by both parties that under no circumstances
is the Company responsible for the payment of Severance Benefits.

     15.      Severance Period. The Severance Period shall begin on the effective
date of termination of Employee’s employment under the conditions specified in
Section 16, and end on the last day of the twenty-four (24) month period
beginning on the Termination Date.

     16.      Eligibility for Severance Benefits. If Employee terminates employment
(other than on account of circumstances described in Section 17 below) with any
successor or assign (or any of their respective affiliates) of the Company at
any time during the twenty-four (24) month period beginning on the effective
date of a Change in Control (the “Protection Period”), he shall be entitled to
the Severance Benefits described in Sections 14, 15 and 16 as follows. If
during the Protection Period, Employee terminates his employment for Good
Reason (as defined below) by delivering to the successor or assign of the
Company (or its respective affiliate), as applicable, each no later than thirty
(30) days after learning of the occurrence of an event constituting Good
Reason: (i) a Preliminary Notice of Good Reason (as defined below); and (ii) a
Notice of Termination (as defined below); Employee shall have the right, in
his sole and reasonable discretion, to commence Severance Benefits. Any
termination of Employee’s employment that qualifies for Severance Benefits
under Sections 14, 15 and 16 of this Agreement shall supersede and take
precedence over the provisions of Section 13. For purposes of this Agreement,
the following terms shall have the respective meanings:

             A.      “Good Reason” shall only result upon the occurrence, without Employee’s
prior written consent, of one or more of the following events, as determined by
Employee in good faith, during the Protection Period: (i) Employee’s authority
or responsibility has materially diminished as compared to Employee’s authority
and responsibility in effect immediately prior to a Change in Control; (ii)
Employee has been assigned duties inconsistent with his position,
responsibility and status with the Company immediately prior to the Protection
Period; (iii) there has been an adverse change in Employee’s title or office as
in effect immediately prior to the Protection Period; (iv) Employee’s base pay
or incentive compensation has been reduced; or (v) Employee’s principal work
location is more than ten (10) miles away from the principal work location as
immediately prior to the Protection Period; provided, however, that “Good
Reason” shall not include (x) acts not taken in bad faith that are cured by the
Company’s successor or assign in all respects, including without limitation
restoration of all back pay and incentive compensation through the Termination
Date, not later than thirty (30) days from the date of receipt by the successor
or assign of the Company (or its respective affiliate), as applicable, of a
written notice from Employee identifying in reasonable detail the act or acts
constituting “Good Reason” (a “Preliminary Notice of Good Reason”), or (y) acts
for which Employee does not provide a Preliminary Notice of Good Reason within
thirty (30) days of learning of the occurrence of the event constituting Good
Reason.

             B.      “Notice of Termination” shall mean a notice that indicates the specific
termination provision relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Employee’s employment under the provision so indicated.

-8-

 

             C.      “Termination Date” shall mean the date specified in the Notice of
Termination for termination of Employee’s employment under this Agreement.

     17.      Ineligibility for Severance Benefits. Notwithstanding any other
provision under this Agreement, Employee shall not be entitled to receive
Severance Benefits in the event that: (i) the Company’s successor or assign (or
any of its respective affiliates) terminates Employee’s employment for Cause
(as defined in Section 13.B); (ii) Employee dies (in which case the terms of
Section 13.F shall apply); (iii) Employee is determined to be totally and
permanently disabled (in which case the terms of Section 13.F shall apply);
(iv) the Company’s successor or assign (or any of its respective affiliates)
terminates Employee’s employment without cause (in which case the terms of
Section 13.C shall apply); or (v) Employee resigns other than for Good Reason
(in which case Sections 13.D and 13.E apply). In any such event, Employee, in
addition to any benefits payable in accordance with this Agreement, shall be
entitled only to his salary and benefits accrued or earned and vested under
other plans, programs, policies, practices and coverages of the Company’s
successor or assign (or any of its respective affiliates).

     18.        Return of Company Information. Immediately upon termination of
employment under this Agreement, the Employee shall promptly deliver to the
Company all documents, software, and other tangible information in the
possession or control of Employee and that relate to, are connected with, or
arise out of Employee’s employment by the Company, including without limitation
all Company Proprietary Information.

     19.      Notice of Subsequent Employment. For a period of one (1) year after
termination of employment under this Agreement, the Employee agrees to notify
the Company of the name and address of each employer with whom Employee accepts
employment. The Employee further authorizes the Company to contact any such
employer during the one-year period for the limited purpose of making the
employer aware of this Agreement and protecting the Company’s rights under this
Agreement.

     20.      Change in Control. For the purposes of this Agreement, a “Change of
Control” shall mean and shall be effective upon the closing date of: (i) the
dissolution or liquidation of the Company; (ii) the merger or consolidation of
the Company with any other corporation, foundation, association or other
entity; (iii) the amendment of the Company’s corporate documents to grant a
party other than the Company’s Employee Stock Ownership Plan, the right to
designate, elect or remove a majority of the Company’s voting directors; or
(iv) the transfer to another corporation, foundation, association or other
entity in a sale, lease, exchange or other similar transfer (in a single
transaction or in a series of related transactions) of all or substantially all
of the assets of the Company.

     21.      Termination of All Other Agreements. Notwithstanding anything
contained herein to the contrary, Employee acknowledges and agrees that the
Company has no obligations or responsibility to Employee under any previous
agreements or understandings, whether oral or written, that Employee may have
had or entered into with Employee’s previous employers, including without
limitation any arrangements for compensation, bonus, or stock appreciation
rights. Employee agrees to look to the

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previous employers for satisfaction of any rights or payments accruing to
Employee under any contracts, agreements, or understandings with those
employers.

     22.      Remedies.

             A.      The parties agree and acknowledge that the Company will be irreparably
injured by the breach of any material provision of this Agreement, including
without limitation Sections 10, 11, and 18, and that money damages alone may
not be an appropriate measure of the harm to the Company from such continuing
breach. Thus, the parties further agree that equitable relief, including
specific performance of these provisions by injunction, is an appropriate
remedy for breach of these provisions in addition to money damages, if
applicable.

             B.      The existence of any claim or cause of action that Employee or any such
other person or entity may have against the Company shall not constitute a
defense or bar to the enforcement of any action under the covenants set forth
in this Agreement. If the Company must resort to legal proceedings to enforce
any covenant which has a fixed term, then such term shall be extended for a
period of time equal to the period during which a breach of such covenant was
occurring, beginning on the date of a final order of a court or other tribunal
(without right of appeal) holding that such a breach occurred or, if later, the
last day of the original fixed term of such covenant.

     23.      Indemnification. Company shall indemnify, defend, hold and save
Employee, his heirs, administrators or executors harmless from any and all
actions and causes of actions, claims, demands, liabilities, losses, costs,
damages or expenses of whatsoever kind of nature, including judgments, interest
and attorney’s fees, that Employee, his heirs, administrators or executors may
sustain or incur subsequent to the date of this Agreement or become subject to
by reason of any claim or claims, resulting from Employee’s execution of the
terms and conditions of this Agreement, except for Employee’s fraudulent or
criminal acts or omissions or gross negligence except as prohibited by
applicable law.

     24.       Miscellaneous.

             A.      Any notices required by this Agreement shall: (i) be delivered by
messenger or made in writing and mailed by certified mail, return receipt
requested, with adequate postage prepaid; (ii) be deemed given when so
delivered or mailed; and (iii) in the case of the Company, be delivered or
mailed to its office at 1750 Tysons Boulevard, Suite 1300, McLean, Virginia
22102-4213, Attn: General Counsel, or in the case of the Employee, be mailed to
the last address that the Employee has given to the Company.

             B.      The obligations and duties of the Employee under this Agreement are
personal and not assignable. This Agreement shall be binding upon and inure to
the benefit of, the parties, their successors, assigns, personal
representatives, distributes, heirs, and legatees.

             C.      If any dispute arises under this Agreement, such dispute shall be
referred to a panel of three (3) arbitrators for resolution. The
three-arbitrator panel shall be selected as follows: the Company will
designate one arbitrator, the Employee will designate one arbitrator, and the
two designees will mutually select the third. The American Arbitration
Association’s Voluntary Labor Arbitration Rules

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shall govern procedures for the arbitration, unless the three arbitrators
unanimously agree to adopt a different rule or rules. The arbitration shall
occur in the the City of McLean, Virginia. Notwithstanding the foregoing, and
specifically in the event of a dispute over the Employee’s termination by the
Company, Employee may, at his or her option, elect to have a court rather than
an arbitrator resolve the dispute.

             D.      If any term or provision of this Agreement is held to be illegal or
invalid, such illegality or invalidity shall not affect the remaining terms or
provisions hereof, and each such remaining term and provision of this Agreement
shall be enforced to the fullest extent permitted by law. If any covenant is
determined to be unenforceable in equity because of its scope, duration,
geographic area, or similar factor, the court or arbitrator making such
determination shall have the power to reduce or limit such scope, duration,
area, or other factor and such covenant shall then be enforceable in equity in
its reduced or limited form.

             E.      This Agreement may be altered, amended or modified only by written
agreement signed by both the Employee and the Company. No oral modification of
this Agreement, or of any part of this Agreement including this paragraph,
shall have any force or effect. No waiver by either of such parties of their
rights under this Agreement shall be deemed to constitute a waiver with respect
to any subsequent occurrences or transactions hereunder unless such waiver
specifically states that it is to be construed as a continuing waiver.

             F.      In any action or claim brought by either party against the other under
or pursuant to this Agreement, the substantially prevailing party shall be
entitled to an award of all actual attorney’s fees, costs and expenses incurred
by the substantially prevailing party.

             G.      This Agreement contains the entire understanding between the parties
and supersedes any prior written or oral agreement(s) between the Company and
Employee relating to the subject matter contained herein. This Agreement shall
not be modified or waived except by written instrument signed by the parties.

             H.      This Agreement shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Virginia.

	 	 	 
	ALION SCIENCE AND TECHNOLOGY

CORPORATION	 	
EMPLOYEE
	 
	 

Signature	 	
 

Signature
	 
	 

Name and Title	 	
 

Name

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Exhibit A

Retention Incentive Agreement

-12-

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