Document:

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                                                                  Exhibit 10.22

                        ALION MEZZANINE WARRANT AGREEMENT

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE
SECURITIES ACT AND UNDER ANY RELEVANT STATE LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Warrant No.
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Cusip #
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      THIS ALION MEZZANINE WARRANT AGREEMENT ("Agreement" or "Warrant
Agreement") is made as of this     day of          , 2002 (the "Effective
Date"), between Alion Science and Technology Corporation, a Delaware corporation
(the "Company"), Alion Science and Technology Corporation Employee Ownership,
Savings and Investment Trust (the "Trust") (for the purposes of Sections 6, 7,
15 and 17 through 25 of this Agreement only) and Bahman Atefi, an individual
("Atefi").

      WHEREAS, the Company and Atefi have entered into an Employment Agreement
dated          , 2002 (the "Employment Agreement"), pursuant to which, the
Company has agreed to issue to Atefi warrants to purchase shares of the
Company's $0.01 par value per share common stock ("Common Stock"); and

      WHEREAS, the Company, various financial institutions (the "Banks") and
Lasalle Bank National Association, as agent, have entered into a Credit
Agreement of even date herewith (the "Credit Agreement").

      NOW, THEREFORE, in consideration of the premises set forth above, the
covenants, representations and warranties contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

      Section 1. Grant of Warrant.

      Upon the terms and subject to the conditions hereinafter set forth, the
Company hereby grants to Atefi, or his permitted registered transferees (subject
to the restrictions set forth herein), an irrevocable right (the "Warrant") to
purchase up to [              (   )] shares of Common Stock upon exercise of the
Warrant, subject to adjustment pursuant to Section 1(b) below (the "Shares") at
an exercise price of $10 per share (the "Exercise Price"), and to exercise the
other rights, powers and privileges hereinafter set forth. The Exercise Price
and the number of Shares shall be subject to adjustment from time to time as
provided in Section 3 hereof.
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      Section 2. Duration and Exercise of Warrant. Subject to Sections 2(b), 4,
5, 6 and 7 herein, the parties hereto agree as follows,

      (a)   Subject to the remaining provisions of this Agreement, the Warrant
may be exercised, in whole or in part, by Atefi and/or his permitted transferees
(Atefi and his permitted transferees are hereinafter referred to individually or
collectively as the "Holder") on any business day on or after the Effective Date
and through and including the sixth anniversary of the Effective Date (the
"Expiration Date"). At 5:00 P.M., Eastern Standard Time, on the Expiration Date,
the Warrant shall be and become void and of no value to the extent it has not
been exercised prior to such time.

      (b)   The Holder shall not be entitled to exercise any portion of the
Warrant unless it has delivered written notice in the form of the Form of
Election to Purchase attached hereto as Exhibit A (the "Exercise Notice") to the
Company in accordance with Section 15 of this Warrant Agreement ninety (90) days
prior to the proposed effective date of such exercise. Subject to the terms of
Sections 2(h), 6(b) and 7(b), the Warrant or a portion thereof, as appropriate,
shall be deemed to be exercised ninety (90) days from the date (the "Exercise
Date") the Company receives the Exercise Notice.

      (c)   The Holder shall make payment for the exercise of the Warrant, or a
portion thereof, as appropriate, in the form of cash, or in lieu of cash, the
Holder may elect to receive such number of Shares equal to the value (as
determined below) of the exercised Warrant, or portion thereof, by indicating in
the Exercise Notice the Holder's desire to consummate a cashless exercise
("Cashless Exercise Notice"), in which event the Company shall issue to the
Holder a number of Shares computed using the following formula:

                        Y x ( A - B )
                  X  =  -------------
                             A

Where:

            X =   The number of Shares to be issued to the Holder;

            Y =   The number of Shares purchasable under the Warrant if
                  exercised in full, or the exercised portion thereof, as
                  appropriate;

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            A =   The then current Fair Value (as determined in accordance with
                  Section 3(c) herein); and

            B =   The then current Exercise Price.

      (d)   Upon exercise of any portion of the Warrant and payment of the
Exercise Price therefor, the Company shall issue to the Holder stock
certificates representing the shares of Common Stock underlying such exercised
portion of the Warrant, or representing such number of Shares as computed in
accordance with Section 2(c) above, as appropriate.

      (e)   If this Warrant is exercised in respect of less than all of the
Shares at the time purchasable hereunder, the Holder hereof shall be entitled to
receive a new Warrant covering the number of Shares in respect of which this
Warrant shall not have been exercised and setting forth the aggregate Exercise
Price applicable to such shares, in which case the Holder shall at the same time
surrender this Warrant to the Company for cancellation.

      (f)   The Shares issuable upon the exercise of this Warrant by the Holder
under this Section 2 shall be deemed to have been issued to the Holder at the
Exercise Date, and the Holder shall be deemed for all purposes to have become
the record holder of such Shares at the Exercise Date.

      (g)   The Company shall not close its books against the transfer of this
Warrant or of any Share issued or issuable upon the exercise of this Warrant in
any manner which interferes with the timely exercise of this Warrant.

      (h)   Notwithstanding any other provision hereof, if an exercise of any
portion of this Warrant is to be made in connection with a public offering, a
Drag-Along Notice (as defined in Section 6), a Tag-Along Notice (as defined in
Section 7), or a sale of the Company, the exercise of any portion of this
Warrant (and the payment of the Exercise Price related thereto) shall be
conditioned upon the consummation of the public offering, the transaction which
is the subject of such Drag-Along Notice or Tag-Along Notice, or such sale of
the Company in which case such exercise shall not be deemed to be effective
until the concurrent consummation of such transaction.

      (i)   The Company shall pay all reasonable expenses, taxes (excluding
transfer taxes) and other charges payable in connection with the preparation,
execution and delivery of stock certificates pursuant to this Section,
regardless of the name or names in which such stock certificates shall be
registered. Such stock certificates shall be delivered within five (5) days of
the applicable Exercise Date.

      (j)   The Company will at all times prior to the Expiration Date reserve
and keep available such number of authorized shares of its Common Stock, solely
for the purpose of issue upon the exercise of the rights represented by this
Warrant as may at any time be issuable upon the exercise of this Warrant and
such shares issuable upon the exercise of this Warrant shall at no time have an
aggregate par value which is in excess of the aggregate Exercise Price.

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      (k)   The Company may at its option issue fractional Shares, or cash
representing the then current Fair Value of such fractional Shares, upon any
exercise of this Warrant, if appropriate.

      Section 3. Adjustment of Number of Shares and Exercise Price.

      The number of shares of Common Stock underlying the Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows in
each applicable instance. With respect to any determination of adjustments to
the number of shares of Common Stock or the Exercise Price which may be required
by this Section 3, the Company's board of directors shall make a good faith
determination regarding any adjustment.

      (a)   In the event of any change in the outstanding Common Stock of the
Company due to stock dividends, consolidations, stock splits or reverse stock
splits, the number of shares of Common Stock underlying the Warrant and/or the
Exercise Price will be appropriately adjusted, upwards or downwards, so that the
Holder thereafter shall be entitled to purchase the number of shares of Common
Stock consistent with such change at an exercise price that is proportionate
with such change.

      (b)   If the Company issues or sells any Additional Stock (as defined in
Section 3(l) below) for a consideration less than Fair Value (as defined in
Section 3(c) herein) as of the date of execution of the binding written
agreement providing for such issuance or sale, the Exercise Price for the
Warrant which was in effect immediately prior to each such issuance shall be
reduced to the "Diluted Price". The Diluted Price shall be calculated in
accordance with the following formula for any issuance of Additional Stock in a
transaction triggering the rights afforded in this Section 3(b) (the "Trigger
Transaction"). The product of the per share consideration and the number of
shares of Additional Stock issued in connection with the corresponding Trigger
Transaction shall hereinafter be referred to as the "Transaction Price".

      The Diluted Price shall equal the product of (i) the Exercise Price
(subject to adjustment pursuant to this Section 3) and (ii) the quotient of (x)
the number of then outstanding shares of Common Stock on a fully diluted basis
(assuming the exercise of all outstanding options, rights (including, without
limitation, stock appreciation rights ("SARs")) and warrants and the conversion
into Common Stock of all convertible securities) plus the number of shares of
Additional Stock that would have been issued for the Transaction Price if the
per share consideration in the Trigger Transaction had been equal to the Fair
Value per Share as of the date of execution of the binding written agreement
providing for the issuance of the Additional Stock, divided by (y) the number of
then outstanding shares of Common Stock on a fully diluted basis (assuming the
exercise of all outstanding options, rights and warrants and the conversion into
Common Stock of all convertible securities) plus the number of shares of
Additional Stock issued in connection with the Trigger Transaction.

      (c)   Fair Value and Current Market Price.

            (i)   The "Fair Value", at any given time, shall mean the fair value
of the appropriate security (including, without limitation, any share of Common
Stock), property, assets, business or entity as determined in good faith by the
board of directors of the Company.

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Notwithstanding the foregoing, in the case of any security, if clauses (a), (b)
or (c) of the definition of Current Market Price are applicable to such
security, then the Fair Value of such security shall be the Current Market Price
of such security.

            (ii)  "Current Market Price" of any security (including, without
limitation, any share of Common Stock) as of any date herein specified shall
mean the average of the daily closing prices for the twenty (20) consecutive
trading days immediately prior to, but not including the day in question (or in
the event that a security has been traded for less than twenty (20) days, each
of the trading days prior to the day in question on which such security has been
traded). The closing price for each day shall be (a) if such security is listed
or admitted for trading on any domestic national securities exchange, the
closing sale price of such security, regular way, or the average of the closing
bid and asked prices thereof if no such sale occurred, in each case as
officially reported on the principal securities exchange on which such security
is listed, or (b) if not reported as described in clause (a), the closing sale
price of such security, or the average of the closing bid and asked prices
thereof if no such sale occurred, in each case as reported by the Nasdaq
National Market, or any similar system of automated dissemination of quotations
of securities prices then in common use, if so quoted, as reported by any member
firm of the New York Stock Exchange selected by the Company, or (c) if not
quoted as described in clause (b), the average of the closing bid and asked
prices for such security as reported by the National Quotation Bureau
Incorporated or any similar successor organization, as reported by any member
firm of the New York Stock Exchange selected by the Company.

      (d)   No adjustment of the Exercise Price shall be made in an amount less
than one cent per share, provided that any adjustments that are not required to
be made by reason of this sentence shall be carried forward and shall be taken
into account in any subsequent adjustment made after the date of the event
giving rise to the adjustment being carried forward.

      (e)   Reorganization, Reclassification or Recapitalization of the Company.
If and whenever subsequent to the date hereof the Company shall effect (i) any
reorganization or reclassification or recapitalization of the capital stock of
the Company (other than in the cases referred to in Section 3(a)), (ii) any
consolidation or merger of the Company with or into another Person, (iii) the
sale, transfer or other disposition of the property, assets or business of the
Company as an entirety or substantially as an entirety or (iv) any other
transaction (or any other event shall occur) as a result of which holders of
Shares become entitled to receive any Common Stock or other securities and/or
property of the Company, any of its Subsidiaries or any other Person (including,
without limitation, cash) with respect to or in exchange for the Shares, there
shall thereafter be deliverable upon the exercise of this Warrant or any portion
thereof (in lieu of or in addition to the Shares theretofore deliverable, as
appropriate) the same number of shares of Common Stock or other securities
and/or the same amount of property (including, without limitation, cash) to
which the holder of the number of Shares which would otherwise have been
deliverable upon the exercise of this Warrant or any portion thereof at the time
would have been entitled upon such reorganization or reclassification or
recapitalization of capital stock, consolidation, merger, sale, transfer,
disposition or other transaction or upon the occurrence of such other event, and
at the same aggregate Exercise Price. The term "Person" shall mean an
individual, a corporation, an association, a joint-stock company, a business
trust or other similar organization, a partnership, a limited liability company,
a joint venture, a trust, an unincorporated organization or a government or any
agency, instrumentality or political subdivision thereof.

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      (f)   Determination of Consideration. For the purposes of this Section 3,
the consideration received or receivable by the Company for the issuance, sale
or grant of shares of Common Stock, options, warrants, rights or convertible
securities, irrespective of the accounting treatment of such consideration,
shall be valued and determined as follows:

            (i)   Cash Payment. In the case of cash, the gross amount paid by
the purchasers without deduction of any accrued interest or dividends, any
reasonable expenses paid or incurred and any reasonable underwriting commissions
or concessions paid or allowed by the Company in connection with such issue or
sale.

            (ii)  Non-Cash Payment. In the case of consideration other than
cash, the Fair Value thereof (in any case as of the date immediately preceding
the issuance, sale or grant in question).

            (iii) Certain Allocations. If shares of Additional Stock are issued
or sold together with other securities or other assets of the Company for a
consideration which covers more than one of the foregoing categories of
securities and assets, the consideration received or receivable (computed as
provided in Sections 3(f)(i) and 3(f)(ii)) shall be allocable to such shares of
Additional Stock as reasonably determined in good faith by the board of
directors of the Company (provided such allocation is set forth in a written
resolution and a certified copy thereof is furnished to the Holder of this
Warrant promptly (but in any event within thirty (30) days following its
adoption).

            (iv)  Dividends in Securities. If the Company shall declare a
dividend or make any other distribution upon the Common Stock of the Company
payable in shares of Additional Stock, such shares of Additional Stock, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.

            (v)   Rights and Convertible Securities. The consideration for which
each share of Additional Stock shall be deemed to be issued upon the execution
of the binding written agreement providing for the issuance or sale of any
Additional Stock shall be determined by dividing (A) the total consideration, if
any, received by the Company as consideration for the Additional Stock, as the
case may be, plus the minimum aggregate amount of additional consideration, if
any, ever payable to the Company upon the exercise of such Additional Stock, as
the case may be, but without deduction of any accrued interest or dividends, any
reasonable expenses paid or incurred and any reasonable underwriting commissions
or concessions paid or allowed by the Company in connection with such issue or
sale; by (B) the maximum number of shares of Common Stock issuable upon the
exercise of such Additional Stock or attributable to such Additional Stock.

            (vi)  Merger, Consolidation or Sale of Assets. If any shares of
Additional Stock are issued in connection with any merger or consolidation of
which the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the Fair Value of such portion of the assets and
business of the non-surviving corporation as shall be attributable to such
Additional Stock, as the case may be.

            (viii) Consideration for Underlying Shares.

                                1. The shares of Common Stock deliverable upon
exercise of options or warrants to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued for a consideration equal to the
consideration (determined in the manner provided in Section 3(f)(i) and/or
Section 3(f)(ii) if any, received by the Company upon the issuance of such
options, warrants or rights plus the minimum exercise price provided in such
options, warrants or rights (without taking into account potential antidilution
adjustments) for the shares of Common Stock covered thereby.

                                2. The shares of Common Stock deliverable upon
conversion of, or in exchange for, any convertible or exchangeable securities or
upon the exercise of options or warrants to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued for a consideration equal
to the consideration, if any, received by the Company for any such securities
and related options, warrants or rights, plus the minimum additional
consideration, if any, to be received by the Company upon the conversion or
exchange of such securities or the exercise of any related options, warrants or
rights (the consideration in each case to be determined in the manner provided
in Section 3(f)(i) or Section 3(f)(ii).

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      (g)   Shares Outstanding. The number of shares of Common Stock deemed to
be outstanding at any given time shall not include shares of Common Stock held
by the Company or any Subsidiary of the Company, but shall include shares of
Common Stock held by or in the name of the ESOP or any trust associated with the
ESOP.

      (h)   Maximum Exercise Price. At no time shall the Exercise Price exceed
the amount set forth in Section 1 of this Warrant except as a result of an
adjustment thereto pursuant to this Section 3.

      (i)   Application. All subdivisions of this Section 3 are intended to
operate independently of one another. If a transaction or an event occurs that
requires the application of more than one subdivision, all applicable
subdivisions shall be given independent effect (but without duplication of
adjustment).

      (j)   INTENTIONALLY OMITTED.

      (k)   Effect of Failure. Failure to give any certificate or notice, or any
defect in any certificate or notice required under this Section 3 shall not
affect the legality or validity of the adjustment of the Exercise Price or the
number of Shares purchasable upon exercise of this Warrant.

      (l)   "Additional Stock" shall mean any shares of Common Stock, warrants
or rights (including, without limitation, SARs) to purchase Common Stock, or
securities convertible into Common Stock, issued or deemed to have been issued
by the Company, other than:

            (i)   SARs issued to employees, consultants, officers or directors
of the Company or any of its Subsidiaries with an exercise price no less than
Fair Value, except for such amount of SARs that, at the time of issuance, would
cause the aggregate number of SARs then outstanding (excluding any SARs that
have (x) been exercised, (y) expired, terminated unexercised, or become
unexercisable or (z) been forfeited or otherwise terminated, surrendered or
canceled) to be in excess of:

                  (1)   two percent (2%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the first anniversary of the Effective Date;

                  (2)   four percent (4%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the second anniversary of the Effective Date;

                  (3)   six percent (6%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the third anniversary of the Effective Date;

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                  (4)   eight percent (8%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the fourth anniversary of the Effective Date; and

                  (5)   ten percent (10%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the fifth anniversary of the Effective Date.

            (ii)  shares of Common Stock contributed by the Company to any
Company benefit plan, including, but not limited to, the ESOP ("Company
Contributions"), except for such amount of shares that, at the time of issuance,
would cause the aggregate value of all Company Contributions (in each case the
total value of a Company Contribution is calculated by multiplying the number of
shares of Common Stock contributed by the Fair Value at the time of such
contribution) to exceed five percent (5%) of the Company's aggregate
consolidated payroll expenses (i.e., the aggregate payroll expenses of the
Company and any of the Company's Subsidiaries substantially all of whose
employees are eligible to participate in such Company benefit plans) from the
Effective Date to the date of such contributions, measured at the end of each
plan year for such Company benefit plans;

            (iii) shares of Common Stock issued to the ESOP in connection with
employees' purchase of ESOP interests after the Effective Date via payroll
deductions, at a purchase price which is the lesser of (x) the Fair Value as of
the date of issuance of such Common Stock as determined by an independent
appraiser in connection with the ESOP ("Full Price Employee Contributions"), or
(y) the Fair Value resulting from the immediately preceding appraisal of the
Common Stock performed by an independent appraiser in connection with the ESOP
("Price Protected Employee Contributions"), except for such amount of shares
that, at the time of issuance, would cause the aggregate value of all Price
Protected Employee Contributions (in each case the total value of a Price
Protected Employee Contribution shall be the dollar value of the payroll
deduction made in connection with such Price Protected Employee Contribution) to
exceed three percent (3%) of the Company's aggregate consolidated payroll
expenses (i.e., the aggregate payroll expenses of the Company and any of the
Company's Subsidiaries substantially all of whose employees are eligible to
participate in the ESOP) from the Effective Date to the date of such
contributions, measured at the end of each plan year for the ESOP;

            (iv)  shares of Common Stock, or any other securities or property of
the Company, issued to the Holder pursuant to any of its rights or privileges
under this Agreement; and

            (v)   interests or rights designated as phantom stock issued or
granted by the Company to employees, consultants, officers or directors of the
Company or any of its Subsidiaries in accordance with a phantom stock plan to be
adopted by the Company's board of directors after the Effective Date, except for
such amount of phantom stock that, at the time of issuance or grant, would cause
the aggregate number of shares of phantom stock then outstanding (excluding any
shares of phantom stock that have (x) expired, terminated

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unexercised or become unexercisable, or (y) been forfeited or otherwise
terminated, surrendered or cancelled) to be in excess of 171,494 shares of
phantom stock.

      (m)   In the case of the Company's contribution, after the Effective Date,
of any shares of Common Stock to any Company benefit plan, including but not
limited to the ESOP, the consideration for such shares shall be deemed to be
equal to the Fair Value of such shares on the date of contribution.

      Section 4. Call Rights.

      (a)   Subject to the terms and conditions of this Section 4, the Company
shall have the following call rights with respect to the Warrant:

            (i)   immediately upon receipt of any Exercise Notice from the
Holder and prior to any pending Exercise Date (as determined pursuant to Section
2(b)), the Company shall have the right to purchase that portion of the Warrant
proposed to be exercised by the Holder pursuant to such Exercise Notice, and if
the Company exercises such right, the Holder shall be required to sell such
portion of the Warrant to the Company at a purchase price (the "Call Price")
determined in accordance with Section 4(b); and

            (ii)  at any time within thirty (30) days prior to the Expiration
Date, the Company shall have the right to purchase the Warrant or any portion
thereof from the Holder, and if the Company exercises such right, the Holder
shall be required to sell the Warrant or any portion thereof, as the case may
be, to the Company at the Call Price determined in accordance with Section 4(b)
below.

      (b)   The "Call Price" is equal to the product of (i) the number of shares
of Common Stock underlying the Warrant or the portion thereof being purchased
pursuant to this Section 4, and (ii) the difference between the Call Fair Value
(as defined below) on the date of the Call Notice (as defined below) and the
Exercise Price on the date of the Call Notice; provided that notwithstanding the
foregoing, in no event shall the Call Price be less than zero (0). So long as
the ESOP is still in existence, the "Call Fair Value" shall equal (i) the per
share value of the Common Stock as set forth in the then most recent appraisal
performed by an independent appraiser at the Company's request in connection
with the ESOP, for the purposes of the Company's call right under Section
4(a)(i); provided that such appraisal shall not reflect any discount for any
lack of liquidity or absence of control, and (ii) the per share value of the
Common Stock as set forth in the September 2008 Appraisal, for the purposes of
the Company's call right under Section 4(a)(ii). As of such date that the ESOP
is no longer in existence, the "Call Fair Value" shall equal the Fair Value of
the Common Stock. Notwithstanding the foregoing, whether or not the ESOP is in
existence, if clauses (a), (b) or (c) of the definition of Current Market Price
are applicable to the Common Stock but no Qualified Public Offering (as defined
below) has occurred, then the Call Fair Value shall be the Current Market Price
of the Common Stock on the date of the Call Notice.

      (c)   Prior to exercising its call rights under this Section 4, the
Company must deliver written notice to the Holder (the "Call Notice"), in
accordance with Section 15, of its intent to purchase the Warrant or the portion
thereof being purchased, as the case may be. The Call Notice

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shall be deemed to be given and served on the date that the Company sends the
Call Notice to the Holder (the "Call Election Date") and shall be irrevocable.

      (d)   Payment of the Call Price shall be made in cash in immediately
available funds within thirty (30) days after the date of the Call Election
Date, but not later than the Exercise Date.

      (e)   If the Company has received an Exercise Notice from the Holder prior
to the Company's delivery of a Call Notice to the Holder, then such Call Notice
shall take priority over such Exercise Notice until the expiration of the dates
set forth in Section 4(d). If the Company does not purchase the portion of the
Warrant subject to the Call Notice on or prior to the appropriate date set forth
in Section 4(d), the Holder shall be entitled to immediately exercise the
portion of the Warrant it originally intended to exercise, without the delivery
of any additional Exercise Notice, subject to the expiration of the ninety-day
period following delivery of the Exercise Notice.

      (f)   If the Holder has received a Tag-Along Notice from the Trust in
accordance with Section 7(a) herein prior to delivery by the Company to the
Holder of a Call Notice and the Holder has responded to such Tag-Along Notice
with a Participation Notice and an Exercise Notice in accordance with Section
7(b) herein, then the Company shall not be entitled to exercise its call right
pursuant to Section 4(a)(i) or Section 4(a)(ii) herein with respect to such
portion of the Warrant to be exercised by the Holder in connection with such
Participation Notice, unless (i) the Call Fair Value as of the date of delivery
by the Company of a Call Notice is greater than or equal to the per share sale
price in connection with the transaction that is the subject of the Tag-Along
Notice or the transaction that is subject of the Tag-Along Notice has been
terminated.

      (g)   The rights of the Company under this Section 4 shall expire on the
consummation by the Company of a Qualified Public Offering. For purposes of this
Agreement, "Qualified Public Offering" means the consummation of one or more
underwritten public offerings of the Company's Common Stock which results in
aggregate gross proceeds to the sellers in such offerings of not less than U.S.
$30,000,000 (excluding proceeds received in such offerings from "affiliates" of
the Company (other than any Holder that is an affiliate of the Company), within
the meaning of Rule 12b-2 of the Securities and Exchange Commission under the
Securities Act of 1934, as amended (the "Exchange Act") or the ESOP) and
pursuant to which the Company obtains a listing for its shares on a United
States national securities exchange, the Nasdaq National Market System, or an
automated quotation system of nationally recognized standing.

      Section 5. Put Right.

      (a)   Subject to the terms and conditions of this Section 5 and Section 6
herein, at any time within (i) thirty (30) days prior to the Expiration Date or
(ii) within thirty (30) days after the date that the Company has sent notice to
the Holder that a Change of Control (as defined below) has occurred, the Holder
shall have the right to sell the Warrant or any portion thereof to the Company,
and if the Holder exercises such right, the Company shall be required to
purchase the Warrant or such portion thereof, as the case may be, from the
Holder, for a purchase price (the "Put Price") determined in accordance with
Section 5(b) below.

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      (b)   The "Put Price" is equal to the product of (i) the number of shares
of Common Stock underlying the Warrant or the portion thereof being purchased
pursuant to this Section 5, and (ii) the difference between the Put Fair Value
(as defined below) on the date of the Put Notice (as defined below) and the
Exercise Price on the date of the Put Notice; provided that notwithstanding the
foregoing, in no event shall the Put Price be less than zero (0). So long as the
ESOP is in existence, the "Put Fair Value" shall equal (i) the per share value
of the Common Stock as set forth in the September 2008 Appraisal, for the
purpose of the Holder's put right under Section 5(a)(i), and (ii) the per share
value of the Common Stock as set forth in the then most recent appraisal
performed by an independent appraiser at the Company's request in connection
with the ESOP, which such appraisal shall not reflect any discount for any lack
of liquidity or absence of control, for the purposes of the Holder's put right
under Section 5(a)(ii). As of such date that the ESOP is no longer in existence,
the "Put Fair Value" shall equal the Fair Value of the Common Stock.
Notwithstanding the foregoing, whether or not the ESOP is in existence, if
clauses (a), (b) or (c) of the definition of Current Market Price are applicable
to the Common Stock but no Qualified Public Offering has occurred, then the Put
Fair Value shall be the Current Market Price of the Common Stock on the date of
the Put Notice.

      (c)   "Change of Control" shall mean and shall be deemed to have occurred
if at any time for whatever reason:

            (i)   any Person (other than the Holder, or any of the Holder's
direct assignees or transferees), or the Trust, together with their "affiliates"
within the meaning of Rule 12b-2 of the Commission under the Exchange Act) shall
acquire beneficial ownership (including beneficial ownership resulting from the
formation of a "group" within the meaning of Rule 13d-5 of the Securities
Exchange Commission ("SEC") under the Exchange Act) of more than fifty percent
(50%) of the combined voting power of the outstanding capital stock of the
Company, ordinarily having the right to vote at any election of directors;

            (ii)  there is a sale of all or substantially all of the Company's
assets, directly or indirectly through one or more transactions whether or not
concurrent.

      (d)   INTENTIONALLY OMITTED.

      (e)   The Holder must deliver written notice to the Company (the "Put
Notice"), in accordance with Section 15, at least ninety (90) days prior to the
date that it intends to exercise its right under Section 5(a)(i) or Section
5(a)(ii) to sell the Warrant, or any portion thereof. The Put Notice shall be
deemed to be given and served on the date that the Company receives the Put
Notice. The date that the Holder intends to exercise its put right pursuant to
either Section 5(e)(i), or Section 5(e)(ii), shall in each case be hereinafter
referred to as the "Put Exercise Date".

                                       11
<PAGE>
      (f)   Payment of the Put Price shall be made in cash in immediately
available funds within ninety (90) days after the date of the Put Exercise Date,
which such date may be rescheduled in accordance with Sections 5(h), 6(j)(i)(2)
or 7(i)(i)(2) (in either case, the "Put Effective Date").

      (g)   If the Company has received an Exercise Notice from the Holder prior
to receipt of a Put Notice from the Holder, then the Holder shall not be
entitled to exercise its put right pursuant to Section 5(a) herein with respect
to such portion of the Warrant that is the subject of the aforementioned
Exercise Notice.

      (h)   If the Trust has sent a Drag-Along Notice to the Holder in
accordance with Section 6(a) herein in connection with a transaction that has
not been consummated or terminated prior to delivery by the Holder of a Put
Notice to the Company, then the Holder shall not be entitled to exercise its put
right pursuant to Section 5(a) with respect to any portion of the Warrant that
is the subject of such Drag-Along Notice, unless the transaction that is the
subject of the Drag-Along Notice is terminated or not consummated within sixty
(60) days of the date of the Drag-Along Notice; provided that notwithstanding
the foregoing the Holder shall be entitled to deliver a Put Notice to the
Company (if permitted under Section 5(a)) and if the Put Notice satisfies the
requirements of Section 5(c) prior to such termination or expiration of such
sixty (60) day period, which Put Notice shall (if permitted under Section 5(a))
and if the Put Notice satisfies the requirements of Section 5(c) be given full
effect upon the occurrence of such termination or expiration, provided that the
corresponding Put Effective Date shall be delayed by adding the number of days
that is equal to the number of days that have passed from the date of delivery
to the Company of the Put Notice until the date of such termination or
expiration, as appropriate, to the 90-day waiting period under Section 5(f).

      (i)   The rights of the Holder under this Section 5 shall expire on the
consummation by the Company of a Qualified Public Offering.

      Section 6. Drag-Along Rights.

      (a)   Subject to the terms and conditions of this Section 6, and
notwithstanding Section 2(b) herein, if the Trust proposes to sell seventy-five
percent (75%) or more of the shares of Common Stock it then holds (the "Drag
Sale Shares") to a bona fide unaffiliated third party or parties on an arm's
length basis in a single transaction or a series of related transactions for
either (i) cash or unrestricted marketable securities that are traded on a U.S.
stock exchange, over the counter or on a bulletin board, or (ii) any
consideration so long as the third party or parties that have proposed to
purchase the Drag Sale Shares shall not become the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than fifty percent (50%) of the common stock of the ultimate
parent company of the Company (assuming the execution of all outstanding stock
options, stock warrants and stock rights, and conversion of all other securities
that are convertible to shares of common stock of such ultimate parent company),
or if there is no such ultimate parent company, so long as such third party or
parties shall not become the "beneficial owner", directly or indirectly of more
than fifty percent (50%) of the total outstanding Common Stock or Voting Stock
of the Company (assuming the execution of all outstanding stock options, stock
warrants and stock rights, and conversion of all

                                       12
<PAGE>
other securities of the Company that are convertible to shares of Common Stock
or Voting Stock), the Trust shall be entitled to provide to the Holder, at least
ten (10) days prior to the closing of such sale, written notice, in accordance
with Section 15 herein, of its good faith intention to sell the shares of Common
Stock, the name of the proposed transferee(s) (the "Proposed Transferee"), the
price and other material terms under which the sale is proposed to be made and
that it is requiring the Holder to exercise all or a portion of the Warrant, if
any portion remains outstanding and unexpired hereunder, and to sell the Shares
obtained through such exercise, if any (the "Required Exercise Shares"), as well
as a certain number of the Shares then held by the Holder to the Proposed
Transferee on the terms and conditions contained therein ("Drag-Along Notice"),
such that the total number of Shares to be sold to the Proposed Transferee by
the Holder shall be equal to:

                                  C
                  (A  +  B)  x  -----
                                  D

      where: A =  the number of Shares then held by the Holder, including the
                  Required Exercise Shares;

             B =  the number of shares of Common Stock subject to the
                  outstanding, unexpired portion of the Warrant (if any) below,
                  after taking into account the exercise required with respect
                  to the Required Exercise Shares (but excluding any portion of
                  the Warrant that is not subject to drag-along rights pursuant
                  to Section 6(f) below);

             C =  the number of Drag Sale Shares; and

             D =  the total number of shares of Common Stock then held by the
                  Trust,

subject to the limitation that if the sale price to the Proposed Transferee is
less than the then current Exercise Price, (i) the Holder shall not be required
to exercise any portion of the Warrant in order to sell to the Proposed
Transferee the Shares that could be obtained by such exercise, in connection
with the proposed sale and (ii) that portion of the Warrant which the Holder
would have been required to exercise under this Section 6 in the absence of the
preceding clause (i), shall expire and shall be and become void and of no value,
immediately upon consummation of the transaction that is the subject of the
Drag-Along Notice.

      The Holder shall be required to, and shall, comply with the terms of the
Drag-Along Notice as long as it is consistent with the terms of this Section 6.
The Shares to be sold by the Holder to the Proposed Transferee shall be sold to
the Proposed Transferee at a purchase price equal to the product of (x) the
number of such Shares, and (y) the per share sale price of the shares of Common
Stock proposed to be sold by the Trust to the Proposed Transferee. The
Drag-Along Notice shall be deemed to be given and served on the date that the
Holder receives the Drag-Along Notice from the Company in accordance with
Section 15.

      (b)   Notwithstanding Section 2(b) herein and subject to Section 6(i)
herein, the Holder shall, within five (5) days of receipt of a Drag-Along
Notice, deliver an Exercise Notice to the Company with respect to the Required
Exercise Shares provided that the Exercise Date is deemed to occur concurrently
with the consummation of the transaction which is the subject of

                                       13
<PAGE>
the Drag-Along Notice. If the Holder does not deliver the Exercise Notice within
the required 5-day period or delivers the Exercise Notice without the
appropriate payment in cash for the exercise of the Warrant, or portion thereof,
as appropriate, upon consummation of the transaction which is the subject of the
Drag-Along Notice the Holder will have been deemed to have delivered a Cashless
Exercise Notice to the Company in accordance with Section 2(c) above.

      The Company's call rights under Section 4(a)(i) shall not apply to the
Holder's exercise with respect to the Required Exercise Shares.

      (c)   Promptly after receipt of the Drag-Along Notice, the Holder shall
deliver to the Trust, to hold in escrow pending closing of the transaction that
is the subject of the Drag-Along Notice, stock certificates in its possession
(if any) representing its shares of Common Stock to be transferred, properly
endorsed for transfer to the Proposed Transferee.

      (d)   The Trust shall, together with the Drag-Along Notice, provide to the
Holder a fairness opinion from an independent appraiser or investment bank
selected by the Trust regarding the transaction that is the subject of the
Drag-Along Notice, provided that there shall be no such requirement if the Trust
has obtained such a fairness opinion for itself with respect to the transaction
that is the subject of the Drag-Along Notice.

      (e)   The monetary value of any indemnity to be provided by the Holder to
the Proposed Transferee under the terms of its sale of Shares in accordance with
this Section 6 (which indemnity may also cover operational matters not the
subject of the Holder's representations and warranties described in the
following sentence) shall be in the same ratio to the monetary value of the
indemnity provided by the Trust as the ratio of the relative value of the
securities to be sold by each of the Holder and the Trust in any such sale, but
in no case shall it exceed the monetary value of the consideration it receives
pursuant to the terms of such sale. The Holder's representations and warranties
shall be limited to enforceability, the ownership of the Shares to be
transferred by such Holder, authority to transfer such Shares, that such Shares
are free of liens and encumbrances as of the transfer date and other standard
and customary non-operational representations and warranties.

      (f)   If the Company has received a Put Notice from the Holder in
accordance with Section 5(d) herein prior to delivery by the Trust to the Holder
of a Drag-Along Notice, then the Trust shall not be entitled to exercise its
drag-along right pursuant to Section 6(a) herein with respect to such portion of
the Warrant that is the subject of such Put Notice, unless the per share sale
price in connection with the transaction that is the subject of the Drag-Along
Notice is greater than or equal to the Put Fair Value as of the date of delivery
of such Drag-Along Notice by the Trust.

      (g)   If upon the Trust's delivery of a Drag-Along Notice to the Holder
there is a pending Exercise Date and/or Put Effective Date, then the
corresponding Exercise Notice and the 90-day waiting period under the last
sentence of Section 2(b) and/or the corresponding Put Notice and the 90-day
waiting period under Section 5(f), as the case may be, shall be tolled, as of
the date of delivery of the Drag-Along Notice (the "Drag Toll Date") even if any
such waiting period has not yet begun to run as of the date of delivery of the
Drag-Along Notice, and the Exercise Date and/or Put Effective Date, as
applicable, shall be suspended, and shall only be rescheduled in accordance with
Section 6(j)(i) below. The suspended Exercise Date and/or Put Effective Date, as
appropriate, and the

                                       14
<PAGE>
corresponding Exercise Notice and/or Put Notice, as appropriate, shall be
cancelled if the transaction that is the subject of the Drag-Along Notice is
consummated within sixty (60) days of the date of delivery of the Drag-Along
Notice by the Trust to the Holder.

      (h)   If the Trust delivers a Drag-Along Notice to the Holder in
accordance with Section 6(a) following its delivery of a Tag-Along Notice to the
Holder in accordance with Section 7(a), then such Tag-Along Notice, and any
Participation Notice delivered by the Holder in connection with the Tag-Along
Notice, shall be deemed cancelled and of no effect as of the date of delivery of
the Drag-Along Notice to the Holder, and the Holder shall not be entitled to
exercise such tag-along right.

      (i)   Notwithstanding Section 6(b) above and subject to the limitations of
Section 2(a) above, after receiving a Drag-Along Notice, the Holder shall be
entitled to deliver to the Company an Exercise Notice relating to the portion of
the Warrant that is the subject of the Drag-Along Notice, provided that such
Exercise Notice shall only be given effect if the transaction relating to the
Drag-Along Notice is terminated or is not consummated within sixty (60) days of
the date of delivery of the Drag-Along Notice by the Trust, and further provided
that no days that have passed from the date of delivery to the Company of the
Exercise Notice until the date of such termination or expiration, as appropriate
(the "Draft Expiry Date"), shall be counted for purposes of the waiting period
under Section 2(b).

      (j)   If the transaction that is the subject of a Drag-Along Notice
delivered by the Trust to the Holder in accordance with Section 6(a) herein (the
"Drag Transaction") is terminated or is not consummated within sixty (60) days
of the date of delivery of the Drag-Along Notice by the Trust, then

            (i)   notwithstanding anything contained herein to the contrary, any
Exercise Date and/or Put Effective Date that was/were suspended pursuant to
Section 6(g) above shall each be deemed reinstated and rescheduled, subject to
the following provisions:

                  (1)    with respect to an Exercise Date, no days that have
passed from the Drag Toll Date until the Drag Expiry Date shall be counted for
purposes of the waiting period under Section 2(b) and the corresponding election
to exercise the Warrant, or portion thereof, and the corresponding Exercise
Notice, shall be deemed reinstated and effective subject to the rescheduled date
of the Exercise Date, to reflect the provisions of this Section 6(j)(i)(1); and

                  (2)    with respect to a Put Effective Date, the Put
Effective Date shall be delayed by adding the number of days that is equal to
the number of days that have passed from the Drag Toll Date until the Drag
Expiry Date to the 90-day waiting period under Section 5(f), and the
corresponding election to put the Warrant, or portion thereof, and the
corresponding Put Notice, shall be deemed reinstated and effective subject to
the rescheduled date of the Put Effective Date, to reflect the provisions of
this Section 6(j)(i)(2).

            (ii)  the Drag-Along Notice shall be deemed voided.

      (k)   The rights of the Trust under this Section 6 shall expire upon the
consummation by the Company of a Qualified Public Offering.

      Section 7. Tag-Along Rights.

      (a)   Subject to the terms and conditions of this Section 7 and
notwithstanding Section 2(b) herein, if the Trust proposes to sell twenty-five
percent (25%) or more of the Shares it then

                                       15
<PAGE>
holds to a bona fide unaffiliated third party or parties on an arm's length
basis in a single transaction or a series of related transactions, and the Trust
did not elect its drag-along right pursuant to Section 6(a) above, the Trust
shall provide to the Holder, at least thirty (30) days prior to the closing of
such sale, written notice, in accordance with Section 15 herein, of its
intention to sell the shares of Common Stock, the name of the Proposed
Transferee, the price and other material terms under which the sale is proposed
to be made and that the Holder is entitled to immediately exercise a certain
portion of the Warrant, if any portion thereof is still outstanding and
unexpired hereunder, and to sell the Shares obtained through such exercise, if
any (the "Optional Exercise Shares"), as well as a certain number of the Shares
then held by the Holder to the Proposed Transferee on the terms and conditions
contained therein ("Tag-Along Notice").

      (b)   Subject to the terms and conditions of this Section 7, upon receipt
of the Tag-Along Notice, the Holder shall have the right, exercisable upon
written notice in accordance with Section 15 herein to the Trust, sent within
twenty (20) days after the Holder's receipt of the Tag-Along Notice (the
"Participation Notice"), to exercise a portion of the Warrant, if still
outstanding and unexpired hereunder, and to sell to the Proposed Transferee the
Optional Exercise Shares, if any, and a certain number of Shares then held by
the Holder (collectively, the "Tag Shares"), such that in the aggregate the
number of Shares to be sold by the Holder to the Proposed Transferee shall be no
greater than:

                         ( B + C )
                  A   x  ---------
                             D

      where: A =  the number of shares of Common Stock proposed to be sold by
                  the Trust to the Proposed Transferee (the "Tag Sale Shares");

             B =  the number of Shares then held by the Holder, including any
                  Optional Exercise Shares;

             C =  the number of shares of Common Stock subject to the
                  outstanding, unexpired portion of the Warrant (if any), after
                  taking into account the exercise with respect to any Optional
                  Exercise Shares (but excluding any portion of the Warrant that
                  is not entitled to the benefit of tag-along rights pursuant to
                  Section 7(e) below); and

             D =  the total number of shares of Common Stock then outstanding
                  (assuming the exercise of all outstanding options, warrants
                  and rights, and the conversion into Common Stock of all
                  convertible securities).

Any of the Shares sold to the Proposed Transferee shall be sold by the Holder at
the same per share price and on the same terms and conditions as specified in
the Tag-Along Notice or any modification thereof, but in no event less favorable
than the terms and conditions of Shares sold by the Trust. Together with its
delivery of the Participation Notice to the Trust, the Holder is required to
deliver an Exercise Notice to the Company with respect to the Optional Exercise
Shares. The Participation Notice shall be deemed to be given and served on the
date that the

                                       16
<PAGE>
Trust receives the Participation Notice. Notwithstanding Section 2(b) herein,
the portion of the Warrant to be exercised pursuant to the terms of this Section
7 and the Exercise Notice, shall be deemed exercised with respect to the
Optional Exercise Shares concurrently with the consummation of the transaction
which is the subject of the Tag-Along Notice as provided in Section 2(h). If the
Holder delivers the Participation Notice but fails to deliver the appropriate
payment in cash for the exercise of the Warrant, or portion thereof, as
appropriate, at the time of consummation of such transaction, then the Holder
will have been deemed to have delivered a Cashless Exercise Notice to the
Company in accordance with Section 2(c) above. The Company's call rights under
Section 4(a)(i) shall not apply to the Holder's exercise with respect to the
Optional Exercise Shares. The Holder's failure to respond within the 20-day
period noted above shall be deemed a decision by the Holder not to participate
in such sale.

      (c)   To the extent that the Holder exercises its right of participation
in accordance with the terms and conditions set forth in Section 7(b), the
Proposed Transferee may decide to purchase all of the Tag Shares, in addition to
all of the Tag Sale Shares. In the event the Proposed Transferee does not so
decide, then the number of Tag Sale Shares that the Trust may sell in the
transaction (on the same terms and conditions as specified in the Tag-Along
Notice or any modification thereof) will be reduced by the number of shares
necessary to permit the sale of the Tag Shares in accordance with the provisions
of Section 7(b).

      (d)   Promptly after delivery of the Participation Notice, the Holder
shall deliver to the Trust, to hold in escrow pending closing of the sale of
shares of Common Stock, stock certificates in its possession (if any)
representing its shares of Common Stock to be transferred, properly endorsed for
transfer to the Proposed Transferee. The Holder's failure to deliver the stock
certificates so endorsed by the closing date of the sale to the Proposed
Transferee shall be deemed a decision by the Holder not to participate in such
transaction.

      (e)   To the extent that the Proposed Transferee refuses to purchase any
portion of the Tag Shares from the Holder (the "Refused Shares"), the Trust
shall not sell to the Proposed Transferee any Tag Sale Shares unless and until,
simultaneously with such sale, the Trust shall purchase the Refused Shares from
the Holder for the same consideration per Share as specified in Section 7(b). In
such event, the number of Tag Sale Shares that the Trust may sell to the
Proposed Transferee will be increased by adding the number of shares of Common
Stock represented by the Refused Shares.

      (f)   If the Company has sent a Call Notice to the Holder in accordance
with Section 4(c) herein prior to delivery by the Trust of a Tag-Along Notice to
the Holder, then the Holder shall not be entitled to exercise its tag-along
right pursuant to Section 7(b) herein with respect to such portion of the
Warrant that is the subject of the aforementioned Call Notice.

      (g)   If upon the Trust's delivery of a Tag-Along Notice to the Holder
there is a pending Exercise Date, Put Exercise Date and/or Put Effective Date,
then the Exercise Notice and the applicable 90-day waiting period under Section
2(b) and/or the corresponding Put Notice and the 90-day waiting period under
Section 5(f), as the case may be, shall be tolled, as of the date of delivery of
the Tag-Along Notice (the "Tag Toll Date"), even if any such waiting period has
not yet begun to run as of the date of delivery of the Tag-Along Notice, and the
Exercise Date and/or Put Effective Date, as applicable, shall be suspended, and
shall only be rescheduled in accordance with Section 7(i)(i) below. The
suspended Exercise Date and/or Put Effective Date, as applicable, and the
corresponding Exercise Notice or Put

                                       17
<PAGE>
Notice, as appropriate, shall be cancelled if the transaction that is the
subject of the Tag-Along Notice is consummated within sixty (60) days of the
date of delivery of the Tag-Along Notice by the Trust to the Holder.

      (h)   Notwithstanding Section 7(b) above and subject to the limitations of
Section 2(a) above, after delivering a Participation Notice to the Trust, the
Holder shall be entitled to deliver to the Company an Exercise Notice relating
to the portion of the Warrant that is the subject of the Participation Notice,
provided that the Exercise Notice shall only be given effect if the transaction
relating to the Participation Notice is terminated or is not consummated within
sixty (60) days of the date of delivery of the corresponding Tag-Along Notice by
the Trust, and further provided that no days that have passed from the date of
delivery to the Company of the Exercise Notice until the date of such
termination or expiration, as appropriate (the "Tag Expiry Date"), shall be
counted for purposes of the waiting period under Section 2(b).

      (i)   If the transaction that is the subject of a Tag-Along Notice
delivered by the Trust to the Holder in accordance with Section 7(a) herein (the
"Tag Transaction") is terminated or is not consummated within sixty (60) days of
the date of delivery of the Tag-Along Notice by the Trust then

            (i)   notwithstanding anything contained herein to the contrary, any
Exercise Date and/or Put Effective Date that was/were suspended pursuant to
Section 7(g) above shall each be deemed reinstated and rescheduled, subject to
the following provisions:

                  (1)    with respect to an Exercise Date, no days that have
passed from the Tag Toll Date until the Expiry Date shall be counted for
purposes of the waiting period under Section 2(b) and the corresponding election
to exercise the Warrant, or portion thereof, and the corresponding Exercise
Notice, shall be deemed reinstated and effective subject to the rescheduled date
of the Exercise Date, to reflect the provisions of this Section 7(i)(i)(1); and

                  (2)    with respect to a Put Effective Date, the Put Effective
Date shall be delayed by adding the number of days that is equal to the number
of days that have passed from the Tag Toll Date until the Tag Expiry Date to the
90-day waiting period under Section 5(f), and the corresponding election to put
the Warrant, or portion thereof, and the corresponding Put Notice, shall be
deemed reinstated and effective subject to the rescheduled date of the Put
Effective Date, to reflect the provisions of this Section 7(i)(i)(2).

            (ii)  the Tag-Along Notice and corresponding Participation Notice
shall be deemed voided.

      (j)   The rights of the Holder under this Section 7 shall expire upon the
consummation of a Qualified Public Offering.

      Section 8. Rights as Stock.

      Notwithstanding any other rights that the Holder may have that arise out
of any stockholding in the Company, the Holder shall not be entitled to vote or
be deemed the holder of Common Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Warrant, nor shall
anything contained herein be construed to confer upon the Holder, by virtue of
the Warrant, the rights of a stockholder of the Company or the right to vote
upon any matter submitted to stockholders at any meeting thereof, or give or
withhold consent to any corporate action or to receive notice of meetings or
other actions affecting stockholders (except as provided herein), or the right
to receive dividends or subscription rights or otherwise.

                                       18
<PAGE>
      Section 9. Registration of Warrants and Shares.

      Neither the Warrant nor the Shares have been registered under the
Securities Act, as amended (such Act, or any similar Federal statute then in
effect, being hereinafter referred to as the "Act").

      Section 10. Assignment of Rights and Benefits by the Holder.

      (a)   Subject to the terms of Section 11 and subject to the restrictions
set out in Section 10(b), the Holder may (x) transfer the Warrant, or a portion
thereof or, (y) assign all or any portion of its rights and/or benefits under
this Agreement, (each a "Warrant Transfer"), provided that,

            (i)   the Company is, at least fifteen (15) days prior to such
Warrant Transfer, furnished with written notice of the name and address of the
transferee or assignee;

            (ii)  the transferee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement pursuant to the form of Assignment
and Joinder, attached hereto as Exhibit B;

            (iii) the Holder shall have obtained an opinion of its legal
counsel, addressed to the Company and reasonably acceptable to the Company,
stating that such Warrant Transfer complies with all applicable federal and
state securities laws; and

            (iv)  the Holder shall only assign such rights and benefits pro rata
with the portion of the Warrant being transferred to the transferee.

      (b)   The Holder agrees that it may not make a Warrant Transfer to:

            (i)   any Person that generated at least 20% of its total revenue
(on a consolidated basis together with all entities it controls, is controlled
by or is under common control with) from government contracts in its last fiscal
year preceding the proposed Warrant Transfer, other than any Financial
Institution (as defined below), provided that this limitation shall be waived
with respect to a proposed transferee if the Company determines in its
reasonable discretion that such proposed transferee does not then compete with
the Company or any entity controlled by the Company;

            (ii)  any person or entity that is not a U.S. person. For this
purpose, U.S. persons shall be limited to those persons that (i) are defined as
U.S. persons in Section 7701(a)(3) of the Internal Revenue Code of 1986, as
amended (the "Code") and (ii) are U.S. citizens or entities organized under U.S.
federal or state laws which are not owned, controlled or influenced, directly or
indirectly, by a foreign person (or term of like meaning) under the National
Industrial Security Program Operating Manual (or any successor document) as
amended from time to time; or

            (iii) as long as the Company maintains its status as an
S-corporation within the meaning of Section 1361, et seq., of the Code, any
person or entity whose ownership of the Warrant or any portion thereof would
cause the Company to lose such status.

                                       19
<PAGE>
      (c)   INTENTIONALLY OMITTED.

      (d)   Subject to the terms of Section 11 and subject to the restrictions
set out in Section 10(e) and Section 12(f), the Holder may transfer any number
of Shares it has obtained by exercising the Warrant or a portion thereof (each a
"Stock Transfer"), provided that,

            (i)   the Company is, at least fifteen (15) days prior to such Stock
Transfer, furnished with written notice of the name and address of the
transferee or assignee;

            (ii)  the transferee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement pursuant to the form of Assignment
and Joinder, attached hereto as Exhibit B;

            (iii) the Holder shall have obtained an opinion of its legal
counsel, addressed to the Company and reasonably acceptable to the Company,
stating that such Stock Transfer complies with all applicable federal and state
securities laws; and

            (v)   the Holder shall only assign such rights and benefits pro rata
with the number of Shares being transferred to the transferee.

      (e)   The Holder agrees that it may not make a Stock Transfer to:

            (i)   any Person that generated at least 20% of its total revenue
(on a consolidated basis together with all entities it controls, is controlled
by or is under common control with) from government contracts in its last fiscal
year preceding the proposed Stock Transfer, other than any Financial Institution
(as defined below), provided that this limitation shall be waived with respect
to a proposed transferee if the Company determines in its reasonable discretion
that such proposed transferee does not then compete with the Company or any
entity controlled by the Company;

            (ii)  any person or entity that is not a U.S. person. For this
purpose, U.S. persons shall be limited to those persons that (i) are defined as
U.S. persons in Section 7701(a)(3) of the Internal Revenue Code of 1986, as
amended (the "Code") and (ii) are U.S. citizens or entities organized under U.S.
federal or state laws which are not owned, controlled or influenced, directly or
indirectly, by a foreign person (or term of like meaning) under the National
Industrial Security Program Operating Manual (or any successor document) as
amended from time to time; or

            (iii) as long as the Company maintains its status as an
S-corporation within the meaning of Section 1361, et seq., of the Code, any
person or entity whose ownership of the Warrant or any portion thereof would
cause the Company to lose such status.

      (f)   Any transfer by the Holder that is in contravention of any of the
terms of Sections 10(a), (b), (d), or (e) above shall be void ab initio and of
no force or effect, and the Company shall not be obligated to honor or recognize
any such transfer on its stock records or otherwise.

      (g)   "Financial Institution" shall mean any insurance company, bank,
trust company, pension fund (whether private, public or governmental), mutual
fund or any other entity whose

                                       20
<PAGE>
primary business is owning and investing in the securities of other unaffiliated
entities, regardless of whether or not such Financial Institution has an
investment in a person or entity that generated at least 20% of its total
revenue from government contracts; provided that not more than 50% of the Voting
Stock of such Financial Institution is owned or controlled, directly or
indirectly, by a person or entity that generated at least 20% of its total
revenue from government contracts.

      (h)   "Subsidiary" means, with respect to any Person, (i) any corporation
more than fifty percent (50%) of the outstanding securities having ordinary
voting power of which shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries, or (ii) any partnership, limited
liability company, association, joint venture or similar business organization
more than fifty percent (50%) of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" means a Subsidiary
of the Company.

      Section 11. Company Right of First Offer and Second Offer.

      (a)   First Offer

            (i)   If the Holder proposes to sell or otherwise transfer the
Warrant, any portion thereof, and/or any number of the Shares it holds at such
time (collectively, the "Transfer Interests") to any third party other than one
that it controls, is controlled by, or is under common control with (each an
"Affiliate"), the Holder is required to first notify the Company, by delivering
to the Company a written notice ("Sale Notice") in accordance with Section 15,
stating the Holder's bona fide intention to sell or otherwise transfer the
Transfer Interests. The Company shall have the exclusive right, for a period of
thirty (30) days from its receipt of the Sale Notice, to make an offer to
purchase the Transfer Interests at a price to be proposed by the Company;
provided that, in relation to a proposed sale or transfer of Transfer Interests
by the Holder in connection with a transaction that is the subject of a
Tag-Along Notice delivered to the Holder by the Trust, the Company shall have
the exclusive right, for a period of ten (10) days from its receipt of the Sale
Notice, to make an offer to purchase the Transfer Interest at a price to be
proposed by the Company.

            (ii)  Subject to Section 11(c) below, if either (x) the Company does
not deliver to the Holder written notice of an offer to purchase the Transfer
Interests ("Purchase Notice") within the appropriate offer period referenced in
Section 11(a)(i) above, or (y) the Holder has rejected the Company's offer, the
Holder shall be entitled to issue and sell the Transfer Interests at a price
which is no less than ninety percent (90%) of the last price offered by the
Company for the Transfer Interests (the "Last Offer Price"), to any third party
that is not an Affiliate of the Holder at any time during the period of nine (9)
months following the date of delivery of the Sale Notice by the Holder to the
Company, without the obligation to provide any further offers or notices to the
Company.

                                       21
<PAGE>
      (b)   Second Offer.

            (i)   If the Holder proposes to sell or otherwise transfer the
Transfer Interests to a third party that is not an Affiliate of the Holder at a
price that is less than ninety percent (90%) of the Last Offer Price (the
"Proposed Sale Price"), the Holder shall, prior to consummating such sale or
transfer of the Transfer Interests to the third party, make an offer to the
Company in writing and in accordance with Section 15 (the "Second Sale Notice"),
to sell the Transfer Interests to the Company at the Proposed Sale Price.

            (ii)  Subject to Section 11(c) below, if the Company does not
deliver to the Holder written notice of acceptance of any offer made pursuant to
Section 11(b)(i) within thirty (30) days after the Company's receipt of the
Second Sale Notice, the Company shall be deemed to have waived its rights to
purchase the Transfer Interests, and the Holder shall be entitled to issue and
sell or otherwise transfer the Transfer Interests at the Proposed Sale Price to
such unrelated third party within nine (9) months following the date of delivery
of the Sale Notice, without the obligation to provide any further offers or
notices to the Company.

      (c)   If the Holder proposes to sell or otherwise transfer the Transfer
Interests to a third party that is not an Affiliate of the Holder at any time
after the expiry of the nine-month period referenced in Section 11(a)(ii) or
Section 11(b)(ii), then the Holder shall again be required to comply with all of
the obligations and requirements contained in Sections 11(a) and 11(b).

      (d)   Payment of the Purchase Price shall be made in cash in immediately
available funds within sixty (60) days after the date (if any) that a purchase
price is agreed for the Company's purchase of the Transfer Interests.

      Section 12. INTENTIONALLY OMITTED.

      Section 13. Representations and Warranties and Covenants of The Holder.

      (a)   Representations and Warranties. In order to induce the Company to
accept this Agreement, the Holder hereby represents and warrants to the Company
as follows:

            (i)   Purchase Entirely for Own Account. The Holder represents that
it is acquiring the Warrant and the Shares issuable upon exercise of the Warrant
(collectively the "Securities") to be issued to it for investment for the
Holder's own account, not as a nominee or agent, and not with a view to view to
the resale or the distribution thereof, and that the Holder has no present
intention of selling, granting any participation rights in, or otherwise
distributing the same. By executing this Agreement, the Holder further
represents that the Holder does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to such
Person or to any third Person, with respect to any of the Securities.

            (ii)  Disclosure of Information. The Holder represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and

                                       22
<PAGE>
conditions of the sale of the Securities and the business, properties, prospects
and financial condition of the Company.

            (iii) Investment Experience. The Holder acknowledges that it can
bear the economic risk of its investment, and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Securities. The Holder also represents it has not
been organized for the purpose of acquiring the Securities.

            (iv)  Accredited Investor. The Holder is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Act, as
presently in effect.

            (v)   Restricted Securities. The Holder understands that the Warrant
and the Shares it is purchasing are characterized as "restricted securities"
under the federal securities laws and applicable blue sky laws inasmuch as they
are being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act and such blue sky laws
only in certain limited circumstances. In this connection, the Holder represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act and such blue
sky laws.

            (vi)  S-Corporation Shareholder. The Holder is an entity whose
ownership of Common Stock, if it were to exercise any portion of the Warrant on
the date hereof, would not cause the Company to lose its status as an
S-corporation within the meaning of Section 1361, et seq., of the Code (a
"Permitted S-corp Shareholder"). Notwithstanding any other provision of this
Agreement, the Holder shall not be entitled to exercise any portion of the
Warrant if its ownership of Common Stock would cause the Company to lose its
status as an S-corporation within the meaning of Section 1361, et seq., of the
Code.

      (b)   Permitted S-corp Shareholder. In order to induce the Company to
accept this Agreement, the Holder covenants and agrees that it will not
intentionally and knowingly take any action to change its status from a
Permitted S-corp Shareholder (as defined above), which change of status results
in the Company losing its status as an S-corporation within the meaning of
Section 1361, et seq., of the Code.

      Section 14. Legends.

      It is understood that the certificates evidencing the Securities may bear
the following legends:

      (a)   "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND UNDER ANY
RELEVANT STATE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED."

                                       23
<PAGE>
      (b)   Any legend required by applicable state securities laws.

      (c)   A legend to reflect restrictions on transferability of Common Stock
and Warrants, to be contained in the Certificate of Incorporation of the
Company, as amended and restated, and/or the By-Laws of the Company as amended
and restated.

      Section 15. Notices.

      Unless otherwise provided herein, any notice required or permitted under
this Agreement shall be given in writing and shall be delivered (a) by hand, (b)
by mail, certified mail, return receipt requested, or (c) by facsimile to the
party to be notified, at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by prior
written notice to the other party. Unless otherwise provided herein, notices
shall be deemed to have been given and served (a) where delivered by hand, at
time of delivery, (b) where delivered by mail, on acknowledgement of receipt as
shown by the date indicated on the return receipt as having been received, and
(c) where delivered by facsimile, 24 hours after transmission confirmation by
the transmitting machine unless within those 24 hours the intended recipient has
informed the sender that the transmission was received in an incomplete or
unreadable form, or the transmission report of the sender indicates a faulty or
incomplete transmission. If such receipt is on a day that is not a working day
or is later than 5 p.m. (local time) on a working day, the notice shall be
deemed to have been given and served on the next working day.

      Section 16. Covenants. So long as the Warrant remains outstanding:

      (a)   As long as none of the clauses (a), (b) or (c) of the definition of
Current Market Price in Section 3(c)(ii) is applicable to the Common Stock, all
SARs issued by the Company will be issued with an exercise price no less than
the per share value of the Common Stock as set forth in the then most recent
appraisal performed by an independent appraiser at the Company's request in
connection with the ESOP. If one of the clauses (a), (b) or (c) of the
definition of Current Market Price in Section 3(c)(ii) is applicable to the
Common Stock, all SARs issued by the Company will be issued with an exercise
price no less than the then current Current Market Price. All SARs issued by the
Company will vest in accordance with the terms of the Company's Stock
Appreciation Rights Plan, as in effect at the time of issuance. The Company will
not issue SARs that cause the aggregate number of outstanding SARs (excluding
any SARs that have been exercised, that have expired, terminated unexercised, or
become unexercisable or that have been forfeited or otherwise terminated,
surrendered or cancelled), at the time of issuance, to be in excess of:

                  (1)   two percent (2%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the first anniversary of the Effective Date;

                  (2)   four percent (4%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the second anniversary of the Effective Date;

                                       24
<PAGE>
                  (3)   six percent (6%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the third anniversary of the Effective Date;

                  (4)   eight percent (8%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the fourth anniversary of the Effective Date; and

                  (5)   ten percent (10%) of the number of then outstanding
shares of Common Stock on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and rights and the conversion into Common Stock of
all convertible securities) at the fifth anniversary of the Effective Date.

      (b)   The Company will not issue Company Contributions that cause the
aggregate value of all Company Contributions to exceed, at the time of issuance,
five percent (5%) of the Company's aggregate consolidated payroll expenses
(i.e., the aggregate payroll expenses of the Company and of any of the Company's
Subsidiaries substantially all of whose employees are eligible to participate in
Company benefit plans) from the Effective Date to the date of such
contributions, measured at the end of each plan year for the Company benefit
plans.

      (c)   The Company will not issue shares of phantom stock that cause the
number of shares of outstanding phantom stock (excluding any shares of phantom
stock that have expired, terminated unexercised, or become unexercisable, or
that have been forfeited or otherwise terminated, surrendered or cancelled), at
the time of issuance, to be in excess of 171,494 shares of phantom stock.

      Section 17. Rights and Obligations of the Trust.

      Notwithstanding anything contained herein to the contrary, the parties
hereto acknowledge and agree that the Trust shall only be a party to this
Agreement with respect to the terms and conditions contained in Sections 6, 7,
15, and 17 through 25, and shall not be liable for any obligations of the
Company hereunder.

      Section 18. Amendment.

      This Agreement may be amended by the mutual written agreement of the
Company and the Holder, except that Section 1, 6, 7, 15 and 17 through 25 of
this Agreement may only be amended by the mutual written consent of the Company,
the Trust and all holders of an outstanding portion of the Warrant.

      Section 19. Binding Effect.

      This Agreement shall be binding upon and inure to the sole and exclusive
benefit of the Company and its successor, Atefi and its successors and the Trust
and its successors.

                                       25
<PAGE>
      Section 20. Governing Law.

      This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to relevant conflict of law
principles.

      Section 21. Waiver.

      Failure to insist upon strict compliance with any of the terms, covenants
or conditions of this Agreement shall not be deemed a waiver of such terms,
covenants or conditions, nor shall any waiver or relinquishment of any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.

      Section 22. Entire Agreement.

      This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by all of the parties.

      Section 23. Severability.

      The invalidity or unenforceability of any provision of this Agreement
shall in no way affect the validity or enforceability of any other provision
hereof.

      Section 24. Headings.

      The headings to the sections of this Agreement are used for reference only
and are not to be construed as limiting or extending the provisions hereof.

      Section 25. Counterparts.

      This Agreement may be executed in any number of counterparts, each of
which shall be considered an original but all of which shall constitute the
Agreement by and among the parties.

                        [SIGNATURES FOLLOW ON NEXT PAGE]

                                       26
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have caused this Alion Mezzanine
Warrant Agreement to be executed under its corporate seal by its officers
thereunto duly authorized as of the date hereof.

ALION SCIENCE AND TECHNOLOGY CORPORATION

By:
   -----------------------------                ---------------------------
Name:                                           Bahman Atefi,
Title:                                          an individual
Address: 1750 Tysons Blvd.
         Suite 1300
         McLean, VA 22102-4213
Fax: 703-714-6508  Fax:

ALION SCIENCE AND TECHNOLOGY CORPORATION
EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT
TRUST, FOR THE PURPOSES OF SECTIONS 6, 7,
15 AND 17 THROUGH 25 OF THIS MEZZANINE
WARRANT AGREEMENT ONLY

By:
   -----------------------------
Name:
Title: Trustee
Address:

Fax:

                                       27
<PAGE>
                                    EXHIBIT A

FORM OF EXERCISE NOTICE

(To be Executed by the Holder if the Holder Desires to Exercise the Warrant
Evidenced by the Foregoing Alion Mezzanine Warrant Agreement)

To Alion Science and Technology Corporation

The undersigned hereby irrevocably elects to purchase ______ shares of Common
Stock, issuable upon exercise of said Warrant.

The undersigned hereby elects to make payment in connection with such exercise
by:

      delivery of $______ (in cash) and any applicable taxes payable by the
---   undersigned; or.

      cashless exercise, pursuant to Section 2(c) of the Alion Mezzanine Warrant
---   Agreement.

The undersigned requests that certificates for such shares be issued in the name
of

PLEASE INSERT TAX IDENTIFICATION NUMBER

---------------------

---------------------------------------
(Print Name)

---------------------------------------
(Print Address)

---------------------------------------

                                       28
<PAGE>
                                    EXHIBIT B

                           ASSIGNMENT AND JOINDER FORM

      FOR VALUE RECEIVED, the undersigned Holder hereby sells, assigns and
transfers unto the undersigned Assignee all of the rights and obligations of the
undersigned Holder under the within Alion Mezzanine Warrant Agreement, with
respect to           shares of Common Stock (the "Warrant Shares"), and does
hereby irrevocably constitute and appoint          to make such transfer on the
books of the Company maintained for the purpose, with full power of substitution
in the premises.

      The Assignee hereby acknowledges and agrees that (i) it is assuming all of
the obligations, relating to the portion of the Warrant being assigned and
transferred pursuant to this instrument (the "Warrant Portion") and the Warrant
Shares, which are contained in the Alion Mezzanine Warrant Agreement, and (ii)
as of the date written below, the Assignee shall join and become a party to the
Alion Mezzanine Warrant Agreement as if it were named on the signature page of
the Alion Mezzanine Warrant Agreement as a Holder and that it shall be bound as
a Holder by all of the terms, conditions, covenants and restrictions contained
in the Warrant Agreement.

      The undersigned Holder and Assignee hereby agree that this instrument
shall be construed in accordance with and governed by the laws of the State of
Delaware, without regard to relevant conflict of law principles.

Dated:
                                             HOLDER

                                             By:
                                                 ----------------------------
                                             Name:
                                             Its:

                                             ASSIGNEE

                                             By:
                                                 ----------------------------
                                             Name:
                                             Its:exv10w25

 

EXHIBIT 10.25

STOCK PURCHASE AGREEMENT

between

ALION SCIENCE AND TECHNOLOGY CORPORATION,

and

STATE STREET BANK & TRUST COMPANY, as Trustee of

The Employee Stock Ownership Plan Component of the

ALION SCIENCE AND TECHNOLOGY CORPORATION

EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT TRUST

___________, 2002

 

 

STOCK PURCHASE AGREEMENT

     STOCK PURCHASE AGREEMENT (“Agreement"), dated as of      , 2002, by and
between ALION SCIENCE AND TECHNOLOGY CORPORATION, a Delaware corporation (the
“Company"), and STATE STREET BANK & TRUST COMPANY, a state chartered trust
company organized under the laws of the Commonwealth of Massachusetts, not in
its individual or corporate capacity, but solely as trustee (the “Trustee”) of
the employee stock ownership plan component of the ALION SCIENCE AND TECHNOLOGY
CORPORATION EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT TRUST (the “Purchaser”)
which implements and forms a part of the ALION SCIENCE AND TECHNOLOGY
CORPORATION EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT PLAN (the “Plan”). The
Purchaser and the Plan are hereinafter collectively referred to as the “ESOP.”
Capitalized terms used herein but not otherwise defined shall have the
meanings assigned to them in the Asset Purchase Agreement (as defined below).

RECITALS

     WHEREAS, the Company is simultaneously purchasing substantially all of the
assets related to IIT Research Institute’s (“IITRI”) business (as more fully
described in the Asset Purchase Agreement referred to below, the “Business”) of
providing advanced technological and scientific services in the fields of
research and development, engineering, and ordnance and explosive waste
remediation, for governmental and private sponsors pursuant to the Fourth
Amended and Restated Asset Purchase Agreement, dated November      , 2002 between
IITRI and the Company (the “Asset Purchase Agreement”); and

     WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company up to Three Million (3,000,000)
shares of common stock of the Company, $0.01 par value per share (“Common
Stock”), that once issued will (together with 100 shares of Common Stock
referred to in Section 1.4 below) be all of the outstanding Company Stock of
the Company (together, the “Shares”), subject to the terms and conditions of
this Agreement.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements, covenants, representations and warranties hereinafter contained,
the parties hereby agree as follows:

AGREEMENT

     SECTION 1. Purchase and Sale of Shares.

     1.1 Shares to be Sold. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 2.1), the Company shall issue
and sell to the Purchaser, and the Purchaser shall purchase from the Company,
the Shares.

 

 

     1.2 Purchase Price. The purchase price for each Share shall be Ten
Dollars ($10.00) and the aggregate purchase price (the “Purchase Price”) shall
be an amount equal to the product of the number of Shares invested in by
employees of the Company and the Business Subsidiary (as defined below)
pursuant to the offering described in the S-1 (as defined below) multiplied by
Ten Dollars ($10.00); provided, that in no event shall the Purchase Price be
less than Twenty Four Million Dollars ($24,000,000) or greater than Thirty
Million Dollars ($30,000,000). The Purchase Price shall be payable by the
Purchaser to the Company by wire transfer of immediately available funds to an
account designated by the Company.

     1.3 Use of Proceeds. The Company shall use all of the proceeds of the
Purchase Price that it receives hereunder to pay a portion of the Cash Purchase
Price (as defined in the Asset Purchase Agreement) pursuant to the Asset
Purchase Agreement.

     1.4 Special Contribution to the Initial ESOP Trust. After the Closing
Date, but no later than five Business Days thereafter, the Company shall make a
special contribution to the Beagle Holdings, Inc. Employee Stock Ownership and
401(k) Trust, established December 19, 2001 (the “Initial Trust”) of which
Stacy Mendler is presently the trustee (the “Initial Trustee”) as a special
contribution for the Plan’s fiscal year beginning October 1, 2002. Such
special contribution shall be in an amount sufficient to enable the Initial
Trustee to repay in full all amounts borrowed by the Initial Trust to purchase
the 100 shares of Common Stock held by it. It is contemplated that the Initial
Trustee will use the special contribution to immediately repay such loan. Upon
such repayment, the 100 shares of Common Stock held by the Initial Trust shall
thereupon become available for allocation to Plan participants as part of the
contributions for the Plan’s fiscal year beginning October 1, 2002, and the
Company shall take whatever actions are required to cause such 100 shares of
Common Stock to be transferred to the Purchaser following the above described
repayment, and the Purchaser shall hold on behalf of the Plan such 100 shares
of Common Stock for allocation to Plan participants. Immediately thereafter
the Initial Trust shall be dissolved.

     SECTION 2. Closing.

     2.1 Time and Place. The closing (“Closing”) of the purchase of the Shares
will be held at the offices of Baker & McKenzie in Chicago, Illinois, at 10:00
a.m. local time, on December [     ], 2002, or at such other time and place as
shall be mutually agreed upon by the parties. The date of the Closing is
sometimes referred to herein as the “Closing Date.”

     2.2 Deliveries.

     2.2.1 Deliveries by the Company. At the Closing, the Company shall
deliver, or cause to be delivered, to the Purchaser the following:

     (a)  The certificates representing the Shares, duly endorsed to the
Purchaser or with stock powers attached duly executed to the Purchaser,

 

 

in proper form for transfer, and with stamps for all applicable Federal,
state or local stock transfer taxes, if any, affixed thereto.

     (b)  The opinions of counsel to the Company referred to in Section 6.3.

     (c)  True and correct copies of the Company’s Certificate of Incorporation,
certified by the Secretary of State of the State of Delaware, and of its
By-laws, the Plan, the Trust Agreement (as defined below) and certain
resolutions of its Board of Directors with respect to (i) the adoption of the
Plan and the Trust Agreement, (ii) the appointment of the Trustee, (iii) the
approval of the Transaction Agreements (as defined below), and (iv) such other
matters as may be reasonably requested by the Purchaser, in each case certified
by the Secretary of the Company, which copies are true, correct and complete.

     (d)  True and correct copies of the Transaction Agreements executed by the
Company and each other party thereto, other than the Purchaser.

     "Transaction Agreements” shall mean this Agreement, the Trust Agreement,
dated [     ], 2002, between the Trustee and the Company (the “Trust
Agreement”), the Asset Purchase Agreement, the Mezzanine Note Securities
Purchase Agreement, the Mezzanine Investment Note, the Mezzanine Note Warrant,
the Seller Note Securities Purchase Agreement, the Seller Investment Note and
the Seller Note Warrant, and the First Union Line of Credit or if it is
replaced, the Replacement Line of Credit, the Guarantee, the Rights Agreement,
the Letter Agreement, dated [     ], 2002, between IITRI and the Company, and
the Registration Rights Agreement, dated the date hereof, between the Company
and the Purchaser, in each case including all the certificates and other
instruments attached to Exhibits hereto or thereto or delivered in connection
herewith or therewith.

     2.2.2 Deliveries by the Purchaser. At the Closing, the Purchaser shall
deliver, or cause to be delivered, to the Company the following:

     (a)  The Purchase Price as provided in Section 1.2.

     (b)  True and correct copies of each Transaction Agreement to which the
Purchaser is a party executed by it.

     SECTION 3. Representations and Warranties of the Company. The Company
represents and warrants to the Purchaser as follows:

     3.1 Organization, Corporate Standing and Investments. Each of the Company
and the Business Subsidiary is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
As of the date hereof, the Company is authorized to issue 15,000,000 shares of
Common Stock, and 100 shares of Common Stock are issued or outstanding, all of
which are held by the

 

 

Initial Trust, and Human Factors Applications, Inc. (the “Business
Subsidiary”) is authorized to issue [     ] shares of common stock, par value
$[     ] per share (the “Subsidiary Common Stock”) and [     ] shares of common
stock are issued and outstanding, all of which are held by the Company. Once
issued and sold as contemplated by this Agreement, all of the outstanding
shares of Common Stock will be held by the Purchaser and will be duly
authorized and validly issued, fully paid and non-assessable. The Company
shall convey to the Purchaser, at the Closing, good and valid title to the
Shares, free and clear of any liens, security interests, claims and
encumbrances. No other class of capital stock or other ownership interests of
the Company or the Business Subsidiary is authorized or outstanding. Except as
set forth on Schedule 3.1, there is no, and after giving effect to the
Transactions (as defined below) there will not be any, outstanding right,
subscription, warrant, call, unsatisfied preemptive right, option or other
agreement of any kind to purchase or otherwise to receive from the Company or
the Business Subsidiary any of the outstanding, authorized but unissued,
unauthorized or treasury shares of Common Stock or Subsidiary Common Stock and
there is no outstanding security of any kind of the Company convertible into
any such Common Stock or Subsidiary Common Stock. Except as set forth on
Schedule 3.1, the Company has, and after giving effect to the Transactions will
have, no direct or indirect equity interest in or loans to any partnership,
corporation, joint venture, business association or other entity, other than
the Business Subsidiary. Each of the Company and the Business Subsidiary has
full corporate authority to own, lease and operate its business, and is in good
standing and is qualified to transact business as a foreign corporation in all
states in which the nature of the Business or the properties owned by it, in
each case after giving effect to the consummation of the transactions
contemplated by the Transaction Agreements (the “Transactions”) require it to
qualify to transact business, except for such failures to qualify as would not,
individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined). The Company has been organized solely for the purposes
contemplated by the Transactions, and has no liabilities and no assets and has
not conducted any business, other than as contemplated by the Transactions.

     As used in this Agreement, the term “Material Adverse Effect” used in
connection with a party hereof means any event, change or effect that (i) is
materially adverse to the condition (financial or otherwise), assets,
liabilities, businesses, operations, results of operations or prospects of
such party taken as a whole, including, in the case of the Company, after
giving effect to the Transactions or (ii) adversely affects the ability of such
party to consummate the transactions contemplated in this Agreement.

     3.2 Necessary Authority. The Company has all requisite corporate power
and authority to enter into, deliver and perform this Agreement and the other
Transaction Agreements and to consummate the transactions contemplated herein
and therein. The execution, delivery and performance of this Agreement and the
other Transaction Agreements and the consummation of the transactions
contemplated herein and therein have been duly authorized by all necessary
action on the part of the Company. This Agreement and the other Transaction
Agreements, when executed and delivered by the Company, shall each constitute
its valid and legally binding obligation, enforceable against the Company in
accordance with its terms, except as the same may be

 

 

limited by (i) bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors’ rights generally and (ii) general
equitable principles regardless of whether the issue of enforceability is
considered in a proceeding at law or in equity.

     3.3 Conflict; Change of Control. Subject to satisfaction of the
conditions set forth in Sections 6 and 7, and except as shown in Schedule 3.3,
neither the execution and delivery of this Agreement or any other Transaction
Agreements nor the consummation of the transactions contemplated hereby or
thereby will (i) conflict with or violate, (ii) result in any breach or default
(with or without notice or lapse of time, or both) under, (iii) give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or (iv) result in the creation of security
interest, claim, lien, charge or encumbrance upon any of the Transferred Assets
or the Shares pursuant to:

     3.3.1 any provision of the Certificate of Incorporation or By-laws of the
Company or the Business Subsidiary;

     3.3.2 any law, rule, regulation, ordinance, order, writ, injunction,
judgment or decree applicable to the Company or the Business Subsidiary or by
which any of the Company’s or the Business Subsidiary’s assets are or will be
bound or affected;

     3.3.3 any agreement, contract, note, mortgage, indenture, lease,
instrument, permit, clearance, approval, concession, franchise or license to
which the Company or the Business Subsidiary is or will be a party or by which
the Company or the Business Subsidiary, any of the Company’s or Business
Subsidiary’s assets, employees or consultants or the Shares may be bound or
affected (specifically including, but not limited to, any of the foregoing
relating to the United States Federal Government or any agency or
instrumentality thereof);

     in each case except where such conflict, violation, breach, default,
termination, cancellation, acceleration, creation or encumbrance would not be
material to either the Company and the Business Subsidiary, taken as a whole,
or the Business, whether before or after giving effect to the Transactions.

     3.4 Filings and Approvals. Subject to satisfaction of the conditions set
forth in Sections 6 and 7, and except as shown in Schedule 3.4 attached hereto,
neither the Company nor the Business Subsidiary is required to submit any
notice, declaration, report or other filing or registration with, or request
the consent, approval, order or authorization of, any Governmental Body (as
hereinafter defined) in connection with the execution, delivery or performance
by the Company of this Agreement, the other Transaction Agreements or the
consummation of the Transactions, except where the failure to make such
submission or request would not have been material to either the Company and
the Business Subsidiary, taken as a whole, or the Business, whether before or
after giving effect to the Transactions.

 

 

     "Governmental Body” shall mean any (i) nation, region, state, county,
city, town, village, district or other jurisdiction, (ii) Federal, State,
local, municipal, foreign or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department or other entity and any court or other tribunal), (iv)
multinational organization, (v) body exercising, or entitled to exercise, any
administrative, executive, judicial, arbitral, legislative, policy, regulatory
or taxing authority or power of any nature, or (vi) official of any of the
foregoing.

     3.5 Financial Statements. The Company has furnished Purchaser with copies
of the unaudited consolidated operating results and balance sheet of the
selected operations of IITRI for the 40-week period ending July 5, 2002,
derived from the unaudited financial statements of IITRI, and the audited
consolidated operating results and balance sheets of the selected operations of
IITRI for the fiscal years ending September 30, 2001, September 30, 2000 and
September 30, 1999, derived from the audited financial statements of IITRI
(collectively, the “Financial Statements”). The Financial Statements have been
prepared in accordance with United States Generally Accepted Accounting
Principles (“GAAP”) consistently applied (except as may be indicated in the
notes thereto), and fairly present in all material respects the financial
position of the Business as at the dates thereof and the results of operations
and changes in financial position for the periods then ended. The reserves and
management accruals, including, without limitation, with respect to excess
billings and contract losses related to audits being performed by the DCAA (as
defined below), reflected in the Financial Statements are adequate in all
material respects.

     3.6 S-1. Each of the Form S-1 filed by the Company on October 4, 2002
registering the Shares (the “S-1”) and any supplement or post-effective
amendment filed with respect thereto (each, a “Supplement”) with the Securities
and Exchange Commission (the “SEC”) complies in all material respects with the
requirements of the Securities Act of 1933, as amended (the “Securities Act”)
and the rules and regulations of the SEC thereunder applicable to the S-1.
Each of the S-1 and each Supplement at the time it was filed did not, as of the
date hereof does not, and as of the effective date of such filing did not,
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of IITRI that are included in the S-1 comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the financial position of IITRI as at the dates thereof and the results
of its operations and cash flows for the periods then ended. The forecasted
financial information included in the S-1 is reasonable, represents the
Company’s management’s best estimate of its financial results through the
Company’s fiscal year ending in 2007, was prepared using the same accounting
policies used in preparing the Financial Statements and is based on reasonable
assumptions.

     3.7 Compliance with Law. The Company, the Business Subsidiary and IITRI
(with respect to the Business) are in compliance in all material respects, and
the

 

 

Business has been conducted so as to comply in all material respects, with
all laws, rules and regulations, judgments, decrees or orders of any
Governmental Body applicable to the Business or with respect to which
compliance is a condition of engaging in the Business, including, without
limitation the (i) Federal Acquisition Regulations, (ii) Truth in Negotiations
Act, (iii) Cost Accounting Standards and (iv) any other laws, regulations and
executive orders restricting the use and dissemination of information
classified for national security purposes and the exportation of certain
products or technical data. There are no material judgments or orders,
injunctions, decrees, stipulations or awards by any Governmental Body adversely
affecting the Company, the Business Subsidiary or IITRI (with respect to the
Business), any of the assets of the Company or the Business and none have been
issued or entered into with respect to the Business since October 1, 1997.

     3.8 No Defaults. Neither the Company nor the Business Subsidiary is in
violation of any provision of its Certificate of Incorporation or by-laws (or
other organizational or charter document). Except as set forth in Schedule
3.8, none of the Company, the Business Subsidiary or IITRI has received written
notice or otherwise has knowledge that it is or would be with the passage of
time, in default or violation of any term, condition or provision of (a) any
material judgment, decree, order, injunction or stipulation applicable to the
Company, the Business Subsidiary or IITRI (with respect to the Business) or (b)
any material agreement, note, mortgage, indenture, contract, lease or
instrument, permit, concession, franchise or license to which the Company, the
Business Subsidiary or IITRI (with respect to the Business) is a party or by
which the Company, the Business Subsidiary or IITRI (with respect to the
Business) or their respective assets or the Business may be bound.

     3.9 Litigation. Except as shown in Schedule 3.9, there is no action,
suit, proceeding, arbitration, claim or investigation pending or, to the
knowledge of the Company, threatened, against the Company, the Business
Subsidiary or IITRI or involving the Business, and no such action, suit,
proceeding, arbitration, claim or investigation could reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect. Schedule
3.9 sets forth with respect to each pending action, suit, proceeding,
arbitration, claim or investigation to which the Company or the Business
Subsidiary is a party or involving the Business to the extent that the
aggregate damages claimed for all such complaints exceed $50,000, the forum,
the parties thereto, a brief description of the subject matter thereof and the
amount of damages claimed. Except as otherwise indicated on Schedule 3.9, each
pending action, suit, proceeding, arbitration, claim or investigation set forth
on Schedule 3.9 is fully covered by a fully paid occurrence based insurance
policy. Neither the Business Subsidiary nor the Company is subject to or in
default with respect to any final judgment, writ, injunction, restraining order
or order of any nature, decree, rule or regulation of any court or Governmental
Body which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

     As used in this Agreement “knowledge of the Company” shall mean the
knowledge of Bahman Atefi, Stacy Mendler, Steve Trichka, C. Randall Crawford,
Barry S. Watson, Jack Hughes and Gary Amstutz, in their capacities as officers
with respect to

 

 

the Business and after due inquiry of the appropriate personnel involved
in the Business who have internal responsibility for the subject matter.

     3.10 No Material Adverse Effect. Since September 30, 2001, the Business
has been conducted in the ordinary course and, except for the Transactions and
as set forth in Schedule 3.10, there has not occurred:

     3.10.1 any Material Adverse Effect with respect to the Company and the
Business Subsidiary, taken as a whole, or the Business;

     3.10.2 any amendments or changes in the Certificate of Incorporation or
By-laws of the Company or the Business Subsidiary;

     3.10.3 any material damage, destruction or loss, whether covered by
insurance or not, involving the Company, the Business Subsidiary or the
Business;

     3.10.4 any increase in or modification of the compensation or benefits
payable or to become payable to any of the employees of the Company, the
Business Subsidiary or IITRI involved in the Business, except in the ordinary
course of business consistent with past practice;

     3.10.5 any increase in or modification of any bonus, pension, insurance or
other employee benefit plan, payment or arrangement made to, for or with any of
the employees of the Company, the Business Subsidiary or IITRI involved in the
Business, except in the ordinary course of the Business consistent with past
practice;

     3.10.6 any acquisition or sale of a material amount of property or assets
of the Company, the Business Subsidiary or IITRI relating to the Business
(other than the sale of assets pursuant to the Asset Purchase Agreement);

     3.10.7 any incurrence, assumption or guarantee by the Company, the
Business Subsidiary or IITRI relating to the Business of any debt for borrowed
money, except for the First Union Line of Credit or the Replacement Line of
Credit or as contemplated by the Transaction Agreements;

     3.10.8 any creation or assumption by the Company, the Business Subsidiary
or IITRI (with respect to the Business) of any mortgage, pledge, security
interest or lien on any asset (other than liens arising under the First Union
Line of Credit or the Replacement Line of Credit, liens arising under existing
lease financing arrangements, liens arising in the ordinary course of business
consistent with past practice which in the aggregate are not material and liens
for taxes not yet due and payable);

     3.10.9 any payment, discharge or satisfaction of any claim, liabilities or
obligations for borrowed money by the Company, the Business Subsidiary or IITRI
(with respect to the Business), other than in the ordinary course of business

 

 

consistent with past practice and other than liabilities reflected or
reserved against in the Financial Statements (or the notes thereto) or as
otherwise contemplated by the Transaction Agreements;

     3.10.10 any making of any loan, advance or capital contribution to or
investment in any person other than travel loans or advances made in the
ordinary course of business of the Company, the Business Subsidiary or IITRI
(with respect to the Business);

     3.10.11 any entry into, amendment of, relinquishment, termination or
non-renewal by the Company, the Business Subsidiary or IITRI of any contract,
lease transaction, commitment or other right or obligation related to the
Business requiring aggregate payments by or to the Company, the Business
Subsidiary or IITRI in excess of $250,000 other than (i) in the ordinary course
of the business or (ii) in connection with or preparation of the Asset Purchase
Agreement, this Agreement and the transactions contemplated therein or herein;

     3.10.12 any transfer or grant of a right under the Company Intellectual
Property Rights (as defined in Section 3.17), other than those transferred or
granted in the ordinary course of business consistent with past practice;

     3.10.13 any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company, the Business Subsidiary or IITRI
involved in the Business;

     3.10.14 any declaration or distribution of cash or assets of the Company,
the Business Subsidiary or IITRI to the Illinois Institute of
Technology (“IIT”) or any affiliate of IIT, or any
agreement or business arrangement requiring any payment to IIT or any affiliate
of IIT;

     3.10.15 any agreement or amendment of any agreement related to the
Business to which the Company, the Business Subsidiary or IITRI is a party
pursuant to which any other party is granted exclusive rights with respect to
the Business or the assets transferred pursuant to the Asset Purchase
Agreement;

     3.10.16 except as described in the notes to the Financial Statements, any
change in the accounting methods or practices followed by the Business, the
Company, the Business Subsidiary or IITRI, including any change in any
assumption underlying, or method of calculating, any bad debt, contingency or
other reserve, except as may be required by changes in GAAP or by Securities
Exchange Commission requirements, make or change any material Tax election,
adopt or change any Tax accounting method, file any amendment to a material Tax
Return, enter into any material closing agreement, settle any material Tax
claim or assessment, or consent to any extension or waiver of the limitation
period applicable to any material Tax claim or assessment (for purposes of this
covenant a “material” Tax Return, closing agreement, Tax claim or assessment
shall mean a Tax Liability with respect to each such item in excess of
$50,000);

 

 

     3.10.17 any capital expenditure commitments with respect to the Business
in the aggregate in excess of $100,000 on an annual basis; or

     3.10.18 any agreement or arrangement made by the Company, the Business
Subsidiary or IITRI to take any action which, if taken prior to the date
hereof, would have made any representation or warranty set forth in this
Section 3.10 untrue or incorrect as of the date when made.

     3.11 Absence of Undisclosed Liabilities. Except as shown in Schedule 3.11,
neither the Company, the Business Subsidiary nor the Business has, or will have
after giving effect to the Transactions, any liabilities or obligations
(whether absolute, accrued or contingent, and whether or not determined or
determinable), of a character which, under GAAP, should be accrued, shown or
disclosed on a balance sheet of the Business (including the footnotes thereto)
except liabilities (i) adequately provided for in the Financial Statements,
(ii) incurred in the ordinary course of business and not required under GAAP to
be reflected on the Financial Statements or (iii) incurred since September 30,
2001 which are not material, or (iv) arising under the Transaction Agreements.

     3.12 Certain Agreements. Except as set forth on Schedule 3.12, neither the
execution and delivery of this Agreement or any of the other Transaction
Agreements nor the consummation of the Transactions will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any director or employee
of the Company, the Business Subsidiary or IITRI involved in the Business,
under any Plan (as defined in Section 3.13) or otherwise, (ii) materially
increase any benefits otherwise payable under any Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.

     3.13 ERISA. For purposes of this Agreement, “Plans” is defined to include
any (i) incentive compensation, retention, retirement, pension, group
insurance, death benefit, cafeteria, medical expense reimbursement, dependent
care, savings, deferred compensation, consulting, employment, severance pay or
termination pay, vacation pay, welfare or other employee benefit or fringe
benefit plan, program, policy or arrangement; or (ii) plan, program or
arrangement which is an “employee pension benefit plan” as such term is defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), or an “employee welfare benefit plan” as defined in Section
3(1) of ERISA. “Company Plans” means all Plans sponsored, maintained or
contributed to by the Company or any of its ERISA Affiliates that cover any
active, former or retired employee of the Company or Plans of IITRI that the
Company will be assuming or that portion of any Plan of IITRI for which the
Company will be assuming liability pursuant to the Asset Purchase Agreement.
“ERISA Affiliate” shall mean for purposes of this Agreement any trade or
business (whether or not incorporated) which is or ever has been treated as a
single employer with the Company under Section 414(b), (c), (m) or (o) of the
Code. Schedule 3.13 contains an accurate and complete list of each Company
Plan. To the extent applicable, each Company Plan complies in all material
respects with the terms of such Company Plan, the requirements of ERISA and the
Internal Revenue Code of 1986, as amended, (the “Code”) and all applicable
regulations thereunder, and any Company Plan and any trust related to each

 

 

such Company Plan intended to be qualified under Section 401(a) or Section
409 of the Code has either obtained a favorable determination letter as to its
qualified status from the Internal Revenue Service or still has a remaining
period of time under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination and, in any
event, has been maintained in compliance with the terms of each such Company
Plan. To the extent any Company Plan with an existing determination letter from
the Internal Revenue Service must be amended to comply with the applicable
requirements of any legislation not covered by the Tax Reform Act of 1986, the
time period for effecting such amendments will not expire prior to the Closing
Date. The Company has furnished or will furnish within twenty-one (21) days of
the date hereof, Purchaser with copies of such Company Plans and the most
recent Internal Revenue Service letters and Forms 5500 with respect to any such
Company Plan. The Company has furnished or will furnish within 21 (twenty-one)
days of the date hereof, the Purchaser with copies of all insurance and annuity
policies and contracts and other funding arrangements and documents relevant to
any Company Plan. None of the Company Plans is a “multiemployer plan” as that
term is defined in Section 3(37) of ERISA. The Company has not been required
to contribute to, or withdraw from, and does not have any direct or indirect
liability whether contingent or otherwise with respect to any multiemployer
plan. No Company Plan is and no Plans previously sponsored or maintained by
the Company or IITRI are covered by Title IV of ERISA or Section 412 of the
Code. Except as set forth in Schedule 3.13, neither the Company nor any
officer or director of the Company has incurred any liability or penalty under
Sections 4975 through 4980 of the Code or Title I of ERISA, and each Company
Plan has been maintained and administered in all material respects in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Company Plans. With respect to any of
the Company Plans subject to Section 4975 of the Code or Section 406 of ERISA,
no “prohibited transaction,” as defined in Section 4975(c)(1) of the Code and
Section 406(a) and (b) of ERISA has occurred (at any time since the effective
date of each such Company Plan) or will occur as a result of the transactions
contemplated by this Agreement, which is not exempt or which will impose any
tax or penalty on the Company or any ERISA Affiliate. Other than with respect
to the ESOP, neither the consummation of the transactions contemplated by the
Transaction Agreements nor the execution of the Transaction Agreements will
accelerate or materially increase any liability under any Company Plan. No
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Company Plan activities) has been brought, or to the
knowledge of the Company is threatened, against or with respect to any such
Company Plan. All material contributions, reserves or premium payments
required by law or by contract to be made or accrued as of the date hereof to
the Plans have been made or accrued and there is no material action, suit or
claim pending with respect to any Company Plan as of the date hereof, other
than routine claims for benefits. Except as set forth in Schedule 3.13, no
Company Plan other than the ESOP provides benefits to any employees, officers,
directors or consultants after termination of employment other than as required
by Section 601 of ERISA or Section 4980(B) of the Code or applicable law.

 

 

     3.14 Major Contracts. Except for the Transaction Agreements and as shown
in Schedule 3.14, neither the Company, the Business Subsidiary nor IITRI (with
respect to the Business) is, or will be after giving effect to the Transaction,
a party to or subject to:

     3.14.1 any union contract or any employment contract or arrangement
providing for future annual compensation greater than $50,000 per year, written
or oral, with any officer, consultant, director or employee which is not
terminable by it on 30 days’ notice or less without penalty or obligation to
make payments related to such termination, other than (i) (in the case of
employees other than executive officers) such agreements as are not materially
different from standard arrangements offered to employees generally in the
ordinary course of business consistent with past practices, copies of which
have been provided to Purchaser and (ii) such agreements as may be imposed or
implied by law;

     3.14.2 any plans, contracts or arrangements which collectively require
aggregate payments by the Company, the Business Subsidiary or IITRI (with
respect to the Business) in excess of $20,000 per annum per individual, written
or oral, providing for bonuses, deferred compensation, severance pay or
benefits, or the like;

     3.14.3 any joint venture contract or arrangement or any other agreement
which has involved or is expected to involve a sharing of profits with other
persons;

     3.14.4 any agreement under which exclusive rights related to the Business
are granted or received;

     3.14.5 any lease for real or personal property involving aggregate
payments by the Company, the Business Subsidiary or IITRI (with respect to the
Business) on an annual basis in excess of $100,000;

     3.14.6 except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to indebtedness of
the Company, the Business Subsidiary or IITRI (with respect to the Business) in
the aggregate in excess of $100,000 for borrowed money by way of direct loan,
sale of debt securities, purchase money obligation, conditional sale,
guarantee, or otherwise;

     3.14.7 any material license agreement, either as licensor or licensee
(excluding nonexclusive software licenses granted to sponsors or end-users in
the ordinary course of business) expected by management to involve aggregate
payments in excess of $15,000 on an annual basis;

     3.14.8 any contract containing covenants purporting to limit the freedom
of the Company, the Business Subsidiary or IITRI (with respect to the Business)
to compete in any line of its business in any geographic area; or

     3.14.9 any other agreement, contract or commitment which contains an
obligation for payment by or to the Company, the Business Subsidiary or

 

 

IITRI (with respect to the Business) of at least $50,000 on an annual
basis or which involves IIT or any of its Affiliates.

     Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license and commitment listed in
Schedule 3.14, is valid and binding on the Company, the Business Subsidiary or
IITRI, as applicable, and is in full force and effect, and neither the Company,
the Business Subsidiary, IITRI nor, to the knowledge of the Company, any other
party thereto has breached any material provision of, or is in material default
under the terms of, any such agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license or
commitment. The Company has the right to receive the benefits of and to
perform under, each agreement, contract or commitment which would have been
assigned to the Company pursuant to the Asset Purchase Agreement but for the
inability of IITRI to obtain consent for the transfer of such agreement,
contract or commitment to the Company.

     3.15 Taxes.

     3.15.1 Except as shown on Schedule 3.15, all Tax Returns (as defined
below), statements, reports and forms (including estimated Tax Returns and
reports and information returns and reports) required to be filed with any
Taxing Authority (as defined below) with respect to any Taxable (as defined
below) period ending on or before the Closing Date, by or on behalf of the
Company or the Business Subsidiary (collectively, the “Company Returns”), have
been or will be filed when due in accordance with all applicable laws
(including any extensions of such due date), and all amounts shown due thereon
have been paid or have been fully accrued on the Financial Statements in
accordance with GAAP. Except to the extent provided for or disclosed in the
Financial Statements (including notes thereto), the Company Returns correctly
reflect in all material respects (and, as to any Company Returns not filed as
of the date hereof but filed prior to the Closing Date, will correctly reflect
in all material respects) the Tax liability and status of the Company and the
Business Subsidiary. Each of the Company and the Business Subsidiary has
withheld and paid to the applicable financial institution or Governmental Body
all amounts required to be withheld. Neither the Company nor the Business
Subsidiary (or any member of any affiliated or combined group of which the
Company or the Business Subsidiary has been a member) has granted any extension
or waiver of the limitation period applicable to any Company Returns. There is
no claim, audit, action, suit, proceeding, or investigation now pending or (to
the knowledge of Company) threatened against or with respect to the Company or
the Business Subsidiary in respect of any Tax or assessment. No written notice
of deficiency or similar document of any Governmental Body has been received by
the Company or the Business Subsidiary, and there are no liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to the issues that have been raised (and are
currently pending) by any Governmental Body that could, if determined adversely
to the Company or the Business Subsidiary, materially affect the liability of
the Company or the Business Subsidiary for Taxes in other Taxable periods.
Neither the Company, the Business Subsidiary, nor any other person on behalf of
the Company or the Business Subsidiary, has entered into any agreement or
consent

 

 

pursuant to Section 341(f) of the Code. There are no liens for Taxes upon
the assets of the Company or the Business Subsidiary except liens for current
Taxes not yet due. Neither the Company nor the Business Subsidiary has been or
will be required to include any material adjustment in Taxable income for any
Tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or
any comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Closing Date.
There is no contract, agreement, plan or arrangement, including but not limited
to the provisions of this Agreement, covering any employee or former employee
of the Company or the Business Subsidiary that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Section 162 (as unreasonable compensation) or pursuant to Section
280G of the Code. Each of the Company and the Business Subsidiary has provided
or made available to Purchaser or its designated representative true and
correct copies of all material Tax Returns, and, as reasonably requested by
Purchaser prior to or following the date hereof, information statements,
reports, work papers, Tax opinions and memoranda and other Tax data and
documents. Neither the Company nor the Business Subsidiary has been since its
formation a “United States real property holding corporation” within the
meaning of Section 897(c)(2) of the Code. Neither the Company nor the Business
Subsidiary is a party to (or obligated under) any Tax allocation, Tax
distribution, Tax sharing, Tax indemnity or similar agreement or arrangement
with respect to any Tax (including without limitation any such agreement or
arrangement imposed by operation of law), and neither the Company nor the
Business Subsidiary is assuming any liability or obligation in respect of Taxes
in connection with the Transactions.

     3.15.2 For purposes of this Agreement,

     "Tax” (and, with correlative meaning, “Taxes” and “Taxable”) shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by any
Governmental Body, including, but not limited to, income, excise, property,
sales, use, transfer, franchise, employment, unemployment, railroad retirement,
environmental, payroll, withholding social security, gross receipts, stamp,
real estate, use, business, license, occupation and other taxes, and including
any interest, penalties or additions attributable thereto; and

     "Tax Return” shall mean any return, report, information return,
declaration, claim for refund or other document (including any schedule or
related or supporting information) required to be supplied to any Governmental
Body with respect to Taxes, including amendments thereto.

     3.16 Interests of Officers and Directors. Except as set forth on Schedule
3.16, no officer or director of the Company, the Business Subsidiary, IITRI or
any “affiliate” or “associate” (as those terms are defined in Rule 405
promulgated under the Securities Act) of any such person has had, or will have
after giving effect to the Transactions, either directly or indirectly, a
material interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to the Business more than $60,000 per year in goods,
property, technology or intellectual or other property rights or services;

 

 

(ii)  any contract or agreement in an amount greater than $60,000 per year
to which the Company, the Business Subsidiary or IITRI (with respect to the
Business) is a party or by which the Company, the Business Subsidiary or IITRI
(with respect to the Business) or the assets of the Business may be bound or
affected; or (iii) any property, real or personal, tangible or intangible, used
by or pertaining to the Company, the Business Subsidiary or the Business,
including any interest in the Company Intellectual Property Rights, except for
rights under any Plan.

     3.17 Company’s Intellectual Property Rights. Except as shown in Schedule
3.17:

     3.17.1 after giving effect to the Transactions, the Company or the
Business Subsidiary will own or will otherwise be entitled to exercise, free
and clear of any liens, encumbrances or security interests, all right, title
and interest in and to all patents, trademarks, trade names, service marks,
copyrights, master work rights, trade secret rights and other intellectual
property rights, and any applications or registrations therefor, and all master
works, net lists, schematics, technology, source code, know-how, computer
software programs and all other tangible and intangible information or
material, that are used or currently proposed to be used in the Business as
currently conducted (collectively, the “Company Intellectual Property Rights”);

     3.17.2 neither the Company, the Business Subsidiary nor IITRI (with
respect to the Business) has any material infringement liability with respect
to any patent, trademark, service mark, copyright or other intellectual
property right of another, and no claims with respect to the Company
Intellectual Property Rights have been asserted or, to the knowledge of
Company, have been threatened in writing by any person, and the Company knows
of no claims (i) to the effect that the manufacture, sale or use of any product
or service as now used or offered or proposed for use or sale by the Company,
the Business Subsidiary or IITRI relating to the Business infringes any third
parties’ copyright, patent, trade secret, or other intellectual property right,
(ii) against the use by the Company, the Business Subsidiary or IITRI of any
Company Intellectual Property Rights, or (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property Rights;

     3.17.3 to the knowledge of the Company, there has not been and there is
not now any material unauthorized use, infringement or misappropriation of any
of the Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company, the Business Subsidiary or IITRI;
and

     3.17.4 no Company Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting in
any manner the licensing thereof by the Company or the Business Subsidiary.
Neither the Company, the Business Subsidiary nor IITRI has entered into any
agreement granting any third party the right to bring infringement actions with
respect to, or otherwise to enforce rights with respect to, any Company
Intellectual Property Right. Subject to the march-in rights of any
Governmental Body, as applicable, the Company and the Business Subsidiary

 

 

have the exclusive right to file, prosecute and maintain all applications
and registrations with respect to the Company Intellectual Property Rights.

     3.18 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding upon the Company, the Business
Subsidiary or IITRI relating to the Business which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Business by the Company, the Business Subsidiary or IITRI as
currently conducted or as currently proposed to be conducted by the Company and
the Business Subsidiary.

     3.19 Title to Assets; Liens; Condition of Equipment.

     3.19.1 After giving effect to the Transactions, each of the Company and
the Business Subsidiary will have good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its assets,
including the assets acquired under the Asset Purchase Agreement, free and
clear of any liens, except as reflected in the Financial Statements, as set
forth on Schedule 3.19 and for Permitted Liens. For purposes of this
Agreement, “Permitted Liens” means (i) liens for taxes, assessments or other
governmental charges or levies the payment of which is not due; (ii) landlord’s
liens in favor of the landlord of the leased real property and liens of
carriers, warehousemen, mechanics, materialmen and other liens imposed by law
incurred in the ordinary course of business for amounts not yet due or being
contested in good faith by appropriate proceedings; (iii) liens incurred or
deposits made in the ordinary course of business in connection with worker’s
compensation, unemployment insurance and other types of social security; and
(iv) such imperfections of title and encumbrances which are not substantial in
character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby.

     3.19.2 The foregoing assets that are to be acquired by the Company under
the Asset Purchase Agreement are taken as a whole, (i) adequate for the conduct
of the Business as currently conducted, (ii) suitable for the uses to which
they are currently employed, (iii) in good operating condition, normal wear and
tear excepted, (iv) regularly and properly maintained, (v) not obsolete,
dangerous or in need of renewal or replacement, except for renewal or
replacement in the ordinary course of business, and (vi) free from any inherent
defects.

     3.20 Governmental Authorizations and Licenses. Schedule 3.20 contains a
list of all authorizations and licenses by a Governmental Body held by the
Company and the Business Subsidiary. The Company and the Business Subsidiary
are the holders of all licenses, authorizations, permits, concessions,
certificates and other franchises of any Governmental Body required to operate
the Business, except where the failure to hold such licenses, authorizations,
permits, concessions, certificates or franchises would not be material to the
Business (collectively, the “Licenses”). The Licenses are, and subject to
obtaining consents pursuant to the Asset Purchase Agreement, will be after
giving effect to the Transactions, in full force and effect. There is not now
pending, and to the knowledge of the Company, there is not threatened in

 

 

writing, any action, suit, investigation or proceeding against the
Company, the Business Subsidiary or IITRI (with respect to the Business) before
any Governmental Body with respect to the Licenses, nor is there any issued or
outstanding written notice, order or complaint with respect to the violation by
the Company, the Business Subsidiary or IITRI (with respect to the Business) of
the terms of any License or any rule or regulation applicable thereto.

     3.21 Environmental Matters. Except as listed in Schedule 3.21:

     3.21.1 There is no substance that is regulated by any Governmental Body or
that has been designated by any Governmental Body to be radioactive, toxic,
hazardous, biohazardous or otherwise a danger to health or the environment (a
“Hazardous Material”) in, on or under any property used by the Business or that
the Company, the Business Subsidiary or IITRI in connection with the Business
has at any time owned, operated, occupied or leased.

     3.21.2 Neither the Company, the Business Subsidiary nor IITRI in
connection with the Business has transported, stored, used, manufactured,
released or exposed its employees or any other person to any Hazardous Material
in violation of any applicable statute, rule, regulation, order or law.

     3.21.3 IITRI in connection with the Business has, and upon the
consummation of the Transactions, the Company and the Business Subsidiary will
have, obtained all permits, licenses and other authorizations (“Environmental
Permits”) required to be obtained by any of them under the laws of any
Governmental Body relating to pollution or protection of the environment
(collectively, “Environmental Laws”), except where the failure to comply or
obtain such Environmental Permits would not be material to the Business. All
Environmental Permits are in full force and effect. Each of the Company, the
Business Subsidiary (and in the case of the Company and the Business
Subsidiary, including, without limitation, with respect to periods from and
after the consummation of the Transactions) and IITRI (with respect to the
Business) (i) is in compliance with in all material respects all terms and
conditions of the Environmental Permits and (ii) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated
or approved thereunder, except where the failure to comply would not be
material to the Business. Neither the Company, the Business Subsidiary nor
IITRI (with respect to the Business) has received any written notice or is
aware of any past or present condition or practice which forms or could form
the basis of any claim, action, suit, proceeding, hearing or investigation
against the Company, the Business Subsidiary, IITRI or the Business arising out
of the manufacture, processing, distribution, use, treatment, storage, spill,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Material.

     3.22 Insurance. Schedule 3.22 sets forth a list of all material insurance
policies and fidelity bonds the Company and the Business Subsidiary maintain
covering

 

 

the assets, business, equipment, properties, operations, employees,
officers and directors of the Company and the Business Subsidiary
(collectively, the “Insurance Policies”). The Insurance Policies cover such
risks and are in such amounts and with such deductibles and exclusions, as are
reasonable for the Business and the assets and properties of the Company and
the Business Subsidiary. There is no material claim by the Company or the
Business Subsidiary pending under any of the Insurance Policies as to which
coverage has been questioned, denied or disputed in writing by the underwriters
of such policies or bonds. All premiums due under all such material Insurance
Policies have been paid and the Company and the Business Subsidiary are
otherwise in compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). Except
as set forth in Schedule 3.22, neither the Company nor the Business Subsidiary
has received any written notice of threatened termination of, or material
premium increase with respect to, any of its material Insurance Policies.

     3.23 Labor Matters. The Company, the Business Subsidiary and IITRI (with
respect to the Business) are, and have been for the past three years, in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment and wages and hours and occupational safety and health
and employment practices, and is not engaged in any unfair labor practice. In
the past three years, neither the Company, the Business Subsidiary nor IITRI
(with respect to the Business) has received any written notice from any
Governmental Body, and there has not been asserted before any Governmental
Body, any claim, action or proceeding to which the Company, the Business
Subsidiary or IITRI is a party or involving the Company, the Business
Subsidiary or the Business, and there is neither pending nor, to the Company’s
knowledge, threatened any investigation or hearing concerning the Company, the
Business Subsidiary or IITRI (with respect to the Business), in each case
arising out of or based upon any such laws, regulations or practices. No
employee of the Company, the Business Subsidiary or IITRI involved in the
Business is represented by a union or other organization representing or, to
the knowledge of the Company, purporting to represent any employees of the
Company, the Business Subsidiary or IITRI involved in the Business, nor is the
Company, the Business Subsidiary or IITRI (with respect to the Business) a
party to or bound by any collective bargaining agreement. Neither the Company
or the Business Subsidiary has at any time during the last three years had,
nor, to the knowledge of the Company, is there now threatened, any strike, work
stoppage, other material labor dispute, picketing, concerted refusal to work
overtime or other similar labor activity, nor are there labor disputes
involving the Company, the Business Subsidiary or IITRI (with respect to the
Business) that are currently the subject of any grievance procedure,
arbitration or litigation, except as set forth in Schedule 3.9 or Schedule
3.23.

     3.24 Questionable Payments. No officer or director of the Company, the
Business Subsidiary or IITRI (with respect to the Business) has or has
authorized, and to the knowledge of the Company, no other employee of the
Company, the Business Subsidiary or IITRI involved in the Business, has: (i)
made any payments or provided services or other favors in the United States or
in any foreign country in order to obtain

 

 

preferential treatment or consideration by any Governmental Body with
respect to any aspect of the Business; or (ii) made any political contributions
which would not be lawful under the laws of the United States and the foreign
country in which such payments were made. Neither the Company, the Business
Subsidiary or IITRI (with respect to the Business) nor to the knowledge of the
Company, any director, officer or other employee of the Company, the Business
Subsidiary or IITRI involved in the Business, nor to the knowledge of the
Company, any sponsor or supplier of the Company, the Business Subsidiary or
IITRI (with respect to the Business) has been the subject of any inquiry or
investigation by any Governmental Body in connection with payments or benefits
or other favors to or for the benefit of any governmental or armed services
official, agent, representative or employee with respect to any aspect of the
Business with respect to any political contribution.

     3.25 Brokers. Other than VM Equity Partners, Inc., no broker, finder or
investment banker engaged by the Company or the Business Subsidiary is entitled
to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement. In accordance with the terms of
the Asset Purchase Agreement, the Company has certain expense reimbursement
obligations with respect to fees that IITRI owes to Houlihan Lokey Howard &
Zukin Capital and Willamette Management Associates.

     3.26 Relationships. Neither the Company, the Business Subsidiary nor IITRI
has been notified or otherwise has knowledge that any of the ten largest
sponsors or ten largest suppliers of the Business set forth on Schedule 3.26
intend to cancel, discontinue, review outside of normal practice, materially
change or curtail their relationships with the Company, the Business Subsidiary
or the Business. A list of all of the contracts, agreements and commitments
related to the Business with any Governmental Body with respect to which there
is backlog, whether funded or unfunded, and the amount of such backlog, as of
September 30, 2002, has previously been delivered by the Company to the
Purchaser. The Company has not been notified that any such backlog listed in
Schedule 3.26 has been or will be canceled, materially modified or, if
currently unfunded, will not be funded.

     3.27 Put Options. Except as set forth in Schedule 3.27, the Company’s
ability to honor put options (the “Put Options”) which obligate the Company to
repurchase Shares distributed from time to time to Plan participants and
beneficiaries under the ESOP, as may be required by the ESOP, the Trust
Agreement and by applicable laws, regulations or rulings, is not restricted by
the provisions of any law, rule or regulation in effect as of the date hereof
(other than applicable provisions of the Delaware General Corporation law, and
applicable fraudulent conveyance, fraudulent transfer, bankruptcy and similar
laws) or by terms of any loan, financing or other agreement or instrument to
which the Company is a party or by which the Company is bound, including,
without limitation, the Company’s Certificate of Incorporation.

     3.28 ESOP and Trustee. The Company has taken all necessary actions
required of it (i) to establish the Plan and the Purchaser, (ii) to consummate
the transactions contemplated by the Transaction Agreements and (iii) to
appoint the Trustee

 

 

as trustee of the Purchaser. The Shares meet the requirements of Sections
4975(e)(8) and 409(l) of the Code.

     3.29 Audits. Except as set forth on Schedule 3.29, none of the three most
recent audits of the Business completed the by the Defense Contract Audit
Agency (the “DCAA”) (i) has resulted in the Company, the Business Subsidiary or
IITRI (with respect to the Business) having to adjust, repay or reimburse any
Governmental Body for any payments received by the Company, the Business
Subsidiary or IITRI or any of their respective subcontractors or (ii) has
reported that either the Company, the Business Subsidiary or IITRI (with
respect to the Business) is not in compliance with the DCAA’s internal control
systems and policies or applicable laws, regulations or standards. All DCAA
audits conducted with respect to the Business for period ending on or prior to
September 30, 2000 have been completed and closed.

     3.30 Security Clearances. The Company, the Business Subsidiary and IITRI
(with respect to the Business) and their employees involved in the Business
have all of the security clearances required to be maintained by them under all
of the contracts with any Governmental Bodies to which the Company, the
Business Subsidiary or IITRI (with respect to the Business) is a party or to
which the assets relating to the Business are bound. Neither the Company, the
Business Subsidiary nor IITRI (with respect to the Business) has received
within the past three years any written notice of any failure by it or its
employees to maintain such security clearances, nor has the Company, the
Business Subsidiary IITRI or, to the knowledge of the Company, any of their
respective employees involved in the Business taken any action that would
result in the loss of such security clearances.

     3.31 Pre-Contract Costs. As of the date hereof, the total costs incurred
by the Company, the Business Subsidiary and IITRI on behalf of the Business
prior to the execution of any contract or contract renewal (the “Pre-Contract
Costs”) do not exceed $     . Neither the Company, the Business Subsidiary nor
IITRI has received written notice that it will not be reimbursed for any
material portion of such Pre-Contract Costs.

     3.32 Anti-Takeover Statutes. The Board of Directors of the Company has
taken all appropriate and necessary actions to ensure that the Company has not
elected by any amendment to its certificate of incorporation to be governed by
Section 203 of the Delaware General Corporation Law (“DGCL”) and, accordingly,
the Purchaser’s acquisition of the Shares pursuant to this Agreement does not
constitute a “business combination” thereunder.

     3.33 Disclosure. No representation or warranty made by the Company in this
Agreement, nor any document, written information, statement, financial
statement, certificate, Schedule or Exhibit prepared and furnished or to be
prepared and furnished by the Company or its representatives pursuant hereto or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. There are no events, facts or conditions

 

 

that, individually or in the aggregate, have resulted in, or could
reasonably be expected to result in, a Material Adverse Effect on the Company
that have not been set forth in this Agreement or in the Schedules hereunder
(and appropriately identified as such).

     3.34 Disclaimer. The representations and warranties set forth in this
Article III are the only representations and warranties made by the Company to
the Purchaser with respect to the Company, the Business Subsidiary, IITRI and
the Business. The Trustee and the Purchaser have the right to rely on such
representations and warranties notwithstanding any facts or circumstances
related to the Company, IITRI or the Business that the Trustee or the Purchaser
has knowledge of whether obtained from their due diligence review of the
Company, IITRI and the Business or otherwise.

     SECTION 4. Representations and Warranties of the Purchaser. The Trustee,
on behalf of the Purchaser, represents and warrants to the Company as follows:

     4.1 Necessary Authority. Subject to the accuracy of the representations
made by the Company in Section 3.28, the Trustee, on behalf of the Purchaser,
has full power and authority under the Plan and the Trust Agreement to enter
into, deliver and perform this Agreement and the other Transaction Agreements
and to consummate the transactions contemplated herein and therein. The
execution, delivery, and performance of this Agreement and the other
Transaction Agreements and the consummation of the transactions contemplated
herein and therein have been duly authorized by all necessary action on the
part of the Purchaser. This Agreement and the other Transaction Agreements to
which the Purchaser is a party, when executed by the Trustee on behalf of
Purchaser, each constitute the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as the same may be limited by (i) ERISA, bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally now or hereafter in effect, and subject to the availability of
equitable remedies and (ii) general equitable principles regardless of whether
the issue of enforceability is considered in a proceeding at law or in equity.

     4.2 No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Agreements to which the Purchaser is a
party by the Trustee on behalf of the Purchaser and the consummation of the
transactions contemplated by this Agreement do not and will not (i) require the
consent or approval of, or filing with, any Person, except for the filings with
the Internal Revenue Service or the Department of Labor which may from time to
time be required by ERISA or the Code and the regulations thereunder, (ii)
constitute or result in the breach of any provision of, or constitute a default
under, the ESOP or any agreement, indenture or other instrument known to the
Trustee to which the Purchaser is a party or by which it or its assets may be
bound, or (iii) violate any law, regulation, judgment or order binding upon the
Purchaser or give rise to any liability to the Purchaser under Title I of ERISA
or Section 4975 of the Code.

 

 

     4.3 Investment Intent.

     4.3.1 The Shares to be acquired by the Purchaser pursuant to this
Agreement are being or will be acquired for the account of the ESOP, for
investment and not with a view to the distribution thereof within the meaning
of the Securities Act, and the Purchaser has no intention of distributing or
reselling such securities or any part thereof, without prejudice, however, to
the rights of Purchaser at all times to sell or otherwise dispose of all or any
part of the Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under
the Securities Act, and subject, nevertheless, to the disposition of the
Purchaser property being at all times within its control. If the Purchaser
should in the future decide to dispose of any of the Shares, the Purchaser
understands and agrees that it may do so only in compliance with the Securities
Act and applicable state securities laws, as then in effect.

     4.3.2 The Purchaser understands that the Shares have not been registered
under the Securities Act, by reason of their issuance by the Company in a
transaction exempt from the registration requirements of the Securities Act and
that the transactions contemplated by this Agreement have not been reviewed by,
passed on or submitted to any Federal or state agency where an exemption is
being relied upon, and that the Company’s reliance thereon is based in part
upon the representations made by the Purchaser in this Agreement.

     4.3.3 The Purchaser understands that until such time as the Shares are
registered pursuant to the provisions of the Securities Act, any certificate or
certificates representing the Shares delivered pursuant to Section 1.1, or
thereafter upon transfer, exchange or substitution, will bear a legend in
substantially the following form, in addition to any legend required by the
Certificate of Incorporation of the Company:

	 
	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN

REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE

SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE

DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT

UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO

AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH

ACT AND SUCH LAWS

     SECTION 5. Covenants of the Company.

     5.1 Honoring Put Options. To the extent required by the ESOP, the Trust
Agreement and applicable law, the Company shall honor the Put Options and shall
fully perform its obligations with respect to the Put Options in accordance
with their terms, unless such performance would contravene any applicable law.
The Company shall not at any time permit its ability to honor the Put Options
to be restricted in any way by the provisions of any loan, financing instrument
or other agreement to which the

 

 

Company is a party or by which the Company is or may be bound. The
Company shall use reasonable efforts to maintain sufficient capital and/or
surplus and shall comply with all other requirements of state and federal law
in order to be legally permitted to honor the Put Options. If the provisions
of any applicable state or federal law shall prevent the Company from honoring
the Put Options, the Company shall, as soon as practicable, use reasonable
efforts to take all such actions as shall be required to enable the Company to
honor the Put Options, including, but not limited to, adjustments to its
capital and/or surplus.

     5.2 ESOP Submission. The Company will submit the ESOP and the Trust
Agreement to the IRS within the “remedial amendment period” (within the meaning
of Section 401(b) of the Code) for a determination (a “Determination”) that the
Plan and the Purchaser are qualified and tax-exempt under Sections 401(a) and
501(a) of the Code, respectively, and that the ESOP is an “employee stock
ownership plan,” within the meaning of 4975(e)(7) of the Code, and the Company
will timely make any amendments required by the IRS as a condition to the
issuance of such Determination. The Company shall promptly after availability,
upon request of the Trustee, provide to the Trustee copies of the application
to the IRS for such Determination and any amendments thereto, and shall provide
to the Trustee, promptly after availability and without request of the Trustee,
a copy of the Determination letter.

     5.3 Plan Qualification. The Company shall use its best efforts to cause
the Plan and the Purchaser at all times to be operated and administered so as
to be in compliance with the qualification and tax exemption requirements under
Sections 401(a) and 501(a) of the Code, respectively, and to cause the Plan to
qualify as an “employee stock ownership plan,” within the meaning of 4975(e)(7)
of the Code, and to be operated and administered in substantial compliance with
all applicable requirements of ERISA and the Code. The Company shall amend the
ESOP and the Trust Agreement in a timely manner as required in order to ensure
that such qualification is maintained from and after the effective date of the
ESOP and, following any such amendment of a material nature, to submit the ESOP
and the Trust Agreement to the IRS for a Determination. The Company shall
promptly provide the Trustee with copies of any amendments to the ESOP or the
Purchaser and, upon request of the Trustee, with copies of any application for
a Determination.

     5.4 S Corporation. The Company has executed the applicable election forms
or other filings required to be made for purposes of the Company’s election to
be taxed as an “S corporation” as such term is defined in Section 1361 of the
Code. The Company shall not, without prior authorization from the Purchaser,
take or omit to take any action, and shall use its best efforts to cause any
Person not to take or omit to take any action, that would reasonably be
expected to cause the Company not to be qualified as an “S corporation” as
defined in Section 1361 of the Code.

     5.5 Affiliate Transactions. The Company will not, nor will it permit the
Business Subsidiary to, without the written consent of the Purchaser, enter
into any transaction with an officer or director of the Company (an “Affiliate
Transaction”) or increase any amount payable pursuant to any Affiliate
Transaction, except as required by

 

 

the written terms of such transaction as in effect as of the date hereof
as disclosed in Schedule 3.16 or as duly approved by the Board of Directors of
the Company or the compensation committee thereof.

     5.6 Consents. The Company shall satisfy all of its obligations under
Section 7.05 of the Asset Purchase Agreement.

     5.7 Rights Under Certain Agreements. The Company shall enforce all of its
rights under the Asset Purchase Agreement, including without limitation its
rights under Article XIV thereof, and the other Transaction Agreements against
the Seller and IIT, unless it would not be commercially reasonable to enforce
such rights.

     5.8 Shareholders’ Rights. Without the prior written consent of the
Purchaser, from and after the Closing Date, the Company shall not, and shall
not permit any subsidiary or controlled affiliate of the Company to effect the first public offering of Voting Securities which would be listed on any
securities exchange pursuant to an effective registration statement filed under
the Securities Act. In addition,
the Company shall take all appropriate and necessary action under Section 203
of the DGCL and under any similar “anti-takeover,” “interested shareholder”,
“fair price”, “moratorium”, “control share acquisition” or other state or
federal anti-takeover statute or regulation, to ensure that neither the
Purchaser nor its transferees or their successors or assigns will become an
“interested shareholder” or other restricted person as a result of any of the
Transactions or any future transaction involving the Company or its securities
or assets, and shall refrain from taking any action that would cause any such
statute or regulation to be inapplicable to any other transaction, person or
entity without the prior written consent of the Purchaser. The Company shall
also refrain from taking any action inconsistent with, and shall use its best
efforts to ensure that the Purchaser fully enjoys, Purchaser’s right to elect a
majority of the Company’s board of Directors and to otherwise control the
Company, including its rights under the Rights Agreement.

     SECTION 6. Closing Conditions for the Benefit of the Purchaser.

     Each and every obligation of the Purchaser under this Agreement shall be
subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, any of which may be waived in writing by the Trustee on
behalf of the Purchaser (except that the conditions set forth in Sections 6.5,
6.6 and 6.7 shall not be waived by the Purchaser):

     6.1 Representations and Warranties True. The representations and
warranties of the Company contained in this Agreement shall be true, correct
and complete in all material respects (except for any such representations and
warranties which are qualified by their term by a reference to materiality or
material adverse effect, which representations or warranties as so qualified
shall be true and correct in all respects) as of the date when made and at and
as of the Closing Date as though such representations and warranties were made
at and as of the Closing Date (except, to the

 

 

extent such representations and warranties are made as of a specific date
in which case such representations and warranties shall be true at and as of
such date.)

     6.2 Performance. Each obligation of the Company to be performed by them
on or before the Closing pursuant to the terms hereof shall have been duly
performed and complied with by the Closing.

     6.3 Opinions of Counsel to the Company. The Company shall have furnished
to the Trustee the opinion of (a) Baker & McKenzie, counsel to the Company, on
such corporate, tax and securities matters and in such form and scope as the
Trustee may reasonably request substantially in the form attached hereto as
Exhibit A, and (b) Silverstein and Mullens, counsel to the Company, on such
other matters and in such form and scope as the Trustee may reasonably request,
including but not necessarily limited to advice that (i) the Shares meet the
requirements of Sections 4975 (e)(8) and 409(l) of the Code, (ii) the ESOP and
Purchaser are qualified under Sections 401(a) and 501(a) of the Code and the
applicable provisions of Section 4975 of the Code, and (iii) the Company as of
the Closing, will qualify as an S corporation (as defined in Section 1361 of
the Code, and substantially in the form attached hereto as Exhibit B.

     6.4 Consents. Except as provided for in Section 7.05 of the Asset
Purchase Agreement, all approvals, consents, exemptions, authorizations, or
other actions by, or notices to, or filing with Governmental Bodies and other
Persons in respect of requirements of law necessary or required in connection
with the execution, delivery or performance by the Company or enforcement
against the Company of this Agreement or the Transaction Agreements and the
Transactions, including with respect to the operation of the Business, shall
have been obtained and be in full force and effect, and the Purchaser shall
have been furnished with appropriate evidence thereof, and all applicable
waiting periods shall have lapsed without extension or the imposition of any
conditions or restrictions.

     6.5 Opinion of Valuation Consultants. The Trustee shall have been
furnished with an opinion of Duff & Phelps LLC, in form and substance
acceptable to the Purchaser in its sole and absolute discretion, including to
the effect that (i) the consideration to be paid by the Purchaser for the
Shares is not in excess of “adequate consideration,” within the meaning of
Section 3(18) of ERISA and (ii) the transactions contemplated in connection
with the Transaction Agreements, are fair to the Purchaser from a financial
point of view, and such opinion shall remain in effect and shall not have been
withdrawn by such valuation consulting firm prior to the Closing.

     6.6 Trustee Approval. The Trustee, after considering the advice of its
advisors and such other information as it may deem necessary or advisable,
shall have reached the conclusions that (i) the purchase of the Shares
hereunder are prudent, fair and in the interest of the Plan and its
participants and beneficiaries and primarily for the benefit of such
participants and beneficiaries, (ii) the Purchase Price constitutes no more
than “adequate consideration” for the purchase of the Shares within the meaning
of Section 3(18) of ERISA and (iii) the purchase of the Shares hereunder will
not otherwise

 

 

result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code or violate the provisions of applicable law.

     6.7 Deliveries by Company. The Company shall have made the deliveries
required by Section 2.2.1.

     6.8 Trustee Fees. At the Closing, or on such later date as may be
specified in writing by the Trustee, the Company shall pay to the Trustee (and
its advisors) the fees and expenses as set forth in the retention letter
between the Company and the Trustee, dated February 7, 2002 (together with the
Indemnification Agreement attached thereto, the “Trustee Engagement Letter”).

     6.9 Equity Investment in the ESOP. Employees of IITRI and the Business
Subsidiary shall have elected to invest at least Twenty Four Million Dollars
($24,000,000) in the ESOP thereby purchasing at least Two Million Four Hundred
Thousand (2,400,000) Shares; provided, that in no event shall such employees be
permitted to invest greater than Thirty Million Dollars ($30,000,000) in the
ESOP (or purchase greater than Three Million (3,000,000) Shares).

     6.10 Asset Purchase Agreement; Transaction Agreements. The transactions
contemplated by the Asset Purchase Agreement and the Transaction Agreements
(other than this Agreement) shall have been consummated or shall be consummated
simultaneously herewith, in either case without amendment or waiver of the
terms and conditions contained therein.

     6.11 Employment Agreements. The Company shall have exercised its right
under Section 7.09.1 of the Asset Purchase Agreement to require that each
employee of IITRI who had an employment agreement with IITRI (other
than Stephen Trichka, Gary Amstutz and James Revetta) voluntarily
terminate such employment agreement as of the Closing Date (as defined in the
Asset Purchase Agreement).

     SECTION 7. Closing Conditions for the Benefit of the Company.

     Each and every obligation of the Company under this Agreement shall be
subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, any of which may be waived in writing by the Company:

     7.1 Representations and Warranties True. The representations and
warranties of the Trustee on behalf of the Purchaser contained in this
Agreement shall be true and correct in all material respects (except for any
such representations and warranties which are qualified by their term by a
reference to materiality or material adverse effect, which representations or
warranties as so qualified shall be true and correct in all respects) as of the
date when made and at and as of the Closing Date as though such representations
and warranties were made at and as of the Closing Date (except, to the extent
such representations and warranties are made as of a specific date in which
case such representations and warranties shall be true at and as of such date.)

 

 

     7.2 The Purchaser’s Performance. Each of the obligations of the Trustee
on behalf of the Purchaser to be performed by it on or before the Closing
pursuant to the terms hereof shall have been duly performed and complied with
by the Closing.

     7.3 Deliveries by the Purchaser. The Purchaser shall have made the
deliveries required by Section 2.2.2.

     SECTION 8. Survival of Representations and Warranties; Indemnification.

     8.1 Survival.

     8.1.1 Representations and Warranties. The representations and warranties
made under this Agreement shall survive the Closing for a period of eighteen
months from the date hereof, except for those in (i) Sections 3.1, 3.2, 3.3,
3.19.1, 4.1 and 4.2 which shall survive without any expiration, (ii) Sections
3.13 and 3.21 which shall survive until the date upon which the liability to
which any such representation and warranty may relate is barred by all
applicable statutes of limitation and (iii) Sections 3.15 and 3.28 which shall
survive until the later to occur of (a) the date upon which the liability to
which any such representation and warranty may relate is barred by all
applicable statutes of limitation, and (b) the date upon which any claim for
refund or credit related to any such representation and warranty is barred by
all applicable statutes of limitation, and no claim or demand for
indemnification pursuant to Section 8.2 or otherwise shall be made after such
date, except for those claims or demands for indemnification pursuant to
Section 8.2, of which the Purchaser has notified the Company in writing prior
to such date in accordance with the terms of this Agreement.

     8.1.2 Covenants. The covenants and agreements set forth in Sections 5.4,
5.5, 5.7 and 5.8 (other than the last sentence of Section 5.8) shall survive
the Closing for so long as the Purchaser beneficially owns (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended and
in effect from time to time (the “1934 Act”)), including, without limitation,
through participation in a “group” (within the meaning of Section 13(d)(3) of
the 1934 Act) or a voting trust, by subjecting the shares of Common Stock held
by it to a voting or similar agreement, or by having the right to cause or
direct the vote of any shares of Common Stock or other securities of the
Company held by any other Person, at least 20% of the then outstanding Voting
Securities (as defined below) of the Company. The covenants and agreements set
forth in the last sentence of Section 5.8 shall survive the Closing for so long
as the Purchaser beneficially owns (as such term is defined in Rule 13d-3 under
the 1934 Act), including, without limitation, through participation in a
“group” (within the meaning of Section 13(d)(3) of the 1934 Act) or a voting
trust, by subjecting the shares of Common Stock held by it to a voting or
similar agreement, or by having the right to cause or direct the vote of any
shares of Common Stock or other securities of the Company held by any other
Person, at least a majority of the then outstanding Voting Securities of the
Company.

 

 

     As used herein, the term “Voting Securities” shall mean any securities of
the Company, or any successor to the Company, entitling the holder thereof to
vote as a stockholder for any purpose or under any circumstance or any
securities convertible into or exchangeable for under any circumstance such
securities or any rights, warrants or options to acquire (through purchase,
exchange, conversion or otherwise) any such securities under any circumstance

     8.2 Indemnification.

     8.2.1 Purchaser’s Right to Indemnification. Subject to Section 8.2.2, the
Company agrees to defend, indemnify and hold Purchaser harmless against and
shall reimburse Purchaser for any actions, claims, proceedings, losses,
liabilities and damages, including reasonable attorneys’ fees (collectively,
“Damages”) incurred by the Purchaser on or after the Closing Date arising out
of:

     (a)  any inaccuracy of or any breach of any representation or warranty of
the Company contained in or made pursuant to this Agreement or any certificate
or instrument in connection herewith; or

     (b)  a breach of any covenant or agreement of the Company contained in or
made pursuant to this Agreement.

     8.2.2 Company’s Limitation of Liability.

     (a)  The liability of the Company to indemnify the Purchaser pursuant to
Section 8.2.1(a) and Section 8.2.1(b) hereof against any Damages sustained by
reason of any claim covered by Section 8.2.1(a) or Section 8.2.1(b) hereof
shall be limited to claims as to which the Purchaser has given the Company
written notice thereof, setting forth therein in reasonable detail the basis
for such claim, on or prior to the expiration of the survival periods set forth
in Section 8.1.1 and Section 8.1.2 hereof, respectively, whether or not any
Damages have then actually been sustained.

     (b)  The Company’s indemnity obligations pursuant to Section 8.2.1(a)
hereof shall be effective with respect to claims for Damages only after the
aggregate amount of all Damages for which the Company is liable thereunder
exceeds $250,000 and then only to the extent of such excess (the “Basket”).

     (c)  Subject to Section 8.2.2(d), the Company’s aggregate indemnity
obligations pursuant to Section 8.2.1(a) shall not exceed the Purchase Price
(the “Cap”).

     (d)  Notwithstanding anything to the contrary contained herein, the Basket
and Cap shall not be applicable to claims relating to any inaccuracy or breach
of any representation or warranty made in Sections 3.1, 3.2, 3.3, 3.19 and
3.21.

     8.2.3 Company’s Right to Indemnification. Subject to Section 8.2.4, the
Purchaser agrees to defend, indemnify and hold the Company harmless

 

 

against and shall reimburse the Company for any Damages incurred by the
Company on or after the Closing Date arising out of:

     (a)  any inaccuracy of or breach of any representation or warranty of
Purchaser contained in or made pursuant to this Agreement or any certificate or
instrument in connection herewith; or

     (b)  a breach of any covenant or agreement of Purchaser contained in or
made pursuant to this Agreement.

     8.2.4 Purchaser’s Limitation of Liability.

     (a)  The liability of Purchaser to indemnify the Company pursuant to
Section 8.2.3(a) hereof against any Damages sustained by reason of any claim
covered by Section 8.2.3(a) hereof shall be limited to claims as to which the
Company has given Purchaser written notice thereof, setting forth therein in
reasonable detail the basis for such claim, on or prior to the expiration of
the survival periods set forth in Section 8.1 hereof, whether or not any
Damages have then actually been sustained.

     (b)  Purchaser’s indemnity obligations pursuant to Section 8.2.3(a) hereof
shall be effective with respect to any claim for Damages only after the
aggregate amount of all Damages for which Purchaser is liable under this
Agreement exceeds the Basket, and only to the extent of such excess.

     (c)  Subject to Section 8.2.4(d), Purchaser’s aggregate indemnity
obligations pursuant to Section 8.2.3(a) shall not exceed the Cap.

     (d)  Notwithstanding any other provision hereof, the Basket and Cap shall
not be applicable to claims relating to any inaccuracy or breach of any
representation or warranty made in Sections 4.1 and 4.2.

     8.3 AB Technologies, Inc. Notwithstanding anything contained herein to
the contrary, the Company shall indemnify and hold the Purchaser harmless and
shall reimburse the Purchaser for any Damages incurred by the Company related
to earnout provisions or purchase price adjustments in connection with, or
other Damages arising out of or related to, the Asset Purchase Agreement, dated
as of February 7, 2000, between AB Technologies, Inc. and IITRI, including,
without limitation, the claims filed September 12, 2002 by Clyde O. Andrews and
William M. Bewley (collectively, the “AB Tech Shareholders”) against IITRI in
the Circuit Court for the County of Fairfax, Virginia and September 16, 2002 by
IITRI against the AB Tech Shareholders in the U.S. District Court, Eastern
District of Virginia, in each case to the extent such Damages in the aggregate
exceed $5,400,000. The liability of the Company to indemnify the Purchaser
pursuant to this Section 8.3 shall not be limited in any way by Section 8.1 or
8.2.2 hereof; provided, that there shall be no duplication of liability of the
Company for indemnification pursuant to Section 8.2. and this Section 8.3.

 

 

     8.4 Computation of Damages. For purposes of computing any Damages under
this Section 8 with respect to any representation, warranty, covenant or
agreement that is qualified as to materiality or Material Adverse Effect, the
amount of the Damages shall be the entire amount of Damages arising by reason
of the breach of such representation, warranty, covenant or agreement and not
merely the amount of such Damages in excess of an amount that constitutes
material Damages or in excess of an amount that constitutes a Material Adverse
Effect.

     8.5 Conditions of Indemnification.

     8.5.1 In the event the Purchaser or the Company has a reasonable good
faith basis for asserting a claim for Damages, such party shall give prompt
written notice to the other parties hereto briefly setting forth the basis of
the claim and the amount thereof (or, if not then determinable, a reasonable
good faith estimate of the amount thereof) in reasonable detail; provided, that
the failure to provide such notice in a timely fashion shall not affect the
right of the indemnified party unless and only to the extent that the
indemnifying party is actually prejudiced thereby.

     8.5.2 The obligations and liabilities of the Company and Purchaser with
respect to claims made by third parties shall be subject to the following terms
and conditions:

     (a)  The indemnified party will give the indemnifying party prompt notice
of any such claim as set forth in subpart (a) above; provided, that the failure
to provide such notice in a timely fashion shall not affect the right of the
indemnified party unless and only to the extent that the indemnifying party is
actually prejudiced thereby, and the indemnifying party shall have the right to
undertake the defense thereof by representatives chosen by it by giving written
notice to that effect within twenty (20) business days of receiving notice of
the third-party claim.

     (b) The indemnified party shall have the right to participate in the
defense or other disposition of any third-party claim, but the indemnifying
party shall not be liable for any legal fees or expenses subsequently incurred
by the indemnified party in connection with the defense thereof unless (i) the
indemnifying party agreed to pay such fees and expenses, (ii) the indemnifying
party shall have failed to employ counsel reasonably satisfactory to the
indemnified party in a timely manner, or (iii) the indemnified party shall have
been advised by counsel (either that was employed by the indemnifying party or
one of its own choosing) that representation of the indemnified party by
counsel provided by the indemnifying party pursuant to the foregoing would be
inappropriate due to actual or potential conflicting interests between the
indemnifying party and the indemnified party, including situations in which
there are one or more legal defenses available to the indemnified party that
are different from or additional to those available to the indemnifying party.
Neither the indemnified party nor the indemnifying party may settle any claim
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed.

 

 

     (c)  Anything in this Section 8 to the contrary notwithstanding, (i) if
there is a reasonable probability that a claim may materially and adversely
affect the indemnified party other than as a result of money damages or other
money payments, the indemnified party shall have the right, at its own cost and
expense, to defend, compromise or settle such claim upon prior notification to
the indemnifying party of its intent to do so; provided, however, that if such
claim is settled without the indemnifying party’s consent, the indemnified
party shall be deemed to have waived all rights hereunder against the
indemnifying party for money damages arising out of such claim, and (ii) the
indemnifying party shall not, without the written consent of the indemnified
party, settle or compromise any claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the indemnified party a release from all liability
in respect to such claim.

     (d)  In connection with any indemnification claim, the indemnified party
shall give the indemnifying party reasonable access to the books, records and
assets of the indemnified party which relate to the act, omission or occurrence
giving rise to such Damages and the right, upon prior notice during normal
business hours, to interview any appropriate personnel of the indemnified party
with respect thereto and the indemnified party otherwise shall cooperate with
the indemnifying party (and its insurance company, if applicable) in defending
any third-party claim.

     8.6 Trustee Indemnification. The indemnification described in this
Section 8 shall be in addition to, and shall not affect in way, the
Indemnification Agreement between the Trustee and the Company, dated February
7, 2002, attached to the Trustee Engagement Letter, or any other
indemnification provided to the Trustee pursuant to the Trust Agreement.

     8.7 Other Rights. The indemnification described in this Section 8 shall
be in addition to, and shall not affect in any way, the rights of the parties
hereto under any of the other Transaction Agreements.

     SECTION 9. General.

     9.1 Execution of Counterparts. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
document.

     9.2 Notices. All notices which are required or may be given pursuant to
the terms of this Agreement or which any of the parties may desire to give
hereunder shall be in writing and delivered personally or sent by express
delivery, or by facsimile, or by registered or certified mail, with proof of
receipt, postage and expenses prepaid, return receipt requested, addressed as
follows:

	 	 	 
	If to the
Company to:	 	 

 

 

	 	 	 
	 	 	
Alion Science and Technology Corporatio

1759 Tysons Boulevard

Suite 1300

McLean, Virginia 22102

Attention: Steve Trichka, Esq.

Facsimile: (703) 714-6508

	 	 	
and with a copy to:

	 	 	
Baker & McKenzie

815 Connecticut Avenue, NW

Washington, DC 20006

Attention: Marc R. Paul, Esq.

Facsimile: (202) 452-7074

	If to the
Trustee or the
Purchaser to:
	 	 
	 	 	
State Street Bank & Trust Company

Alion Science and Technology Corporation

Employee Stock Ownership Trust

Batterymarch III

3 Pinehill Drive, 5th Floor

Quincy, MA 02169

Attention: Kelly Driscoll

Facsimile: (617) 664-2376

	 	 	
and with a copy to:

	 	 	
Paul, Weiss, Rifkind, Wharton & Garrison

1285 Avenue of the Americas

New York, NY 10019-6064

Attention: James H. Schwab

Facsimile: (212) 757-3990

or to such other address or addresses and to the attention of such other person
or person as any party may from time to time designate to the other party. Any
notice given in accordance with this Section 9.2 shall be deemed to have been
given when delivered personally, or when received if sent via overnight
delivery, facsimile, or registered or certified mail, return receipt
requested.

     9.3 Assignment, Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No party shall assign any of its rights or obligations
hereunder without the prior written consent of the other parties, except that
the Trustee may assign its rights and obligations hereunder without consent to
any successor trustee of the Purchaser appointed in accordance with the
provisions of the Plan or to any purchaser of all or substantially all of the
Shares.

 

 

     9.4 Applicable Laws. This Agreement shall be construed and governed by
the laws of the State of Delaware applicable to agreements made and to be
performed entirely within such State to the extent not superseded by ERISA.

     9.5 Entire Agreement. This Agreement, together with the Schedules and
Exhibit attached hereto, the other Transaction Agreements and the Trustee
Engagement Letter and the Indemnification Agreement, constitutes the entire
agreement among the parties hereto regarding the subject matter hereof, and no
party hereto shall be bound by any communications between them on the subject
matter hereof unless such communications are in writing and bear a date
contemporaneous with or subsequent to the date hereof. Any prior written
agreements or letters of intent among the parties other than the Trustee
Engagement Letter and the Indemnification Agreement shall, upon the execution
of this Agreement, be null and void.

     9.6 Headings. The headings in the sections of this Agreement are inserted
for convenience only and shall not constitute a part hereof or affect the
meaning or interpretation hereof

     9.7 Amendment, Waiver, Discharge of the Agreement. This Agreement may not
be amended, released or discharged except by an instrument in writing signed on
behalf of each of the parties hereto. The failure of a party to enforce any
provision of this Agreement shall not be deemed a waiver by such party of any
other provision or subsequent breach of the same or any other obligation
hereunder.

     9.8 Action Taken as Trustee. The Trustee has executed and delivered this
Agreement, not in its individual or corporate capacity, but solely as Trustee
of the Purchaser. The performance of this Agreement by the Trustee and any and
all duties, obligations and liabilities of the Trustee hereunder will be
effected by the Trustee only as Trustee. The Trustee does not undertake nor
shall have any individual or corporate liability or obligation of any nature
whatsoever by virtue of the execution and delivery of this Agreement or the
representations, covenants or warranties contained herein or in any instrument
or certificate delivered pursuant hereto.

 

 

     IN WITNESS WHEREOF, each of the parties has executed this Stock
Purchase Agreement as of the day and year first above written.

	 
	ALION SCIENCE AND TECHNOLOGY CORPORATION
	 
	By:
	

     Name:

     Title

 

	 	
ALION SCIENCE AND
TECHNOLOGY CORPORATION
EMPLOYEE STOCK OWNERSHIP
TRUST
	 
	By:    	 	 	 	STATE STREET BANK &
TRUST COMPANY, not in its individual or
corporate capacity, but solely as Trustee of the
Alion Science and Technology Corporation
Employee Stock Ownership Trust
	 
	 	 	 	 	By:
	 	 	 	 	

    Name:

    Title:
	 
	 	 	 	 	

 

 

EXHIBIT A

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	

	SECTION 1
	 	Purchase and Sale of Shares	 	 	31	 
	 	1.1
	 	Shares to be Sold	 	 	31	 
	 	1.2
	 	Purchase Price	 	 	32	 
	 	1.3
	 	Use of Proceeds	 	 	32	 
	 	1.4
	 	Inactive ESOP	 	 	32	 
	SECTION 2
	 	Closing	 	 	32	 
	 	2.1
	 	Time and Place	 	 	32	 
	 	2.2
	 	Deliveries	 	 	32	 
	SECTION 3
	 	Representations and Warranties of the Company	 	 	33	 
	 	3.1
	 	Organization, Corporate Standing and Investments	 	 	33	 
	 	3.2
	 	Necessary Authority	 	 	34	 
	 	3.3
	 	Conflict; Change of Control	 	 	35	 
	 	3.4
	 	Filings and Approvals	 	 	35	 
	 	3.5
	 	Financial Statements	 	 	36	 
	 	3.6
	 	S-1		 	 	 	36	 
	 	3.7
	 	Compliance with Law	 	 	36	 
	 	3.8
	 	No Defaults	 	 	37	 
	 	3.9
	 	Litigation	 	 	37	 
	 	3.10
	 	No Material Adverse Effect	 	 	38	 
	 	3.11
	 	Absence of Undisclosed Liabilities	 	 	40	 
	 	3.12
	 	Certain Agreements. ,	 	 	40	 
	 	3.13
	 	ERISA	 	 	40	 
	 	3.14
	 	Major Contracts	 	 	42	 
	 	3.15
	 	Taxes	 	 	43	 
	 	3.16
	 	Interests of Officers and Directors	 	 	44	 
	 	3.17
	 	Company's Intellectual Property Rights.  :	 	 	45	 
	 	3.18
	 	Restrictions on Business Activities	 	 	46	 
	 	3.19
	 	Title to Assets; Liens; Condition of Equipment	 	 	46	 
	 	3.20
	 	Governmental Authorizations and Licenses	 	 	46	 
	 	3.21
	 	Environmental Matters	 	 	47	 
	 	3.22
	 	Insurance.  the Business Subsidiarythe Business Subsidiary	 	 	47	 
	 	3.23
	 	Labor Matters	 	 	48	 
	 	3.24
	 	Questionable Payments	 	 	48	 
	 	3.25
	 	Brokers	 	 	49	 
	 	3.26
	 	Relationships	 	 	49	 
	 	3.27
	 	Put Optionst	 	 	49	 
	 	3.28
	 	ESOP and Trustee	 	 	49	 
	 	3.29
	 	Audits	 	 	50	 
	 	3.30
	 	Security Clearances	 	 	50	 

 

 

	 	 	 	 	 	 	 	 	 	 
	 	3.31
	 	Pre-Contract Costs	 	 	50	 
	 	3.32
	 	Anti-Takeover Statutes	 	 	50	 
	 	3.33
	 	Disclosure	 	 	50	 
	 	3.34
	 	Disclaimer	 	 	51	 
	SECTION 4
	 	Representations and Warranties of the Purchaser	 	 	51	 
	 	4.1
	 	Necessary Authority	 	 	51	 
	 	4.2
	 	No Conflicts	 	 	51	 
	 	4.3
	 	Investment Intent	 	 	52	 
	SECTION 5
	 	Covenants of the Company	 	 	52	 
	 	5.1
	 	Honoring Put Options	 	 	52	 
	 	5.2
	 	ESOP Submission	 	 	53	 
	 	5.3
	 	Plan Qualification	 	 	53	 
	 	5.4
	 	S Corporation	 	 	53	 
	 	5.5
	 	Affiliate Transactions	 	 	53	 
	 	5.6
	 	Consents	 	 	54	 
	 	5.7
	 	Rights Under Certain Agreements	 	 	54	 
	 	5.8
	 	Shareholders' Rights	 	 	54	 
	SECTION 6
	 	Closing Conditions for the Benefit of the Purchaser	 	 	54	 
	 	6.1
	 	Representations and Warranties True	 	 	54	 
	 	6.2
	 	Performance	 	 	55	 
	 	6.3
	 	Opinions of Counsel to the Company	 	 	55	 
	 	6.4
	 	Consents	 	 	55	 
	 	6.5
	 	Opinion of Valuation Consultants	 	 	55	 
	 	6.6
	 	Trustee Approval	 	 	55	 
	 	6.7
	 	Deliveries by Company	 	 	56	 
	 	6.8
	 	Trustee Fees	 	 	56	 
	 	6.9
	 	Equity Investment in the ESOP	 	 	56	 
	 	6.10
	 	Asset Purchase Agreement; Transaction Agreements	 	 	56	 
	 	6.11
	 	Employment Agreements	 	 	56	 
	SECTION 7
	 	Closing Conditions for the Benefit of the Company	 	 	56	 
	 	7.1
	 	Representations and Warranties True	 	 	56	 
	 	7.2
	 	The Purchaser's Performance	 	 	57	 
	 	7.3
	 	Deliveries by the Purchaser	 	 	57	 
	SECTION 8
	 	Survival of Representations and Warranties; Indemnification	 	 	57	 
	 	8.1
	 	Survival of Representations and Warranties	 	 	57	 
	 	8.2
	 	Indemnification	 	 	58	 
	 	8.3
	 	Computation of Damages	 	 	59	 
	 	8.4
	 	Conditions of Indemnification	 	 	60	 
	 	8.5
	 	Trustee Indemnification	 	 	61	 
	 	8.6
	 	Other Rights	 	 	61	 

 

 

	 	 	 	 	 	 	 	 	 	 
	SECTION 9
	 	General	 	 	61	 
	 	9.1
	 	Execution of Counterparts	 	 	61	 
	 	9.2
	 	Notices	 	 	61	 
	 	9.3
	 	Assignment, Successors and Assigns	 	 	62	 
	 	9.4
	 	Applicable Laws	 	 	63	 
	 	9.5
	 	Entire Agreement	 	 	63	 
	 	9.6
	 	Headings	 	 	63	 
	 	9.7
	 	Amendment, Waiver, Discharge of the Agreement	 	 	63	 
	 	9.8
	 	Action Taken as Trustee	 	 	63	 

Schedules

[To come]

Exhibits

A. Opinion of Baker & McKenzie

B. Opinion of Silverstein and Mullens

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