Document:

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                                                                    EXHIBIT 10.8

                                RIGHTS AGREEMENT

         THIS RIGHTS AGREEMENT ("Agreement") is made as of this ___ day of
_______, 2002 (the "Effective Date"), among Alion Science and Technology
Corporation, a Delaware corporation (the "Company"), each of the persons named
on the signature page under the heading Warrantholders (the "Warrantholders")
and any Person acquiring Registrable Securities (as defined herein) of the
Company after the date hereof and executing an assignment and joinder in the
form attached hereto as Exhibit A (collectively with the Warrantholders, the
"Holders"), and Alion Science and Technology Corporation Employee Ownership,
Savings and Investment Trust (the "Trust") (for the purposes of Sections 3
through 15 of this Agreement only).

         WHEREAS, the Company and IIT Research Institute, an Illinois
not-for-profit corporation ("IITRI") have entered into that certain Second
Amended and Restated Asset Purchase Agreement dated October __, 2002 (the
"Purchase Agreement"), pursuant to which IITRI has agreed to sell to the Company
and the Company has agreed to purchase from IITRI, subject to the terms and
conditions set forth therein, substantially all of the assets and liabilities of
IITRI; and

         WHEREAS, pursuant to the terms of the Purchase Agreement, the Company
has issued to the Warrantholders senior subordinated notes dated the Effective
Date in the aggregate principal amount of [$___________________] (collectively
the "Mezzanine Notes"), subject to the terms and conditions set forth in the
Mezzanine Note Securities Purchase Agreement, dated the Effective Date, among
the Company and the purchasers now or hereafter party thereto; and

         WHEREAS, pursuant to the terms of the Purchase Agreement, the Company,
the Warrantholders and the Trust have entered into a Mezzanine Warrant Agreement
dated the Effective Date, pursuant to which the Company has issued to the
Warrantholders warrants to purchase _________ shares (subject to adjustment) of
the Company's $0.01 par value per share common stock ("Common Stock") at an
exercise price (subject to adjustment) of Ten Dollars ($10) per share (the
"Mezzanine Warrants"); and

         WHEREAS, pursuant to the terms of the Purchase Agreement, the Company
has issued to the Warrantholders junior subordinated notes dated the Effective
Date in the aggregate principal amount of Thirty-Nine Million Nine Hundred
Thousand Dollars ($39,900,000) (collectively, the "Seller Notes"), subject to
the terms and conditions set forth in the Seller Note Securities Purchase
Agreement dated the Effective Date among the Company and the purchasers party
thereto (the Mezzanine Notes and the Seller Notes shall hereinafter be referred
to collectively as the "Notes"); and

         WHEREAS, pursuant to the terms of the Purchase Agreement, the Company,
IITRI and the Trust have entered into a Seller Warrant Agreement dated the
Effective Date, pursuant to which the Company has issued to the Warrantholders
warrants to purchase ___________ shares (subject to adjustment) of Common Stock
at an exercise price (subject to adjustment) of $10 per share (the "Seller
Warrants") (the Mezzanine Warrants and the Seller Warrants shall hereinafter be
referred to collectively as the "Warrants"); and

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         WHEREAS, the Company, the Holders and the Trust wish to agree upon
certain rights relating to the Warrants, the Notes and the Registrable
Securities.

         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.        Registration Rights.

         The parties hereto agree as follows:

         (a)      Definitions

         For purposes of this Agreement:

                  (i)      The term "Affiliate" means, with respect to any
Person, any third party that is controlled by, controls or is under common
control with, such Person.

                  (ii)     The term "Beneficially Own" shall have the meaning
given to such term in Rule 13d-3 under the 1934 Act.

                  (iii)    The term "Broadly Distributed Offering" shall mean a
sale or transfer by a Holder of Shares of all or any of such Shares owned by it
if, but only if, such sale is made pursuant to (A) a public offering within the
meaning of, and registered under, the Securities Act and such public offering is
an underwritten public offering in which the Holder of Shares uses its
reasonable efforts to effect as wide a distribution of such Shares as is
reasonably practicable so as to prevent any Person (including any "group" within
the meaning of Section 13(d)(3) of the 1934 Act) and its Affiliates actually
known to such Holder from purchasing through such offering Shares representing
more than 5% of the voting power of the Voting Securities of the Company (such
calculation to be made in a manner consistent with the provisions of Rule
13d-3(d) under the 1934 Act, as in effect on the date hereof) (the "Voting
Power"), or (B) a program of bona fide open market dispositions of Shares by one
or more brokers or dealers which dispositions have not been previously
negotiated by such holder of Shares with the purchasers; provided, however, that
during any three month period, the aggregate Shares disposed of pursuant to this
clause (B) shall not represent more than 5% of the Voting Power (the "5%
Restriction"); provided, further, that the 5% Restriction shall not apply to any
Holder (x) that does not control (whether solely or with a group, including any
"group" within the meaning of Section 13(d)(3) of the 1934 Act) the making of a
request for a Demand Registration, (y) if any Demand Registration rights
otherwise available to such Holder (or group of which such Holder is a member,
including any "group" within the meaning of Section 13(d)(3) of the 1934 Act)
with respect to the Shares under this Agreement are not so available as a result
of the Company's exercise of its deferral rights under Section 1(b)(vi) of this
Agreement or (z) if the right of such Holder to require registration of Shares
under this Agreement has been suspended pursuant to Section 1(k) of this
Agreement.

                  (iv)     The term "Demand Registration" means collectively a
Mezzanine Holder Demand Registration as defined in Section 1(b)(i)(1), a
Required Holder Demand Registration as defined in Section 1(b)(ii)(1), and a
Supplementary Demand Registration as defined in Section 1(b)(iii)(1).

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                  (v)      The term "Form S-1" means such form under the
Securities Act as in effect on the date hereof or any comparable registration
form under the Securities Act subsequently adopted in replacement thereof by the
SEC.

                  (vi)     The term "Form S-3" means such form under the
Securities Act as in effect on the date hereof or any comparable registration
form under the Securities Act subsequently adopted in replacement thereof by the
SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.

                  (vii)    The term "Form S-4" means such form under the
Securities Act as in effect on the date hereof or any comparable registration
form under the Securities Act subsequently adopted in replacement thereof by the
SEC for corporate combinations and exchange offers which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

                  (viii)   The term "Form S-8" means such form under the
Securities Act as in effect on the date hereof or any comparable registration
form under the Securities Act subsequently adopted in replacement thereof by the
SEC.

                  (ix)     The term "Holder(s)" has the meaning set forth in the
preamble.

                  (x)      The term "Initial Public Offering" means an
underwritten public offering registered under the Securities Act (other than on
Form S-8) which becomes effective, pursuant to which the Company obtains a
listing for its Common Stock on a United States national securities exchange,
the Nasdaq National Market System, or an automated quotation system of
nationally recognized standing, and so long as the sale of securities thereunder
is consummated and either (i) such securities consist solely of Common Stock or
(ii) such securities consist of Common Stock and other securities of which
Common Stock comprises a majority of the value.

                  (xi)     The term "Majority Holders" means Holders holding a
majority of the Registrable Securities.

                  (xii)    The term "Mezzanine Registrable Securities" means (i)
the Mezzanine Shares and (ii) any Common Stock issued or issuable in respect of
such Mezzanine Shares upon any distribution, stock split, stock dividend,
conversion or combination, recapitalization, merger, consolidation, other
reorganization or similar event.

                  (xiii)   The term "Mezzanine Required Holders" means Holders
holding a majority of the Mezzanine Registrable Securities.

                  (xiv)    The term "Mezzanine Shares" means the shares of
Common Stock of the Company issuable upon exercise of the Mezzanine Warrants.

                  (xv)     The term "1934 Act" means the Securities Exchange Act
of 1934, as amended and in effect from time to time.

                  (xvi)    The term "Person" means an individual, a corporation,
a limited liability company, a partnership, an association, a trust or any other
entity organization, including a governmental entity.

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                  (xvii)   The term "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 SEC under the
1934 Act, or the Trust) 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.

                  (xviii)  The terms "register", "registered", and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement or document.

                  (xix)    The term "Registrable Securities" means,
collectively, the Mezzanine Registrable Securities and the Seller Registrable
Securities.

                  (xx)     The term "Required Holders" means Holders holding a
majority of the Registrable Securities.

                  (xxi)    The term "SEC" means the Securities and Exchange
Commission or any successor governmental agency.

                  (xxii)   The term "Securities Act" means the Securities Act of
1933, as amended and in effect from time to time.

                  (xxiii)  The term "Seller Registrable Securities" means (i)
the Seller Shares and (ii) any Common Stock issued or issuable in respect of
such Seller Shares upon any distribution, stock split, stock dividend,
conversion or combination, recapitalization, merger, consolidation, other
reorganization or similar event.

                  (xxiv)   The term "Seller Shares" means the shares of Common
Stock of the Company issuable upon exercise of the Seller Warrants.

                  (xxv)    The term "Shares" means, collectively, the Mezzanine
Shares and the Seller Shares.

                  (xxvi)   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.

         (b)      Demand Registrations.

                  (i)      Mezzanine Holder Demand Registration.

                           (1)      Subject to the remaining provisions of this
Agreement, following the date that is one hundred eighty (180) days after the
effective date of an Initial Public Offering by the Company, the Mezzanine
Required Holders shall be entitled to provide written

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notice to the Company in accordance with Section 7 herein ("Mezzanine Holder
Demand Notice"), that the Mezzanine Required Holders are requiring the Company
to file a registration statement under the Securities Act covering the
registration of, and any related qualification or compliance with respect to,
all or part of the Registrable Securities owned by the Mezzanine Required
Holders ("Mezzanine Holder Demand Registration"). The request for a Mezzanine
Holder Demand Registration shall specify the approximate number of Mezzanine
Registrable Securities requested to be registered and the anticipated per share
price range for such offering (which range may be revised from time to time by
holders of a majority of the Registrable Securities requested to be included in
such registration by written notice to the Company to that effect). Within ten
days after receipt of any such request, the Company shall give written notice of
such requested registration to all other holders of Registrable Securities and,
subject to the other provisions of this Agreement, shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within thirty (30) days of the
sending of the Company's notice. The holders of Mezzanine Registrable Securities
initially demanding such registration may withdraw such demand if such holders
determine that public market conditions are not satisfactory to effect the
Mezzanine Holder Demand Registration in accordance with the intended method or
methods of disposition (including price range); provided that any Registration
Expenses (as defined below) shall be paid by such holders promptly upon the
Company's demand, or the right to make a future Mezzanine Holder Demand
Registration shall be forfeited.

                           (2)      The Company shall not be obligated to
effect, or take any action to effect, a Demand Registration pursuant to Section
1(b)(i)(1) after the Company has effected one (1) registration pursuant to
Section 1(b)(i)(1) and such registration has been declared or ordered effective
in accordance with the procedures set forth in Section 1(e) below and the
Company has complied in all material respects with the terms thereof.

                  (ii)     Required Holder Demand Registration.

                           (1)      Subject to the remaining provisions of this
Agreement, following the date that is one hundred eighty (180) days after the
effective date of an Initial Public Offering by the Company, the Required
Holders shall be entitled to provide written notice to the Company in accordance
with Section 7 herein ("Required Holder Demand Notice"), that the Required
Holders are requiring the Company to file a registration statement under the
Securities Act covering the registration of, and any related qualification or
compliance with respect to, all or part of the Registrable Securities owned by
the Required Holders ("Required Holder Demand Registration"). The request for a
Required Holder Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering (which range may be revised from time to time by
holders of a majority of the Registrable Securities requested to be included in
such registration by written notice to the Company to that effect). Within ten
days after receipt of any such request, the Company shall give written notice of
such requested registration to all other holders of Registrable Securities and,
subject to the other provisions of this Agreement, shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within thirty (30) days of the
sending of the Company's notice. The holders of Registrable Securities initially
demanding such registration may withdraw such demand if such holders determine
that public market conditions are not satisfactory to effect the Required Holder
Demand Registration in accordance with the intended method or methods of
disposition (including price range); provided that any Registration

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Expenses (as defined below) shall be paid by such holders promptly upon the
Company's demand, or the right to make any future Required Holder Demand
Registration shall be forfeited.

                           (2)      The Company shall not be obligated to
effect, or take any action to effect, a Required Holder Demand Registration
pursuant to Section 1(b)(ii)(1) after the Company has effected one (1)
registration pursuant to Section 1(b)(ii)(1) and such registration has been
declared or ordered effective in accordance with the procedures set forth in
Section 1(e) below and the Company has complied in all material respects with
the terms thereof.

                  (iii)    Supplementary Demand Registration.

                           (1)      If the Holders participating in the
Mezzanine Holder Demand Registration and the Required Holder Demand Registration
are unable to sell (in the aggregate) at least sixty percent (60%) of the
Registrable Securities requested to be registered in such Demand Registrations,
the Holders of a majority of the Registrable Securities that were requested to
be sold but were not sold pursuant to such Demand Registrations (the "Unsold
Shares") shall be entitled to provide written notice to the Company in
accordance with Section 7 herein ("Supplementary Demand Notice"), that they are
requiring the Company to file a further registration statement under the
Securities Act (a "Supplementary Demand Registration") covering the registration
of the Unsold Shares. The request for a Supplementary Demand Registration shall
specify the approximate number of Unsold Shares requested to be registered and
the anticipated per share price range for such offering (which range may be
revised from time to time by the holders of a majority of the Registrable
Securities requested to be included in such registration by written notice to
the Company to that effect). Within ten days after receipt of any such request,
the Company shall give written notice of such requested registration to all
other holders of Registrable Securities and, subject to the other provisions of
this Agreement, shall include in such registration all Unsold Shares with
respect to which the Company has received written requests for inclusion therein
within thirty (30) days of the sending of the Company's notice. The holders of a
majority of the Unsold Shares initially demanding such registration may withdraw
such demand if such holders determine that public market conditions are not
satisfactory to effect the Supplementary Demand Registration in accordance with
the intended method or methods of disposition (including price range); provided
that any Registration Expenses shall be paid by such holders promptly upon the
Company's demand, or the right to a Supplementary Demand Registration shall be
forfeited.

                           (2)      The Company shall not be obligated to
effect, or take any action to effect, a Supplementary Demand Registration
pursuant to Section 1(b)(iii)(1) after the Company has effected one (1)
registration pursuant to Section 1(b)(iii)(1) and such registration has been
declared or ordered effective in accordance with the procedures set forth in
Section 1(e) below and the Company has complied in all material respects with
the terms thereof.

                  (iv)     The Company shall be entitled, in its sole
discretion, to determine the appropriate registration form upon which the
registration requested pursuant to Section 1(b)(i), 1(b)(ii) or 1(b)(iii) above
is effected, whether it be Form S-1, Form S-3 or some other appropriate form.

                  (v)      The registration rights of all Holders under Sections
1(b)(i), 1(b)(ii) and 1(b)(iii) shall be conditioned upon their complying with
the requirements set forth in Section 1(d) with the underwriter or underwriters
selected by the Company for each such offering. Any

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such selection of underwriter by the Company for the Mezzanine Holder Demand
Registration is subject to the reasonable approval of the Mezzanine Required
Holders, unless the selected underwriter was a lead or co-lead underwriter in
connection with the Company's Initial Public Offering and is a nationally
recognized investment bank, in which case the Mezzanine Required Holders shall
have no such right of reasonable approval. Any such selection of underwriter by
the Company for the Required Holder Demand Registration shall require the
reasonable approval of the Required Holders, unless the selected underwriter was
a lead or co-lead underwriter in connection with the Company's Initial Public
Offering or any subsequent Company public offering and is a nationally
recognized investment bank, in which case the Required Holders shall have no
such right of reasonable approval. Any such selection of underwriter by the
Company for the Supplementary Demand Registration shall require the reasonable
approval of the holders of a majority of the Unsold Shares, unless the selected
underwriter was a lead or co-lead underwriter in connection with the Company's
Initial Public Offering or any subsequent Company public offering and is a
nationally recognized investment bank, in which case such Holders shall have no
such right of reasonable approval.

                  (vi)     If the Company shall furnish to the Mezzanine
Required Holders, the Required Holders or the holders of a majority of Unsold
Shares, as appropriate, a certificate signed by a duly authorized officer of the
Company stating that in the good faith judgment of the Company that the filing
of a registration statement as requested pursuant to Sections 1(b)(i), 1(b)(ii)
or 1(b)(iii) would materially interfere with a pending material business
transaction or other pending material action by the board of directors of the
Company and that it is therefore necessary to defer the filing of such
registration statement, the Company shall have the right, subject to the
limitations listed in Section 1(b)(vii) below, to defer taking action with
respect to such filing, and with respect to any other request for a Demand
Registration, for a period not to exceed the earlier of (i) the date that the
Company ceases to diligently pursue such business transaction or such other
action, and (ii) one hundred twenty (120) days after receipt of the request from
the Mezzanine Required Holders, the Required Holders or the holders of a
majority of Unsold Shares, as appropriate. Upon the expiration of such deferral
period, the Company shall comply with its obligations under Section 1(e), upon
written confirmation of the Mezzanine Required Holders, the Required Holders or
the holders of a majority of Unsold Shares, as appropriate, of their continued
desire to have the Company effect such registration. The Company shall promptly
provide written notice to the Mezzanine Required Holders, the Required Holders
or the holders of a majority of the Unsold Shares, as the case may be, upon the
Company ceasing to pursue any such business transaction or such other action.

                  (vii)    The Company shall only be entitled to one deferral
pursuant to Section 1(b)(vi) with respect to the Mezzanine Holder Demand
Registration, one deferral with respect to the Required Holder Demand
Registration, and one deferral with respect to the Supplementary Demand
Registration and only one deferral in any period of twelve (12) consecutive
months with respect to the Demand Registrations.

                  (viii)   The Company shall not be obligated to effect, or to
take any action to effect, any Demand Registration pursuant to this Section
1(b):

                           (1)      In any jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to or otherwise required to be subject to service in such
jurisdiction;

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                           (2)      Subject to Section 1(b)(iii), after the
Company has effected one (1) registration pursuant to Section 1(b)(i) and one
(1) registration pursuant to Section 1(b)(ii), and such registrations have been
declared or ordered effective in accordance with the procedures set forth in
Section 1(e) below and the Company has complied in all material respects with
the terms thereof;

                           (3)      During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of, and ending on a
date one hundred eighty (180) days after the effective date of, a
Company-initiated registration for the purpose of raising capital in order to
(a) pay any outstanding principal amount of and accrued interest on the
Mezzanine Notes and/or Seller Notes, and/or (b) pay amounts to the Holders as a
result of or in anticipation of the exercise of their put right(s) under the
Mezzanine Warrant Agreement and/or the Seller Warrant Agreement;

                           (4)      If the Mezzanine Required Holders, the
Required Holders or the holders of a majority of Unsold Shares, as appropriate,
do not request that such offering be underwritten; or

                           (5)      If the Company is unable to obtain the
commitment of its first three choices of nationally recognized investment banks
to underwrite the offering, and subsequently the Mezzanine Required Holders, the
Required Holders or the holders of a majority of Unsold Shares, as appropriate,
are unable to find a nationally recognized investment bank that will underwrite
the offering.

         (c)      Piggyback Rights and Cutbacks.

                  (i)      Piggyback Registrations.

                           (1)      Holders' Piggyback Rights. After the
effective date of an Initial Public Offering, whenever the Company proposes to
register any of its stock or other securities under the Securities Act in
connection with the public offering, solely for cash, of such securities to be
publicly traded on a stock exchange (other than a registration relating solely
to the sale of securities to participants in a Company plan or resale of such
securities by participants in a Company plan, or pursuant to a Demand
Registration, or a registration on Form S-4 or Form S-8) (a "Piggyback
Registration"), the Company shall, at such time, promptly give the Holders
written notice of such registration in accordance with Section 7 herein. Upon
the written request of any Holder given within fifteen (15) days after the
sending of such notice ("Piggyback Notice"), the Company shall, subject to the
remaining provisions of this Agreement, use its best efforts to include in such
registration all of the Registrable Securities that any Holder has requested to
be registered.

                           (2)      Company Piggyback Rights. Subject to the
remaining provisions of this Agreement, if the Company shall request inclusion
in any registration pursuant to Section 1(b) of securities being sold for its
own account, or if other Persons shall request inclusion in any registration
pursuant to Section 1(b) of securities being sold for their own account, the
Holders shall offer to include such securities in the registration.

                  (ii)     Piggyback Expenses. All Registration Expenses shall
be paid by the Company in all Piggyback Registrations.

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                  (iii)    Priority on Primary Registrations. If a registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
Company or the marketability of the offering, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, and (ii)
second, the Registrable Securities and other securities of the Company requested
to be included in such registration, pro rata among the holders of such
Registrable Securities and other securities of the Company on the basis of the
number of shares requested to be included in such registration by each such
holder.

                  (iv)     Priority on Secondary Registration. If a registration
is an underwritten secondary registration on behalf of holders of the Company's
securities who have the contractual right to initiate such a registration
(including any Demand Registration), and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the Company or the marketability of the
offering, the Company shall include in such registration (i) first, the
securities that the initiating holders propose to sell, and (ii) second, the
Registrable Securities (if the secondary registration is not a Demand
Registration) and other securities (including securities of the Company)
requested to be included in such registration, pro rata among the holders of
such Registrable Securities and other securities on the basis of the number of
shares requested to be included in such registration by each such holder (and by
the Company, where appropriate).

                  (v)      Other Registrations. If the Company has previously
filed an underwritten registration statement with respect to Registrable
Securities pursuant to Section 1(b) hereof, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8), whether on its own behalf or at the
request of any holder or holders of such securities, until either: (a) 180 days
has elapsed from the date such previous registration became effective, or (b)
such other shorter period of time as specified by the underwriter(s) involved in
such registration has elapsed.

         (d)      Participation in Underwritten Offerings.

         No Person may participate in any registration hereunder which is
underwritten unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements, (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents that are standard and customary and are required
under the terms of such underwriting arrangements, (c) makes representations and
warranties concerning (i) the Beneficial Ownership of the Securities (if any) to
be sold by such Person, and (ii) such Person's ability to execute all necessary
documents and perform its obligations thereunder, and (d) completes and executes
any other documents reasonably required; provided that no holder of Registrable
Securities will be required to make any representation or warranty in connection
with any registration other than non-operational representations or warranties
that are then standard and customary in secondary offerings underwritten by such
underwriter.

         (e)      Obligations of the Company.

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         In the case of each registration required under this Section 1 to be
effected by the Company pursuant to this Agreement, the Company shall, as
expeditiously as reasonably possible:

                  (i)      Use its best efforts to prepare and file with the SEC
within ninety (90) days after the initial request in the case of a Demand
Registration, a registration statement (including, without limitation compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) with respect to such Registrable
Securities and use its best efforts to cause such registration statement to be
declared effective, and, upon the request of the Mezzanine Required Holders, the
Required Holders or the holders of a majority of the Unsold Shares, as
appropriate, use its best efforts to keep such registration statement effective
for a period of up to one hundred twenty (120) days or until such earlier date
that the distribution contemplated in the registration statement has been
completed; provided, however, that (i) such 120-day period shall be extended for
a period of time equal to the period the Holders refrain from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company or the Company, including,
without limitation, as a result of any stop-order, and (ii) in the case of any
registration of Registrable Securities on Form S-3 (or its successor) which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, however, in no event longer than
one year from the effective date of the registration statement and provided that
SEC Rule 415, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis, and provided further that applicable
rules under the Securities Act governing the obligation to file a post-effective
amendment permit, in lieu of filing a post-effective amendment which (I)
includes any prospectus required by Section 10(a)(3) of the Securities Act or
(II) reflects facts or events representing a material or fundamental change in
the information set forth in the registration statement, the incorporation by
reference of information required to be included in (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934
Act in the registration statement.

                  (ii)     Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.

                  (iii)    Furnish to each Holder such numbers of copies of the
prospectus included in such registration statement, including a preliminary
prospectus, in conformity with the requirements of the Securities Act and such
other documents as it and the underwriter, if any, may reasonably request in
order to facilitate the disposition of Registrable Securities covered by such
registration statement.

                  (iv)     Use best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested by the
holders of a majority of the Registrable Securities requested to be included in
such offering or each underwriter; provided, however, that the Company shall not
be required in connection therewith to qualify to transact business as a foreign
corporation in any jurisdiction where the Company is not otherwise required to
qualify or to execute a general consent to service of process in any such
jurisdiction, unless the Company is already subject to or otherwise required to
be subject to service in such jurisdiction.

                                       10
<PAGE>

                  (v)      In the event of any underwritten public offering,
enter into and perform the Company's obligations under customary agreements
(including an underwriting agreement) and take all such other actions as the
underwriters reasonably request in order to expedite or facilitate the
disposition of the Registrable Securities requested to be included in such
offering.

                  (vi)     Promptly notify each Holder at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, the Company shall prepare a supplement or
amendment to such prospectus and/or registration statement so that, as
thereafter delivered to the purchasers of Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;

                  (vii)    Use its best efforts to cause all Registrable
Securities registered pursuant hereto to be listed on each securities exchange
(if any) or automated quotation system (if any) on which similar securities
issued by the Company are then listed.

                  (viii)   Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereto and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.

                  (ix)     make available for inspection by any Holder of
Registrable Securities participating in such registration, any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such Holder or underwriter,
all pertinent financial and other records and pertinent corporate documents of
the Company reasonably requested by such Holder or underwriter, and make
available for inspection by such underwriter any properties of the Company
(subject to the terms of any security arrangements between the Company or its
subsidiaries and their customers) and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such Holder, underwriter, attorney, accountant or agent in
connection with such registration statement;

                  (x)      otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC relating to such
registration statement;

                  (xi)     in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any securities included in such registration statement for sale
in any jurisdiction, the Company shall use its best efforts promptly to obtain
the withdrawal of such order;

                  (xii)    with respect to a Mezzanine Holder Demand
Registration or a Required Holder Demand Registration, use its best efforts to
cause its management to participate fully in the sale process, including,
without limitation, the preparation of the registration statement and the
preparation and presentation of any "road shows";

                  (xiii)   use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or

                                       11
<PAGE>

authorities as may be necessary to enable the Holders to consummate the
disposition of such Registrable Securities;

                  (xiv)    notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm such advice
in writing promptly thereafter:

                           (1)      when the registration statement, the
prospectus or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and, with respect to the
registration statement or any post-effective amendment thereto, when the same
has become effective;

                           (2)      of any request by the SEC for amendments or
supplements to the registration statement or the prospectus or for additional
information;

                           (3)      of the issuance by the SEC of any stop order
suspending the effectiveness of the registration or the initiation of any
proceedings by any Person for that purpose; and

                           (4)      of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose, or written
notice of intent to initiate such a proceeding.

         (f)      Obligations of the Holder.

         In connection with any registration of the Registrable Securities, the
Holders shall have the following obligations:

                  (i)      It shall be a condition precedent to the obligations
of the Company to include in any registration pursuant to this Agreement any of
the Registrable Securities of such Holder that the Holder shall furnish to the
Company such information regarding itself, the Registrable Securities it intends
to register and the intended method of disposition of such Registrable
Securities as shall be reasonably required to effect the registration of such
Registrable Securities and shall, if not an underwritten offering, execute such
documents in connection with such registration as the Company may reasonably
request and otherwise comply with the obligations set forth in this Agreement.
As soon as reasonably possible, but in no event less than ten days prior to the
first anticipated filing date of the appropriate registration statement, the
Company shall notify the Holder of the information the Company requires from the
Holder.

                  (ii)     Each Holder agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any registration statement hereunder, unless the Holder has notified
the Company in writing of the Holder's election to exclude all of such Holder's
Registrable Securities from any such registration statement.

                  (iii)    Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
1(e)(vi), the Holder will immediately discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until the Holder's receipt of the copies of a supplemented or amended

                                       12
<PAGE>

prospectus and, if so directed by the Company, the Holder shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Holder's possession of the
prospectus covering such Registrable Securities at the time of receipt of such
notice.

                  (iv)     Each Holder agrees not to make any sale or other
disposition of any of the Registrable Securities without complying with the
provisions of this Agreement and with all laws and regulations applicable to the
offering and sale of securities, including those relating to the prospectus
delivery requirements under the Securities Act.

         (g)      Registration Expenses.

         The Holder shall pay all underwriting discounts and commissions
incurred with respect to Registrable Securities included in registrations,
filings or qualifications pursuant to this Agreement. All expenses related or
incidental to the Company's performance of or compliance with this Agreement,
including all registration and filing fees, securities exchange listing fees,
fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company, and up to $50,000 in reasonable fees
and expenses (on an hourly basis at customary rates) of one counsel selected by
the holders of a majority of the Registrable Securities requested to be included
in a Demand Registration, and up to $10,000 in reasonable fees and expenses (on
an hourly basis at customary rates) of one counsel selected by the holders of a
majority of the Registrable Securities requested to be included in a Piggyback
Registration (all such expenses being herein called "Registration Expenses"),
shall be borne by the Company, subject to the provisions of the final sentence
of Sections 1(b)(i)(1), 1(b)(ii)(1) and 1(b)(iii)(1).

         (h)      Indemnification.

         In the event any Registrable Securities are included in a registration
statement under this Section 1:

                  (i)      To the extent permitted by law, the Company agrees to
indemnify each holder of Registrable Securities, such holder's officers and
directors, and each Person who controls such holder (within the meaning of the
Securities Act) (each a "Representative") against all losses, claims, damages,
liabilities (joint or several) and expenses to which they may become subject
caused by any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein, offering
circular or other document or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required or
allegedly required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any other federal or state law
(including securities laws) or any rule or regulation promulgated under the
Securities Act, the 1934 Act or any other federal or state law (including
securities laws); and the Company will pay to the Holder and any Representative
any legal or other expenses reasonably incurred by such Person in connection
with investigating or defending any such loss, claim, damage, liability, or

                                       13
<PAGE>

action; provided, however, that the indemnity agreement contained in this
Section 1(h)(i) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company, nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon either (x) a Violation that occurs in reliance upon and in
conformity with written information furnished in writing to the Company by such
Holder expressly for use in connection with such registration by Holder, or (y)
a breach by a Holder of its obligations under this Agreement or under the
Securities Act, the 1934 Act or any other federal or state law (including
securities laws) in connection with such registration statement.

                  (ii)     In connection with any registration statement in
which a Holder of Registrable Securities is participating, each such Holder
shall furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall indemnify the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities (joint or several) and expenses resulting from (i) any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto (each a "Securities Filing") or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such Holder expressly for use in the preparation of such
Securities Filing and provided that such Holder has not provided the Company
with updated written information correcting such untrue statement or omission in
a timely fashion such that the Company had a reasonable opportunity (but failed)
to make the appropriate change to the appropriate Securities Filing before any
such losses, claims, damages, liabilities or expenses were incurred, or (ii) a
breach by the Holder of its obligations under this Agreement or under the
Securities Act, the 1934 Act or any other federal or state law (including
securities laws); provided that the obligation to indemnify shall be individual,
not joint and several, for each Holder and shall be limited to the net amount of
proceeds received by such Holder from the sale of Registrable Securities
pursuant to such registration statement; and the Holder will pay any legal or
other expenses reasonably incurred by any Person intended to be indemnified
pursuant to this Section 1(h)(ii), in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 1(h)(ii) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder.

                  (iii)    Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section, deliver to the
indemnifying party a written notice in accordance with Section 7 of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense of
such action, with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
that may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if the indemnifying party's counsel advises the indemnifying
party that there may be legal defenses available to the indemnified party which
create a legal conflict of interest between the indemnified party and the
indemnifying party in such proceeding. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its

                                       14
<PAGE>

ability to defend such action, shall relieve such indemnifying party of its
liability to the indemnified party under this Section 1(h) only to the extent
that the indemnifying party has been injured by the delay.

                  (iv)

                           (1)      If the indemnification provided for in this
Section is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.

                           (2)      The Company and the holders of Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this clause (iv) were determined by pro rata allocation (even if the
holders and any underwriters were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph and Section
1(h)(v) below.

                           (3)      Notwithstanding the provisions of this
Section 1(h), no holder of Registrable Securities shall be required to
contribute pursuant to this clause (iv) any amount in excess of the amount by
which the net proceeds received by such Holder from the sale of Registrable
Securities exceeds the amount of any damages such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission.

                  (v)      The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.

         (i)      "Market Stand-Off" Agreement.

                  (i)      If requested by the Company and the managing
underwriter of any underwritten public offering of Common Stock, each Holder
agrees that, during the 180-day period following the effective date of a
registration statement of the Company filed under the Securities Act, it shall
not, to the extent requested by the Company and such managing underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any Common
Stock of the Company held by it, except for Common Stock included in such
registration.

                  (ii)     If requested only by the Company (but not by any
managing underwriter), each Holder agrees that, during the 90-day period
following the effective date of a registration

                                       15
<PAGE>

statement of the Company filed under the Securities Act, it shall not, to the
extent requested by the Company, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any Common Stock of the Company held by it, except
for Common Stock included in such registration.

                  (iii)    Each Holder further agrees to sign such documents as
may be requested by a managing underwriter or the Company to effect the
foregoing and agrees that the Company may impose stop-transfer instructions with
respect to the Registrable Securities (and the shares or securities of every
other Person subject to the foregoing restriction) until the end of such period.
The Company and the Holder acknowledge that each managing underwriter of a
public offering of Common Stock is an intended beneficiary of this Section 1(i).

         (j)      Rule 144, Rule 144A.

                  (i)      If the Company shall have completed an Initial Public
Offering, the Company will file the reports required to be filed by it under the
Securities Act and the Securities Exchange Act with respect to Common Stock and
the rules and regulations adopted by the SEC thereunder and will use its best
efforts to take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of any
holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.

                  (ii)     The Company represents and warrants that on the
Effective Date, the Registrable Securities are not, and are not of the same
class as any other securities, listed on a national securities exchange
registered under the 1934 Act or quoted in an automated inter-dealer quotation
system. For so long as any shares of Registrable Securities are restricted
securities within the meaning of Rule 144(a)(3) under the Securities Act, the
Company covenants and agrees that it shall during any period in which it is not
subject to Section 13 or 15(d) of the 1934 Act, make available to any holder of
Registrable Securities in connection with the sale of such holder's Registrable
Securities and any prospective purchaser of Registrable Securities from such
holder, in each case upon request, the information specified in, and meeting the
requirements of Rule 144A(d)(4) under the Securities Act.

         (k)      Suspension of Registration Rights.

         The right of any Holder to request registration of shares as provided
in this Agreement shall be suspended during any period of time that all of the
Registrable Securities held and entitled to be held (as a result of exercise of
the Warrant held) by such Holder may immediately be sold under (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the SEC.

         (l)      Transfer or Assignment of Registration Rights.

         The rights to cause the Company to register Registrable Securities
pursuant to this Section 1 may be transferred or assigned (but only with all
related obligations) by the Holder to

                                       16
<PAGE>

any permitted transferee or assignee of such securities or to any holder of
Notes, provided: (i) the Company is, at least fifteen (15) days prior to such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and (ii) such transferee signs an
assignment and joinder in the form of Exhibit A.

         (m)      Company Right to Purchase Seller Shares.

         Notwithstanding anything contained herein to the contrary, at any time
within ninety (90) days after receipt by the Company of a Mezzanine Holder
Demand Notice, a Required Holder Demand Notice, a Supplementary Demand Notice or
a Piggyback Notice (each a "Registration Notice"), the Company shall have a
right to purchase any Seller Shares that are the subject of the Registration
Notice (the "Sale Shares"), and may exercise such right by giving written notice
to the appropriate Holder(s), in accordance with Section 7 herein, of its
election to purchase all (but not less than all) of the Sale Shares. The
aggregate purchase price for such transaction shall be equal to the product of
the "Current Market Price" (as defined in Section 3(c) of the Seller Warrant
Agreement) as of the date of receipt by the Company of the appropriate
Registration Notice, and the number of Sale Shares that the Company elects to
purchase (the "Purchase Price"). Payment of the Purchase Price shall be made in
cash (in immediately available funds) within sixty (60) days after the date that
the Company sends its notice of election to purchase Sale Shares.

         Section 2.        Director Nomination Rights.

         (a)      Warrant Nomination Right. So long as at least twenty-five
percent (25%) of the Warrants outstanding on the Effective Date, in the
aggregate, remains outstanding, the Holders holding a majority of the
outstanding Warrants, in the aggregate, shall (i) be entitled to nominate one
individual for election to the board of directors of the Company, and (ii) once
such director is elected, have the exclusive right to (x) remove such director
(other than removal for cause or for failure to satisfy the required
qualifications set forth in the Directors Qualification Policy of the Company,
as amended from time to time by the board of directors of the Company in good
faith), and (y) nominate an individual to replace such director or to fill the
vacancy created by the departure of such director from the Company's board of
directors.

         (b)      Mezzanine Notes Nomination Right. So long as any principal
amount of the Mezzanine Notes remains outstanding and is held by Persons who are
not officers or employee directors of the Company, the Holders holding a
majority of the outstanding principal amount of the Mezzanine Notes shall (i) be
entitled to nominate one individual for election to the board of directors of
the Company, and (ii) once such director is elected, have the exclusive right to
(x) remove such director (other than removal for cause or for failure to satisfy
the required qualifications set forth in the Directors Qualification Policy of
the Company, as amended from time to time by the board of directors of the
Company in good faith), and (y) nominate an individual to replace such director
or to fill the vacancy created by the departure of such director from the
Company's board of directors.

         (c)      Seller Notes Nomination Right. So long as any principal amount
of the Seller Notes remains outstanding and is held by Persons who are not
officers or employee-directors of the Company, the holders holding a majority of
the outstanding principal amount of the Seller Notes shall (i) be entitled to
nominate one individual for election to the board of directors of the Company,
and (ii) once such director is elected, have the exclusive right to (x)

                                       17
<PAGE>

remove such director (other than removal for cause or for failure to satisfy the
required qualifications set forth in the Directors Qualification Policy of the
Company, as amended from time to time by the board of directors of the Company
in good faith), and (y) nominate an individual to replace such director or to
fill the vacancy created by the departure of such director from the Company's
board of directors.

         (d)      Expiration. Notwithstanding the foregoing, the director
nomination rights under this Section 2 shall expire on the consummation by the
Company of an Initial Public Offering.

         Section 3.        Election of Directors by Trustee.

         During the time periods indicated in Section 2 above, the trustee for
the Trust (the "Trustee") shall vote all of the shares of Common Stock
beneficially owned by the Trust in the favor of the nominee(s) for director
designated by such Holder or Holders, as appropriate; provided, that the Trustee
shall not have any obligation to elect any such nominee as a director who does
not satisfy the required qualifications set forth in the Director Qualification
Policy of the Company, as amended from time to time by the board of directors of
the Company in good faith, a current copy of which is attached hereto as Exhibit
B, or the extent that the Trustee in good faith determines that to do so could
reasonably be expected to result in a violation of its fiduciary duties.

         Section 4.        Stockholder Vote.

         (a)      At any time that a Holder Beneficially Owns any Seller Shares,
or, subject to Section 4(b) below, Mezzanine Shares, such Holder agrees that in
connection with any meeting of, or action by written consent of, stockholders
holding Common Stock for the purpose of approving or taking any action, the
Holder shall vote or provide a consent with respect to all such then-outstanding
Shares Beneficially Owned by the Holder in the same manner and proportion as the
Trustee shall vote the shares of Common Stock Beneficially Owned by it; provided
that, in no event shall such Holder be obligated to vote in favor of or consent
to any (i) action that would provide for rights or obligations of any holder of
Seller Shares or Mezzanine Share that are different in any way to the rights and
obligations of any other holder of Common Stock pursuant to the Certificate of
Incorporation of the Company, or (ii) merger of the Company with and into a
third party, pursuant to which the Holder would not receive the same per share
consideration for its shares of Common Stock as the Trust would receive for its
shares of Common Stock.

         (b)      The provisions of Section 4(a) shall not be binding (i) in the
case of Mezzanine Shares, upon any bona fide third party transferee for value
that is not an Affiliate of IITRI and that is not an officer, director or
employee of the Company, or (ii) with respect to any Seller Shares sold in any
Broadly Distributed Offering of shares of Common Stock.

         Section 5.        Irrevocable Proxy.

         (a)      In furtherance of the agreements contained in Section 4 of
this Agreement (subject to Section 4(b) thereof), the Holder hereby irrevocably
grants to, and appoints, the Trustee as the Holder's proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of the
Holder, to vote all Seller Shares and Mezzanine Shares (if any) Beneficially
Owned by the Holder that are outstanding from time to time, to grant or withhold
a

                                       18
<PAGE>

consent or approval in respect of such Seller Shares and Mezzanine Shares and
to execute and deliver a proxy to vote such Seller Shares, in each case in the
manner specified in Section 4. The Holder acknowledges and agrees that its proxy
hereby granted is coupled with an interest.

         (b)      The provisions of Section 5(a) shall not be binding (i) in the
case of Mezzanine Shares, upon any bona fide third party transferee for value
that is not an Affiliate of IITRI and that is not an officer, director or
employee of the Company, or (ii) with respect to any Seller Shares registered
and sold in any Broadly Distributed Offering of Common Stock.

         Section 6.        Standstill.

         Neither IITRI, any of its Affiliates, nor any holder of Seller Warrants
or Seller Shares (each, for the purposes of this Section 6, a "Restricted
Holder") shall, directly or indirectly, at any time:

         (a)      purchase or otherwise acquire, or propose or offer to purchase
or acquire, any shares of, or security of the Company convertible into, Common
Stock or any right, subscription, warrant, call, option or other agreement to
purchase or otherwise receive any shares of Common Stock, whether by tender
offer, market purchase, privately negotiated purchase, merger or otherwise (an
"Acquisition"), except (i) if immediately following such Acquisition such
Restricted Holder would Beneficially Own less than 5% of the outstanding Voting
Securities of the Company; (ii) in connection with a merger, consolidation, or
any transaction or series of transactions which results in the stockholder
holding a majority of the outstanding Voting Securities of the Company
immediately prior to such transaction(s) no longer holding such Voting
Securities of the Company immediately following such transaction(s) (a "Business
Combination"), in each case that has been approved of the Board of Directors of
the Company; (iii) to purchase Shares issuable pursuant to an Exercise Notice or
a Cashless Exercise Notice (in each case, as defined in the Warrants) given in
respect of the Warrants, or to purchase shares of Common Stock or any securities
convertible or exercisable into Common Stock, or other rights to acquire Common
Stock pursuant to Section 12 of the Warrants; or (iv) to acquire Common Stock
pursuant to any pro rata stock dividend, stock split, exchange, reclassification
or other distribution;

         (b)      make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" (as such terms are defined or used in Regulation
14A of the 1934 Act) to vote, make any public or private statement to any third
party as to how such Restricted Holder intends to vote, or seek to advise or
influence any person with respect to the voting of, any shares of Common Stock,
or become a "participant" in any "election contest" (as such terms are used or
defined in Regulation 14A of the 1934 Act) relating to the election of directors
of the Company;

         (c)      form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the 1934 Act) or otherwise act in concert with
any person other than the Trustee, for the purpose of acquiring, holding, voting
or disposing of any Shares;

         (d)      request the Company (or its directors, officers, employees or
agents), directly or indirectly, to amend or waive any of the provisions
contained in this Section 6 or take any action which would reasonably be
expected to require pursuant to law the Company to make a public announcement
regarding the possibility of a Business Combination;

                                       19
<PAGE>

         (e)      propose, publicly disclose any intention to disclose, vote for
or otherwise act to consummate any Business Combination unless such Business
Combination has been approved by, or is expressly conditioned upon the approval
of, a majority of the Board of Directors of the Company; or

         (f)      deposit any Shares in a voting trust, or subject any Shares to
a voting or similar agreement (other than this Agreement).

         (g)      The provisions of this Section 6 shall apply for so long as
the Trust Beneficially Owns, 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 its Shares to a voting or similar
agreement, or by having the right to cause or direct the vote of any Shares or
other securities of the Company held by any other Person, at least 20% of the
then outstanding Voting Securities of the Company; provided, that the provisions
of this Section 6 shall not apply with respect to any Shares acquired by any
Person not otherwise bound by this Agreement, pursuant to a Broadly Distributed
Offering.

         Section 7.        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 8.        Successors and Assigns.

         Except as otherwise provided herein, the terms and conditions of this
Agreement shall be binding upon and inure to the sole and exclusive benefit of
the Company and its successor, the Trust and its successors and IITRI and its
successors. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.

         Section 9.        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 10.       Waiver.

                                       20
<PAGE>

         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 11.       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 12.       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 13.       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 14.       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.

         Section 15.       No Inconsistent Agreements.  The Company shall not
hereafter enter into any agreement with respect to its securities which violates
the rights granted to the holders of Registrable Securities in this Agreement.

                        [Signatures follow on next page]

                                       21
<PAGE>

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

ALION SCIENCE AND TECHNOLOGY                 WARRANTHOLDERS:
CORPORATION
                                             IIT RESEARCH INSTITUTE

By:____________________________              By:_______________________________
Name: Bahman Atefi                           Name:
Title: Chief Executive Officer               Title:
Address:      1750 Tysons Blvd.              Address:
              Suite 1300
              McLean, VA  22102-4213
Fax:     703-714-6508 Fax:                   Fax:

ALION SCIENCE AND TECHNOLOGY CORPORATION
EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT TRUST
FOR THE PURPOSES OF SECTIONS 3 THROUGH 15
OF THIS RIGHTS AGREEMENT ONLY

By:_____________________________
Name:
Title:
Address:

Fax:

                                       22
<PAGE>

                                    EXHIBIT A

                           ASSIGNMENT AND JOINDER FORM

         FOR VALUE RECEIVED the undersigned Warrantholder hereby sells, assigns
and transfers unto the undersigned Assignee all of the rights and obligations of
the undersigned Holder under the within Rights Agreement and the
________________________ (the "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 Warrant Agreement and the Rights Agreement,
and (ii) as of the date written below, the Assignee shall join become a party to
the Warrant Agreement and the Rights Agreement as if it were named on the
signature page of the Warrant Agreement as a Holder and on the signature page of
the Rights Agreement as a Warrantholder and that it shall be bound, as a
Warrantholder and Holder, as the case may be, by all of the terms, conditions,
covenants and restrictions contained in the Warrant Agreement and the Rights
Agreement.

         The undersigned Warrantholder 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.

                                      WARRANTHOLDER

                                      By:_________________________
                                      Name:
                                      Its:

                                      ASSIGNEE

                                      By:_________________________
                                      Name:
                                      Its:

                                       23
<PAGE>

                                    EXHIBIT B

                          DIRECTOR QUALIFICATION POLICY

                                       24exv10w14

 

EXHIBIT 10.14

Employment Agreement

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

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

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

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

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

     1.     Appointment of Atefi as Chief Executive Officer. Upon the terms and
subject to the conditions contained herein, Alion hereby appoints and employs
Atefi to serve as the Chief Executive Officer of Alion, and Atefi hereby
accepts such appointment and employment. Atefi shall provide services
hereunder in accordance with the goals, policies, supervision and direction of
Alion’s Board of Directors (the “Board”).

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

 

 

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

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

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

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

     4.     Annual Base Salary. As of the Effective Date, during Atefi’s
employment hereunder, and for all services rendered and all covenants made
hereunder, Alion shall pay Atefi an annual base salary of $375,000 (“Annual
Base Salary”), payable in equal biweekly installments. Atefi’s Annual Base
Salary shall be reviewed annually by the Board and may be increased at the sole
discretion of the Board. Such annual salary review will be in conjunction with
a review by the Board or a committee of the Board of Atefi’s performance.

 

 

     5.     Incentive Compensation.

		
	 	        a. Annual Incentive Compensation. For each Alion fiscal year
during Atefi’s employment hereunder, Alion shall pay Atefi incentive
compensation as set forth on Exhibit A attached hereto and incorporated
herein by reference ( “Incentive Compensation”).
	 
	 	        Within thirty (30) days of the end of each fiscal year starting
with the fiscal year ending [September 30, 2003], Alion shall estimate
the Incentive Compensation due to Atefi for such fiscal year in
accordance with Exhibit A based on Alion’s annual internal financial
statements (the “Estimated Incentive Compensation”) and deliver notice
of such amount to Atefi. Within forty-five (45) days following the
date of such notice Alion shall pay the Estimated Incentive Compensation
to Atefi.
	 
	 	        Upon receipt of Alion’s audited financial statements for the
applicable fiscal year, the actual Incentive Compensation due to Atefi
in accordance with Exhibit A shall be calculated based on such audited
financial statements (the “Actual Incentive Compensation”). Within
thirty (30) days of receipt of the audited financial statements, Alion
shall compare the Estimated Incentive Compensation to the Actual
Incentive Compensation and provide notice of any difference to Atefi.
To the extent that the Actual Incentive Compensation exceeds the
Estimated Incentive Compensation, Alion shall pay any additional amounts
due and owing to Atefi within fifteen (15) days of delivery of such
notice. To the extent that the Estimated Incentive Compensation exceeds
the Actual Incentive Compensation, Atefi shall pay any such difference
to Alion within fifteen (15) days of delivery of such notice.

 

 

		
	 	        b. Special Incentive Arrangement. In connection with Alion’s
acquisition of IITRI assets as of the Effective Date, Atefi has been
awarded a special credit in Alion’s deferred compensation plan
(described below), representing a right to have his deferred
compensation account credited with the amounts that would be received if
the deferred compensation plan owned for his benefit $1 million face
amount of subordinated notes of the series issued to IITRI in connection
with the acquisition, including without limitation all payment-in-kind
thereon. If and to the extent that the series of subordinated notes
are paid off prior to the scheduled redemption date, Atefi’s deemed
investment in such subordinated notes shall be proportionately deemed
paid off and those amounts shall thereafter be adjusted for deemed
investment experience of other deemed investment options made available
under the terms of the deferred compensation plan, pending vesting and
payment, in accordance with the rules set forth below. Additionally, as part of that same award, Atefi shall directly be
granted warrants to acquire Alion stock, the terms of which are
consistent with the warrants attached to the issued series of the
referenced subordinated notes. Atefi’s right to receive payment in
respect of the deferred compensation plan credit and to exercise the
warrants shall be forfeitable upon termination of employment, unless he
shall remain employed continuously from the Effective Date to the
seventh anniversary of the Effective Date at which time he shall be 50%
vested in the deferred compensation and the warrants shall be 50%
exercisable; the remaining portion of the deferred compensation and
warrants shall become 100% vested and exercisable on the eighth
anniversary of the Effective Date, subject to his employment through
that date. Notwithstanding the foregoing, upon a termination of Atefi’s
employment by Alion without Just Cause or by Atefi with Good Reason (as 

 

 

		
	 	defined in Section 15.a. but, for this purpose only,
without regard to whether the occurrence of one of the events is during
the Protection Period), the deferred compensation plan credits and the
rights to exercise or put the warrants (in accordance with the
applicable Warrant Agreement) shall vest immediately on a pro rata basis
by month from the Effective Date through the end of the month in which
such termination is effective.
	 
	 	        c. Deferred Compensation Plan. Atefi will participate in Alion’s
deferred compensation plan (which will continue the deferral of the net
amount of deferral of Atefi’s accounts under IITRI’s deferred
compensation programs, determined at the time of Alion’s acquisition of
IITRI’s assets. Atefi has elected to have such net amount of deferral
(that is, the net deferral amount of Atefi’s accounts in the Executive
Deferred Compensation Agreement, attached as Exhibit B to this
Agreement), and in the Retention Agreement, attached as Exhibit C to
this Agreement, credited to the Alion deferred compensation plan and
such net amount, up to a maximum of $1 million, shall be deemed invested
in mezzanine notes of the type issued to IITRI in connection with the
acquisition and to be credited with the associated warrants. All
interest payable (12% interest) on the mezzanine notes shall be deemed
credited to Atefi’s account in the Alion deferred compensation plan and
be deemed invested in accordance with the provisions and investment
options of the plan. Atefi will be permitted, under rules provided by
Alion, to elect in advance to receive compensation currently in lieu of
an equal amount of such 12% interest credits. Notwithstanding the
foregoing,[ if Alion terminated Atefi’s employment with Just Cause or]
if Atefi terminates his employment with Alion without Good Reason (as
defined in Section 15.a. but, for purposes of this sentence only,
without

 

 

		
	 	regard to whether the occurrence of one of the events is during the
Protection Period), then no current payments of interest as compensation
shall be made available and all such interest shall instead be credited
to the Alion deferred compensation plan and paid to Atefi in accordance
with the terms of the Alion deferred compensation plan.
	 
	 	        Upon the later of the sixth anniversary of the Effective Date or
the date the mezzanine noteholders have the right to receive the
principal of their mezzanine notes, the Alion deferred compensation plan
shall allow Atefi to withdraw all (but not less than all) of the fair
value of such deemed investment in the mezzanine notes to be paid in the
same manner as the mezzanine holders. 
	 
	 	        d. Long Term Incentive Plan. It is presently expected that the
Board will establish a long term incentive plan subject to a maximum
limitation, which may, but is not required to, include special
provisions for accelerated vesting and early payment in the event of
termination of employment by Alion without Just Cause or by Executive
for Good Reason.

 

 

     6.     Retention Payment. The parties acknowledge that Atefi has fully vested
in his right to receive the payments under the Retention Agreement entered into
by IITRI and Atefi, attached as Exhibit B to this Agreement, and has deferred
receipt of the payments in accordance with the deferred compensation plan
described in Section 5(c) above.

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

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

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

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

     11.     Termination by Alion.

		
	 	        a. For Just Cause. Alion may terminate Atefi’s employment under
this Agreement at any time for “Just Cause.” If Alion terminates
Atefi’s employment for Just Cause, Atefi shall not be entitled to any
further payments under this Agreement, other

 

 

		
	 	than payment for any annual base salary which Atefi earned prior to
such termination but for which has not been paid, and shall specifically
be deemed to have forfeited any Incentive Compensation which might
otherwise be due to him. For purposes of this Agreement, “Just Cause”
means (i) Atefi’s material breach of this Agreement which is not cured
within thirty (30) days after receipt of notice thereof; (ii) Atefi’s
theft or embezzlement of any material property of Alion; (iii) Atefi’s
gross negligence or willful misconduct in performing his duties under
this Agreement; (iv) Atefi’s willful refusal to perform or substantial
neglect of any duties under this Agreement; (v) Atefi’s unauthorized use
of Alion’s trade secrets or Proprietary Information (as defined below);
(vi) Atefi’s commission of a felony which adversely affects Alion’s
business, reputation or business relations. If Atefi is terminated for
Just Cause, Atefi shall be entitled to no future compensation under
Sections 4, 5 or 6 above.
	 
	 	        b. Upon Atefi’s Death. Atefi’s employment under this Agreement
shall terminate automatically if Atefi dies. If Atefi’s employment is
terminated due to Atefi’s death, Alion shall pay to Atefi’s heirs or
personal representatives, as the case may be, six monthly payments, each
equal to 1/12 of Atefi’s then current annual base salary, beginning the
first calendar month after Atefi’s employment terminates.
	 
	 	        c. Upon Atefi’s Disability. Atefi’s employment under this
Agreement shall terminate automatically if Atefi becomes totally
disabled in accordance with the definition of total disability set forth
in Alion’s long term disability insurance plan. Alion reserves the
right to require Atefi to submit to a medical examination, either
physical or mental, by a fully-licensed physician selected by Alion, at
Alion’s sole expense, to determine whether Atefi is or has become so
disabled. If Atefi’s employment

 

 

		
	 	is terminated due to Atefi’s total disability, Alion shall pay to
Atefi six monthly payments, each equal to 1/12 of Atefi’s then current
annual base salary less any long-term disability insurance payments for
which Atefi is or becomes entitled to receive that month, beginning the
first calendar month after Atefi’s employment terminates.
	 
	 	        d. Without Cause. Alion may terminate Atefi’s employment hereunder
without cause, for any reason or no reason, by delivering to Atefi
written notice of the Board’s intent to terminate. If Alion terminates
Atefi’s employment without cause during the term of this Agreement,
Alion shall make a lump sum severance payment to Atefi equal to the
greater of (i) the amount of Atefi’s Annual Base Salary as of the
effective date of such termination over the unexpired term of this
Agreement up to a maximum of three years or (ii) an amount equal to
Atefi’s Annual Base Salary plus $100,000.

     12.     Termination by Atefi. This Agreement may be terminated by Atefi by
giving Alion thirty (30) days advance written notice. If Atefi exercises his
right under this Section to terminate his employment with Alion, he shall
forfeit any right to any further payments under this Agreement other than
payment for any annual base salary which Atefi earned prior to such termination
but for which has not been paid, and shall specifically be deemed to have
forfeited any Incentive Compensation which might otherwise be due to him and
any future payments under Sections 4, 5 or 6 above.

     13.     Special Change of Control Severance Benefits.

		
	 	        a. If eligibility for severance benefits from Alion’s successor or
assign (or any of its respective affiliates) is established pursuant to
Section 15 below (the “Severance Benefits”), the Severance Benefits
payable to Atefi shall, in lieu of the benefits otherwise be payable
under Section 11, consist of the following: (i) a lump sum severance
payment

 

 

		
	 	equal to the greater of (a) Atefi’s base pay as of the Termination
Date (as defined in Section 15 below) over the unexpired term of this
Agreement up to a maximum of three (3) years, or (b) an amount equal to
one (1) year base salary plus $100,000 minimum incentive compensation;
and (ii) continued eligibility to participate throughout the Severance
Period (as defined below) in Alion’s successor’s or assigns’ insured
welfare benefit plans and policies (including, without limitation,
health, dental, vision, disability and term life insurance benefits) at
the same level of employee cost and at the same level of coverage
provided to Atefi as of the Termination Date, it being understood that
Alion’s successor or assign has and reserves the right to amend, modify
or replace such plans or policies to provide substantially similar
insured coverage during the Severance Period. For purposes of Alion’s
successor or assigns welfare benefit plans and policies subject to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), Atefi’s “qualifying event” for COBRA purposes shall be the
Termination Date.
	 
	 	        b. Atefi shall enjoy continued entitlement to such other accrued or
earned and vested benefits provided under Alion’s successor or assigns’
plans, programs, policies and practices as of the Termination Date.

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

     15.     Eligibility for Severance Benefits. If Atefi terminates employment
(other than on account of circumstances described in Section 16 below) with any
successor or assign (or any of their respective affiliates) of Alion, other
than an entity which is owned in whole or in part by an employee stock
ownership plan, at any time during the twenty-four (24) month period beginning

 

 

 on the effective date of a Change in Control, as defined in Section 18 of
this Agreement (the “Protection Period”), he shall be entitled to the Severance
Benefits described in Sections 13, 14 and this 15, as follows: If during the
Protection Period, Atefi terminates his employment for Good Reason (as defined
below) by delivering to the successor or assign of Alion (or its respective
affiliate), as applicable, each no later than thirty (30) days after learning
of the occurrence of an event constituting Good Reason: (i) a Preliminary
Notice of Good Reason (as defined below); and (ii) a Notice of Termination (as
defined below); Atefi shall have the right, in his sole and reasonable
discretion, to commence Severance Benefits. Any termination of Atefi’s
employment that qualifies for Severance Benefits under Sections 13, 14 and 15
of this Agreement shall supersede and take precedence over the provisions of
Section 12. For purposes of this Agreement, the following terms shall have the
respective meanings:

		
	 	        a. “Good Reason” shall only result upon the occurrence, without
Atefi’s prior written consent, of one or more of the following events,
as determined by Atefi in good faith, during the Protection Period: (i)
Atefi’s authority or responsibility has materially diminished as
compared to Atefi’s authority and responsibility in effect immediately
prior to a Change in Control; (ii) Atefi has been assigned duties
inconsistent with his position, responsibility and status with Alion
immediately prior to the Protection Period; (iii) there has been an
adverse change in Atefi’s title or office as in effect immediately prior
to the Protection Period; (iv) Atefi’s base pay or incentive
compensation has been reduced; or (v) Atefi’s principal work location is
more than ten (10) miles away from the principal work location as
immediately prior to the Protection Period; provided, however, that
“Good Reason” shall not include (x) acts not taken in bad faith that are
cured by Alion’s successor or assign in all respects, including without
limitation restoration of all back pay

 

 

		
	 	and incentive compensation through the Termination Date, not later
than thirty (30) days from the date of receipt by the successor or
assign of Alion (or its respective affiliate), as applicable, of a
written notice from Atefi identifying in reasonable detail the act or
acts constituting “Good Reason” (a “Preliminary Notice of Good Reason”),
or (y) acts for which Atefi does not provide a Preliminary Notice of
Good Reason within thirty (30) days of learning of the occurrence of the
event constituting Good Reason.
	 
	 	        b. “Notice of Termination” shall mean a notice that indicates the
specific termination provision relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of Atefi’s employment under the provision so indicated.
	 
	 	        c. “Termination Date” shall mean the date specified in the Notice
of Termination for termination of Atefi’s employment under this
Agreement.

     16.     Ineligibility for Severance Benefits. Notwithstanding any other
provision under this Agreement, Atefi shall not be entitled to receive
Severance Benefits in the event that: (i) Alion’s successor or assign (or any
of its respective affiliates) terminates Atefi’s employment for Just Cause (as
defined in Section 11.a); (ii) Atefi dies (in which case the terms of Section
11.b shall apply); (iii) Atefi is determined to be totally and permanently
disabled (in which case the terms of Section 11.c shall apply); (iv) Alion’s
successor or assign (or any of its respective affiliates) terminates Atefi’s
employment without cause (in which case the terms of Section 11.d shall apply);
or (v) Atefi resigns other than for Good Reason (in which case Section 12
applies). In any such event, Atefi, in addition to any benefits payable in
accordance with this Agreement, shall be entitled only to his salary and
benefits accrued or earned and vested under other plans,

 

 

 programs, policies, practices and coverages of Alion’s successor or assign
(or any of its respective affiliates).

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

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

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

 

 

 files, financial information, computer files, hardware, software, records
and any other materials relating in any way to Alion.

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

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

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

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

 

 

		
	 	the business of any customer or prospective customer of Alion of
which Atefi is aware at the time of such termination.
	 
	 	        b. During the Restricted Period, Atefi will not directly or
indirectly: (i) engage in any services either individually or on behalf
of any person that compete with any material business of Alion or
Alion’s subsidiaries as conducted at the time Atefi ceases to be
employed by Alion (including, without limitation, businesses which Alion
or Alion’s subsidiaries had at such time specific plans to conduct in
the future and as to which plans Atefi is aware at the time Atefi ceases
to be employed by Alion) in the United States (a “Competitive
Business”); (ii) acquire a financial interest in, or otherwise become
actively involved with, any Competitive Business, directly or
indirectly, as an individual, partner, shareholder, officer, director,
principal, agent, trustee or consultant, except to the extent that such
financial interest is a component of compensation or benefits payable
pursuant to subsequent employment not otherwise prohibited by this
Agreement; or (iii) interfere with, or attempt to interfere with,
business relationships formed at or prior to the time Atefi ceases to be
employed by Alion between Alion or any of Alion’s subsidiaries and
customers, clients, suppliers of Alion or Alion’s subsidiaries, as to
which Atefi is aware at the time he ceases to be employed by Alion.
	 
	 	        c. Notwithstanding anything to the contrary in this Agreement,
Atefi may, directly or indirectly own, solely as an investment,
securities of any person engaged in the business of Alion or Alion’s
subsidiaries which are publicly traded on a national or regional stock
exchange or on the over-the-counter market, or for which such person is
required to file annual and quarterly reports with the U.S. Securities
and Exchange Commission in accordance with the Securities Exchange Act
of 1934, as amended, if

 

 

		
	 	Atefi (i) is not a controlling person of, or a member of a group
which controls, such person and (ii) does not, directly or indirectly,
own 5% or more of any class of securities of such person.
	 
	 	        d. During the Restricted Period, Atefi will not, whether on Atefi’s
own behalf or on behalf of or in conjunction with any person, company,
business entity or other organization whatsoever, directly or
indirectly: (i) solicit or encourage any employee of Alion or any of
Alion’s affiliates to leave the employment of Alion or such affiliate,
provided that such employee was employed (or had an offer of employment)
with Alion at the time Atefi ceases to be employed by Alion; (ii)
without Alion’s written permission, hire any such employee who was
employed by Alion or Alion’s affiliates as of the effective date of
Atefi’s termination of employment with Alion or who left employment with
Alion or Alion’s affiliates coincident with, or within three (3) months
prior to or after, the termination of Atefi’s employment with Alion; or
(iii) encourage to cease to work with Alion or Alion’s affiliates any
consultant then under contract with Alion or Alion’s affiliates.
	 
	 	        e. It is expressly understood and agreed that although Atefi and
Alion consider the restrictions contained in this Section 22(e) to be
reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory or any other
restriction contained in this letter agreement is an unenforceable
restriction against you, the provisions of this Agreement will not be
rendered void but will be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.

 

 

		
	 	        Alternatively, if any court of competent jurisdiction finds that
any restriction contained in this letter agreement is unenforceable, and
such restriction cannot be amended so as to make it enforceable, such
finding will not affect the enforceability of any of the other
restrictions contained herein.
	 
	 	        f. “Restricted Period” shall mean, following the date of Atefi’s
termination of Employment with Alion, the greater of (i) the unexpired
term of this Agreement, up to a maximum of three (3) years or (ii) one
year; provided, however, that if Atefi’s employment with Alion is
terminated by Alion for Just Cause, then the “Restricted Period” shall
mean the two (2) years following such termination.

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

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

 

 

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

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

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

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

	 	 	 
	a. If to Alion:	 	 
	 	 	
Alion Science and Technology Corporation
	 	 	
1750 Tysons Boulevard, Suite 1300
	 	 	
McLean, Virginia 22102
	 	 	
Attn: General Counsel
	b. If to Atefi:	 	 

 

 

	 	 	 
	 	 	
Bahman Atefi
	 	 	
8745 Old Dominion Drive
	 	 	
McLean, Virginia 22102

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

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

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

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

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

 

 

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

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

 

 

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

	 	 	 
	BAHMAN ATEFI	 	
ALION SCIENCE AND TECHNOLOGY CORPORATION
	 
	 

	 	
 

	 
	 	 	
Title:
	 	 	

 

 

Exhibit A

CEO Annual Incentive Schedule

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Fiscal Year
	 	 	

	EBITDA ($M)	 	2002	 	2003	 	2004	 	2005
	
	 	
	 	
	 	
	 	

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

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

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

		
	 	   a. For Fiscal Year 2002, EBITDA of the company below $15.0 million;
	 
	 	   b. For Fiscal Year 2003, EBITDA of the company below $17.0 million; and
	 
	 	   c. For Fiscal Year 2004, EBITDA of the company below $20.0 million.

 

 

Exhibit B

[See attached copy of Executive Deferred Compensation Agreement]

 

 

Exhibit C

[See attached copy of Retention Agreement]

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