Document:

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                                                                   EXHIBIT 10.31

                      ALION SUBORDINATED WARRANT AGREEMENT

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

Warrant No. __________

Cusip # __________

        THIS ALION SUBORDINATED WARRANT AGREEMENT ("Agreement" or "Warrant
Agreement") is made as of this ___ day of _________, 2002 (the "Effective
Date"), between Alion Science and Technology Corporation, a Delaware corporation
(the "Company"), Alion Science and Technology Corporation Employee Ownership,
Savings and Investment Trust (the "Trust") (for the purposes of Sections 6, 7,
15 and 17 through 26 of this Agreement only) and Stephen J. Trichka, an
individual ("Trichka").

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

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

        Section 1. Grant of Warrant.

        (a)     Grant. Upon the terms and subject to the conditions hereinafter
set forth, the Company hereby grants to Trichka, or his permitted registered
transferees (subject to the restrictions set forth herein), an irrevocable right
(the "Warrant") to purchase up to [_____________ (___)] shares of Common Stock
upon exercise of the Warrant, subject to adjustment pursuant to Section 1(b)
below (the "Shares"), at an exercise price of $10 per share (the "Exercise
Price"), and to exercise the other rights, powers and privileges hereinafter set
forth. The Exercise Price and the number of Shares shall be subject to
adjustment from time to time as provided in Section 3 hereof.

        (b)     Reduction in the Number of Shares Subject to the Warrant. Upon
the termination of Trichka's employment by the Company without cause (as
described in Section 17.C of the Employment Agreement) or by Trichka with Good
Reason (as defined in Section 17.A of the

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Employment Agreement), the number of shares subject to the Warrant shall be
reduced by an amount equal to the product of (i) the number of Shares (as
originally defined in Section 1(a) above, and (ii) the quotient of (x) the
number of whole months remaining from the date of termination of Trichka's
employment until the eighth anniversary of the Effective Date, divided by (y)
ninety-six.

        Section 2. Duration and Exercise of Warrant. Subject to Sections 2(b),
4, 5, 6 and 7 herein, the parties hereto agree as follows,

        (a)     Subject to the remaining provisions of this Agreement, the
Warrant may be exercised, in whole or in part, by Trichka and/or his permitted
transferees (Trichka and his permitted transferees are hereinafter referred to
individually or collectively as the "Holder") on any business day on or after
the Effective Date and through and including (i) the date that is thirty (30)
days following the date of the Company's delivery to the Holder of the appraisal
performed by an independent appraiser at the Company's request in connection
with the Alion Science and Technology Corporation Employee Ownership, Savings
and Investment Plan (the "ESOP") that sets forth the per share value of the
Common Stock as of September 30, 2010 (the "September 2010 Appraisal"), if the
ESOP is still in existence on September 30, 2010 and if none of clauses (a), (b)
and (c) of the definition of "Current Market Price" in Section 3(c)(ii) below
are applicable; provided that the September 2010 Appraisal shall not reflect any
discount for any lack of liquidity or absence of control, or (ii) the eighth
(8th) anniversary of the Effective Date, if the ESOP is not still in existence
on September 30, 2008 or if one of the clauses (a), (b) or (c) of the definition
of "Current Market Price" in Section 3(c)(ii) below is applicable (in each case,
the "Expiration Date"). At 5:00 P.M., Eastern Standard Time, on the Expiration
Date, the Warrant shall be and become void and of no value to the extent it has
not been exercised prior to such time.

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

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

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

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Where:

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

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

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

        B =     The then current Exercise Price.

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

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

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

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

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

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

        (j)     The Company will at all times prior to the Expiration Date
reserve and keep available such number of authorized shares of its Common Stock,
solely for the purpose of issue

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upon the exercise of the rights represented by this Warrant as may at any time
be issuable upon the exercise of this Warrant and such shares issuable upon the
exercise of this Warrant shall at no time have an aggregate par value which is
in excess of the aggregate Exercise Price.

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

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

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

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

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

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

        (c)     Fair Value and Current Market Price.

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                (i)     The "Fair Value", at any given time, shall mean the fair
value of the appropriate security (including, without limitation, any share of
Common Stock), property, assets, business or entity as determined in good faith
by the board of directors of the Company. Notwithstanding the foregoing, in the
case of any security, if clauses (a), (b) or (c) of the definition of Current
Market Price are applicable to such security, then the Fair Value of such
security shall be the Current Market Price of such security.

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

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

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

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organization, a partnership, a limited liability company, a joint venture, a
trust, an unincorporated organization or a government or any agency,
instrumentality or political subdivision thereof.

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

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

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

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

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

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

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

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

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

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

        (j)     INTENTIONALLY OMITTED.

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

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

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

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

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

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

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

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

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

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

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

                (v)     interests or rights designated as phantom stock issued
or granted by the Company to employees, consultants, officers or directors of
the Company or any of its Subsidiaries in accordance with a phantom stock plan
to be adopted by the Company's board of directors after the Effective Date,
except for such amount of phantom stock that, at the time of issuance or grant,
would cause the aggregate number of shares of phantom stock then outstanding
(excluding any shares of phantom stock that have (x) expired, terminated
unexercised, or become unexercisable, or (y) been forfeited or otherwise
terminated, surrendered or cancelled) to be in excess of 171,494 shares of
phantom stock.

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

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

        Section 4. Call Rights.

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

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

                (ii)    at any time within thirty (30) days following (a) the
date of the Company's delivery to the Holder of the appraisal performed by an
independent appraiser at the Company's request in connection with the ESOP that
sets forth the per share value of the Common Stock as of September 30, 2009 (the
"September 2009 Appraisal"), if the ESOP is still in existence on September 30,
2009 and none of clauses (a), (b) and (c) of the definition of "Current Market
Price" in Section 3(c)(ii) below are applicable, or (b) the seventh (7th)
anniversary of the Effective Date, if the conditions of clause (b) above are not
met (in either case, the "First Put/Call Date"), the Company shall have the
right to purchase up to fifty percent (50%) of the Warrant from the Holder, and
if the Company exercises such right, the Holder shall be required to sell up to
fifty percent (50%) of the Warrant to the Company at the Call Price determined
in accordance with Section 4(b) below; and

                (iii)   at any time within thirty (30) days prior to the
Expiration Date, the Company shall have the right to purchase up to one hundred
percent (100%) of the Warrant from the Holder, and if the Company exercises such
right, the Holder shall be required to sell the Warrant or any portion thereof,
as the case may be, to the Company at the Call Price determined in accordance
with Section 4(b) below.

        (b)     The "Call Price" is equal to the product of (i) the number of
shares of Common Stock underlying the Warrant or the portion thereof being
purchased pursuant to this Section 4, and (ii) the difference between the Call
Fair Value (as defined below) on the date of the Call Notice (as defined below)
and the current Exercise Price on the date of the Call Notice; provided

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that notwithstanding the foregoing, in no event shall the Call Price be less
than zero (0). So long as the ESOP is still in existence, the "Call Fair Value"
shall equal (i) the per share value of the Common Stock as set forth in the then
most recent appraisal performed by an independent appraiser at the Company's
request in connection with the ESOP, for the purposes of the Company's call
right under Section 4(a)(i), (ii) the per share value of the Common Stock as set
forth in the September 2009 Appraisal, for the purposes of the Company's call
right under Section 4(a)(ii), and (iii) the per share value of the Common Stock
as set forth in the September 2010 Appraisal, for the purposes of the Company's
call right under Section 4(a)(iii). As of such date that the ESOP is no longer
in existence, the "Call Fair Value" shall equal the Fair Value of the Common
Stock. Notwithstanding the foregoing, whether or not the ESOP is in existence,
if clauses (a), (b) or (c) of the definition of Current Market Price are
applicable to the Common Stock but no Qualified Public Offering (as defined
below) has occurred, then the Call Fair Value shall be the Current Market Price
of the Common Stock on the date of the Call Notice.

        (c)     Prior to exercising its call rights under this Section 4, the
Company must deliver written notice to the Holder (the "Call Notice"), in
accordance with Section 15, of its intent to purchase the Warrant or the portion
thereof being purchased, as the case may be. The Call Notice shall be deemed to
be given and served on the date that the Company sends the Call Notice to the
Holder (the "Call Election Date") and shall be irrevocable.

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

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

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

        (g)     The rights of the Company under this Section 4 shall expire on
the consummation by the Company of a Qualified Public Offering. For purposes of
this Agreement, "Qualified Public Offering" means the consummation of one or
more underwritten public offerings of the Company's Common Stock which results
in aggregate gross proceeds to the sellers in such

                                       10
<PAGE>

offerings of not less than U.S. $30,000,000 (excluding proceeds received in such
offerings from "affiliates" of the Company (other than any Holder that is an
affiliate of the Company), within the meaning of Rule 12b-2 of the Securities
and Exchange Commission under the Securities Act of 1934, as amended (the
"Exchange Act") or the ESOP) and pursuant to which the Company obtains a listing
for its shares on a United States national securities exchange, the Nasdaq
National Market System, or an automated quotation system of nationally
recognized standing.

        Section 5. Put Right.

        (a)     Subject to the terms and conditions of this Section 5 and
Section 6 below, the Holder shall have the following put rights with respect to
the Warrant:

                (i)     at any time within thirty (30) days following the First
Put/Call Date, the Holder shall have the right to sell up to fifty percent (50%)
of the Warrant to the Company, and if the Holder exercises such right, the
Company shall be required to purchase up to fifty percent (50%) of the Warrant
from the Holder for a purchase price (the "Put Price") determined in accordance
with Section 5(b) below; and

                (ii)    at any time within thirty (30) days prior to the
Expiration Date, the Holder shall have the right to sell up to one hundred
percent (100%) of the Warrant to the Company, and if the Holder exercises such
right, the Company shall be required to purchase the Warrant, or such portion
thereof, as the case may be, from the Holder for the Put Price.

        (b)     The "Put Price" is equal to the product of (i) the number of
shares of Common Stock underlying the Warrant or the portion thereof being
purchased pursuant to this Section 5, and (ii) the difference between the Put
Fair Value (as defined below) on the date of the Put Notice (as defined below)
and the Exercise Price on the date of the Put Notice; provided that
notwithstanding the foregoing, in no event shall the Put Price be less than zero
(0). So long as the ESOP is in existence, the "Put Fair Value" shall equal (i)
the per share value of the Common Stock as set forth in the September 2009
Appraisal, which such appraisal shall not reflect any discount for any lack of
liquidity or absence of control, for the purposes of the Holder's put right
under Section 5(a)(i), and (ii) the per share value of the Common Stock as set
forth in the September 2010 Appraisal, for the purposes of the Holder's put
right under Section 5(a)(ii). As of such date that the ESOP is no longer in
existence, the "Put Fair Value" shall equal the Fair Value of the Common Stock.
Notwithstanding the foregoing, whether or not the ESOP is in existence, if
clauses (a), (b) or (c) of the definition of Current Market Price are applicable
to the Common Stock but no Qualified Public Offering has occurred, then the Put
Fair Value shall be the Current Market Price of the Common Stock on the date of
the Put Notice.

        (c)     Prior to exercising its put right under Section 5(a)(i), the
Holder must deliver written notice to the Company (the "Put Notice"), in
accordance with Section 15, by July 30, 2009, of its intention to exercise its
right under Section 5(a)(i) to sell the Warrant, or any portion thereof, to the
Company, and similarly, prior to exercising its put right under Section
5(a)(ii), the Holder must deliver the Put Notice to the Company by June 30,
2010. The Put Notice shall be deemed to be given and served on the date that the
Company receives the Put Notice. The date that the Holder intends to exercise
its put right pursuant to either Section 5(a)(i) or Section 5(a)(ii) as
indicated in the Put Notice, shall in each case be hereinafter referred to as
the "Put Exercise Date".

                                       11
<PAGE>

        (d)     Payment of the Put Price shall be made in cash in immediately
available funds within ninety (90) days after the date of the Put Exercise Date
(the "Put Effective Date").

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

        (f)     If the Trust has sent a Drag-Along Notice to the Holder in
accordance with Section 6(a) herein in connection with a transaction that has
not been consummated or terminated prior to delivery by the Holder of a Put
Notice to the Company, then the Holder shall not be entitled to exercise its put
right pursuant to Section 5(a) with respect to any portion of the Warrant that
is the subject of such Drag-Along Notice, unless the transaction that is the
subject of the Drag-Along Notice is terminated or not consummated within sixty
(60) days of the date of the Drag-Along Notice; provided that notwithstanding
the foregoing the Holder shall be entitled to deliver a Put Notice to the
Company (if permitted under Section 5(a) prior to such termination or expiration
of such sixty (60) day period which Put Notice shall (if permitted under Section
5(a)) be given full effect upon the occurrence of such termination or
expiration, but no days that have passed from the date of delivery to the
Company of the Put Notice until the date of such termination or expiration, as
appropriate, shall be counted for purposes of the waiting periods under Sections
5(e) and 5(f).

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

        Section 6. Drag-Along Rights.

        (a)     Subject to the terms and conditions of this Section 6, and
notwithstanding Section 2(b) herein, if the Trust proposes to sell seventy-five
percent (75%) or more of the shares of Common Stock it then holds (the "Drag
Sale Shares") to a bona fide unaffiliated third party or parties on an arm's
length basis in a single transaction or a series of related transactions for
either (i) cash or unrestricted marketable securities that are traded on a U.S.
stock exchange, over the counter or on a bulletin board, or (ii) any
consideration so long as the third party or parties that have proposed to
purchase the Drag Sale Shares shall not become the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than fifty percent (50%) of the common stock of the ultimate
parent company of the Company (assuming the execution of all outstanding stock
options, stock warrants and stock rights, and conversion of all other securities
that are convertible to shares of common stock of such ultimate parent company),
or if there is no such ultimate parent company, so long as such third party or
parties shall not become the "beneficial owner", directly or indirectly of more
than fifty percent (50%) of the total outstanding Common Stock or Voting Stock
(as defined in Section 6(j) below) of the Company (assuming the execution of all
outstanding stock options, stock warrants and stock rights, and conversion of
all other securities of the Company that are convertible to shares of Common
Stock or Voting Stock), the Trust shall be entitled to provide to the Holder, at
least ten (10) days prior to the closing of such sale, written notice, in
accordance with Section 15 herein, of its good faith intention to sell the
shares of Common Stock, the name of the proposed transferee(s) (the "Proposed
Transferee"), the price and other material terms under which the sale

                                       12
<PAGE>

is proposed to be made and that it is requiring the Holder to exercise all or a
portion of the Warrant, if any portion remains outstanding and unexpired
hereunder, and to sell the Shares obtained through such exercise, if any (the
"Required Exercise Shares"), as well as a certain number of the Shares then held
by the Holder to the Proposed Transferee on the terms and conditions contained
therein ("Drag-Along Notice"), such that the total number of Shares to be sold
to the Proposed Transferee by the Holder shall be equal to:

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

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

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

               C =    the number of Drag Sale Shares; and

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

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

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

        (b)     Notwithstanding Section 2(b) herein and subject to Section 6(i),
the Holder shall, within five (5) days of receipt of a Drag-Along Notice,
deliver an Exercise Notice to the Company with respect to the Required Exercise
Shares provided that the Exercise Date is deemed to occur concurrently with the
consummation of the transaction which is the subject of the Drag-Along Notice.
If the Holder does not deliver the Exercise Notice within the required 5-day
period or delivers the Exercise Notice without the appropriate payment in cash
for the exercise of the Warrant, or portion thereof, as appropriate, upon
consummation of the transaction which is the subject of the Drag-Along Notice
the Holder will have been deemed to have delivered a Cashless Exercise Notice to
the Company in accordance with Section 2(c) above.

                                       13
<PAGE>

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

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

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

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

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

        (g)     If upon the Trust's delivery of a Drag-Along Notice to the
Holder there is a pending Exercise Date, Put Exercise Date and/or Put Effective
Date, then the corresponding Exercise Notice and the 90-day waiting period under
the last sentence of Section 2(b) or the corresponding Put Notice and the
applicable waiting periods under Sections 5(e) and 5(f)), as the case may be,
shall be tolled, as of the date of delivery of the Drag-Along Notice (the "Drag
Toll Date") and the Exercise Date, the Put Exercise Date and/or Put Effective
Date, as applicable, shall be suspended, and shall only be rescheduled in
accordance with Section 6(j)(i) below. The suspended Exercise Date, Put Exercise
Date and/or Put Effective Date, as applicable, and the corresponding Exercise
Notice or Put Notice, as appropriate, shall be cancelled if the transaction that
is the subject of the Drag-Along Notice is consummated within sixty (60) days of
the date of delivery of the Drag-Along Notice by the Trust to the Holder.

        (h)     If the Trust delivers a Drag-Along Notice to the Holder in
accordance with Section 6(a) following its delivery of a Tag-Along Notice to the
Holder in accordance with Section 7(a), then such Tag-Along Notice, and any
Participation Notice delivered by the Holder

                                       14
<PAGE>

in connection with the Tag-Along Notice, shall be deemed cancelled and of no
effect as of the date of delivery of the Drag-Along Notice to the Holder, and
the Holder shall not be entitled to exercise such tag-along right.

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

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

                (i)     notwithstanding anything contained herein to the
contrary, any Exercise Date, Put Exercise Date and/or Put Effective Date that
was/were suspended pursuant to Section 6(g) above shall each be deemed
reinstated, but no days that have passed from the Drag Toll Date until the date
of termination of the Drag Transaction or the date as of which the above noted
sixty-day period has elapsed, as appropriate, shall be counted for purposes of
the waiting periods under Sections 2(b), 5(e) and 5(f), and the corresponding
election to exercise or put the Warrant, or portion thereof, and the
corresponding Exercise Notice or Put Notice, shall be deemed reinstated and
effective subject to the rescheduled date of the Exercise Date, the Put Exercise
Date and/or Put Effective Date, as appropriate, to reflect the provisions of
this Section 6(j)(i); and

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

        (k)     "Voting Stock" shall mean shares of capital stock of a Person
having ordinary voting power for the election of a majority of the members of
the board of directors of such person, other than shares having such power only
by reason of the happening of a contingency (prior to the occurrence of such
contingency).

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

        Section 7. Tag-Along Rights.

        (a)     Subject to the terms and conditions of this Section 7 and
notwithstanding Section 2(b) herein, if the Trust proposes to sell twenty-five
percent (25%) or more of the Shares it then holds to a bona fide unaffiliated
third party or parties on an arm's length basis in a single transaction or a
series of related transactions, and the Trust did not elect its drag-along right
pursuant to Section 6(a) above, the Trust shall provide to the Holder, at least
thirty (30) days prior to the closing of such sale, written notice, in
accordance with Section 15 herein, of its

                                       15
<PAGE>

intention to sell the shares of Common Stock, the name of the Proposed
Transferee, the price and other material terms under which the sale is proposed
to be made and that the Holder is entitled to immediately exercise a certain
portion of the Warrant, if any portion thereof is still outstanding and
unexpired hereunder, and to sell the Shares obtained through such exercise, if
any (the "Optional Exercise Shares"), as well as a certain number of the Shares
then held by the Holder to the Proposed Transferee on the terms and conditions
contained therein ("Tag-Along Notice").

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

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

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

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

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

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

        Any of the Shares sold to the Proposed Transferee shall be sold by the
Holder at the same per share price and on the same terms and conditions as
specified in the Tag-Along Notice or any modification thereof, but in no event
less favorable than the terms and conditions of Shares sold by the Trust.
Together with its delivery of the Participation Notice to the Trust, the Holder
is required to deliver an Exercise Notice to the Company with respect to the
Optional Exercise Shares. The Participation Notice shall be deemed to be given
and served on the date that the Trust receives the Participation Notice.
Notwithstanding Section 2(b) herein, the portion of the Warrant to be exercised
pursuant to the terms of this Section 7 and the Exercise Notice, shall be deemed
exercised with respect to the Optional Exercise Shares concurrently with the
consummation of the transaction which is the subject of the Tag-Along Notice as
provided in Section 2(h). If the Holder delivers the Participation Notice but
fails to deliver the appropriate

                                       16
<PAGE>

payment in cash for the exercise of the Warrant, or portion thereof, as
appropriate, at the time of consummation of such transaction, then the Holder
will have been deemed to have delivered a Cashless Exercise Notice to the
Company in accordance with Section 2(c) above. The Company's call rights under
Section 4(a)(i) shall not apply to the Holder's exercise with respect to the
Optional Exercise Shares. The Holder's failure to respond within the 20-day
period noted above shall be deemed a decision by the Holder not to participate
in such sale.

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

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

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

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

        (g)     If upon the Trust's delivery of a Tag-Along Notice to the Holder
there is a pending Exercise Date, Put Exercise Date and/or Put Effective Date,
then the corresponding Exercise Notice and the 90-day waiting period under the
last sentence of Section 2(b) or the corresponding Put Notice and the applicable
waiting periods under Sections 5(e) and 5(f), as the case may be, shall be
tolled, as of the date of delivery of the Tag-Along Notice (the "Tag Toll Date")
and the Exercise Date, the Put Exercise Date and/or Put Effective Date, as
applicable, shall be suspended, and shall only be rescheduled in accordance with
Section 7(i)(i) below. The suspended Exercise Date, Put Exercise Date and/or Put
Effective Date, as applicable, and the corresponding Exercise Notice or Put
Notice, as appropriate, shall be cancelled if the transaction that is the
subject of the Tag-Along Notice is consummated within sixty (60) days of the
date of delivery of the Tag-Along Notice by the Trust to the Holder.

        (h)     Notwithstanding Section 7(b) above and subject to the
limitations of Section 2(a) above, after delivering a Participation Notice to
the Trust, the Holder shall be entitled to deliver

                                       17
<PAGE>

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

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

                (i)     notwithstanding anything contained herein to the
contrary, any Exercise Date, Put Exercise Date and/or Put Effective Date that
was/were suspended pursuant to Section 7(g) above shall each be deemed
reinstated, but no days that have passed from the Tag Toll Date until the date
of termination of the Tag Transaction or the date as of which the above noted
sixty-day period has elapsed, as appropriate, shall be counted for purposes of
the waiting periods under Sections 2(b), 5(e) and 5(f), and the corresponding
election to exercise or put the Warrant or portion thereof, and the
corresponding Exercise Notice or Put Notice, shall be deemed reinstated and
effective subject to the rescheduled date of the Exercise Date, the Put Exercise
Date and/or Put Effective Date, as appropriate, to reflect the provisions of
this Section 7(i)(i); and

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

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

        Section 8. Rights as Stock.

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

        Section 9. Registration of Warrants and Shares.

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

                                       18
<PAGE>

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

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

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

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

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

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

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

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

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

                (iii)   as long as the Company maintains its status as an
S-corporation within the meaning of Section 1361, et seq., of the Internal
Revenue Code of 1986, as amended, any person or entity whose ownership of the
Warrant or any portion thereof would cause the Company to lose such status.

        (c)     INTENTIONALLY OMITTED.

                                       19
<PAGE>

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

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

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

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

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

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

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

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

                (iii)   as long as the Company maintains its status as an
S-corporation within the meaning of Section 1361, et seq., of the Internal
Revenue Code of 1986, as amended, any person or entity whose ownership of Common
Stock would cause the Company to lose such status.

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

        (g)     "Financial Institution" shall mean any insurance company, bank,
trust company, pension fund (whether private, public or governmental), mutual
fund or any other entity whose primary business is owning and investing in the
securities of other unaffiliated entities, regardless of whether or not such
Financial Institution has an investment in a person or entity that generated at
least 20% of its total revenue from government contracts; provided that not

                                       20
<PAGE>

more than 50% of the Voting Stock of such Financial Institution is owned or
controlled, directly or indirectly, by a person or entity that generated at
least 20% of its total revenue from government contracts.

        Section 11. Company Right of First Refusal.

        (a)     Before the Warrant, any portion thereof or any Shares may be
sold or otherwise transferred by the Holder, the Company shall have a right of
first refusal to purchase the Warrant, such portion thereof and/or any such
Shares, as the case may be, on the terms and conditions set forth in this
Section 11.

        (b)     If the Holder proposes to sell or otherwise transfer the
Warrant, any portion thereof or any number of the Shares it holds at such time
to any third party other than one that it controls, is controlled by, or is
under common control with (each an "Affiliate"), the Holder shall deliver to the
Company a written notice ("Sale Notice"), in accordance with Section 15, stating
(i) the Holder's bona fide intention to sell or otherwise transfer the Warrant,
any portion thereof or a certain number of Shares (collectively, the "Transfer
Interests"), as the case may be, (ii) the name of the proposed purchaser or
other transferee (the "Proposed Buyer"), and (iii) the bona fide cash price or
other consideration for which the Holder proposes to transfer the Transfer
Interests (the "Offered Price"), and the Holder shall offer to sell the Transfer
Interests to the Company at the Offered Price.

        (c)     The Company may, at any time within sixty (60) days after
receipt by the Company of a Sale Notice, elect to purchase the Transfer
Interests by giving written notice to the Holder, in accordance with Section 15,
at a purchase price equal to the Offered Price (the "Purchase Price"). If the
Offered Price includes consideration other than cash, the cash equivalent value
of the non-cash consideration shall be determined by the board of directors of
the Company in good faith.

        (d)     Payment of the Purchase Price shall be made in cash (by check)
within sixty (60) days after the date of the Company's election to purchase the
Transfer Interests.

        (e)     If the Transfer Interests are not purchased by the Company as
provided herein, then the Holder may sell or otherwise transfer the Transfer
Interests to the Proposed Buyer at the Offered Price or at a higher price,
provided that such sale or other transfer (i) is consummated within six (6)
months after the date of the Sale Notice, and (ii) is in accordance with all the
terms of this Agreement and all other agreements between the Holder and the
Company. If the Transfer Interests are not transferred to the Proposed Buyer
within such six-month period in accordance with the preceding sentence, a new
Sale Notice shall be given to the Company, and the Company shall again be
offered a right of first refusal under this Section 11 before the Warrant, any
portion thereof or any Shares, as the case may be, may be sold or otherwise
transferred.

        Section 12. INTENTIONALLY OMITTED.

                                       21
<PAGE>

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

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

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

                (ii)    Disclosure of Information. The Holder represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the sale of the Securities and the
business, properties, prospects and financial condition of the Company.

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

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

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

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

        (b)     Permitted S-corp Shareholder. In order to induce the Company to
accept this Agreement, the Holder covenants and agrees that it will not
intentionally or knowingly take any action to change its status from a Permitted
S-corp Shareholder (as defined above), which change

                                       22
<PAGE>

of status results in the Company losing its status as an S-corporation within
the meaning of Section 1361, et seq., of the Code.

        Section 14. Legends.

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

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

        (b)     Any legend required by applicable state securities laws.

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

        Section 15. Notices.

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

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

        (a)     As long as none of the clauses (a), (b) or (c) of the definition
of Current Market Price in Section 3(c)(ii) is applicable to the Common Stock,
all SARs issued by the Company will be issued with an exercise price no less
than the per share value of the Common Stock as set forth in the then most
recent appraisal performed by an independent appraiser at the Company's request
in connection with the ESOP. If one of the clauses (a), (b) or (c) of the
definition of Current Market Price in Section 3(c)(ii) is applicable to the
Common Stock, all SARs issued by the Company will be issued with an exercise
price no less than the then current Current Market Price. All SARs issued by the
Company will vest in accordance with the terms of the Company's

                                       23
<PAGE>

Stock Appreciation Rights Plan, as in effect at the time of issuance. The
Company will not issue SARs that cause the aggregate number of outstanding SARs
(excluding any SARs that have been exercised, that have expired, terminated
unexercised, or become unexercisable or that have been forfeited or otherwise
terminated, surrendered or cancelled), at the time of issuance, to be in excess
of:

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

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

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

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

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

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

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

                                       24
<PAGE>

        Section 17. Rights and Obligations of the Trust.

        Notwithstanding anything contained herein to the contrary, the parties
hereto acknowledge and agree that the Trust shall only be a party to this
Agreement with respect to the terms and conditions contained in Sections 6, 7,
15, and 17 through 26, and shall not be liable for any obligations of the
Company hereunder.

        Section 18. Amendment.

        This Agreement may be amended by the mutual written agreement of the
Company and the Holder, except that Section 1, 6, 7, 15 and 17 through 26 of
this Agreement may only be amended by the mutual written consent of the Company,
the Trust and all holders of an outstanding portion of the Warrant.

        Section 19. Termination.

        This Warrant Agreement shall be terminated immediately upon the
termination of Trichka's employment by the Company for cause (as described in
Section 17.B of the Employment Agreement) or by Trichka without Good Reason (as
defined in Section 17.A of the Employment Agreement).

        Section 20. Binding Effect.

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

        Section 21. 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 22. Waiver.

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

        Section 23. 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 24. 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 25. Headings.

                                       25
<PAGE>

        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 26. Counterparts.

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

                        [SIGNATURES FOLLOW ON NEXT PAGE]

                                       26
<PAGE>

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

ALION SCIENCE AND TECHNOLOGY CORPORATION

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

ALION SCIENCE AND TECHNOLOGY CORPORATION EMPLOYEE OWNERSHIP, SAVINGS AND
INVESTMENT TRUST, FOR THE PURPOSES OF SECTIONS 6, 7, 15 AND 17 THROUGH 26 OF
THIS SELLER WARRANT AGREEMENT ONLY

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

Fax:

                                       27
<PAGE>

                                    EXHIBIT A

FORM OF EXERCISE NOTICE

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

To Alion Science and Technology Corporation

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

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

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

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

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

PLEASE INSERT TAX IDENTIFICATION NUMBER

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

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

(Print Name)

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

(Print Address)

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

                                       28
<PAGE>

                                    EXHIBIT B

                           ASSIGNMENT AND JOINDER FORM

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

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

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

Dated:
                                                  HOLDER

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

                                                  ASSIGNEE

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

                                       29exv10w32

 

EXHIBIT 10.32

Alion Science and Technology Corporation

Executive Deferred Compensation Plan

 

 

Table of Contents

(To be completed)

-i-

 

 

ALION

DEFERRED COMPENSATION PLAN

Purpose

     The purpose of this Plan is to provide specified benefits to a select
group of management and highly compensated Employees who contribute materially
to the continued growth, development and future business success of Alion
Science and Technology Corporation, a Delaware corporation. This Plan shall be
unfunded for tax purposes and for purposes of Title I of ERISA.

ARTICLE 1

Definitions

     For purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:

	 	 	 
	1.1	 	
“Account Balance” shall mean, with respect to a Participant, a credit on
the records of the Employer equal to the Deferral Account balance. The
Account Balance shall be a bookkeeping entry only and shall be utilized
solely as a device for the measurement and determination of the amounts to
be paid to a Participant, or his or her designated Beneficiary, pursuant
to this Plan.
	 	 	 
	1.2	 	
“Affiliate” shall mean (i) a corporation that is a member of a controlled
group of corporations (as determined pursuant to Section 414(b) of the
Code) which includes the Company and (ii) a trade or business (whether or
not incorporated) which is under common control (as determined pursuant to
Section 414(c) of the Code) of the Company, (iii) any organization
(whether or not incorporated) that is a member of an affiliated service
group (as determined pursuant to Section 414(m) of the Code) that includes
an Employer, a corporation described in clause (i) of this section or a
trade or business described in clause (ii) of this section, or (iv) any
other entity that is required to be aggregated with the Employer pursuant
to regulations promulgated under Section 414(o) of the Code.
	 	 	 
	1.3	 	
“Annual Base Salary” shall mean the annual cash compensation relating to
services performed during any Plan Year, whether or not paid in such Plan
Year or included on the Federal Income Tax Form W-2 for such Plan Year,
excluding bonuses, SAR payments, Phantom Stock Payments, income related to
the exercise of stock options, overtime, fringe benefits, relocation
expenses, incentive payments, non-monetary awards, directors fees and
other fees, automobile and other allowances paid to a Participant for
employment services rendered (whether or not such allowances are included
in the Employee’s gross income). Annual Base Salary shall be calculated
before reduction for compensation voluntarily deferred or contributed by
the Participant pursuant to all qualified or non-qualified plans of

-2-

 

	 	 	 
	 	 	
any Employer and shall be calculated to include amounts not otherwise
included in the Participant’s gross income under Code Sections 125,
402(e)(3), 402(h), or 403(b) pursuant to plans established by the
Employer; provided, however, that all such amounts will be included in
compensation only to the extent that, had there been no such plan, the
amount would have been payable in cash to the Employee.
	 	 	 
	1.4	 	
“Annual Bonus” shall mean any compensation, in addition to Annual Base
Salary relating to services performed during any Plan Year, whether or not
paid in such Plan Year or included on the Federal Income Tax Form W-2,
payable to a Participant as an Employee under the Employer’s bonus plans
that are based on performance goals.
	 	 	 
	1.5	 	
“Annual Deferral Amount” shall mean that portion of a Participant’s
Annual Base Salary, Annual Bonus, SAR Payment and Phantom Stock Payment
that a Participant elects to have, and is deferred, in accordance with
Article 3, for any one Plan Year. In the event of a Participant’s
retirement, Disability (if deferrals cease in accordance with Section
6.1), death or a Termination of Employment prior to the end of a Plan
Year, such year’s Annual Deferral Amount shall be the actual amount
withheld prior to such event.
	 	 	 
	1.6	 	
“Beneficiary” shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 8, that are entitled to
receive benefits under this Plan upon the death of a Participant.
	 	 	 
	1.7	 	
“Beneficiary Designation Form” shall mean the form established from time
to time by the Committee that a Participant completes, signs and returns
to the Committee to designate one or more Beneficiaries.
	 	 	 
	1.8	 	
“Board” shall mean the board of directors of the Company.
	 	 	 
	1.9	 	
“Change in Control” shall mean:

	 	(a)	 	A sale or transfer of all or substantially all of the
assets of the Company on a consolidated basis in any
transaction or series of related transactions;
	 
	 	(b)	 	Any merger, consolidation or reorganization to which
the Company is a party, except for a merger, consolidation or
reorganization in which the Company is the surviving
corporation and, after giving effect to such merger,
consolidation or reorganization, the holders of the Company’s
outstanding equity (on a fully diluted basis) immediately
prior to the merger, consolidation or reorganization will own
in the aggregate immediately following the merger,
consolidation or reorganization the Company’s outstanding
equity (on a fully diluted basis) either (i) having the
ordinary voting power to elect a majority of the members of
the Company’s board of directors to be elected by the holders
of Common Stock and any other class which votes together with
the Common Stock as a single class or (ii) representing at
least 50% of the equity value of the Company as reasonably
determined by the Board;

-3-

 

	 	(c)	 	The election by shareholders of members of the Board
20% or more of whom are persons not nominated in the most
recent proxy statement of the Company; or
	 
	 	(d)	 	A liquidation of dissolution of the Company.

	 	 	 
	1.10	 	
“Claimant” shall have the meaning set forth in Section 13.1.
	 	 	 
	1.11	 	
“Code” shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
	 	 	 
	1.12	 	
“Committee” shall mean the committee described in Article 11.
	 	 	 
	1.13	 	
“Company” shall mean Alion, Inc., a Delaware corporation and any
successor to such corporation that adopts the Plan.
	 	 	 
	1.14	 	
“Deduction Limitation” shall mean the following described
limitation on a benefit that may otherwise be distributable
pursuant to the provisions of this Plan. Except as otherwise
provided, this limitation shall be applied to all distributions
that are “subject to the Deduction Limitation” under this Plan.
If the Company determines in good faith prior to a Change in
Control that there is a reasonable likelihood that any
compensation paid to a Participant for a taxable year of the
Company would not be deductible by the Company solely by reason
of the limitation under Code Section 162(m), then to the extent
deemed necessary by the Company to ensure that the entire amount
of any distribution to the Participant pursuant to this Plan
prior to the Change in Control is deductible, the Company may
defer all or any portion of a distribution under this Plan. Any
amounts deferred pursuant to this limitation shall continue to be
credited/debited with additional amounts in accordance with
Section 3.5 below. The amounts so deferred and amounts
credited/debited thereon shall be distributed to the Participant
or his or her Beneficiary (in the event of the Participant’s
death) at the earliest possible date, as determined by the
Company in good faith, on which the deductibility of compensation
paid or payable to the Participant for the taxable year of the
Company during which the distribution is made will not be limited
by Section 162(m), or if earlier, the effective date of a Change
in Control. Notwithstanding anything to the contrary in this
Plan, the Deduction Limitation shall not apply to any
distributions made after a Change in Control.
	 	 	 
	1.15	 	
“Deferral Account” shall mean (i) the sum of all of a
Participant’s Subaccounts, plus (ii) amounts credited in
accordance with all the applicable crediting provisions of this
Plan that relate to the Participant’s Deferral Account, less
(iii) all distributions made to the Participant or his or her
Beneficiary pursuant to this Plan that relate to his or her
Deferral Account. The Deferral Account, and each other specified
account balance, shall be a bookkeeping entry only and shall be
utilized solely as a device for the measurement and determination
of the amounts to be paid to a Participant, or his or her
designated Beneficiary, pursuant to this Plan.

-4-

 

	 	 	 
	1.16	 	
“Disability” shall mean a period of disability during which a
Participant qualifies for permanent disability benefits under the
Employer’s long-term disability plan, or, if a Participant does
not participate in such a plan, a period of disability during
which the Participant would have qualified for permanent
disability benefits under such a plan had the Participant been a
participant in such a plan, as determined in the sole discretion
of the Committee. If the Employer does not sponsor such a plan,
or discontinues sponsoring such a plan, Disability shall be
determined by the Committee in its sole discretion.
	 	 	 
	1.17	 	
“Disability Benefit” shall mean the benefit set forth in Article
7.
	 	 	 
	1.18	 	
“Elected Distribution Date” shall mean the beginning date for
distribution with respect to amounts credited to the
Participant’s Subaccount pursuant to Section 4.1.
	 	 	 
	1.19	 	
“Election Form” shall mean the form established by the Committee
that a Participant completes, signs and returns to the Committee
to make his or her deferral election under the Plan.
	 	 	 
	1.20	 	
“Employee” shall mean an individual whose relationship with an
Employer is, under common law, that of an employee.
	 	 	 
	1.21	 	
“Employer” shall mean the Company and any Affiliate that, with
the consent of the Company, elects to participate in the Plan and
any successor entity that adopts the Plan pursuant to Section
15.11. If any such entity withdraws, is excluded from
participation in the Plan or terminates its participation in the
Plan, such entity shall thereupon cease to be an Employer.
	 	 	 
	1.22	 	
“ERISA” shall mean the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
	 	 	 
	1.23	 	
“Hardship” shall mean an unanticipated emergency that is caused
by an event beyond the control of the Participant that would
result in severe financial hardship to the Participant resulting
from (i) a sudden and unexpected illness or accident of the
Participant or a dependent of the Participant, (ii) a loss of the
Participant’s property due to casualty, or (iii) such other
extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Participant, all as
determined in the sole discretion of the Committee. The Committee
shall determine whether the circumstances presented by the
Participant constitute an unanticipated emergency. Such
circumstances and the Committee’s determination will depend on
the facts of each case, but, in any case, payment may not be made
to the extent that such hardship is or may be relieved: (i)
through reimbursement or compensation by insurance or otherwise,
(ii) by liquidation of the Participant’s assets, to the extent
liquidation of such assets would not itself cause severe
financial hardship, or (iii) by cessation of his elective
deferrals under this Plan for the remainder of the Plan Year.

-5-

 

	 	 	 
	1.24	 	
“Participant” shall mean (i) any Employee who is selected by the
Committee to participate in the Plan, (ii) who elects to
participate in the Plan, (iii) who signs an Election Form, (iv)
whose signed Election Form is accepted by the Committee, (v) who
commences participation in the Plan, and (vi) whose participation
has not terminated.
	 	 	 
	1.25	 	
“Phantom Stock Award” shall mean an award granted to an Employee
pursuant to the terms of the Alion Phantom Stock Plan.
	 	 	 
	1.26	 	
“Phantom Stock Payment” shall mean an amount paid to an Employee
upon vesting of a Phantom Stock Award.
	 	 	 
	1.27	 	
“Plan” shall mean the Alion Deferred Compensation Plan, which
shall be evidenced by this instrument, as may be amended from
time to time.
	 	 	 
	1.28	 	
“Plan Year” shall mean the twelve-month period commencing each
October 1 and ending on September 30.
	 	 	 
	1.29	 	
“SAR” shall mean an award granted to an Employee pursuant to the
terms of the Alion Stock Appreciation Rights Plan.
	 	 	 
	1.30	 	
“SAR Payment” shall mean an amount paid to an Employee upon his
exercise of a SAR.
	 	 	 
	1.31	 	
“Subaccount” shall mean the separate subaccounts under the
Deferral Account that are established and maintained for each
Participant. Such subaccounts shall reflect (i) the amount
deferred pursuant to the Participant’s Election Form for each
deferral election; (ii) amounts credited in accordance with all
the applicable crediting provisions of this Plan that relate to
the Subaccount, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that
relate to the Subaccount. In the event that two or more
Subaccounts reflect amounts deferred that are to be paid at the
same time, all such Subaccounts shall be aggregated into a single
Subaccount.
	 	 	 
	1.32	 	
“Termination of Employment” shall mean the severing of employment
with all Employers, voluntarily or involuntarily, for any reason
other than Disability or an authorized leave of absence.
	 	 	 
	1.33	 	
“Termination Benefit” shall mean an amount equal to the
Participant’s Account Balance if a Participant experiences a
Termination of Employment.
	 	 	 
	1.34	 	
“Trust” shall mean one or more trusts established, effective as
of
                , 2002 between the Company and the trustee named therein,
as amended from time to time.

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ARTICLE 2

Selection, Enrollment and Eligibility

	 	 	 
	2.1	 	
Selection by Committee. Participation in the Plan shall be
limited to Employees providing services to the Employer at the
level of Vice President (Corporate or Operation Management) or
above and any other individuals as determined by the Committee,
in its sole discretion, from a select group of management and
highly compensated Employees of the Employer. From that group,
the Committee shall select, in its sole discretion, Employees to
participate in the Plan.
	 	 	 
	2.2	 	
Enrollment Requirements. As a condition to participation, each
selected Employee shall complete, execute and return to the
Committee an Election Form. The Committee shall establish from
time to time such enrollment requirements as it determines in its
sole discretion are necessary.
	 	 	 
	2.3	 	
Eligibility; Commencement of Participation. Provided an Employee
selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the
Committee, including returning all required documents to the
Committee within the specified time period, that Employee shall
commence participation in the Plan on the first day of the month
following the month in which the Employee completes all
enrollment requirements.
	 	 	 
	2.4	 	
Termination of Participation and/or Deferrals. If the Committee
determines in good faith that a Participant no longer qualifies
as a member of a select group of management or highly compensated
employees, as membership in such group is determined in
accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, the Committee shall have the right, in its sole
discretion, to (i) terminate any deferral election the
Participant has made for the remainder of the Plan Year in which
the Participant’s membership status changes, (ii) prevent the
Participant from making future deferral elections and/or (iii)
immediately distribute the Participant’s then Account Balance as
a Termination Benefit and terminate the Participant’s
participation in the Plan.

-7-

 

ARTICLE 3

Deferral Elections/Crediting/Taxes

	3.1	 	Deferrals.

	 	(a)	 	Annual Base Salary, Annual Bonus, SAR Payments, Phantom Stock
Payments. For each Plan Year, a Participant may elect to defer, as
his or her Annual Deferral Amount, Annual Base Salary, Annual Bonus,
SAR Payments and/or Phantom Stock Payments in the following
percentages.

	 	 	 
	Deferral	 	Minimum Amount
	
	 	

	Annual Base Salary	 	
0% to 50%, in 1% increments
	Annual Bonus	 	
0% to 100%, in 1% increments
	SAR Payments	 	
0% to 100%, in 1% increments
	Phantom Stock Payments	 	
0% to 100%, in 1% increments

	 	(b)	 	If no election is made, the amount deferred shall be zero.

	3.2	 	Election to Defer; Effect of Election Form

	 	(a)	 	First Plan Year. In connection with a Participant’s
commencement of participation in the Plan, the Participant shall
make an irrevocable deferral election for the Plan Year in which the
Participant commences participation in the Plan, along with such
other elections as the Committee deems necessary or desirable under
the Plan. For these elections to be valid, the Election Form must
be completed and signed by the Participant, timely delivered to the
Committee (in accordance with Section 2.2) and accepted by the
Committee.
	 
	 	(b)	 	Annual Election Forms. A Participant’s Election Form shall
be effective only for the Plan Year that will be listed on the
Election Form. The Committee shall maintain an open enrollment
period preceding each Plan Year in order to allow Participants to
submit Election Forms.
	 
	 	(c)	 	Timing of Election to Defer Annual Base Salary and Annual
Bonus. To be effective for any Plan Year, an Election Form to defer
a percentage of Annual Base Salary and/or a percentage of the Annual
Bonus must be received by the Committee prior to October 1 of the
Plan Year to which these payments relate. However, if an
individual first becomes eligible to participate in the Plan on or
after the Effective Date and on a date other than October 1, the
individual may submit an Election 

-8-

 

	 	 	 	Form to defer a percentage of
Annual Base Salary for the remainder of the Plan Year in which he
or she becomes a Participant if the Election Form is submitted
within thirty (30) days after becoming eligible to participate in
the Plan; provided, however, that the Election Form shall apply
only to compensation not yet earned. If an Employee first becomes
eligible to participate in the Plan on a date after June 30 of any
calendar year, then the Employee shall not be entitled to elect to
defer any portion of his or her Annual Base Salary for this short
Plan Year.
	 
	 	(d)	 	Timing of Election to Defer SAR Payment and Phantom Stock
Payment. A Participant may elect to defer receipt of all or a
portion of any SAR or Phantom Stock Award. A Participant’s election
must be made at least 180 days prior to the date that the applicable
SAR or Phantom Stock Award vests. The elected deferral percentage
for SARs shall be applied to each SAR Payment received pursuant to
the exercise of SARs for which the deferral election has been made.
The elected deferral percentage for Phantom Stock Awards shall apply
solely to the Phantom Stock Payment for which the deferral election
has been made.

	 	 	 
	3.3	 	
Withholding of Annual Deferral Amounts. For each Plan Year, the Annual
Base Salary portion of the Annual Deferral Amount shall be withheld from
each regularly scheduled Annual Base Salary payroll in equal amounts, as
adjusted from time to time for increases and decreases in Annual Base
Salary. The Annual Bonus, SAR Payment and Phantom Stock Payment portions
of the Annual Deferral Amount shall be withheld at the time the Annual
Bonus, SAR Payments and/or Phantom Stock Payments are or otherwise would
be paid to the Participant, whether or not this occurs during the Plan
Year itself.
	 	 	 
	3.4	 	
Investment of Trust Assets. The Trustee of the Trust shall be
authorized, upon written instructions received from the Committee or
investment manager appointed by the Committee, to invest and reinvest the
assets of the Trust in accordance with the applicable Trust Agreement.
	 	 	 
	3.5	 	
Crediting/Debiting of Account Balances. In accordance with, and subject
to, the rules and procedures that are established from time to time by the
Committee, in its sole discretion, amounts shall be credited or debited to
a Participant’s Account Balance in accordance with the following rules:

	 	(a)	 	Election of Measurement Funds for Deferral Account. A
Participant, in connection with his or her initial deferral election
in accordance with Section 3.2(a) above, shall elect, on the
Election Form, one or more Measurement Fund(s) (as described in
Section 3.5(c) below) to be used to determine the additional amounts
to be credited to his or her Deferral Account when the Participant
commences participation in the Plan and continuing thereafter for
each subsequent business day in which the Participant participates
in the Plan, unless changed in accordance with
the next sentence. Commencing with the business day that follows
the Participant’s commencement of participation in the Plan and
continuing thereafter for each subsequent business day in which the
Participant participates in the Plan, the Participant may (but is
not required to) elect, by submitting an Election Form to the

-9-

 

	 	 	 	Committee that is accepted by the Committee, to reallocate among
the available Measurement Fund(s) to be used to determine the
additional amounts to be credited to his or her Deferral Account,
or to change the portion of his or her Deferral Account allocated
to each previously or newly elected Measurement Fund. If an
election is made in accordance with the previous sentence, it shall
apply as soon as administratively possible and shall continue
thereafter for each subsequent business day in which the
Participant participates in the Plan, unless changed in accordance
with the previous sentence.
	 
	 	(b)	 	Proportionate Allocation. In making any election described
in Section 3.5(a) above, the Participant shall specify on the
Election Form, in increments of one percentage point (1%), the
percentage of his or her Deferral Account to be allocated to a
Measurement Fund (as if the Participant was making an investment in
that Measurement Fund with that portion of his or her Deferral
Account).
	 
	 	(c)	 	Measurement Funds. The Participant may elect one or more
measurement funds (the “Measurement Funds”) for the purpose of
crediting additional amounts to his or her Deferral Account. The
Committee shall, in its sole discretion, select, discontinue,
substitute or add a Measurement Fund at any time.
	 
	 	(d)	 	Crediting or Debiting Method. The performance of each
elected Measurement Fund (either positive or negative) will be
determined by the Committee, in its reasonable discretion, based on
the performance of the Measurement Funds themselves. Each
Participant’s Account balance shall be credited or debited on a
daily basis based on the performance of each Measurement Fund
selected by the Participant for the Deferral Account, as determined
by the Committee in its sole discretion, as though (i) a
Participant’s Account Balance were invested in the selected or
required Measurement Fund(s) in the percentages applicable to such
business day, as of the close of business on the business day, at
the closing price on such date; (ii) the portion of the Annual
Deferral Amount that was actually deferred as of the business day
were invested in the Measurement Fund(s) selected by the
Participant, in the percentages applicable to such business day, as
soon as administratively possible after the day on which such
amounts are actually deferred from the Participant’s Annual Salary
through reductions in his or her payroll; and (iii) any distribution
made to a Participant that decreases such Participant’s Account
Balance ceased being invested in the Measurement Fund(s), in the
percentages applicable to such business day, as soon as
administratively possible.
	 
	 	(e)	 	No Actual Investment. Notwithstanding any other provision of
this Plan that may be interpreted to the contrary, the Measurement
Funds are to be used for measurement purposes only, and a
Participant’s election of any such Measurement
Fund, the allocation to his or her Account Balance thereto, the
calculation of additional amounts and the crediting or debiting of
such amounts to a Participant’s Account Balance shall not be
considered or construed in any manner as an actual investment of
his or her Account Balance in any such Measurement Fund. In the

-10-

 

	 	 	 	event that the Employer or the Trustee (as that term is defined in
the Trust), in its own discretion, decides to invest funds in any
or all of the Measurement Funds, no Participant shall have any
rights in or to such investments themselves. Without limiting the
foregoing, a Participant’s Account Balance shall at all times be a
bookkeeping entry only and shall not represent any investment made
on his or her behalf by the Employer or the Trust; the Participant
shall at all times remain an unsecured creditor of the Employer.

	 	 	 
	3.6	 	
FICA and Other Taxes. For each Plan Year in which an Annual
Deferral Amount is being withheld from a Participant, the Participant’s
Employer(s) shall withhold from that portion of the Participant’s Annual
Base Salary, Annual Bonus, SAR Payment and Phantom Stock Payment that is
not being deferred, in a manner determined by the Employer, the
Participant’s share of FICA and other employment taxes on such Annual
Deferral Amount. If necessary, the Committee may reduce the Deferral
Account in order to comply with this Section 3.6.
	 	 	 
	3.7	 	
Distributions. The Employer, or the trustee of the Trust, shall withhold
from any distributions made to a Participant under this Plan all federal,
state and local income, employment and other taxes required to be withheld
by the Employer, or the trustee of the Trust, in connection with such
distributions, in amounts and in a manner to be determined in the sole
discretion of the Employer and the trustee of the Trust.

-11-

 

ARTICLE 4

Distributions

	 	 	 
	4.1	 	
Elected Distribution Date. Each Participant shall make an irrevocable
election as to the Elected Distribution Date with respect to each amount
deferred. This election shall be made on the Election Form(s) for each
Plan Year and shall apply solely to the applicable Subaccount for the
deferral election specified on the Election Form(s). The Election Form
shall allow each Participant to elect from among the following Elected
Distribution Dates: (i) a date that falls upon the fifth, sixth, seventh,
eighth, ninth or tenth anniversary of the final day of the Plan Year; or
(ii) the date of the Participant’s Termination of Employment.
	 	 	 
	4.2	 	
Method of Distribution. Each Participant shall make an irrevocable
election as to the method of distribution with respect to each amount
deferred. This election shall be made on the Election Form(s) for each
Plan Year and shall apply solely to the applicable Subaccount for the
deferral election specified on the Election Form(s). Each Election Form
shall allow each Participant to elect from among the following methods of
distribution: (i) a lump sum payment of the Participant’s entire
Subaccount balance, to be paid, subject to the Deduction Limitation,
within 30 days of the Elected Distribution Date or Participant’s
Termination of Employment; or (ii) a series of ten (10) substantially
equal installment payments. Such installment payments, which shall be
subject to the Deduction Limitation, shall be paid in accordance with
Section 4.3.
	 	 	 
	4.3	 	
Installment Payments. The first annual installment shall be paid within
30 days of the Elected Distribution Date or the date of the Participant’s
Termination of Employment, whichever occurs first. Subsequent annual
installments shall be paid within 30 days of the end of each 12-month
anniversary of the Elected Distribution Date or the date of the
Participant’s Termination of Employment, whichever is applicable. The
amount of the first payment shall be a fraction of the total applicable
Subaccount, the numerator of which is 1 and the denominator of which is
10. The amount of each subsequent payment shall be a fraction of the
total balance of the applicable Subaccount, the numerator of which is 1
and the denominator of which is the total number of installments
remaining.

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ARTICLE 5

Hardship; Early Withdrawal

Withdrawal Election

	 	 	 
	5.1	 	
Withdrawal Payout/Suspensions for Hardship. If the Participant
experiences a Hardship, and distributions have not yet commenced under
Article 4, the Participant may petition the Committee to (i) suspend any
deferrals required to be made by a Participant and/or (ii) receive a
partial or full payout from the Plan. The payout shall not exceed the
lesser of the Participant’s Account Balance, calculated as if such
Participant were receiving a Termination Benefit, or the amount reasonably
needed to satisfy the Hardship. If, subject to the sole discretion of the
Committee, the petition for a suspension and/or payout is approved,
suspension shall take effect upon the date of approval and any payout
shall be made within 60 days of the date of approval. The payment of any
amount under this Section 5.1 shall not be subject to the Deduction
Limitation. Any suspension of deferrals pursuant to this Section 5.1
shall continue for the remainder of the Plan Year in which the suspension
is approved.
	 	 	 
	5.2	 	
Early Withdrawal. During any Plan Year, prior to the Elected
Distribution Date, a Participant may withdraw up to 100% of his or her
Account Balance. A Participant who makes an election to withdraw any
amount pursuant to this Section 5.2 shall forfeit 10% of the amount
withdrawn. Distribution of withdrawals shall be made as soon as
practicable after the Plan Administrator receives the request for
withdrawal, except that amounts deferred in the immediately preceding Plan
Year will not be paid before January 16. All forfeited amounts shall be
removed from the Participant’s Account Balance and shall be retained by
the Employer. If such election is made, the Participant shall not be
entitled to participate in the Plan for a period ending one year after the
date of the payout.

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ARTICLE 6

Termination of Employment Prior to Elected Distribution Date

	 	 	 
	6.1	 	
Termination Benefit. Subject to the Deduction Limitation, if a
Participant’s Termination of Employment occurs prior to the applicable
Elected Distribution Date(s), the Participant’s death or disability, the
Participant shall receive a Termination Benefit, payable pursuant to the
terms of Article 4.
	 	 	 
	6.2	 	
Death Prior to Completion of Termination Benefit. If a Participant dies
after Termination of Employment but before the Termination Benefit is
paid, the Participant’s unpaid Termination Benefit shall be paid as soon
as administrative practicable to the Participant’s Beneficiary in the same
amount as that benefit would have been paid to the Participant had the
Participant survived.
	 	 	 
	6.3	 	
Death Prior to Termination of Employment. If a Participant dies before
Termination of Employment, the Termination Benefit shall be paid as soon
as administratively practicable to the Participant’s Beneficiary in the
same amount as that benefit would have been paid to the Participant had
the Participant survived.

-14-

 

ARTICLE 7
Disability Waiver and Benefit

	 	 	 
	7.1	 	
Disability Waiver

	 	(a)	 	Waiver of Deferral. A Participant who is determined by the
Committee to be suffering from a Disability shall be excused from
fulfilling that portion of the Annual Deferral Amount commitment
that would otherwise have been withheld from a Participant’s Annual
Base Salary, Annual Bonus, SAR Payment and/or Phantom Stock Payment
for the Plan Year during which the Participant first suffers a
Disability. During the period of Disability, the Participant shall
not be allowed to make any additional deferral elections, but will
continue to be considered a Participant for all other purposes of
this Plan.
	 
	 	(b)	 	Return to Work. If a Participant returns to employment with
the Employer, after a Disability ceases, the Participant may elect
to defer an Annual Deferral Amount for the Plan Year following his
or her return to employment or service and for every Plan Year
thereafter while a Participant in the Plan; provided such deferral
elections are otherwise allowed and an Election Form is delivered to
and accepted by the Committee for each such election in accordance
with Section 3.2 above.

	 	 	 
	7.2	 	
Continued Eligibility; Disability Benefit. A Participant suffering a
Disability shall, for benefit purposes under this Plan, continue to be
considered to be employed, and shall be eligible for the benefits provided
for in Articles 3, 4 or 5 in accordance with the provisions of those
Articles. Notwithstanding the above, the Committee shall have the right
to, in its sole and absolute discretion and for purposes of this Plan only
deem the Participant to have experienced a Termination of Employment,
after such Participant is determined to be suffering a Disability, in
which case the Participant shall receive a Disability Benefit equal to his
or her Account Balance at the time of the Committee’s determination. The
Participant shall be paid in accordance with Article 6 as a deemed
Termination of Employment. Any payment made shall be subject to the
Deduction Limitation.

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ARTICLE 8

Beneficiary Designation

	 	 	 
	8.1	 	
Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as contingent)
to receive any benefits payable under the Plan to a beneficiary upon the
death of a Participant. The Beneficiary designated under this Plan may be
the same as or different from the Beneficiary designation under any other
plan of an Employer in which the Participant participates.
	 	 	 
	8.2	 	
Beneficiary Designation and Change of Beneficiary. A Participant shall
designate his or her Beneficiary by completing and signing the Beneficiary
Designation Form, and returning it to the Committee or its designated
agent. A Participant shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Committee’s rules and procedures, as
in effect from time to time. Upon the acceptance by the Committee of a new
Beneficiary Designation Form, all Beneficiary designations previously
filed shall be canceled. The Committee shall be entitled to rely on the
last Beneficiary Designation Form filed by the Participant and accepted by
the Committee prior to his or her death.
	 	 	 
	8.3	 	
Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received and acknowledged in writing by the
Committee or its designated agent.
	 	 	 
	8.4	 	
No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided in Sections 8.1, 8.2 and 8.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant’s benefits, then the
Participant’s designated Beneficiary shall be deemed to be his or her
estate.
	 	 	 
	8.5	 	
Doubt as to Beneficiary. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall
have the right, exercisable in its discretion, to cause the Employer to
withhold such payments until this matter is resolved to the Committee’s
satisfaction.
	 	 	 
	8.6	 	
Discharge of Obligations. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge the Employer and the
Committee from all further obligations under this Plan with respect to the
Participant, and that Participant’s participation in the Plan shall
terminate upon such full payment of benefits.

-16-

 

ARTICLE 9

Leave of Absence

	 	 	 
	9.1	 	
Paid Leave of Absence. If a Participant is authorized by the Employer
for any reason to take a paid leave of absence from the employment of the
Employer, the Participant shall continue to be considered employed by the
Employer and the Annual Deferral Amount shall continue to be withheld
during such paid leave of absence in accordance with Section 3.2.
	 	 	 
	9.2	 	
Unpaid Leave of Absence. If a Participant is authorized by the Employer
for any reason to take an unpaid leave of absence from the employment of
the Employer, the Participant shall continue to be considered employed by
the Employer and the Participant shall be excused from making deferrals
until the earlier of the date the leave of absence expires or the
Participant returns to a paid employment status. Upon such expiration or
return, deferrals shall resume for the remaining portion of the Plan Year
in which the expiration or return occurs, based on the deferral election,
if any, made for that Plan Year. If no election was made for that Plan
Year, no deferral shall be withheld.

-17-

 

ARTICLE 10

Termination, Amendment or Modification

	 	 	 
	10.1	 	
Termination. Although the Company anticipates that it will
continue the Plan for an indefinite period of time, there is no
guarantee that the Company will continue the Plan or will not
terminate the Plan at any time in the future. Accordingly, the
Company reserves the right to discontinue its sponsorship of the
Plan and/or to terminate the Plan at any time with respect to any
or all of its participating Employees, by action of its board of
directors. Upon the termination of the Plan, the affected
Participants shall terminate their participation in the Plan and
their Account Balances, determined as if they had experienced a
Termination of Employment on the date of Plan termination, shall
be paid to the Participants as follows: Prior to a Change in
Control, if the Plan is terminated with respect to all of its
Participants, the Company shall pay such benefits as soon as
administratively practicable. After a Change in Control, the
Account Balances of all participants shall be fully vested and
the Company shall be required to pay such benefits in a lump sum
within five (5) business days of such Change in Control. The
termination of the Plan shall not adversely affect any
Participant or Beneficiary who has become entitled to the payment
of any benefits under the Plan as of the date of termination.
	 	 	 
	10.2	 	
Amendment. The Company may, at any time, amend or modify the Plan
in whole or in part with respect to that Employer by the action
of its board of directors; provided, however, that: (i) no
amendment or modification shall be effective to decrease or
restrict the value of a Participant’s vested Account Balance in
existence at the time the amendment or modification is made,
calculated as if the Participant had experienced a Termination of
Employment as of the effective date of the amendment or
modification, and (ii) no amendment or modification of this
Section 10.2 or Section 11.2 of the Plan shall be effective. The
amendment or modification of the Plan shall not affect any
Participant or Beneficiary who has become entitled to the payment
of benefits under the Plan as of the date of the amendment or
modification.
	 	 	 
	10.3	 	
Effect of Payment. The full payment of the applicable benefit
under Articles 4, 5 or 6 of the Plan shall completely discharge
all obligations to a Participant and his or her designated
Beneficiaries under this Plan and the Participant’s participation
in the Plan shall terminate.

-18-

 

ARTICLE 11

Administration

	 	 	 
	11.1	 	
Committee Duties. Except as otherwise provided in this Article 11, this
Plan shall be administered by a Committee that shall consist of members
appointed by the Board. Members of the Committee may be Participants in
this Plan. The Committee shall also have the discretion and authority to
(i) make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and (ii) decide or resolve
any and all questions including interpretations of this Plan, as may arise
in connection with the Plan. Any individual serving on the Committee who
is a Participant shall not vote or act on any matter relating solely to
himself or herself. When making a determination or calculation, the
Committee shall be entitled to rely on information furnished by a
Participant or the Employer.
	 	 	 
	11.2	 	
Administration Upon Change In Control. For purposes of this Plan, the
Committee shall be the “Administrator” at all times prior to the
occurrence of a Change in Control. Upon and after the occurrence of a
Change in Control, the “Administrator” shall be an independent third party
selected by the trustee of the Trust and approved by the individual who,
immediately prior to such event, was the Company’s Chief Executive Officer
or, if not so identified, the Company’s highest ranking officer (the
“Ex-CEO”). The Administrator shall have the discretionary power to
determine all questions arising in connection with the administration of
the Plan and the interpretation of the Plan and Trust including, but not
limited to benefit entitlement determinations; provided, however, upon and
after the occurrence of a Change in Control, the Administrator shall have
no power to direct the investment of Plan or Trust assets or select any
investment manager or custodial firm for the Plan or Trust. Upon and
after the occurrence of a Change in Control, the Company must: (i) pay all
reasonable administrative expenses and fees of the Administrator; (ii)
indemnify the Administrator against any costs, expenses and liabilities
including, without limitation, attorney’s fees and expenses arising in
connection with the performance of the Administrator hereunder, except
with respect to matters resulting from the gross negligence or willful
misconduct of the Administrator or its employees or agents; and (iii)
supply full and timely information to the Administrator on all matters
relating to the Plan, the Trust, the Participants and their Beneficiaries,
the Account Balances of the Participants, the date of circumstances of the
Disability, death or Termination of Employment of the Participants, and
such other pertinent information as the Administrator may reasonably
require. Upon and after a Change in Control, the Administrator may be
terminated (and a replacement appointed) by the trustee of the Trust only
with the approval of the Ex-CEO. Upon and after a Change in Control, the
Administrator may not be terminated by the Company.
	 	 	 
	11.3	 	
Agents. In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties as
it sees
fit (including acting through a duly appointed representative) and may
from time to time consult with counsel who may be counsel to any
Employer.

-19-

 

	 	 	 
	11.4	 	
Binding Effect of Decisions. The decision or action of the Administrator
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
	 	 	 
	11.5	 	
Indemnity of Committee. The Company shall indemnify and hold harmless
the members of the Committee, and any Employee to whom the duties of the
Committee may be delegated, and the Administrator against any and all
claims, losses, damages, expenses or liabilities arising from any action
or failure to act with respect to this Plan, except in the case of willful
misconduct by the Committee, any of its members, any such Employee or the
Administrator.
	 	 	 
	11.6	 	
Employer Information. To enable the Committee and/or Administrator to
perform its functions, the Employer shall supply full and timely
information to the Committee and/or Administrator, as the case may be, on
all matters relating to the compensation of its Participants, the date and
circumstances of the Retirement, Disability, death or Termination of
Employment of its Participants, and such other pertinent information as
the Committee or Administrator may reasonably require.

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ARTICLE 12

Other Benefits and Agreements

Coordination with Other Benefits. The benefits provided for a Participant and
Participant’s Beneficiary under the Plan are in addition to any other benefits
available to such Participant under any other plan or program for employees of
the Employer. The Plan shall supplement and shall not supersede, modify or
amend any other such plan or program except as may otherwise be expressly
provided.

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ARTICLE 13

Claims Procedures

	 	 	 
	13.1	 	
Presentation of Claim. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a
“Claimant”) may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant
from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days after such
notice was received by the Claimant. All other claims must be made within
180 days of the date on which the event that caused the claim to arise
occurred. The claim must state with particularity the determination
desired by the Claimant.
	 	 	 
	13.2	 	
Notification of Decision. The Committee shall consider a Claimant’s
claim within a reasonable time, and shall notify the Claimant in writing:

	 	(a)	 	that the Claimant’s requested determination has been made,
and that the claim has been allowed in full; or
	 
	 	(b)	 	that the Committee has reached a conclusion contrary, in
whole or in part, to the Claimant’s requested determination, and
such notice must set forth in a manner calculated to be understood
by the Claimant:

	 	(i)	 	the specific reason(s) for the denial of the
claim, or any part of it;
	 
	 	(ii)	 	specific reference(s) to pertinent provisions of
the Plan upon which such denial was based;
	 
	 	(iii)	 	a description of any additional material or
information necessary for the Claimant to perfect the claim,
and an explanation of why such material or information is
necessary; and
	 
	 	(iv)	 	an explanation of the claim review procedure set
forth in Section 13.3 below.

	 	 	 
	13.3	 	
Review of a Denied Claim. Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant’s duly authorized representative) may file with
the Committee a written request for a review of the denial of the claim.
Thereafter, but not later than 30 days after the review procedure began,
the Claimant (or the Claimant’s duly authorized representative):

	 	(a)	 	may review pertinent documents;
	 
	 	(b)	 	may submit written comments or other documents; and/or
	 
	 	(c)	 	may request a hearing, which the Committee, in its sole
discretion, may grant.

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	13.4	 	
Decision on Review. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written request
for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee’s
decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant,
and it must contain:

	 	(a)	 	specific reasons for the decision;
	 
	 	(b)	 	specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
	 
	 	(c)	 	such other matters as the Committee deems relevant.

	 	 	 
	13.5	 	
Legal Action. A Claimant’s compliance with the foregoing provisions of
this Article 13 is a mandatory prerequisite to a Claimant’s right to
commence any legal action with respect to any claim for benefits under
this Plan.

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ARTICLE 14

Trust

	 	 	 
	14.1	 	
Establishment of the Trust. The Company shall establish the Trust, and
shall at least annually transfer over to the Trust such assets as the
Company determines, in its sole discretion, are necessary to provide, on a
present value basis, for its respective future liabilities created with
respect to the Annual Deferral Amounts for Participants for all periods
prior to the transfer, as well as any debits and credits to the
Participants’ Account Balances for all periods prior to the transfer,
taking into consideration the value of the assets in the trust at the time
of the transfer.
	 	 	 
	14.2	 	
Interrelationship of the Plan and the Trust. The provisions of the Plan
shall govern the rights of a Participant to receive distributions pursuant
to the Plan. The provisions of the Trust shall govern the rights of the
Company, Participants and the creditors of the Company to the assets
transferred to the Trust. The Company shall at all times remain liable to
carry out its obligations under the Plan.
	 	 	 
	14.3	 	
Distributions From the Trust. The Company’s obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of
the Trust, and any such distribution shall reduce the Company’s
obligations under this Plan.

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ARTICLE 15

Miscellaneous

	 	 	 
	15.1	 	
Status of Plan. The Plan is intended to be a plan that is not qualified
within the meaning of Code Section 401(a) and that “is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and
401(a)(1). The Plan shall be administered and interpreted to the extent
possible in a manner consistent with that intent.
	 	 	 
	15.2	 	
Unsecured General Creditor. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of the Employer. For purposes of the
payment of benefits under this Plan, any and all of the Employer’s assets
shall be, and remain, the general, unpledged unrestricted assets of the
Employer. The Employer’s obligation under the Plan shall be merely that
of an unfunded and unsecured promise to pay money in the future.
	 	 	 
	15.3	 	
Employer’s Liability. The Employer shall have no obligation to a
Participant under the Plan except as expressly provided in the Plan.
	 	 	 
	15.4	 	
Nonassignability. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate, alienate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or any
part thereof, which are, and all rights to which are expressly declared to
be, unassignable and non-transferable. No part of the amounts payable
shall, prior to actual payment, be subject to seizure, attachment,
garnishment or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person,
be transferable by operation of law in the event of a Participant’s or any
other person’s bankruptcy or insolvency or be transferable to a spouse as
a result of a property settlement or otherwise.
	 	 	 
	15.5	 	
Not a Contract of Employment. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between the
Employer and the Participant. Such employment is hereby acknowledged to
be an “at will” employment relationship that can be terminated at any time
for any reason, or no reason, with or without cause, and with or without
notice, unless expressly provided in a written employment agreement.
Nothing in this Plan shall be deemed to give a Participant the right to be
retained in the service of the Employer, either as an Employee or a
director, or to interfere with the right of the Employer to discipline or
discharge the Participant at any time.
	 	 	 
	15.6	 	
Furnishing Information. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all
information requested by the Committee and take such other actions as may
be requested in order to facilitate the administration of the Plan

-25-

 

	 	 	 
	 	 	
and
the payments of benefits hereunder, including but not limited to taking
such physical examinations as the Committee may deem necessary.
	 	 	 
	15.7	 	
Terms. Whenever any words are used herein in the masculine, they shall
be construed as though they were in the feminine in all cases where they
would so apply; and whenever any words are used herein in the singular or
in the plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they would
so apply.
	 	 	 
	15.8	 	
Captions. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
	 	 	 
	15.9	 	
Governing Law. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the internal laws of the
Commonwealth of Virginia.
	 	 	 
	15.10	 	
Notice. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address
below:

	 	Alion

Attention:                              

1750 Tysons Boulevard, Suite 1300

McLean, VA 22102

	 	 	Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
	 
	 	 	Any notice or filing required or permitted to be given to a Participant
under this Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Participant.

	 	 	 
	15.11	 	
Successors. The provisions of this Plan shall bind and inure to the
benefit of the Company and its successors and assigns and the Participant
and the Participant’s designated Beneficiaries.
	 	 	 
	15.12	 	
Validity. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
	 	 	 
	15.13	 	
Incompetent. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that
person’s property, the Committee may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of
such

-26-

 

	 	 	 
	 	 	
minor, incompetent or incapable person. The Committee may require
proof of minority, incompetence, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant’s Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.
	 	 	 
	15.14	 	
Court Order. The Committee is authorized to make any payments directed
by court order in any action in which the Plan or the Committee has been
named as a party. In addition, if a court determines that a spouse or
former spouse of a Participant has an interest in the Participant’s
benefits under the Plan in connection with a property settlement or
otherwise, the Committee, in its sole discretion, shall have the right,
notwithstanding any election made by a Participant, to immediately
distribute the spouse’s or former spouse’s interest in the Participant’s
benefits under the Plan to that spouse or former spouse.
	 
	15.15	 	
Distribution in the Event of Taxation. If, for any reason, all or any
portion of a Participant’s benefits under this Plan becomes taxable to the
Participant prior to receipt, a Participant may petition the Committee
before a Change in Control, or the trustee of the Trust after a Change in
Control, for a distribution of that portion of his or her benefit that has
become taxable. Upon the grant of such a petition, which grant shall not
be unreasonably withheld (and, after a Change in Control, shall be
granted), the Company shall distribute to the Participant immediately
available funds in an amount equal to the taxable portion of his or her
benefit (which amount shall not exceed a Participant’s unpaid Account
Balance under the Plan). If the petition is granted, the tax liability
distribution shall be made within 90 days of the date when the
Participant’s petition is granted. Such a distribution shall affect and
reduce the benefits to be paid under this Plan.
	 	 	 
	15.16	 	
Trust. If the Trust terminates and benefits are distributed from the
Trust to a Participant, the Participant’s benefits under this Plan shall
be reduced to the extent of such distributions.
	 	 	 
	15.17	 	
Legal Fees To Enforce Rights After Change in Control. The Company is
aware that upon the occurrence of a Change in Control, the Board (which
might then be composed of new members) or a shareholder of the Company, or
of any successor corporation might then cause or attempt to cause the
Company or such successor to refuse to comply with its obligations under
the Plan and might cause or attempt to cause the Company to institute, or
may institute, litigation seeking to deny Participants the benefits
intended under the Plan. In these circumstances, the purpose of the Plan
could be frustrated. Accordingly, if,
following a Change in Control, it should appear to any Participant that
the Company or any successor corporation has failed to comply with any of
its obligations under the Plan or any agreement thereunder or, if the
Company or any other person takes any action to declare the Plan void or
unenforceable or institutes any litigation or other legal action designed
to deny, diminish or to recover from any Participant the benefits
intended to be provided, then the Company irrevocably authorizes such
Participant to retain counsel of his or her choice at the expense of the
Company to represent such Participant in connection with the initiation
or defense of any litigation or other legal action, whether by or against
the

-27-

 

	 	 	 
	 	 	
Company or any director, officer, shareholder or other person
affiliated with the Company or any successor thereto in any jurisdiction.

	 	 	IN WITNESS WHEREOF, the Company has signed this Plan document effective
as
of                    , 2002.

	 	 	 
	 	
Alion Science and Technology Corporation, a
Delaware corporation
	 
	 	By:	 
	 	 	

	 	Title:	 
	 	 	

-28-

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