SETTLEMENT AGREEMENT AND
GENERAL RELEASE
This Settlement
Agreement and General Release (“Agreement”) is entered
into by and between John M. Hughes (“Hughes”) and Alion
Science and Technology Corporation (“Alion” or the
“Company”) as of the latest date of execution by the
parties to this Agreement. This Agreement supersedes any prior
employment agreements or arrangements Hughes may have entered into
with Alion or its subsidiaries, affiliates, successors, assigns or
predecessors in interest, including without limitation the
Employment Agreement between Hughes and Alion dated June 28,
2007 (the “Employment Agreement”), the Separation
Agreement and General Release dated April 25, 2008 (the
“Separation Agreement”) (except those provisions as set
forth in Paragraph 5 below), and any and all phantom stock or
other incentive compensation agreements between Hughes and the
Company; provided, however, that the Employee Intellectual Property
Agreement between Hughes and Alion, dated December 16, 2002,
shall remain in full force and effect.
WHEREAS ,
Hughes terminated employment with Alion effective August 15,
2008, and the parties entered into the Separation Agreement with
respect to such termination; and
WHEREAS ,
the Company has completed an investigation of certain issues
arising from Hughes’ conduct of his employment with the
Company; and
WHEREAS ,
the parties now desire to finally resolve and settle any
outstanding claims the parties may have in respect of Hughes’
employment and termination thereof:
NOW ,
THEREFORE , in consideration of the mutual covenants,
agreements and representations contained herein, the adequacy of
which is hereby acknowledged, the parties hereto expressly and
intentionally bind themselves as follows:
If Hughes signs
and does not revoke this Agreement, in exchange for the promises
and covenants herein, Alion shall pay or cause to be paid to or for
the benefit of Hughes, Three Million Dollars ($3,000,000.00) by the
following payments:
(a) Five
Hundred Thousand Dollars ($500,000.00), payable within fifteen
(15) days of the date the Agreement becomes effective in
accordance with its terms;
(b) Five
Hundred Thousand Dollars ($500,000.00), payable on
December 31, 2008; and
(c) Five
Hundred Thousand Dollars ($500,000.00) payable by the end of each
of the following four calendar quarters thereafter until the total
amount of Three Million Dollars ($3,000,000.00) has been
paid.
Hughes expressly
acknowledges and agrees that these payments by Alion are in
exchange for resolution of all issues arising from or relating to
Hughes’ employment with Alion and the
termination of
such employment, and any and all issues which could have been or
were raised by him in connection with the foregoing. Hughes further
expressly acknowledges and agrees that these payments by Alion are
in lieu of any payments to which Hughes would otherwise be entitled
to under the terms of the Employment Agreement, the Separation
Agreement and any phantom stock or other incentive or other
compensation agreements between Hughes and the Company.
In addition to the
above payments, Hughes expressly acknowledges and agrees that he
received from the Company all outstanding and accrued Paid Time Off
(“PTO”), as well as all proceeds previously held on his
behalf in the Alion Non-Qualified Deferred Compensation Plan in
accordance with the terms of such plan. Hughes further acknowledges
and agrees that, except as provided in this Agreement or under the
terms of an applicable qualified retirement or welfare employee
benefit plan, no further payments shall be made to him, including
any severance, phantom stock or other payments described in the
Separation Agreement or Employment Agreement.
The parties agree
that, under current federal tax law, the settlement payments
hereunder shall be reported on IRS Form W-2 and federal income tax
shall be withheld at the applicable withholding rate. The Company
shall withhold such further federal, state or local tax, payroll
and other amounts from payments under this Agreement as the Company
reasonably believes to be required by law. Hughes shall be solely
responsible for payment of his own taxes, including any taxes
arising under Internal Revenue Code Section 409A. The Company
has not provided and will not provide tax advice to
Hughes.
(a) Hughes
agrees and acknowledges that his participation in any 401(k) Plan,
short-term and long-term Disability Plans, or any other benefit
plans made available to him as an Alion employee, and his
participation in and entitlement to any and all other benefits in
which he is currently enrolled, but which are not specifically
addressed in this Agreement, terminated on August 15,
2008.
(b) To the
extent that Hughes is eligible for and elects to receive medical
and/or dental benefits pursuant to the provisions of the
Consolidated Omnibus Budget Reconciliation Act
(“COBRA”) for himself and/or any qualifying
beneficiaries, the Company shall pay on Hughes’ behalf, or
reimburse Hughes for, the amount of the applicable COBRA that
exceeds the amount of premium payable by Hughes for the same level
of coverage immediately prior to the effective date of termination.
Any such COBRA premium payment by the Company that constitutes
taxable income to Hughes shall be grossed up by the Company,
assuming an applicable income tax rate of forty percent (40%).
Payments under this paragraph shall cease at the earlier of
(i) the end of the first month in which Hughes is no longer
eligible for COBRA for any reason (other than death or eligibility
for Medicare, provided that COBRA coverage continues for any
qualified beneficiary), or (ii) Eighteen (18) months
after the Notification Date. Hughes shall notify the Company as
soon as practicable after he ceases to be eligible for COBRA
coverage due to coverage under the group health plan of another
employer.
2
3.
GENERAL RELEASE BY HUGHES
(a) Hughes
hereby releases and forever discharges Alion, its subsidiaries,
affiliates, insurers, predecessors, successors, and assigns, and
the directors, officers, shareholders, employees, representatives
and agents of each of the foregoing (collectively
“Releasees”) of and from the following:
(i) Any and
all claims, demands, damages, liabilities, obligations, debts, and
agreements whatsoever of every name and nature (other than those
arising directly out of this Agreement), including, without
limitation, those with respect to Hughes’ employment by
Alion, or the terms and conditions of employment, benefits or
compensation including, without limitation, any and all
plan
|
