**Exhibit10.3**

 

**AMERICANSCIENCE AND ENGINEERING, INC.**

**2005Equity and Incentive Plan**

 

Nonstatutory StockOption Grant Agreement

Performance VestedOptions

 

American Scienceand Engineering, Inc. (the “Company”), a Massachusetts corporation,hereby grants to the person named below an option to purchase shares of CommonStock, $0.66 2/3 par value, of the Company (the “Option”) under andsubject to the Company’s 2005 Equity and Incentive Plan (the “Plan”)exercisable on the terms and conditions set forth below and those attachedhereto and in the Plan:

 
|  **Grant Date**      |   | [Date]             |   |      |
|---------------------------|--------|--------------------|--------|-----------|
|                      |   |               |   |      |
|  **Optionee**        |   | [Name]             |   |      |
|                      |   |               |   |      |
|  **Options Granted** |   | [# of Options]     |   |      |
|                      |   |               |   |      |
|  **Exercise Price**  |   | $[Strike Price]    |   | per share |
|                      |   |               |   |      |
|  **Expiration Date** |   | [Expiration  Date] |   |      |

 

Exercise Scheduleand Vesting:  The options shall vest andbecome exercisable upon the achievement of performance targets of the Company,as more particularly described herein (“Performance-Vested Options”).  Specifically, Performance-Vested Optionsshall become exercisable in accordance with the following terms: as soon as practicable following the deliveryto the Company of its audited financial statements for the fiscal year, theCompensation Committee shall determine whether the Performance Goals (asdefined in the Plan) have been met. Restrictions on the Performance-Vested Options will lapse, pro-rata, aseach or any of the Performance Goals are met. If the Company has not met any portion of the Performance Goals prior tothe end of the fiscal year ending on or before [Fiscal Year Date], one half(1/2) of the pro-rata portion of the Performance-Vested Options attributable tosuch unattained goals shall immediately vest, and one half (1/2) shall beautomatically and immediately forfeited.

 

 The Performance Goals shall be established bythe Committee based on one or more of the following objective criteria prior tothe beginning of such Performance Period or within such period after thebeginning of the Performance Period (as defined in the Plan) as shall meet therequirements to be considered “pre-established objective performance goals” forpurposes of the regulations issued under Section 162(m) of the Code: (i) increasesin the price of the Common Stock, (ii) market share, (iii) sales, (iv) revenue,(v) return on equity, assets, or capital, (vi) economic profit(economic value added), (vii) total shareholder return, (viii) costs,(ix) expenses, (x) margins, (xi) earnings (including EBITDA) orearnings per share, (xii) cash flow (including adjusted operating cash flow),(xiii) customer satisfaction, (xiv) operating profit, (xv) net income, (xvi)research and development, (xvii) product releases, (xviii) manufacturing, or(xix) any combination of the foregoing, including without limitation, goalsbased on any of such measures relative to appropriate peer groups or marketindices, as more particularly outlined on Exhibit A, attached to thisAgreement

 

This Option shall not betreated as an Incentive Stock Option under section 422 of the Internal RevenueCode of 1986, as amended.

 

By acceptance of thisOption, the Participant agrees to the terms and conditions set forth above andthose attached hereto and in the Plan.

 
| PARTICIPANT |   | AMERICAN SCIENCE  AND ENGINEERING, INC. |
|-------------|--------|-----------------------------------------|
|        |   |                                    |
|        |   | By:                                     |   |

 

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** AMERICAN SCIENCE AND ENGINEERING, INC. 2005EQUITY AND INCENTIVE PLAN**

 

**Nonstatutory Stock Option TermsAnd Conditions**

 

1.             Plan Incorporated by Reference.  This Option is issued pursuant to the termsof the Plan.  This Grant Agreement doesnot set forth all of the terms and conditions of the Plan, which areincorporated herein by reference. Capitalized terms used and not otherwise defined in this Grant Agreementhave the meanings given to them in the Plan. The Committee administers the Plan and its determinations regarding theoperation of the Plan are final and binding. A copy of the Plan may be obtained upon written request without chargefrom the Human Resources Department of the Company.

 

2.             OptionPrice.  The price to be paid for eachshare of Common Stock issued upon exercise of the whole or any part of thisOption is the Option Price set forth on the face of this Grant Agreement.

 

3.             Exercisabilityand Vesting Schedule.  As long as theParticipant remains continuously employed by the Company or an Affiliate, thisOption will vest and may be exercised (in whole or in part) in accordance withthe Exercisability and Vesting Schedule set forth on the face of this GrantAgreement, but only for the purchase of whole shares.  This Option may not be exercised as to anyshares after the Expiration Date.

 

4.             Effectof Termination of Employment.  If theParticipant’s status as an employee of the Company or an Affiliate isterminated for any reason (voluntary or involuntary), this Option shall notthereafter become vested or exercisable as to any additional shares, and thealready vested portion of this Option shall remain exercisable (to the extentnot previously exercised) for ninety (90) days after the day on which theParticipant’s employment is terminated, whereupon this Option shall terminate; exceptthat

 

(a)                                  Ifthe Participant is on military leave, sick leave, or other leave of absenceapproved by the Company or the Affiliate, his or her employment with theCompany or the Affiliate will be treated as continuing intact during the periodof such leave.  The Participant’semployment will be deemed to have terminated on the first day after theexpiration of such leave.

 

(b)                                 If the Participant is terminated by reason ofretirement prior to the end of the fiscal year ending on or before [Fiscal YearDate] and the Participant’s age is equal to or greater than 65 and theParticipant’s age plus length of service is equal to or greater than 70, onehalf (1/2) of the pro-rata portion of the Performance-Vested Shares reflectingthe percentage of such Option that was accrued by the Company on its books atthe time of the Participant’s retirement date shall immediately vest, and onehalf (1/2) shall be automatically and immediately forfeited.

 

(c)                                  Ifthe Participant’s employment is terminated by reason of his or her death, thisOption shall become exercisable and vested on a prorated basis reflecting thepercentage of such Option that was accrued by the Company on its books at thetime of the Participant’s death, without regard to the Exercisability andVesting Schedule.  In such event, suchprorated portion of this Option may be exercised at any time within twelve (12)months after the date of the Participant’s death by the person(s) to whomthe Participant’s option rights pass by will or by the applicable laws of descentand distribution.

 

(d)                                 Ifthe Participant’s employment is terminated by the Company or the Affiliate for “cause,”this Option, to the extent vested and exercisable upon such termination ofemployment, may be exercised by the Participant only through the close ofregular business hours on the date of termination.  Unless otherwise defined in any writtenemployment agreement between the Company or the Affiliate and the Participant,cause shall be determined by the Committee in its discretion.

 

In no event,however, may this Option be exercised after the Expiration Date set forth onthe face of this Grant Agreement.

 

5.             Methodof Exercise.  To exercise thisOption, the Participant shall deliver notice of exercise to the Companyspecifying the number of shares with respect to which the Option is beingexercised accompanied by payment of the Option Price for such shares (i) bycash, (ii) by actual delivery or attestation of ownership of shares ofCommon Stock owned by the Participant, including vested Restricted Stock, (iii) byretaining shares of Common Stock otherwise issuable pursuant to the Option, (iv) forconsideration received by the Company under a broker-assisted cashless exerciseprogram acceptable to the Company, or (v) for such other 

 

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lawful considerationas the Committee may determine.  Suchexercise notice must be given at the time and in the manner as specified by theCommittee from time to time.  Uponpayment of the exercise price and applicable taxes, and assuming satisfactionof all applicable securities laws and exchange listing requirements, theCompany shall delivery, or make available to the Participant through the Plan’sdesignated broker, the net shares or cash proceeds (as the case may be)resulting from the Option exercise.

 

6.             Changeof Control.  To preserve theParticipant’s rights under this Option in the event of a Change in Control ofthe Company (as defined below) occurring while the Participant is employed bythe Company or an Affiliate, the Committee shall fully accelerate the vestingof this Option and may in its discretion take one or more of the followingactions: (i) provide for payment to the Participant of cash or otherproperty with a Fair Market Value equal to the amount that would have beenreceived upon the exercise or payment of the Option had the Option beenexercised or paid upon the Change in Control of the Company, (ii) adjustthe terms of the Option in a manner determined by the Committee to reflect theChange in Control of the Company, (iii) cause the Option to be assumed, ornew rights substituted therefore, by another entity, or (iv) make suchother provision as the Committee may consider equitable to the Participant andin the best interests of the Company. For purposes of this Section, a “Change in Control of the Company” shallmean:  (i) the consummation of (a) anyconsolidation or merger of the Company in which the Company is not thecontinuing or surviving entity or pursuant to which the Company’s Common Stockis converted into cash, securities, or other property, other than a merger ofthe Company in which the ownership by the Company’s stockholders of thesecurities in the surviving entity is at least two-thirds of the combinedvoting power; or (b) any sale, lease, exchange, or other transfer (in onetransaction or a series of related transactions) of all or substantially all ofthe assets of the Company; (ii) the stockholders of the Company haveapproved any plan or proposal for the liquidation or dissolution of theCompany; (iii) any person (as that term is used in Sections 13(d) and14(d)(2) of the Exchange Act) has become the beneficial owner (within themeaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or moreof the Company’s outstanding Common Stock; or (iv) that during any periodof two consecutive years, individuals who, at the beginning of such period,constitute the entire Board of Directors of the Company shall cease, for anyreason, to constitute a majority thereof, unless the election, or thenomination for election by the Company’s stockholders, of each new director wasapproved by a vote of at least three-quarters of the directors then still inoffice who were directors at the beginning of the period.

 

7.             Option Not Transferable.  This Option is not transferable by the Participantother than by will or the laws of descent and distribution, and is exercisable,during the Participant’s lifetime, only by the Participant.  The naming of a Designated Beneficiary doesnot constitute a transfer. The Committee may, in its sole discretion, allow theParticipant to transfer this Option under a domestic relations order insettlement of marital or domestic property rights.

 

8.             Payment of Taxes. TheParticipant shall pay to the Company, or make provision satisfactory to theCommittee for payment of, any taxes required by law to be withheld with respectto the exercise of the Option no later than the date of the event creating thetax liability.  The Company and itsAffiliates may, to the extent permitted by law, deduct any such tax obligationsfrom any payment of any kind due to the Participant.  In the Committee’s discretion, the minimumtax obligations required by law to be withheld with respect to the exercise ofthe Option may be paid in whole or in part in shares of Common Stock, includingshares retained from the exercise of the Option, valued at their Fair MarketValue on the date of retention.

 

9.             No Right To Employment.  No person shall have any claim or right to begranted an Option.  Neither the Plan northis Option shall be deemed to give any Participant the right to continuedemployment or to limit the right of the Company or an Affiliate to dischargeany Participant at any time.

 

10.           Amendment of Option.  The Committee may amend, modify, or terminatethis Option, including substituting therefore another option of the same or adifferent type, changing the date of exercise or realization and converting anincentive stock option to a nonstatutory stock option, provided that theParticipant’s consent to such action shall be required unless (i) theCommittee determines that the action, taking into account any related action,would not materially and adversely affect the Participant, or (ii) theaction is permitted by the terms of the Plan.

 

11.           Data Privacy and ElectronicDelivery.  By executing this GrantAgreement, the Participant: (i) authorizes the Company, its Affiliates,and any agent of the Company or its Affiliates administering the Plan orproviding Plan recordkeeping services, to disclose to the Company, itsAffiliates or third-party service providers such information and data as may bedeemed necessary or appropriate to facilitate the grant of Options and theadministration of the Plan; (ii) waives any data privacy rights he or shemay have with respect to such information; and (iii) authorizes theCompany, its Affiliates, and third-party service providers to store andtransmit such information in electronic form. The Participant agrees that the Company, its Affiliates, and theiragents may 

 

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deliverelectronically all documents relating to the Plan or this Option (including,without limitation, prospectuses required by the Securities and ExchangeCommission) and all other documents that the Company is required to deliver toits stockholders.

 

12.           Cancellation and Rescission ofOption.  In consideration of thisOption the Participant agrees that if Participant breaches Participant’sobligations under the terms of the American Science & EngineeringEmployee Representation, Rights in Data, and Non-Compete Agreement, then theCompany may cancel, suspend, withhold, or otherwise limit or restrict (in wholeor in part) the exercise of this Option. If this Option has been exercised prior to the occurrence or discoveryby the Company of any such breach, then the Committee may rescind the exerciseof this Option at any time within the two (2) year period after suchexercise.  In the event of anyrescission, the Participant shall pay to the Company the amount of incomerecognized upon exercise of the Option and any additional gain realized uponany sale of Option shares in such manner and on such terms and conditions asmay be required by the Committee, and the Company shall be entitled to set-offthe amount of any such income or gain against any amount that may be owed tothe Participant.

 

13.           Impact of Restatement of FinancialStatements Upon Option.  If any ofthe Company’s financial statements are required to be restated as a result oferrors, omissions, or fraud, the Committee may (in its sole discretion, butacting in good faith) direct that the Company recover all or a portion of theamount of income recognized upon the exercise of this Option and any additionalgain realized upon any sale of the Option shares with respect to any fiscalyear of the Company the financial results of which are negatively affected bysuch restatement. The amount to be recovered from the Participant shall be theamount by which the Option income at exercise, and any gain upon sale of theOption shares of the affected award, exceed the amount that would have beenpayable to the Participant had the financial statements been initially filed asrestated, or any greater or lesser amount that the Committee shall determine.The Committee may determine to recover different amounts from differentparticipants or different classes of participants on such bases as it shalldeem appropriate.  In no event shall theamount to be recovered by the Company be less than the amount required to berepaid or recovered as a matter of law. The Committee shall determine whetherthe Company shall effect any such recovery (i) by seeking repayment fromthe Participant, (ii) by reducing (subject to applicable law and the termsand conditions of the applicable plan, program, or arrangement) the amount thatwould otherwise be payable to the Participant under any compensatory plan,program, or arrangement maintained by the Company or any of its Affiliates, (iii) bywithholding payment of future increases in compensation (including the paymentof any discretionary bonus amount) or grants of compensatory awards that wouldotherwise have been made in accordance with the Company’s otherwise applicablecompensation practices, or (iv) by any combination of the forgoing.

 

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