**Exhibit 10.42**

 

**AMERICANSCIENCE AND ENGINEERING, INC.**

**2005Equity and Incentive Plan**

 

Nonstatutory StockOption Grant Agreement

Performance VestedOptions

 

American Science andEngineering, 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 Schedule andVesting:  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 aspracticable following the delivery to the Company of its audited financialstatements for the fiscal year, the Compensation Committee shall determinewhether the Performance Goals (as defined in the Plan) have been met.  Restrictions on the Performance-VestedOptions will lapse, pro-rata, as each or any of the Performance Goals aremet.  If the Company has not met anyportion of the Performance Goals prior to the end of the fiscal year ending onor before                                 ,one half (1/2) of the pro-rata portion of the Performance-Vested Optionsattributable to such unattained goals shall immediately vest, and one half(1/2) shall be automatically and immediately forfeited.

 

The PerformanceGoals shall be established by the Committee based on one or more of thefollowing objective criteria prior to the beginning of such Performance Periodor within such period after the beginning of the Performance Period (as definedin the Plan) as shall meet the requirements to be considered “pre-establishedobjective performance goals” for purposes of the regulations issued under Section 162(m) ofthe Code: (i) increases in the price of the Common Stock, (ii) marketshare, (iii) sales, (iv) revenue, (v) return on equity, assets,or capital, (vi) economic profit (economic value added), (vii) totalshareholder return, (viii) costs, (ix) expenses, (x) margins,(xi) earnings (including EBITDA) or earnings 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 theforegoing, including without limitation, goals based on any of such measuresrelative to appropriate peer groups or market indices, as more particularlyoutlined on Exhibit A, attached to this Agreement

 

This Option shallnot be treated as an Incentive Stock Option under section 422 of the InternalRevenue Code of 1986, as amended.

 

By acceptance ofthis Option, the Participant agrees to the terms and conditions set forth aboveand those attached hereto and in the Plan.

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

 

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**AMERICAN SCIENCE AND ENGINEERING,INC. 2005 EQUITY 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.             Option Price.  The price to be paid for each share of CommonStock issued upon exercise of the whole or any part of this Option is theOption Price set forth on the face of this Grant Agreement.

 

3.             Exercisability and VestingSchedule.  As long as the Participantremains continuously employed by the Company or an Affiliate, this Option willvest and may be exercised (in whole or in part) in accordance with theExercisability 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.             Effect of Termination ofEmployment.  If the Participant’sstatus as an employee of the Company or an Affiliate is terminated for anyreason (voluntary or involuntary), this Option shall not thereafter become vestedor exercisable as to any additional shares, and the already vested portion ofthis Option shall remain exercisable (to the extent not previously exercised)for ninety (90) days after the day on which the Participant’s employment isterminated, whereupon this Option shall terminate; exceptthat

 

(a)                                  If the Participant is on military leave,sick leave, or other leave of absence approved by the Company or the Affiliate,his or her employment with the Company or the Affiliate will be treated ascontinuing intact during the period of such leave.  The Participant’s employment will be deemedto have terminated on the first day after the expiration of such leave.

 

(b)                                 If theParticipant is terminated by reason of retirement prior to the end of thefiscal year ending on or before                                           and the Participant’s age is equal to or greater than 65 and the Participant’sage plus length of service is equal to or greater than 70, one half (1/2) ofthe pro-rata portion of the Performance-Vested Shares reflecting the percentageof such Option that was accrued by the Company on its books at the time of theParticipant’s retirement date shall immediately vest, and one half (1/2) shallbe automatically and immediately forfeited.

 

(c)                                  If the Participant’s employment isterminated by reason of his or her death, this Option shall become exercisableand vested on a prorated basis reflecting the percentage of such Option thatwas accrued by the Company on its books at the time of the Participant’s death,without regard to the Exercisability and Vesting Schedule.  In such event, such prorated portion of thisOption may be exercised at any time within twelve (12) months after the date ofthe Participant’s death by the person(s) to whom the Participant’s optionrights pass by will or by the applicable laws of descent and distribution.

 

(d)                                 If the Participant’s employment isterminated by the Company or the Affiliate for “cause,” this Option, to theextent vested and exercisable upon such termination of employment, may beexercised by the Participant only through the close of regular business hourson the date of termination.  Unlessotherwise defined in any written employment agreement between the Company orthe Affiliate and the Participant, cause shall be determined by the Committeein its discretion.

 

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

 

5.             Method of Exercise.  To exercise this Option, the Participantshall deliver notice of exercise to the Company specifying the number of shareswith respect to which the Option is being exercised accompanied by payment ofthe Option Price for such shares (i) by cash, (ii) by actual deliveryor attestation of ownership of shares of Common Stock owned by the Participant,including vested Restricted Stock, (iii) by retaining shares of CommonStock otherwise issuable pursuant to the Option, (iv) for consideration 

 

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received by theCompany under a broker-assisted cashless exercise program acceptable to theCompany, or (v) for such other lawful consideration as the Committee maydetermine.  Such exercise notice must begiven at the time and in the manner as specified by the Committee from time totime.  Upon payment of the exercise priceand applicable taxes, and assuming satisfaction of all applicable securitieslaws and exchange listing requirements, the Company shall delivery, or makeavailable to the Participant through the Plan’s designated broker, the netshares or cash proceeds (as the case may be) resulting from the Optionexercise.

 

6.             Change of Control.  To preserve the Participant’s rights underthis Option in the event of a Change in Control of the Company (as definedbelow) occurring while the Participant is employed by the Company or anAffiliate, the Committee shall fully accelerate the vesting of this Option andmay in its discretion take one or more of the following actions: (i) providefor payment to the Participant of cash or other property with a Fair MarketValue equal to the amount that would have been received upon the exercise orpayment of the Option had the Option been exercised or paid upon the Change inControl of the Company, (ii) adjust the terms of the Option in a mannerdetermined by the Committee to reflect the Change in Control of the Company, (iii) causethe Option to be assumed, or new rights substituted therefore, by anotherentity, or (iv) make such other provision as the Committee may considerequitable to the Participant and in the best interests of the Company.  “The term ‘Change in Control’ or ‘Change inControl of the Company’ shall mean the occurrence hereafter of any of thefollowing:

 

(a)                                  AnyPerson, other than the Company or an Affiliate, becomes a beneficial owner(within the meaning of Rule 13d-3, as amended, as promulgated under theSecurities Exchange Act of 1934, as amended), directly or indirectly, in one ora series of transactions, of securities representing more than fifty percent(50%) of the combined voting power of the Company’s then outstandingsecurities;

 

(b)                                 Theconsummation of a merger or consolidation of the Company with any other Person,other than a merger or consolidation which would result in the votingsecurities of the Company outstanding immediately prior thereto continuing torepresent (either by remaining outstanding or by being converted into votingsecurities of the surviving entity) more than fifty percent (50%) of thecombined voting power of the voting securities of the Company or such survivingentity outstanding immediately after such merger or consolidation;

 

(c)                                  Theclosing of a sale or other disposition by the Company of all or substantiallyall of the assets of the Company;

 

(d)                                 Individualswho constitute the Board of Directors on the date hereof (“Incumbent Directors”)cease for any reason to constitute at least a majority of the board; provided,that any individual who becomes a member of the Board subsequent to the datehereof, whose election or nomination for election was approved by a vote of atleast two-thirds of the Incumbent Directors shall be treated as an IncumbentDirector unless he or she assumed office as a result of an actual or threatenedelection contest with respect to the election or removal of directors; or

 

(e)                                  Acomplete liquidation or dissolution of the Company;

 

provided, in each case,that such event also constitutes a “change in control event” within the meaningof Treasury Regulation Section 1.409A-3(i)(5).

 

7.             Option Not Transferable.  This Option is not transferable by theParticipant other than by will or the laws of descent and distribution, and isexercisable, 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.

 

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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 discharge anyParticipant 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) the actionis 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 deliver electronically all documents relating to the Plan or thisOption (including, without limitation, prospectuses required by the Securitiesand Exchange Commission) and all other documents that the Company is requiredto deliver to its 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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