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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

 

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AMERICAN SCIENCE AND ENGINEERING, INC.
829 Middlesex Turnpike
Billerica, MA 01821

July [    ], 2010

To our stockholders:

        You are cordially invited to attend the Annual Meeting of Stockholders of American Science and Engineering, Inc. (the "Company") to be held Wednesday, September 8, 2010 at 8:30 a.m. at the Doubletree Hotel Boston-Bedford Glen, 44 Middlesex Turnpike, Bedford, Massachusetts. The Board of Directors and management look forward to personally greeting those stockholders who attend.

        The accompanying Proxy Statement asks for your vote to re-elect the nominated incumbent directors to another one-year term.

        The Proxy Statement also asks for your vote in favor of the proposed amendment to the Company's Articles of Organization to authorize the Board of Directors to make amendments to the Company's bylaws subject to certain limits on that authority.

        In addition, the Board of Directors is requesting that stockholders ratify its selection of Caturano and Company, Inc., a registered public accounting firm, as auditors for the fiscal year ending March 31, 2011.

        The Board of Directors of your Company recommends that you vote FOR these proposals. If you have any questions, please call me, our Chairman, Mr. Denis R. Brown, or Mr. Kenneth J. Galaznik, our Senior Vice President, Chief Financial Officer and Treasurer, at 800-225-1608.

        Thank you for your consideration and I look forward to seeing you at our Annual Meeting on September 8, 2010.

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AMERICAN SCIENCE AND ENGINEERING, INC.
829 Middlesex Turnpike
Billerica, Massachusetts 01821

        

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 8, 2010

        

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        The Annual Meeting of Stockholders of American Science and Engineering, Inc. (the "Company") will be held Wednesday, September 8, 2010 at 8:30 a.m. at the Doubletree Hotel Boston-Bedford Glen, 44 Middlesex Turnpike, Bedford, Massachusetts, for the following purposes:

        (1)   To elect the persons named in the accompanying Proxy Statement to serve as Directors until the next Annual Meeting and until their successors are elected and qualified;

        (2)   To approve the proposed amendment to the Company's Articles of Organization to authorize the Board of Directors to make amendments to the Company's bylaws subject to certain limits on that authority;

        (3)   To ratify the selection of Caturano and Company, Inc., a registered public accounting firm, as auditors for the fiscal year ending March 31, 2011; and

        (4)   To consider and act upon any other business that may properly come before the meeting and any adjournment or adjournments thereof.

        Our Proxy Statement containing information for stockholders accompanies this Notice and a copy of our Annual Report for the fiscal year ended March 31, 2010 is also enclosed.

        The Board of Directors has fixed the close of business, July 23, 2010, as the record date for the determination of stockholders entitled to notice of, and to vote at, the meeting. In addition to voting via mail, the Company will also be offering to stockholders of record voting via the telephone and the internet. Instructions for voting via the telephone or the internet are provided on the enclosed proxy cards. If you hold your shares in "street name" through a bank or broker, you should follow the voting instructions sent to you by your bank or broker.

        Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on September 8, 2010: the Proxy Statement, the Annual Report to Stockholders, and directions to attend the meeting and vote in person are available on the Investor Information page of the Company's website at www.as-e.com under the subheading "Annual Meeting Materials."

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        YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING IN PERSON, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE, OR VOTE BY TELEPHONE OR INTERNET ACCORDING TO THE INSTRUCTIONS ON THE PROXY CARD. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.

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AMERICAN SCIENCE AND ENGINEERING, INC.
829 Middlesex Turnpike
Billerica, Massachusetts 01821

        

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PROXY STATEMENT

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        The enclosed Proxy is solicited by the Board of Directors of American Science and Engineering, Inc. (the "Company") for use at the Annual Meeting of Stockholders to be held on Wednesday, September 8, 2010 at 8:30 a.m. at the Doubletree Hotel Boston-Bedford Glen, 44 Middlesex Turnpike, Bedford, Massachusetts, and at any adjournment of the meeting (the "Meeting"). The matters to be considered and acted upon at the Meeting are described in the attached notice of the Meeting and in this Proxy Statement.

        Stockholders of record at the close of business on July 23, 2010 are entitled to notice of and to vote at the Meeting. Each share of Common Stock of the Company outstanding on the record date is entitled to one vote. As of the close of business on July 23, 2010, [                                    ] shares of Common Stock of the Company were outstanding.

        We anticipate that this Proxy Statement and the accompanying proxy card will first be mailed to stockholders on or about August [4], 2010.

        The votes of the stockholders present in person or represented by proxy at the Meeting will be tabulated by an inspector of elections appointed by the Company. The representation in person or by proxy of at least a majority of the outstanding shares of Common Stock of the Company as of the record date is necessary to provide a quorum at the Meeting. When a quorum is present, directors are elected by a plurality of the votes properly cast, and other matters voted on at the meeting are decided by a majority of votes properly cast, except when a larger vote is required by law, the Articles of Organization or by the bylaws. The affirmative vote of two-thirds of the holders of Common Stock outstanding and entitled to vote is required for the approval of the amendment of the Company's Articles of Organization. Abstentions and broker "non-votes" are each counted as present in determining whether the quorum requirement is satisfied, but are not counted as votes properly cast with respect to the matter. Accordingly, abstentions and broker "non-votes" will have no effect on the outcome of voting on the election of directors or the ratification of the selection of independent registered public accountants, other than to establish quorum. Abstentions and broker "non-votes" will have the effect of votes against the proposed amendment to the Company's Articles of Organization. A "non-vote" occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a proposal because the broker or other nominee does not have discretionary voting power and has not received instructions from the beneficial owner.

        All proxies solicited by the Board of Directors of the Company that are properly executed and returned, but which are not expressly voted, will be voted at the Meeting in accordance with the recommendation of the Board of Directors of the Company, unless such proxies are revoked prior to the Meeting. A proxy may be revoked by delivering a written notice of revocation to the principal office of the Company, by properly executing and returning a proxy with a later date prior to the vote at the annual meeting, by revoking the proxy in person at the Meeting at any time prior to the voting thereof or by voting a new proxy at the Meeting. Attendance at the Meeting will not, by itself, revoke a proxy.

        The solicitation of proxies in the enclosed form is made on behalf of the Board of Directors. The entire cost of soliciting these proxies, including the costs of preparing, printing and mailing to stockholders this Proxy Statement and accompanying materials, will be borne by the Company. We have retained MacKenzie Partners, Inc. to assist in the distribution of materials and in soliciting proxies by

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mail, telephone and personal interview for a fee of approximately [$            ] plus expenses. In addition to use of the mail, proxies may be solicited personally or by telephone or otherwise by our officers, directors and employees, who will receive no additional compensation for such activities. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of shares held of record by such institutions and persons. Such parties will be reimbursed for their reasonable expenses incurred in connection with these activities.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

        The Board of Directors currently consists of eight members, whose terms expire at the Meeting.

        We have included below the principal occupation and other information about the nominees. We believe the nominees consist of individuals having backgrounds and skills that are important to our business and key initiatives. The summary of each nominee's background that appears below highlights the specific experience, qualifications, attributes and skills of such individual director in the following areas which we consider to be important qualifications for members of our Board: experience in government and defense; experience in global operations and international relations; CEO and other leadership experience; knowledge of industry operations, technology, manufacturing and/or research; knowledge of economics or finance; and knowledge of science, engineering and physics.

        A plurality of the votes properly cast by stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon is required to elect each of the nominated directors. Each director will serve for one year and until his successor is elected and qualified. If any nominee at the time of the election is unable or unwilling to serve or is otherwise unavailable for election, the Board of Directors may designate another nominee and the persons named as proxies will vote all proxies for such nominee. The Board of Directors has no reason to believe that any nominee is unwilling or unable to serve. There are no arrangements between any nominee and any other person relating to such nominee's nomination.

        The Board of Directors recommends a vote FOR each of the below mentioned nominees as directors. Proxies solicited by the Board of Directors of the Company, if properly signed and returned and containing no instructions to the contrary, will be voted FOR electing the nominees listed below as directors of the Company.

Nominees

        The names of, and certain information with respect to, the persons nominated by the Board of Directors for election as directors are as follows:

        Mr. Denis R. Brown has served on the Company's Board of Directors since April 2004 and was appointed Chairman of the Board in June 2008. Mr. Brown is a seasoned CEO with significant experience in defense technology, commercial manufacturing, and service businesses. Since 1999, Mr. Brown has been a private investor and has advised a start-up software company serving the idea management market. As Chairman and CEO of Pinkerton, Inc. from 1994 to 1999, he successfully negotiated the merger with Securitas A.B. to form the largest security company in the world and significantly improved performance and shareholder value. From 1992 to 1996, Mr. Brown served as Chairman and principal owner of Engineering Technical Services until he successfully negotiated the

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Company's sale. He also served in the capacity of Chairman and CEO at Concurrent Corporation (1990 to 1993), and as President and CEO (1985 to 1990) at Penn Central Industries, Inc., Mr. Brown worked at ITT Corp. holding senior positions of Division General Manager and Vice President, ITT Corp. and Chief Executive of the Defense and Space Group from 1970 to 1985. Mr. Brown holds a Bachelor's degree in Slavic Languages from the University of California and a Bachelor's degree in Communications Engineering from the U.S. Naval Postgraduate School, Monterey, California. He served as a U.S. Navy Officer from 1962 to 1969. We believe that Mr. Brown is well suited to serve on our Board due to his experience as a CEO in companies operating in the defense, engineering and manufacturing industries similar to us, including his experience with multinational corporations and defense.

        Mr. Anthony R. Fabiano was appointed the Company's President and CEO and a director of the Company in September 2003. He brought with him more than 20 years of senior management experience in the manufacture and sale of high technology products for both government and commercial applications. Prior to joining the Company, Mr. Fabiano served for five years as President and Chief Operating Officer at Minneapolis-based Despatch Industries, a leading designer and manufacturer of thermal processing equipment. Prior to Despatch, Mr. Fabiano spent three years as Vice President of Defense Systems Operations at Alliant Techsystems, a Fortune 500 aerospace and defense company with leading positions in propulsion, munitions and composite structure materials. Before advancing to Vice President, he was President of Alliant's Ferrulmatic Operations division, formerly Ferrulmatic Inc., an engineering and manufacturing company specializing in precision products for the munitions, industrial power tool, fluid control and medical industries. Prior to acquisition by Alliant, Mr. Fabiano worked at Ferrulmatic for more than a decade, where he served as Vice President and General Manager until he was promoted to President and CEO in 1985. Mr. Fabiano holds a Bachelor of Arts degree from Rutgers University. We believe that Mr. Fabiano is well suited to serve on our Board due to his position as President and CEO of the Company, as well as his significant executive experience with similar companies.

        General John A. Gordon (USAF, Ret.) was elected as a director of the Company in November 2008, and has served on the Company's Science and Technology Advisory Committee since January 2006. General Gordon served in the White House as the President's Homeland Security Advisor from June 2003 to June 2004 and as the Deputy National Security Advisor for Counter Terrorism and the National Director for Counter Terrorism from June 2002 to June 2003. General Gordon was the first administrator of the National Nuclear Security Administration and Undersecretary of Energy, responsible for the entirety of the nation's nuclear weapons program, serving from June 2000 to June 2002. Additionally, he served as Deputy Director of Central Intelligence at the Central Intelligence Agency from 1997 to 2000 and as Associate Director of Central Intelligence for Military Support from 1996 to 1997. As an Air Force four-star general, General Gordon's thirty-two year Air Force career included assignments in research and development, strategic planning, missile and space operations, inter-governmental operations, and international negotiations. He was commissioned in 1968 following graduation from the University of Missouri with a Bachelors of Science degree in physics. He earned a masters degree in physics from the U.S. Naval Postgraduate School, and a masters of arts in business administration from New Mexico Highlands University. We believe that General Gordon is well suited to serve on our Board due to his significant national security, defense and international experience.

        Dr. Hamilton W. Helmer has been a member of the Board since February 1993. He has been the Managing Director of Deep Strategy, a strategy consulting firm since 2002. Prior to that, Dr. Helmer served as Managing Director of Helmer & Associates (Deep Strategy's predecessor firm) from 1982 to 2002. Deep Strategy and Helmer & Associates have served major clients such as Adobe Systems, Hewlett-Packard, John Hancock Mutual Life, Raychem, Pinkerton, Magnavox and Mentor Graphics. Previously, Dr. Helmer was employed at Bain & Company. Dr. Helmer has been a visiting Professor of Economics at Stanford University from 2008 to the present, where he teaches corporate and business

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strategy in the economics department. He holds a Ph.D. in Economics from Yale and is a Phi Beta Kappa graduate of Williams College. We believe Dr. Helmer is well suited to serve on our Board due to his background in business strategy and management consulting for high technology and security companies and his knowledge of finance, corporate mergers and acquisitions and equity markets.

        Dr. Don R. Kania has been a director of the Company since February 2010. He has been President, Chief Executive Officer and Board member of FEI Company, a leading diversified scientific instruments company providing electron and ion-beam microscopes and tools for nanoscale applications across many industries, since August 2006. From July 2004 to July 2006, Dr. Kania served as President and COO of Veeco Instruments, Inc. ("Veeco"), a provider of metrology and process equipment used by manufacturers in the data storage, semiconductor and compound semiconductor/wireless industries. From March 2003 to July 2004, Dr. Kania was President of Veeco. He also held positions as Vice President and CTO at Veeco and was heavily involved in Veeco's operations as well as mergers and acquisitions. Prior to his positions at Veeco, Dr. Kania was a senior manager at Lawrence Livermore National Laboratory and Research Director at Crystallume, a thin film diamond company, and a researcher at the Department of Energy's Los Alamos National Laboratory. Dr. Kania received his B.S., M.S. and Ph.D. degrees in Physics and Engineering from the University of Michigan. We believe Dr. Kania is well suited to serve on our Board due to his experience as a CEO and COO in manufacturing and high technology companies, and his knowledge of physics and engineering.

        Dr. Ernest J. Moniz has been a director of the Company since October 2002, and also previously served as a director from 1990 to 1995. Dr. Moniz is currently the Cecil and Ida Green Professor of Physics and Engineering Systems at the Massachusetts Institute of Technology where he has served on the faculty since 1973. At MIT, he served as Head of the Department of Physics and Director of the Bates Linear Accelerator Center, and is currently Director of the Laboratory for Energy and the Environment and Director of the MIT Energy Initiative. From October 1997 to January 2001, he was Undersecretary of the Department of Energy, responsible for the Offices of Science; Fossil Energy; Energy Efficiency and Renewable Energy; Nuclear Energy, Science and Technology; Environmental Management; and Civilian Radioactive Waste Management. He was the Department's lead negotiator for cooperative programs with Russia dealing with nuclear weapons material control and disposition. Dr. Moniz also served from 1995 to 1997 as Associate Director for Science in the Office of Science and Technology Policy in the Executive Office of the President. Dr. Moniz holds a Bachelor of Science degree in physics from Boston College, a doctorate in theoretical physics from Stanford University, and honorary doctorates from the University of Athens, the University of Erlangen-Nurenburg, and Michigan State University. Dr. Moniz is a fellow of the American Association for the Advancement of Science, the Humboldt Foundation, and the American Physical Society and is also a member of the Council on Foreign Relations. He currently serves on the Board of Directors of Electric Power Research Institute and Nexant, Inc., and serves on the corporate technology advisory council at BP plc. He is a member of the President's Council of Advisors on Science and Technology and the Blue Ribbon Commission for America's Nuclear Future. We believe Dr. Moniz is well suited to serve on our Board due to his significant knowledge of physics and engineering and his governmental experience.

        Dr. Mark S. Thompson has been a member of the Board since November 2005. Dr. Thompson has been President and Chief Executive Officer of Fairchild Semiconductor since May 2005, and was elected Chairman of its Board of Directors in May 2008. From 2001 to 2004, Dr. Thompson had been the Chief Executive Officer of Big Bear Networks, Inc., a designer and manufacturer of optoelectronic network solutions. He was previously Vice President and General Manager of Tyco Electronics' Power Components Division and, prior to its acquisition by Tyco, was Vice President of Raychem Electronics' OEM Group. In addition to Fairchild Semiconductor, he also currently serves on the Board of Directors of Cooper Industries. He holds a bachelor's degree in Chemistry from State University of New York and a Ph.D. in Inorganic Chemistry from the University of North Carolina. We believe

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Dr. Thompson is well suited to serve on our Board due to his executive experience as a CEO in manufacturing and high technology companies.

        Mr. Carl W. Vogt has been a director of the Company since June 1997. In 2004, Mr. Vogt retired as counsel from Fulbright & Jaworski L.L.P., a nationally and internationally based law firm (where he was formerly a senior partner). He currently serves as a Director of Yellow Roadway Corporation. He was formerly a Director of DWS-Scudder Mutual Funds Investment Company from 1995 to 2007, a Director of the ISI Managed Funds from 1999 to 2004, a Director of the National Passenger Railroad Corporation (AMTRAK) from 1990 until 1992, a Director of Waste Management, Inc., from 2001 to 2006, and Chair of the U.S. National Transportation Safety Board from 1992 until 1994. He was a Trustee of Williams College, where he served as President (interim) from 1999 until 2000, Chair of the Flight Safety Foundation and a member of the American Council of Germany. Mr. Vogt is a Fellow of the Royal Aeronautical Society, a Fellow of the American Bar Foundation and was an Industrial Fellow, Linacre College, Oxford University, England. Mr. Vogt holds a B.A. degree from Williams College and a LLB degree from University of Texas Law School. We believe Mr. Vogt is well suited to serve on our Board due to his prior board experience as well as his finance, legal and governance experience.

Executive Officers (who are not also Directors)

        The names of, and certain information with respect to, each person serving as an executive officer of the Company as of July 13, 2010 (other than Mr. Fabiano whose information appears above) are as follows:

        Kenneth A. Breur was appointed Senior Vice President, Advanced Development and Logistics in May 2010, was Senior Vice President, Product Management and Engineering from March 2008 until May 2010, and was previously Vice President of Operations at the Company. Mr. Breur has more than twenty-five years of experience in manufacturing technology with special focus on increasing operational effectiveness for product optimization and cost reduction. Prior to joining the Company in December

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2003, Mr. Breur spent six years in management positions at Minneapolis-based Despatch Industries, a leading designer and manufacturer of thermal processing equipment, where as Vice President, he managed worldwide sales and marketing, product management and engineering. Overseeing facilities in Minnesota, Michigan and California, Mr. Breur was responsible for profit & loss of all products, as well as product development initiatives. Before advancing to Vice President, Mr. Breur was Director of Product Management and Engineering. Mr. Breur holds a bachelor's degree in manufacturing engineering and a certificate in mechanical engineering from the New Jersey Institute of Technology in Newark, New Jersey.

        Dr. Joseph Callerame is Senior Vice President of Science and Technology at the Company. Prior to joining the Company in 1998, Dr. Callerame served at Raytheon Electronic Systems as Manager of Engineering and Technology Development. From 1993 to 1994, he served as Deputy General Manager of the Research Division of Raytheon, and from 1989 to 1992 he was Assistant General Manager of this Division. Prior to serving as Assistant General Manager, Dr. Callerame held the position of Manager, Infrared Detector Laboratory and the Stable Sources Laboratory. From 1977 to 1980, Dr. Callerame was a senior scientist in Medical Ultrasound at Raytheon's Research Division. Dr. Callerame earned his Ph.D. and master's degree in physics from Harvard University and holds a bachelor's degree in chemical physics from Columbia University. Dr. Callerame also served as a Postdoctoral Fellow in physics at MIT from 1975 to 1977.

        Robert Cline was appointed Senior Vice President of Operations in March of 2008. In his current role, Mr. Cline has responsibility for overseeing the Company's manufacturing facility, including production, manufacturing engineering, facilities, and materials. Prior to appointment to his current position, Mr. Cline held several other positions at the Company, including Vice President, Manufacturing from 2000 to 2008. Prior to joining the Company in 1996, Mr. Cline held management positions at Allard Industries, including Director of Engineering and served as a nuclear trained officer in the U.S. Navy, Submarine Force. Mr. Cline received a master's degree in Manufacturing Engineering from Boston University and a bachelor's degree in Electrical Engineering from Michigan Technological University.

        Kenneth J. Galaznik is Senior Vice President, Chief Financial Officer and Treasurer of the Company. Prior to appointment to his current position in February 2005, Mr. Galaznik served as Acting Chief Financial Officer from June 2004 to February 2005, as Vice President of Finance from July 2003 to June 2004, and as a financial management consultant from August 2002 to July 2003. Previously, he was Vice President of Finance at Spectro Analytical Instruments, Inc. and has over thirty years of experience in accounting and finance positions in manufacturing and real estate development entities. Mr. Galaznik holds a bachelor of business administration degree in accounting from the University of Houston. Mr. Galaznik currently serves on the Board of Directors of Bridgeline Digital, Inc.

        Patricia A. Gray was appointed Senior Vice President, General Counsel and Clerk effective in March 2009. Ms. Gray has more than 25 years experience as a corporate lawyer and almost 20 years as general counsel for various corporations. Prior to joining the Company, Ms. Gray served as Senior Vice President, General Counsel and Secretary of The Children's Place Retail Stores, Inc. from 2007 until 2009. From December 2007 to May 2008, Ms. Gray was also an officer of Hoop Holdings, LLC, a subsidiary of The Children's Place Retail Stores, Inc. and three affiliated companies, which filed for bankruptcy protection in March 2008. From 2005 to 2007, Ms. Gray served as Senior Vice President, Chief Legal Officer and Secretary of Panera Bread Company, and from 1999 to 2004 Ms. Gray served as Senior Vice President, General Counsel and Secretary for Arch Wireless, Inc. and affiliated companies, which filed for bankruptcy protection in December 2001. These companies emerged from bankruptcy protection upon confirmation of a plan of reorganization in May 2002. Ms. Gray received her Bachelor of Arts degree from Cornell University and her JD from Georgetown University.

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        Paul H. Grazewski was appointed Senior Vice President of Strategic Planning in March of 2008 and was previously Vice President of Product Management at the Company. In his current role, Mr. Grazewski has responsibility for developing and implementing strategic plans at all levels of the organization and for managing strategic relationships for the Company. He joined the Company in 2002 as Vice President, Program Management. From 2000 to 2001, Mr. Grazewski served as Director of Programs for Alcatel, a communications solutions provider, where he led the development of a high-speed Internet router. From 1996 to 1999, Mr. Grazewski served as Vice President, Programs and Business Development at General Dynamics Armament Systems, where he delivered integrated defense systems to a worldwide client base. From 1993 to 1996, Mr. Grazewski was Director of Programs at Lockheed Martin, a leading systems integrator and information technology company. Mr. Grazewski holds a bachelor's degree in industrial engineering and operations research from the University of Massachusetts—Amherst, and an MBA from Xavier University in Cincinnati, Ohio.

        George M. Peterman is Senior Vice President of Human Resources at the Company and is responsible for leading the development of the Company's Human Resources operations and programs. With over thirty years of experience in organizational development, compensation program design and strategic recruiting, Mr. Peterman implements effective programs to build and support a world class workforce. Prior to joining the Company in 2003, Mr. Peterman spent eleven years in executive roles at a Boston area human resource professional service provider. Prior to this role, Mr. Peterman provided human resources services through his own consulting practice. Prior to his consulting career, Mr. Peterman held corporate human resources positions at Data General Corporation, Digital Equipment Corporation and Honeywell Information Systems. Mr. Peterman holds a Bachelor of Arts degree from Princeton University.

        Robert G. Postle is Senior Vice President of Worldwide Marketing and Sales at the Company. Prior to joining the Company in March 2004, Mr. Postle was Vice President of Sales and Marketing at SolVision, Inc., a leader in automated visual inspection solutions for the microelectronics industry, from 2003 to 2004. From 2002 to 2003, Mr. Postle was the Vice President of Sales at Sagitta, Inc., a semiconductor/telecommunications equipment manufacturer. Prior to that, Mr. Postle served for seven years as Vice President of Sales, Marketing and International for PRI Automation, a semiconductor capital equipment company. Mr. Postle holds a bachelor's degree in business administration from the State University of New York in Brockport, New York.

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CORPORATE GOVERNANCE

Meetings of the Board of Directors

        During the fiscal year ended March 31, 2010, the Board of Directors of the Company met six times. All of the directors attended 75% or more of the aggregate of the total number of meetings of the Board and of the meetings of committees of the Board on which they served. Our Board of Directors has determined that each of Mr. Denis Brown, General John Gordon, Dr. Hamilton Helmer, Dr. Don Kania, Dr. Ernest Moniz, Dr. Mark Thompson, and Mr. Carl Vogt is an independent director as such term is defined in the NASDAQ Stock Market Listing Rules and that Dr. Roger Heinisch was an independent director under those standards for the period of time he served on the Board in fiscal year 2010. The Board of Directors has three standing Committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The Company also has one informal committee, the Science and Technology Advisory Committee, which holds meetings with members of the Board of Directors as well as members of the Company's scientific team and advisors.

        Resolutions adopted by the Board of Directors provide that directors are encouraged to attend the Annual Meeting of Stockholders. All of the directors attended the 2009 Annual Meeting of Stockholders.

Leadership Structure of Board of Directors

        Mr. Denis R. Brown currently serves as Chairman of the Board, having been appointed to that position in June 2008 and having served on the Company's Board of Directors since 2004. Mr. Anthony Fabiano, a management director, currently serves as President and Chief Executive Officer of the Company. The Chairman of the Board is an independent director in accordance with NASDAQ Stock Market Listing Rules. Our Board has determined that shareholder interests are best served by selecting an independent director to serve as Chairman, who may offer more objective input and leadership to the Board across all Board functions. Given the Board's role in electing Company officers, and overseeing the CEO's performance, the Board believes the Board leadership role is best filled by an individual who does not serve as an officer.

        The Company believes it is the Chairman's responsibility to lead the Board of Directors and the President and Chief Executive Officer's responsibility to lead the day-to-day operations of the Company. The Chairman of the Board is responsible for coordinating the Board's activities, including the scheduling of the meetings and executive sessions of the non-employee directors and the relevant agenda items in each case (in consultation with the Chief Executive Officer as appropriate). The Board believes this leadership structure has enhanced the Board's oversight of and independence from our management, the ability of the Board to carry out its roles and responsibilities on behalf of our shareholders, and our overall corporate governance. In addition to providing strong leadership for our Board, this separation also positions our President and Chief Executive Officer as the leader of the Company in the eyes of our customers, employees and shareholders.

Audit Committee

        The Audit Committee, established in accordance with the applicable securities regulations and NASDAQ Stock Market Listing Rules, currently consists of Dr. Hamilton Helmer (chairman), Dr. Don Kania (who was appointed to the Audit Committee in May of 2010 replacing Mr. Denis Brown) and Dr. Mark Thompson (who was appointed to the Audit Committee in August of 2009 replacing a retiring director). In the opinion of the Board of Directors, all members of the Audit Committee are "independent" as such term is defined in the applicable NASDAQ Stock Market Listing Rules, the applicable securities regulations and the Audit Committee charter and all members of the Audit Committee are independent of management and free of any relationship that would interfere with the

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exercise of independent judgment as members of the Audit Committee. The Board believes that the members of the Audit Committee have sufficient knowledge and experience with financial and accounting matters to perform their duties as members of the Audit Committee and has determined that Dr. Helmer qualifies as an "audit committee financial expert" as such term is defined under applicable securities regulations. This Committee, which met five times during fiscal year 2010, is primarily responsible for reviewing the activities of the Company's independent auditors, reviewing and evaluating recommendations of the auditors, recommending areas of review to the Company's management, and reviewing and evaluating the Company's financial statements, accounting policies, reporting practices and internal controls. Our Board of Directors has adopted a written charter for the Audit Committee which is posted on our website at www.as-e.com in the Corporate Governance section of the Investor Information page.

Compensation Committee

        The Compensation Committee currently consists of Mr. Denis Brown (chairman), Dr. Mark Thompson (who was appointed to the Committee in May 2010) and Mr. Carl Vogt. This Committee, which met three times during fiscal year 2010, is responsible for making recommendations to the Company's Board of Directors concerning the levels and types of compensation and benefits to be paid and granted to the Company's Chief Executive Officer, for approving the compensation of the other executive employees of the Company and for the administration of the Company's equity incentive plans. The Company's Chief Executive Officer did not attend any meeting of the Compensation Committee during which the Compensation Committee prepared its recommendation regarding the level and type of compensation and benefits for the Chief Executive Officer. In the opinion of our Board of Directors, all members of the Compensation Committee are "independent" as such term is defined in the NASDAQ Stock Market Listing Rules and the Compensation Committee charter and "non-employee directors" as such term is defined in the applicable securities regulations. Our Board of Directors has adopted a written charter for the Compensation Committee which is posted on our website at www.as-e.com in the Corporate Governance section of the Investor Information page.

Nominating and Corporate Governance Committee

        The Nominating and Corporate Governance Committee consists of Mr. Carl Vogt (chairman), Mr. Denis Brown and Dr. Hamilton Helmer (who was appointed to the Committee in May 2010). This Committee met two times during fiscal year 2010. The Committee is charged with the responsibility of identifying appropriate candidates for nomination to the Board. Matters under the Company's Code of Business Conduct and Ethics and other matters pertaining to the governance of the Board and Company. In the opinion of our Board of Directors, all members of the Nominating and Corporate Governance Committee are "independent" as defined in the NASDAQ Stock Market Listing Rules and the Nominating and Corporate Governance Committee charter. The Company's bylaws currently set forth the procedures for the nomination of candidates for director by stockholders, which are set forth below under "Stockholder Proposals and Director Nominations for 2011 Annual Meeting." Our Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee which is posted on our website at www.as-e.com in the Corporate Governance section of the Investor Information page.

Nominating Process

        The process followed by the Nominating and Corporate Governance Committee to identify and evaluate director candidates includes 1) requests to Board members, the Chief Executive Officer and others for recommendations, 2) use of executive search firm and professional consulting resources to identify key needs of the Board, selection criteria and potential candidates who may meet such needs and criteria, 3) periodic meetings to discuss and evaluate biographical information and background

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materials relating to potential candidates, and 4) interviews of selected candidates by the Committee members and other members of the Board as determined by this Committee in consultation with the Board.

        In considering whether to include a candidate in the Board's slate of recommended director nominees, the Nominating and Corporate Governance Committee will apply criteria set forth in the Charter of the Committee. These criteria include each candidate's ability, judgment and experience and the overall diversity and composition of the Board. In addition, the criteria for nominee evaluation includes knowledge of the Company's industry; experience in manufacturing, business or corporate operations; executive level management or strategic planning skills; other Board experience; business acumen; federal government, military or international experience; financial reporting familiarity, and other core competencies specific to the Company's business such as physics or other sciences, engineering or radiation technology. The Company seeks a balance of experience and no single criterion or minimum level of qualifications is a prerequisite for each prospective nominee, but depends upon the current composition of the Board. The Board believes that the backgrounds and qualifications of its members taken as a group should provide the experience, knowledge and abilities to allow the Board to fulfill its responsibilities.

        Neither the Board nor the Nominating and Corporate Governance Committee have adopted a formal policy with regard to the consideration of diversity when evaluating candidates for election to the Board. However, the Board believes that Board membership should reflect diversity in its broadest sense, therefore the Nominating and Corporate Governance Committee considers experience, education and differences of viewpoint when evaluating individual qualifications for election to the Board and in making recommendations for Board approval, considering the composition of the Board as a whole.

        Dr. Kania, who joined the Board in February 2010, was identified by a third party search firm.

        Director candidates recommended by stockholders will be considered on the same basis as candidates recommended or identified by other sources. To recommend a candidate, stockholders should submit the candidate's name, along with their biographical and background materials, to the attention of the Nominating and Corporate Governance Committee at 829 Middlesex Turnpike, Billerica, Massachusetts 01821. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in the Company's proxy card for the next Annual Meeting.

        Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or our Board, by following the procedures set forth under "Stockholder Proposals and Director Nominations for the 2011 Annual Meeting."

Risk Oversight

        The Board is responsible for oversight of the Company's risk management process. Having a Chairman who is independent of management adds another layer of objective insight and perspective to the risk assessment process. The entire senior management of the Company is responsible for risk management on a day-to-day basis, including identifying risks, managing risks, and reporting and communicating risks back to the Board of Directors. The Board of Directors, including Board Committees comprised solely of independent directors, reviews various areas of significant risk to the Company, and advises management on policies, strategic initiatives, annual report on internal controls and other actions. Specific examples of risks primarily overseen by the full Board of Directors include competition risks, industry risks, economic risks, business operations and employee compensation risks and risks related to acquisitions and dispositions.

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        The Committees are primarily responsible for considering and overseeing risks within their particular area of concern. For example, as provided in its charter, the Audit Committee meets regularly with management, our independent registered public accountants and our internal auditors, to discuss the integrity of our financial reporting processes and internal controls as well as the steps that have been taken to monitor and control risks related to such matters. The Nominating and Corporate Governance Committee monitors compliance with the Code of Business Conduct and Ethics and reviews compliance with applicable laws and regulations related to corporate governance. The Compensation Committee reviews and evaluates risks related to the design and implementation of all general compensation programs applicable to the Company's employees, including an annual review of both the design and the application of compensation and benefits programs.

Communication with Directors

        The Board of Directors, including a majority of the independent directors, has approved procedures for stockholders to communicate directly with our Board of Directors on a confidential basis. Pursuant to these established procedures, the Board will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. Specifically, the Chairman of the Board (if an independent director), or otherwise the Chairman of the Nominating and Corporate Governance Committee, with the assistance of the Company's Senior Vice President, General Counsel and Clerk, is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors as he or she considers appropriate. Under the procedures approved by the Board of Directors, including a majority of the independent directors, communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the Chairman of the Nominating and Corporate Governance Committee considers to be important for the directors to know. In general, communications relating to corporate governance and long term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which the Company tends to receive repetitive or duplicative communications. Stockholders who wish to send communications on any topic to the Board should address such communications to Board of Directors c/o American Science and Engineering, Inc., 829 Middlesex Turnpike, Billerica, Massachusetts 01821 c/o General Counsel and Clerk.

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OWNERSHIP OF COMMON STOCK OF THE COMPANY BY CERTAIN PERSONS

        The following table sets forth the number of shares of the Company's voting stock beneficially owned (as determined under the applicable securities regulations) directly or indirectly as of June 30, 2010 by (i) each current director of the Company; (ii) each executive officer of the Company named in the Summary Compensation Table below; (iii) all current directors and executive officers of the Company as a group; and (iv) each person who is known to the Company to beneficially own more than five percent (5%) of the outstanding shares of any class of the Company's voting stock, as well as the percentage of the outstanding voting stock represented by each such amount. Unless otherwise indicated below, the persons named in the table have sole voting and dispositive power as to the shares shown. The information in the table is based on information available to the Company. The total number of shares of Common Stock outstanding as of June 30, 2010 was 9,029,157.

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(1)

Unless otherwise indicated, the address of all persons listed above is c/o American Science and Engineering, Inc., 829 Middlesex Turnpike, Billerica, MA 01821.

(2)

Includes shares that may be acquired under stock options exercisable within sixty days after June 30, 2010, as follows: Mr. Breur—2,115; Mr. Brown—41,378; Mr. Fabiano—19,485; Mr. Galaznik—4,765; General Gordon—5,926; Dr. Helmer—35,000; Dr. Moniz—35,000; Mr. Postle—12,044; Dr. Thompson—7,000; Mr. Vogt—28,000 and all current Directors and Officers as a group—270,786.

(3)

Certain executive officers hold restricted shares which we include in this column. The executives may vote the restricted shares, but may not sell or transfer them during the restricted period. These restrictions lapse based upon a combination of attainment of performance-based goals and time of service with the Company. The Board of Directors hold restricted shares which vest ratably during their term. The individuals in the table hold the following number of restricted shares: Mr. Breur—5,272; Mr. Brown—360; Mr. Fabiano—39,275; Mr. Galaznik—10,510; General Gordon—240; Ms. Gray—7,398; Dr. Helmer—241; Dr. Kania—325; Dr. Moniz—241; Mr. Postle—6,064; Dr. Thompson—241; Mr. Vogt—241 and all current Directors and Officers as a group—89,163.

(4)

Amount owned constitutes less than one percent.

(5)

Based on a Schedule 13G filed on January 29, 2010. The address of BlackRock Inc. is 40 East 52^nd Street, New York, NY 10022.

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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

Compensation Discussion and Analysis

Overview

        In considering our executive compensation policies and practices we have an obligation to balance our interests in conserving cash and minimizing stockholder dilution with our interest in using compensation to attract, retain and motivate Company management and employees who contribute to our success. Our approach to achieving this balance is to build compensation programs that integrate marketplace appropriate base salaries with short and long-term performance-based incentives. The majority of executive compensation is dependent on achievement of annual and long-term Company goals.

        We believe that the structure of our executive compensation programs aligns the financial interests of executives with building the long term value of the Company, which in turn will result in an overall increase in stockholder value.

The Role of the Compensation Committee

        The Board of Directors (acting through its independent directors) has sole responsibility for determining compensation for the Chief Executive Officer. The Board of Directors solicits the recommendations of the Compensation Committee regarding his compensation, in light of the Compensation Committee's evaluation of his performance and achievement of financial, strategic and tactical goals and objectives. The Compensation Committee of the Board of Directors has the responsibility for, among other matters, establishing executive compensation programs, overseeing compensation of executive officers (including employment offers and termination arrangements for executive officers), monitoring all general compensation programs applicable to the Company's employees and overseeing regulatory compliance with respect to compensation matters. In the case of compensation for the Chief Executive Officer, the Compensation Committee reviews the goals and objectives established for the Chief Executive Officer, evaluates his performance with respect to such goals and objectives, as well as other factors which may comprise appropriate measures of his performance overall, and, based on such evaluation, makes recommendations to the Board of Directors. This evaluation and determination is made and reviewed annually by the full Board of Directors (acting through the entire group of its independent directors). The Compensation Committee also reports regularly to the full Board of Directors on all of its activities, whether or not related to executive compensation.

        In evaluating the compensation of the Chief Executive Officer, the Board of Directors, acting through its independent directors in executive session, upon recommendation of the Compensation Committee, considers several factors including:

•

Achievement of short and long-term financial and strategic targets and objectives, considering factors such as sales, bookings and earnings per share;



•

The Company's position within the industry in which it competes;



•

Overall Company financial and operating performance;



•

Overall economic climate;



•

Individual contribution to the Company; and



•

Such other qualitative and quantitative factors as the Board of Directors, upon recommendation of the Compensation Committee, may deem appropriate.

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        Compensation practices and policies for the other executive officers are set by the Chief Executive Officer with the advice and oversight of the Compensation Committee. Typically, the Chief Executive Officer makes annual recommendations to the Committee with respect to executive compensation, other than his own. The Committee reviews his proposals and makes a final determination concerning the scope and nature of such compensation arrangements. In addition, the Committee has delegated authority to the President and Chief Executive Officer and Senior Vice President of Human Resources to grant awards under the Company's 2005 Equity and Incentive Plan to "non-reporting" individuals (individuals who are not subject to reporting under Section 16 of the Securities Exchange Act of 1934) of up to 10,000 shares (including shares underlying options) per individual grantee and 100,000 shares (including shares underlying options) in the aggregate.

        For our fiscal year ended March 31, 2009, the Compensation Committee retained an independent compensation consultant from The Nadel Consulting Group, Inc. The consultant reported directly to the Compensation Committee, and advised the independent directors serving on the Board of Directors on matters pertaining to executive and director compensation. He was directed to advise the Compensation Committee and the independent Board members on current and future trends and issues in executive compensation and consulted on the competitiveness of the compensation structure and levels of the Company's Chief Executive Officer as well as compensation comparisons for other members of the senior staff reporting to the Chief Executive Officer. The consultant also advised the Compensation Committee and the Board of Directors on appropriate Board of Directors compensation levels and trends. The Company paid The Nadel Consulting Group, Inc. approximately $23,000 for services rendered in fiscal year 2009.

        The Nadel Consulting Group, Inc. analyzed data from the Economic Research Institute Salary Assessor and Executive database, and the Watson Wyatt Top Management Jobs Interactive database, along with other databases containing key indicators and other relevant data for publicly reporting companies and materials filed with the SEC for such companies in making recommendations to the Compensation Committee. Based on the advice of The Nadel Consulting Group, Inc. and in consultation with the Company's Senior Vice President of Human Resources, the Compensation Committee determined that none of the peer groups offered by any one of these resources provided directly comparable industry metrics. Accordingly, in response to the request of the Compensation Committee, and in consultation with the Company's Senior Vice President of Human Resources, The Nadel Consulting Group, Inc. considered this data from multiple sources, including a peer group consisting of the following companies, which were identified by the Company and Nadel as comparable to the Company (in terms of revenue, market capitalization, price earnings ratio, earnings per share and other financial metrics, along with industry classification, such as high technology, manufacturing and industry):

        The Company did not engage Nadel Consulting Group, Inc. in fiscal 2010 and concluded in November 2009, based on its review of 2009 information gathered by Nadel and its evaluation of market conditions during fiscal 2010 that the fiscal year 2010 executive compensation programs would continue on substantially the same basis as the prior year.

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Compensation Objectives

        The Company's executive compensation program is designed to align executive compensation with financial performance, business strategies and Company values and objectives. This program seeks to enhance the profitability of the Company, and thereby enhance long term stockholder value, by linking the financial interests of the Company's executives with those of its stockholders. Under the guidance of the Compensation Committee, the Company has developed and implemented an executive compensation program to achieve these objectives while providing executives with compensation opportunities that are competitive with peer group companies. It is the Company's philosophy to pay at, or near, industry standards among peer group companies for base salary and to use a combination of short and long-term incentives to reward outstanding Company performance and link the level of the reward to increases in the Company's long term value as a company.

        In applying this philosophy, the Compensation Committee has established a comprehensive program to:

1.

Attract and retain executives with outstanding abilities who are critical to the long-term success of the Company;



2.

Reward executives for attainment of business objectives, including:



a.

Company financial objectives; and



b.

Company operational objectives;



3.

Link executive incentives to the enhancement of stockholder value by:



a.

Structuring the majority of the executive's compensation as performance driven ("at risk") incentive compensation; and



b.

Establishing equity ownership guidelines for executives and members of the Board of Directors;



4.

Encourage continued service by providing a total compensation package that increases in value over time and with an increase in stockholder value.

Executive Compensation Program

        The Compensation Committee approves the executive compensation program on an annual basis, including specific levels of compensation for all executive officers other than the Chief Executive Officer, whose compensation is recommended by the Compensation Committee and approved by the Board of Directors (acting through its independent directors). The Company's executive compensation program has been designed to implement the objectives described above and is comprised of the following elements:

•

Base salary;



•

Performance-based annual cash bonus;



•

Performance-based long term incentive compensation in the form of equity and/or cash based awards;



•

Equity awards made in connection with new hires of executive officers;



•

Stock ownership guidelines; and



•

Change in control and severance benefits.

        Each of these elements of compensation is discussed below.

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        Base Salary.    The Compensation Committee annually reviews the base salaries of the Chief Executive Officer and other members of the senior staff reporting to the Chief Executive Officer. The senior staff is comprised of all officers of the Company at the Senior Vice President level and above, all of whom (with the exception of Mr. Fabiano) report directly to the Chief Executive Officer. The Committee makes recommendations to the Board of Directors (acting through its independent directors) on the base salary for the Chief Executive Officer, to be considered for approval by them in executive session. The executive's performance for the year is measured against pre-determined goals, which are generally designed to include both financial and non-financial objectives, such as successful implementation of management processes, policies and business strategies, and the results are among the factors used as a guide for any salary increase. In addition, the Committee typically approves a budget for increases in base salaries to be allocated by the Chief Executive Officer to other members of the senior staff, in his discretion, in consultation with the Senior Vice President of Human Resources and any outside consultant engaged by the Compensation Committee. The salary levels for the Company's executive officers are reviewed against broad-based compensation surveys and compensation levels of the companies included in the peer group described above, to ensure that such compensation remains at competitive market levels, which is used as the basis on which the budget for market-based adjustments is established. In addition, the Committee also reviews the recommendations of the President and Chief Executive Officer, in consultation with the Senior Vice President of Human Resources, for merit-based increases for other members of the senior staff, and may, in its discretion, establish an additional budget for merit-based salary adjustments to be allocated by the Chief Executive Officer in his discretion.

        In January of 2009, based on the results of the work done by The Nadel Consulting Group, Inc., the Compensation Committee approved a budget totaling 8% of base salary of the entire senior staff excluding the Chief Executive Officer to be allocated by him as follows: half of the budget would be allocated for market-based adjustments to the salaries of those members of the senior staff whose salaries were determined to be below market, and the other half would be allocated for merit based adjustments to the salaries of the senior staff by the Chief Executive Officer in his discretion. In May 2009, upon the recommendation of the Compensation Committee based on its evaluation of his performance and the market and other considerations described above, the Board of Directors, acting through its independent directors in executive session, approved a 5% base salary increase for the Chief Executive Officer for the fiscal year ending March 31, 2010 (fiscal year 2010).

        In January of 2010, the Compensation Committee approved a budget totaling 5% of base salary of the entire senior staff excluding the Chief Executive Officer to be allocated by him as follows: 1% of the budget would be allocated for market-based adjustments to the salaries of those members of the senior staff whose salaries were determined to be below market, and 4% would be allocated for merit based adjustments to the salaries of the senior staff by the Chief Executive Officer in his discretion. In May 2010, upon the recommendation of the Compensation Committee based on its evaluation of his performance and the market and other considerations described above, the Board of Directors, acting through its independent directors in executive session, approved a 5% base salary increase for the Chief Executive Officer for the fiscal year ending March 31, 2011

        Performance-based Annual Bonus Compensation.    Performance-based annual bonus compensation is an important element to reward and motivate executives by making a significant portion of their compensation dependent on the Company's financial performance.

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        The annual bonus plan for the Chief Executive Officer and members of the senior staff requires that a pre-determined threshold level of financial performance be met before any bonus is paid. The threshold is defined to be 80% of the target corporate performance factor, which, for the fiscal year ended March 31, 2010 (fiscal year 2010), was a target level of operating income for the year. The target level of operating income for fiscal year 2010 was $46.7 million. If a threshold performance level of 80% of goal is met, the plan is designed to pay 50% of the target bonus. No bonus is paid for performance below 80% of the goal. If and when the determination is made that the threshold was achieved, the bonus is determined by a formula which adjusts each individual participant's target bonus, expressed as a percentage of the participant's base salary, both by a factor based on the individual's achievement of individual performance targets and another factor based on the Company's achievement of its financial objective. 50% of the target bonus is based on the achievement of both individual performance goals and the corporate performance factor. The remaining 50% of the target bonus is based only on the achievement of the corporate performance factor. Individual performance goals are established by the Board (acting through its independent directors) in the case of the Chief Executive Officer and by the Chief Executive Officer in the case of the other members of the senior staff.

        To maintain cross organizational focus and enhance the priority use of resources across the organization, some individual performance goals are shared among executives. Other individual performance goals are unique to the executive's area of responsibility. The individual performance goals (with their relative weightings) for the Named Executive Officers for fiscal 2010 included the following:

•

Mr. Fabiano was responsible for meeting three top management priorities for the year: (i) development of certain advanced products and technologies (60%); (ii) the development of the Company's Strategic Plan (20%); and (iii) improving the effectiveness of the Company's performance based management practices (20%). This last goal was also shared among the named executives. At the end of fiscal year 2010 Mr. Fabiano achieved 100% of his individual performance goals.



•

Mr. Breur was responsible for: (i) achieving revenue targets in certain product lines (40%); (ii) implementing waste elimination/continuous improvement process (20%); (iii) improving cost of Quality performance (10%); (iv) the development of new products (20%); and (v) the shared goal of improving the organization's performance based management practices (10%). Mr. Breur achieved 100% of his individual performance goals.



•

Mr. Galaznik was responsible for: (i) contributing financial expertise to the accomplish of the three top management priorities discussed above (20%); (ii) ensuring that key management personnel were fully trained in financial and regulatory compliance issues (40%); (iii) improving operational efficiency in the finance organization (20%) and (iv) the shared goal of improving the organization's performance based management practices (20%). Mr. Galaznik achieved 90% of his individual performance goals.



•

Ms. Gray was responsible for: (i) contributing legal expertise to the accomplishment of the three top management priorities discussed above (20%); (ii) improving operational efficiency in the legal organization (20%); (iii) developing and implementing a strategic methodology for IP protection (20%); (iv) implementing additional legal compliance training programs (20%); and (v) the shared goal of improving the organization's performance based management practices (20%). Ms. Gray achieved 100% of her individual performance goals.



•

Mr. Postle was responsible for: (i) achieving the three top management priorities discussed above (20%); (ii) meeting product mix and booking targets (40%); (iii) improving operational efficiency in targeted areas of his organization (20%); and (iv) the shared goal of improving the organization's performance based management practices (20%). Mr. Postle achieved 100% of his individual performance goals.

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        Over-achievement of annual financial objectives is rewarded by prorating the executive's target bonus in relation to the overachievement of financial goals up to a maximum of 200%. Additional compensation above this level is at the discretion of the Compensation Committee and Board of Directors, however no such additional compensation has ever been awarded.

        The target bonus (i.e. amount paid for 100% performance) is calculated as a percent of base pay. In fiscal year 2010 the target bonuses were, as expressed as a percentage of base salary:

        The pre-determined threshold level of financial performance for the fiscal year 2010 bonus plan consisted of achieving operating income of $37.4 million (80% of the financial performance target of $46.7 million operating income). The Company exceeded both the threshold and target performance levels. Accordingly, all members of the senior staff were eligible to receive annual bonus awards in respect of fiscal year 2010. In addition to this Company financial performance target, the formula for calculating the annual bonus award to each member of the senior staff was adjusted based on the individual's achievement of pre-determined management objectives, which included the individual performance targets and operating income targets discussed above. The range of annual bonus awards for members of the senior staff who are Named Executive Officers is set forth in the Summary Compensation Table.

        In January of 2010, the Compensation Committee approved a continuation of these annual bonus programs on substantially the same terms for fiscal year 2011, but with a revised, higher threshold level of financial performance (keyed to a higher operating income targets), which must be met before any bonus becomes payable. Because of the highly unpredictable nature of our business, it is difficult to predict with certainty the likelihood of achieving this threshold. For example, while the Company met its financial targets for fiscal years 2009 and 2010, the Company did not achieve the pre-determined financial performance threshold for fiscal year 2008. The threshold for fiscal year 2011 was determined using a methodology based on past practice.

        Long-Term Incentive Compensation.    The Company adopted a long-term incentive compensation program (LTIP) in fiscal year 2006. This program consists of granting long term incentives in the form of restricted stock, stock options and/or cash subject to performance-based vesting, and is intended to align executive interests with long-term interests of stockholders by linking executive compensation with stockholder value enhancement. The allocation of the awards among these three forms of incentives is determined based on a consideration of accounting and tax factors, along with the Company's cash position and availability of shares for awards. These long term incentive grants are awarded by the Board of Directors (acting through its independent directors) to the Chief Executive Officer and by the Compensation Committee to other members of the Company's senior staff, pursuant to a formula based on a percentage of base salary based on the position of the executive.

        Long term goals that we expect to be achievable within a three to five year horizon are approved annually by the Compensation Committee in consultation with management. These goals include both the financial metrics and business objectives that we believe will result in the growth of long term stockholder value. A portion of the long term incentive compensation vests as each of the goals is met. 100% of the award will vest if all of the goals are met within the five year term limit of the award. If some portion of the goals is not met within the five year timeframe, half of the remaining unvested value of the long term incentive compensation cliff vests and the remainder is forfeited at the end of

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the five year term. We believe that the combination of strict performance vesting modified by a partial cliff vesting provision achieves a balance of performance incentive and executive retention that serves the best interests of the stockholders.

        The financial and business goals underlying the incentive program are recommended by the Compensation Committee for approval by the Board of Directors (acting through its independent members) for the Chief Executive Officer and the members of the senior staff.

        Each of the long term incentive plans initiated in the beginning of each of the fiscal years 2006-2010 calculates the initial value of the award as a percentage of the applicable executive's base salary as follows:

        Financial performance goals for vesting of these awards included, for the long term incentive plan initiated in fiscal year 2006, revenue growth, new product introductions and net operating income, and, for each of the fiscal years 2007 through 2010, revenue growth, new product introductions and return on adjusted net assets over the term of the program. The goals of the previous long term incentive plans were met within the following time frames:

        In June of 2010 the Compensation Committee approved a long term incentive program beginning in fiscal year 2011 with the same target values, expressed as a percentage of base salary, as the program in each of fiscal year 2008, fiscal year 2009 and fiscal year 2010, as follows:

20

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(1)

Non-Equity Incentive Plan Compensation represents incentive compensation earned for the indicated fiscal year under the Company's performance-based annual bonus compensation program and for fiscal 2010 under the Company's performance-based long-term incentive compensation program. For additional information on these programs, please see the section herein named "Compensation Discussion and Analysis—Executive Compensation Program."

(2)

The Stock Awards column represents the grant date fair value of restricted stock awarded during fiscal year 2010, computed in accordance with the FASB ASC 718 Compensation—Stock Compensation. The assumptions used to calculate the value of stock awards are set forth under Note 6 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for fiscal year 2010 filed with the SEC on June 9, 2010. The weighted average fair value of Stock Awards granted in fiscal year 2010 to Named Executive Officers was $61.40 per share.

(3)

The Option Awards column represents the grant date fair value of stock options granted during fiscal year 2010, computed in accordance with the FASB ASC 718 Compensation—Stock Compensation. The assumptions used to calculate the value of option awards are set forth under Note 1 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for fiscal year 2010 filed with the SEC on June 9, 2010. The fair value of Option Awards granted in fiscal year 2010 to Named Executive Officers was $24.97 per share.

(4)

All Other Compensation includes payments by the Company for life insurance premiums, matching contributions to the employee's 401(k) account, costs for annual physical examination for Mr. Fabiano and in fiscal 2009 and fiscal 2010, $22,000 for annual membership dues for Mr. Fabiano for certain business organizations.

(5)

Ms. Gray commenced employment on March 30, 2009.

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(1)

Amounts shown in this row are estimated possible payouts for fiscal year 2010 for the Named Executive Officers under the performance-based annual bonus compensation program. Threshold amounts represent the minimum amount that could be earned for meeting the minimum performance metrics. Target amounts are based on a percentage of the individual's 2010 base salary as outlined in the Compensation Discussion and Analysis above. Maximum amounts are based on 200% of the applicable Named Executive Officers' Target amount for fiscal year 2010 and represent the maximum payout under the program. Actual amounts received for fiscal 2010 are included in the Summary Compensation Table above in the column entitled "Non-Equity Incentive Plan Compensation".

(2)

Amounts shown represent estimated payouts pursuant to restricted stock and stock option awards granted under the long-term incentive plan outlined in the Compensation Discussion and Analysis above. Threshold amounts represent the vesting of 50% of the total potential shares issuable pursuant to the award under the terms of the LTIP. If some portion of the performance goals established under the LTIP is not met by the end of the five year term of the award, half of the remaining unvested shares vest and the remainder are forfeited. Target and maximum amounts represent full vesting of the shares issuable pursuant to the awards, which would occur if all performance goals were met during the five year term of the award. The Grant Date Fair Value column represents the fair value of stock and option awards calculated using the Black-Scholes option pricing model. The assumptions used to calculate the value of the option awards are set forth under Note 1 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for fiscal year 2010 filed with the SEC on June 9, 2010. The fair values reported for stock awards are equal to the market price per share of the Company's common stock on the date of grant.

(3)

One-third of the shares subject to the stock award vest each year from the date of grant. Vesting is contingent upon continued service with us.

(4)

The Grant Date Fair Value column represents the fair value of stock and option awards calculated using the Black-Scholes option pricing model. The assumptions used to calculate the value of the option awards are set forth under Note 1 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for fiscal year 2010 filed with the SEC on June 9, 2010. The fair values reported for stock awards are equal to the market price per share of the Company's common stock on the date of grant.

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(1)

Option grant vested in three annual installments from date of grant.

(2)

Options were originally granted as part of a performance-based award which vested 3/31/07 upon achievement of performance goals.

(3)

Options were originally granted as part of performance-based awards which vested 3/31/09 upon achievement of performance goals.

(4)

Options are part of performance-based awards, one-third of which vested 3/31/09 and two-thirds of which vested 3/31/10 upon achievement of performance goals

(5)

Options are part of performance-based awards which vested 3/31/10 upon achievement of performance goals.

(6)

Awards vest upon attainment of performance-based goals over a five year period. If performance goals are not met within the five year period, 50% of unvested shares subject to the awards vest at that time. The figures above are based upon the assumption that all performance goals will be met, and therefore all shares subject to the awards will vest within the five year period.

(7)

Market value of stock awards is calculated by multiplying the closing price of the Company's common stock on March 31, 2010, the last day of the Company's fiscal year 2010, by the number of shares of stock constituting the award.

(8)

Grant vests in three annual installments from date of grant.

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(1)

The amounts shown in this column represent the difference between the option exercise price and the closing market price on the date of exercise.

(2)

The amounts shown in this column represent the number of shares vesting multiplied by the closing market price on the date of vesting.

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(1)

Cash payment amounts are based on the following components:

a.

Base pay using salary in effect as of March 31, 2010;

b.

Annual target bonus calculated by taking current salary multiplied by target cash bonus percentage;

c.

Health benefits based on current COBRA rates;

d.

For Mr. Fabiano, life insurance premiums of $5,000 annually; and

e.

Value of current non-vested cash award under the long-term incentive plans.

(2)

Amounts shown in the table assume that the termination occurred on March 31, 2010, the last day of the Company's fiscal year 2010.

(3)

Assumes stock price of $74.92, which was the closing price of our stock on March 31, 2010, the last trading day of the Company's fiscal year.

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(1)

Cash payment amounts are based on the following components:

a.

Base pay using salary in effect at March 31, 2010;

b.

Annual target bonus calculated by taking current salary multiplied by target cash bonus percentage;

c.

Health benefits based on current COBRA rates; and

d.

For Mr. Fabiano, life insurance premiums of $5,000 annually.

(2)

Cash payment amounts are based on the following components:

a.

Health benefits based on current COBRA rates; and

b.

For Mr. Fabiano, life insurance premiums of $5,000 annually.