Note 15. Stock-Based Compensation

The Company's selling, general and administrative expenses for the fiscal years ended April 1, 2012, March 27, 2011 and March 28, 2010 includes $2,928,200, $2,274,000 and $2,162,600, respectively, of stock compensation expense. Provision for income taxes for the fiscal years ended April 1, 2012, March 27, 2011 and March 28, 2010 includes $1,127,400, $809,500 and $821,800, respectively, of income tax benefits related to our stock-based compensation arrangements. Stock compensation expense is primarily related to our Performance Stock Unit Program as described below.

The Company's stock incentive plan is the Second Amended and Restated 1994 Stock and Incentive Plan (the 1994 Plan). On July 21, 2011, the Company's shareholders approved an amendment to the 1994 Plan increasing the number of shares of common stock available for the grant of awards by 690,000 shares, from 2,638,125 to an aggregate of 3,553,125 shares of the Company's common stock. As of April 1, 2012, 696,303 shares were available for issue in respect of future awards under the 1994 Plan. Subsequent to the Company's 2012 fiscal year end, on May 3, 2012, based on fiscal year 2012 results, 2,800 shares related to Performance Stock Units (PSUs) were cancelled, and as a result, those shares were made available for future grants. Also in May 2012, additional PSUs and restricted stock awards were issued, providing recipients with the opportunity to earn up to 151,200 and 20,100 additional shares, respectively, of the Company's common stock in the aggregate. Accordingly, on May 3, 2012, an aggregate of 527,803 shares were available for issue pursuant to future awards under the 1994 Plan. The 1994 Plan allows for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock awards and other performance awards. On July 21, 2011, the Company's shareholders also approved an amendment to extend the date through which awards may be granted under the 1994 Plan from July 22, 2014 to July 21, 2016. No additional awards can be made under the 1994 Plan after July 21, 2016, without shareholder approval of an extension of the plan term. Options, restricted stock and PSU awards have been granted as awards under the 1994 Plan. Shares which are subject to outstanding PSU or other awards under the 1994 Plan, and which are not earned, are returned to the 1994 Plan and become available for future issuance in accordance with and otherwise subject to the terms of the 1994 Plan.

Performance Stock Units:Beginning in fiscal year 2005, the Company's equity-based compensation philosophy and practice shifted away from awarding stock options to granting performance-based and time-vested stock grants. Accordingly, in April 2004, the Company's Board of Directors established a Performance Stock Unit (PSU) Award Program under the 1994 Plan. Under the program, PSUs have been granted to selected individuals. Each PSU entitles the participant to earn TESSCO common stock, but only after earnings per share and, for non-director employee participants, individual performance targets are met over a defined performance cycle. Performance cycles, which are fixed for each grant at the date of grant, are one year. Once earned, shares vest and are issued over a specified period of time determined at the time of the grant, provided that the participant remains employed by or associated with the Company at the time of share issuance. Earnings per share targets, which take into account the earnings impact of this program, are set by the Board of Directors in advance for the complete performance cycle at levels designed to grow shareowner value. If actual performance does not reach the minimum annual or threshold targets, no shares are issued. In accordance with the FASB standard on stock compensation, the Company records compensation expense on its PSUs over the service period, based on the number of shares management estimates will ultimately be issued. Accordingly, the Company determines the periodic financial statement compensation expense based upon the stock price at the PSU grant date, net of the present value of dividends expected to be paid on TESSCO common stock before the PSU vests, management's projections of future EPS performance over the performance cycle, and the resulting amount of estimated share issuances, net of estimated forfeitures. The Company estimated the forfeiture rate primarily based on historical experience and expectations of future forfeitures. The Company's calculated estimated forfeiture rate is less than 1%.

The following table summarizes the activity under the Company's PSU program for fiscal years 2012, 2011 and 2010:

	2012					2011					2010
	Shares			Weighted- Average Fair Value at Grant		Shares			Weighted- Average Fair Value at Grant		Shares			Weighted-Average Fair Value at Grant
Outstanding, non-vested beginning of period		696,089		$	10.15		679,627		$	6.75		539,241		$	8.07
Granted		260,000			10.97		274,500			16.00		396,000			5.85
Vested		(201,546	)		8.20		(238,163	)		7.24		(141,794	)		8.19
Forfeited/canceled		(149,699	)		15.55		(19,875	)		9.42		(113,820	)		7.81
Outstanding, non-vested end of period		604,844		$	9.81		696,089		$	10.15		679,627		$	6.75

As of April 1, 2012, there was approximately $1.9 million of total unrecognized compensation cost, net of forfeitures, related to PSUs. These costs are expected to be recognized over a weighted average period of 1.4 years. Total fair value of shares vested during fiscal years 2012, 2011 and 2010 was $2,191,500, $3,639,100 and $833,700, respectively.

Of the outstanding PSUs covering 604,844 non-vested shares as of April 1, 2012, PSUs covering 2,800 shares were cancelled in May 2012, based on fiscal year 2012 activity. These PSUs were cancelled primarily because individual performance targets for certain non-director employee participants did not fully reach the target performance set forth in the PSU grants for fiscal year 2012. The remaining 602,044 shares have been earned based on past performance, but not yet vested as of April 1, 2012. Assuming the respective participants remain employed by or affiliated with the Company on these dates, these shares will vest and be paid on or about May 1 of 2012, 2013, 2014 and 2015, as follows:

	Number of Shares
2012		258,189
2013		187,262
2014		94,043
2015		62,550
		602,044

Subsequent to the Company's 2012 fiscal year end, on May 3, 2012, the Compensation Committee, with the concurrence of the full Board of Directors, granted additional PSUs to selected key employees, providing them with the opportunity to earn up to 151,200 additional shares of the Company's common stock in the aggregate, depending upon whether certain threshold or goal earnings per share targets are met and individual performance metrics are satisfied in fiscal year 2013. These PSUs have only one measurement year (fiscal year 2013), with any shares earned at the end of fiscal year 2013 to vest 25% on or about each of May 1 of 2013, 2014, 2015 and 2016, provided that the participant remains employed by or affiliated with the Company on each such date.

Stock Options: In accordance with the FASB standard on stock compensation, the fair value of the Company's stock options have been determined using the Black-Scholes-Merton option pricing model, based upon facts and assumptions existing at the date of grant. Stock options granted have exercise prices equal to the market price of the Company's common stock on the grant date.

The value of each option at the date of grant is amortized as compensation expense over the option service period. This occurs without regard to subsequent changes in stock price, volatility or interest rates over time, provided that the option remains outstanding. The following table summarizes the pertinent option information for outstanding options:

Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding, beginning of year		135,000		$	5.11
Granted		--			--
Exercised		(135,000	)		5.11
Cancelled		--			--
Outstanding, end of year		--		$	--		--	$	--
Exercisable, end of year		--		$	--		--	$	--

There were no options granted during fiscal years 2012, 2011 and 2010. The total intrinsic value of options exercised during fiscal years 2012, 2011 and 2010 was $2,087,800, $299,300 and $72,300, respectively.

As of April 1, 2012, there was no unrecognized compensation costs related to stock options.

Restricted Stock: During the second quarter of fiscal year 2007, the Company granted 225,000 shares of the Company's common stock to its Chairman and Chief Executive Officer as a restricted stock award under the 1994 Plan. These shares vest ratably over ten fiscal years based on service, beginning on the last day of fiscal year 2007 and ending on the last day of fiscal year 2016, subject, however, to the terms applicable to the award, including terms providing for possible acceleration of vesting upon death, disability, change in control or certain other events. The weighted average fair value for these shares at the grant date was $10.56. On both April 1, 2012 and March 27, 2011, 22,500 shares of restricted stock were released and vested. As of April 1, 2012, there were 90,000 unvested shares and approximately $1.0 million of total unrecognized compensation costs related to restricted stock. Unrecognized compensation costs related to this award are expected to be recognized ratably over a period of approximately four years.

On April 25, 2011, the Compensation Committee, with the concurrence of the full Board of Directors, granted an aggregate of 20,100 restricted stock awards to the non-employee directors of the Company. These awards provide for the issuance of shares of the Company's common stock in accordance with a vesting schedule. These restricted stock awards will vest and be issued 25% on or about each of May 1 of 2012, 2013, 2014 and 2015, provided that the participant remains associated with the Company (or meets orther criteria as prescribed in the agreement) on each such date. As of April 1, 2012, there was approximately $0.3 million of total unrecognized compensation costs related to restricted stock. Unrecognized compensation costs related to this award are expected to be recognized ratably over a period of approximately three years.

Subsequent to the Company's 2012 year end, on May 3, 2012, the Compensation Committee, with the concurrence of the full Board of Directors, also granted restricted stock awards to the non-employee directors of the Company, providing them with the opportunity to have issued to them at a later date, upon vesting, up to 3,350 shares each, or up to 20,100 additional shares of the Company's common stock in the aggregate. Restricted stock awards are subject to time vesting but not performance vesting. These restricted stock awards will vest and be issued 25% on or about each of May 1 of 2013, 2014, 2015 and 2016, provided that the participant remains associated with the Company (or meets other criteria as prescribed in the agreement) on each such date.

Compensation expense on restricted stock is measured using the grant date price, net of the present value of dividends expected to be paid on TESSCO common stock before the PSU vests.

Team Member Stock Purchase Plan: During fiscal year 2000, the Company adopted the Team Member Stock Purchase Plan. This plan permits eligible employees to purchase up to an aggregate of 450,000 shares of the Company's common stock at 85% of the lower of the market price on the first day of a six-month period or the market price on the last day of that same six-month period. The Company's expenses relating to this plan are for its administration and expense associated with the fair value of this benefit in accordance with the FASB standard on employee share purchase plans. Expenses incurred for the Team Member Stock Purchase Plan during the fiscal years ended April 1, 2012, March 27, 2011 and March 28, 2010 related to the FASB standard were $47,800, $51,200 and $42,100, respectively. During the fiscal years ended April 1, 2012, March 27, 2011 and March 28, 2010, 12,503, 16,662 and 21,319 shares were sold to employees under this plan, having a weighted average market value of $11.18, $8.95 and $5.73, respectively.