10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 25, 2006

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 0-24746

TESSCO Technologies Incorporated

(Exact name of registrant as specified in charter)

Delaware	52-0729657
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
11126 McCormick Road, Hunt Valley, Maryland	21031
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code:  (410) 229-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.
Yes  x   No  o

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act). Large accelerated filer o  Accelerated filer o  Non-Accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes  o  No  x

The number of shares of the registrant’s Common Stock, $.01 par value per share, outstanding as of July 31, 2006, was 4,193,888.

TESSCO TECHNOLOGIES INCORPORATED

Index to Form 10-Q

Part I	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of June 25, 2006 and March 26, 2006
		Consolidated Statements of Income for the periods ended June 25, 2006 and June 26, 2005
		Consolidated Statements of Cash Flows for the periods ended June 25, 2006 and June 26, 2005
		Notes to Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk
	Item 4.	Controls and Procedures
Part II	Other Information
	Item 1.	Legal Proceedings
	Item 1A.	Risk Factors
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3.	Defaults upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits
	Signature

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Part I.  Financial Information

Item 1.  Financial Statements

TESSCO TECHNOLOGIES INCORPORATED

Consolidated Balance Sheets

	June 25, 2006			March 26, 2006
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,564,600		$	2,286,900
Trade accounts receivable, net	42,186,200			43,576,500
Product inventory	55,736,100			47,615,700
Deferred tax asset	2,396,000			2,396,000
Prepaid expenses and other current assets	2,370,200			2,799,200
Total current assets	106,253,100			98,674,300
Property and equipment, net	24,627,300			24,619,800
Goodwill, net	3,062,800			2,452,200
Other long-term assets	2,534,200			1,054,100
Total assets	$	136,477,400		$	126,800,400
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	53,441,400		$	44,984,000
Accrued expenses and other current liabilities	6,492,300			7,543,400
Current portion of long-term debt	439,900			442,500
Total current liabilities	60,373,600			52,969,900
Deferred tax liability	2,785,300			2,785,300
Long-term debt, net of current portion	4,470,700			4,559,400
Other long-term liabilities	1,364,500			1,379,000
Total liabilities	68,994,100			61,693,600
Commitments and contingencies
Shareholders’ equity:
Preferred stock	—			—
Common stock	50,100			49,600
Additional paid-in capital	25,425,800			24,748,700
Treasury stock, at cost	(9,699,900		)	(9,521,100		)
Retained earnings	51,617,600			49,764,200
Accumulated other comprehensive income, net of tax	89,700			65,400
Total shareholders’ equity	67,483,300			65,106,800
Total liabilities and shareholders’ equity	$	136,477,400		$	126,800,400

See accompanying notes.

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TESSCO TECHNOLOGIES INCORPORATED

Consolidated Statements of Income

	Fiscal Quarters Ended
	June 25, 2006		June 26, 2005
	(unaudited)		(unaudited)
Revenues	$	111,940,300	$	148,323,300
Cost of goods sold	83,855,200		122,301,200
Gross profit	28,085,100		26,022,100
Selling, general and administrative expenses	24,968,100		23,959,800
Income from operations	3,117,000		2,062,300
Interest, net	155,300		38,000
Income before provision for income taxes	2,961,700		2,024,300
Provision for income taxes	1,108,300		789,500
Net income	$	1,853,400	$	1,234,800
Basic earnings per share	$	0.44	$	0.29
Diluted earnings per share	$	0.43	$	0.29
Basic weighted average shares outstanding	4,180,500		4,236,700
Diluted weighted average shares outstanding	4,275,800		4,277,000

See accompanying notes.

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TESSCO TECHNOLOGIES INCORPORATED

Consolidated Statements of Cash Flows

	Three Months Ended
	June 25, 2006			June 26, 2005
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net income	$	1,853,400		$	1,234,800
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	1,138,100			1,193,800
Non-cash stock compensation expense	529,600			220,900
Deferred taxes and other non-cash items	53,100			(49,400		)
Change in trade accounts receivable	3,075,800			4,541,100
Change in product inventory	(7,223,800		)	5,775,700
Change in prepaid expenses and other current assets	446,200			518,800
Change in trade accounts payable	7,698,500			(16,362,000		)
Change in accrued expenses and other current liabilities	(1,246,800		)	(264,700		)
Net cash provided by (used in) operating activities	6,324,100			(3,191,000		)
Cash flows from investing activities:
Purchases of property and equipment	(999,400		)	(620,800		)
Acquisition of business in purchase transaction	(3,924,900		)	—
Net cash used in investing activities	(4,924,300		)	(620,800		)
Cash flows from financing activities:
Payments on long-term debt	(91,300		)	(90,200		)
Net proceeds from issuance of stock	46,500			21,200
Purchase of treasury stock	(178,800		)	—
Excess tax benefit from stock-based compensation	101,500			—
Net cash used in financing activities	(122,100		)	(69,000		)
Net increase (decrease) in cash and cash equivalents	1,277,700			(3,880,800		)
Cash and cash equivalents, beginning of period	2,286,900			3,880,800
Cash and cash equivalents, end of period	$	3,564,600		$	—

See accompanying notes.

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TESSCO Technologies Incorporated
Notes to Consolidated Financial Statements
June 25, 2006
(Unaudited)

Note 1.  Description of Business and Basis of Presentation

TESSCO Technologies Incorporated, a Delaware corporation (TESSCO or the Company), is a leading provider of integrated product and supply chain solutions to the professionals that design, build, run, maintain and use wireless, mobile, fixed and in-building systems. The Company provides marketing and sales services, knowledge and supply chain management, product solution delivery and control systems utilizing extensive Internet and information technology.  Approximately 97% of the Company’s sales are made to customers in the United States.  The Company takes orders in several ways, including phone, fax, online and through electronic data interchange.

In management’s opinion, the accompanying interim financial statements of the Company include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the Company’s financial position for the interim periods presented.  These statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission (SEC).  Certain information and footnote disclosures normally included in the Company’s annual financial statements have been omitted from these statements, as permitted under the applicable rules and regulations.  The results of operations presented in the accompanying interim financial statements are not necessarily representative of operations for an entire year.  The information included in this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended March 26, 2006.

Note 2.  Recently Issued Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Company is reviewing FIN 48 to determine the impact of adoption on its financial statements.

Note 3.  Stock Compensation

Effective March 27, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based Payment,” using the modified prospective application transition method. Because the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” which the Company had previously adopted effective March 29, 2004, and SFAS No. 123R are generally consistent with respect to the Company’s share-based payments (other than as described below), the adoption of SFAS No. 123R did not have a material impact on the Company’s financial position, results of operations or cash flows.

SFAS No. 123R requires the Company to include in its calculation of periodic stock compensation expense an estimate of future forfeitures.  Previously, in accordance with SFAS No. 123, the Company only included forfeitures in its calculation of stock compensation expense when the PSUs were actually forfeited.  The inclusion of estimated in lieu of actual forfeitures did not have a material impact on the Company’s financial position or results of operations for the quarter.  Prior to the adoption of SFAS No. 123R, benefits of tax deductions in excess of recognized compensation costs were reported as operating cash flows. SFAS No. 123R requires excess tax benefits be reported as a financing cash flow.

The Company’s selling, general and administrative expenses for the three months ended June 25, 2006 and June 26, 2005 includes $529,600 and $220,900, respectively, of stock compensation expense.  Provision for income taxes for the three months ended June 25, 2006 and June 26, 2005 includes $198,100 and $86,200, respectively, of income tax benefits related to our stock-based compensation arrangements.

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The Company’s stock incentive plan is the Amended and Restated 1994 Stock and Incentive Plan (the 1994 Plan).  The 1994 Plan allows for the grant of awards in respect of an aggregate of 1,172,500 shares of the Company’s common stock. As of June 25, 2006, 178,021 shares were available for issue in respect of awards available for future grant 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 units and other performance awards.  No additional awards can be made under the 1994 Plan after July 22, 2009, without shareholder approval of an extension of the plan term.  Options and Performance Stock Unit (PSU) Awards have been granted as awards under the 1994 Plan.  Shares which are subject to outstanding PSU or other awards under the Plan, and which are not earned, are returned to the 1994 Plan and become available for future issuance.

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 Award Program under the Company’s Amended and Restated 1994 Stock and Incentive Plan.  Under the program, Performance Stock Units (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, range from one to three years.  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, and for those PSUs which are based upon multiple year performance cycles, typically represent continual increases in earnings per share.  If actual performance does not reach the minimum annual or cumulative threshold targets, no shares are issued. Under SFAS No. 123R, 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, management’s projections of future EPS performance over the performance cycle, and the resulting amount of estimated share issuances, net of estimated forfeitures.  Future changes in factors impacting the ultimate number of shares granted could cause these estimates to change significantly in future periods.  The Company estimated the forfeiture rate primarily based on historical experience. The Company’s calculated forfeiture rate was approximately 4%.

The following table summarizes the activity under the Company’s PSU program for the three months ended June 25, 2006:

	2006	Weighted Average Fair Value at Grant
Outstanding shares, non-vested beginning of year	428,125	$13.73
Granted	150,000	19.30
Outstanding shares, non-vested end of year	578,125	$15.17
Vesting period	May 1, 2006-2010

Of the 578,125 outstanding shares covered by PSUs, 93,359 shares are earned but not yet issued and will vest and be issued ratably on or about May 1 of 2007 and 2008, provided that the recipient remains employed by or associated with the Company at the time of issuance.  The remaining 484,766 may or may not be earned depending upon: (1) whether cumulative and/or annual earnings per share performance of the Company reaches or exceeds at least the threshold performance targets; (2) the extent to which participants meet applicable individual performance targets; and (3) the participants remain employed by or associated with the Company for all or a portion of the performance cycles and vesting periods.

In May 2006, 52,869 shares were earned and became vested related to fiscal year 2005 and/or fiscal year 2006 performance.  Unrecognized compensation expense based on the current expectation of targets to be achieved as of June 25, 2006 for PSUs expected to be earned is $4.2 million.  These costs are expected to be recognized over a weighted average period of three years.  If the maximum target of PSUs outstanding were assumed to be earned, total unrecognized compensation costs would be $8.8 million.

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Stock Options:  There were no option grants, forfeitures, or exercises during the three months ended June 25, 2006.  For the three months ended June 26, 2005, options for 1,800 shares were exercised at an exercise price of $11.60 per share.  In accordance with SFAS No. 123R, 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:

		Three month ended June 25, 2006
	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, beginning of period	160,000	$12.51	3.92	974,400
Outstanding, end of period	160,000	$12.51	3.67	1,245,300
Exercisable, end of period	144,000	$13.06	3.44	1,045,200

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing stock price on the last trading day of the first quarter of fiscal 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 25, 2006.  This amount changes based on the fair market value of TESSCO’s stock.

As of June 25, 2006, there was $86,300 of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of approximately one year.

Team Member Stock Purchase Plan:  During fiscal 2000, the Company adopted the Team Member Stock Purchase Plan. This plan permits eligible employees to purchase up to an aggregate of 200,000 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 SFAS No. 123R.  Expenses incurred for the Team Member Stock Purchase Plan during the first three months of fiscal year 2007 related to SFAS No. 123R were immaterial.  During the first three months of fiscal year 2007, 2,323 shares were sold to employees under this plan, having a weighted average market value of $11.25.

Note 4.  Acquisition

On April 21, 2006, the Company acquired substantially all the non-cash net assets of TerraWave Solutions, Ltd. and its commonly owned affiliate, GigaWave Technologies, Ltd. for an initial cash payment of approximately $3.8 million, and additional cash earn-out payments over a four-year period, contingent on the achievement of certain minimum earnings thresholds ($1.5 million of the $3.8 million cash amount paid at closing is a non-refundable prepayment against future earn-out payments, if any).  To the extent that certain minimum earnings thresholds are not achieved, the Company will not be able to recover this prepayment.  The maximum amount of contingent future earn-out payments (after subtracting the $1.5 million prepayment) is $15.5 million.  Any contingent payments made under the terms of the purchase agreement will be treated as an additional cost of the acquired businesses and additional goodwill will be recorded.  Additionally, acquisition related transaction costs, primarily comprised of legal and accounting fees totaled $77,100 through the end of the first quarter.

The TerraWave business (TerraWave), now owned by TESSCO, designs, configures and offers 802.11 Wi-Fi products and accessories, many of which are branded under TerraWave’s private label.  Some of the TerraWave-branded products are sold with products of Cisco Systems under Cisco’s Strategic Technology Integrator program.  The GigaWave business (GigaWave), now owned by TESSCO, provides curriculum development and hands-on, instructor-led training courses for the Wireless Local Area Network (WLAN) industry. GigaWave develops and delivers wireless networking courseware for Cisco Systems, allowing IT professionals to obtain Cisco Wireless Certifications.   Both of these businesses are included in the Company’s network infrastructure segment.

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The Company has included the financial results of TerraWave and GigaWave in its consolidated financial statements beginning April 21, 2006 (Acquisition Date).  Pro forma results have not been presented as the impact of the acquisition is not material and did not involve a significant amount of assets.

This acquisition has been accounted for as a business combination in accordance with SFAS No. 141, “Business Combinations.”  Under business combination accounting, the total preliminary purchase price was allocated to TerraWave and GigaWave’s net tangible and identifiable intangible assets based on their estimated fair values as of April 21, 2006.  The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.  The preliminary purchase price was allocated as set forth below:

Trade accounts receivable	$	1,685,600
Product inventory	896,600
Prepaid expenses	17,200
Identifiable intangible assets	1,530,000
Goodwill	610,600
Fixed assets	139,600
Trade accounts payable	(758,900		)
Accrued expenses	(195,800		)
Total preliminary purchase price	$	3,924,900

In performing its preliminary purchase price allocation, the Company considered, among other factors, its intention for future use of acquired assets, analyses of historical financial performance and estimates of future performance of TerraWave and GigaWave. The Company’s estimate of the fair value of intangible assets was based, in part, on a valuation completed by an independent valuation specialist, and estimates and assumptions provided by management. The identified intangible assets consisted of service-marks, covenants not to compete and customer contracts and relationships.  Based upon the preliminary purchase price allocation, the trademarks are estimated to have an approximate fair value of $700,000 and an indefinite life, the customer contacts are estimated to have an approximate fair value of $470,000 and an estimated useful life of four years and the covenants not to complete are estimated to have an approximate fair value of $360,000 and an estimated useful life of six years.  Goodwill noted above is expected to be deductible for tax purposes.  The primary factors contributing to a purchase price that resulted in the recognition of goodwill included expansion of the WLAN product line, expansion of markets for TESSCO’s existing products, the acquired employee force and the expansion of TESSCO’s training business.

Note 5.  Earnings Per Share

The dilutive effect of all outstanding options and PSUs has been determined by using the treasury stock method.  The weighted average shares outstanding is calculated as follows:

	Fiscal Quarters Ended
	June 25, 2006	June 26, 2005
Basic weighted average common shares outstanding	4,180,500	4,236,700
Dilutive common shares outstanding	95,300	40,300
Diluted weighted average common shares outstanding	4,275,800	4,277,000

As of June 25, 2006, stock options with respect to 160,000 shares of common stock were outstanding, of which options to purchase 7,500 shares of common stock at a weighted average exercise price of $26.17 per share were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive.

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Note 6.  Business Segments

The Company evaluates revenue, gross profit and inventory as three business segments:

(1)Network infrastructure products, which are used to build, repair and upgrade wireless telecommunications, computing and Internet networks, and generally complement radio frequency transmitting and switching equipment provided directly by original equipment manufacturers (OEMs).  Results from the recently acquired businesses of TerraWave and GigaWave are included in network infrastructure.

(2)Mobile devices and accessory products, which include cellular telephones and other data devices, pagers and two-way radios and related accessories such as replacement batteries, cases, speakers, mobile amplifiers, power supplies, headsets, mounts, car antennas and various wireless data devices.

(3)Installation, test and maintenance products, which are used to install, tune, maintain and repair wireless communications equipment.

Within the mobile devices and accessories line of business, the Company sells to both commercial and consumer markets. The network infrastructure and installation, test and maintenance lines of business sell primarily to commercial markets. The Company also regularly reviews its commercial results of operations in two customer categories.  These two customer categories and the consumer customer category, for which results of operations are also separately reviewed, are described further below:

·Commercial Public Carriers and Network Operators. Public carriers and network operators include systems operators that are generally responsible for building and maintaining the infrastructure system and provide airtime service to individual subscribers.

·Commercial Self-Maintained Users, Governments and Resellers.  Self-maintained user (SMU) and government customers include commercial entities such as major utilities and transportation companies, federal agencies and state and local governments, including public safety organizations. Resellers include dealers and resellers that sell, install and service cellular telephone, paging and two-way radio communications equipment primarily for the consumer and small business markets.  These resellers include local and national proprietorships and retailers, as well as sales and installation centers operated by cellular and paging carriers.

·Consumers. Consumers include customers that buy through any affinity partner relationships or directly from our consumer website, YourWirelessSource.comTM.

The Company measures segment performance based on segment gross profit.  The segment operations develop their product offering, pricing and strategies, which are collaborative with one another and the centralized sales and marketing function.  Therefore, the Company does not segregate assets, other than inventory, for internal reporting, evaluating performance or allocating capital.  Product delivery revenue and certain cost of sales expenses have been allocated to each segment based on a percentage of revenues and/or gross profit, as applicable.

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(Amounts in thousands)	Network Infrastructure		Mobile Devices and Accessories		Installation, Test and Maintenance		Total
Fiscal Quarter ended June 25, 2006
Commercial Revenues:
Public Carriers and Network Operators	$	12,268	$	704	$	4,244	$	17,216
SMUs, Governments and Resellers	25,437		41,159		26,610		93,206
Total Commercial Revenues	37,705		41,863		30,854		110,422
Consumer Revenues	—		1,518		—		1,518
Total Revenues	$	37,705	$	43,381	$	30,854	$	111,940
Commercial Gross Profit:
Public Carriers and Network Operators	$	2,814	$	197	$	944	$	3,955
SMUs, Governments and Resellers	6,289		8,475		8,609		23,373
Total Commercial Gross Profit	9,103		8,672		9,553		27,328
Consumer Gross Profit	—		757		—		757
Total Gross Profit	$	9,103	$	9,429	$	9,553	$	28,085
Product Inventory	$	16,730	$	18,561	$	20,445	$	55,736
Fiscal Quarter ended June 26, 2005
Commercial Revenues:
Public Carriers and Network Operators	$	14,334	$	625	$	4,385	$	19,344
SMUs, Governments and Resellers	20,558		22,755		11,061		54,374
Total Commercial Revenues	34,892		23,380		15,446		73,718
Consumer Revenues	—		74,605		—		74,605
Total Revenues	$	34,892	$	97,985	$	15,446	$	148,323
Commercial Gross Profit:
Public Carriers and Network Operators	$	3,346	$	172	$	994	$	4,512
SMUs, Governments and Resellers	4,999		5,764		3,542		14,305
Total Commercial Gross Profit	8,345		5,936		4,536		18,817
Consumer Gross Profit	—		7,205		—		7,205
Total Gross Profit	$	8,345	$	13,141	$	4,536	$	26,022
Product Inventory	$	17,755	$	24,422	$	12,880	$	55,057

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Note 7.  Customer Concentration

The Company’s future results could be negatively impacted by the loss of certain customer and/or vendor relationships.  For the three months ended June 25, 2006, sales of products to the Company’s top customer relationship, Cingular Wireless LLC, accounted for 14% and 11% of total revenues and total gross profits, respectively.  For the three months ended June 25, 2006, sales of products related to the Company’s top vendor relationship, the Nokia Inc. (Nokia) repair and replacement component relationship, accounted for 17% and 25% of total revenues and total gross profits, respectively.  The Nokia relationship is a complete supply chain relationship and, therefore, we have no alternative sources of supply, and our purchases, and ultimately our resale of these products, is dependent upon the continuation of the Nokia relationship.  We also sell products other than Nokia repair and replacement materials to many of these customers.  Absent this arrangement with Nokia, we would maintain the ability to sell these other products to these customers. At June 25, 2006, repair and component parts purchased from Nokia accounted for 29% of the dollar value of the total product inventory, based on the purchase price for the inventory.

In September 2005, T-Mobile, previously the Company’s largest customer relationship, transitioned the TESSCO provided e-commerce marketing and sales system to their own in-house web solution and alternative third-party logistics provider, and accordingly, revenues from this relationship ceased.  In the first quarter of fiscal year 2007, this affinity relationship did not account for any revenues or gross profits.  T-Mobile accounted for 48% and 21% of total revenues and total gross profits, respectively, in the first quarter of fiscal year 2006.

Note 8.  Reclassifications

Certain reclassifications have been made to the prior year Consolidated Financial Statements to conform to the current year presentation.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This commentary should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations from the Company’s Form 10-K for the fiscal year ended March 26, 2006.

Business Overview and Environment

TESSCO Technologies Incorporated (TESSCO) is a leading provider of integrated product and supply chain solutions to the professionals that design, build, run, maintain and use wireless mobile, fixed and in-building systems.  Although we sell products to customers in over 100 countries, approximately 97% of our sales are made to customers in the United States.  We have operations and office facilities in Hunt Valley, Maryland, Reno, Nevada and San Antonio, Texas.  Due to the diversity in our business, we are not significantly affected by seasonality.

We offer a wide range of products that are classified into three business segments: network infrastructure; mobile devices and accessories; and installation, test and maintenance.

·Network infrastructure products, which are sold to our commercial customers, are used to build, repair and upgrade wireless telecommunications, computing and Internet networks. Sales of traditional network infrastructure products, such as cable, transmission lines and antennas are in part dependent on capital spending in the wireless communications industry.  However, we have also been growing our offering of wireless broadband and network equipment products, which are not as dependent on the overall capital spending of the industry.  The acquisition of TerraWave and GigaWave in late April 2006 further broadened our WLAN product and service offering in this segment.

·Mobile devices and accessory products include cellular telephones and other data devices, pagers and two-way radios and related accessories.  Mobile devices and accessory products are widely sold to commercial customers and consumers.  Commercial customers include retail stores, value-added resellers and dealers.  Consumers are primarily reached through our affinity partnerships, where we offer services including customized order fulfillment, outsourced call centers, and building and maintaining private label Internet sites.

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·Installation, test and maintenance products, which are sold to our commercial customers, are used to install, tune, maintain and repair wireless communications equipment. Approximately 61% of all of our installation, test and maintenance sales for the first quarter of fiscal year 2007 were generated from the sales of replacement parts and materials for original equipment manufacturers, primarily Nokia Inc. (Nokia).  The arrangements on which these relationships are based, like many of our other customer and vendor arrangements, are of limited duration and are terminable by either party upon several months or otherwise short notice. The remainder of this segment is made up of sophisticated analysis equipment and various frequency-, voltage- and power-measuring devices, as well as an assortment of tools, hardware and supplies required by service technicians.  Both our repair and replacement parts sales and consumer sales through our affinity partnerships are reliant on relationships with a small number of vendors.

We view our customer base in three major categories:

·Commercial Public Carriers and Network Operators.  Public carriers and network operators include systems operators that are generally responsible for building and maintaining the infrastructure system and provide airtime service to individual subscribers.

·Commercial Self-Maintained Users (SMUs), Governments and Resellers.  SMUs and government customers include commercial entities such as major utilities and transportation companies, federal agencies and state and local governments, including public safety organizations. Resellers include dealers and resellers that sell, install and service cellular telephone, paging and two-way radio communications equipment primarily for the consumer and small business markets.  These resellers include local and national proprietorships and retailers, as well as sales and installation centers operated by cellular and paging carriers.

·Consumers.  Consumers are customers buying through any of our affinity-partner relationships or directly from our consumer website, YourWirelessSource.comTM.

The wireless communications distribution industry is competitive and fragmented, and is comprised of several national distributors. In addition, many manufacturers sell direct. Barriers to entry for distributors are relatively low, particularly in the mobile devices and accessory market, and the risk of new competitors entering the market is high.  Consolidation of larger wireless carriers has and will most likely continue to impact our current and potential customer base.  In addition, the agreements or arrangements with our customers or vendors looking to us for product and supply chain solutions are typically of limited duration and are terminable by either party upon several months notice.  Our ability to maintain these relationships is subject to competitive pressures and challenges.  We believe, however, that our strength in service, the breadth and depth of our product offering, our information technology system, our large customer base and purchasing relationships with approximately 350 manufacturers provide us with a significant competitive advantage over new entrants to the market.

Our first quarter revenues decreased by 25% compared to the first quarter of last year.  This 25% decrease is a result of:

·Commercial revenue growth of 50% compared to last year’s first quarter.  This growth was driven by growth in each of our commercial lines of business. We experienced exceptionally strong growth in our installation, test and maintenance segment. This significant increase was primarily driven by large sales related to our repair components relationship with Nokia.  Going forward, we expect that revenues and gross profits from sales of these repair components will not continue at the first quarter level, but will return to levels more consistent with those experienced last fiscal year.

·Consumer revenues decreased by 98% compared to last year’s first quarter due to the loss of the T-Mobile affinity relationship in September 2005.

The transitioned T-Mobile affinity relationship consisted primarily of low-margin handset sales.  The increases in the higher margin commercial business in the first quarter, more than offset the loss of the gross profit generated from this T-Mobile business and thus, gross profits have increased by 8% despite the overall decrease in revenues.

Our first quarter selling, general and administrative expenses grew by 4% compared to the prior year quarter.  Because of the gross profit growth described above and the smaller growth in expenses, our earnings per share reached $0.43 in the first quarter of fiscal 2007, compared to $0.29 in the first quarter of fiscal 2006.

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Results of Operations

The following table summarizes the unaudited results of our operations for the three months ended June 25, 2006 and June 26, 2005:

	Three Months Ended
(Amounts in thousands, except per share data)	June 25, 2006		June 26, 2005		$ Change			% Change
Commercial Revenues
Network Infrastructure:
Public Carriers and Network Operators	$	12,268	$	14,334	$	(2,066	)	(14.4	%)
SMUs, Governments and Resellers	25,437		20,558		4,879			23.7	%
Total Network Infrastructure	37,705		34,892		2,813			8.1	%
Mobile Devices and Accessories:
Public Carriers and Network Operators	704		625		79			12.6	%
SMUs, Governments and Resellers	41,159		22,755		18,404			80.9	%
Total Mobile Devices and Accessories	41,863		23,380		18,483			79.1	%
Installation, Test and Maintenance:
Public Carriers and Network Operators	4,244		4,385		(141		)	(3.2	%)
SMUs, Governments and Resellers	26,610		11,061		15,549			140.6	%
Total Installation, Test and Maintenance	30,854		15,446		15,408			99.8	%
Total Commercial Revenues	110,422		73,718		36,704			49.8	%
Consumer Revenues - Mobile Devices and Accessories	1,518		74,605		(73,087		)	(98.0	%)
Total Revenues	$	111,940	$	148,323	$	(36,383	)	(24.5	%)
Commercial Gross Profit
Network Infrastructure:
Public Carriers and Network Operators	$	2,814	$	3,346	$	(532	)	(15.9	%)
SMUs, Governments and Resellers	6,289		4,999		1,290			25.8	%
Total Network Infrastructure	9,103		8,345		758			9.1	%
Mobile Devices and Accessories:
Public Carriers and Network Operators	197		172		25			14.5	%
SMUs, Governments and Resellers	8,475		5,764		2,711			47.0	%
Total Mobile Devices and Accessories	8,672		5,936		2,736			46.1	%
Installation, Test and Maintenance:
Public Carriers and Network Operators	944		994		(50		)	(5.0	%)
SMUs, Governments and Resellers	8,609		3,542		5,067			143.1	%
Total Installation, Test and Maintenance	9,553		4,536		5,017			110.6	%
Total Commercial Gross Profit	27,328		18,817		8,511			45.2	%
Consumer Gross Profit - Mobile Devices and Accessories	757		7,205		(6,448		)	(89.5	%)
Total Gross Profit	28,085		26,022		2,063			7.9	%
Selling, general and administrative expenses	24,968		23,960		1,008			4.2	%
Income from operations	3,117		2,062		1,055			51.2	%
Interest, net	155		38		117			NM
Income before provision for income taxes	2,962		2,024		938			46.3	%
Provision for income taxes	1,109		789		320			40.6	%
Net income	$	1,853	$	1,235	$	618		50.0	%
Diluted earnings per share	$	0.43	$	0.29	$	0.14		48.3	%

NM - not meaningful

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First Quarter of Fiscal Year 2007 Compared with First Quarter of Fiscal Year 2006

Revenues.  Revenues for the first quarter of fiscal year 2007 decreased 25% as compared with the first quarter of fiscal year 2006, primarily due to a 98% decrease in consumer revenues, partially offset by a 50% growth in commercial revenues.  While total sales in our mobile devices and accessories line of business declined due to the large decrease in consumer sales, we grew sales in all of our commercial lines of business.

Sales in the mobile devices and accessories line of business decreased 56% in the first quarter of fiscal year 2007, as compared with the prior-year period.  The decrease was due to a 98% decrease in consumer sales, offset by a 79% increase in commercial sales.  The decrease in consumer sales was attributable to the transition in the second quarter of fiscal year 2006 of the TESSCO provided e-commerce marketing and sales system to T-Mobile’s own in-house web solution and alternative third-party logistics provider.  The increase in commercial revenues for mobile devices and accessories, which are sold primarily to SMUs, governments and resellers, but also to public carriers and network operators, was primarily due to increased sales of accessory products to carrier and independent retail customers.  During the third quarter of fiscal year 2006, we began supplying several new wireless carrier customers, including one large Tier 1 national carrier.

The 8% increase in our network infrastructure sales as compared with the first quarter of last year is primarily attributable to an increase in sales of fixed wireless broadband products and wireless local area network (WLAN) products.  These increases were largely a result of our acquisition of TerraWave and GigaWave, which primarily offer WLAN products and training.  The market for broadband and network equipment products continues to emerge and grow.  The market for radio frequency (RF) propagation products continues to be challenging, especially in cable products; however, our revenue for these products increased over the prior-year quarter, primarily driven by growth in antenna systems and tower site support products. Most of our growth in sales of network infrastructure product was in sales to SMUs, governments and resellers, as we have focused on diversification beyond the traditional infrastructure carrier customer.  Although we believe the market for both broadband and RF propagation products will continue to grow, there can be no assurance that these trends will continue.

Revenues from our installation, test and maintenance line of business had a 100% increase from the prior-year quarter, primarily due to large sales of repair parts early in the quarter related to our expanded major repair components relationship with Nokia.  This increase in revenue was in part due to one-time large sales to certain customers.  Going forward, we expect that revenues from sales of these repair components will not continue at this level, but will return to levels more consistent with those experienced last fiscal year.

Gross Profit.  Gross profit for the first quarter of fiscal year 2007 increased 8% as compared with the first quarter of fiscal year 2006. Total commercial gross profit grew 45%, while consumer gross profit decreased 89% as a result of the transition of the T-Mobile relationship as discussed above.  Gross profit margin increased to 25.1% in the first quarter of fiscal year 2007 from 17.5% in first quarter of fiscal year 2006.  Gross profit margin in our network infrastructure segment increased from 23.9% in the first quarter of fiscal year 2006 to 24.1% in the first quarter of fiscal year 2007.  In our installation, test and maintenance segment, gross profit margin increased to 31.0% in the first quarter of fiscal year 2007 from 29.4% in the first quarter of fiscal year 2006, which was primarily driven by large sales of repair components as discussed above.  Generally, our gross margins by product within these segments have been sustained and these variations are related to sales mix within the segment product offerings, including repair and replacement parts in our installation, test and maintenance line of business, an increased portion of which was accounted for on a net revenue basis.  Gross profit margin in our mobile devices and accessories segment increased to 21.7% in the first quarter of this fiscal year from 13.4% in the first quarter of last year.  This increase is primarily attributable to a large decrease in low margin consumer sales which had been related to the T-Mobile relationship, partially offset by a decrease in gross profit margin for our commercial sales.  The decrease in commercial gross profit margin for our mobile devices and accessories, from 25.4% in the first quarter of last fiscal year to 20.7% for the first quarter of this fiscal year, is attributable to sales mix within the product offering in part due to new retail relationships established in the third quarter of fiscal year 2006.  We account for inventory at the lower of cost or market, and as a result, write-offs/write-downs occur due to damage, deterioration, obsolescence, changes in prices and other causes.

Our ongoing ability to earn revenues and gross profits from customers and vendors looking to us for product and supply chain solutions is dependent upon a number of factors.  The terms, and accordingly the factors, applicable to each affinity

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relationship often differ.  Among these factors are the strength of the customer’s or vendor’s business, the supply and demand for the product or service, including price stability, changing customer or vendor requirements, and our ability to support the customer or vendor and to continually demonstrate that we can improve the way they do business.  In addition, the agreements or arrangements on which our affinity relationships are based are typically of limited duration, and are terminable by either party upon several months or otherwise relatively short notice.  These affinity relationships could also be affected by wireless carrier consolidation.

Selling, General and Administrative Expenses.  Total selling, general and administrative expenses increased by 4% in the first quarter of fiscal year 2007 as compared with the first quarter of fiscal year 2006.  Selling, general and administrative expenses as a percentage of revenues increased to 22% in the first quarter of fiscal year 2007 from 16% in the first quarter of fiscal year 2006, primarily due to the large decrease in consumer revenues and increased expenses related to business generation activities as discussed below, partially offset by decreased freight costs.

The largest factors contributing to the increase in total selling, general and administrative expenses were increased labor expenses related to business generation activities. These increases are reflective of our increased focus on our commercial business.  Labor costs have also increased over the prior-year quarter due to increased accruals related to our reward programs, including Performance Stock Units (PSU). Reward program expense is based on actual results to date and management’s current estimates of future performance in relation to pre-determined performance targets. Labor costs were also impacted by the acquisition of TerraWave and GigaWave in April 2006.  Total labor costs, including benefits, increased by approximately $2.2 million from the first quarter of fiscal year 2006 to the first quarter of fiscal year 2007.

Marketing expenses also increased in the first quarter of fiscal year 2007 as compared with the first quarter of fiscal year 2006.  Near the end of the first quarter of fiscal year 2006, we retained RTC Relationship Marketing, a direct- and database- marketing firm to increase market awareness of TESSCO’s value proposition and product and solutions offering among potential and existing customers.  Marketing expense also increased due to sales promotion costs related to increased sales to retail customers.  Total marketing and sales promotion expenses increased by approximately $1.3 million from the first quarter of fiscal year 2006 to first quarter of fiscal year 2007.

Freight costs in the first quarter of fiscal year 2007 decreased approximately $2.2 million over the prior-year quarter, primarily due to the loss of consumer sales associated with our T-Mobile relationship which ended in the second quarter of fiscal year 2006.  This decrease was partially offset by the freight costs associated with the increase in commercial sales.

We continually evaluate the credit worthiness of our existing customer receivable portfolio and provide an appropriate reserve based on this evaluation.  We also evaluate the credit worthiness of prospective customers and make decisions regarding extension of credit terms to such prospects based on this evaluation.  Accordingly, we recorded a provision for bad debts of $339,800 and $346,900 for the first quarter ended June 25, 2006 and June 26, 2005, respectively.

Interest, Net.  Net interest expense increased from $38,000 in the first quarter of fiscal year 2006 to $155,300 in the first quarter of fiscal year 2007 primarily due to increased interest expense on our revolving credit facility, as well as increased interest expense on our existing term bank loan due to higher interest rates.  As noted below, we entered into a receive variable/pay fixed interest rate swap on our existing bank loan, thus fixing the interest rate on this loan at 6.38%.  Interest expense on our other debt instruments had only minor variances from year-to-year in total.

Income Taxes, Net Income and Diluted Earnings per Share.  The effective tax rate in the first quarter of fiscal year 2007 was 37.4% as compared with 39.0% in the first quarter of fiscal year 2006.  As a result of the factors discussed above driving growth in sales and gross profit, net income and diluted earnings per share for the first quarter of fiscal year 2007 increased 50% and 48%, respectively, over the prior-year quarter.

Liquidity and Capital Resources

We generated $6.3 million of net cash in the first three months of fiscal year 2007 compared with a net cash outflow of $3.2 million in the first three months of fiscal year 2006.  In the first quarter of fiscal year 2007, our cash inflow from operating activities was primarily driven by net income, a significant increase in trade accounts payable and a significant decrease in trade accounts receivable, partially offset by an increase in product inventory.  The increase in product inventory and trade accounts payable was primarily due to our expanded major repair components relationship with Nokia

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as well as increased purchases and on-hand inventory for our mobile devices and accessories vendors.   At June 25, 2006, repair and component parts purchased from Nokia accounted for 29% of the dollar value of our total product inventory, based on the purchase price for the inventory.  Trade accounts receivable decreased due to the timing of collections from our customers, many of whom maintain accounts with open terms.

Capital expenditures of $1.0 million in the first quarter of fiscal year 2007 were up from expenditures of $0.6 million in the first quarter of fiscal year 2006.  In both periods, capital expenditures primarily consisted of investment in information technology and in fiscal year 2007, also included training equipment.

On April 21, 2006, the Company acquired substantially all the non-cash net assets of TerraWave Solutions, Ltd. and its commonly owned affiliate, GigaWave Technologies, Ltd. for an initial cash payment of approximately $3.8 million, and additional cash earn-out payments over a four-year period, contingent on the achievement of certain minimum earnings thresholds ($1.5 million of the $3.8 million cash amount paid at closing is a non-refundable prepayment against future earn-out payments, if any).  To the extent that certain minimum earnings thresholds are not achieved, the Company will not be able to recover this prepayment.  The maximum amount of contingent future earn-out payments (after subtracting the $1.5 million prepayment) is $15.5 million.  Any contingent payments made under the terms of the purchase agreement will be treated as an additional cost of the acquired businesses and additional goodwill will be recorded.  Additionally, acquisition related transaction costs, primarily comprised of legal and accounting fees, totaled $77,100 through the end of the first quarter.

Net cash used for financing activities was $122,100 in the first quarter of fiscal year 2007 compared with net cash used for financing activities of $69,000 for the first quarter of fiscal year 2006.  During the first quarter of fiscal year 2007, we purchased 8,800 shares of our outstanding common stock pursuant to our stock buyback program.  No shares were purchased in the first quarter of fiscal year 2006.  From the beginning of our stock buyback program (the first quarter of fiscal 2004), through the end of the first quarter of fiscal year 2007, a total of 509,503 shares have been purchased under this program for approximately $5.9 million, or an average price of $11.59 per share.  The Board of Directors had authorized the purchase of up to 900,000 shares in the aggregate.  On July 17, 2006, the Board of Directors amended the program, authorizing the purchase of an additional 400,000 shares, and therefore, 790,497 shares remained available to be purchased as of that date.  We expect to fund future purchases, if any, from working capital and/or our revolving credit facility.  No timetable has been set for the completion of this program.

To minimize interest expense, our policy is to use excess available cash to pay down any balance on our $30 million revolving credit facility.  We expect to meet short-term and long-term liquidity needs through operating cash flow, supplemented by our existing revolving credit facility.  In doing so, the balance on our revolving credit facility could increase depending on our working capital and other cash needs.  If we were to undertake an acquisition or other major capital purchases that require funds in excess of its existing sources of liquidity, we would look to sources of funding from additional credit facilities, debt and/or equity issuances.  There can be no assurances that such additional future sources of funding would be available.  Our current revolving line of credit expires in September 2007.

On October 1, 2005, we entered into a receive variable/pay fixed interest rate swap on a total notional amount of $4.2 million with Wachovia Bank, N.A. to avoid the risks associated with fluctuating interest rates on our existing term bank loan, which bears interest at a floating rate of LIBOR plus 1.75%, and to eliminate the variability in the cash outflow for interest payments.  The interest rate swap agreement locks the interest rate for the outstanding principal balance of the loan at 6.38% through July 1, 2011.  There was no payment due or received at inception of the swap.  No hedge ineffectiveness will be recognized as the interest rate swaps’ provisions match the applicable provisions of the term bank loan.  This cash flow hedge qualified for hedge accounting using the short-cut method since the swap terms match the critical terms of the hedged debt.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of our operations are based on our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.  Actual results may differ from these estimates under different assumptions or conditions.

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We have identified the policies below as critical to our business operations and the understanding of our results of operations. For a detailed discussion on the application of these and other accounting policies, see the Notes to the Consolidated Financial Statements in our Form 10-K for the fiscal year ended March 26, 2006.

Revenue Recognition.  We record revenue when 1) persuasive evidence of an arrangement exists, 2) delivery has occurred or services have been rendered, 3) our price to the buyer is fixed and determinable, and 4) collectibility is reasonably assured. Our revenue recognition policy includes evidence of arrangements for significant revenue transactions through either receipt of a customer purchase order or a web-based order.  We record revenue when risk of loss has passed to the customer and, in most cases, shipments are made using FOB shipping terms.  For a small portion of our sales, we use FOB destination terms and record the revenue when the product is received by the customer.  Our prices are always fixed at the time of sale.  Historically, there have not been any material concessions provided to or by customers, future discounts, or other incentives subsequent to a sale. We sell under normal commercial terms and, therefore, we only record sales on transactions where collectibilty is reasonably assured.

Because our sales transactions meet the conditions set forth in Statement of Financial Accounting Standard (SFAS) No. 48, “Revenue Recognition When Right of Return Exists,” we recognize revenues from sales transactions containing sales returns provisions at the time of the sale.  These conditions require that 1) our price be substantially fixed and determinable at the date of sale, 2) the buyer is obligated to pay us, and such obligation is not contingent on their resale of the product, 3) the buyer’s obligation to us does not change in the event of theft or physical destruction or damage of the product, 4) the buyer has economic substance apart from us, 5) we do not have significant obligations for future performance to directly bring about resale of the product by the buyer, and 6) the amount of future returns can be reasonably estimated.  Because our normal terms and conditions of sale are consistent with conditions 1-5 above, and we are able to perform condition 6, we make a reasonable estimate of product returns in sales transactions and accrue a sales return reserve based on this estimate.

Our current and potential customers are continuing to look for ways to reduce their inventories and lower their total costs, including distribution, order taking and fulfillment costs, while still providing their customers excellent service.  Some of these companies have turned to us to implement supply chain solutions, including purchasing inventory, assisting in demand forecasting, configuring, packaging, kitting and delivering products and managing customer relations, from order taking through cash collections.  In performing these solutions, we assume varying levels of involvement in the transactions and varying levels of credit and inventory risk.  As our solutions offerings continually evolve to meet the needs of our customers, we constantly evaluate our revenue accounting based on the guidance set forth in accounting standards generally accepted in the United States.  When applying this guidance in accordance with Emerging Issues Task Force (EITF) No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent,” we look at the following indicators: whether we are the primary obligor in the transaction; whether we have general inventory risk; whether we have latitude in establishing price; the extent to which we change the product or perform part of the service; whether we have responsibility for supplier selection; whether we are involved in the determination of product and service specifications; whether we have physical inventory risk; whether we have credit risk; and whether the amount we earn is fixed.  Each of our customer relationships is independently evaluated based on the above guidance and revenue is recorded on the appropriate basis.   Based on a review of the factors above, in the majority of our sales relationships, we have concluded that we are the principal in the transaction and we record revenue based upon the gross amounts earned and booked. However, we do have certain relationships where we are not the principal and we record revenue on a net fee basis, regardless of amounts billed (less than 5% of our total revenue). If applying this revenue recognition guidance resulted in recording revenue on a different basis from which we have previously concluded, or if the factors above change significantly, revenues could increase or decrease; however, our gross profit and net income would remain constant.

Most of our sales arrangements do not contain multiple elements.  However, when we enter into arrangements that do contain multiple elements, we follow the guidance under EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables.”  Therefore, at the inception of the arrangement, we determine if each deliverable under the arrangement represents a separate unit of accounting.  We do this by determining whether the undelivered items have value to the customer on a stand-alone basis (if it is sold separately by any other vendor or the customer could resell the delivered item on a stand-alone basis), if there is objective and reliable evidence of the fair value of the item, and whether the delivery or performance of the undelivered item is considered probable and substantially in our control (in cases where the arrangement includes a general right of return relative to the delivered item).

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Allowance for Doubtful Accounts.  We use estimates to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable and unbilled receivables to their expected net realizable value. We estimate the amount of the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends. Actual collection experience has not varied significantly from estimates, due primarily to credit policies, collection experience and our stability as it relates to its current customer base.  Typical payments from commercial customers are due 30 days from the date of the invoice.  Sales made to consumers are primarily made through credit card transactions.  We charge-off receivables deemed to be uncollectible to the allowance for doubtful accounts.  Accounts receivable balances are not collateralized.

Impairment of Long-Lived and Indefinite-Lived Assets.  Our Consolidated Balance Sheet includes goodwill of approximately $3.1 million.  We perform an annual impairment test for goodwill on the first day of our fourth quarter.  We also periodically evaluate our long-lived assets and intangible assets for potential impairment indicators.  Our judgments regarding the existence of impairment indicators are based on estimated future cash flows, market conditions, operational performance and legal factors.  Future events, such as significant changes in cash flow assumptions, could cause us to conclude that impairment indicators exist and that the net book value of goodwill, long-lived assets or intangible assets are impaired.  Had the determination been made that the goodwill asset was impaired, the value of this asset would have been reduced by an amount up to $3.1 million, resulting in a charge to operations.

Income Taxes.  We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities.  We regularly review our deferred tax assets for recoverability.  This review is based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences.  Based on this review, we have not established a valuation allowance.   If we are unable to generate sufficient taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, we could be required to establish a valuation allowance against all or a significant portion of our deferred tax assets, resulting in a substantial increase in our effective tax rate and a material adverse impact on our operating results.

In July, 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Company is reviewing FIN 48 to determine the impact of adoption on its financial statements.

Stock-Based Compensation.  Effective March 27, 2006, we adopted Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based Payment,” using the modified prospective application transition method. Because the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” which we had previously adopted effective March 29, 2004, and SFAS No. 123R are generally consistent with respect to our share-based payments (other than as described below), the adoption of SFAS No. 123R did not have a material impact on our financial position, results of operations or cash flows.

SFAS No. 123R requires us to include in our calculation of periodic stock compensation expense an estimate of future forfeitures.  Previously, in accordance with SFAS No. 123, we included forfeitures in its calculation of stock compensation expense when the PSUs were actually forfeited.  This change did not have a material impact on our  financial position or results of operations for the quarter.  Prior to the adoption of SFAS No. 123R, benefits of tax deductions in excess of recognized compensation costs were reported as operating cash flows. SFAS No. 123R requires excess tax benefits be reported as a financing cash flow.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

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Forward-Looking Statements

This Report contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, all of which are based on current expectations. These forward-looking statements may generally be identified by the use of the words “may,” “will,” “believes,” “should,” “expects,” “anticipates,” “estimates,” and similar expressions. Our future results of operations and other forward-looking statements contained in this report involve a number of risks and uncertainties, including those described throughout this Quarterly Report on Form 10-Q and referenced under Item 1A below. For a variety of reasons, actual results may differ materially from those described in any such forward-looking statement.  Consequently, the reader is cautioned to consider all forward-looking statements in light of the risks to which they are subject.

Available Information

Our Internet Web site address is: www.tessco.com. We make available free of charge through our Web site, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission.  Also available on our Web site is our Code of Business Conduct and Ethics.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

As noted above under the caption “Liquidity and Other Capital Resources,” in October 2005, we entered into an interest rate swap agreement on our existing bank term loan.  We believe our exposure to market risks, including exchange rate risk, interest rate risk and commodity price risk, is not material at the present time.

Item 4.  Controls and Procedures

The Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the period covered by this quarterly report. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Based on the evaluation of these controls and procedures required by Rules 13a-15(b) or 15d-15(b) of the Exchange Act, the Company’s management, including the CEO and CFO, have concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. During the period covered by this quarterly report, there have been no changes to the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II.  Other Information

Item 1.  Legal Proceedings

Lawsuits and claims are filed against us from time to time in the ordinary course of business.  We do not believe that any lawsuits or claims currently pending against the Company, individually or in the aggregate, are material, or will have a material adverse affect on our financial condition or results of operations.

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Item 1A.  Risk Factors

There were no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended March 26, 2006.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to purchases of TESSCO common stock by the Company or any affiliated purchasers during the first quarter of fiscal year 2007.

Issuer Purchases of Equity Securities

Period (1)	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (2)
March 27, 2006 through April 23, 2006	—	N/A		—	399,297
April 24, 2006 through May 28, 2006	2,200	$	21.13	2,200	397,097
May 29, 2006 through June 25, 2006	6,600	$	20.08	6,600	390,497
Total	8,800	$	20.34	8,800	390,497

(1)Periods indicated are fiscal accounting months for the first quarter of fiscal year 2007.

(2)Values are as of the end of the fiscal accounting month or quarter, as applicable.

On April 28, 2003, our Board of Directors announced a stock buyback program and authorized the purchase of up to 450,000 shares of our common stock pursuant to the program.  On October 20, 2005, our Board of Directors amended the program and authorized the purchase of an additional 450,000 shares of outstanding commons stock.  As of June 25, 2006, we had purchased an aggregate of 509,503 shares of our outstanding common stock pursuant to this program for approximately $5.9 million, or an average price of $11.59 per share.  All shares repurchased during the first quarter of fiscal year 2007 were repurchased under this program.  On July 17, 2006, our Board of Directors amended the program and authorized the purchase of an additional 400,000 shares of outstanding common stock, and as of that date, 790,497 shares remained available to be purchased under the program.  Shares may be purchased from time to time in the open market, by block purchase, or through negotiated transactions, or possibly other transactions managed by broker-dealers.  No timetable has been set for completion of the program.

Item 3.  Defaults upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Shareholders at the Company’s facility located in Hunt Valley, Maryland on July 20, 2006.  At the meeting, the shareholders were asked to vote on the election of directors and the ratification of the appointment of the Company’s independent registered public accounting firm.  Each of these proposals was described in the Company’s Definitive Proxy Statement filed with the Commission on June 19, 2006.

ELECTION OF DIRECTORS.  At the meeting, the shareholders re-elected John D. Beletic, Daniel Okrent and Morton F. Zifferer, Jr. for a three-year term expiring at the Company’s 2009 Annual Meeting of Shareholders and until their successors are duly elected and qualify.  The term of office of each of Jerome C. Eppler, Susan D. Goodman, Dennis J. Shaughnessy, Robert B. Barnhill, Jr. and Benn R. Konsynski also continued after the meeting.  The votes cast for Messrs. Beletic, Okrent and Zifferer were as follows:

John D. Beletic	3,336,427	For
	13,581	Against or Withheld
Daniel Okrent	3,321,303	For
	28,705	Against or Withheld
Morton F. Zifferer, Jr.	3,330,402	For
	19,606	Against or Withheld

21

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.  At the meeting, the shareholders ratified the appointment of Ernst & Young LLP to serve as the independent registered public accounting firm of the Company for the fiscal year ending April 1, 2007.  The number of votes “for” was 3,343,957, the number of votes “against” or “withheld” was 3,844, and the number of abstentions was 2,207.

Item 5.  Other Information

None

Item 6.  Exhibits

(a)Exhibits:

10.1	Asset Purchase Agreement, Dated as of April 5, 2006, by and among TerraWave Solutions, Ltd., Gigawave Solutions, Ltd. and TESSCO Incorporated and GW Services Solutions, Inc.
31.1	Rule 15d-14(a) Certification of Robert B. Barnhill, Jr., Chief Executive Officer.
31.2	Rule 15d-14(a) Certification of David M. Young, Chief Financial Officer.
32.1	Section 1350 Certification of Robert B. Barnhill, Jr., Chief Executive Officer.
32.2	Section 1350 Certification of David M. Young, Chief Financial Officer.

22

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TESSCO TECHNOLOGIES INCORPORATED
Date:  August 9, 2006	By:	/s/ David M. Young
		David M. Young
		Chief Financial Officer
		(principal financial and accounting officer)

23

EX-10.1

EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

DATED AS OF APRIL 5, 2006

BY AND AMONG

TERRAWAVE SOLUTIONS, LTD.
AND

GIGAWAVE TECHNOLOGIES, LTD.

SELLERS

AND

TESSCO INCORPORATED

AND

GW SERVICE SOLUTIONS, INC.

PURCHASERS

AND

TESSCO TECHNOLOGIES INCORPORATED

GUARANTOR

TABLE OF CONTENTS

	Page
Recitals	1
Article 1. Definitions	1
Article 2. Terms of Purchase and Sale	13
Section 2.1: Purchase and Sale	13
Section 2.2: Excluded Assets	14
Section 2.3: Purchase Price and Payment	15
Section 2.4: Final Determination and Payment of Net Current Asset Value	16
Section 2.5: Assumed Liabilities and Retained Liabilities	17
Section 2.6: Recoupment of Prepaid Purchase Price	19
Section 2.7: Closing	20
Section 2.8: Purchase Price Allocation	20
Article 3. Contingent Purchase Price Payments	21
Section 3.1: Installment Payments	21
Section 3.2: NPC Earnout Payments	21
Section 3.3: Broadband NPC Payments	22
Section 3.4: Maximum Contingent Purchase Price Payments	23
Section 3.5: Officers’ Certificates	23
Section 3.6: Payments	23
Article 4. Representations and Warranties of Sellers	23
Section 4.1: Power and Authority; Effect of Agreement	23
Section 4.2: Governmental Consents	24
Section 4.3: Litigation	24
Section 4.4: Title to Assets	24
Section 4.5: Inventory	25
Section 4.6: Accounts Receivable	25
Section 4.7: Accounts Payable	25
Section 4.8: Intellectual Property Rights	25
Section 4.9: Sufficiency and Condition of Assets	26
Section 4.10: Financial Statements	26
Section 4.11: Absence of Undisclosed Liabilities	26
Section 4.12: Absence of Certain Changes or Events	26
Section 4.13: Commitments	27
Section 4.14: Facilities Lease	28
Section 4.15: Transactions with Related Parties	28
Section 4.16: Compliance With Laws	28
Section 4.17: Taxes	29
Section 4.18: Environmental Matters	29
Section 4.19: Labor and Employment Matters	30

ii

Section 4.20: Employee Benefit Plans	30
Section 4.21: Bulk Transfer Laws	31
Section 4.22: No Brokers or Finders	31
Section 4.23: No Material Misstatements or Omissions	31
Article 5. Representations and Warranties of Purchasers and TESSCO	31
Section 5.1: Power and Authority; Effect of Agreement	31
Section 5.2: Governmental Consents	32
Section 5.3: Litigation	32
Section 5.4: No Brokers or Finders	33
Section 5.5: No Material Misstatements or Omissions	33
Article 6. Additional Covenants of Sellers	33
Section 6.1: Cooperation by Sellers	33
Section 6.2: Interim Financial Statements	33
Section 6.3: Conduct of Business	33
Section 6.4: Access	34
Section 6.5: No Solicitation of Transactions	34
Section 6.6: Books and Records; Personnel	35
Section 6.7: Further Assurances	35
Section 6.8: Inventory Transition	36
Section 6.9: A/R and A/P Transition	36
Section 6.10: Tax Clearances	36
Section 6.11: Name Changes	36
Article 7. Additional Covenants of Purchasers and TESSCO	36
Section 7.1: Cooperation by Purchasers and TESSCO	37
Section 7.2: Books and Records; Personnel	37
Section 7.3: Maintaining Earn-out Opportunity	37
Section 7.4: Further Assurances	37
Article 8. Employee Matters	38
Section 8.1: Offers to Sellers’ Employees	38
Section 8.2: Preclosing Employee Expenses	38
Article 9. Conditions to Obligations of Purchasers and TESSCO	38
Section 9.1: Representations, Warranties and Covenants of Sellers	38
Section 9.2: No Prohibition	38
Section 9.3: Documents	38
Section 9.4: Employment Agreements	38
Section 9.5: Required Consents	39
Section 9.6: Tax Clearances	39
Section 9.7: Required SKU Information	39
Section 9.8: No Material Adverse Change	39

iii

Article 10. Conditions to Obligations of Sellers	39
Section 10.1: Representations, Warranties and Covenants of Purchasers and TESSCO	39
Section 10.2: No Prohibition	39
Section 10.3: Documents	39
Section 10.4: Employment Agreements	39
Article 11. Termination Before Closing	40
Section 11.1: Termination	40
Section 11.2: Effect on Obligations	40
Article 12. Indemnification	40
Section 12.1: Indemnification by Sellers	40
Section 12.2: Indemnification by Purchasers and TESSCO	41
Section 12.3: Notice of Claims	41
Section 12.4: Third-Person Claims	42
Section 12.5: Time Limits on Assertion of Claims	43
Section 12.6: Limitations on Indemnification	43
Section 12.7: Express Negligence Acknowledgement	44
Article 13. Dispute Resolution	45
Section 13.1: Negotiation and Good-Faith Resolution	45
Section 13.2: Arbitration	45
Section 13.3: Injunctive Relief	45
Article 14. Miscellaneous	45
Section 14.1: Certain Rules of Construction	45
Section 14.2: Entire Agreement	46
Section 14.3: Successors and Assigns	46
Section 14.4: Modification and Waiver	46
Section 14.5: Expenses	46
Section 14.6: Third-Party Beneficiaries	46
Section 14.7: Notices	47
Section 14.8: Governing Law	48
Section 14.9: Public Announcements	48
Section 14.10: Counterparts	48
Exhibits:
A — Assumption Agreement
B — Bill of Sale and Instrument of Assignment
C — Form of Copyright Assignment
D —Employment Agreements:
D-1 — Marco Employment Agreement

iv

D-2 — Burke Employment Agreement

D-3 — Sablatura Employment Agreement

D-4 — Snow Employment Agreement

E — Assignment of Lease

F — Definition of “Net Profit Contribution” and Related Terms

G — Purchasers Certificate

H — Sellers Certificate

I —Trademark Assignments:

I-1 — Assignment of TerraWave Trademark

I-2 — Assignment of GigaWave Trademark

Schedules:

Schedule 1.98: Required Consents

Schedule 2.2: Certain Excluded Assets

Schedule 2.5(a): Certain Assumed Liabilities

Schedule 2.5(c): Certain Retained Liabilities

Disclosure Schedule

v

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is made as of the 5th day of April, 2006, by and among TERRAWAVE SOLUTIONS, LTD., a Texas limited partnership (“TerraWave”), and GIGAWAVE TECHNOLOGIES, LTD., a Texas limited partnership (“GigaWave”) (each “Seller” and together “Sellers”); TESSCO INCORPORATED, a Delaware corporation (“TESSCO Inc.”), and GW SERVICE SOLUTIONS, INC., a Delaware corporation (“GSS”) (each “Purchaser” and together “Purchasers”), and TESSCO TECHNOLOGIES INCORPORATED, a Delaware corporation (“TESSCO”).

Recitals

A.            TerraWave is a value-added distributor and manufacturer specializing in providing 2.4 GHz and 5 GHz wireless local area network (“WLAN”) solutions to resellers and end users. GigaWave is a provider of innovative training services, curriculum development, and certification programs for the WLAN industry. The sole general partner of TerraWave and GigaWave is CCCS Management, LLC, a Texas limited liability company, which in turn is owned by Christopher N. Marco (“Marco”), Carter J. Burke (“Burke”), Charles A. Sablatura (“Sablatura”), and Stephen R. Snow (“Snow”) (each a “Key Executive”). All of the limited partnership interests in TerraWave and GigaWave are owned by the Key Executives.

B.            Sellers desire to sell and transfer to Purchasers, and Purchasers desire to purchase and acquire from Sellers, substantially all of the assets used in the businesses currently conducted by Sellers (the “Acquired Businesses”) on the terms and subject to the conditions set forth herein. In particular, TESSCO Inc. wishes to acquire substantially all of the assets used in the businesses currently conducted by TerraWave, and GSS wishes to acquire substantially all of the assets used in the businesses currently conducted by GigaWave.

C.            TESSCO Inc. is a wholly-owned subsidiary of TESSCO, and GSS is an indirect, wholly-owned subsidiary of TESSCO. Accordingly, TESSCO will derive a substantial economic benefit from the transaction. TESSCO has, therefore, guaranteed the obligations of Purchasers hereunder pursuant to a Guaranty Agreement of even date herewith (the “TESSCO Guaranty”).

NOW, THEREFORE, in consideration of the foregoing premises and the mutual representations, warranties, covenants, and agreements hereinafter set forth, and other good and valuable consideration the receipt and sufficiency of which the parties hereby acknowledge, the parties intending to be legally bound hereby agree as follows:

Article 1.       Definitions.

As used in this Agreement, the following terms have the meanings ascribed to them in this Article:

1.1           “AAA” has the meaning ascribed to it in section 13.2.

1.2           “Accounts Receivable” means all trade accounts receivable of either Seller (regardless of age) relating to the Acquired Business, other than accounts receivable owing by any employee, officer, director, or partner of either Seller.

1.3           “Accrued Vacation Expense” means vacation pay accrued as of the Closing Date to Hired Employees to the extent set forth in a separate schedule agreed upon between Sellers and Purchasers.

1.4           “Acquired Assets” has the meaning ascribed to it in section 2.1.

1.5           “Acquired Businesses” has the meaning ascribed to it in the Recitals.

1.6           “Affiliate” of a person means (i) any other person who, directly or indirectly, Controls, or is Controlled by, or is under common Control with, such person or (ii) in the case of an individual, any other individual related by blood, marriage, or adoption to such individual.

1.7           “Agreement” means this Agreement, including the Disclosure Schedule and all exhibits, schedules, and annexes hereto or thereto, as the same may from time to time be amended or modified by agreement of all of the parties.

1.8           “Assumed Liabilities” has the meaning ascribed to it in section 2.5(a).

1.9           “Assumption Agreement” means the Assumption Agreement by Purchasers relating to the Assumed Liabilities in the form attached hereto as Exhibit A.

1.10         “Base Amount” has the meaning ascribed to it in section 2.3.

1.11         “Base Broadband NPC” has the meaning ascribed to it in section 3.3(b).

1.12         “Bill of Sale” means the Bill of Sale and Instrument of Assignment in the form attached hereto as Exhibit B.

1.13         “Books and Records” means all of the following (whether in written, electronic, or other form): (i) all books, records, files, information, and data arising out of or relating to any of the Acquired Businesses or any of the Acquired Assets (other than items constituting Retained Books and Records), including all lists of and information concerning past and present customers and suppliers, all mailing lists, all vendor contracts and records, and all product plans and specifications and other information concerning products (whether existing or currently planned or under development), and (ii) copies of personnel records and files relating to employees of either Seller who are hired by Purchasers or TESSCO as contemplated by section 8.1.

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1.14         “Broadband Business” means TESSCO’s existing broadband business as such business is conducted after the Closing Date.

1.15         “Broadband NPC” for any period means Net Profit Contribution derived for such period from the Broadband Business.

1.16         “Broadband NPC Payment” has the meaning ascribed to it in section 3.3(a).

1.17         “Bulk Transfer Laws” has the meaning ascribed to it in section 4.21.

1.18         “Business Day” means any day other than a (i) Saturday, (ii) Sunday or (iii) day on which banks in Baltimore, Maryland or San Antonio, Texas are required to be closed.

1.19         “Claim Expenses” means any and all expenses reasonably incurred in connection with investigating, defending, or asserting any claim, action, suit, or proceeding incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants, and other professionals).

1.20         “Claim Notice” has the meaning ascribed to it in section 12.3(a).

1.21         “Claim Rights” means, collectively, all causes of action, judgments, claims, indemnity rights, or similar rights (including rights arising under express or implied warranties with respect to Inventory or Equipment acquired by Purchasers hereunder) that arise out of or otherwise relate to any of the Acquired Businesses or the Contract Rights or other Acquired Assets (but excluding any such cause of action, judgment, claim, indemnity right, or similar right to the extent that it relates to the Excluded Assets or the Retained Liabilities). “Claim Rights” expressly includes all Sparco Claim Rights to the extent that such rights are based on actions by any of the Sparco Parties taken or occurring on or after the Closing Date.

1.22         “Closing” means the closing of the transactions contemplated by this Agreement, as described in section 2.6.

1.23         “Closing Date” means the date on which Closing occurs as provided in section 2.6.

1.24         “Closing Date A/P Report” has the meaning ascribed to it in section 4.7.

1.25         “Closing Date A/R Report” has the meaning ascribed to it in section 4.6.

3

1.26         “Closing Date Inventory Report” has the meaning ascribed to it in section 4.5.

1.27         “Closing Date Payment” has the meaning ascribed to it in section 2.3(a).

1.28         “Closing Document” means any of (i) the Assumption Agreement, (ii) the Bill of Sale, (iii) the Copyright Assignments, (iv) the Employment Agreements, (v) the Lease Assignment, (vi) the Trademark Assignments, (vii) the Purchasers Certificate, or (viii) the Sellers Certificate, and “Closing Documents” means all of the foregoing.

1.29         “Code” means the Internal Revenue Code of 1986, as amended.

1.30         “Combined NPC” for any period means the sum of Private Brand NPC, Wi-Fi NPC, and Training NPC for such period.

1.31         “Commercially Reasonable Efforts” means efforts that a reasonable business person desirous of achieving a result would use in similar circumstances to achieve that result as expeditiously as possible; provided, however, such efforts will not be deemed to require a person to undertake extraordinary or unreasonable measures, including the payment of amounts in excess of normal and usual filing fees, processing fees, or other payments with respect to any contract, agreement, or legally binding commitment or contractual obligation that are significant in the context of such contract, agreement, or legally binding commitment or contractual obligation.

1.32         “Commitment” means any contract, agreement, or legally binding commitment or contractual obligation (whether or not in writing) or any lease of real or personal property, including any and all amendments to any of the foregoing, to which either Seller is a party, or by which either Seller or any of the Acquired Assets is bound, that relates to or affects the Acquired Businesses or the Acquired Assets, including the Facilities Lease, Customer Contracts, Supplier Contracts, the Equipment Leases, the License Agreements, and contracts with and commitments to any of either Seller’s employees.

1.33         “Confidentiality Agreement” means the Reciprocal Confidentiality Agreement dated March 23, 2005 between Sellers and TESSCO.

1.34         “Contamination” means the emission, discharge, or release, or threatened emission, discharge, or release, of any Hazardous Substance to, on, onto, or into the environment and the effects of such emission, discharge, release, or threatened emission, discharge, or release, including the presence, existence, or threat of any such Hazardous Substance.

1.35         “Contract Rights” means all rights of either Seller (including rights to or in respect of any deposits, prepayments, or advances) arising out of: (i) Customer Contracts, Supplier Contracts, the Facilities Lease, the Equipment Leases, and the License Agreements; (ii) any nondisclosure, nonsolicitation, ownership of inventions, or similar

4

agreement with any Hired Employee; (iii) any other nondisclosure or confidentiality agreement relating to proprietary or other information of either Seller; or (ii) any other contract with a third party to the extent that the liabilities and obligations under such other contract are among the Assumed Liabilities.

1.36         “Control” (including its use in the terms “Controlling,” “Controlled by,” and “under common Control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise.

1.37         “Copyright Assignments” means the assignments of the copyrights identified in the Disclosure Schedule in the form attached hereto as Exhibit C.

1.38         “Customer Contract” means any purchase order or other contract for the sale of Inventory, products, goods, or services entered into by either Seller in the ordinary course of the Acquired Businesses to the extent unfilled as of the Closing Date, whether or not entered on the books and records of either Seller, other than a purchase order or contract (if any) that constitute an Excluded Asset.

1.39         “Disclosible Commitment” has the meaning ascribed to it in section 4.13.

1.40         “Disclosure Schedule” means the Disclosure Schedule, dated as of the date of this Agreement, delivered to Purchasers by Sellers in connection with this Agreement.

1.41         “Earnout Period” means one of the four (4) successive periods of twelve (12) consecutive Fiscal Months the first of which periods begins on the first day of the first Fiscal Month beginning on or after the Closing Date.

1.42         “Employee Benefit Plan” means an Employee Pension Plan, an Employee Welfare Plan, or an Other Employee Plan or Arrangement.

1.43         “Employee Pension Plan” means any plan, fund, program, or arrangement established or maintained by an employer that provides or is intended to provide retirement income to employees or their beneficiaries.

1.44         “Employee Welfare Plan” means any plan, fund, program, or arrangement established or maintained by an employer that provides or is intended to provide to its participants or their beneficiaries, through the purchase of insurance or otherwise, medical, surgical, accident, sickness, disability, death, unemployment, or vacation benefits; apprenticeship or other training programs; day care centers or other childcare services; scholarship funds or other education benefits; prepaid legal services; or any other fringe benefit.

1.45         “Employment Agreement” means any of the Employment Agreements with Marco, Burke, Sablatura, and Snow in substantially the form of Exhibits D-1, D-2, D-3, and D-4, respectively.

5

1.46         “Encumbrance” means any lien (statutory or otherwise), claim, charge, security interest, mortgage, deed of trust, pledge, hypothecation, assignment, conditional sale or other title retention agreement, preference, priority, or other security agreement or preferential arrangement of any kind or nature, or any defect in title or other encumbrance of any kind.

1.47         “Environmental Laws” means, collectively, any and all laws, ordinances, rules, regulations, and orders currently in effect of any Governmental Authority relating to Hazardous Substances, Contamination, protection of the environment, or protection of human health and safety.

1.48         “Environmental Matter” means any matter arising out of or relating to occupational or human health and safety, pollution, Contamination that exceeds applicable cleanup standards or remediation thresholds, Environmental Laws, compliance with Environmental Laws or protection of the environment (indoor or outdoor), including any of the foregoing relating to the presence, use, production, generation, handling, transport, management, treatment, storage, disposal, distribution, discharge, release, migration, control, or cleanup of, or exposure to, any Hazardous Substance or Hazardous Substance-containing material.

1.49         “Environmental Permit” means any permit, license, registrations, or authorization required by applicable Environmental Laws in order to use the Facilities or any of the Acquired Assets or to operate an of the Acquired Businesses as currently operated by either Seller.

1.50         “Equipment” means all items of equipment (including training equipment) and other tangible personal property, other than Inventory, owned by either Seller and used in or useful to any of the Acquired Businesses, other than items (if any) that constitute Excluded Assets.

1.51         “Equipment Leases” means the leases of personal property used in the Acquired Businesses identified as such in the Disclosure Schedule, other than those (if any) that constitute Excluded Assets.

1.52         “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.53         “ERISA Affiliate” means any entity that is a member of the “controlled group,” as defined in section 4001(a)(14) of ERISA, that includes Seller.

1.54         “Estimated Net Current Asset Value Payment” has the meaning ascribed to it in section 2.3(a).

1.55         “Excluded Asset” and “Excluded Assets” have the meaning ascribed to them in section 2.2.

6

1.56         “Facilities” means the real property and improvements thereon located at 10521 Gulfdale, San Antonio, Texas 78216 which are leased to Seller pursuant to the Facilities Lease.

1.57         “Facilities Lease” means the Commercial Lease (and Addendum thereto) dated September 27, 2001 by and between Tuleta C. White as Lessor and GigaWave as Lessee, as amended by an Amendment dated December 28, 2001, a Second Amendment dated January 30, 2002, and a Third Amendment dated February 15, 2002, the term of which Commercial Lease has been extended through November 30, 2008 pursuant to written notice from GigaWave to Lessor dated September 1, 2005.

1.58         “Financial Statements” means any of the Unaudited Statements or any of the Interim Statements.

1.59         “Fiscal Month,” “Fiscal Quarter,” or “Fiscal Year” means a fiscal month, fiscal quarter, or fiscal year, respectively, of TESSCO.

1.60         “FY2007,” “FY2008,” FY2009,” and “FY2010” mean TESSCO’s Fiscal Years ending April 1, 2007; March 30, 2008; March 29, 2009; and March 28, 2010; respectively.

1.61         “GAAP” means United States generally accepted accounting principles: (i) with respect to the financial statements of Purchasers or TESSCO as consistently applied by TESSCO and (ii) with respect to the financial statements of either Seller as consistently applied by Sellers in the preparation of their financial statements.

1.62         “GigaWave Trademark” means the service mark “GigaWave Technologies” registered on the Principal Register of the United States Patent and Trademark Office (Registration No. 2,512,492).

1.63         “Governmental Authority” means any nation, including the United States of America, or any state or other political subdivision, or any agency, instrumentality, court, or other body thereof, exercising executive, legislative, judicial, regulatory, or administrative authority.

1.64         “Gross Earnout Amount” has the meaning ascribed to it in section 3.2(a).

1.65         “Hazardous Substance” means any element, substance, compound, or mixture, whether solid, liquid, or gaseous: (i) that is subject to regulation by any Governmental Authority pursuant to one or more Environmental Laws or (ii) the presence, existence, or threat of which can give rise to a claim or liability under one or more Environmental Laws.

1.66         “Hired Employee” means any employee of either Seller (other than a Key Executive) who is offered and accepts employment with TESSCO as contemplated by section 8.1.

7

1.67         “Indemnitee” has the meaning ascribed to it in section 12.3(a).

1.68         “Indemnitor” has the meaning ascribed to it in section 12.3(a).

1.69         “Installment Payment” has the meaning ascribed to it in section 3.1.

1.70         “Intellectual Property Right” means any of the following that is owned by either Seller or used by either Seller in the operation of any of the Acquired Businesses: (i) any United States or foreign patent, patent right, or copyright (whether or not registered), (ii) any trademark, service mark, or trade name (whether or not registered), including the GigaWave Trademark, the TerraWave Trademark, and the rights to use the names “GigaWave” and “TerraWave,” (iii) any Internet domain name, (iv) rights in and to customer and supplier lists and information (whether in written or electronic form), or (v) any right in respect of information that is protectible from unauthorized use or disclosure as a trade secret under federal or state law, other than any of the foregoing that constitutes an Excluded Asset.

1.71         “Interim Statements” has the meaning ascribed to it in section 4.10.

1.72         “Inventory” means, collectively, all inventories of products owned by either Seller that are held for resale and all parts, supplies, and packaging material owned by either Seller that are held for use or consumption in the operation of any of the Acquired Businesses by either Seller, including quantities that are excess to the reasonably anticipated needs of the Acquired Businesses, other than those (if any) that constitute Excluded Assets.

1.73         “IRS” means the Internal Revenue Service.

1.74         “Key Executive” has the meaning ascribed to it in the Recitals.

1.75         “Lease Assignment” means the assignment of the Facilities Lease in substantially the form the Assignment of Lease attached hereto as Exhibit E.

1.76         “Leasehold Improvements” means all leasehold improvements to the Facilities to the extent of any interest therein of either Seller, whether or not the same are reflected in any of the Financial Statements.

1.77         “License Agreements” means the software license agreements and other licenses of tangible and intangible property to which either Seller is a party used in or relating to any of the Acquired Businesses and identified as such in the Disclosure Schedule, other than those (if any) that constitute Excluded Assets.

1.78         “Litigation” means any action or proceeding in any court or before any other Governmental Authority or any arbitration or similar proceeding.

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1.79         “Loss” or “Losses” means each and all of the following: claims, demands, losses, liabilities, damages, judgments, fines, penalties, and awards and all Claim Expenses incurred in connection therewith.

1.80         “Material Adverse Effect” means a material adverse effect (i) on the assets, financial condition, operating results, or business of Sellers (to the extent relating to any of the Acquired Businesses or Acquired Assets), considered as a single enterprise, or (ii) on Purchasers’ operation of the Acquired Businesses or use of the Acquired Assets after the Closing Date, excluding in any case (1) any change in general economic, regulatory, public safety, or political conditions or changes that affect generally the industries in which the Acquired Businesses are operated and (2) any change resulting from compliance by either Seller with the terms of or the taking of any action contemplated or permitted by this Agreement or any of the Closing Documents.

1.81         “Net Current Asset Value” means the sum of the following (without duplication) as of the Closing Date:

(a)           the amount of cash and cash equivalents (if any) transferred by either Seller to Purchasers on the Closing Date; plus

(b)           the value of the Inventory transferred to Purchasers as finally determined in accordance with section 2.4; plus

(c)           the total amount of the Accounts Receivable transferred to Purchasers as finally determined in accordance with section 2.4; plus

(d)           the total amount of prepaid expenses, security deposits, and other current assets on the books of either Seller as agreed to between Purchasers and Sellers on or before the Closing Date and as finally determined in accordance with section 2.4; minus

(e)           the sum of: (i) Sellers’ accounts payable as reflected in the Closing Date A/P Report (except to the extent that any of such accounts payable constitute Retained Liabilities); (ii) Purchasers’ reasonable estimate of any other accounts payable of Sellers arising in the Ordinary Course of Business within the thirty (30) days preceding the Closing Date for which invoices have not been received in sufficient time to be included in the Closing Date A/P Report (except to the extent that any of such accounts payable constitute Retained Liabilities); (iii) without duplication, the total amount of all other liabilities of either Seller that are included in the Assumed Liabilities, including Accrued Vacation Expense and those liabilities (if any) specifically identified in Schedule 2.5(a) (but excluding the costs of satisfying Warranty Obligations, which shall be taken into account in determining Net Profit Contribution).

1.82         “Net Profit Contribution” for any period means Net Profit Contribution for such period determined in accordance with TESSCO’s normal accounting policies and procedures consistent with the provisions of Exhibit F. Notwithstanding any contrary provision of Exhibit F, in determining “Net Profit Contribution” in no event shall any

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deduction be made for any reason whatsoever: (1) with respect to any broker’s fee payable by Purchasers or TESSCO; (2) any amortization or expense for goodwill acquired pursuant to this Agreement or incident to any other acquisition; (3) any intercompany charges, including any interest on funds lent by TESSCO or any of its Affiliates to either Purchaser; (4) the Closing Date Payment; (5) any amount for which either Purchaser or TESSCO is in fact indemnified by either Seller pursuant to the provisions of Article 12; or (6) any other amounts that any other provision of this Agreement (including Exhibit F) specifies shall not be deducted in computing Net Profit Contribution.

1.83         “Net Tangible Asset Value” means the book value net of depreciation and amortization, determined as of the Closing Date (or such other convenient date as is agreed upon in writing by Sellers and Purchasers) in a manner consistent with the accounting methods heretofore used by Sellers, of all tangible personal property  owned by either Seller as of the Closing Date and otherwise included in the Acquired Assets (including Leasehold Improvements, except that all prior amortization of the cost thereof shall be recomputed using a useful life of ten (10) years).

1.84         “NPC Earnout Payment” has the meaning ascribed to it in section 3.2(a).

1.85         “Ordinary Course of Business” means any action taken by a person if that action is consistent in nature, scope, and magnitude with past practices of such person, is taken in the ordinary course of the normal day-to-day operations of such person, and, in the case of a corporation or other entity, does not require the authorization of the board of directors (or comparable governing body) or shareholders (or comparable equity owners) of such person.

1.86         “Other Employee Plan or Arrangement” means any guaranteed annual income plan, fund, or arrangement, or any incentive, bonus, profit-sharing, deferred compensation, stock or other equity option or purchase plan or agreement or arrangement, any severance or termination pay plan or policy, or any other plan for the benefit of all or any of an employer’s employees, but excluding an Employee Welfare Plan and an Employee Pension Plan.

1.87         “Permit” means any permit, license, or authorization, including an Environmental Permit, issued by any Governmental Authority.

1.88         “Permitted Encumbrance” means: (a) Encumbrances for Taxes, fees, levies, duties, or other governmental charges of any kind (i) that are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established and are reflected in the Financial Statements or (ii) that are not yet due or delinquent; and (b) purchase money liens, liens securing rental payments under capital lease arrangements, mechanics, materialmen’s liens and similar liens, and other liens arising in the Ordinary Course of Business that secure an obligation (other than an obligation for borrowed money) that is included among the Assumed Liabilities and is disclosed as such in the Disclosure Schedule.

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1.89         “Person” or “person” includes an individual, corporation, partnership, limited liability company, or other entity.

1.90         “Prepaid Purchase Price” has the meaning ascribed to it in section 2.3.

1.91         “Private Brand Business” means TerraWave’s business of selling and distributing products manufactured by or for TerraWave for marketing under the TerraWave brand name (or any successor brand name that may hereafter be used by either Purchaser or by TESSCO for marketing such products) as such business continues to be conducted after the Closing Date.

1.92         “Private Brand NPC” for any period means Net Profit Contribution derived for such period from the Private Brand Business.

1.93         “Proposal” has the meaning ascribed to it in section 6.5(a).

1.94         “Purchase Price” has the meaning ascribed to it in section 2.3.

1.95         “Purchase Price Allocation” has the meaning ascribed to it in section 2.8.

1.96         “Purchasers Certificate” means a certificate of Purchasers and TESSCO, dated as of the Closing Date and signed by duly authorized officers of Purchasers and TESSCO, certifying to the fulfillment of the conditions and other matters set forth in section 10.1 in substantially the form attached hereto as Exhibit G.

1.97         “Representative” has the meaning ascribed to it in section 6.5.

1.98         “Required Consents” means: (i) written consent of the Landlord under the Facilities Lease to the assignment by GigaWave of the Facilities Lease pursuant to and on the terms contained in the Lease Assignment or as may otherwise be acceptable to Purchasers; (ii) written consents by all parties other than Sellers to the assignment of the contracts identified in Schedule 1.98; and (iii) any other consent of any Governmental Authority or other third party necessary for the consummation of the transactions contemplated hereby or the transfer of any of the Acquired Assets the absence of which would have a Material Adverse Effect.

1.99         “Required SKU Information” has the meaning ascribed to it in section 6.8.

1.100       “Retained Books and Records” means, collectively: (i) all books, records, files, and data (whether in written, electronic, or other form) to the extent arising out of and relating exclusively to any of the Excluded Assets or Retained Liabilities or to Sellers’ policies or procedures that are not applicable to any of the Acquired Businesses; (ii) all minute books and other partnership records, and (iii) all records of either Seller relating to federal, state, or local Taxes.

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1.101       “Retained Liabilities” has the meaning ascribed to it in section 2.5(c).

1.102       “Sellers Certificate” means a certificate of Sellers, dated as of the Closing Date and signed by each of the Sellers, certifying to the fulfillment of the conditions and other matters set forth in section 9.1 in substantially the form attached hereto as Exhibit H.

1.103       “Sellers’ Knowledge” means the actual knowledge after reasonable inquiry of Marco, Burke, Sablatura, or Snow.

1.104       “Sparco Claim Rights” means includes all rights (but none of the obligations) of either Seller arising out of or relating to the Settlement Agreement and Release of Claims among Sellers and the Sparco Parties and the related Agreed Permanent Injunction entered on or about June 9, 2004, in Cause No. 2004CI05111 by the District Court for Bexar County, Texas.

1.105       “Sparco Parties” means Sparco Technologies, Inc., David R. Dullnig, and Christopher F. Cooke.

1.106       “Supplier Contract” means any purchase order or other contract for the purchase or acquisition of Inventory, products, goods, or services relating to any of the Acquired Businesses entered into by either Seller in the Ordinary Course of Business to the extent unfilled as of or providing for the delivery or rendering of such Inventory, products, goods, or services after the Closing Date, whether or not entered on the books and records of either Seller, other than a purchase order or contract that constitutes an Excluded Asset.

1.107       “Tax” means any federal, state, local, or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, customs duty, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, and including any interest, penalties or additions to tax on or with respect to any of the foregoing.

1.108       “TESSCO Guaranty” has the meaning ascribed to it in the Recitals.

1.109       “TerraPoints Liability” means Sellers’ obligations in respect of Sellers’ “TerraPoints” incentive program.

1.110       “TerraWave Trademark” means the service mark “TerraWave Solutions” registered on the Principal Register of the United States Patent and Trademark Office (Registration No. 2,835,977).

1.111       “Trademark Assignments” means the assignments of the TerraWave Trademark and the GigaWave Trademark in the form attached hereto as Exhibit I.

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1.112       “Training Business” means GigaWave’s business of providing wireless- and broadband-related training services, logistics support, curriculum development, and certification programs (and any other similar services that Purchasers or TESSCO may hereafter determine to offer under the GigaWave name), as such business continues to be conducted after the Closing Date.

1.113       “Training NPC” for any period means Net Profit Contribution derived for such period from the Training Business.

1.114       “Unaudited Statements” has the meaning ascribed to it in section 4.10.

1.115       “Warranty Obligations” has the meaning ascribed to it in section 2.5(a)(vi).

1.116       “Wi-Fi Business” means Sellers’ non-private-label distribution business, including the distribution and sale of Wi-Fi and wireless products xxx xxxxxxxxxxx xxxxxxxxxx xxxxxx xxxxxxxx xxx xxxxxxxxx xxx xxxxxxxxxxxx xx xxxx xx xxxxxxxxxxxx-xxxxx xxxxxxx xxxxxxxx xx xxxxxxxxx xx xxxxxx, as such business continues to be conducted after the Closing Date.

1.117       “Wi-Fi NPC” for any period means Net Profit Contribution derived for such period from the Wi-Fi Business.

1.118       “WLAN” has the meaning ascribed to it in the Recitals.

Article 2.       Terms of Purchase and Sale.

2.1           PURCHASE AND SALE. AT THE CLOSING, ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS AGREEMENT, SELLERS SHALL SELL, CONVEY, TRANSFER, ASSIGN, AND DELIVER TO PURCHASERS, AND PURCHASERS SHALL PURCHASE AND ACQUIRE FROM SELLERS, ALL OF SELLERS’ RIGHT, TITLE, AND INTEREST IN AND TO THE FOLLOWING (COLLECTIVELY, THE “ACQUIRED ASSETS”), WHICH ACQUIRED ASSETS SHALL BE CONVEYED, TRANSFERRED, AND ASSIGNED TO TESSCO INC. OR TO GSS, AS THE CASE MAY BE, AS SET FORTH IN THE BILL OF SALE:

(a)           all shares of stock, securities, or investment assets owned by or held for the benefit of either Seller on the Closing Date to the extent included in Net Current Asset Value;

(b)           the Accounts Receivable, as reflected in the Closing Date A/R Report;

(c)           the Inventory, as reflected in the Closing Date Inventory Report (including items of Inventory ordered but not yet received as of the Closing Date to the extent of any estimates thereof included in the Closing Date Inventory Report);

(d)           the Equipment;

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(e)           the Leasehold Improvements;

(f)            the Contract Rights;

(g)           the Claim Rights (provided, however, that Purchasers shall be solely responsible for the costs and expenses, of litigation or otherwise, that are incurred in Purchasers’ enforcement of any Claim Rights, including the Sparco Claim Rights, so assigned to Purchasers);

(h)           the Intellectual Property Rights;

(i)            the Books and Records (provided, however, that Sellers shall be entitled to keep copies of financial books and records and personnel records and files);

(j)            the benefit of all rent, property taxes, and other expenses and deposits paid in advance of the Closing Date to the extent relating to periods after the Closing Date;

(k)           all sales and promotional literature, office supplies, and other consumable supplies;

(l)            all Permits of or relating to any of the Acquired Businesses; and

(m)          all goodwill of Sellers associated with the Acquired Businesses and the Acquired Assets.

2.2           Excluded Assets. Notwithstanding anything in section 2.1 or any other provision of this Agreement to the contrary, the Acquired Assets shall not be deemed to include any of the following (each an “Excluded Asset” and together the “Excluded Assets”):

(a)           any Accounts Receivable not reflected in the Closing Date A/R Report;

(b)           any items of Inventory not reflected in the Closing Date Inventory Report;

(c)           all accounts receivable, notes receivable, and other obligations owing by either Seller to the other or by any employee, officer, director, or equity owner of either Seller, or any Affiliate of either Seller;

(d)           the Retained Books and Records;

(e)           all rights of Sellers under this Agreement, the TESSCO Guaranty, or any of the Closing Documents;

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(f)            any insurance policies maintained by either Seller or rights or claims thereunder;

(g)           any tort claims or similar rights arising out of acts or occurrences before the Closing Date;

(h)           all Sparco Claim Rights to the extent that such rights are based on actions by any of the Sparco Parties taken or occurring before the Closing Date, including awards of damages, reimbursements of fees and expenses, and settlement awards that pertain to such Sparco Claim Rights;

(i)            any and all rights to the extent arising out of or relating to one or more of the Excluded Assets or Retained Liabilities, including amounts due to either Seller as reimbursement under any of Sellers’ Employee Benefit Plans;

(j)            the other items (if any) listed on Schedule 2.2;

(k)           all rights to refunds, credits, or overpayments with respect to Taxes paid or accrued by either Seller and all other payments or deposits made by either Seller in respect of Taxes, but only to the extent that the liability for such Taxes is not an Assumed Liability; and

(l)            all rights under any contract, agreement, guaranty, or arrangement not otherwise included herein as an Excluded Asset between either Seller and any Affiliate of either Seller or any officer, director, employee, or partner of either Seller.

2.3           Purchase Price and Payment. The purchase price for the Acquired Assets (the “Purchase Price”) shall be the sum of the following amounts: (i) Two Million Dollars ($2,000,000) (the “Base Amount”), of which One Million Five Hundred Thousand Dollars ($1,500,000) (the “Prepaid Purchase Price”) constitutes a prepayment of other amounts owing to Sellers hereunder to be recouped as provided in section 2.6; (ii) an amount equal to the Net Current Asset Value; (iii) an amount equal to the Net Tangible Asset Value; (iv) the Installment Payments payable under section 3.1; (v) the NPC Earnout Payments payable under section 3.2; (vi) the Broadband NPC Payments payable under section 3.3; and (vii) the total amount of the Assumed Liabilities assumed under section 2.5(a). The Purchase Price shall be paid as follows:

(a)           Amount Due at Closing. On the Closing Date, Purchasers shall pay to Sellers (by wire transfer of immediately available funds to an account or accounts designated by Sellers) the sum of the following amounts (together, the “Closing Date Payment”): (i) the Base Amount plus (ii) ninety percent (90%) of Net Current Asset Value as reasonably estimated by Purchasers in consultation with Sellers as of the Closing Date (the “Estimated Net Current Asset Value Payment”), which estimate of Net Current Asset Value shall, in the case of Inventory, be based on the lower of Sellers’ cost or TESSCO’s cost as reflected in the Closing Date Inventory Report, plus (iii) Net Tangible Asset Value.

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(b)           Balance of Net Current Asset Value. The balance of the Net Current Asset Value shall be determined and paid to Sellers as provided in section 2.4.

(c)           Contingent Payments. Subject to the satisfaction of the conditions therein specified, Purchasers shall pay to Sellers the Installment Payments provided for in section 3.1, the NPC Earnout Payments provided for in section 3.2, and the Broadband NPC Payments provided for in section 3.3, in each case as and when due under Article 3 (all of which obligations shall be guaranteed by TESSCO as provided in the TESSCO Guaranty).

(d)           Assumption of Certain Liabilities. On the Closing Date, Purchasers shall assume the Assumed Liabilities as set forth in section 2.5 and shall execute and deliver the Assumption Agreement in confirmation thereof (which assumption obligations shall be guaranteed by TESSCO as provided in the TESSCO Guaranty).

2.4           Final Determination and Payment of Net Current Asset Value.

(a)           Not later than one (1) month after the last day of FY2007, Purchasers shall furnish to Sellers in writing its determination of Net Current Asset Value based on (i) actual sales of the Inventory during FY2007 (net of returns and allowances), (ii) actual collections of the Accounts Receivable during FY2007, (iii) the amount of prepaid expenses and other current assets as of the Closing Date the value of which is actually realized after the Closing Date, and (iv) the actual amount of accounts payable and other Assumed Liabilities as of the Closing Date (at face value and without regard to any discounts or other accommodations subsequently negotiated with the obligees of such accounts payable and other Assumed Liabilities), together with such supporting information and materials as Sellers may reasonably request. If Sellers object to such determination, Sellers shall notify Purchasers of such objection and the grounds therefor within ten (10) days of receiving Purchasers’ determination, and Sellers and Purchasers shall thereafter work together to resolve such objections in a timely manner.

(b)           Any disputes regarding the determination of Net Current Asset Value that cannot be resolved informally as contemplated by subsection (a) shall be resolved in accordance with Article 13.

(c)           If Sellers have no objections to Purchasers’ determination or do not timely notify Purchasers of any objections, then the amount shown in Purchasers’ determination shall constitute Net Current Asset Value. If Sellers timely notify Purchasers of one or more objections, then the amount finally agreed upon by the parties or determined in accordance with Article 13 shall constitute Net Current Asset Value.

(d)           Not later than twenty (20) days after Net Current Asset Value has been finally determined as provided in subsection (c):

(i)            If Net Current Asset Value exceeds the Estimated Net Current Asset Value Payment, Purchasers shall pay to Sellers (by wire transfer of immediately available funds to an account or accounts designated by Sellers) the amount of such excess; and

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(ii)           If the Estimated Net Current Asset Value Payment exceeds Net Current Asset Value, then Sellers shall pay to Purchasers (by wire transfer of immediately available funds to an account or accounts designated by Purchasers) the amount of such excess or, at Purchasers’ option, Purchasers may withhold and recoup such amount from any payments that are or may thereafter become due to Sellers under this Agreement.

(e)           For purposes of subsection (a):

(i)            amounts received after the Closing Date in payment of Accounts Receivable shall be applied to unpaid invoices as designated in writing by the payor and, in the absence of any such written designation, shall be applied to unpaid invoices in chronological order, i.e., to the oldest invoices first;

(ii)           where Purchasers or TESSCO or any of their Affiliates hold items of inventory on the Closing Date of the same kind as items included in the Inventory, the items held by Purchasers or TESSCO or any of their Affiliates on the Closing Date shall be deemed sold before items included in the Inventory;

(iii)          except as provided in paragraph (v), in determining Net Current Asset Value, items of Inventory sold after the Closing Date shall be valued at the lesser of Sellers’ cost as shown on the Closing Date Inventory Report and the actual selling price of such items;

(iv)          except as provided in paragraph (v), no value shall be attributed to, and there shall not be taken into account in determining Net Current Asset Value, any items of Inventory unsold or any Accounts Receivable uncollected as of the last day of FY2007; and

(v)           items of Inventory on hand as of the Closing Date that are subsequently returned to the vendor or exchanged for other products shall be treated as having been sold for the amount credited by the vendor or, if no specific amount is so credited, for an amount based on Sellers’ cost for such items as shown on the Closing Date Inventory Report.

(f)            At any time after Net Current Asset Value has been finally determined as contemplated by subsection (c), Purchasers shall, upon Sellers’ written request, assign to Sellers (without recourse) all of Purchasers’ right, title, and interest in any items of Inventory and in any Accounts Receivable not taken into account in determining Net Current Asset Value, and Purchasers shall (at Sellers’ sole cost and expense) deliver possession of any such items of Inventory as Sellers may reasonably request.

2.5           Assumed Liabilities and Retained Liabilities.

(a)           As of the Closing Date, Purchasers shall assume the following liabilities and obligations of Sellers (collectively, the “Assumed Liabilities”):

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(i)            Sellers’ accounts payable set forth in the Closing Date A/P Report and any other accounts payable of Sellers arising in the Ordinary Course of Business within the thirty (30) days preceding the Closing Date for which invoices have not been received in sufficient time to be included in the Closing Date A/P Report, but only to the extent taken into account in determining Net Current Asset Value;

(ii)           Accrued Vacation Expense;

(iii)          Sellers’ TerraPoints Liability;

(iv)          those other liabilities of Sellers (if any) specifically identified in Schedule 2.5(a);

(v)           credits or refunds due to customers that are reflected in the Closing Date A/R Report;

(vi)          obligations under warranties extended by either Seller, or arising by operation of law, in the Ordinary Course of Business before the Closing Date on account of the sale of merchandise by either Seller, but only to the extent that any such warranty requires either Seller to repair or replace such merchandise or to grant a credit for or refund of the purchase price of such merchandise (and specifically excluding any other liability or obligation in connection with any such warranties, including any liability for death or personal injury or for special, incidental, consequential, or punitive damages) (collectively “Warranty Obligations”); and

(vii)         Sellers’ liabilities and obligations under the Facilities Lease, the Equipment Leases, and the License Agreements, and under Customer Contracts and Supplier Contracts, but only to the extent that any such liability or obligation: (1) in the case of the Facilities Lease, an Equipment Lease, or a License Agreement, relates or is allocable to periods beginning on or after the Closing Date or (2) is a liability or obligation to pay for goods to be delivered or services to be furnished to either Purchaser by a third party after the Closing Date or (3) is a liability or obligation in respect of goods to be delivered or services to be furnished by either Purchaser after the Closing Date the right to payment for which is included in the Accounts Receivable or will otherwise inure to either Purchaser.

(b)           Purchasers shall pay or otherwise perform each Assumed Liability as it becomes due, provided that Purchasers may dispute any Assumed Liability in good faith by appropriate proceedings. The grant to Purchasers of such right to dispute shall not in any way affect the obligation of Purchasers or TESSCO pursuant to section 12.2(c) to indemnify Sellers and their Affiliates against Losses sustained or incurred by any of them arising out of or relating to such Assumed Liability, including by reason of Purchasers’ disputing such Assumed Liability.

(c)           Subject always to the terms of Article 12, Purchasers shall not assume, and Sellers shall be responsible for the payment, performance, and discharge of, the following liabilities and obligations (collectively, the “Retained Liabilities”):

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(i)            any liability or obligation of either Seller for Taxes (including payroll taxes and amounts withheld from compensation and other amounts paid to employees), whether arising before, on, or after the Closing Date or relating to periods commencing or ending before or after the Closing Date;

(ii)           any liability or obligation the responsibility for which is expressly identified in Schedule 2.5(c) as remaining with Sellers;

(iii)          any liability or obligation arising out of or relating to any of the Excluded Assets;

(iv)          any liability or obligation to, or arising out of or in connection with any claim by, any of the Sparco Parties, as well as all costs and expenses (including legal fees) incurred in connection with the enforcement of the Sparco Claim Rights, except to the extent that such Sparco Claim Rights have been assigned to Purchasers as provided in section 2.1(g);

(v)           any liability or obligation for Environmental Matters concerning or affecting any of the Acquired Assets, any of the Acquired Businesses, or the Facilities which Environmental Matters arise directly or indirectly from acts, omissions, facts, circumstances, events, or conditions (including the presence or release of Hazardous Substances) occurring before the Closing Date;

(vi)          any and all accounts payable, notes payable, and other indebtedness or obligations owing by either Seller to the other Seller or to any officer, director, employee, or partner of either Seller, or any Affiliate of either Seller;

(vii)         any other liabilities and obligations referred to in this Agreement as being the responsibility of Sellers; and

(viii)        any other liability or obligation of either Seller not assumed by Purchasers pursuant to section 2.5(a).

2.6           Recoupment of Prepaid Purchase Price. Notwithstanding any other provision of this Agreement, the Prepaid Purchase Price shall be recouped at the rate of $375,000 per Earnout Period from amounts otherwise payable (but not in fact paid) to Sellers, in respect of the first of the four Earnout Periods, under section 2.4(d)(i) and, in respect of each Earnout Period, under sections 3.1, 3.2, and 3.3. If and to the extent that such amount is not recouped from payments otherwise due with respect to a particular Earnout Period, the unrecouped portion shall be recouped out of amounts otherwise payable (but not in fact paid) with respect to the next succeeding Earnout Period or Earnout Periods, in addition to amounts otherwise to be recouped pursuant to the preceding sentence with respect to such succeeding Earnout Period or Earnout Periods.

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2.7           Closing.

(a)           Time and Place. Subject to the terms and conditions of this Agreement, Closing shall take place at the offices of Sellers in San Antonio, Texas commencing at 10:00 a.m. local time, on the later of (a) April 21, 2006 and (b) the Friday of the first full calendar week following the earliest date as of which all the conditions set forth in Article 9 and Article 10 have been satisfied or waived (or at such other time and place and on such other date as the parties may mutually agree). Except as Sellers and Purchasers may otherwise agree, Closing shall be deemed effective as of 12:01 a.m. Eastern time on the Closing Date.

(b)           Deliveries at Closing. At the Closing:

(i)            Purchasers shall deliver to Sellers (1) the Assumption Agreement, (2) the Lease Assignment, and (3) the Purchasers Certificate, each duly executed by Purchasers;

(ii)           TESSCO Inc. shall deliver to each of the Key Executives his Employment Agreement, duly executed by TESSCO Inc.;

(iii)          Purchasers shall make the Closing Date Payment; and

(iv)          Sellers shall deliver or cause to be delivered to Purchasers (1) the Bill of Sale, (2) the Copyright Assignments, (3) the Lease Assignment, (4) the Trademark Assignments, and (5) the Sellers Certificate, each duly executed by Sellers.

(c)           Closing Date Adjustments. Purchasers and Sellers shall adjust all rents and other amounts due under the Facilities Lease, the Equipment Leases, and License Agreements (if any) as of the Closing Date. Sellers shall pay and discharge all such amounts to the extent allocable to periods up to the Closing Date, and Purchasers shall reimburse Sellers for any such amounts to the extent they have previously been paid by either Seller and are so allocable.

(d)           Transfer Taxes. The parties shall share equally the cost of any documentary, stamp, sales, excise, transfer, or other taxes or recording fees payable as a result of the transfer of the Acquired Assets (other than income Taxes or other Taxes based on or measured by reference to income of either Seller).

(e)           Possession of Acquired Assets. On the Closing Date Sellers shall put Purchasers in possession of the Acquired Assets.

2.8           Purchase Price Allocation. Not later than two (2) months after the Closing Date, Purchasers, with the concurrence of Sellers, shall reasonably determine in a manner consistent with section 1060 of the Code and provide to Sellers an allocation of the Purchase Price among the Acquired Assets (the “Purchase Price Allocation”). Sellers and Purchasers shall report the transfer of the Acquired Assets in a manner consistent with the

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Purchase Price Allocation for all federal state, local, and foreign Tax purposes and shall file any amendments required as a result of a subsequent increase or decrease in the Purchase Price.

Article 3.       CONTINGENT PURCHASE PRICE PAYMENTS

3.1           Installment Payments. Subject to the satisfaction of the conditions herein specified, Purchasers shall make the following payments (each an “Installment Payment”) to Sellers (by wire transfer of immediately available funds to an account or accounts designated by Sellers), less in each case any amount recouped as provided in section 2.6:

(a)           If total Combined NPC for the first six (6) Fiscal Months beginning on or after the Closing Date is at least Four Hundred Thousand Dollars ($400,000), Purchasers shall pay, not later than one (1) month after the end of the sixth Fiscal Month beginning on or after the Closing Date, Five Hundred Thousand Dollars ($500,000); and

(b)           Whether or not Sellers are entitled to the Installment Payment referred to in subsection (a), if total Combined NPC for the seventh through the twelfth Fiscal Months beginning on or after the Closing Date is at least Six Hundred Twelve Thousand Dollars ($612,000), Purchasers shall pay, not later than one (1) month after the end of the twelfth Fiscal Month beginning on or after the Closing Date, Five Hundred Thousand Dollars ($500,000); and

(c)           If total Combined NPC for the first six (6) Fiscal Months beginning on or after the Closing Date is less than Four Hundred Thousand Dollars ($400,000) (and, as a result, no Installment Payment is payable under subsection (a)) but total Combined NPC for the first twelve (12) Fiscal Months beginning on or after the Closing Date is at least One Million Twelve Thousand Dollars ($1,012,000), Purchasers shall pay, not later than one (1) month after the end of the twelfth Fiscal Month beginning on or after the Closing Date, in addition to the Installment Payment due under subsection (b), Five Hundred Thousand Dollars ($500,000).

3.2           NPC Earnout Payments.

(a)           Provided that Combined NPC for such Earnout Period exceeds the minimum for such Earnout Period provided for in subsection (b), then, not later than three (3) months after the end of each of Earnout Period, Purchasers shall pay to Sellers an amount equal to the following percentage of Combined NPC for the immediately preceding Earnout Period (the “Gross Earnout Amount”), less in each case any amount recouped as provided in section 2.6 (each such payment an “NPC Earnout Payment”):

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Earnout Period Ending in	Applicable Percentage of Combined NPC
FY2008	80%
FY2009	70%
FY2010	70%
FY2011	70%

(b)           No payment shall be due under this section 3.2 for a particular Earnout Period unless Combined NPC for such Earnout Period equals or exceeds the minimum amount for such Earnout Period:

Earnout Period Ending in	Minimum Combined NPC
FY2008	$1,012,000
FY2009	$1,450,000
FY2010	$1,650,000
FY2011	$1,800,000

3.3           Broadband NPC Payments.

(a)           Provided that Combined NPC for the Earnout Period in which such Fiscal Quarter ends equals or exceeds the Minimum Combined NPC for such Earnout Period provided for in section 3.2(b), then, not later than two (2) months after the end of each Earnout Period, Purchasers shall pay to Sellers an amount (each a “Broadband NPC Payment”) in respect of each of the four Fiscal Quarters ending in such Earnout Period determined as follows, less in each case any amount recouped as provided in section 2.6:

If Broadband NPC for such Fiscal Quarter equals or exceeds the following  percentage of Base Broadband NPC for such Fiscal Quarter:	Then the Broadband NPC Payment for such Fiscal Quarter shall be:
105.0%	$55,000
107.5%	$85,000
110.0%	$100,000

(b)           “Base Broadband NPC” means: (i) for the first Fiscal Quarter ending after the Closing Date, $x,xxx,xxx, (ii) for the second Fiscal Quarter ending after the Closing Date, Broadband NPC for the immediately preceding Fiscal Quarter; (iii) for the third Fiscal Quarter ending after the Closing Date, the average of Broadband NPC for the

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two (2) immediately preceding Fiscal Quarters; and (iv) for each subsequent Fiscal Quarter, the average of Broadband NPC for the three (3) immediately preceding Fiscal Quarters.

(c)           In no event shall any payment be due under this section 3.3 for a particular Fiscal Quarter unless total Combined NPC for the Earnout Period in which such Fiscal Quarter ends equals or exceeds the Minimum Combined NPC set forth in section 3.2(b).

3.4           Maximum Contingent Purchase Price Payments. In no event shall the total amount of the Installment Payments, the NPC Earnout Payments, and the Broadband NPC Payments (after subtracting the recoupment of the Prepaid Purchase Price pursuant to section 2.6) exceed Fifteen Million Five Hundred Thousand Dollars ($15,500,000), and neither Purchasers nor TESSCO shall have any liability for payments otherwise due under this Article 3 if and to the extent that such payment would cause such total amount to exceed that amount.

3.5           Officers’ Certificates. As promptly as practicable, but in no event later than the date each such payment is due, Purchasers and TESSCO shall deliver to Sellers a certificate signed by the Chief Financial Officer of TESSCO certifying to Sellers the calculation of the amount of the Installment Payment, NPC Earnout Payment, or Broadband NPC Payment (as the case may be) for the relevant period and setting forth the determination of Combined NPC or Broadband NPC (as the case may be) for such period underlying such calculation.

3.6           Payments. All payments due under this Article 3 shall be made by wire transfer of immediately available funds to an account or accounts designated by Sellers.

Article 4.       Representations and Warranties of Sellers

Sellers jointly and severally represent and warrant to Purchasers and to TESSCO as of the date hereof and (except as otherwise specifically provided herein) as of the Closing Date as follows:

4.1           Power and Authority; Effect of Agreement.

(a)           Each Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas and has all requisite limited partnership power and authority to execute, deliver, and perform its obligations under this Agreement and each of the Closing Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. Each Seller has heretofore delivered to Purchasers true and correct copies of its certificate of limited partnership and limited partnership agreement as currently in effect.

(b)           The execution, delivery, and performance by each Seller of this Agreement and the Closing Documents to which it is a party and the consummation by each Seller of the transactions contemplated hereby and thereby have been duly authorized by all necessary limited partnership action on its part.

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(c)           This Agreement has been duly and validly executed and delivered by each Seller and constitutes the legally valid and binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except to the extent: (i) that such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium, preference, equitable subordination, marshaling, or other similar laws of general application now or hereafter in effect relating to creditors’ rights generally and (ii) that the remedies of specific performance, injunction, and other forms of equitable relief are subject to certain tests of equity jurisdiction, equitable defenses, and the discretion of the court before which any proceeding therefor may be brought.

(d)           Except as set forth in section 4.1 of the Disclosure Schedule, and except for any violation or default that would not prevent or hinder the consummation of the transactions contemplated hereby, the execution, delivery, and performance by each Seller of this Agreement and of the Closing Documents to which such Seller is a party and the consummation by each Seller of the transactions contemplated hereby and thereby do not and will not, with or without the giving of notice or the lapse of time or both: (i) violate any provision of law, rule, or regulation to which either Seller or any of the Acquired Assets is subject; (ii) violate any order, judgment, or decree applicable to either Seller or any of the Acquired Assets; (iii) violate any provision of the certificate of limited partnership or limited partnership agreement of either Seller; or (iv) violate or constitute a default under any provision of any Commitment. Notwithstanding the foregoing, this representation and warranty shall (1) not extend to laws, contracts, or other requirements that are adopted or otherwise take effect after the Closing Date and (2) apply only to violations or defaults arising from either Seller’s execution, delivery, or performance of this Agreement or of the Closing Documents to which either Seller is a party and not to violations or defaults arising from actions taken by Purchasers or TESSCO.

4.2           Governmental Consents. Except as set forth in section 4.2 of the Disclosure Schedule, or as may be necessary as a result of facts or circumstances relating solely to Purchasers or TESSCO, no consent, approval, or authorization of or exemption by or filing with any Governmental Authority is required to be obtained by either Seller in connection with the execution, delivery, and performance by either Seller of this Agreement or the consummation of the transactions contemplated hereby or the taking by either Seller of any other action required hereunder.

4.3           Litigation. Except as set forth in section 4.3 of the Disclosure Schedule, there is no Litigation pending or, to Sellers’ Knowledge, threatened (i) against either Seller or relating to any of the Acquired Businesses or (ii) that seeks to enjoin or obtain damages in respect of the consummation of the transactions contemplated hereby. Neither of the Sellers nor any of the Acquired Assets is subject to any outstanding order, ruling, judgment, or decree.

4.4           Title to Assets. Except as set forth in section 4.4 of the Disclosure Schedule, on the date hereof, the Acquired Assets are free and clear of Encumbrances, except Permitted Encumbrances. On the Closing Date, the Acquired Assets will be free and clear of Encumbrances, except Permitted Encumbrances.

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4.5           Inventory. The listing of Inventory contained in section 4.5 of the Disclosure Schedule is true and accurate in all material respects as of the date there shown. Except as set forth in section 4.5 of the Disclosure Schedule, to Sellers’ Knowledge, all such Inventory is in salable condition and is not obsolete and the quantities thereof are not in excess of those that are reasonable in light of either Sellers’ past business experience and pending or reasonably anticipated customer orders. Sellers shall furnish to Purchasers immediately before the Closing Date a listing of Inventory as of a reasonably current date (the “Closing Date Inventory Report”), which shall include Sellers’ reasonable estimate of Inventory ordered but not yet received but shall exclude those items Purchasers reasonably determine are not in salable condition or are obsolete. The Closing Date Inventory Report shall show the Sellers’ cost for each item listed thereon or, where less, TESSCO’s cost for such item (which information shall be provided by TESSCO) and shall identify the quantity of any item that exceeds the quantity that is reasonably required in the conduct of the Acquired Businesses after the Closing Date. The Closing Date Inventory Report will be true and accurate in all material respects as of its date and, except as noted therein, all Inventory shown thereon as of such date will, to Sellers’ Knowledge: (i) be in salable condition, (ii) not be obsolete (except to the extent of any reserve provided therefor), and (iii) not exceed quantities that are reasonably required in the conduct of the Acquired Businesses after the Closing Date, taking into account the relative growth of the Acquired Businesses over the two-year period preceding the Closing Date.

4.6           Accounts Receivable. The accounts receivable aging report contained in section 4.6 of the Disclosure Schedule accurately sets forth all of Sellers’ Accounts Receivable as of the date there shown. Except as set forth in section 4.6 of the Disclosure Schedule, all such Accounts Receivable are, to Sellers’ Knowledge (after giving effect to the reserve for uncollectible amounts and customer credits), collectible in full, without offset or counterclaim. Sellers shall furnish to Purchasers immediately before the Closing Date a detailed accounts receivable aging report (by customer by invoice) accurately setting forth all of Sellers’ Accounts Receivable as of the Closing Date or the immediately preceding Business Day (the “Closing Date A/R Report”), which report shall exclude (except to the extent of any reserve provided therefor) any Accounts Receivable that Purchasers reasonably determine are unlikely to be collectible or that are substantially past due as of the Closing Date. Except as noted in the Closing Date A/R Report, all Accounts Receivable therein set forth will, to Sellers’ Knowledge (after giving effect to any reserves for uncollectible amounts and customer credits), be collectible in full, without offset or counterclaim.

4.7           Accounts Payable. The accounts payable aging report contained in section 4.7 of the Disclosure Schedule accurately sets forth all of Sellers’ accounts payable as of the date there shown. Sellers shall furnish to Purchasers on the Closing Date a detailed accounts payable aging report (by payee by invoice) accurately setting forth all of Sellers’ accounts payable as of the Closing Date or the immediately preceding Business Day, other than those items included among the Retained Liabilities (the “Closing Date A/P Report”).

4.8           Intellectual Property Rights. The Disclosure Schedule identifies all Intellectual Property Rights owned by either Seller or used by either Seller in the operation of any of the Acquired Businesses. Except as set forth in section 4.8 of the Disclosure Schedule: (i) to Sellers’ Knowledge, no other person has any rights in (including any license of or right to

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use) or claim to any of the Intellectual Property Rights and (ii) there is no Litigation pending or, to Sellers’ Knowledge, threatened against Seller alleging infringement with respect to or otherwise challenging either Seller’s use of any of such Intellectual Property Rights.

4.9           Sufficiency and Condition of Assets. Except as set forth in section 4.9 of the Disclosure Schedule, the Acquired Assets, together with the Leased Premises and the Excluded Assets, include all assets (but not personnel) that are necessary for the conduct of the Acquired Businesses as currently conducted. All Equipment and, to the extent that GigaWave as Lessee under the Facilities Lease is responsible for maintenance thereof, the Leased Premises will be in substantially the same condition (reasonable and ordinary wear and tear excepted) on the Closing Date as on the date of this Agreement, except for damages caused by casualty or condemnation.

4.10         Financial Statements. Sellers have delivered to Purchasers: (1) their unaudited financial statements for the fiscal years ended December 31, 2003, 2004, and 2005 (the “Unaudited Statements”); and (2) their unaudited internally-prepared balance sheet and statement of operations or income for the month of January 2006 (together with the subsequent interim statements delivered pursuant to section 6.2, the “Interim Statements”), copies of which Unaudited Statements and January 2006 Interim Statements are included in section 4.10 of the Disclosure Schedule. Except as set forth in the Disclosure Schedule: (i) the Unaudited Statements have been prepared in accordance with GAAP and (ii) the Unaudited Statements and the Interim Statements fairly present in all material respects the financial position of the Acquired Businesses as of dates there shown and the results of operations of the Acquired Businesses for the periods then ended, except that the Unaudited Statements and the Interim Statements lack footnotes.

4.11         Absence of Undisclosed Liabilities. Except for liabilities and obligations (i) reflected in the Unaudited Statements, (ii) reflected in the Interim Statements, (iii) arising after December 31, 2005 in the ordinary course of the operation by Sellers of the Acquired Businesses, or (iv) disclosed in section 4.11 of the Disclosure Schedule, to Sellers’ Knowledge, neither Seller has, and none of the Acquired Businesses is subject to, any liability or obligation of any kind or nature (fixed or contingent) that would be required to be recorded as a liability, or otherwise be disclosed in the notes thereto, in financial statements prepared in accordance with GAAP as of the date hereof or as of the Closing Date.

4.12         Absence of Certain Changes or Events. Except as set forth in section 4.12 of the Disclosure Schedule or permitted by this Agreement, since December 31, 2004, neither Seller has with respect to any of the Acquired Businesses or the Acquired Assets:

(a)           suffered any material damage, destruction, or casualty loss to its physical properties;

(b)           suffered any material adverse change in its business or financial condition or in its relationship with any of its material suppliers, customers, distributors, lessors, licensors, licensees, or other third parties;

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(c)           incurred or discharged any obligation or liability except in the Ordinary Course of Business and except for obligations, liabilities, and transactions that do not individually or in the aggregate have a Material Adverse Effect;

(d)           other than with respect to agreements for which neither Purchasers nor TESSCO will have any liability after the Closing Date, increased the rate or terms of compensation or benefits payable to or to become payable by it to its directors, officers, or key employees or increased the rate or terms of any bonus, pension, or other employee benefit plan covering any of its directors, officers, or key employees except in each case increases occurring in the Ordinary Course of Business in accordance with its customary practice (including normal periodic performance reviews and related compensation and benefits increases) or as required by any pre-existing Commitment;

(e)           incurred any indebtedness for borrowed money or the deferred purchase price of property;

(f)            forgiven or canceled any indebtedness for borrowed money owing to it or waived any claims or rights of material value, in each case except in the Ordinary Course of Business;

(g)           sold, leased, licensed, or otherwise disposed of any of its material assets other than sales of Inventory and sales of obsolete assets in the Ordinary Course of Business;

(h)           amended or terminated any material Commitment to which it is a party other than in the Ordinary Course of Business; or

(i)            committed pursuant to a legally binding agreement to do any of the things set forth in (c) through (h) above.

4.13         Commitments. Section 4.13 of the Disclosure Schedule identifies each of the following (each a “Disclosible Commitment”): (i) each lease of personal property used in any of the Acquired Businesses, (ii) each software license agreement and other license of tangible or intangible property used in any of the Acquired Businesses (other than licenses of standard off-the-shelf software that is readily available at retail establishments), (iii) each written Customer Contract and Supplier Contract, (iv) each contract with or commitment to any one or more of either Seller’s employees, and (v) each other Commitment, other than the Facilities Lease: (1) that relates to an obligation of either Seller for borrowed money or the deferred purchase price of property; (2) that requires payments by either Seller after the date hereof totaling more than $5,000 in any twelve-month period or more than $25,000 in the aggregate; or (3) that provides for goods or services to be leased, sold, or purchased by either Seller and requires performance by either Seller for a period extending beyond December 31, 2006 (without regard to options to renew or extend that are exercisable only by either Seller and only in either Seller’s sole discretion). Except as set forth in section 4.13 of the Disclosure Schedule:

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(a)           Each Seller is and at all times since December 31, 2004 has been in compliance in all material respects with the terms of, and is not currently and has not at any time since December 31, 2004 been in breach of or default with respect to, each Disclosible Commitment to which it is a party or by which it or any of its assets is bound;

(b)           to Sellers’ Knowledge (but without having conducted any inquiry of such other party), no other party to any Disclosible Commitment is in breach thereof or in default with respect thereto (in each case without regard to the giving of notice or the passage of time or both); and

(c)           no other party to any Disclosible Commitment has indicated to either Seller at any time after December 31, 2004 any intention or desire to terminate, cancel, or not renew such Disclosible Commitment (either on account of the transactions contemplated hereby or otherwise).

Except for the Required Consents or as identified in section 4.13 of the Disclosure Schedule, no consents are required for the assignment of any Commitment or Contract Rights to Purchasers. Except as set forth in section 4.13 of the Disclosure Schedule, true and complete copies of all Disclosible Commitments have previously been delivered to Purchasers.

4.14         Facilities Lease. Except as set forth in the Disclosure Schedule: (i) GigaWave is, and at all times since December 31, 2001 has been, in compliance in all material respects with the terms of, and is not currently and has not at any time since December 31, 2001 been in breach of or default with respect to any material provision of, the Facilities Lease; (ii) neither Seller has received any notice of breach or default under the Facilities Lease; and (iii) to Sellers’ Knowledge (but without having conducted any inquiry of such lessor), the lessor under the Facilities Lease is not in breach of or in default with respect to any of the material provisions of the Facilities Lease (in each case without regard to the giving of notice or the passage of time or both).

4.15         Transactions with Related Parties. Except: (i) as set forth in section 4.15 of the Disclosure Schedule or (ii) for matters that will not affect Purchasers’ or TESSCO’s operation of the Acquired Businesses or its use or enjoyment of the Acquired Assets, neither Seller is a party to any Commitment or transaction with any officer, director, or partner of either Seller or any Affiliate of either Seller or of any such officer, director, or partner.

4.16         Compliance With Laws. Except as set forth in section 4.16 of the Disclosure Schedule, each Seller: (i) has since December 31, 2002 with respect to the Acquired Businesses complied with all applicable laws, rules, and regulations in effect at the particular time the failure to comply with which could have a Material Adverse Effect or could result in any liability or obligation to either Purchaser or to TESSCO and (ii) is in compliance with all applicable laws, rules, and regulations currently in effect. Sellers have all Permits necessary for the conduct of the Acquired Businesses as currently conducted the failure to have which would have a Material Adverse Effect or could result in any liability or obligation to either Purchaser or to TESSCO.

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4.17         Taxes. Except as set forth in section 4.17 of the Disclosure Schedule, all Tax returns and reports required to be filed by either Seller or with respect to any of the Acquired Businesses have been filed in a timely manner (taking into account any extensions) and all Taxes for periods covered by such Tax returns and reports have been paid or adequate accruals therefor are reflected in the appropriate Financial Statements. Except as set forth in section 4.17 of the Disclosure Schedule, no deficiencies for any Taxes in respect of any of the Acquired Businesses or any of the Acquired Assets have been asserted or assessed against either Seller in writing and remain unpaid and, to Sellers’ Knowledge, there exists no basis for the assertion of any deficiency for any Tax in respect of any of the Acquired Businesses or any of the Acquired Assets. Neither Seller is subject to any income, franchise, or similar Tax under the laws of the State of Texas, and neither Seller has any employees, assets, or operations outside the State of Texas.

4.18         Environmental Matters. Except as set forth in section 4.18 of the Disclosure Schedule:

(a)           Each Seller has complied in all material respects with all applicable Environmental Laws, and neither Seller has received any written notice that either Seller or any other person occupying or using any portion of the Facilities with the knowledge or permission of either Seller is in violation of applicable Environmental Laws.

(b)           No claims have been asserted in writing and, to Sellers’ Knowledge, there is no basis for any claims that either Seller is in violation of any Environmental Law with respect to the Facilities or the ownership, operation, or use of any of the Acquired Businesses or any of the Acquired Assets.

(c)           Sellers have obtained, and to Sellers’ Knowledge Sellers have complied in all material respects with the terms of, all Environmental Permits required under applicable Environmental Laws to operate the Acquired Businesses or use the Acquired Assets as currently operated or used by Sellers and to store, dispose of, and otherwise handle any Hazardous Substances used in any of the Acquired Businesses.

(d)           Since December 31, 2001, neither Seller has received any written request for information, notice, demand letter, administrative inquiry, or compliance notice from a Governmental Authority or other third party with respect to the presence of, and to Sellers’ Knowledge there does not exist, any Contamination exceeding applicable clean-up standards or remediation thresholds in, on, under, or about the Facilities or, except as set forth in section 4.18 of the Disclosure Schedule, any other real property that is owned or leased by either Seller or the threat of migration of Contamination exceeding applicable clean-up standards or remediation thresholds onto, at, into, or under the Facilities.

(e)           Since December 31, 2001, neither Seller has received any written request for information, notice, demand letter, inquiry, or compliance notice from a Governmental Authority or other third party concerning, and to Sellers’ Knowledge there does not exist, any Contamination or threatened Contamination at any off-site location or locations to which either Seller transported or arranged for the transportation of Hazardous Substances during either Seller’s operation of any of the Acquired Businesses or ownership or use of any of the Acquired Assets.

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4.19         Labor and Employment Matters.

(a)           Except as set forth in section 4.19 of the Disclosure Schedule: (i) there is no unfair labor practice charge or complaint, and to Sellers’ Knowledge no union organizing effort, pending or threatened against either Seller; (ii) to Sellers’ Knowledge, there are no labor controversies, including strikes, disputes, slowdowns, or work stoppages pending or threatened, against either Seller; and (iii) there are no other employment-related claims, including wrongful termination, discrimination, or sexual harassment claims, pending, or to Sellers’ Knowledge threatened, against either Seller, and no such claims have been asserted against either Seller or any of its employees at any time after December 31, 2002.

(b)           Section 4.19 of the Disclosure Schedule identifies each nondisclosure or noncompetition agreement with any past or present employee of either Seller and each agreement with any past or present employee of either Seller relating to the disclosure or ownership of inventions or other intellectual property conceived by the employee.

4.20         Employee Benefit Plans.

(a)           Except as set forth in section 4.20 of the Disclosure Schedule, neither Seller is a party to or obligated to contribute to any Employee Benefit Plan. True and complete copies of all such Employee Benefit Plans have been delivered to Purchasers.

(b)           With respect to any Employee Benefit Plan that covers employees of either Seller: (1) neither such Employee Benefit Plan nor, to Sellers’ Knowledge, any plan fiduciary has engaged in a prohibited transaction as defined in section 406 of ERISA (for which no individual or class exemption exists under section 408 of ERISA) or any prohibited transaction as defined in section 4975 of the Code (for which no individual or class exemption exists under section 4975 of the Code) involving such Employee Benefit Plan that resulted in any liability which has not been satisfied; (2) all filings and reports as to such Employee Benefit Plan required to have been made to the IRS, to the U.S. Department of Labor or, if applicable, to the Pension Benefit Guaranty Corporation have been made; (3) there is no litigation, disputed claim (other than routine claims for benefits), or governmental proceeding or investigation commenced, pending, or to Sellers’ Knowledge threatened with respect to any such Employee Benefit Plan or its related trust; (4) such Employee Benefit Plan has been established, maintained, funded, and administered in all material respects in accordance with its governing documents and any applicable provisions of ERISA, the Code, and the regulations promulgated thereunder; (5) neither of the Sellers nor any ERISA Affiliate has, during the preceding five (5) year-period, incurred any withdrawal liability from a “multiemployer plan” within the meaning of section 4001(a)(3) of ERISA.

(c)           With respect to each Employee Benefit Plan that covers employees of either Seller and that is intended to be qualified under section 401(a) or section

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501(c)(9) of the Code, except as set forth in section 4.20 of the Disclosure Schedule, favorable determination or approval letters as to qualification of such Employee Benefit Plan under section 401(a) or section 501(c)(9) of the Code have been issued by the IRS and, to Sellers’ Knowledge, no event has occurred or condition exists that would adversely affect such qualification.

(d)           There has not been any termination or partial termination of any Employee Pension Benefit Plan maintained by either Seller or any ERISA Affiliate, during the period of such common control, at a time when Title IV of ERISA applied to such Plan that resulted in a liability to either Seller that has not been satisfied.

4.21         Bulk Transfer Laws. The transactions contemplated by this Agreement do not require compliance with the provisions of any “Bulk Sales Act,” bulk transfer law, or similar law requiring or providing for notice to any of Sellers’ creditors (including taxing authorities) in any jurisdiction (“Bulk Transfer Laws”).

4.22         No Brokers or Finders. No broker’s, finder’s, or any similar fee will be incurred by or on behalf of either Seller or any of the Acquired Businesses in connection with the initiation, negotiation, execution, or performance of this Agreement or the transactions contemplated hereby for which Purchasers or TESSCO or any of their respective Affiliates shall have any liability.

4.23         No Material Misstatements or Omissions. No representation or other statement by either Seller contained in this Agreement or in any exhibit, schedule, annex, or other document (including the Disclosure Schedule) delivered by either Seller in connection with this Agreement knowingly contains any misstatement of a material fact or knowingly omits to state any fact necessary to make the representations or statements made therein not misleading.

Article 5.               Representations and Warranties of Purchasers and TESSCO

Purchasers and TESSCO jointly and severally represent and warrant to Sellers as of the date hereof and (except as otherwise specifically provided herein) as of the Closing Date as follows:

5.1           Power and Authority; Effect of Agreement.

(a)           TESSCO Inc., GSS, and TESSCO are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware. Purchasers and TESSCO each have all requisite corporate power and authority to execute, deliver, and perform their respective obligations under this Agreement and each of the Closing Documents to which they are a party and to consummate the transactions contemplated hereby and thereby. TESSCO has all requisite corporate power and authority to execute, deliver, and perform its obligations under the TESSCO Guaranty.

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(b)           The execution, delivery, and performance by Purchasers and TESSCO of this Agreement and the Closing Documents to which each is a party and the consummation by Purchasers and TESSCO of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on their part.

(c)           This Agreement has been duly and validly executed and delivered by each of Purchasers and TESSCO and constitutes the legally valid and binding obligation of each of them, enforceable against each of them in accordance with its terms, and the TESSCO Guaranty has been duly and validly executed and delivered by TESSCO and constitutes the legally valid and binding obligation of TESSCO, enforceable against TESSCO in accordance with its terms, except, in each case, to the extent: (i) that such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium, preference, equitable subordination, marshaling, or other similar laws of general application now or hereafter in effect relating to creditors’ rights generally and (ii) that the remedies of specific performance, injunction, and other forms of equitable relief are subject to certain tests of equity jurisdiction, equitable defenses, and the discretion of the court before which any proceeding therefor may be brought.

(d)           Except for any violation or default that would not prevent or hinder the consummation of the transactions contemplated hereby, the execution, delivery, and performance by each of Purchasers and TESSCO of this Agreement and of the Closing Documents to which each of them is a party and the consummation by each of them of the transactions contemplated hereby and thereby do not and will not, with or without the giving of notice or the lapse of time or both: (i) violate any provision of law, rule, or regulation to which either of them is subject; (ii) violate any order, judgment, or decree applicable to either of them; (iii) violate any provision of the certificate of incorporation or bylaws or other organizational documents of either of them; or (iv) violate or constitute a default under any provision of any contract, agreement, or commitment to which either of them is a party or by which either of them is bound. Notwithstanding the foregoing, this representation and warranty shall (1) not extend to laws, contracts, or other requirements that are adopted or otherwise take effect after the Closing Date and (2) apply only to violations or defaults arising from the execution, delivery, or performance by Purchasers or TESSCO of this Agreement or of the Closing Documents and not to violations or defaults arising from actions taken by either Seller.

5.2           Governmental Consents. No consent, approval, or authorization of or exemption by or filing with any Governmental Authority is required to be obtained or made by either Purchaser or by TESSCO in connection with the execution, delivery, and performance by either of them of this Agreement or the consummation of the transactions contemplated hereby or the taking by either of them of any other action required hereunder.

5.3           Litigation. There is no Litigation pending or, to the knowledge of Purchasers or TESSCO, threatened against either Purchaser or against TESSCO that seeks to enjoin or obtain damages in respect of the consummation of the transactions contemplated hereby.

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5.4           No Brokers or Finders. No broker’s, finder’s, or any similar fee will be incurred by or on behalf of either Purchaser or by or on behalf of TESSCO in connection with the initiation, negotiation, execution, or performance of this Agreement or the transactions contemplated hereby for which either of the Sellers or any of their respective Affiliates shall have any liability.

5.5           No Material Misstatements or Omissions. No representation or other statement by either Purchaser or by TESSCO contained in this Agreement or in any exhibit, schedule, annex, or other document delivered by either Purchaser or by TESSCO in connection with this Agreement knowingly contains any misstatement of a material fact or knowingly omits to state any fact necessary to make the representations or statements made therein not misleading.

Article 6.       ADDITIONAL COVENANTS OF SELLERS

Sellers hereby jointly and severally covenant and agree with Purchasers and TESSCO as follows:

6.1           Cooperation by Sellers. From the date hereof and through the Closing Date, Sellers shall use Commercially Reasonable Efforts, and shall cooperate with Purchasers, to promptly secure all necessary consents, approvals, authorizations, exemptions, and waivers from third parties as shall be required in order to enable Sellers to promptly effect the transactions contemplated hereby and shall otherwise use Commercially Reasonable Efforts to cause the prompt consummation of such transactions in accordance with the terms and conditions hereof.

6.2           Interim Financial Statements. Commencing with the month of February 2006 and continuing with each calendar month thereafter that ends at least fifteen (15) days before the Closing Date, Sellers shall deliver to Purchasers not later than fifteen (15) days after the end of such month an internally-prepared balance sheet and statement of operations or income for such month and for the calendar year to date.

6.3           Conduct of Business. Except as may otherwise be contemplated by this Agreement or required by any of the documents listed in the Disclosure Schedule, or except as Purchasers may otherwise consent to in writing (which consent shall not be unreasonably withheld), from the date hereof and through the Closing Date or the earlier termination of this Agreement in accordance with its terms, Sellers shall:

(a)           in all material respects, operate the Acquired Businesses only in the ordinary course in substantially the manner heretofore conducted;

(b)           use Commercially Reasonable Efforts to continue all existing insurance policies (or comparable insurance, including as to scope and amount of coverage) insuring the Acquired Businesses and the Acquired Assets in full force and effect through (but not after) the Closing Date and deliver certificates evidencing such coverage to Purchasers upon Purchasers’ request;

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(c)           use Commercially Reasonable Efforts to preserve Sellers’ relationships relating to the Acquired Businesses with its material suppliers, customers, distributors, lessors, and others having material business dealings with it;

(d)           other than with respect to agreements for which neither Purchaser nor any of the Acquired Businesses will have any liability after the Closing Date, not enter into any employment or termination agreement or effect any increase in the rate or terms of compensation payable or to become payable to directors, officers, or employees of either Seller or effect any general increase in the compensation of other employees of the Acquired Businesses, or increase the rate or terms of any bonus, pension, or other employee benefit plan covering any of its directors, officers, or employees, except in each case increases occurring in the Ordinary Course of Business in accordance with Sellers’ customary practice (including normal periodic performance reviews and related compensation and benefits increases) or as required by any pre-existing Commitment;

(e)           not agree to amend, modify, or terminate any of the Disclosible Commitments; and

(f)            not (i) incur any indebtedness for borrowed money, (ii) sell, lease, license, or otherwise dispose of any material asset of any of the Acquired Businesses, other than sales of Inventory and sales of obsolete assets in the Ordinary Course of Business, (iii) purchase or enter into any lease for real property, (iv) knowingly create any consensual Encumbrance on any of the assets of any of the Acquired Businesses other than Permitted Encumbrances, (v) forgive or cancel any indebtedness owing to either Seller or waive any claims or rights of material value other than in the Ordinary Course of Business, or (vi) enter into a legally binding agreement to do any of the things set forth in this subsection (f).

6.4           Access. From the date hereof through the Closing Date, Sellers shall provide Purchasers with such information as Purchasers may from time to time reasonably request with respect to the Acquired Businesses and the transactions contemplated by this Agreement and shall provide Purchasers and their Representatives, accountants, and lenders reasonable access during regular business hours and upon reasonable notice to the employees, properties, books, and records of or relating to the Acquired Businesses as Purchasers may from time to time reasonably request. Until the Closing Date, all such information and access shall be subject to the terms and conditions of the Confidentiality Agreement, which the parties hereby agree shall terminate, if the Closing occurs, as of the Closing Date. TESSCO agrees to cause each of its direct and indirect subsidiaries, and each of its and their respective Representatives, accountants, and lenders, to abide by the provisions of the Confidentiality Agreement.

6.5           No Solicitation of Transactions. Until the Closing Date or the earlier termination of this Agreement in accordance with its terms, neither Seller shall, directly or indirectly, through any agent, attorney, financial advisor, or otherwise (each a “Representative”):

(a)           solicit, initiate, or encourage the submission of inquiries, proposals, or offers from any person (other than Purchasers or TESSCO) relating in any way to

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any equity investment in either Seller, any acquisition of direct or indirect control of either Seller, the purchase of any partnership or other equity interest in either Seller, the purchase of any material portion of the Acquired Assets (other than in the Ordinary Course of Business), or any business combination involving either Seller, including any merger, consolidation, acquisition, purchase, or recapitalization of any nature that would involve either Seller or any of the Acquired Businesses or any of the Acquired Assets (each a “Proposal”);

(b)           participate in any discussions or negotiations regarding a Proposal; furnish to any person any information relating to, or to be used in connection with, a Proposal; enter into any agreement with any person relating to a Proposal; or otherwise consummate any merger, consolidation, acquisition, purchase, recapitalization, issuance or sale of partnership or other equity interests, or disposition of a material amount of assets (other than in the Ordinary Course of Business or with respect to any of the Excluded Assets) of any nature involving either Seller or any of the Acquired Businesses or any of the Acquired Assets; or

(c)           otherwise cooperate in any way with, or assist or participate in, facilitate, or encourage, any effort or attempt by any other person to do or seek any of the foregoing.

In addition, Sellers shall promptly advise Purchasers if any person makes inquiries regarding a possible transaction of the sort described above.

6.6           Books and Records; Personnel. For a period of three (3) years after the Closing Date:

(a)           Sellers shall retain and not destroy or dispose of the Retained Books and Records and shall allow Purchasers and their agents reasonable access to all Retained Books and Records relating to any of the Acquired Businesses in either Seller’s possession and not transferred to Purchasers during normal working hours at Sellers’ principal place of business or at any location where such Retained Books and Records are stored, and Purchasers shall have the right, at their own expense, to make copies of such Retained Books and Records.

(b)           Sellers shall make available to Purchasers upon written request (i) copies of any Retained Books and Records, (ii) personnel to assist Purchasers in reasonably locating and obtaining any Retained Books and Records, and (iii) any of its personnel whose assistance or participation is reasonably required by either Purchaser or any of their Affiliates in anticipation of, or preparation for, existing or future Litigation or other matters in which either Purchaser or any of its Affiliates is involved. In addition, Sellers shall otherwise cooperate with any reasonable request of Purchasers in connection with the performance, defense, or discharge of the Assumed Liabilities. Purchasers shall reimburse Sellers for all reasonable out-of-pocket expenses incurred by them in performing the covenants contained in this subsection.

6.7           Further Assurances. At any time or from time to time after the Closing Date, Sellers shall, at the request of Purchasers and at Purchasers’ expense, execute and

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deliver any further instruments or documents and take all such further action as Purchasers may reasonably request in order to accomplish or confirm the consummation of the transactions contemplated hereby.

6.8           Inventory Transition. Not later than seven (7) calendar days before the Closing Date, Sellers shall provide to TESSCO, in a mutually-agreed electronic form, the information specified in Schedule 6.8 with respect to the Inventory (the “Required SKU Information”) to enable TESSCO to set up SKU data in TESSCO’s systems. On or before the Closing Date, Sellers shall (i) cause all of the Inventory to be labeled with TESSCO SKU labels and packaged for shipment to TESSCO and (ii) otherwise provide to TESSCO such assistance relating to the transition of the Inventory to TESSCO’s facilities and the data relating to the Inventory to TESSCO’s information systems as Purchasers and TESSCO shall reasonably request. Purchasers and TESSCO shall bear all costs (including the cost of providing SKU labels, packaging, necessary supervision, and nonsupervisory labor) associated with causing the Inventory to be labeled, packaged, and shipped to TESSCO’s facilities and transitioning Required SKU Information provided by Sellers to TESSCO’s systems. Not later than sixty (60) days after the Closing Date Sellers shall cooperate with TESSCO in taking all steps reasonably necessary to assemble the additional SKU information relating to the Inventory that is required for presentation on www.tessco.com and in TESSCO’s Solutions Guide.

6.9           A/R and A/P Transition. On or before the Closing Date, (i) Sellers and Purchasers shall cooperate to develop methods of efficiently transferring information concerning the Accounts Receivable on the Closing Date A/R Report and information concerning Sellers’ accounts payable set forth in the Closing Date A/P Report and any other accounts payable of Sellers assumed by Purchasers pursuant to section 2.5(a)(i) into TESSCO’s systems and (ii) Sellers shall otherwise provide to Purchasers and TESSCO such assistance relating to the transition of such information to TESSCO’s information systems as Purchasers and TESSCO shall reasonably request.

6.10         Tax Clearances. Sellers shall make Commercially Reasonable Efforts to obtain and deliver to Purchasers on or before the Closing Date a certificate from the State of Texas in respect of sales, use, employment, and any other Tax to which either Seller is or may be subject under the laws of the State of Texas to the effect that all returns and reports due before the Closing Date have been filed and that all Taxes shown thereon for which either Purchaser may have any liability have been paid in full.

6.11         Name Changes. Promptly after the Closing Date, each Seller shall take such action as is reasonably necessary to change its name to one that does not use the names “TerraWave” or “GigaWave.”

ARTICLE 7.   ADDITIONAL COVENANTS OF PURCHASERS AND TESSCO

Purchasers and TESSCO hereby jointly and severally covenant and agree with Seller as follows:

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7.1           Cooperation by Purchasers and TESSCO. From the date hereof and through the Closing Date, Purchasers and TESSCO shall use Commercially Reasonable Efforts, and shall cooperate with Sellers, to promptly secure all necessary consents, approvals, authorizations, exemptions, and waivers from third parties as shall be required in order to enable Purchasers and TESSCO to promptly effect the transactions contemplated hereby and shall otherwise use Commercially Reasonable Efforts to cause the prompt consummation of such transactions in accordance with the terms and conditions hereof.

7.2           Books and Records; Personnel. For a period of three (3) years after the Closing Date:

(a)           Purchasers shall, and TESSCO shall cause Purchasers to, retain and not destroy or dispose of the Books and Records and shall allow Sellers and their agents reasonable access to all Books and Records in Purchasers’ possession and not in Sellers’ possession during normal working hours at Purchasers’ principal place of business or at any location where such Books and Records are stored, and Sellers shall have the right, at their own expense, to make copies of such Books and Records.

(b)           Purchasers shall, and TESSCO shall cause Purchasers to, make available to Sellers upon written request (i) copies of any Books and Records, (ii) personnel to assist Sellers in reasonably locating and obtaining any Books and Records, and (iii) any of its personnel whose assistance or participation is reasonably required by Sellers or any of their Affiliates in anticipation of, or preparation for, existing or future Litigation or other matters in which Sellers or any of their Affiliates are involved. In addition, Purchasers shall, and TESSCO shall cause Purchasers to, otherwise cooperate with any reasonable request of Sellers in connection with the performance, defense, or discharge of the Retained Liabilities. Sellers shall reimburse Purchasers for all reasonable out-of-pocket expenses incurred by either of them in performing the covenants contained in this section.

7.3           Maintaining Earn-Out Opportunity. Before the end of the fourth Earnout Period, neither Purchasers nor TESSCO shall, without the prior written consent of Sellers in each case (which consent shall not be unreasonably withheld, conditioned, or delayed): (i) sell, or agree to sell, the Broadband Business, the Private Brand Business, the Training Business or the Wi-Fi Business to any third party, other than as part of a sale or other transfer to the same purchaser or transferee of substantially all of the assets of TESSCO and its subsidiaries; (ii) restructure the definitions of its lines of business in a manner that adversely affects the computation of Broadband NPC or Combined NPC; or (iii) establish or maintain a line of business within TESSCO or an Affiliate thereof that materially and directly competes with the Broadband Business, the Private Brand Business, the Training Business, or the Wi-Fi Business.

7.4           Further Assurances. At any time or from time to time after the Closing Date, Purchasers and TESSCO shall, at the request of Sellers and at Sellers’ expense, execute and deliver any further instruments or documents and take all such further action as Sellers may reasonably request in order to accomplish or confirm the consummation of the transactions contemplated hereby.

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Article 8.       Employee Matters

8.1           Offers to Sellers’ Employees. Purchasers and TESSCO shall be free, at any time before or after the Closing Date, to make (or decline to make) offers of employment to such of Sellers’ employees as Purchasers or TESSCO shall determine, in their sole and absolute discretion. Any such offers shall be on such terms as Purchasers or TESSCO may determine, without regard to compensation, benefits, or other terms of employment afforded to or under which such employees have been engaged by Sellers. In order to minimize disruption to Sellers’ operation of the Acquired Businesses before the Closing Date, Purchasers and TESSCO shall consult with Sellers and make Commercially Reasonable Efforts to coordinate such offers with Sellers. Sellers agree to cooperate with and use Commercially Reasonable Efforts to assist Purchasers and TESSCO in connection with such offers.

8.2           Preclosing Employee Expenses. Any and all claims, liabilities, and expenses (including compensation, accrued vacation and sick pay and other benefits, severance pay, payroll taxes, workers’ compensation benefits, premiums, additional premiums, and audit adjustments, and claims under federal and state wage and hour laws and other laws and regulations with respect to employment) relating to or arising out of the employment, or cessation of the employment, on or before the Closing Date of any present or former active or inactive employee of either Seller, with the exception of Accrued Vacation Expense, shall be the sole responsibility of Sellers, all of which shall constitute Retained Liabilities.

Article 9.       Conditions to Obligations of Purchasers and TESSCO

The obligations of Purchasers and TESSCO to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver in writing by Purchasers and TESSCO) of each of the following conditions:

9.1           Representations, Warranties and Covenants of Sellers. Sellers shall have complied in all material respects with their agreements and covenants contained herein to be performed on or before the Closing Date; the representations and warranties of Sellers contained herein shall be true and correct in all material respects as of the date hereof and shall be true and correct in all material respects as of the Closing Date with the same effect as though made on and as of the Closing Date, except, in the latter case, to the extent that any such representations and warranties were made as of a specified date, such representations and warranties shall continue on the Closing Date to be true in all material respects as of the specified date; and Purchasers shall have received the Sellers Certificate.

9.2           No Prohibition. No statute, rule, or regulation or order of any Governmental Authority shall be in effect that prohibits Purchasers or TESSCO from consummating the transactions contemplated hereby.

9.3           Documents. Purchasers shall have received the Closing Documents referred to in section 2.7(b)(iv) duly executed by Sellers.

9.4           Employment Agreements. Each of the Key Executives shall have executed and delivered his Employment Agreement.

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9.5           Required Consents. All Required Consents shall have been obtained and delivered in writing to Purchasers.

9.6           Tax Clearances. Purchasers shall be reasonably satisfied, by virtue of the receipt of certificates from the relevant taxing authorities or otherwise, that neither Purchaser nor TESSCO shall incur any liability by operation of law for Taxes shown on any return or report filed or required to be filed by either Seller before the Closing Date with the taxing authorities of the State of Texas.

9.7           Required SKU Information. Sellers shall have provided the Required SKU Information.

9.8           No Material Adverse Change. No event, condition, or change shall have occurred with respect to any of the Acquired Businesses or the Acquired Assets or the Facilities that has or, in Purchasers’ reasonable judgment is likely to have, a Material Adverse Effect.

Article 10.    Conditions to Obligations of Sellers

The obligation of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver in writing by Sellers) of each of the following conditions:

10.1         Representations, Warranties and Covenants of Purchasers and TESSCO. Purchasers and TESSCO shall have complied in all material respects with their respective agreements and covenants contained herein to be performed on or before the Closing Date; the representations and warranties of Purchasers and TESSCO contained herein shall be true and correct in all material respects as of the date hereof and shall be true and correct in all material respects as of the Closing Date with the same effect as though made on and as of the Closing Date, except, in the latter case, to the extent that any such representations and warranties were made as of a specified date, such representations and warranties shall continue on the Closing Date to be true in all material respects as of the specified date; and Sellers shall have received the Purchasers Certificate.

10.2         No Prohibition. No statute, rule, or regulation or order of any Governmental Authority shall be in effect that prohibits either Seller from consummating the transactions contemplated hereby.

10.3         Documents. Sellers shall have received the Closing Documents referred to in section 2.7(b)(i) duly executed by Purchasers and TESSCO as applicable.

10.4         Employment Agreements. TESSCO Incorporated shall have executed and delivered the Employment Agreements.

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Article 11.    Termination Before Closing

11.1         Termination. This Agreement may be terminated at any time before the Closing:

(a)           By the mutual written consent of Purchasers and Sellers; or

(b)           By either Sellers or Purchasers by notice to the other in writing, without liability to the terminating party on account of such termination (provided the terminating party is not otherwise in default under or in breach of this Agreement), if the Closing has not occurred on or before April 28, 2006; or

(c)           By either Sellers or Purchasers by notice to the other in writing, if the other party shall be in default under or shall have breached any of the provisions of this Agreement, or if any of the other party’s representations made herein shall be untrue in any material respect, and such default or breach has not been cured within five (5) Business Days of the date notice thereof is given to the defaulting or breaching party.

11.2         Effect on Obligations. Termination of this Agreement pursuant to this Article 11 shall terminate all further obligations of the parties hereunder, except for the obligations under Article 13 and Article 14 hereof and under the Confidentiality Agreement; provided, however, that termination pursuant to section 11.1(c) by reason of a default under or breach of any covenant or agreement, or by reason of a failure of a representation to be true in any material respect, shall not relieve the defaulting or breaching party from any liability to the other party hereunder.

Article 12.    Indemnification

12.1         Indemnification by Sellers. Sellers, jointly and severally, agree to indemnify and hold Purchasers and TESSCO and their respective Affiliates harmless from and against any and all Losses incurred by Purchasers or TESSCO or any if its respective Affiliates in connection with or arising from or by virtue of:

(a)           any breach by either Seller of or any failure by either Seller to perform any of its covenants, agreements, or obligations in or under this Agreement or any other document delivered pursuant hereto (including the Closing Documents to which Sellers are a party);

(b)           any breach of any warranty or the inaccuracy of any representation of either Seller contained in this Agreement or in any document or certificate delivered by or on behalf of Sellers pursuant hereto;

(c)           any of the Retained Liabilities;

(d)           either Seller’s failure to comply with or any waiver by Purchasers of compliance with the provisions of any Bulk Transfer Laws;

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(e)           (i) the provisions of the Worker Adjustment and Retraining Notification Act, as amended, attributable to any actions taken by either Seller before, on, or after the Closing Date; (ii) any claims made by any employee of either Seller for any severance pay or termination pay by reason of any termination or deemed termination of such employee’s employment by either Seller (1) before, on, or after the Closing Date for any reason or (2) as a result of the transactions contemplated by this Agreement; or (iii) any claim made by any employee of either Seller for wrongful termination, discrimination, or violation of any labor or employment law arising out of facts occurring during the period when such employee was employed by either Seller; or

(f)            any claim based on acts, events, or omissions on the part of either Seller occurring before the Closing Date, except to the extent that liability for such claim is included among the Assumed Liabilities.

12.2         Indemnification by Purchasers and TESSCO. Purchasers and TESSCO jointly and severally agree to indemnify and hold Sellers and their Affiliates harmless from and against any and all Losses incurred by either Seller or any of its Affiliates in connection with or arising from or by virtue of:

(a)           any breach by Purchasers or TESSCO of or any failure by Purchasers or TESSCO to perform any of its respective covenants, agreements, or obligations in or under this Agreement or any other document delivered pursuant hereto (including the Closing Documents);

(b)           any breach of any warranty or the inaccuracy of any representation of Purchasers or TESSCO contained in this Agreement or in any document or certificate delivered by or on behalf of Purchasers or TESSCO pursuant hereto;

(c)           any of the Assumed Liabilities;

(d)           the operation of the Acquired Businesses or the ownership of the Acquired Assets by Purchasers after the Closing Date, except to the extent that liability for such matter is included among the Retained Liabilities; or

(e)           any claim based on acts, events, or omissions occurring after the Closing Date on the part of Purchasers or TESSCO, except to the extent that liability for such claim is included among the Retained Liabilities.

12.3         Notice of Claims.

(a)           Any party (the “Indemnitee”) seeking indemnification hereunder shall give to the party obligated to provide indemnification to such Indemnitee (the “Indemnitor”) a notice (a “Claim Notice”) describing in reasonable detail the facts giving rise to any claim for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim and a reference to the provision of this Agreement or any other agreement, document, or instrument executed hereunder or in connection herewith upon which such claim is based. A Claim Notice in respect

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of any action at law or suit in equity by or against a third person as to which indemnification will be sought shall be given promptly after the action or suit is commenced, but failure to give such notice shall not relieve the Indemnitor of its obligations hereunder except to the extent that the Indemnitor shall have been prejudiced by such failure.

(b)           After the giving of any Claim Notice pursuant hereto, the amount of indemnification to which an Indemnitee shall be entitled under this Article 12 shall be determined: (i) by written agreement between the Indemnitee and the Indemnitor; (ii) by a final decision of the arbitrator in an arbitration conducted pursuant to section 13.2; (iii) by a final judgment or decree of any court of competent jurisdiction; or (iv) by any other means to which the Indemnitee and the Indemnitor shall agree. The decision of an arbitrator or the judgment or decree of a court shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined. The Indemnitee shall have the burden of proof in establishing the amount of Losses suffered by it.

(c)           In calculating any Loss there shall be deducted any insurance recovery in respect thereof and, to the extent permitted by the applicable insurance policy, the Indemnitee shall secure a waiver of all rights of subrogation of any insurer. Any Indemnitee shall be entitled to indemnification in respect of any Loss notwithstanding the availability of and before the receipt of the proceeds of any insurance claim, but the Indemnitee shall promptly pay over to the Indemnitor any insurance proceeds subsequently received that relate to the Loss with respect to which the Indemnitor has previously indemnified the Indemnitee.

12.4         Third-Person Claims.

(a)           Subject to subsection (b), the Indemnitee shall have the right to conduct and control, through counsel of its choosing, the defense, compromise, or settlement of any third-person claim, action, or suit against such Indemnitee as to which indemnification will be sought by any Indemnitee from any Indemnitor hereunder, and in any such case the Indemnitor shall cooperate in connection therewith and shall furnish such records, information, and testimony and attend such conferences, discovery proceedings, hearings, trials, and appeals as may be reasonably requested by the Indemnitee in connection therewith. The Indemnitor may nevertheless participate, through counsel chosen by it and at its own expense, in the defense of any such claim, action, or suit as to which the Indemnitee has so elected to conduct and control the defense thereof. The Indemnitee shall not, without the written consent of the Indemnitor (which written consent shall not be unreasonably withheld), pay, compromise, or settle any such claim, action, or suit, except that no such consent shall be required if, following a written request from the Indemnitee, the Indemnitor shall fail, within fourteen (14) days after the making of such request, to acknowledge and agree in writing that, if such claim, action, or suit shall be adversely determined, such Indemnitor has an obligation to provide indemnification hereunder to such Indemnitee, nor shall any such consent be required if the Indemnitee waives any right to indemnity therefor.

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(b)           If any third-person claim, action, or suit against any Indemnitee is solely for money damages, then the Indemnitor shall have the right to conduct and control, through counsel of its choosing, the defense, compromise, or settlement of any such third-person claim, action, or suit against such Indemnitee as to which indemnification will be sought by any Indemnitee from any Indemnitor hereunder if the Indemnitor has acknowledged and agreed in writing that, if the same is adversely determined, the Indemnitor has an obligation to provide indemnification to the Indemnitee in respect thereof, and in any such case the Indemnitee shall cooperate in connection therewith and shall furnish such records, information, and testimony and attend such conferences, discovery proceedings, hearings, trials, and appeals as may be reasonably requested by the Indemnitor in connection therewith. The Indemnitee may nevertheless participate, through counsel chosen by it and at its own expense, in the defense of any such claim, action, or suit as to which the Indemnitor has so elected to conduct and control the defense thereof. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, settle, or compromise any such claim, action, or suit if the Indemnitee waives any right to indemnity therefor.

12.5         Time Limits on Assertion of Claims.

(a)           In General. Except to the extent that subsection (b) operates to provide a longer period, no claim for indemnification may be asserted under sections 12.1 or 12.2 after December 31, 2007, but the foregoing shall not preclude indemnification for any Losses arising out of or relating to any matter with respect to which a Claim Notice has been given before such date. The obligations of the Indemnitor in respect of any such matter shall continue until the liability of the Indemnitor therefor has been determined pursuant to this Article 12 and the Indemnitor has reimbursed the Indemnitee for all Losses for which the Indemnitor is liable under this Article 12.

(b)           Claims With Respect to Retained Liabilities. A claim for indemnification against either Seller arising out of or relating to a Retained Liability may be asserted against such Seller at any time until the later of: (i) three (3) years after the Closing Date and (ii) one (1) year of the date that either Purchaser or TESSCO is finally determined to be liable to a third party with respect to such Retained Liability.

12.6         Limitations on Indemnification.

(a)           In General. Notwithstanding anything in this Article 12 or any other provision of this Agreement, except as provided in subsection (b), neither Sellers, on the one hand, nor Purchasers and TESSCO, on the other hand, shall have any liability (for indemnification or otherwise) with respect to Losses under this Article 12 until the total of all Losses and Claim Expenses with respect to such matters exceeds Twenty Five Thousand Dollars ($25,000) (the “Threshold”), and then only for the amount by which such Losses exceed the Threshold.

(b)           Exclusions from Threshold. The following shall be excluded from the computation and application of the Threshold:

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(i)            In the case of Purchasers and TESSCO, the obligation to pay the Purchase Price (including the obligation to pay and perform the Assumed Liabilities) and any amount payable under the Employment Agreements; and

(ii)           In the case of Sellers, the obligation to pay and perform the Retained Liabilities.

(c)           Accounts Receivable and Inventory. Other than on account of a representation by Sellers that was made in bad faith and, to Sellers’ Knowledge, was materially false or misleading when made with respect to the collectibility of an Account Receivable reflected in the Closing Date A/R Report or the salability or condition of any item of Inventory reflected in the Closing Date Inventory Report, neither Purchasers nor TESSCO shall be entitled to assert any claim for indemnification arising out of the determination after the Closing Date that an Account Receivable is uncollectible or an item of Inventory is not salable or is obsolete. In no event, however, shall the foregoing preclude the deduction, in the determination of Net Profit Contribution, of any amount in respect of an Account Receivable or an item of Inventory otherwise permitted by Exhibit F.

(d)           Aggregate Maximum Liability of Sellers. Except with respect to Losses resulting from the actual fraud of either Seller or its agents and related Claim Expenses (for which there shall be no limitation), Sellers’ aggregate total liability for Losses under this Article 12 and all other provisions of this Agreement shall not exceed the amount of the Purchase Price.

(e)           Right of Offset. Purchasers and TESSCO shall have the right to withhold from any Installment Payment, NPC Earnout Payment, or Broadband NPC Payment otherwise payable to Sellers under the provisions of this Agreement the amount of any Losses with respect to which Purchasers or TESSCO has made a claim for indemnification hereunder, and, upon the resolution or determination of such claim, Purchasers and TESSCO may offset the amount of indemnification to which they are entitled against such withheld amount as a result thereof. In the event that Purchasers or TESSCO propose to make any such withholding or offset, Purchasers or TESSSCO shall give Sellers written notice thereof. Any dispute with respect thereto shall be resolved in accordance with Article 13.

12.7         Express Negligence Acknowledgement. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES THAT THE VARIOUS INDEMNITIES CONTAINED IN THIS AGREEMENT INCLUDE PROVISIONS INDEMNIFYING PERSONS FOR MATTERS THAT MAY BE DEEMED TO INCLUDE THE ORDINARY NEGLIGENCE OF THE INDEMNITEE. THE PARTIES AGREE THAT THE INDEMNIFICATION PROVISIONS CONTAINED IN THIS AGREEMENT ARE CAPTIONED TO CLEARLY IDENTIFY THE INDEMNIFICATION PROVISIONS AND, THEREFORE, ARE SO CONSPICUOUS THAT EACH PARTY HAS FAIR NOTICE OF THE EXISTENCE AND CONTENTS OF SUCH PROVISIONS AND WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OTHERWISE.

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ArtIcle 13.            DISPUTE RESOLUTION

13.1         Negotiation and Good-Faith Resolution. The parties agree to use Commercially Reasonable Efforts in good faith to settle any dispute arising between them under or in connection with this Agreement by amicable means and not to resort to arbitration or other legal action unless such efforts have been attempted and are unsuccessful after a period of sixty (60) days, except where delay would in the reasonable judgment of a party result in irreparable harm. In the event of a dispute, the party raising the same shall give written notice to the other setting forth in reasonable detail the factual basis of the dispute and citing the pertinent provisions of this Agreement. Promptly thereafter senior executives of the parties with authority to resolve the matter shall meet, either in person or by telephone, in an attempt to resolve the dispute.

13.2         Arbitration. Any claims (including counterclaims and cross-claims) and disputes between the parties that cannot be resolved in accordance with section 13.1, except for a claim or action permitted by section 13.3, shall be resolved by submission to binding arbitration before a single neutral arbitrator in accordance with the Commercial Arbitration Rules and Procedures of the American Arbitration Association (“AAA”) then in effect. If the arbitration is commenced by either Seller, it shall be held in Baltimore, Maryland. If the arbitration is commenced by Purchasers or TESSCO, it shall be held in San Antonio, Texas. The party that substantially prevails in the arbitration shall be entitled to an award of its Claim Expenses (including reasonable attorneys’ fees) with respect to any such arbitration, and the cost of the arbitration and the fees charged by the AAA shall be shared equally by the parties. No depositions, interrogatories, production of documents, or other discovery shall be permitted in connection with any arbitration except as may be determined by the arbitrator upon a specific showing of need and then only in accordance with such conditions as the arbitrator shall specify.

13.3         Injunctive Relief. Notwithstanding any other provision of this Agreement, a party shall have the right to apply to a court having appropriate jurisdiction to seek injunctive or other equitable relief, on either an interim or permanent basis, for any claim arising under or in connection with this Agreement.

Article 14.            MISCELLANEOUS

14.1         Certain Rules of Construction.

(a)           Number. The definitions contained in Article 1 and elsewhere in this Agreement shall be equally applicable to both the singular and plural forms.

(b)           Agreements. Any agreement referred to herein shall mean such agreement as amended, supplemented, and modified from time to time to the extent permitted by the provisions thereof and by this Agreement.

(c)           “Including”; “Or.” The word “including” means and shall be read as “including but not limited to” and the word “or” means “or” in the nonexclusive sense, i.e., either “and” or “or.”

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(d)           Article and Section References. Except as otherwise specified herein, references herein to Articles, sections, subsections, and paragraphs are references to the Articles, sections, subsections, and paragraphs of this Agreement.

(e)           “Party” and “Parties.” References to a “party” or the “parties,” unless the context otherwise plainly requires, are references to the parties to this Agreement, namely, Sellers, Purchasers, and TESSCO.

(f)            Headings. The headings of the Articles, sections, subsections, and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or affect the construction hereof.

14.2         Entire Agreement. This Agreement (including the Disclosure Schedule and all exhibits, schedules, and annexes hereto), together with the Confidentiality Agreement and the TESSCO Guaranty, constitutes the sole understanding of the parties with respect to the subject matter hereof and supersedes any and all prior discussions, negotiations, understandings, and agreements.

14.3         Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties hereto; provided, however, that, before the end of the fourth Earnout Period, this Agreement may not be assigned by any party to any third person without the prior written consent of all of the other parties. Notwithstanding the foregoing, either Purchasers or TESSCO may assign its rights under this Agreement after the Closing Date to any person who acquires all or substantially all of the Acquired Businesses or the Acquired Assets, but no such assignment of this Agreement or any of the rights or obligations hereunder shall relieve Purchasers or TESSCO of its obligations under this Agreement accrued through the date of such assignment.

14.4         Modification and Waiver. No amendment, modification, or alteration of the terms or provisions of this Agreement shall be binding unless the same shall be in writing and duly executed by the parties hereto, except that any of the terms or provisions of this Agreement may be waived in writing at any time by the party who is entitled to the benefits of such waived term or provision. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar). No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof.

14.5         Expenses. Except as otherwise provided herein, Sellers and Purchasers shall each pay all costs and expenses incurred by them or on their behalf in connection with this Agreement and the transactions contemplated hereby, including fees and expenses of their own financial consultants, accountants, and counsel.

14.6         Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon any other person or entity any rights or remedies of any nature whatsoever under or by reason of this Agreement.

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14.7         Notices. Any notice, request, demand, instruction, or other communication to be given hereunder by any party hereto to any other party shall be in writing and shall be given by delivery in person (including by overnight courier), by electronic facsimile transmission, or by certified mail, return receipt requested, as follows:

if to Sellers, to:

TerraWave Solutions, Ltd.
GigaWave Technologies, Ltd.
10521 Gulfdale
San Antonio, TX 78216
Attention: Christopher N. Marco, President
Fax: (210) 798-8372

with copy to:

S. Michael Dunn, Esq.
Phillips & Reiter, PLLC
5000 Plaza on the Lake, Suite 175
Austin, TX 78746
Fax: (512) 646 1106

if to Purchasers or TESSCO, to:

TESSCO Incorporated
GW Service Solutions, Inc.
TESSCO Technologies Incorporated
375 West Padonia Road
Timonium, MD 21093
Attention: Robert B. Barnhill, Jr., President and CEO
Fax: (410) 229 1656

with a copy to:

Michael L. Quinn, Esquire
Neuberger, Quinn, Gielen, Rubin & Gibber, P.A.
27th Floor
One South Street
Baltimore, MD 21202
Fax: (410) 332 8576

or at such other address or fax number for a party as shall be specified by like notice. The date of giving any such notice shall be the date of hand delivery, the date received if sent by electronic facsimile transmission, the Business Day after delivery to the overnight courier service, or seven (7) Business Days after deposit, postage prepaid, in the United States mail.

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14.8         Governing Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of Maryland (without regard to any provision that would result in the application of the laws of any other state or jurisdiction) applicable to agreements made and to be performed wholly within such jurisdiction.

14.9         Public Announcements. None of the parties shall make any public statements, including any press releases, with respect to this Agreement and the transactions contemplated hereby, without the prior written consent of the other party (which consent shall not be unreasonably withheld) except as may be required by applicable law or by the rules, regulations, or practices of the Securities and Exchange Commission or the Nasdaq Stock Exchange. If a public statement is required to be made pursuant to the foregoing sentence, the parties shall, to the extent reasonably practicable, consult with each other in advance as to the contents and timing thereof.

14.10       Counterparts. This Agreement may be executed in two or more counterparts, each of which shall for all purposes be deemed an original and all of which together shall constitute the same instrument. This Agreement may be executed and delivered by facsimile, and a counterpart signature page so delivered shall have the same effect as an original.

[SIGNATURES CONTINUED ON NEXT PAGE — BALANCE OF THIS PAGE INTENTIONALLY BLANK]

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf as of the date first above written.

Attest/Witness:		TerraWave Solutions, Ltd.
	By:	CCCS Management, LLC, its General Partner
/s/ Carter J. Burke	By:	/s/ Christopher N. Marco
		Name: Christopher N. Marco
		Title: President
Attest/Witness:		GigaWave Technologies, Ltd.
	By:	CCCS Management, LLC, its General Partner
/s/ Carter J. Burke	By:	/s/ Christopher N. Marco
		Name: Christopher N. Marco
		Title: President

[Signatures continued on next page — Balance of this page intentionally blank]

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[Asset Purchase Agreement Signature Page — Continued]

Attest/Witness:		TESSCO Incorporated
/s/ P.D. Dollenberg, Jr.	By:	/s/ Robert B. Barnhill, Jr.
		Robert B. Barnhill, Jr., President
Attest/Witness:		GW Service Solutions, Inc.
/s/ P.D. Dollenberg, Jr.	By:	/s/ Robert B. Barnhill, Jr.
		Robert B. Barnhill, Jr., President
Attest/Witness:		TESSCO Technologies Incorporated
/s/ P.D. Dollenberg, Jr.	By	:/s/ Robert B. Barnhill, Jr.
		Robert B. Barnhill, Jr.
		President and CEO

[SIGNATURES CONTINUED ON NEXT PAGE — BALANCE OF THIS PAGE INTENTIONALLY BLANK]

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[ASSET PURCHASE AGREEMENT SIGNATURE PAGE — CONTINUED]

Subject to the satisfaction (or waiver by Sellers) of the conditions set forth in Article 10, each of the undersigned hereby agrees to execute and deliver his Employment Agreement on the Closing Date.

WITNESS:

/s/ Carter J. Burke	/s/ Christopher N. Marco
	Christopher N. Marco, Individually
/s/ Christopher N. Marco	/s/ Carter J. Burke
	Carter J. Burke, Individually
/s/ Stephen R. Snow	/s/ Charles A. Sablatura
	Charles A. Sablatura, Individually
/s/ Charles A. Sablatura	/s/ Stephen R. Snow
	Stephen R. Snow, Individually

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EXHIBITS:

A — Assumption Agreement

B — Bill of Sale and Instrument of Assignment

C — Form of Copyright Assignment

D —Employment Agreements:

D-1 — Marco Employment Agreement

D-2 — Burke Employment Agreement

D-3 — Sablatura Employment Agreement

D-4 — Snow Employment AgreementE — Assignment of Lease

F — Definition of “Net Profit Contribution” and Related Terms

G — Purchasers Certificate

H — Sellers Certificate

I —Trademark Assignments:

I-1 — Assignment of TerraWave Trademark

I-2 — Assignment of GigaWave Trademark

SCHEDULES:

Schedule 1.98: Required Consents

Schedule 2.2: Certain Excluded Assets

Schedule 2.5(a): Certain Assumed Liabilities

Schedule 2.5(c): Certain Retained Liabilities

DISCLOSURE SCHEDULE

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert B. Barnhill, Jr., Chairman, President and Chief Executive Officer of TESSCO Technologies Incorporated, certify that:

1.             I have reviewed this quarterly report on Form 10-Q for the period ended June 25, 2006, of TESSCO Technologies Incorporated (the “registrant”);

2.             Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.             Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)             Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)            Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)             Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)             All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)            Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 9, 2006	By:	/s/ Robert B. Barnhill, Jr.
		Robert B. Barnhill, Jr.
		Chairman, President and
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, David M. Young, Chief Financial Officer of TESSCO Technologies Incorporated, certify that:

1.             I have reviewed this quarterly report on Form 10-Q, for the period ended June 25, 2006, of TESSCO Technologies Incorporated (the “registrant”);

2.             Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.             Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)             Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)            Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)             Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)             All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)            Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 9, 2006	By:	/s/ David M. Young
		David M. Young
		Senior Vice President, Corporate Secretary and
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

I, Robert B. Barnhill, Jr., Chief Executive Officer of TESSCO Technologies Incorporated, (the “Company”), certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.             The Quarterly Report on Form 10-Q of the Company for the period ended June 25, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2.             The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2006	/s/ Robert B. Barnhill, Jr.
	Robert B. Barnhill, Jr

.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

I, David M. Young, Chief Financial Officer of TESSCO Technologies Incorporated, (the “Company”), certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.             The Quarterly Report on Form 10-Q of the Company for the period ended June 25, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2.             The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2006	/s/ David M. Young
	David M. Young

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.