NOTE 6 – STOCK-BASED COMPENSATION

The Transcat, Inc. 2003 Incentive Plan, as Amended and Restated (the “2003 Plan”), provides for, among other awards, grants of restricted stock units and stock options to directors, officers and key employees at the fair market value at the date of grant. At March 28, 2015, the number of shares available for future grant under the 2003 Plan totaled 1.4 million.

Restricted Stock

The Company grants performance-based restricted stock units as a primary component of executive compensation. The units generally vest following the third fiscal year from the date of grant subject to certain cumulative diluted earnings per share growth targets over the eligible period. Compensation cost ultimately recognized for performance-based restricted stock units will equal the grant date fair market value of the unit that coincides with the actual outcome of the performance conditions. On an interim basis, the Company records compensation cost based on the estimated level of achievement of the performance conditions.

The following table summarizes the performance-based restricted stock units vested and shares issued during fiscal years 2014 and 2015:

Total

Grant Date

Number

Fair

Target

Number of

Date

Measurement

of Units

Value

Level

Shares

Granted

Period

Granted

Per Unit

Achieved

Issued

April 2010

April 2010 - March 2013

$7.00

May 2013

April 2011

April 2011 - March 2014

$8.44

114

May 2014

The following table summarizes the non-vested performance-based restricted stock units outstanding as of March 28, 2015:

		Total	Grant Date			Estimated
		Number	Fair			Level of
Date	Measurement	of Units	Value			Achievement at
Granted	Period	Granted	Per Unit			March 28, 2015
April 2012	April 2012 - March 2015 (1)	24		$	13.11	75% of target level
April 2013	April 2013 - March 2016	99		$	6.17	75% of target level
April 2014	April 2014 – March 2017	64		$	9.28	75% of target level

____________________

(1)	Transcat achieved 75% of the target level. As a result, 18 shares were issued in May 2015.

Total expense relating to performance-based restricted stock units, based on grant date fair value and the achievement criteria, was $0.3 million in fiscal year 2015 and $0.4 million in fiscal year 2014. Unearned compensation totaled $0.5 million as of March 28, 2015.

During the first quarter of fiscal year 2015, the Company's Board of Directors granted its Executive Chairman a stock award of ten thousand shares of common stock under the 2003 Plan. The award vested 50% on July 1, 2014, and the remaining 50% will vest on July 1, 2015. During the second quarter of fiscal year 2015, the Company's Board of Directors granted a stock award of two thousand shares of common stock under the 2003 Plan to a retiring board member. The award vested in the second quarter of fiscal year 2015. Total expense relating to these stock awards, based on grant date fair value, was $0.1 million in fiscal year 2015. As of March 28, 2015, the unrecognized compensation cost for these awards expected to be recognized over the next three months was less than $0.1 million.

Stock Options

Options generally vest over a period of up to four years, using either a graded schedule or on a straight-line basis, and expire ten years from the date of grant. The expense relating to options is recognized on a straight-line basis over the requisite service period for the entire award.

The following table summarizes the Company's options for fiscal years 2015 and 2014:

							Weighted
				Weighted			Average
				Average			Remaining
	Number			Exercise			Contractual		Aggregate
	of			Price Per			Term (in		Intrinsic
	Shares			Share			Years)		Value
Outstanding as of March 30, 2013		554			$	6.02
Granted		110				7.64
Exercised		(52	)			3.04
Forfeited		(3	)			4.93
Outstanding as of March 29, 2014		609				6.58
Granted		10				9.66
Exercised		(58	)			4.66
Outstanding as of March 28, 2015		561				6.83		3		$	1,550
Exercisable as of March 28, 2015		461				6.67		2			1,348

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of fiscal year 2015 and the exercise price, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all holders exercised their options on March 28, 2015. The amount of aggregate intrinsic value will change based on the fair market value of the Company's stock.

During both of the fiscal years 2015 and 2014, total expense relating to stock options was $0.1 million. Total unrecognized compensation cost related to non-vested stock options as of March 28, 2015 was $0.2 million, which is expected to be recognized over a weighted average period of two years. The aggregate intrinsic value of stock options exercised in both of the fiscal years 2015 and 2014 was $0.3 million. Cash received from the exercise of options in fiscal years 2015 and 2014 was $0.3 million and $0.2 million, respectively.