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UNITED
STATES
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OMB
APPROVAL
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SECURITIES
AND EXCHANGE
COMMISSION
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OMB
Number:
3235-0145
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Washington,
D.C. 20549
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Expires:
February 28, 2009
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SCHEDULE
13D
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Estimated
average burden hours per response. .
14.5
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TESSCO
Technologies Incorporated
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(Name
of Issuer)
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Common
Stock, $0.01 par value per share
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(Title
of Class of Securities)
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872386107
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(CUSIP
Number)
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Daniel
J. Donoghue
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Discovery
Group I, LLC
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191
North Wacker Drive
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Suite
1685
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Chicago,
Illinois 60606
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Telephone
Number: (312) 265-9600
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(Name,
Address and Telephone Number of Person
Authorized
to Receive Notices and Communications)
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February
1, 2010
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(Date
of Event which Requires Filing of this
Statement)
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CUSIP
No. 872386107
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1.
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Names
of Reporting Persons.
Discovery
Equity Partners, L.P.
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2.
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Check
the Appropriate Box if a Member of a Group (See
Instructions)
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(a)
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o
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(b)
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o
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3.
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SEC
Use Only
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4.
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Source
of Funds (See Instructions)
WC
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5.
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Check
if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or
2(e) o
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6.
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Citizenship
or Place of Organization
Illinois
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Number
of
Shares
Beneficially
Owned
by
Each
Reporting
Person
With
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7.
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Sole
Voting Power
None.
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8.
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Shared
Voting Power
580,870
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9.
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Sole
Dispositive Power
None.
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10.
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Shared
Dispositive Power
580,870
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11.
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Aggregate
Amount Beneficially Owned by Each Reporting Person
580,870
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12.
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Check
if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) o
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13.
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Percent
of Class Represented by Amount in Row (11)
12.1%
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14.
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Type
of Reporting Person (See Instructions)
PN
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CUSIP
No. 872386107
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1.
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Names
of Reporting Persons.
Discovery
Group I, LLC
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2.
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Check
the Appropriate Box if a Member of a Group (See
Instructions)
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(a)
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o
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(b)
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o
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3.
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SEC
Use Only
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4.
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Source
of Funds (See Instructions)
AF
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5.
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Check
if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or
2(e) o
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6.
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Citizenship
or Place of Organization
Delaware
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Number
of
Shares
Beneficially
Owned
by
Each
Reporting
Person
With
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7.
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Sole
Voting Power
None.
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8.
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Shared
Voting Power
680,092
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9.
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Sole
Dispositive Power
None.
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10.
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Shared
Dispositive Power
680,092
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11.
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Aggregate
Amount Beneficially Owned by Each Reporting Person
680,092
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12.
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Check
if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) o
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13.
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Percent
of Class Represented by Amount in Row (11)
14.1%
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14.
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Type
of Reporting Person (See Instructions)
OO
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CUSIP
No. 872386107
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1.
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Names
of Reporting Persons.
Daniel
J. Donoghue
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2.
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Check
the Appropriate Box if a Member of a Group (See
Instructions)
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(a)
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o
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(b)
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o
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3.
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SEC
Use Only
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4.
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Source
of Funds (See Instructions)
AF
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5.
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Check
if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or
2(e) o
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6.
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Citizenship
or Place of Organization
United
States of America
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Number
of
Shares
Beneficially
Owned
by
Each
Reporting
Person
With
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7.
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Sole
Voting Power
None.
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8.
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Shared
Voting Power
680,092
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9.
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Sole
Dispositive Power
None.
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10.
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Shared
Dispositive Power
680,092
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11.
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Aggregate
Amount Beneficially Owned by Each Reporting Person
680,092
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12.
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Check
if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) o
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13.
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Percent
of Class Represented by Amount in Row (11)
14.1%
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14.
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Type
of Reporting Person (See Instructions)
IN
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CUSIP
No. 872386107
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1.
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Names
of Reporting Persons.
Michael
R. Murphy
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2.
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Check
the Appropriate Box if a Member of a Group (See
Instructions)
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(a)
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o
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(b)
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o
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3.
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SEC
Use Only
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4.
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Source
of Funds (See Instructions)
AF
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5.
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Check
if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or
2(e) o
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6.
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Citizenship
or Place of Organization
United
States of America
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Number
of
Shares
Beneficially
Owned
by
Each
Reporting
Person
With
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7.
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Sole
Voting Power
None.
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8.
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Shared
Voting Power
680,092
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9.
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Sole
Dispositive Power
None.
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10.
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Shared
Dispositive Power
680,092
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11.
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Aggregate
Amount Beneficially Owned by Each Reporting Person
680,092
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12.
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Check
if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) o
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13.
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Percent
of Class Represented by Amount in Row (11)
14.1%
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14.
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Type
of Reporting Person (See Instructions)
IN
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Item
1.
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Security
and Issuer
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This
Amendment No. 7 (the “Amendment No. 7”)
relates to the Common Stock, par value $0.01 per share (the “Common Stock”), of
TESSCO Technologies Incorporated, a Delaware corporation (the “Company”), which has its
principal executive offices at 11126 McCormick Road, Hunt Valley, Maryland
21031. This Amendment No. 7 amends and supplements, as set
forth below, the information contained in items 1, 3, 4, 5 and 6 of the
Schedule 13D filed by the Reporting Persons on March 14, 2008, as amended
by Amendment No. 1 thereto filed by the Reporting Persons with respect to
the Company on April 14, 2008, Amendment No. 2 thereto filed by the
Reporting Persons with respect to the Company on May 23, 2008, Amendment
No. 3 filed by the Reporting Persons with respect to the Company on June
10, 2008, Amendment No. 4 filed by the Reporting Persons with respect to
the Company on July 9, 2008, Amendment No. 5 filed by the Reporting
Persons with respect to the Company on January 29, 2009 and Amendment No.
6 filed by the Reporting Persons with respect to the Company on July 24,
2009(as so amended, the “Schedule
13D”). All capitalized terms used herein but not defined
herein have the meanings set forth in the Schedule 13D. Except
as amended by this Amendment No. 7, all information contained in the
Schedule 13D is, after reasonable inquiry and to the best of the Reporting
Persons’ knowledge and belief, true, complete and correct as of the date
of this Amendment No. 7.
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Item
3.
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Source
and Amount of Funds or Other Consideration
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Item
3 of the Schedule 13D is amended to read in its entirety as
follows:
The
total purchase price for the 680,092 shares
of Common Stock beneficially owned by Discovery Group and Messrs. Donoghue
and Murphy as of February 1, 2010 was approximately $9,923,532, and the
total purchase price for the 580,870 shares of Common Stock beneficially
owned by Discovery Equity Partners was approximately
$8,476,749. The source of such funds was the assets of
Discovery Equity Partners and another private investment partnership
(collectively, the “Partnerships”) over
which Discovery Group exercises discretionary investment management
authority, including proceeds of margin loans under margin loan facilities
maintained in the ordinary course of business by the Partnerships with a
broker on customary terms and conditions. None of the shares of
Common Stock beneficially owned by the Reporting Persons currently serves
as collateral for any such margin loans. The Partnerships are
the legal owner of all of the Common Stock beneficially owned by Discovery
Group and Messrs. Donoghue and Murphy.
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Item
4.
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Purpose
of Transaction
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Item
4 of the Schedule 13D is amended by adding the following as the sixth
paragraph thereto:
By
a letter dated February 1, 2010, Discovery Equity Partners has submitted
to the Company a shareholder proposal under Securities and Exchange
Commission Rule 14a-8 for inclusion in the Company’s proxy statement for
the Company’s 2010 Annual Meeting of Stockholders. The text of
the proposal is as follows:
Stockholder
Proposal
RESOLVED, that the
stockholders of TESSCO Technologies Incorporated ("TESSCO") request that
the Board of Directors declassify the Board and thereby submit all
directors for shareholder election on an annual basis rather than
staggering their individual elections to occur once every three
years.
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Supporting Statement
Discovery
Group is a long-term investor in TESSCO. Our motivation for
this proposal is the chronic undervaluation of TESSCO shares, which we
believe reflects a discount related to the company’s small size combined
with a perceived reticence on the part of the Board to consider a takeover
by larger strategic suitors that could offer shareholders a significantly
higher valuation.
Last
year, we submitted a proposal to eliminate the company’s Rights Plan,
commonly referred to as a “Poison Pill.” The Board adopted a
Poison Pill in 2008 in response to an accumulation of shares by
Brightpoint, Inc., a logical strategic acquirer. Our proposal
received an overwhelming 75% of the votes cast by non-management
shareholders as well as an endorsement from RiskMetrics, the leading proxy
advisory firm. The Board ignored the shareholders’ directive
and maintains this antiquated anti-takeover mechanism. This new
proposal affords shareholders another opportunity to address these serious
valuation and governance concerns.
In
its 2009 US Voting Manual, RiskMetrics states that “directors should be
accountable to shareholders on an annual basis.” RiskMetrics
argues that “the only real motive for board classification is to make it
more difficult to change control of the board.” RiskMetrics
also states: “A classified board can (1) delay a takeover desired by
shareholders but opposed by management, and (2) prevent bidders from even
approaching a target company if they do not want to wait more than a year
to gain majority control. Shareholders lose in both cases, and
management has less incentive to keep shares fully valued if the
directors’ board seats are secure.”
There
is also strong academic research that highlights the negative effects of a
classified board. In the 2002 research paper, “The Powerful
Antitakeover Force of Staggered Boards: Theory, Evidence, & Policy,”
Bebchuk et al. find that a classified board increases the likelihood that
the average target will remain independent from 34% to
61%. Moreover, shareholders of companies with classified boards
“achieved 31.8% returns in the nine months after a hostile bid was
announced, compared to 43.4% returns” for shareholders of companies with
non-classified boards.
In
the last decade, the move away from classified boards has
accelerated. From 1999 to 2009, according to Georgeson and
Sharkrepellent.net, the percentage of S&P 500 companies with
classified boards has dropped from 60.4% to 32.2%, a trend similar to the
decline in the number of companies with Poison Pill
defenses. Clearly, best-of-class companies are embracing
improved shareholder rights and protections.
Annual
director elections would increase the accountability of TESSCO’s Board and
eliminate disincentives for its directors to proactively pursue all
strategic alternatives that could unlock shareholder
value. Vote FOR this proposal to
communicate to the Board that shareholders should have the right to elect
their full slate of directors on an annual basis.
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Item
5
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Interests
in the Securities of the Issuer
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Item
5 of the Schedule 13D is amended to read in its entirety as
follows:
The
information concerning percentages of ownership set forth below is based
on 4,817,826 shares of Common Stock reported outstanding as of October 30,
2009 in the Company’s most recent Quarterly Report on Form 10-Q, for the
period ended September 27, 2009.
Discovery
Equity Partners beneficially owns 580,870 shares of Common Stock as of
February 1, 2010, which represents 12.1% of the outstanding Common
Stock.
Discovery
Group beneficially owns 680,092 shares of Common Stock as of February 1,
2010, which represents 14.1% of the outstanding Common Stock.
Mr.
Donoghue beneficially owns 680,092 shares of Common Stock as of February
1, 2010, which represents 14.1% of the outstanding Common
Stock.
Mr.
Murphy beneficially owns 680,092 shares of Common Stock as of February 1,
2010, which represents 14.1% of the outstanding Common Stock.
Discovery
Group is the sole general partner of Discovery Equity Partners and has
sole discretionary investment authority with respect to the other
Partnership’s investment in the Common Stock. Messrs. Donoghue
and Murphy are the sole managing members of Discovery Group. As
a consequence, Discovery Group and Messrs. Donoghue and Murphy may be
deemed to share beneficial ownership of all of the shares of Common Stock
owned by both of the Partnerships, while Discovery Equity Partners shares
beneficial ownership with Discovery Group and Messrs. Donoghue and Murphy
of only the shares of Common Stock owned by it.
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There
have been no transactions in Common Stock effected by the Reporting
Persons during the past 60 days.
No
person other than the Partnerships is known to any Reporting Person to
have the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, any of the shares of Common Stock
reported herein.
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Item
6.
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Contracts,
Arrangements, Understandings or Relationships with Respect to Securities
of the Issuer
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Item
6 of the Schedule 13D is amended to read in its entirety as
follows:
There
are no contracts, arrangements, understandings or relationships (legal or
otherwise) between or among any of the Reporting Persons and any other
person with respect to any securities of the Company other than the
governing documents of Discovery Group and the Partnerships, the margin
loan facilities referred to under Item 3 of the Schedule 13D, the Joint
Filing Agreements of the Reporting Persons with respect to the Schedule
13D that were included as exhibits thereto, the Joint Filing Agreement of
the Reporting Persons with respect to this Amendment No. 7 included as
Exhibit 1 to this Amendment No. 7,
and the Powers of Attorney granted by Messrs Donoghue and Murphy with
respect to reports under Section 13 of the Securities Exchange Act of
1934, as amended, which Powers of Attorney are included as Exhibit 2 and Exhibit 3, respectively, to this Amendment
No. 7.
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Item
7.
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Material
to Be Filed as Exhibits
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Exhibit
1: Joint
Filing Agreement dated as of February 1, 2010, by and among Discovery
Equity Partners; Discovery Group; Daniel J. Donoghue; and Michael R.
Murphy.
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Exhibit
2: Power
of Attorney of Daniel J. Donoghue, dated as of April 28,
2008.
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Exhibit
3: Power
of Attorney of Michael R. Murphy, dated as of April 28,
2008.
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February
1, 2010
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Date
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DISCOVERY
GROUP I, LLC,
for
itself and as general partner of
DISCOVERY
EQUITY PARTNERS, L.P.
By: Michael
R. Murphy*
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Signature
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Michael
R. Murphy, Managing Member
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Name/Title
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Daniel
J. Donoghue*
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Signature
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Daniel
J. Donoghue
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Name/Title
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Michael
R. Murphy*
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Signature
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Michael
R. Murphy
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Name/Title
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*By:
/s/ Mark Buckley
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Mark
Buckley
Attorney-in-Fact
for Daniel J. Donoghue
Attorney-in-Fact
for Michael R. Murphy
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Exhibit
1:
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Joint
Filing Agreement dated as of February 1, 2010, by and among Discovery
Equity Partners; Discovery Group; Daniel J. Donoghue; and Michael R.
Murphy.
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Exhibit
2:
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Power
of Attorney of Daniel J. Donoghue, dated as of April 28,
2008
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Exhibit
3:
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Power
of Attorney of Michael R. Murphy, dated as of April 28,
2008
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