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Form DEF 14A DAKTRONICS INC /SD/ For: Apr 30

August 8, 2022 2:23 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 14A
(Rule 14a-101)
 
INFORMATION REQUIRED IN PROXY STATEMENT
 
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.___)
 
Filed by the Registrant
Filed by a Party other than the Registrant
 
Check the appropriate box:
 
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under § 240.14a-12
 
Daktronics, Inc.
(Name of Registrant as Specified in its Charter)
 
____________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check all boxes that apply):
 
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 




 
 

DAKTRONICS, INC.
201 Daktronics Drive
Brookings, South Dakota 57006
 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 7, 2022
 
Time
4:30 p.m. Central Daylight Time on Wednesday, September 7, 2022
   
PlaceDaktronics, Inc. (the "Company")
 201 Daktronics Drive
 Brookings, South Dakota 57006
   
Items of Business1.To elect two Directors to serve for a three-year term that expires on the date of the Annual Meeting of Shareholders in 2025 or until his successor is duly elected and qualified.
 2.To approve, on an advisory (non-binding) basis, of the Company's executive compensation.
 3.
To ratify the appointment of Deloitte & Touche, LLP as the Company's independent registered public accounting firm for the Company for fiscal 2023; and
4.To approve an amendment to our Employee Stock Purchase Plan.
5. To approve our shareholder Rights Agreement.
Shareholders will also transact such other business as may properly come before the 2022 Annual Meeting of Shareholders and any adjournment or postponement thereof (the "Annual Meeting").
   
Record Date
You are entitled to notice of and to vote at the Annual Meeting if you were a shareholder of record at the close of business on July 6, 2022.
   
Annual MeetingAll shareholders are invited to attend the Annual Meeting in person with proof of ownership, such as your last broker or EQ Shareholder Services statement.
   
Voting by ProxyEven if you plan to attend the Annual Meeting, please submit a proxy as soon as possible so that your shares can be voted at the Annual Meeting in accordance with your instructions. Shareholders may vote their shares:
 1.over the Internet;
2.by written ballot at the Annual Meeting;
 3.by telephone; or
 4.by mail.
 
 For specific instructions, refer to the procedural matters section of the Proxy Statement or to the voting instructions on the proxy card, both of which accompany this notice.
 
THIS PROXY STATEMENT AND PROXY CARD ARE BEING DISTRIBUTED ON OR ABOUT AUGUST 8, 2022.
 
 By Order of the Board of Directors,
  
 Carla S. Gatzke
 Secretary
 
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE DAKTRONICS, INC. ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 7, 2022.
 
This notice and the accompanying Proxy Statement, proxy card and our Fiscal 2022 Annual Report to Shareholders, which includes our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, are available at our website at www.daktronics.com. Additionally, and in accordance with the rules of the Securities and Exchange Commission, shareholders may access these materials at the cookies-free website indicated in the Notice of Internet Availability of Proxy Materials that you received in connection with this notice and the accompanying Proxy Statement.
 
 





 
 
Daktronics, Inc.
Table of Contents
 
 
 
 







DAKTRONICS, INC.
 
 
PROXY STATEMENT
FOR 2022 ANNUAL MEETING OF SHAREHOLDERS
 
PROCEDURAL MATTERS
 
General
The enclosed proxy is solicited by and on behalf of the Board of Directors (the "Board") of Daktronics, Inc., a South Dakota corporation, for use at our 2022 Annual Meeting of Shareholders and any adjournments or postponements thereof (the "Annual Meeting") scheduled to be held on Wednesday, September 7, 2022 at Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota at 4:30 p.m. Central Daylight Time, for the purposes set forth herein and in the accompanying Notice of Annual Meeting. This Proxy Statement and the accompanying form of proxy, together with our Fiscal 2022 Annual Report to Shareholders, are being made available to shareholders on the Internet or are being mailed on or about August 8, 2022 to shareholders entitled to vote at the Annual Meeting.
 
All shareholders are invited to attend the Annual Meeting in person with proof of ownership, such as your last broker or EQ Shareholder Services statement, and government-issued identification.
 
In this Proxy Statement, "Daktronics", "Company", "registrant", "we", "us" and "our" refer to Daktronics, Inc.
 
Shareholders Entitled to Vote; Record Date
Only shareholders of record at the close of business on July 6, 2022 (the "Record Date") are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 45,033,839 shares of our common stock, no par value (the "Common Stock"), outstanding and entitled to vote held by 947 shareholders of record.
 
Notice of Internet Availability of Proxy Materials
We are making proxy materials for the Annual Meeting available over the Internet. Therefore, we are mailing to the majority of our shareholders a notice about the Internet availability of the proxy materials instead of a paper copy of the proxy materials. The notice is entitled "Notice of Internet Availability of Proxy Materials." All shareholders receiving the Notice of Internet Availability of Proxy Materials will have the ability to access the proxy materials over the Internet and to request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found on the notice. Our proxy materials may also be accessed on our website at www.daktronics.com by selecting "Investors" at the bottom of the website under "Our Company" and then "Annual Reports and Proxy" under the heading "Financial Information." We are providing some of our shareholders, including shareholders who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of the Notice of Internet Availability of Proxy Materials.
 
Voting at the Annual Meeting; Vote Requirements
The holders of a majority of the shares of Common Stock entitled to vote at the Annual Meeting, represented for any purpose at the Annual Meeting, will constitute a quorum for the transaction of business. If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is present. Abstentions and broker non-votes will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Each share is entitled to one vote on all matters submitted to a vote. 

However, with respect to only the election of Directors, shareholders have cumulative voting rights. Every shareholder will have the right to cast a number of votes equal to the number of Directors to be elected at the Annual Meeting multiplied by the number of shares the shareholder is entitled to vote. Shareholders may cast all votes for one nominee or distribute the votes as they choose among two or more nominees. Shares abstaining will be treated as not voted.
 
A plurality of the votes cast is required for the election of Directors. This means that the Director nominee with the most votes for a particular slot is elected for that slot. Because there are two seats up for election, the two Directors receiving the most "FOR" votes will be elected to the Board at the Annual Meeting. Only votes "for" or "withheld" affect the outcome. Abstentions and broker non-votes will have no effect on the outcome of the election of Directors. The affirmative vote of a majority of the voting power of the shares of Common Stock present and entitled to vote and represented at the Annual Meeting at the time of the vote, either in person or by proxy, assuming a quorum is present, is required to approve the other proposals. If an executed proxy is returned and the shareholder has abstained from voting on any matter, the shares represented by such proxy will be considered present at the Annual Meeting for purposes of determining a quorum and for purposes of calculating the vote, but they will not be considered to have been voted in favor of such matter. If a signed proxy is returned by a broker, bank, trustee, or other nominee holding shares in "street name," and it indicates that the broker, bank, trustee, or other nominee does not have discretionary authority to vote certain shares on one or more matters, such shares will be considered present at the Annual Meeting for purposes of determining a quorum but will not be considered to be represented at the Annual Meeting for purposes of calculating the vote with respect to such matter.
 
Counting Votes
The inspector of election appointed for the Annual Meeting will count the votes cast by proxy or in person at the Annual Meeting.
 
Brokers, banks, trustees, or other nominees who hold shares in street name for customers will not be able to vote the shares without instructions from their customers with respect to any of the proposals, other than the proposal to ratify the selection of our auditors (Proposal Three of this Proxy Statement). Shares for which brokers, banks, trustees, or other nominees have not received instructions, and which therefore are not voted, with respect to a particular proposal are referred to as "broker non-votes" with

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respect to that proposal. Abstentions will not affect the outcome of the vote on Proposal One and will have the same effect as a vote "AGAINST" on Proposal Two, Proposal Three, Proposal Four and Proposal Five, Broker non-votes will not affect the outcome of Proposal One and will have the same effect as a vote "AGAINST" on Proposal Two, Proposal Three, Proposal Four and Proposal Five.
 
How Votes are Submitted
If the shares of Common Stock are held directly in the name of the shareholder, he or she can vote on matters to come before the Annual Meeting:
 
 by completing, dating and signing the proxy card and returning it to us in the postage-paid envelope provided for that purpose, if the shareholder has received a paper copy of a proxy card;
 by written ballot at the Annual Meeting;
 by telephone, by calling 1-866-804-9616; or
 by Internet, at www.AALvote.com/DAKT.
 
Shareholders whose shares of Common Stock are held in "street name" must either direct the record holder of their shares as to how to vote their shares of Common Stock or obtain a proxy from the record holder to vote at the Annual Meeting. "Street name" shareholders should check the voting instruction cards used by their brokers, banks, trustees, or other nominees for specific instructions on methods of voting, including by telephone or using the Internet.
 
Participants in the Daktronics, Inc. 401(k) Plan (the "401(k) Plan") who hold Common Stock in the 401(k) Plan are entitled to instruct the trustee of the 401(k) Plan as to how to vote their shares. Each participant will receive a Notice of Internet Availability of Proxy Materials, similar to the notice received by the registered holders described above. Each participant will have the ability to access the proxy materials over the Internet and to request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found on the notice as described above. The participants can vote on matters as described above. The votes will then be tabulated and submitted for vote by the trustee for the 401(k) Plan. If a participant does not timely vote, the trustee will vote the shares allocated to that participant in the same proportion as the shares that are voted by all other participants under the 401(k) Plan.
 
Proxies
All shares entitled to vote and represented by properly submitted proxies received before the Annual Meeting will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies if they are not revoked before the vote as described below. If no instructions are indicated on a properly submitted proxy, the shares represented by that proxy will be voted as recommended by the Board. If any other matters are properly presented for consideration at the Annual Meeting, the proxy holders will have discretion to vote on those matters in accordance with their best judgment to the extent permitted under Rule 14a-4(c).
 
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. A proxy may be revoked by:
 delivering a written notice of revocation to the Secretary of the Company;
 submitting another proxy bearing a later date;
 voting by telephone or via the Internet after a prior telephone or Internet vote; or
 attending the Annual Meeting and voting in person (although attendance at the Annual Meeting alone will not itself revoke a proxy).
 
Appraisal or Dissenters' Rights
Applicable South Dakota law, the Company's Amended and Restated Articles of Incorporation with Articles of Amendment, and its Amended and Restated Bylaws do not provide for appraisal or other similar rights for dissenting shareholders in connection with any of the proposals set forth in this Proxy Statement Accordingly, you will have no right to dissent and obtain payment for your shares in connection with such proposals.

Expenses of Solicitation
All expenses of this solicitation by the Company, including the cost of preparing and mailing this Proxy Statement, will be borne by us. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of Common Stock for their reasonable expenses in forwarding solicitation material to such beneficial owners. Our Directors, officers and employees may also solicit proxies in person or by telephone, email, letter or facsimile. Such Directors, officers and employees will not be additionally compensated, but they may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. We have engaged Alliance Advisors LLC ("Alliance Advisors") to assist with the solicitation of proxies for an estimated fee of $90,000 plus reimbursement of expenses. We have agreed to indemnify Alliance Advisors against potential certain liabilities arising out of our agreement with Alliance Advisors.
 
Procedure for Submitting Shareholder Proposals
Shareholders may present proper proposals for inclusion in our proxy materials for consideration at the next annual meeting of our shareholders by submitting their proposals to us in a timely manner. In order to be included in our proxy materials for the next annual meeting, shareholder proposals must be received by us no later than April 10, 2023 and must otherwise comply with the

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requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If a shareholder would like to nominate a Director or bring other business before the shareholders at the next annual meeting of our shareholders without including the proposal in our proxy statement, we must receive notice of the proposal on or before June 24, 2023, and the shareholder must otherwise comply with Rule 14a-4(c) under the Exchange Act. Notices of intention to present proposals at the 2023 annual meeting of shareholders should be addressed to Corporate Secretary, Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006.
 
At the date of this Proxy Statement, the Company knows of no other business that may be presented at the Annual Meeting. However, if any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxies to vote the proxy in accordance with their best judgment to the extent permitted under Rule 14a-4(c) of the Exchange Act.
 



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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth information regarding the beneficial ownership of Common Stock as of July 6, 2022, the Record Date, by each of our current Directors and the one director nominee who is not currently a Director; by each named executive officer named in the Summary Compensation Table; by all named executive officers, the Director nominee who is not currently a Director, and all current Directors as a group; and by each shareholder who is known by us to own beneficially more than five percent of our outstanding Common Stock.
 
Name and Address of Beneficial OwnersNoteAmount and Nature of Beneficial Ownership(1)Percentage of Outstanding Shares(2)
5% Beneficial Owners:(15)
Dimensional Fund Advisors LP(16)2,356,797 5.2 %
Building One, 6300 Bee Cave Road
Austin, TX 78746
Dr. Aelred J. Kurtenbach(17)2,617,218 5.8 %
Daktronics, Inc. 401(k) Plan(18)2,390,213 5.3 %
Named Executive Officers, Directors, and Director Nominee:
Reece A. Kurtenbach(3)683,150 1.5 %
James B. Morgan(4)1,350,862 3.0 %
Kevin P. McDermott(5)78,615 *
John P. Friel(6)73,967 *
Dr. José-Marie Griffiths(7)24,149 *
Shereta Williams(8)10,159 *
Lance D. Bultena(9)10,159 *
Sheila M. Anderson(10)102,278 *
Bradley T. Wiemann(11)171,789 *
Matthew J. Kurtenbach(12)333,690 *
Carla S. Gatzke(13)825,323 1.8 %
Andrew Siegel(14)1,212,875 2.7 %
All current Directors, the one Director nominee who is not currently a director, and all named executive officers as a group (12 persons, consisting of those named above)4,877,016 10.8 %
* Less than one percent
 
 (1)Each person has sole voting and sole dispositive power with respect to all outstanding shares, except as noted.
 (2)
Applicable percentage ownership is based on 45,033,839 shares of Common Stock outstanding as of July 6, 2022. In computing the number of shares of Common Stock beneficially owned by a person or group and the percentage ownership of that person or group, we deemed outstanding shares of Common Stock subject to options held by that person or group that are currently exercisable, options held by that person or group that are exercisable within 60 days of July 6, 2022, and restricted stock units that are scheduled to vest within 60 days of July 6, 2022. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
 (3)
Includes 136,950 shares subject to options, 33,585 shares held through the 401(k) Plan, 17,400 shares held by his spouse, 44,800 shares held by his children, and 5,520 shares of restricted stock which vest within 60 days from July 6, 2022.
 (4)
Includes 17,496 shares subject to exercisable options and 10,159 shares of restricted stock which vest on August 23, 2022.
Mr. Morgan is retiring from the Board of Directors on September 7, 2022.
 (5)
Includes 17,496 shares subject to exercisable options and 10,159 shares of restricted stock which vest on August 23, 2022.
 (6)
Includes 17,496 shares subject to exercisable options and 10,159 shares of restricted stock which vest on August 23, 2022.
 (7)
Includes 10,159 shares of restricted stock which vest on August 23, 2022.
 (8)
Includes 10,159 shares of restricted stock which vest on August 23, 2022.

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 (9)
Includes 10,159 shares of restricted stock which vest on August 23, 2022.
 (10)
Includes 61,870 shares subject to options, 8,544 shares held through the 401(k) Plan and 2,600 shares of restricted stock which vest within 60 days from July 6, 2022.
 (11)
Includes 63,300 shares subject to options, 597 shares held by his spouse and 2,600 shares of restricted stock which vest within 60 days from July 6, 2022.
 (12)
Includes 63,000 shares subject to options, 16,120 shares held through 401(k) Plan, 39,100 shares held by his children and 2,600 shares of restricted stock which vest within 60 days from July 6, 2022.
 (13)
Includes 59,850 shares subject to options, 169,683 shares held through the 401(k) Plan, 90,000 shares held by her spouse, 15,005 shares held by her child and 2,550 shares of restricted stock with which vest within 60 days from July 6, 2022.
(14)
Consists of 1,212,875 shares owned by Prairieland Holdco, LLC ("PLH"). Mr. Siegel is the sole member and president of Prairieland MM, LLC. which is the manager of PLH.
 (15)
To the Company's knowledge, except as noted in the table above, no person or entity is the beneficial owner of more than five percent of the outstanding shares of the Company's common stock.
 (16)
Data based on an Amendment to Schedule 13G/A filed by the shareholder with the Securities and Exchange Commission (the "SEC") on February 14, 2022. As set forth in the Schedule 13G/A, Dimensional Fund Advisors LP has sole voting power as to 2,276,834 of these shares and sole dispositive power as to all 2,356,797 shares.
 (17)
Includes 838,488 shares held by his spouse, Irene Kurtenbach, and 681,675 shares held in Medary Creek LLLP. Medary Creek LLLP is a limited liability limited partnership of which Aelred and Irene Kurtenbach are the general partners. The address for Aelred and Irene Kurtenbach and Medary Creek LLLP is 47209 220th Street, Brookings, SD 57006. Aelred J. Kurtenbach is a founder of the Company and its former Chairperson, President and Chief Executive Officer.
 (18)The Common Stock held by the 401(k) Plan and allocated to the 401(k) Plan participants are voted by the trustee of the 401(k) Plan according to the instructions of the 401(k) Plan participants. The address of the 401(k) Plan is 201 Daktronics Drive, Brookings, South Dakota 57006.
 




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PROPOSAL ONE
ELECTION OF DIRECTORS
 
General
The Board consists of seven individuals divided into three classes serving staggered three-year terms of office. There is one Director (Kevin P. McDermott) whose term will expire at the Annual Meeting; two Directors (Dr. José-Marie Griffiths and Lance D. Bultena) whose terms will expire in 2023; and three Directors (John P. Friel, Reece A. Kurtenbach, and Shereta Williams) whose terms will expire in 2024. Because of Mr. Morgan's retirement, of which the Board was notified on July 28, 2022, the Board did not include him in the slate of nominees for the Annual Meeting.
 
The Nominating and Corporate Governance Committee of the Board (the "Nominating Committee") has recommended to the Board of Directors that Kevin P. McDermott be nominated for re-election and Andrew Siegel be nominated for election at the Annual Meeting for a three-year term that expires on the date of the Annual Meeting of Shareholders in 2025 or until his successor is duly elected and qualified, and the Board has approved the recommendations. With respect to Mr. Siegel's nomination, please see the section of this Proxy Statement below entitled "Proposal One - Election of Directors - Cooperation Agreement."
 
Vote Required
See "Procedural Matters – Voting at the Annual Meeting: Vote Requirements" for a description of the votes required for the election of Directors.
 
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEES NAMED BELOW FOR DIRECTORS.
 
Directors and Nominees for Director
The following table sets forth the name, age and certain other information about each nominee for Director as of the Record Date:
 
Name Age Principal Occupation Committees Served On
Kevin P. McDermott68Board member of Genesco Inc.Audit Committee - Chair
Andrew Siegel56President of Prairieland Holdco, LLC and TLI Bedrock Holdco, LLC
Not applicable (1)
(1) The Company has agreed in the Cooperation Agreement described below that the Board will appoint Mr. Siegel to the Nominating Committee after his election to the Board.

Each of the Company's nominees has consented to (i) serve as a nominee, (ii) be named as a nominee in this Proxy Statement, and (iii) serve as a director if elected. Except as described elsewhere in this Proxy Statement, none of our directors, director nominees, officers, or any of their associates has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the Annual Meeting, other than elections to office.
 
Kevin P. McDermott (68) has been a Director of the Company since June 2015 and has served on the Audit Committee of the Board (the "Audit Committee") as a member from August 2015 through September 2016 and as Chairperson of the Audit Committee since October 2016. On June 1, 2020, Mr. McDermott was named by the Board as the Lead Independent Director. Mr. McDermott retired from an international accounting firm, KPMG LLP, in the fall of 2013 after being with the firm for 33 years in various capacities, including audit engagement partner, SEC reviewing partner, professional practice partner, and in the firm’s Office of General Counsel. In addition to fulfilling professional obligations related to audits of financial statements and internal control over financial reporting, he assisted clients with financial and operational issues, acquisition due diligence, personnel performance, and corporate governance. In his capacity as SEC reviewing partner, Mr. McDermott performed concurring partner reviews of audits of financial statements and internal control over financial reporting for publicly-held audit clients. While in the Office of General Counsel, he provided assistance on a privileged basis to the firm and outside counsel in various SEC and Public Company Accounting Oversight Board investigations and third-party litigation matters. He holds a Bachelor of Science in Economics from South Dakota State University. Mr. McDermott was appointed to the board of directors of Genesco Inc. (NYSE-GCO) effective February 1, 2016 and currently serves on its Audit Committee. Genesco is a publicly-traded retailer and wholesaler of branded footwear, apparel and accessories. From March 2019 through March 2020, Mr. McDermott served as Chief Audit Executive for Pinnacle Financial Partners, Inc., a publicly-held bank holding company located in Nashville, Tennessee. Mr. McDermott brings significant expertise in the area of financial and internal control over financial reporting by publicly-traded companies. This expertise aligns with our responsibility and commitment to provide oversight for our shareholders relating to the integrity of our financial statements and related filings.
 
Andrew Siegel (56) currently manages Prairieland Holdco, LLC ("PLH"), whose sole member is TLI Bedrock, LLC ("TLI"), a private multi-strategy investment firm of which he is chief investment officer. In 2019, he co-founded and served as Executive Chairman of FourQ Systems, Inc. an enterprise financial technology company which was sold to Blackline, Inc. (NASDAQ:BL) in January 2022. Mr. Siegel was founding partner of Advance Venture Partners, the investment fund of global media company Advance Publications, Inc. He joined Advance in 2010 and, as Executive Vice President, Strategy and Corporate Development, was responsible for growth initiatives at the holding company and its operating units including Condé Nast. He oversaw The Sports Business Journal/SBD until December 2019. Mr. Siegel joined Advance from Yahoo! Inc., where he led the digital media company’s corporate development team from September 2009 until December 2010. He previously was an executive with General Electric Company ("GE") from 2004 until 2009 and its financial arm, GE Capital. He joined GE upon its acquisition of InVision Technologies, Inc. (NASDAQ: INVN) in December 2004, where he had served as an executive officer since 2001. He began his career as a corporate lawyer at Skadden, Arps, Slate, Meagher & Flom, LLP in New York City. Andrew received a

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Bachelor of Arts from the Newhouse School of Public Communications at Syracuse University, a Master of Science degree from the Jewish Theological Seminary, and a juris doctor degree (JD) from New York University School of Law. He serves on the boards of the Park Avenue Synagogue and the Ashley Hope Foundation as well as those of the private companies Gaming Society, Next League, Strategic Financial Solutions and Copyleaks. Mr. Siegel brings to the Board his experience in strategy and corporate development.
 
The identity of the remaining Directors whose terms do not expire at the Annual Meeting and certain information about them as of the Record Date are set forth below:
 
John P. Friel (68) has been a Director of the Company since September 2015 and has served on the Audit Committee since September 2015 and on the Compensation Committee of the Board (the "Compensation Committee") since October 2016. Mr. Friel was named Compensation Committee Chair on September 1, 2020. Mr. Friel served for 30 years in various capacities at MEDRAD, Inc., a global company that designs, develops, manufactures, sells, and supports medical devices. MEDRAD is an affiliate of Bayer, AG. He joined MEDRAD in the accounting area and earned a promotion to Treasurer and Vice President of Corporate Planning in 1986 and Vice President of Business Development in 1987. He served as Executive Vice President of Sales and Marketing from 1989 to 1995, Senior Vice President and General Manager from 1995 to 1998, and President and Chief Executive Officer from 1998 to 2010. MEDRAD received the Malcolm Baldrige National Quality Award twice during his tenure, once in 2004 and again in 2010. Mr. Friel retired as Chief Executive Officer of Vascor, Inc. in December 2019, and he has served as a member of the Board of Directors since June 2016. Vascor is a pre-clinical medical device development company. He also is currently a Director at Preservation Technologies L.P., a Director of the medical device industry segment at Blue Water Growth LLC, and a Director at American Productivity and Quality Center ("APQC"). Mr. Friel is the Principal and Founder of Five Radicals, which focuses on Baldrige Performance Excellence, strategic planning, general business consulting to entrepreneurial medical device companies, and private equity business development opportunity search efforts. Mr. Friel is a director and Chief Strategy Officer of Magvation, LLC, a medical device development company. Mr. Friel is a Senior Partner of the Mikan Group, a general management consulting company. He holds a Master of Arts in Law and Diplomacy from Tufts University and a Bachelor of Arts in Political Science and Bachelor of Science in Accounting from Pennsylvania State University. Mr. Friel brings to the Board extensive global general management knowledge and practice. He has strong experience in building and growing businesses, especially in technical product development and global expansions, which align with many of the Company's initiatives and strategies.
 
Reece A. Kurtenbach (57) was appointed as President and Chief Executive Officer and a Director of the Company effective on September 1, 2013 and has served as Chairman of the Board since September 2014. He served as Executive Vice President from 2012 until September 2013, Vice President for Live Events and International from 2007 to 2012, Vice President for Video Systems from 2004 until 2007, and manager for video products engineering from 1994 until 2004. Mr. Kurtenbach joined the Company in 1991 as an applications engineer focusing on large display projects. Mr. Kurtenbach also worked as a student employee with various responsibilities from 1983 to 1987. Mr. Kurtenbach holds a Bachelor of Science degree from South Dakota State University in Electrical Engineering, with minors in Mathematics and Computer Science. Mr. Kurtenbach is the son of Dr. Aelred Kurtenbach and brother of Matthew J. Kurtenbach and Carla S. Gatzke. The Board believes that Mr. Kurtenbach is an appropriate representative of management on the Board, given his position as a senior executive officer and his over 30 years of experience with the Company. In addition, Mr. Kurtenbach brings a wealth of industry experience to the Board.
 
Shereta Williams (48) has been a Director of the Company since September 2021 and has since served on the Audit Committee since September 2021 and the Compensation Committee since September 2021. Ms. Williams is Senior Vice President, New Verticals of Cox Enterprises, Inc., a global communications, automotive, and media company, based in Atlanta, Georgia and has served in such capacity since 2021. She has held a variety of strategy, corporate development and business development roles within the Cox Enterprise, Inc. subsidiaries and groups, including Vice President Business Development from 2020 to 2021; President of Videa, LLC from 2014 through 2020; Vice President of Corporation Development for Cox Media Group from 2010 to 2013; and Director of Development and Digital Services for Cox Television from 2001 through 2006. In between the roles at Cox Enterprise, Inc., from 2006 through 2009, she was the managing director of the currency division for Maven Funds, a startup hedge fund in Atlanta, Georgia where she was responsible for managing traders, implementing automated trading systems, risk management and operations. She began her career working in investment banking as an analyst for mergers and acquisitions for Lazard Freres & Co, LLC from 1996 through 1998. She holds a Bachelor of Science degree in Electrical Engineering, with a concentration in Economics, from the Massachusetts Institute of Technology. Ms. Williams brings to the Board extensive knowledge in corporate development, strategy, and mergers and acquisitions, as well as operational leadership in the digital communications industry.
 
Lance D. Bultena (59) has been a Director of the Company since September 2021 and has served on the Nominating Committee since September 2021 and the Audit Committee since September 2021. Mr. Bultena is the Global Director of Thought Leadership for Mobility and Transportation at Hogan Lovells, a global law firm, where he is currently a senior counsel after serving as a partner for many years. He has been at the firm (and its predecessor Hogan & Hartson) since 1999. He was Counsel to the U.S. Senate Committee on Commerce, Science, and Transportation from 1995 to 1999. He received a doctorate (D. Phil) in Politics and a masters (M. Phil) in Economics from Oxford University which he attended as a Rhodes Scholar. He received a law degree (J.D.) from Harvard Law School and did his undergraduate study at the University of South Dakota. Dr. Bultena brings to the Board significant experience in helping businesses evaluate and address the challenges of technological change and public policy developments.

Dr. José-Marie Griffiths (70) has been a Director of the Company since September 2020. She is president of Dakota State University, a public university, in Madison, South Dakota and has served in such capacity since July 2015. President Griffiths has spent her career in research, teaching, public service, corporate leadership, economic development, and higher education administration. She has served in presidential appointments to the National Science Board, the U.S. President’s Information Technology Advisory Committee, and the U.S. National Commission on Libraries and Information Science. In 2018, she was appointed as a member of the National Security Commission on Artificial Intelligence, part of the John S. McCain National

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Defense Authorization Act for 2019. She has led projects for over 28 U.S. federal agencies, such as the National Science Foundation, NASA, the Department of Energy, and various intelligence and military agencies, and over 20 major corporations, such as AT&T Bell Laboratories and IBM, in over 35 countries, and she has worked with seven major international organizations, including NATO and the United Nations. Dr. Griffiths has received over 20 significant awards in science, technology, teaching and the advancement of women in these fields. She holds a Bachelor of Science degree and a Doctor of Philosophy in Physics and Information Science from the University College London ("UCL"). She was a Post-Doctoral Fellow in Computer Science and Statistics and was recently awarded a Doctor of Science honoris causa from UCL. Dr. Griffiths brings to the Board expertise in a variety of new and emerging technologies including cybersecurity and artificial intelligence, along with significant experience with both military and civilian federal agencies.

Cooperation Agreement
The Company received a letter dated May 27, 2022, as amended May 31, 2022, from PLH which notified the Company of PLH's intent to nominate candidates to the Board, among other requests (the "Nomination Letter"). On July 23, 2022, the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with PLH and its affiliates (collectively, the “Prairieland Group”).

Pursuant to the Cooperation Agreement, the Company has agreed to nominate Andrew Siegel to the Board for election at the Annual Meeting. Following the Annual Meeting, the Board will appoint Mr. Siegel to the Nominating Committee. After the Annual Meeting, the Board will also expand from seven to eight directors, and an additional director mutually agreed upon by the Company and the Prairieland Group will be appointed to the Board.

In addition, under the Cooperation Agreement, the Prairieland Group irrevocably withdrew the Nomination Letter; ceased all solicitations of proxies and other activities in connection with the Annual Meeting; and agreed to vote in accordance with the recommendation of the Board with respect to certain proposals at all shareholder meetings, subject to various exceptions.

The Prairieland Group also agreed to certain customary standstill provisions and a voting commitment for the duration of the Cooperation Agreement. The Cooperation Agreement will terminate on the earlier of September 30, 2025 and the conclusion of the Company’s 2025 Annual Meeting of Shareholders. Further, pursuant to the Cooperation Agreement, the Company has agreed to provide the Prairieland Group up to $190,000 in the aggregate to reimburse the Prairieland Group for its documented expenses.

The foregoing description of the Cooperation Agreement does not purport to be complete and is qualified in its entirety by reference to the Cooperation Agreement, a copy of which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2022.

Independent Directors
The Nominating Committee has determined that each of Messrs. McDermott, Morgan, Friel, Bultena, Siegel, Ms. Williams, and Dr. Griffiths are "independent," as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules (the "Independent Directors"). Accordingly, the Board is composed of a majority of Independent Directors as required by the Nasdaq Listing Rules. In addition, none of our Directors are a party to any agreement or arrangement that would require disclosure pursuant to Nasdaq Listing Rule 5250(b)(3) regarding the payment of compensation to directors by a third party in connection with serving as a Director of the Company.
 
Summary of Board Diversity
The Nominating Committee is responsible for overseeing the process to recruit and vet candidates for nomination to the Board. In selecting nominees, the Board will consider how to best round out the skills and experience in order to ensure an effective, competent Board that represents diverse perspectives and is best suited to govern the Company into the foreseeable future. Diversity of thought, experience, and composition are important factors the Board evaluates when nominating Board candidates. The following chart summarizes certain self-identified personal characteristics of our Directors, in accordance with Nasdaq Listing Rule 5605(f).
Board Diversity Matrix (As of July 6, 2022)
Total Number of Directors7
FemaleMaleNon-BinaryDid Not Disclose Gender
Part I: Gender Identity
Directors2500
Part II: Demographic Background
African American or Black1000
Alaskan Native or American Indian0000
Asian0000
Hispanic or Latinx0000
Native Hawaiian or Pacific Islander0000
White1500
Two or More Races or Ethnicities0000
LGBTQ+1
Did Not Disclose Demographic Background0

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PROPOSAL TWO
ADVISORY (NON-BINDING) APPROVAL OF THE COMPANY'S EXECUTIVE COMPENSATION
 
The foundation of our executive compensation program is to pay for performance. Base compensation for our executive officers is set relatively low as compared to members of our peer group, and a meaningful portion of the compensation paid to our executive officers is based on long-term equity incentive compensation and annual non-equity incentive compensation, which is focused on the key results and strategic drivers of our business. 
 
The Compensation Discussion and Analysis section of this Proxy Statement explains in more detail our executive compensation program.
 
We believe that, viewed as a whole, our compensation practices and policies are appropriate and are fair to both the Company and its executives and align with the long-term interests of our shareholders.
 
As an advisory approval, this proposal is non-binding. However, the Board and our Compensation Committee, which is responsible for designing and overseeing the administration of our executive program, value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for our Chief Executive Officer (the "CEO") and all of the other executive officers named in the Summary Compensation Table appearing later in this Proxy Statement (collectively, along with the CEO, the "Named Executive Officers").

Vote Required
See "Procedural Matters - Voting at the Annual Meeting: Vote Requirements" for a description of the votes required for approval on an advisory, non-binding basis of the Company's executive compensation.
 
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL TWO, THE ADVISORY (NON-BINDING) APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE PROXY STATEMENT PURSUANT TO THE SECS COMPENSATION DISCLOSURE RULES.
 



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PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
 
The Audit Committee of the Board has selected Deloitte & Touche, LLP ("Deloitte") to serve as our independent registered public accounting firm (the "Independent Auditor") for the fiscal year ending April 29, 2023. Deloitte has been our Independent Auditor since fiscal 2018.
 
The Audit Committee recognizes the importance of maintaining the independence of the Company's Independent Auditor, both in fact and appearance. Each year, the Audit Committee evaluates the qualifications, performance and independence of our Independent Auditor and determines whether to re-engage such firm. In doing so, the Audit Committee considers, among other things, the quality and efficiency of the services provided by the Independent Auditor, its capabilities and its technical expertise, its knowledge of our operations and industry, and relevant information concerning its independence.
 
While not required to do so, the Board is submitting the selection of Deloitte for ratification to ascertain the views of our shareholders with respect to the choice of Deloitte as our Independent Auditor. If the shareholders do not approve the selection of Deloitte, the Audit Committee will reconsider its selection. A representative from Deloitte is expected to be present at the Annual Meeting.
 
Audit and Other Professional Fees
The following table presents the aggregate fees billed for professional services rendered by Deloitte, including out-of-pocket expenses, for fiscal 2022 and 2021. As provided in the Audit Committee’s Charter, all engagements for any non-audit services by our Independent Auditor must be approved by the Audit Committee before the commencement of any such services. The Audit Committee may designate a member or members of the Audit Committee to represent the entire Audit Committee for purposes of approving non-audit services, subject to review by the full Audit Committee at its next regularly scheduled meeting. The Audit Committee considers the provision of services by Deloitte to us, over and above the audit fees, to be compatible with the ability of Deloitte to maintain its independence. 
 
Fiscal Year Ended
April 30, 2022May 1, 2021
Audit Fees (1)$845,800 $846,452 
Audit-Related Fees (2)44,800 61,250 
Tax Fees (3)43,409 4,937 
All Other Fees (3)3,790 3,790 
Totals$937,799 $916,429 
 
 (1)Audit Fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements, the audit of our internal control over financial reporting, the reviews of the interim financial statements included in our Quarterly Reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings or engagements. 
 (2)Audit-Related Fees are fees for assurance and related services performed by Deloitte that are reasonably related to the performance of the audit or review of our financial statements.
 (3)All Other Fees are fees for other permissible work performed by Deloitte that does not meet the above category descriptions.

Vote Required
See "Procedural Matters - Voting at the Annual Meeting: Vote Requirements" for a description of the vote required for ratification of the appointment of Deloitte as the Company's independent registered public accounting firm.

THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF DELOITTE AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING APRIL 29, 2023 AS SET FORTH IN PROPOSAL THREE.
 



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PROPOSAL FOUR
APPROVAL OF AN AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN

General
The Daktronics, Inc. Employee Stock Purchase Plan, or ESPP, was established by our Board and approved by our shareholders in 2002. Our Board and shareholders initially authorized the issuance of 1,000,000 shares under the ESPP (as adjusted for the two-for-one stock split effective on June 8, 2006). On June 3, 2010, our Board approved, subject to shareholder approval, an amendment to the ESPP to increase the number of shares authorized under the ESPP to 2,500,000 shares, which was approved by our shareholders at the annual meeting of shareholders held on August 25, 2010. On May 30, 2018, our Board approved, subject to shareholder approval, an amendment to the ESPP to increase the number of shares authorized under the ESPP to 4,000,000 shares, which was approved by our shareholders at the annual meeting of shareholders held on September 5, 2018. On July 27, 2022, our Board approved, subject to shareholder approval, an amendment to the ESPP to increase the number of shares authorized under the ESPP to 5,500,000 (an increase of 1,500,000 shares).

Our Board believes that the amendment to the ESPP is in our and your best interests and is important to help assure our ability to continue to recruit and retain highly qualified employees. As of April 30, 2022, 705,035 shares of our common stock remained available for purchase under the ESPP. If the amendment to the ESPP is not approved by shareholders, we will exhaust these previously authorized shares in the coming months or years, and our employees then will no longer be able to purchase shares of our common stock under the ESPP.

Below is a summary of the material features of the ESPP. The summary is qualified in its entirety by reference to the full text of the ESPP as proposed to be amended, which is included as Appendix A to this Proxy Statement.

Summary of the Amended ESPP
Available Shares. The aggregate number of shares of common stock to be reserved by the Company and available for purchase under the ESPP is 5,500,000 shares.

Purpose. The purpose of the ESPP is to provide eligible employees with an opportunity to increase their proprietary interest in the success of the Company by purchasing common stock from the Company on favorable terms and paying for such purchases through periodic payroll deductions.

Administration. The ESPP is administered by the Compensation Committee (the "Committee"). The Committee interprets the ESPP and makes all other policy decisions relating to the operation of the ESPP.

Eligibility. Any employee of the Company (or any designated subsidiary) whose customary employment is for more than five months per calendar year and for more than 20 hours per week and who has been employed for at least six months at the start of an offering period under the ESPP is eligible to participate in the ESPP. As of the Record Date, there were approximately 1,900 employees who were eligible to participate in the ESPP. No employee is permitted to purchase common stock under the ESPP if such employee owns more than five percent (5%) of the total combined voting power or value of all classes of our common stock (including shares which may be purchased under the ESPP, and no employee is entitled to purchase shares having a fair market value of more than $25,000 in any calendar year.

Contribution Period. Each calendar year, two offering periods, each with a duration of six months, commence on November 1 and May 1. Each offering period contains one six-month contribution period, with purchases occurring at the end of each six-month contribution period.

Purchase Price. The price of each share of common stock purchased under the ESPP is 85% of the lower of (i) the fair market value per share of common stock on the last trading day of the offering period or (ii) the fair market value per share of common stock on the last trading day before the offering date. The purchase price of the shares is accumulated by payroll deductions over each contribution period. The deductions may not exceed 15% of an employee's compensation, and no more than 4,000 shares may be purchased on any purchase date. All payroll deductions of a participant are credited to his or her account under the ESPP, and such funds may be used for any corporate purpose.

Termination. Employees may end their participation in the ESPP at any time during the contribution period, and participation ends automatically upon termination of employment with the Company.

Amendment. The Board may amend or terminate the ESPP at any time. However, the Board may not, without shareholder approval, increase the number of shares of common stock reserved for issuance under the ESPP.

Antidilution Provisions. The Board of Directors must equitably adjust the maximum number of shares of common stock reserved for issuance under the ESPP in the event of stock splits or consolidations, stock dividends or other transactions in which the Company receives no consideration.

New Plan Benefits
Benefits and purchases of shares of our common stock under the ESPP depend on elections made by employees and the fair market value of our common stock on dates in the future. As a result, it is not possible to determine the benefits that will be received by executive officers and other employees in the future under the ESPP. As described above, no employee may purchase shares under the ESPP at a rate that exceeds $25,000 in fair market value in any calendar year.

Summary of U.S. Federal Income Tax Consequences
The ESPP is intended to be an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code of 1986 (the "Code"). Under such a plan, no taxable income is recognized by participants, and no deductions are allowable to the

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Company either when a purchase right is granted at the beginning of the offering period or when shares are purchased at the end of a contribution period.

The Internal Revenue Service (the "IRS") has in the past stated that participants will recognize income in the year in which they make a disposition of the purchased shares. The term "disposition" generally includes any transfer of legal title, whether by sale, exchange or gift. It does not include a transfer to a participant's spouse, a transfer into joint ownership if the participant remains one of the joint owners, or a transfer into a participant's brokerage account. Hence, a participant will be subject to federal income tax on the purchased shares only when he or she disposes of them.

A participant's federal income tax liability will depend on whether he or she makes a qualifying or disqualifying disposition of the purchased shares. A qualifying disposition will occur if the sale or other disposition of those shares is made after the participant has held the shares for (a) more than two years after the start date of the applicable offering period, and (b) more than one year after the actual purchase date. A disqualifying disposition is any sale or disposition which is made before either of these two holding periods is satisfied.

If a participant makes a qualifying disposition, he or she will recognize ordinary income in the year of the qualifying disposition equal to the lesser of (a) the amount by which the fair market value of the shares on the date of the qualifying disposition exceeds the purchase price paid for those shares, or (b) 15% of the fair market value of the shares on the start date of the offering period during which those shares were purchased. The Company is not entitled to an income tax deduction with respect to such disposition. Any additional gain recognized by the participant upon the qualifying disposition will be taxed as long-term capital gain. If the fair market value of the shares on the date of the qualifying disposition is less than the purchase price a participant paid for the shares, there will be no ordinary income, and any loss recognized will generally be a long-term capital loss.

If a participant disposes of the shares acquired under the ESPP prior to meeting either of the above-described holding periods, he or she will recognize ordinary income in the year of disposition equal to the difference between the fair market value of the shares at the date of exercise and the purchase price and capital gain or loss equal to the difference between the amount realized on the sale and the fair market value on the date of exercise. The amount of the ordinary income will be added to the participant's basis in the shares, and any resulting gain or loss realized will be treated as long-term capital gain or loss if the participant held the stock at least 12 months. The Company is entitled to an income tax deduction in the amount of the ordinary income recognized by the participant with respect to the disqualifying disposition.

The foregoing is only a summary of the general effect of the U.S. federal income taxation upon participants and the Company with respect to the purchase of shares under the ESPP and the subsequent sale of such shares, and it does not purport to be complete. This summary does not discuss the tax consequences of a participant's death or the income tax laws of any state or foreign country in which a participant may reside. A participant should consult his or her own tax advisor as to the tax consequences of any particular transaction under the ESPP.

Vote Required
The ESPP is designed to qualify for favorable tax treatment under Section 423 of the Code. To maintain this qualification, we must obtain shareholder approval of the amendment to the ESPP within 12 months of the Board’s approval date. The affirmative vote of a majority of the votes cast by shareholders entitled to vote who are present in person or represented by proxy is required to approve the amendment to the ESPP.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO OUR EMPLOYEE STOCK PURCHASE PLAN AS SET FORTH IN PROPOSAL FOUR.


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PROPOSAL FIVE
APPROVAL OF OUR SHAREHOLDER RIGHTS AGREEMENT

Background of and Reasons for our Shareholder Rights Agreement
Effective on November 16, 2018, our Board of Directors declared a dividend of one Right (a “Right”) for each of the Company’s issued and outstanding shares of common stock. The dividend was paid to the shareholders of record at the close of business on November 19, 2018 (the “Rights Record Date”). Each Right entitles the holder, subject to the terms of the “Rights Agreement” (as defined below), to purchase from the Company one one-thousandth of one share of the Company’s Series A Junior Participating Preferred Stock (the “Preferred Stock”) at an initial exercise price of $25.00 per Right, subject to certain adjustments. The terms of the Rights are set forth in the Rights Agreement dated as of November 16, 2018 (the “Original Rights Agreement”) between the Company and Equiniti Trust Company, as rights agent.

Effective on November 19, 2021, the Board approved a First Amendment to Rights Agreement dated as of November 19, 2021 (the "First Amendment "). The First Amendment amends the Original Rights Agreements to extend the expiration date of the Rights from the close of business on November 19, 2021 to the close of business on November 19, 2024 and to change the exercise price from $25.00 per Right to $20.00 per Right. The Original Rights Agreement, as amended by the First Amendment, is referred to in this Proxy Statement as the “Rights Agreement.”

The Rights are designed to enable Daktronics shareholders to realize the full long-term value of their investment and to provide for fair and equal treatment of all shareholders if an unsolicited attempt is made to acquire Daktronics. The Board believes that the Rights Agreement enables it to be in a better position to perform its fiduciary duties and help it to protect shareholders against abusive takeover tactics that may be used to gain control of the Company without paying a price that is in the best interests of all shareholders and other stakeholders. Daktronics has had a shareholder rights agreement in place since November 1998 to protect abusive tactics during times of changing economic environments, varying levels of cash reserves, and volatility in its stock price and to provide time for the Board to evaluate any offer to acquire Daktronics.

The South Dakota Domestic Public Corporation Takeover Act (the “Takeover Act”) provides that a South Dakota corporation may issue rights to its shareholders, such as the Rights, and may determine the terms of such rights. The Takeover Act also states that the board of a South Dakota corporation, in discharging its duties relating to a change or potential change in the control of the corporation, and in determining what it believes to be in the best interest of the corporation, may consider factors such as the long-term and short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the corporation’s continued independence; the effect of the action on the corporation’s employees, customers, creditors and suppliers; the effect of the action on any community in which the corporation has facilities; and the state and national economies.

The Rights Agreement, which was adopted by the Board of Daktronics after evaluation and consultation with advisors of Daktronics and the Board’s consideration of all stakeholders, had no immediate dilutive effect and does not prevent Daktronics or its shareholders from accepting a fair offer to acquire Daktronics in a negotiated transaction.
The Rights Agreement does not in any way diminish or affect the duty of the Board to act honestly and in good faith with a few to the best interests of the Company. The Board, when a takeover bid or similar offer is made, will continue to have the duty and power to take such actions and make such recommendations to shareholders as are considered appropriate under applicable law.

Description of the Rights Agreement
The following description of the material terms of the Rights Agreement is qualified in its entirety by reference to the full text of the Original Rights Agreement, a copy of which is attached to this Proxy Statement as Appendix B, and the First Amendment, a copy of which is attached to this Proxy Statement as Appendix C.

Description of the Rights; Rights Certificates
After the Rights become exercisable, each Right will entitle the holder, subject to the terms of the Rights Agreement, to purchase from the Company one one-thousandth of one share of the Company’s Preferred Stock at an Exercise Price of $20.00, subject to adjustment. Until a Right is exercised, it does not give its holder any additional rights as a shareholder of the Daktronics, including the right to vote or receive any dividends.

Before the Distribution Date:
the Rights are and will be evidenced by and trade with the stock certificates for the shares of Daktronics’ common stock (or, with respect to any uncertificated shares of common stock registered in book entry form, by notation in book entry), and no separate Rights certificates will be distributed;

stock certificates for shares of Daktronics’ common stock issued after the Rights Record Date contain a legend incorporating the Rights Agreement by reference (and, for any uncertificated shares of common stock registered in book entry form, this legend is contained in a notation in book entry);

new Rights will accompany any new shares of Daktronics’ common stock issued after the Rights Record Date; and

the surrender for transfer of any certificates for shares of Daktronics’ common stock (or the surrender for transfer of any uncertificated shares of common stock registered in book entry form) will also constitute the transfer of the Rights associated with such shares.

Distribution Date

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Subject to certain exceptions set forth in the Rights Agreement, the Rights will become exercisable on the earliest to occur of: (i) the close of business on the 10th business day after the first date of a public announcement that a person or a group of affiliated or associated persons (with certain exceptions, an “Acquiring Person”) has acquired beneficial ownership of 20% or more of the outstanding shares of common stock; and (ii) the close of business on the 10th business day after the date of the commencement by any person of, or of the first public announcement of the intention of any person to commence, a tender or exchange offer the consummation of which would result in such person becoming the beneficial owner of 20% or more of the outstanding shares of common stock (the earlier of such dates being called the “Distribution Date”).

As soon as practicable after the Distribution Date, separate certificates evidencing the Rights (the “Rights Certificates”) will be mailed to holders of record of the common stock as of the close of business on the Distribution Date, and such separate Rights Certificates alone will evidence the Rights.

Consequences of a Person or Group Becoming an Acquiring Person
The Rights will be exercisable only if a person or group becomes an Acquiring Person by becoming the beneficial owner of 20% or more of Daktronics’ common stock or by announcing a tender offer, the consummation of which would result in the beneficial ownership by a person or group of 20% or more of the common stock. At that time, Daktronics’ shareholders (other than the acquirer, whose Rights will have become void and will not be exercisable) would have the right to purchase, at a price equal to 50% of the common stock’s market value, a number of shares of Daktronics’ common stock equal to (i) the exercise price multiplied by the number of one one-thousandth of a share of Preferred Stock for which a Right was exercisable divided by (ii) 50% of the then current market value of Daktronics’ common stock.

Flip-In Trigger: If any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right (other than Rights beneficially owned by the Acquiring Person, affiliates and associates of the Acquiring Person, and certain transferees thereof, which Rights will have become null and void), will thereafter have the right to receive upon the exercise of a Right that number of shares of common stock having a market value of two times the exercise price of the Right.

Flip-Over Trigger: If, after a person or group of affiliated or associated persons becomes an Acquiring Person, the Company is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provision will be made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person, affiliates and associations of the Acquiring Person, and certain transferees thereof, which Rights will have become null and void) will thereafter have the right to receive upon the exercise of a Right that number of shares of common stock of the acquiring company having a market value at the time of that transaction equal to two times the Exercise Price.

Description of Shares of Preferred Stock Purchasable Upon Exercise of Rights
After the Distribution Date, each Right will entitle the holder to purchase, for the Exercise Price, one one-thousandth of a share Preferred Stock.

Each share of Preferred Stock, if issued, will:
not be redeemable;

be entitled to receive, when, as and if declared, a minimum preferential quarterly dividend payment equal to the greater of $1.00 or 1,000 times the dividend declared per share of common stock;

upon the liquidation, dissolution or winding up of the Company, be entitled to a minimum preferential payment of the greater of (i) $1,000.00 per share or (ii) an amount equal to 1,000 times the payment made per share of common stock.

have 1,000 votes on all matters submitted to a vote of the shareholders of the Company, voting together with the common stock; and

upon any merger, consolidation or other transaction in which outstanding shares of common stock are converted or exchanged, be entitled to receive 1,000 times the amount received per share of common stock.

Redemption of Rights
At any time before any person or group becomes an Acquiring Person, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”) payable, at the option of the Company, in cash, shares of common stock or such other form of consideration as the Board shall determine. The redemption of the Rights may be made effective at such time, on such basis, and with such conditions as the Board in its sole discretion may establish.

Exchange of Rights
At any time after any person or group becomes an Acquiring Person and before the acquisition of beneficial ownership by such Acquiring Person of 50% or more of the outstanding shares of common stock, the Board, at its option, may exchange the Rights (other than Rights owned by such Acquiring Person, affiliates and associates of the Acquiring Person, and certain transferees thereof, which Rights will have become null and void), in whole or in part, for shares of common stock or Preferred Stock (or a series of the

14


Company’s preferred stock having equivalent rights, preferences and privileges) at an exchange ratio of one share of common stock, or a fractional share of Preferred Stock (or other preferred stock) equivalent in value thereto, per outstanding Right.

Expiration
The Rights will expire at the earliest to occur of:

the close of business on November 19, 2024;

the time at which the Rights are redeemed under the Rights Agreement;

the time at which the Rights are exchanged under the Rights Agreement; and

the time at which the Rights are terminated upon the closing of any merger or other acquisition transaction involving the Company and a person pursuant to a merger or other acquisition agreement that has been approved by the Board of Directors of the Company before such person has become an Acquiring Person.

Anti-Dilution Provisions
The Exercise Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution upon:

a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock;

the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or purchase Preferred Stock at a price, or securities convertible into Preferred Stock with a conversion price, less than the then-current market price of the Preferred Stock; or

upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Preferred Stock) or of subscription rights or warrants (other than those referred to above).

The number of outstanding Rights and the number of one one-thousandths of a share of Preferred Stock issuable upon exercise of each Right are also subject to adjustment in the event of a stock split, reverse stock split, stock dividend and other similar transactions.
Amendments to Rights Agreement

For so long as the Rights are redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement in any manner. After the Rights are no longer redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement in any manner that does not adversely affect the interests of holders of the Rights (other than holders of Rights owned by or transferred to any person who is or becomes an Acquiring Person, affiliates and associates of an Acquiring Person, and certain transferees thereof).

Certain Considerations Relating to the Rights Agreement
The Board believes that attempting to protect shareholders against abusive takeover tactics that may be used to gain control of the Company without paying a price that is in the best interests of all shareholders and other stakeholders is in Daktronics’ and its shareholders’ best interests. However, you should consider the following factors, among others, when making your decision to approve the Rights Agreement:

Potential Effects on Liquidity. The Rights Agreement is intended to deter persons or groups of persons from acquiring beneficial ownership of Daktronics’ common stock in excess of the specified limitations. A shareholder’s ability to dispose of Daktronics’ common stock may be limited if the Rights Agreement reduces the number of persons willing to acquire Daktronics’ common stock or the amount they are willing to acquire.


Shareholder Becoming an Acquiring Person. A shareholder may become an Acquiring Person upon actions taken by persons related to, or affiliated with, them. Shareholders are advised to carefully monitor their ownership of Daktronics’ common stock and consult their own legal advisors and/or us to determine whether their ownership of the shares approaches the specified level.

Potential Impact on Value of Common Stock. The Rights Agreement could negatively impact the value of Daktronics’ common stock by deterring persons or groups of persons from acquiring Daktronics’ common stock, including in acquisitions for which shareholders might receive a premium above market value.

Anti-Takeover Effect. The Rights Agreement may have an anti-takeover effect because it may deter a person or group of persons from acquiring beneficial ownership of 20% or more of Daktronics’ common stock or, in the case of a person or group of persons that already owned 20% or more of Daktronics’ common stock as of the Rights Record Date, from

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increasing its percentage ownership. The Rights Agreement could discourage or prevent a merger, tender offer, proxy contest or accumulations of substantial blocks of shares.

Voting on Rights Agreement
The Board determined to submit the Rights Agreement for approval by its shareholders to allow them to decide whether the adoption of the Rights Agreement is desirable because it may protect the value of their shares of Daktronics’ common stock or whether the adoption of the Rights Agreement is not desirable because it may discourage or prevent a takeover attempt that shareholders favor.
Proxies will be voted in favor of the Rights Agreement unless shareholders specify otherwise in their proxies and except for broker non-votes. The affirmative vote of at least a majority of the voting power of the shares of common stock present, in person or by proxy, and entitled to vote (excluding broker non-votes) is required for the approval of the Rights Agreement.

If the Rights Agreement is not approved by our shareholders, the Board plans to terminate the Rights Agreement. If the Board terminates the Rights Agreement, it plans to adopt a shareholder rights agreement policy setting forth the general conditions under which the Board would adopt a shareholder rights agreement and the terms of the agreement. The definitive terms of the policy and the shareholder rights agreement have not been determined by the Board.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE RIGHTS AGREEMENT AS SET FORTH IN PROPOSAL FIVE.


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CORPORATE GOVERNANCE
 
Board Leadership Structure
The Board is committed to achieving the long-term mutual prosperity of all stakeholders while maintaining the highest standard of responsibility and integrity. The Board has adopted these corporate governance principles to provide an effective framework that reflects a set of core values and provides a foundation for Daktronics governance and management systems. Specific Board of Director responsibilities to achieve this commitment include:
 Strategic and operational planning: reviewing the overall operating, financial and strategic plans and performance of Daktronics;
 Management oversight: selecting and evaluating the Company’s CEO and approving and monitoring the selection and evaluation process of other executive officers;
 Governance, compliance and risk management: overseeing appropriate policies of corporate conduct and compliance with laws; and
 Financial reporting: reviewing the process by which financial and related non-financial information about the Company is provided to management, the Board and the Company’s shareholders.
 
The Board believes that it must stay well-informed about the issues, challenges and opportunities facing Daktronics so that the Board members can properly exercise their fiduciary responsibilities to our shareholders. As part of this process, the Board is kept informed of our business, strategies, and major corporate actions through discussions with the Named Executive Officers, by reviewing material provided to them and by participating in meetings of the Board and its committees.
 
The Board currently combines the roles of CEO and Chairman of the Board ("Chair"). Periodically, our Board assesses these roles and the Board leadership structure to assure that the interests of the Company and its shareholders are best served.
 
The Board has determined that its current structure, with a combined Chair and CEO role, is in the best interests of the Company and its shareholders at this time. Kevin McDermott has served as Lead Independent Director since June 1, 2020. 
 
The Chair conducts the Board meetings. The Chair, after consulting with the Lead Independent Director, sets the agenda for Board meetings, sets schedules, and distributes information to the Board. This collaborative process assures that the agenda takes into account issues and concerns of all Directors and is forward-looking and focuses on strategic matters.
 
The Lead Independent Director calls and presides over Independent Director meetings and provides timely feedback from each meeting to the Chair. The Lead Independent Director is responsible for promoting effective relationships and open communication among Directors and the CEO, building consensus among Board members, building an effective and complementary Board, promoting the highest standards of corporate governance, participating actively in the selection of new Directors, and promoting the orientation of new Directors to provide coaching and support for their development.
 
Our governance practices are compliant with the Nasdaq Listing Rules and the corporate governance regulations of the Sarbanes-Oxley Act of 2002. Among other things, these practices include the following:
 
 The Nominating Committee reviews with the Board annually the composition of the Board as a whole, including the Directors’ independence, skills, experience, age, diversity, and availability of service to the Company.
 The Nominating Committee recommends Director candidates for approval by the Board and election by the shareholders, taking into account the Company’s need for diverse skills, professional experiences, backgrounds, and other qualities to ensure a variety of viewpoints.
 The Board conducts periodic self-evaluations facilitated by the Nominating Committee.
 The Independent Directors meet in conjunction with regularly scheduled quarterly Board meetings and at other appropriate times.
 The Board and all Board committees are authorized to hire their own advisors as they deem to be necessary or advisable to fulfill their obligations, and the Company will pay the costs of such advisors.
 
Meetings of the Board and Committees
During fiscal 2022, the Board held four regularly scheduled meetings and six special meetings, the Audit Committee met five times, the Compensation Committee met four times, and the Nominating Committee met four times. All of the Directors attended at least 75 percent of all meetings of the Board and Board committees upon which they served, and all of the Directors attended the annual meeting of shareholders held in September 2021.
 
Executive Sessions of the Board
The Board has adopted a practice of meeting in executive session, and with Independent Directors only, in conjunction with each regularly scheduled Board meeting. The Independent Directors met four times in fiscal 2022.
 



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Annual Meeting Attendance Policy
As set forth in our Corporate Governance Guidelines, members of the Board are expected to devote sufficient time and attention to prepare for, attend and participate in Board meetings, shareholder meetings, and meetings of committees of the Board on which they serve.
 
Boards Role in Risk Oversight
The Board takes an active role in risk oversight both as a full Board and through its committees. The Company's management team attends a portion of each regular Board meeting, and the Board engages management in a review of the business with respect to our strategies and risks. Such risks include those inherent in our businesses as well as the risks from external sources such as competitors, cybersecurity, the economy, credit markets, and regulatory and legislative developments. The Board has also been actively engaged with management in preparing for, responding to, and monitoring the impacts of the COVID-19 novel coronavirus pandemic and related recovery along with supply chain disruptions. Management is in regular communication with the Board about the assessment, management, and strategic response to the significant risks to Daktronics.
 
The various committees of the Board are also responsible for specific areas of risks. The Audit Committee meets regularly with management and our Independent Auditor to oversee our financial risk management processes, controls and capabilities. The Audit Committee also oversees and reviews with management certain aspects of our information systems, credit, litigation, and currency risks and other finance matters. In addition, the Audit Committee reviews and monitors our procedures regarding the receipt, retention and treatment of complaints regarding internal accounting, accounting controls or audit matters.
 
The Compensation Committee oversees our executive compensation arrangements and certain benefit plans. This includes the identification and management of risks that may arise from our compensation policies and practices. 
 
The Nominating Committee has oversight of corporate governance, including practices and procedures that promote good governance and thus mitigate governance risk, and it is also responsible for reviewing the performance of the Board, its committees and their members. These committees report to the full Board on these topics, including risks, as they deem to be necessary or advisable.
 
Hedging
In accordance with our insider trading policy, officers, Directors, senior managers, market managers, and other designated employees are prohibited from engaging in hedging transactions, trading in puts and calls in and engaging in short sales of the Common Stock. In addition to our officers, Directors, and other designated employees, the covered persons also include family members of such Company personnel sharing the same residence. Hedging or monetization transactions are typically accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds, in which all of which our covered persons are precluded from using or trading.
 
Code of Conduct
The Board has adopted our Code of Conduct, which applies to all of our employees, officers and Directors as described in our Annual Report to Shareholders. Included in the Code of Conduct are ethics provisions that apply to our CEO, Chief Financial Officer, and all other financial and accounting management employees. Copies of the Code of Conduct are available on our website at www.daktronics.com. The Nominating Committee reviews the Code of Conduct annually and oversees its implementation.
 
Policy and Procedures with Respect to Related Party Transactions
The Board has adopted a written policy and procedures with respect to related party transactions, which the Audit Committee oversees. Under the policy, a "related party transaction" is generally defined as a transaction, arrangement or relationship in which the Company was, is or will be a participant; the amount involved exceeds $120,000; and in which any "related person" had, has or will have a direct or indirect material interest. The policy generally defines a "related person" as a Director, executive officer or beneficial owner of more than five percent of any class of our voting securities and any immediate family member of any of the foregoing persons.
 
The Audit Committee reviews and, if appropriate, approves related party transactions, including certain transactions which are deemed to be pre-approved under the policy. On an annual basis, the Audit Committee reviews any previously approved related party transaction that is ongoing. 
 
Committees of the Board
The Board currently has three standing committees: the Audit Committee, the Compensation Committee, and the Nominating Committee.
 
Audit Committee. During fiscal 2022, the Audit Committee consisted of Kevin P. McDermott (Chairperson), James B. Morgan (until September 1, 2021), John P. Friel, Shereta Williams (appointed on September 2, 2021), and Lance D. Bultena (appointed on September 2, 2021). The Board has determined that each Audit Committee member is independent as defined under Rule 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Exchange Act. The Board has determined that Mr. McDermott, Mr. Friel, Mr. Morgan, Ms. Williams, and Mr. Bultena are qualified as "audit committee financial experts," as that term is defined in Item 407(d)(5)(ii) of Regulation S-K. The Audit Committee assists the Board in fulfilling its oversight responsibilities concerning the quality and integrity of our financial reports and related filings with the SEC. In fulfilling this role, the Audit Committee, among other things, oversees the accounting and financial reporting process and audits of the financial statements and related SEC filings, appoints and determines the compensation of our Independent Auditor, reviews the scope and findings of the audit, reviews the adequacy and effectiveness of our accounting policies and system of internal control over financial reporting, and oversees our policy and procedures with respect to related party transactions. The Audit Committee’s Charter is available on our website at www.daktronics.com.
 

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Compensation Committee. During fiscal 2022, the Compensation Committee consisted of prior Directors Robert G. Dutcher (Chairperson until September 1, 2021, retired on September 1, 2021) and Byron J. Anderson (retired on September 1, 2021), John P. Friel (named Chairperson on September 2, 2021), Dr. José-Marie Griffiths, and Shereta Williams (appointed on September 2, 2021). All of the Compensation Committee members are Independent Directors, as determined by the Board. The Compensation Committee annually reviews and approves the CEO’s and other executives' compensation packages and acts upon management’s recommendations for executives concerning employee equity incentives, bonuses, and other compensation and benefit plans. The Compensation Committee’s Charter is available on our website at www.daktronics.com.
 
Nominating Committee. During fiscal 2022, the Nominating Committee (the "Nominating Committee") consisted of prior Director Byron J. Anderson (retired on September 1, 2021), James B. Morgan (Chairperson until July 20, 2022), Dr. José-Marie Griffiths, and Lance Bultena (appointed on September 2, 2021 and named Chairperson on July 20 2022). The Board has determined that all of the Nominating Committee members are Independent Directors, as determined by the Board. Our Nominating Committee advises and makes recommendations to the Board on all matters concerning the selection of candidates as nominees for election as Directors, develops and recommends to the Board of Directors corporate governance guidelines, oversees our Code of Conduct, and provides oversight with respect to corporate governance and ethical conduct. It also facilitates the annual review of the performance of the Board. The Nominating Committee’s Charter and our Corporate Governance Guidelines are available on our website at www.daktronics.com.
 
The information below describes the criteria and process that the Nominating Committee uses to evaluate future candidates to the Board:
 
Director Qualifications
When Board candidates are considered, they are evaluated based upon various criteria, such as their broad-based business and professional skills and experiences, experience serving as management or on the board of directors of other organizations, concern for the long-term interests of the shareholders, governance risk and compliance knowledge, innovation expertise, international business experience, technology company experience, contracting experience, acquisition experience, financial literacy, personal integrity and judgment, and willingness to be prepared and active participants at Board and committee meetings. The Nominating Committee and the Board seek to attract and retain highly qualified and diverse Directors who have sufficient time to attend to their duties and responsibilities to the Company. 
 
The Nominating Committee and the Board seek members who will contribute to our overall corporate goals, taking into account:
 
 The Company’s responsibility to its key stakeholders, which include shareholders, customers, suppliers, community, and employees.
 Integrity in financial reporting and business conduct. Candidates are selected based upon their potential contributions to the long-term interests of shareholders.
 Diversity of a candidate’s skills and experiences.
 Each candidate for Director must possess the following specific minimum qualifications:
 
 Demonstrated integrity and ethics in his or her professional life and an established record of professional accomplishment in his or her chosen field.
 Absence of any material personal, financial or professional interest in any present or potential competitor of the Company.
 Ability to participate fully in activities of the Board, including active membership in at least one committee of the Board (in the case of Independent Directors) and attendance at, and active participation in, meetings of the Board and the Committee(s) of the Board of which he or she is a member.
 
Shareholder Proposals for Nominees
The Nominating Committee will consider written proposals from shareholders for nominees for Director. Any such nominations must be submitted to the Nominating Committee in the care of our Corporate Secretary and should include (at a minimum) the following information: (a) all information relating to such nominee that is required to be disclosed in Schedule 14A under the Exchange Act (including appropriate biographical information); (b) other board memberships; (c) such person’s written consent to being named in the Proxy Statement as a Director nominee and to serving as a Director, if elected; (d) the name(s) and address(es) of the shareholder(s) making the nomination and the number of shares of our Common Stock which are owned beneficially and of record by such shareholder(s); and (e) a statement as to the qualifications of the nominee. Shareholder proposals should be submitted by the deadline described in this Proxy Statement under the caption "Procedural Matters – Procedure for Submitting Shareholder Proposals" above.
 
The Nominating Committee will not change the manner in which it evaluates candidates for Board nominees, including the applicable criteria set forth above, based on whether the candidate was recommended by a shareholder. 
 
The Board's Evaluation
On an ongoing basis, the Nominating Committee facilitates a process to determine whether the Board and its committees are functioning effectively. The results of this process are reported to the Board for discussion.
 
How to Contact the Board
Shareholders wishing to contact the Board may do so by writing to it at the following address: Corporate Secretary, Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006. All letters received will be forwarded to the Board.
 

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Compensation Committee Interlocks and Insider Participation
During fiscal 2022, none of our executive officers served on the board of directors or compensation committee of another company that had an executive officer who served on our Board of Directors or our Compensation Committee.
 
Director Compensation
The following table sets forth information about the compensation paid to and earned by our Directors for the fiscal year ended April 30, 2022:
 
FISCAL YEAR 2022 DIRECTOR COMPENSATION
 
Name(1)Fees Earned or Paid in Cash ($)Stock Awards ($) (2)Total Compensation ($)
John P. Friel$60,750 $57,500 $118,250 
Kevin P. McDermott63,500 57,500 121,000 
James B. Morgan59,000 57,500 116,500 
Dr. José-Marie Griffiths56,500 57,500 114,000 
Shereta Williams (5)41,875 57,500 99,375 
Lance Bultena (6)41,875 57,500 99,375 
Byron J. Anderson (3)15,625 — 15,625 
Robert G. Dutcher (4)14,875 — 14,875 
 
 (1)
As an employee of the Company, Reece A. Kurtenbach, the President and CEO since September 1, 2013, was a Named Executive Officer during fiscal 2022 and therefore his compensation is reported in the appropriate tables within the section of this Proxy Statement entitled "Executive Compensation."
 (2)
Represents September 2, 2021 grants of 10,159 restricted shares of our Common Stock to each of the Directors named in the table with a grant date fair value of $57,500, which vest on August 23, 2022 if they are then Directors of the Company. The dollar amounts in this column of the table were computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation - Stock Compensation ("ASC 718").
 (3)Retired as Director on September 1, 2021.
(4)Retired as Director on September 1, 2021.
 (5)Joined as Director on September 1, 2021.
(6)Joined as Director on September 1, 2021.
 
Independent Director Fees. For fiscal 2022, each Independent Director received an annual retainer of $40,500. In addition, each Independent Director received $2,500 per meeting for each Board meeting attended. The following table describes the annual retainers paid for fiscal 2022 to each Independent Director for committee membership participation:
 
ChairOther Members
Audit Committee$8,000 $5,000 
Compensation Committee6,000 3,000 
Nominating Committee6,000 3,000 
Lead Independent Director5,000 
 
The retainers for Board and committee service are included in the table above entitled "Fiscal Year 2022 Director Compensation".
 
Stock Ownership and Retention Guidelines. The Board of Directors has implemented stock ownership guidelines for Directors. Under these guidelines, each Director is expected to achieve a target of 5,000 shares owned, excluding shares subject to options. Directors have five years from the date they first become a member of the Board to achieve this level of ownership. As of the Record Date, all Directors were in compliance with these guidelines.
 
Executive Officers
The following discussion sets forth information as of July 6, 2022 about our executive officers who are not Directors.
 

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NamePositions with the CompanyAgeExecutive Officer Since
Sheila M. AndersonChief Financial Officer and Treasurer492012
Bradley T. WiemannExecutive Vice President592004
Matthew J. KurtenbachVice President of Manufacturing532014
Carla S. GatzkeVice President of Human Resources and Secretary612015
 
Sheila M. Anderson joined the Company in 2002 as a senior accountant after spending a number of years working as a certified public accountant in public accounting and auditing firms and as a senior accountant at a private company. In 2006, Ms. Anderson was named Corporate Controller and, in 2012, she was named Chief Financial Officer and Treasurer. Ms. Anderson holds a Master of Business Administration degree from the University of South Dakota and a Bachelor of Science degree in Accounting from Southwest Minnesota State University.
 
Bradley T. Wiemann joined the Company in 1993 as a lead design engineer after spending a number of years with Rockwell International Corporation, where he was involved in flight control systems. In 1994, he became manager of the Company's engineering groups focused on commercial and transportation product design. In 2001, his responsibilities expanded to include sales and service for commercial and transportation. In 2004, he was appointed Vice President, Commercial and Transportation and, in 2012, he was named Executive Vice President. In 2013, his responsibilities expanded to include sales and service for the High School Park and Recreation business unit. Mr. Wiemann holds a Master of Science degree in Electrical and Computer Engineering from the University of Iowa and a Bachelor of Science degree in Electrical Engineering from South Dakota State University.
 
Matthew J. Kurtenbach joined the Company in 1992 as a manager in manufacturing, and he subsequently served as a project manager for sports projects and as a project manager for the Company's process improvements and facility expansions. In 2001, he was named Manufacturing Manager and, in 2006, he was appointed Vice President of Manufacturing. Also in 2006, he was charged with leading the Company's transformation to lean manufacturing and, in 2013, he gained responsibility for repair center operations associated with after-sales services. Mr. Kurtenbach holds a Master of Science degree in Industrial Management and a Bachelor of Science degree in Electrical Engineering from South Dakota State University. Mr. Kurtenbach is the son of Aelred J. Kurtenbach and the brother of Reece A. Kurtenbach and Carla S. Gatzke.
 
Carla S. Gatzke joined the Company in 1984 in Systems Sales Engineering where she was responsible for sales and project management for legislative voting systems. In 1988, Ms. Gatzke took an 18-month leave of absence to attend and teach at Drake University. In 1990, Ms. Gatzke returned to Daktronics and managed the Star Circuits division, which manufactured printed circuit boards. In 1992, she became responsible for Human Resources and, in 1996, she added the responsibility of Information and Technology and Systems. In 2006, the responsibility of the Company's Human Resources and Information and Technology and Systems departments separated, and Ms. Gatzke was appointed Vice President of Human Resources. Ms. Gatzke has also served as Corporate Secretary since 1994. Ms. Gatzke holds a Master of Business Administration degree from Drake University and a Bachelor of Science degree in Electrical Engineering with minors in Mathematics and Computer Science from South Dakota State University. Ms. Gatzke is the daughter of Aelred J. Kurtenbach and the sister of Reece A. Kurtenbach and Matthew J. Kurtenbach.
 
COMPENSATION DISCUSSION AND ANALYSIS
 
Introduction
The following discussion should be read in conjunction with the various tables and accompanying narrative disclosure appearing in this Proxy Statement. Those tables and narrative disclosure provide more detailed information regarding the compensation and benefits awarded to, earned by, or paid to our Named Executive Officers, as well as the plans in which they are eligible to participate. At last year’s annual meeting, our shareholders provided an advisory "say-on-pay" vote indicating their overwhelming support of the Company’s compensation program for our Named Executive Officers. Our shareholders had previously voted that such say-on-pay votes be held annually. As a result, Proposal Two presented in this Proxy Statement seeks our shareholders’ input on our executive compensation program. This Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the tables provide information that will assist our shareholders in deciding how to vote on Proposal Two.
 
Executive Summary
Our executive compensation program, developed by management and approved by the Compensation Committee, is intended to be simple (easily understood) and team-based, focused on a few key performance metrics, and balanced among:
 
 employees, managers and executives;
 long-term and short-term objectives;
 financial and stock performance; and
 cash and equity compensation.
 
The compensation program is designed to align the interests of the executive team with the interests of our shareholders. It uses salary, benefits, and non-equity-based and equity-based incentive plans to achieve these goals, with a focus on tying compensation

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to corporate performance. The retention of top talent and the achievement of corporate objectives measure the effectiveness of our compensation program.
 
The Company's financial performance for the fiscal year ended April 30, 2022 included an increase in orders of 64.0 percent to $846 million, a record level for the Company. Each business unit's order volume grew through fiscal 2022 because of eased pandemic site restrictions and customers choose our products and solutions for our industry-leading value. The increase in orders is also attributed to two large multi-million orders and customers placing orders sooner than historical patterns to secure our manufacturing capacity for future deliveries. The net sales increase was driven by the order recovery. While orders have recovered from the pandemic, the supply chain has not, which is a key reason our product backlog grew and we experienced inflationary pressures in our input costs causing a near breakeven year. Financial metrics for fiscal 2022 included a 0.1 percent return on assets and a 0.3 percent return on beginning shareholders' equity. Operating margin was 0.7 percent as a percent of sales for fiscal 2022 as compared to 3.5 percent as a percent of sales for fiscal 2021 due to part supply disruptions during fiscal 2022.
 
Changes to executive compensation during the current fiscal year were mainly due to maintaining the competitiveness of our compensation program. In addition, executive pay was reinstated beginning in fiscal 2022. After an April 1, 2020 reduction in executive compensation in response to the uncertainty, longevity, and severity of the effects of the COVID-19 pandemic would have on Daktronics' business.
 
Role of Compensation Committee, Philosophy and Objectives
The Compensation Committee has the responsibility for guiding our executive compensation philosophy and overseeing the design of our executive compensation programs. In arriving at the appropriate levels of pay and incentive opportunities, the Compensation Committee reviews our compensation philosophy and trends in our peer group to assure that our executive compensation program is competitive to effectively recruit and retain talented management, focus our executives to achieve short- and long-range corporate objectives, and align the interests of the executives with the interests of our shareholders.
 
The Compensation Committee bases its executive compensation decisions on the following philosophies:
 
 Executive compensation should be appropriate to recruit and retain high-performing executives successfully, taking into account executive pay at comparable companies and our pay practices for non-executive employees.
 An individual executive's compensation should be based on the executive's responsibility level, capability and performance.
 The executive team's compensation should include a significant component that is based on the Company's overall financial performance to encourage the executive team to focus on the overall success of the Company.
 Our executives should receive few perquisites, if any, other than those provided to all employees.
 
The Compensation Committee annually reviews each executive's compensation. The Compensation Committee has determined that our executives' compensation will include base salary, non-equity-based incentive compensation, and equity-based incentive pay in the form of options and restricted stock units. We view the various components of compensation as related but distinct.
 
We determine the appropriate level for each executive compensation component based in part, but not exclusively, on the following factors:
 
 internal equity and consistency;
 individual performance;
 the executive compensation paid by other companies with which we compete for executive talent; and
 Company performance.
 
The base salary reflects the pay the Compensation Committee believes is appropriate for each executive's responsibility, capability and performance. The non-equity-based incentive compensation is designed to focus the executive team on the Company-wide goals and objectives, which focus on growth in revenue and reductions in costs in order to achieve and sustain a target operating margin. The Compensation Committee has not adopted any formal policies or guidelines for allocating compensation between long-term and currently paid-out compensation, between cash and non-cash compensation, or among different forms of non-cash compensation, although it has a preference for a material amount of "at risk" compensation, the amount of which is based on our financial results. The equity-based compensation plan is designed to encourage executives to also own shares of Common Stock in the Company and thereby align executives' interests with our shareholders' interests.
 
The Compensation Committee considers both internal equity and market competitiveness. We compare executive pay to the compensation of other key managers and employees at the Company. As described below, we also compare overall executive compensation to comparison companies and to salary database information. The Compensation Committee believes that equitable and competitive compensation, as well as leader development and promotion-from-within, are essential to retain high-performing executives. Our currently employed Named Executive Officers have an average of 30.6 years of experience with Daktronics.
 
For fiscal 2022, our Named Executive Officers were Reece A. Kurtenbach, Chair, President and CEO; Sheila M. Anderson, Chief Financial Officer and Treasurer; Bradley T. Wiemann, Executive Vice President; Matthew J. Kurtenbach, Vice President of Manufacturing; and Carla S. Gatzke, Vice President of Human Resources and Secretary.
 

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Role of Executive Officers in Compensation Decisions
Our CEO and Vice President of Human Resources present to the Compensation Committee their recommendations for the salary, non-equity-based incentive compensation, and equity-based compensation grants for the Named Executive Officers. The Compensation Committee considers these recommendations and accepts or adjusts them, in whole or in part. The CEO and Vice President of Human Resources are not present for the discussions or determinations about their own compensation, but they generally participate in the discussions regarding other executive officers’ compensation. The Chair of the Compensation Committee presents the Compensation Committee’s findings regarding compensation for executive officers to the Board. Based on such input, the Board reviews and generally approves and adopts the Committee's recommendations regarding the executives' compensation plan.
 
Benchmarking
In making decisions regarding elements and amounts of compensation, the Compensation Committee considers the compensation paid to executive officers at similar levels and responsibilities. These are public companies in our geographical area with revenues of between $250 million and $1 billion and with a focus on manufacturing or technology.
 
The following list sets forth the companies comprising our peer group list:
 
Apogee Enterprises, Inc.Hawkins, Inc.Johnson Outdoors Inc
Badger Meter, Inc.iMedia Brands, Inc.Manitowoc Co Inc.
Bio-Techne CorporationTennant CompanyProto Labs Inc.
Douglas Dynamics IncLindsay CorporationStrattec Security Corp.
Raven Industries, Inc.Enerpac Tool Group Corp.Mayville Engineering Co Inc.
Graco, Inc.Flexsteel Industries Inc.MTS Systems Corp
 
The Compensation Committee also considers compensation data from the Economic Research Institute, which takes into consideration company size, geography, base salary and variable cash compensation but excludes equity incentive compensation information.
 
The Compensation Committee believes that its executive compensation is sufficiently conservative, as well as appropriately competitive, so as not to require an external consultant opinion.

Elements of Compensation
For fiscal 2022, the principal components of our executive compensation program consisted of the following, each of which is addressed below in greater detail:
 
 base salary;
 non-equity-based incentive compensation plan;
 equity-based compensation plan; and
 benefits.
 
Base Salary. The base salary reflects each executive's responsibility, capability and performance. Base salary is determined based on the benchmarking data for the executive's responsibilities, the executive's experience, and the executive's performance and the impact of such performance on our business results.
 
The Compensation Committee also takes into account the Company's financial performance, and it has in the past limited executive pay changes based on business or economic conditions. The Compensation Committee also considers the recommendations of the CEO for other Named Executive Officers.
 
In April 2020, in response to the potential impacts of the COVID-19 pandemic on the Company's business, Mr. Reece A. Kurtenbach and Ms. Sheila M. Anderson reduced their base salaries by 15%, and the other Named Executive Officers elected to reduce their base salaries by 10%. Executive pay was reinstated beginning in fiscal 2022.
 
Non-Equity-Based Incentive Compensation Plan. The purpose of our non-equity-based incentive compensation plan is to focus the executive team on the Company-wide goals and objectives of growth in revenue and reductions in costs in order to achieve and sustain a target operating margin. The non-equity-based incentive compensation plan is a formula-based variable cash compensation plan, with no payouts if operating margin is less than 2.5 percent, targeted payouts at a 10 percent operating margin, and maximum payouts at a 12.5 percent operating margin. The targeted level of variable cash compensation varies from an amount equal to five months of base salary to eight months of base salary for each executive officer. The maximum level of the variable cash compensation is 120 percent of the targeted level of variable cash compensation.
 
This level of non-equity compensation takes into account other non-equity incentive compensation plans at comparable companies, as well as the Compensation Committee's preference for a material level of executive compensation that varies with the Company's performance. The Compensation Committee selected the operating margin measure for the formula because they believe it is the most appropriate indicator of performance that will drive long-term shareholder value, and it is consistent with our corporate strategies.

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The various payout percentages based on operating margins are as follows:
 
Operating Margin  Percentage of Targeted Non-equity Incentive Compensation 
Less than 2.5%  
2.5 to 5.0% 0.0 to 25.0%
5.0 to 7.5% 25.0 to 60.0%
7.5 to 10.0% 60.0 to 100.0%
10.0 to 12.5% 100.0 to 120.0%
 
We follow applicable laws and regulations regarding the recovery of any non-equity-based compensation, other incentive-based or equity-based compensation, and profits realized from the sale of securities resulting from any misconduct on the part of an executive officer.
 
During fiscal 2022, the Named Executive Officers were eligible for non-equity-based incentive compensation if the maximum payout of 120 percent of target was achieved as follows: CEO - 80 percent of his base salary; Chief Financial Officer - 55 percent of her base salary; Vice President and Secretary - 50 percent of her base salary; and all other Named Executives Officers - 65 percent of his or her base salary. For fiscal 2022, 2021, and 2020, there was no non-equity-based incentive compensation paid out to any Named Executive Officer.
 
Equity-Based Compensation Program. Grants of equity awards offer long-term incentives to our executives and align the interests of employees more closely with those of our shareholders.
 
Each year, the Board, based on recommendations of the Compensation Committee, determines the number of shares that may be subject to equity awards for all employees, including the Named Executive Officers. The total number of shares subject to equity awards is constrained by the Board’s desire to limit dilution to shareholders to a level consistent with our historical levels, which generally approximate a dilution of one percent, and to limit the total grant date fair value of the equity awards to a targeted level. The one percent dilution is based on an assessment of a conservative amount relative to high-tech growth companies. The grant date fair value is based on a comparison to the prior fiscal year's expense and the current year’s estimate of a percentage of total payroll expense. The Compensation Committee and the Board generally follow a practice of calculating the equity grant valuation limit based on the share price on the date of the Compensation Committee meeting at which the equity grants are determined by the Compensation Committee for recommendation to the Board to assure that the valuation limit is consistent with the approximate dilution limit of one percent. The Compensation Committee then allocates these equity grants to the Named Executive Officers, and the CEO allocates equity grants to selected employees. To facilitate the grant of stock options to employees and other executive officers, the Board authorized the CEO to grant individual stock options and restricted stock units during fiscal 2022, subject to the guidelines and limitations imposed by the Compensation Committee.
 
The Compensation Committee also considers trends in equity-based compensation, the mix of the type of equity grants, and the number of our shares that are available for equity grants. The Compensation Committee and the Board also generally follow a practice of allocating similar equity grants to each of the Named Executive Officers, with some variation based on responsibilities and experience. The allocation to the Named Executive Officers is based on historical grants, the value of past grants, and the Company’s performance, all of which are subject to the objectives listed under the section of this Proxy Statement entitled "Compensation Discussion and Analysis - Role of Compensation Committee, Philosophy and Objectives."
 
For fiscal 2022, the Compensation Committee determined that each Named Executive Officer would be allocated equity grants for approximately 8,750 shares of Common Stock, with a ratio of 2.5-to-1 of incentive stock options to restricted stock units. The Compensation Committee determined that Mr. Reece A. Kurtenbach should receive a grant of approximately twice the amount of the other Named Executive Officers to facilitate his ownership of additional stock of the Company as the CEO and to reflect a ratio of grants to the CEO compared to the grant to Named Executive Officers that is more similar to the ratio in the benchmarking data. The Compensation Committee determined that the valuation of the equity grants, based on the grant date fair value as determined under ASC 718, would be limited to approximately $2.5 million for all employees, including the Named Executive Officers. The value of the restricted stock units was equal to 93.2 percent of the value of the stock options for executives, as determined under the fair value provisions of ASC 718. For fiscal 2022, all equity grants to employees were made under the Daktronics, Inc. 2020 Stock Incentive Plan (the "2020 Plan").
 
The Board and the Compensation Committee approve equity grants for Named Executive Officers and other employees annually in their summer meetings to coincide with the director equity grants and the annual meeting of shareholders. Equity awards are not typically granted at other times of the year for employees, including new employees. The exercise price of all stock options granted is equal to the fair market value of the Common Stock as reported on The Nasdaq Global Select Market on the date of grant, which is defined in the 2020 Plan as the closing price of the Common Stock as reported on The Nasdaq Global Select Market on the date of grant. All options also contain five-year vesting provisions, with 20 percent of the shares underlying the stock option vesting each year following the date of grant. The restricted stock units also contain a five-year vesting provision, with 20 percent of the restricted stock units vesting each year following the date of grant.
 
Benefits. Our Named Executive Officers are eligible for all benefits generally available to our full-time employees. We do not provide pension arrangements, post-retirement health coverage, or similar benefits for our executives or employees. 
 
All employees, including the Named Executive Officers, are entitled to participate in the 401(k) Plan, which is qualified under Section 401(k) of the Internal Revenue Code (the "Code"). At the discretion of the Board, we may make matching contributions

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equal to a percentage of the salary deduction contributions or other discretionary amounts. For fiscal year 2021, the matching contribution program was suspended because of the COVID-19 pandemic. Effective for fiscal year 2022, the matching contribution program was reinstated. We paid $2.6 million in fiscal 2022 and $2.9 million in fiscal 2020 in matching contributions. Contributions to the 401(k) Plan on behalf of the Named Executive Officers are described in the table entitled "Summary Compensation Table – Fiscal 2022."
 
All employees, including the Named Executive Officers, are entitled to participate in the Daktronics, Inc. Employee Stock Purchase Plan ("ESPP"), which is intended to qualify under Section 423 of the Code. The ESPP allows employees to purchase shares of Common Stock, subject to annual limitations, at a price equal to 85 percent of the lower of the fair market value of the Common Stock at the beginning or the end of each six-month offering period.
 
Accounting and Tax Treatment
We account for equity-based compensation paid to employees under ASC 718, Compensation-Stock Compensation, promulgated by the Financial Accounting Standards Board, which requires us to estimate and record an expense over the service period of the award. Thus, we may record an expense in one year for awards granted in earlier years. Accounting rules also require us to record cash compensation as an expense at the time the obligation is accrued.
 
With respect to option awards, we generally can deduct the gain recognized by employees and directors from the exercise of non-qualified options. However, to the extent that an option is an incentive stock option, we cannot deduct the gain recognized by the optionee upon exercise of the option if there is no disqualifying disposition by the optionee.
 
With respect to restricted stock awards, we generally can deduct the fair market value of the shares vested on the vesting date. Alternatively, if the recipient were to make an election under Section 83(b) of the Code, we would be entitled to a deduction on the date of grant equal to the value of the restricted stock on the date of grant.
 
Section 162(m) of the Code generally disallows a tax deduction to a public company for compensation in excess of $1 million paid to a company's chief executive officer and the four other most highly paid executive officers. Qualifying performance-based compensation will not be subject to the deduction limitation if certain requirements are met. Because the potential amount of base salary and non-equity-based incentive compensation that each of our executive officers can earn is less than $1 million, Section 162(m) of the Code has not been material to our compensation decisions.
 
 
COMPENSATION COMMITTEE REPORT
 
The Compensation Committee has reviewed and discussed the section of this Proxy Statement entitled "Compensation Discussion and Analysis" with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
 
By the Compensation Committee,
 
John P. Friel, Chair
Dr. José-Marie Griffiths
Shereta Williams

 



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EXECUTIVE COMPENSATION
 
For the fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020, the following table sets forth information about compensation awarded to, earned by or paid to our principal executive officer and principal financial officer and our next three most highly compensated executive officers whose total compensation was greater than $100,000 for the fiscal year ended April 30, 2022, all of whom constitute our Named Executive Officers.
 
SUMMARY COMPENSATION TABLE FISCAL 2022
 
Name and Principal PositionYearSalary($)Stock Awards ($) (1)Option Awards ($) (2)Non-Equity Incentive Plan Compensation($) (3)All Other Compensation($)(4)Total($)
Reece A. Kurtenbach2022$470,308 $28,296 $30,375 $— $9,694 $538,673 
CEO and President2021386,658 20,520 42,660 — — 449,838 
2020451,489 34,290 24,705 — 8,400 518,884 
Sheila M. Anderson2022$300,192 $13,100 $14,063 $— $7,883 $335,238 
Chief Financial Officer2021244,963 9,500 19,750 — — 274,213 
2020287,413 15,875 11,438 — 7,578 322,304 
Bradley T. Wiemann2022$287,339 $13,100 $14,063 $— $8,186 $322,688 
Executive Vice President2021255,240 9,500 19,750 — — 284,490 
2020277,802 15,875 11,438 — 8,334 313,449 
Matthew J. Kurtenbach2022$276,546 $13,100 $14,063 $— $8,296 $312,005 
Vice President2021245,340 9,500 19,750 — — 274,590 
2020266,059 15,875 11,438 — 7,982 301,354 
Carla S. Gatzke2022$235,523 $13,100 $14,063 $— $7,066 $269,752 
Vice President and2021208,980 9,500 19,750 — — 238,230 
Secretary2020226,599 15,875 11,438 — 6,798 260,710 
 
 (1)
Consists of restricted stock units granted under the 2015 Stock Incentive Plan (the "2015 Plan") for fiscal 2020 and under the 2020 Plan for fiscal 2021 and 2022. In accordance with ASC 718, the amount is calculated based on the grant date fair value of the award. Refer to "Note 10. Shareholders' Equity and Share-Based Compensation" of the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 for a discussion of the assumptions used in calculating the amount under ASC 718. 
 (2)
Consists of stock options granted under the 2015 Plan for fiscal 2020 and under the 2020 Plan for fiscal 2021 and fiscal 2022. The value of the option awards is calculated based on the grant date fair value of the award in accordance with ASC 718. Refer to "Note 10. Shareholders' Equity and Share-Based Compensation" of the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 for a discussion of the assumptions used in calculating the amount under ASC 718.
 (3)
The amounts in this column reflect the total variable cash compensation paid to the Named Executive Officers under the non-equity-based incentive compensation plan. As explained earlier in this Proxy Statement, variable incentive compensation payments are based upon the achievement of certain operating margin targets for fiscal 2020, 2021, and 2022.
 (4)Consists of matching contributions made by us under the 401(k) Plan, which is intended to qualify under Section 401(k) of the Code.
 



 






26


The following table sets forth information regarding grants of plan-based awards to the Named Executive Officers during fiscal 2022:
 
 
GRANTS OF PLAN-BASED AWARDS FISCAL 2022
 
Estimated future payouts under non-equity incentive plan awards(1)All other stock awards: number of shares of stock or unitsAll other option awards: number of securities underlying optionsExercise or base price of option awardsGrant date fair value of stock and option
NameThreshold($)Target($)Maximum($)Grant Date(#)(2)(#) (3)($/share)(4)awards($) (5)
Reece A. Kurtenbach81,000 324,000 388,800 9/2/20215,40013,5005.66 58,671 
Sheila M. Anderson35,521 142,083 170,500 9/2/20212,5006,2505.66 27,163 
Bradley T. Wiemann39,867 159,467 191,360 9/2/20212,5006,2505.66 27,163 
Matthew J. Kurtenbach38,458 153,833 184,600 9/2/20212,5006,2505.66 27,163 
Carla S. Gatzke25,188 100,750 120,900 9/2/20212,5006,2505.66 27,163 
 
 (1)Consists of variable cash compensation under our annual non-equity-based incentive compensation plan. The amounts reflect the minimum payment level, if an award is achieved, the target payment level, and the maximum payment level under the plan. For additional information concerning our annual non-equity-based compensation plan, see the section of this Proxy Statement entitled "Compensation Discussion and Analysis - Elements of Compensation."
 (2)Consists of restricted stock units granted to the Named Executive Officers in fiscal 2022 under the 2020 Plan. The units vest as to 20 percent of the shares one year after the date of grant and as to an additional 20 percent in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.
 (3)
Consists of options granted to the Named Executive Officers in fiscal 2022 under the 2020 Plan. The options vest and become exercisable as to 20 percent of the shares one year after the date of grant and as to an additional 20 percent in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.
 (4)The exercise price of all options was equal to the closing price of the Common Stock as quoted on The Nasdaq Global Select Market on the date of grant as provided in the 2020 Plan.
 (5)
Represents the full grant date fair value determined pursuant to ASC 718 as reflected in our financial statements, based on the number of shares subject to the options and restricted stock unit awards granted and the closing price of the Common Stock as quoted on The Nasdaq Global Select Market on the date of grant, which was $5.66 per share on September 2, 2021.
 



27



 
The following table sets forth information about unexercised options and restricted stock units that have not vested that were held at April 30, 2022 by the Named Executive Officers:
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END FISCAL 2022
 
Option Awards(1)Stock Awards
NameGrant DateNumber of Securities Underlying Unexercised Options (#) ExercisableNumber of Securities Underlying Unexercised Options (#) UnexercisableOption Exercise Price ($)Option Expiration DateNumber of Shares or Units of Stock that Have Not Vested (#)(2)Market Value of Shares or Units of Stock That Have Not Vested ($)(3)
Reece A. Kurtenbach8/23/201210,800 9.51 08/22/22— — 
8/22/20138,750 — 11.05 08/22/23— — 
9/1/201325,000 10.93 08/22/23— — 
9/4/201415,000 13.31 09/04/24— — 
9/3/201515,000 8.51 09/03/25— — 
9/1/201615,000 — 9.57 09/01/26— — 
8/31/201712,000 3,000 9.63 08/31/27— — 
9/6/20188,100 5,400 7.83 09/06/28— — 
9/5/20195,400 8,100 7.47 09/05/29— — 
9/3/20205,400 21,600 4.11 09/03/30— — 
9/2/2021— 13,500 5.66 09/02/31— — 
— — 16,320 54,672 
Sheila M. Anderson8/23/20124,000 9.5108/22/22— — 
9/12/20126,000 9.5608/22/22— — 
8/22/20136,870 11.0508/22/23— — 
9/4/20147,500 13.3109/04/24— — 
9/3/20157,500 8.5109/03/25— — 
9/1/20167,500 — 9.5709/01/26— — 
8/31/20176,000 1,500 9.6308/31/27— — 
9/6/20183,750 2,500 7.8309/06/28— — 
9/5/20192,500 3,750 7.4709/05/29— — 
9/3/20202,500 10,000 4.1109/03/30— — 
9/2/2021— 6,250 5.66 09/02/31— — 
7,600 25,460 
Bradley T. Wiemann8/23/201210,500 9.5108/22/22— — 
8/22/201310,800 11.0508/22/23— — 
9/4/20147,500 13.3109/04/24— — 
9/3/20157,500 8.5109/03/25— — 
9/1/20167,500 — 9.5709/01/26— — 
8/31/20176,000 1,500 9.6308/31/27— — 
9/6/20183,750 2,500 7.8309/06/28— 
9/5/20192,500 3,750 7.4709/05/29— 
9/3/20202,500 10,000 4.1109/03/30— — 
9/2/2021— 6,250 5.66 09/02/31— — 
— — 7,600 25,460 
Matthew J. Kurtenbach8/23/201210,500 — 9.5108/22/22— — 
8/22/201310,500 — 11.0508/22/23— — 
9/4/20147,500 — 13.3109/04/24— — 
9/3/20157,500 — 8.5109/03/25— — 
9/1/20167,500 — 9.5709/01/26— — 
8/31/20176,000 1,500 9.6308/31/27— — 
9/6/20183,750 2,500 7.8309/06/28— — 
9/5/20192,500 3,750 7.4709/05/29— — 
9/3/20202,500 10,000 4.1109/03/30— — 

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9/2/2021— 6,250 5.66 09/02/31— — 
— — — 7,600 25,460 
Carla S. Gatzke8/23/201210,500 — 9.5108/22/22— — 
8/22/20136,870 — 11.0508/22/23— — 
9/4/20146,870 — 13.3109/04/24— — 
9/3/20156,870 — 8.5109/03/25— — 
9/1/20166,870 — 9.5709/01/26— — 
8/31/20175,496 1,374 9.6308/31/27— — 
9/6/20183,750 2,500 7.8309/06/28— — 
9/5/20192,500 3,750 7.4709/05/29— — 
9/3/20202,500 10,000 4.1109/03/30— — 
9/2/2021— 6,250 5.66 09/02/31— — 
— — 7,550 25,293 
 
 (1)All options vest in equal installments over five years beginning one year after the grant date, but only if the Named Executive Officer is then an employee of the Company, and expire after 10 years.
 (2)Restricted stock units vest as to 20 percent of the shares one year after date of grant and as to an additional 20 percent in each succeeding year, but only if the Named Executive Officer is then an employee of the Company.
 (3)
Determined by multiplying the Company's $3.35 per share closing stock price as reported on The Nasdaq Global Select Market on April 30, 2022, which was the last business day of fiscal 2022, by the number of shares subject to the award.
 
The following table sets forth information regarding the exercise of stock options by and the vesting of restricted stock awards during fiscal 2022 for the Named Executive Officers:
 
OPTION EXERCISES AND STOCK VESTED FISCAL 2022

Option AwardsStock Awards
NameNumber of Shares Acquired on Exercise (#)Value Realized on Exercise($)(1)Number of Shares Acquired on Vesting(#)Value Realized on Vesting($)(2)
Reece A. Kurtenbach— — 5,640 34,122 
Sheila M. Anderson— — 2,700 16,335 
Bradley T. Wiemann— — 2,700 16,335 
Matthew J. Kurtenbach— — 2,700 16,335 
Carla S. Gatzke— — 2,600 15,730 
 

 
 (1)Consists of the difference between the closing price of the Common Stock on the date of exercise and the per share exercise price of the option multiplied by the number of shares acquired upon exercise.
 (2)Consists of the number of shares vested multiplied by the market value of the stock as of the vesting date.



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Securities Authorized for Issuance Under Equity Compensation Plans
 
The following table sets forth certain information as of April 30, 2022 with respect to our equity compensation plans:
 
EQUITY COMPENSATION PLAN INFORMATION
 
Plan categoryNumber of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and RightsWeighted-Average Exercise Price of Outstanding Options, Warrants and RightsNumber of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
(a)(b)(c)
Equity compensation plans approved by security holders:
2007 Stock Incentive Plan607,662 $10.92 
2015 Stock Incentive Plan886,699 8.61 — 
2020 Stock Incentive Plan612,376 4.66 2,456,318 
Employee Stock Purchase Plan(1)Not ApplicableNot Applicable705,035 
Total2,106,737 $8.13 3,161,353 
 
 (1)Under the ESPP, shares are acquired at the time of investment by the participating employees at the applicable discount.
 
Post-Employment Compensation
 
Potential Payments upon Termination of Employment or Change in Control
The table below reflects the compensation that would be paid to each of our Named Executive Officers in the event of termination of such executive’s employment. The amounts shown assume that such termination was effective as of April 30, 2022, include estimated amounts earned through such date, and are estimates of the amounts which would be paid out to the Named Executive Officers upon the termination of their employment. The actual amounts to be paid can be determined only at the time of such Named Executive Officer's separation from the Company. In addition, there may be re-negotiation of the payments upon any termination of employment or change in control.
 
Under the 2020 Plan, all options and restricted stock units immediately vest upon a "change in control", as that term is defined in the 2020 Plan. The 2007 Plan and 2015 Plan have expired, but there are awards outstanding under the 2007 Plan and 2015 Plan that are governed by its terms. Upon a termination of employment for any reason, and consistent with our employment policies which apply to all employees, we are obligated to pay for accrued and unused vacation time, which would then be payable in a lump sum.
 



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NameBenefitTermination due to change in controlTermination without cause or for good reasonTermination for cause or for good reasonDeath
Reece A. KurtenbachStock option vesting acceleration(1)$— $— $— $— 
Restricted stock unit vesting acceleration54,672 — — — 
Vacation pay19,206 19,206 19,206 19,206 
$73,878 $19,206 $19,206 $19,206 
Sheila M. AndersonStock option vesting acceleration(1)$— $— $— $— 
Restricted stock unit vesting acceleration25,460 — — — 
Vacation pay15,824 15,824 15,824 15,824 
$41,284 $15,824 $15,824 $15,824 
Bradley T. WiemannStock option vesting acceleration(1)$— $— $— $— 
Restricted stock unit vesting acceleration25,460 — — — 
Vacation pay25,052 25,052 25,052 25,052 
$50,512 $25,052 $25,052 $25,052 
Matthew J. KurtenbachStock option vesting acceleration(1)$— $— $— $— 
Restricted stock unit vesting acceleration25,460 
Vacation pay33,452 33,452 33,452 33,452 
$58,912 $33,452 $33,452 $33,452 
Carla S. GatzkeStock option vesting acceleration(1)$— $— $— $— 
Restricted stock unit vesting acceleration25,293 — — — 
Vacation pay40,455 40,455 40,455 40,455 
$65,748 $40,455 $40,455 $40,455 
 
 (1)
For option awards, consists of the difference between the $3.35 per share closing price of the Common Stock as reported on The Nasdaq Global Select Market as of April 30, 2022, which was the last business day of fiscal 2022, and the exercise price of the option multiplied by the number of shares subject to the option.
 
Other Post-Employment Payments
We do not provide pension arrangements, post-retirement health coverage or non-qualified defined contribution plans to any of our employees.
 
Compensation Risk Analysis
The Compensation Committee has established the non-equity incentive program to be based on the same Company-wide measure for each executive. As previously described, the Compensation Committee has selected operating margin as the Company-wide measure. Basing the program on the same Company-wide measure for all the executives minimizes the risks associated with individual formulas based on individual actions. The non-equity incentive program is the only formula-based incentive-compensation program in the Company.
 
CEO Pay Ratio
Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information with respect to fiscal 2022:
 

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the annual total compensation of the median employee of our Company (which excludes our CEO) was $54,227; and
 
the annual total compensation of our CEO was $538,673.
 
Based on this information, a reasonable estimate of the ratio of the annual total compensations of our CEO and the median employee for fiscal 2022 was approximately 10-to-1.
 
We determined our median employee compensation as of January 1, 2022. We included all world-wide full-time, part-time, temporary and student employees, and excluded our CEO in the median compensation calculation. We calculated each identified employee’s total compensation as the annualized value of their current base hourly rate with scheduled hours or salary rate. Compensation paid in currencies other than U.S. dollars were converted to U.S. dollars based on average exchange rates for the period ended January 1, 2022. 
 
The identified median employee received $50,960 of base pay in fiscal 2022. We then calculated the median employee's annual total compensation on the same basis that we used to calculate the total compensation of our Named Executive Officers set forth in the Summary Compensation Table, which added $3,267 to the median employee's base pay due to overtime. Thus, our median employee's annual total compensation was $54,227.
 
The pay ratio reported above is calculated in a manner consistent with SEC rules and guidance, based on our internal records and the methodology described above. In addition, the rules for identifying the "median employee" and calculating the pay ratio allow companies to apply various methodologies and assumptions. As a result, the compensation for our median employee and the pay ratio reported by us should not be used as a comparison to the information reported by other companies.
 



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AUDIT COMMITTEE REPORT
 
The Audit Committee is currently composed of four directors who are independent as provided in Rule 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Exchange Act. The members of the Audit Committee are appointed annually by the Board.
 
The membership of the Audit Committee for fiscal 2022, together with their appointment dates and attendance at meetings, is set forth below:
 
MembersAudit Committee Member sinceAttendance/Total Meetings
Kevin P. McDermott20165/5
John P. Friel20165/5
James B. Morgan20171/1
Shereta Williams(1)20214/5
Lance D. Bultena(1)20214/5
(1) Appointed to the Audit Committee effective September 2, 2021. Ms. Williams and Mr. Bultena attended all Audit Committee meetings held while she/he was an Audit Committee member.
 
The Audit Committee has reviewed and discussed with management and the Independent Auditor our audited consolidated financial statements as of and for the fiscal year ended April, 30 2022, and the results of management's assessment and the Independent Auditor's audit of the effectiveness of the Company's internal control over financial reporting; the significant accounting policies, including their quality and acceptability, applied by management in the preparation of our financial statements, as well as alternative treatments; significant estimates and judgements applied by management in the preparation of our financial statements; use of non-GAAP measures, and management's and the Independent Auditor's judgment with respect to risk assessment. The Audit Committee received regular updates from our Chief Financial Officer and general counsel on various matters including the status of litigation and regulatory matters, our banking relationships and credit facilities, and estimated cash flow, capital expenditures, and investments in affiliates. The Audit Committee reviewed and discussed our quarterly earnings press releases and Quarterly Reports on Form 10-Q filed with the SEC. We have discussed with our Independent Auditor the matters required by the standards of the Public Company Accounting Oversight Board ("PCAOB"), including PCAOB Auditing Standards No. 1301, Communications with Audit Committees, the rules of the SEC, and other applicable regulations. We have also received from the Independent Auditor the written disclosures and the letter required by applicable requirements of PCAOB Rule 3526, Communications with Audit Committees Concerning Independence, regarding the Independent Auditor's independence; and reviewed and pre-approved fees charged by the Independent Auditor and considered whether the Independent Auditor's provision of non-audit services to us is compatible with its independence. The Audit Committee also met in executive session following each of the Audit Committee meetings with representatives of our Independent Auditor.
 
The Audit Committee recognizes the importance of maintaining the independence of the Company's Independent Auditor, both in fact and appearance. Each year, the Audit Committee evaluates the qualifications, performance and independence of the Company's Independent Auditor and determines whether to re-engage such firm. In doing so, the Audit Committee considers, among other things, the quality and efficiency of the services provided by the Independent Auditor, its capabilities and its technical expertise, its knowledge of the Company's operations and industry, and relevant information concerning its independence. Based on this evaluation, the Audit Committee recommended the appointment of Deloitte as our Independent Auditor to perform reviews of our interim consolidated financial statements and to perform audits of our annual consolidated financial statements and of our internal control over financial reporting for fiscal 2023.
 
Based on the review and discussions described above, the Audit Committee recommended to the Board that our audited consolidated financial statements for the fiscal year ended April 30, 2022 be included in our Annual Report on Form 10-K for filing with the SEC.
 
By the Audit Committee,
 
Kevin P. McDermott, Chair
John P. Friel
Shereta Williams
Lance D. Bultena
 
HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
 
We have adopted a procedure called "householding," which has been approved by the SEC. Under this procedure, we are delivering only one copy of our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials to multiple shareholders who have requested paper copies of the Annual Report and Proxy Statement and who share the same address, unless we have received contrary instructions from one or more of the shareholders. Shareholders who participate in householding will continue to be able to access and receive separate proxy cards or voting instruction cards. In addition, some banks, brokers, trustees and other nominees may be participating in this practice of householding our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials. This practice benefits us and our shareholders because it reduces the volume of duplicate information received at a shareholder’s address and helps reduce our expenses. Shareholders who share an address and receive multiple copies of our Annual Report, this Proxy Statement and our Notice of Internet Availability of

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Proxy Materials may request only one copy of these materials by contacting their bank, broker, trustee or other nominee record holder or by contacting the Company as described in the next paragraph.
 
Shareholders that have previously received a single set of our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials may request their own copies this fiscal year or in future years by contacting their bank, broker, trustee or other nominee record holder or by contacting the Company as described in the next sentence. We will also deliver promptly separate paper copies of our Annual Report, this Proxy Statement and our Notice of Internet Availability of Proxy Materials to any shareholder upon written request sent to Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006, Attention: Investor Relations, or upon verbal request by calling (605) 692-0200.
 
AVAILABLE INFORMATION
 
The Annual Report to Shareholders for the fiscal year ended April 30, 2022, including financial statements, is being mailed with this Proxy Statement. The Annual Report to Shareholders is not incorporated in this Proxy Statement and is not deemed to be a part of this Proxy Statement.
 
The Annual Report to Shareholders for the fiscal year ended April 30, 2022 can also be accessed on our website at www.daktronics.com by selecting "Investors" at the bottom of the website under "Our Company" and then "Annual Reports and Proxy" under the heading "Financial Information." Any person whose proxy is solicited by this Proxy Statement will be provided, upon request and without charge, with a copy of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022. Please submit such requests to Daktronics, Inc., 201 Daktronics Drive, Brookings, South Dakota 57006, Attention: Investor Relations, or by calling (605) 692-0200.
 
By Order of the Board of Directors,
 
Carla S. Gatzke
Secretary
 

 





































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APPENDIX A
DAKTRONICS, INC.
2002 EMPLOYEE STOCK PURCHASE PLAN
Adopted November 1, 2002
Amended Effective September 8, 2022


1. PURPOSE OF THE PLAN

The Plan was adopted by the Board on June 25, 2002, to be effective as of November 1, 2002. The purpose of the Plan is to provide Eligible Employees with an opportunity to increase their proprietary interest in the success of the Corporation by purchasing Common Stock from the Corporation on favorable terms and to pay for such purchases through payroll deductions. The Plan is intended to qualify under Section 423 of the Code.

2. ADMINISTRATION OF THE PLAN

2.1    COMMITTEE COMPOSITION.
The Board or Compensation Committee shall oversee the Plan. (For purposes of this Plan, references hereinafter to the Committee shall mean either the Compensation Committee or the Board.)
2.2    COMMITTEE RESPONSIBILITIES.
The Committee shall interpret the Plan and make all other policy decisions relating to the operation of the Plan. The Committee may adopt such rules, guidelines and forms as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. The Committee shall act by majority vote of its members. An action of the Committee may be taken without a meeting by a unanimous written consent signed by all members of the Committee.

2.3    PLAN YEAR.
The Plan Year shall consist of a twelve month period commencing on May 1 and ending on April 30.

3. ENROLLMENT AND PARTICIPATION

3.1    OFFERING PERIODS.
While the Plan is in effect, options to purchase shares of Common Stock shall be offered to Participants under the Plan through a continuous series of Offering Periods, each continuing for six months, and each of which shall commence on May 1 and November 1 of each year (the “Offering Date”) and shall terminate on October 31 and April 30 of each year (the “Termination Date”). Offering Periods under the Plan shall continue until either (A) the Committee decides that no further Offerings shall be made because the Common Stock remaining available under the Plan is insufficient to make an Offering to all Eligible Employees or (B) the Plan is terminated in accordance with Section 14 below.

3.2    CONTRIBUTION PERIODS.
While the Plan is in effect, two Contribution Periods shall commence in each calendar year. The Contribution Periods shall consist of the six-month periods commencing on each May 1 and ending on October 31 and commencing on November 1 and ending on April 30.

3.3    ENROLLMENT.
Participation in the Plan by an Eligible Employee is voluntary. Any individual who, on the day prior to the first day of an Offering Period, qualifies as an Eligible Employee may elect to become a Participant in the Plan for such Offering Period by executing the enrollment form prescribed for this purpose by the Committee. The enrollment form shall be filed with the Corporation at the prescribed location not later than ten business days prior to the commencement of such Offering Period.
3.4    DURATION OF PARTICIPATION.
Once enrolled in the Plan, a Participant shall continue to participate in the Plan until he or she ceases to be an Eligible Employee, withdraws from the Plan under Section 5.1 or reaches the end of the Contribution Period in which his or her employee contributions were discontinued under Section 4.4 or 8.2. A Participant who discontinued employee contributions under Section 4.4 or withdrew from the Plan under Section 5.1 may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Section 3.3 above. A Participant whose employee contributions were discontinued automatically under Section 8.2 shall automatically resume participation at the beginning of the earliest Contribution Period ending in the next calendar year, if he or she then is an Eligible Employee.

3.5    APPLICABLE OFFERING PERIOD.
For purposes of calculating the Purchase Price under Section 7.2, the applicable Offering Period shall be determined as follows:

3.5.1    Once a Participant is enrolled in the Plan for an Offering Period, such Offering Period shall continue to apply to him or her until the earliest of (A) the end of such Offering Period or (B) the end of his or her participation under Section 3.4 above.
3.5.2    Each Participant who actively contributed to the plan on the last pay date of an offering period is automatically re-enrolled in the following offering period. Employees who withdraw or change their deferrals to 0% during an offering period must submit a new enrollment form to participate in a future offering period.
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4. EMPLOYEE CONTRIBUTIONS

4.1    FREQUENCY OF PAYROLL DEDUCTIONS.
A Participant may purchase shares of Common Stock under the Plan solely by means of payroll deductions. Payroll deductions, as designated by the Participant pursuant to Section 4.2 below, shall occur on each payday during participation in the Plan and shall be determined based upon the Payroll Withholding Rate designated by the Participant pursuant to Section 4.2 below. Payroll deductions for a Participant shall be on an after-tax basis and shall begin with the first payroll on or following the applicable Offering Date and shall continue until the termination date of the Plan, subject to earlier termination as provided herein or to decreases by the Participant in the amount of the Payroll Withholding Rate as provided in Section 4.3.
4.2    AMOUNT OF PAYROLL DEDUCTIONS.
An Eligible Employee shall designate on the enrollment form the portion of his or her Compensation that he or she elects to have withheld for the purchase of Common Stock (the “Payroll Withholding Rate”). Such portion shall be a percentage of the Eligible Employee's Compensation, but not more than 15% or such lesser percentage established by the Committee from time to time. In no event may a Participant contribute more than 15% of his or her Compensation during a calendar year for the purchase of shares of Common Stock under the Plan.

4.3    CHANGING WITHHOLDING RATE.
No increases in the Payroll Withholding Rate may be made during an Offering Period. A Participant may elect to make one decrease in the Payroll Withholding Rate during an Offering Period, which change shall become effective as soon as reasonably practical after a new enrollment form has been received by the Corporation. Otherwise, if a Participant wishes to change the Payroll Withholding Rate, he or she may do so by filing a new enrollment form with the Corporation at the prescribed location not less than ten business days before the Offering Date as of which such increase or decrease is to be effective. The new Payroll Withholding Rate shall be a percentage of the Participant’s Compensation, not more than 15%.

4.4    DISCONTINUING PAYROLL DEDUCTIONS.
If a Participant wishes to discontinue employee contributions entirely, he or she may do so by filing a new enrollment form with the Corporation at the prescribed location at any time. Payroll withholding shall cease as soon as reasonably practicable after such form has been received by the Corporation. (In addition, employee contributions may be discontinued automatically pursuant to Section 8.2.) A Participant who has discontinued employee contributions may resume such contributions by filing a new enrollment form with the Corporation pursuant to Section 3.3 above.

5. WITHDRAWAL FROM THE PLAN
5.1    WITHDRAWAL.
A Participant may elect to withdraw from the Plan by filing the prescribed form with the Corporation at the prescribed location at any time before the last day of a Contribution Period. As soon as reasonably practicable thereafter, payroll deductions shall cease, and the entire amount credited to the Participant's Plan Account shall be refunded to him or her in cash, without interest. No partial withdrawals shall be permitted.
5.2    RE-ENROLLMENT AFTER WITHDRAWAL.
A former Participant who has withdrawn from the Plan shall not be a Participant until he or she re-enrolls in the Plan under Section 3.3. Re-enrollment may be effective only at the commencement of an Offering Period.

6. CHANGE IN EMPLOYMENT STATUS

6.1    TERMINATION OF EMPLOYMENT.
Termination of employment as an Eligible Employee for any reason, including death, shall be automatically treated as a withdrawal from the Plan under Section 5.1. (A transfer from one Participating Corporation to another shall not be treated as a termination of employment.)

6.2    DEATH.
In the event of the Participant's death, the amount credited to his or her Plan Account shall be paid to a beneficiary designated by him or her for this purpose on the prescribed form or, if none, to the Participant's estate. Such form shall be valid only if it was filed with the Corporation at the prescribed location before the Participant's death.

7. PLAN ACCOUNTS AND PURCHASE OF SHARES
7.1    PLAN ACCOUNTS.
The Corporation shall maintain a Plan Account on its books in the name of each Participant. Whenever an amount is deducted from the Participant’s Compensation under the Plan, such amount shall be credited to the Participant’s Plan Account. Amounts credited to Plan Accounts shall not be trust funds and may be commingled with the Corporation’s general assets and applied to general corporate purposes. A Participant may not make any separate cash payment or contribution to his or her Plan Account. No interest shall be credited to Plan Accounts.

7.2    PURCHASE PRICE.
The Purchase Price for each share of Common Stock purchased at the Termination Date of an Offering Period shall be the lower of:

7.2.1    85% of the Fair Market Value of such share on the last trading day in such Offering Period; or

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7.2.2    85% of the Fair Market Value of such share on the last trading day before the Offering Date.

7.3    NUMBER OF SHARES PURCHASED.
As of the Termination Date of each Offering Period, each Participant shall be deemed to have elected to purchase the number of shares of Common Stock calculated in accordance with this Section 7.3, unless the Participant’s participation has terminated, through withdrawal or otherwise, in accordance with Section 5.1 or Section 6. The amount then in the Participant's Plan Account shall be divided by the Purchase Price, and the whole number of shares that results shall be purchased from the Corporation with the funds in the Participant's Plan Account. The foregoing notwithstanding, no Participant shall purchase more than 4,000 shares of Common Stock with respect to any Contribution Period nor more than the amounts of Common Stock set forth in Sections 8.2 and 13.1. Notwithstanding the foregoing, the Committee may determine with respect to all Participants that any fractional share, as calculated under this Section 7.3, shall be (i) rounded down to the next lower whole share or (ii) credited as a fractional share.

7.4    AVAILABLE SHARES INSUFFICIENT.
In the event that the aggregate number of shares that all Participants are to purchase on any Termination Date exceeds the maximum number of shares remaining available for issuance under Section 13.1, then the number of shares to which each Participant is entitled shall be determined by multiplying the number of shares available for issuance by a fraction, the numerator of which is the number of shares that such Participant has elected to purchase on the Termination Date and the denominator of which is the number of shares that all Participants have elected to purchase on the Termination Date. In such event, the Corporation shall give written notice of such reduction of the number of shares subject to the option to each Participant affected thereby.
7.5    ISSUANCE OF COMMON STOCK CERTIFICATES.
Certificates representing the shares of Common Stock purchased by a Participant under the Plan shall be issued to him or her as soon as reasonably practicable after the Termination Date of each Offering Period, except that the Committee may determine that such shares shall be held for each Participant's benefit by a broker designated by the Committee (unless the Participant has elected that certificates be issued directly to him or her). Shares may be registered in the name of the Participant or jointly in the name of the Participant and his or her spouse as joint tenants with right of survivorship or as community property. The Committee may impose such restrictions on the transfer or resale of issued shares as it may deem advisable.

7.6    RESTRICTED RESALE OF SHARES ACQUIRED UNDER PLAN.
Notwithstanding anything else set forth herein, shares of Common Stock acquired under this Plan may not be resold or transferred for a period of one year after the date of purchase. Certificates for shares issued under this Plan shall contain an appropriate legend identifying such restriction on resale.

7.7    UNUSED CASH BALANCES.
An amount remaining in the Participant's Plan Account that represents the Purchase Price for any fractional share shall be carried over in the Participant's Plan Account to the next Offering Period. Any amount remaining in the Participant's Plan Account that represents the Purchase Price for whole shares that could not be purchased by reason of Section 7.4 above, Section 8.2 or Section 13.1 shall be refunded to the Participant in cash, without interest.

7.8    STOCKHOLDER APPROVAL.
Any other provision of the Plan notwithstanding, no shares of Common Stock shall be purchased under the Plan unless and until the Corporation's stockholders have approved the adoption of the Plan.

8. LIMITATIONS ON STOCK OWNERSHIP

8.1    FIVE PERCENT LIMIT.
Any other provision of the Plan notwithstanding, no Participant shall be granted a right to purchase Common Stock under the Plan if such Participant, immediately after his or her election to purchase such Common Stock, would own stock possessing more than 5% of the total combined voting power or value of all classes of stock of the Corporation or any parent or Subsidiary of the Corporation. For purposes of this Section 8.1, the following rules shall apply:
8.1.1    Ownership of stock shall be determined after applying the attribution rules of section 424(d) of the Code;

8.1.2    Each Participant shall be deemed to own any stock that he or she has a right or option to purchase under this or any other plan; and

8.1.3    Each Participant shall be deemed to have the right to purchase no more than 4,000 shares of Common Stock under this Plan with respect to each Offering Period.
8.2    DOLLAR LIMIT.
Any other provision of the Plan notwithstanding, no Participant shall acquire a right to purchase Common Stock which permits his rights to purchase stock under all “employee purchase plans (as such term is defined in Section 423 of the Code) of the Corporation and its parent and Subsidiary corporations to accrue at a rate which exceeds $25,000 of the Fair Market Value of such stock (determined at the time the right was granted) for each calendar year in which such right is outstanding at any time.

For purposes of this Section 8.2, the Fair Market Value of Common Stock shall be determined in each case as of the Offering Date of the Offering Period in which such Common Stock is purchased. Employee stock purchase plans not described in section 423 of the Code shall be disregarded. If a Participant is precluded by this Section 8.2 from purchasing additional Common Stock under the Plan, then his or her employee contributions shall automatically be discontinued and
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shall resume at the beginning of the earliest Contribution Period ending in the next calendar year (if he or she then is an Eligible Employee).

9. RIGHTS NOT TRANSFERABLE

The rights of any Participant under the Plan, or any Participant's interest in any Common Stock or moneys to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or in any other manner other than by beneficiary designation, will or the laws of descent and distribution. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than by beneficiary designation, will or the laws of descent and distribution, then such act shall be treated as an election by the Participant to withdraw from the Plan under Section 5.1.

10. NO RIGHTS AS AN EMPLOYEE

Nothing in the Plan or in any right granted under the Plan shall confer upon the Participant any right to continue in the employ of a Participating Corporation for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Participating Corporations or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her employment at any time and for any reason, with or without cause.

11. NO RIGHTS AS A STOCKHOLDER

A Participant shall have no rights as a stockholder with respect to any shares of Common Stock that he or she may have a right to purchase under the Plan until such shares have been purchased on the Termination Date of the applicable Offering Period.

Even if the right to purchase shares is granted hereunder to a Participant, this does not mean that the Participant remains further entitled to purchase Common Stock. Such right to purchase Common Stock is granted voluntarily by the Company and may be revoked by the Company at any time.

12. SECURITIES LAW REQUIREMENTS

Shares of Common Stock shall not be issued under the Plan unless the issuance and delivery of such shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Corporation's securities may then be traded.

13. STOCK OFFERED UNDER THE PLAN

13.1    AUTHORIZED SHARES.
The aggregate number of shares of Common Stock to be reserved by the Company and available for purchase under the Plan shall be 5,500,000.

13.2    ANTI-DILUTION ADJUSTMENTS.
The aggregate number of shares of Common Stock offered under the Plan, the number of shares by which the share reserve is to increase each calendar year, the 4,000-share limitation described in Section 7.3 and the price of shares that any Participant has elected to purchase shall be adjusted proportionately by the Committee for any increase or decrease in the number of outstanding shares of Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend, any other increase or decrease in such shares effected without receipt or payment of consideration by the Corporation, the distribution of the shares of a Subsidiary to the Corporation's stockholders or a similar event.
13.3    REORGANIZATIONS.
Any other provision of the Plan notwithstanding, immediately prior to the effective time of a Change in Control, the Offering Period and Contribution Period then in progress shall terminate and shares shall be purchased pursuant to Section 7. In the event of a merger or consolidation to which the Corporation is a constituent corporation and which does not constitute a Change in Control, the Plan shall continue unless the plan of merger or consolidation provides otherwise. The Plan shall in no event be construed to restrict in any way the Corporation's right to undertake a dissolution, liquidation, merger, consolidation or other reorganization.

14. AMENDMENT OR DISCONTINUANCE

The Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate in light of, and consistent with, Section 423 of the Code; provided, however, that no such amendment shall be effective without approval of the shareholders of the Corporation if shareholder approval of such amendment is then required under Rule 16b-3 under the Exchange Act or any successor rule or Section 423 of the Code or any other applicable law or regulation.. The Board shall have the right to amend, suspend or terminate the Plan at any time and without notice; provided, however, that the Board shall not have the right to modify, cancel or amend any outstanding right to purchase Common Stock hereunder before such termination unless each Participant consents in writing.

15. DEFINITIONS

15.1    “BOARD”
Means the Board of Directors of the Corporation, as constituted from time to time.

15.2    “CHANGE IN CONTROL”
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Means:

15.2.1    The consummation of a merger or consolidation of the Corporation with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Corporation immediately prior to such merger, consolidation or other reorganization;

15.2.2    The sale, transfer or other disposition of all or substantially all of the Corporation's assets;

15.2.3    A change in the composition of the Board as a result of which fewer than two-thirds of the incumbent directors are directors who either (i) had been directors of the Corporation on the date 24 months prior to the date of the event that may constitute a Change in Control (the “original directors”) or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; or

15.2.4    Any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing at least 50% of the total voting power represented by the Corporation's then outstanding voting securities. For purposes of this Section 15.2.2 , the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or of a Parent or Subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of the common stock of the Corporation.

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Corporation's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Corporation's securities immediately before such transaction.

15.3    “CODE”
Means the Internal Revenue Code of 1986, as amended.

15.4    “COMMITTEE”
Means the Compensation Committee of the Board, as described in Section 2.

15.5    “COMMON STOCK”
Means the common stock of the Corporation.
15.6    “CONTRIBUTION PERIOD”
Means a six-month period during which contributions may be made toward the purchase of Common Stock under the Plan, as determined pursuant to Section 3.2.
15.7    “CORPORATION”
Means Daktronics, Inc., a South Dakota corporation.

15.8    “COMPENSATION”
Means (i) the total compensation paid in cash to a Participant by a Participating Corporation, including salaries, wages, bonuses, incentive compensation, commissions, overtime pay and shift premiums, plus (ii) any pre-tax contributions made by the Participant under section 401(k) or 125 of the Code. “Compensation” shall exclude all non-cash items, moving or relocation allowances, cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans, income attributable to the exercise of stock options, and similar items. The Committee shall determine whether a particular item is included in Compensation, determined in a manner consistent with the requirements of Section 423 of the Code.

15.9    “ELIGIBLE EMPLOYEE”
Means any employee of a Participating Corporation whose customary employment is for more than five months per calendar year and for more than 20 hours per week provided that such employee has been employed by any Participating Corporation for a continuous period of six (6) months preceding an applicable Offering Period.

15.10    “EXCHANGE ACT”
Means the Securities Exchange Act of 1934, as amended.

15.11    “FAIR MARKET VALUE”
Means the market price of Common Stock, determined by the Committee as follows:
15.11.1    If the Common Stock was traded over-the-counter on the date in question but was not traded on The Nasdaq National Market or The Nasdaq SmallCap Market, then the Fair Market Value shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the Common Stock was quoted or, if the Common Stock was not quoted on any such system, by the “Pink Sheets” published by Pink Sheets LLC;
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15.11.2    If the Common Stock was traded over-the-counter market on the date in question and was traded on The Nasdaq National Market or The Nasdaq SmallCap Market, then the Fair Market Value shall be equal to the last-transaction price quoted for such date by The Nasdaq National Market or The Nasdaq SmallCap Market;
    
15.11.3    If the Common Stock was traded on a stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported by the applicable composite transactions report for such date; or
    
15.11.4    If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate. Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in THE WALL STREET JOURNAL or as reported directly to the Corporation by Nasdaq or a stock exchange. Such determination shall be conclusive and binding on all persons.
15.12    “OFFERING PERIOD”
Means a six-month period with respect to which the right to purchase Common Stock may be granted under the Plan, as determined pursuant to Section 3.1.

15.13    “PARTICIPANT”
Means an Eligible Employee who elects to participate in the Plan, as provided in Section 3.3.

15.14    “PARTICIPATING CORPORATION”
Means (i) the Corporation and (ii) each present or future Subsidiary designated by the Committee as a Participating Corporation.
15.15    “PLAN”
Means this Daktronics, Inc. 2002 Employee Stock Purchase Plan, as it may be amended from time to time.

15.16    “PLAN ACCOUNT”
Means the account established for each Participant pursuant to Section 7.1.
15.17    “PURCHASE PRICE”
Means the price at which Participants may purchase Common Stock under the Plan, as determined pursuant to Section 7.2.

15.18    “SUBSIDIARY”
Means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

16. GOVERNING LAW

The Plan shall be construed consistent with and governed by the laws of the State of South Dakota and the laws of the United States.



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APPENDIX B

RIGHTS AGREEMENT
between
DAKTRONICS, INC.
and
EQUINITI TRUST COMPANY
dated as of November 16, 2018



TABLE OF CONTENTS    
SECTION 1.            Certain Definitions                            1
SECTION 2.            Appointment of Rights Agent                        11
SECTION 3.            Issue of Rights Certificates                        11
SECTION 4.            Form of Rights Certificate                            13
SECTION 5.            Countersignature and Registration                        14
SECTION 6.    Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates                    15
SECTION 7.            Exercise of Rights; Exercise Price; Expiration Date of Rights            16
SECTION 8.            Cancellation and Destruction of Rights Certificates                17
SECTION 9.            Reservation and Availability of Capital Stock                18
SECTION 10.            Preferred Stock Record Date                        19
SECTION 11.            Adjustment of Exercise Price, Number and Kind of Shares or Number of Rights    20
SECTION 12.            Certificate of Adjusted Exercise Price or Number of Shares            25
SECTION 13.            Consolidation, Merger or Sale or Transfer of Assets or Earning Power        26
SECTION 14.            Fractional Rights; Fractional Shares; Waiver                    29
SECTION 15.            Rights of Action                                30
SECTION 16.            Agreement of Rights Holders                        30
SECTION 17.            Rights Certificate Holder Not Deemed a Shareholder                31
SECTION 18.            Duties of Rights Agent                            31
SECTION 19.            Concerning the Rights Agent                        34
SECTION 20.            Merger or Consolidation or Change of Name of Rights Agent            35
SECTION 21.            Change of Rights Agent                            35
SECTION 22.            Issuance of New Rights Certificates                        36
SECTION 23.            Redemption                                36
SECTION 24.            Exchange                                38
SECTION 25.            Notice of Certain Events                            40
SECTION 26.            Notices                                    40
SECTION 27.            Supplements and Amendments                        41
SECTION 28.            Successors                                42
SECTION 29.            Determinations and Actions by the Board                    42
SECTION 30.            Benefits of this Agreement                            43
SECTION 31.            Tax Compliance and Withholding                        43
SECTION 32.            Severability                                43
SECTION 33.            Governing Law                                43
SECTION 34.            Counterparts                                43
SECTION 35.            Descriptive Headings; Section References                    44
SECTION 36.            Force Majeure                                44
Exhibit A - Articles of Amendment

Exhibit B - Summary of Rights

Exhibit C - Rights Certificate






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RIGHTS AGREEMENT

This Rights Agreement, dated as of November 16, 2018 (the “Agreement”), is by and between Daktronics, Inc., a South Dakota corporation (the “Company”), and Equiniti Trust Company (the “Rights Agent”).

WITNESSETH:

WHEREAS, on August 28, 2008, the Company’s Board of Directors authorized and declared a dividend of one common stock purchase right for each outstanding share of the Company’s Common Stock, payable to shareholders of record at the close of business on November 19, 2008, each right representing the right to purchase from the Company one-tenth of a share of Common Stock, or a combination of securities and assets of equivalent value, at a purchase price of $100.00 per one-tenth of a share of Common Stock, subject to adjustment, under a Rights Agreement dated as of August 28, 2008 (the “Existing Rights Agreement”);

WHEREAS, the rights issued under the Existing Rights Agreement will expire at the close of business on November 19, 2018, and the Existing Rights Agreement then will terminate;

WHEREAS, the Board of Directors of the Company (the “Board”) has determined it is desirable and in the best interests of the Company and its shareholders for the Company to adopt this Agreement as the Company’s new rights agreement to replace the Existing Rights Agreement that is expiring as of November 19, 2018, and to implement this Agreement as the Company’s new rights agreement, with the Company and the Rights Agent executing this Agreement and the Board declaring the dividend distribution described in the next paragraph; and

WHEREAS, on November 16, 2018 (the “Rights Dividend Declaration Date”), the Board determined to extend the protections similar to those provided by the Existing Rights Agreement by authorizing and declaring a dividend distribution of one preferred share purchase right (a “Right”) for each share of Common Stock of the Company to be paid on November 19, 2018 (the “Record Date”) to holders of record of the Company’s Common Stock issued and outstanding at the Close of Business on November 19, 2018 to replace the rights previously issued under the Existing Rights Agreement, and the Board also has authorized the issuance of one Right (as such number may hereafter be adjusted pursuant to the provisions of Section 11) for each share of Common Stock of the Company that shall become outstanding between the Record Date (whether originally issued or from the Company’s treasury) and the earlier of the Distribution Date, the Redemption Date and the Final Expiration Date, each Right representing the right to purchase one one-thousandth (subject to adjustment) of one share of Preferred Stock of the Company, all upon the terms and subject to the conditions set forth in this Agreement (the “Rights”).

NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereby agree as follows:

SECTION 1. Certain Definitions

For purposes of this Agreement, the following terms have the meanings indicated:

(a)    “Acquiring Person” means any Person which, together with all of its Related Persons, is the Beneficial Owner of 20% or more of the shares of Common Stock of the Company then outstanding, but excluding (i) the Exempt Persons and (ii) any Grandfathered Persons.

Notwithstanding anything in this Agreement to the contrary, no Person shall become an “Acquiring Person”:

(i)    as the result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares of Common Stock outstanding, increases the percentage of the shares of Common Stock Beneficially Owned by such Person, together with all of its Related Persons, to 20% or more of the shares of Common Stock of the Company then outstanding; provided, however, that if a Person, together with all of its Related Persons, becomes the Beneficial Owner of 20% or more of the shares of Common Stock of the Company then outstanding by reason of share acquisitions by the Company and, after such share acquisitions by the Company, becomes the Beneficial Owner of any additional shares of Common Stock of the Company (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock), then such Person shall be deemed to be an “Acquiring Person” unless, upon becoming the Beneficial Owner of such additional shares of Common Stock, such Person, together with all of its Related Persons, does not Beneficially Own 20% or more of the shares of Common Stock then outstanding;

(ii)    if (A) the Board determines, in its sole discretion, that such Person has become an “Acquiring Person” inadvertently (including, without limitation, because (1) such Person was unaware that it Beneficially Owned a percentage of the then outstanding Common Stock that would otherwise cause such Person to be an “Acquiring Person”; or (2) such Person was aware of the extent of its Beneficial Ownership of Common Stock but had no actual knowledge of the consequences of such Beneficial Ownership under this Agreement); and (B) such Person divests as promptly as practicable (as determined by the Board) a sufficient number of shares of Common Stock so that such Person would no longer be an “Acquiring Person”;

(iii)    solely as a result of any unilateral grant of any security by the Company, or through the exercise of any options, warrants, rights or similar interests (including, without limitation, restricted stock) granted by the Company to its directors, officers and employees; provided, however, that if a Person, together with all of its Related Persons, becomes the Beneficial Owner of 20% or more of the shares of Common Stock of the Company then outstanding by reason of a unilateral grant of a security by the Company, or through the exercise of any options,
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warrants, rights or similar interests (including, without limitation, restricted stock) granted by the Company to its directors, officers and employees, then such Person shall nevertheless be deemed to be an “Acquiring Person” if, subject to Section 1(a)(ii), such Person, together with all of its Related Persons, thereafter becomes the Beneficial Owner of any additional shares of Common Stock (unless upon becoming the Beneficial Owner of additional shares of Common Stock, such Person, together with all of its Related Persons, does not Beneficially Own 20% or more of the Common Stock then outstanding), except as a result of (A) a dividend or distribution paid or made by the Company on the outstanding Common Stock or a split or subdivision of the outstanding Common Stock; or (B) the unilateral grant of a security by the Company, or through the exercise of any options, warrants, rights or similar interest (including, without limitation, restricted stock) granted by the Company to its directors, officers and employees;

(iv)    by means of share purchases or issuances (including, without limitation, debt to equity exchanges), directly from the Company or indirectly through an underwritten offering of the Company, in a transaction approved by the Board; provided, however, that a Person shall be deemed to be an “Acquiring Person” if such Person (A) is or becomes the Beneficial Owner of 20% or more of the shares of Common Stock then outstanding after such transaction and (B) after such transaction, becomes the Beneficial Owner of any additional shares of Common Stock without the prior written consent of the Company and then Beneficially Owns 20% or more of the shares of Common Stock then outstanding;

(v)    if such Person is a bona fide swaps dealer who has become an “Acquiring Person” as a result of its actions in the ordinary course of its business that the Board determines, in its sole discretion, were taken without the intent or effect of evading or assisting any other Person to evade the purposes and intent of this Agreement, or otherwise seeking to control or influence the management or policies of the Company; or

(vi)    as the result of an acquisition of shares of Common Stock pursuant to a Qualifying Offer.

(b)    A person shall be deemed to be “Acting in Concert” with another Person if such Person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert or in parallel with such other Person, or towards a common goal with such other Person, relating to (i) acquiring, holding, voting or disposing of voting securities of the Company or (ii) changing or influencing the control of the Company or in connection with or as a participant in any transaction having that purpose or effect, where, in each case, (A) each Person is conscious of the other Person’s conduct or intent and this awareness is an element in their decision-making processes and (B) at least one additional factor supports a determination by the Board, in its sole discretion, that such Persons intended to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information, attending meetings, conducting discussions or making or soliciting invitations to act in concert or in parallel. A Person who is Acting in Concert with another Person shall be deemed to be Acting in Concert with any third Person who is Acting in Concert with such other Person.

(c)    “Adjustment Shares” has the meaning set forth in Section 11(a)(ii).

(d)    “Affiliate” has the meaning ascribed to such term in Rule 12b-2 of the Exchange Act Regulations, as in effect on the date of this Agreement.

(e)    “Agreement” has the meaning set forth in the Preamble of this Agreement.

(f)    “Articles of Amendment” has the meaning set forth in Section 1(g).

(g)    “Articles of Incorporation” means the Amended and Restated Articles of Incorporation of the Company, as amended and as may be further amended from time to time, as filed with the Office of the Secretary of State of the State of South Dakota, and together with the Articles of Amendment for the Preferred Stock of the Company adopted contemporaneously with the approval of this Agreement and attached hereto as Exhibit A (the “Articles of Amendment”), as the same may hereafter be amended or restated.

(h)    “Associate” has the meaning ascribed to such term in Rule 12b-2 of the Exchange Act Regulations, as in effect on the date of this Agreement.

(i)    A Person is the “Beneficial Owner” of (and “Beneficially Owns” and has “Beneficial Ownership”) of any securities (that are as such “Beneficially Owned”):

(i)    that such Person or any of such Person’s Affiliates or Associates Beneficially Owns, directly or indirectly, as determined pursuant to Rule 13d-3 of the Exchange Act Regulations as in effect on the date of this Agreement;

(ii)    that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time or satisfaction of other conditions) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights (other than the Rights), rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of (1) securities tendered pursuant to a tender or exchange offer made in accordance with the Exchange Act Regulations by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; (2) securities issuable upon exercise of Rights at any time before the occurrence of a Triggering Event; (3) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event if such Rights were acquired by such Person or any of such Person’s Affiliates or Associates before the Distribution Date or pursuant to Section
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3(a) or Section 22 (the “Original Rights”) or pursuant to Section 11(a) in connection with an adjustment made with respect to any Original Rights; or (4) securities which such Person or any of such Person’s Affiliates or Associates may acquire, does or do acquire or may be deemed to have the right to acquire, pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of such Person’s Affiliates or Associates) if such agreement has been approved by the Board, in its sole discretion, before such Person’s becoming an Acquiring Person; or (B) the right to vote pursuant to any agreement, arrangement, or understanding;

(iii)    that are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate of such Person) with which such Person (or any of such Person’s Affiliates or Associates) is (A) Acting in Concert, or has (B) any agreement, arrangement, or understanding (whether or not in writing), for the purpose of acquiring, holding, voting or disposing of any such securities; or

(iv)    which are Beneficially Owned, directly or indirectly, by a Counterparty (or any of such Counterparty’s Affiliates or Associates) under any Derivatives Contract (without regard to any short or similar position under the same or any other Derivatives Contract) to which such Person or any of such Person’s Affiliates or Associates is a Receiving Party; provided, however, that the number of shares of Common Stock that a Person is deemed to Beneficially Own pursuant to this clause (iv) in connection with a particular Derivatives Contract shall not exceed the number of Notional Common Shares with respect to such Derivatives Contract; provided, further, that the number of securities Beneficially Owned by each Counterparty (including, without limitation, its Affiliates and Associates) under a Derivatives Contract shall for purposes of this clause (iv) include all securities that are Beneficially Owned, directly or indirectly, by any other Counterparty (or any of such other Counterparty’s Affiliates or Associates) under any Derivatives Contract to which such first Counterparty (or any of such first Counterparty’s Affiliates or Associates) is a Receiving Party, with this proviso being applied to successive Counterparties as appropriate.

Notwithstanding anything in this definition of “Beneficial Ownership” to the contrary, (x) no Person engaged in business as an underwriter of securities shall be the “Beneficial Owner” of any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition; and (y) no Person shall be deemed the “Beneficial Owner” of any security as a result of an agreement, arrangement or understanding to vote such security that would otherwise render such Person the Beneficial Owner of such security if such agreement, arrangement or understanding is not also then reportable on Schedule 13D and arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act Regulations.

With respect to any Person, for all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including, without limitation, for purposes of determining the particular percentage of the outstanding shares of Common Stock of which any such Person is the Beneficial Owner, shall include the number of shares of Common Stock not outstanding at the time of such calculation that such Person is otherwise deemed to Beneficially Own for purposes of this Agreement, provided, however, that the number of shares of Common Stock not outstanding that such Person is otherwise deemed to Beneficially Own for purposes of this Agreement shall not be included for the purpose of computing the percentage of the outstanding shares of Common Stock Beneficially Owned by any other Person (unless such other Person is also deemed to Beneficially Own for purposes of this Agreement such shares of Common Stock not outstanding).

(j)    “Board” has the meaning set forth in the Preamble of this Agreement.

(k)    “Board Evaluation Period” has the meaning set forth in Section 23(c)(i).

(l)    “Book Entry” means an uncertificated book entry for the Common Stock.

(m)    “Business Day” means any day other than a Saturday, a Sunday, or a day on which banking or trust institutions in New York City, New York are authorized or obligated by law or executive order to close.

(n)    “Close of Business” on any given date means 5:00 p.m., Minneapolis, Minnesota time, on such date; provided, however, that if such date is not a Business Day, it means 5:00 p.m., Minneapolis, Minnesota time, on the next succeeding Business Day.

(o)    “Closing Price” means in respect of any security for any day means the last sale price, regular way, reported at or before 4:00 p.m. New York City time or, if no such sale takes place on such day, the average of the bid and asked prices, regular way, reported at or before 4:00 p.m. New York City time, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on NASDAQ or the NYSE or, if the security is not listed or admitted to trading on NASDAQ or the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the security is listed or admitted to trading or, if the security is not listed or admitted to trading on any national securities exchange, the last quoted price reported at or before 4:00 p.m. New York City time or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by any system then in use reported as of 4:00 p.m. New York City time or, if not so quoted, the average of the closing bid and asked price furnished by a professional market maker making a market in the security selected by the Board.

(p)    “Common Stock” means (i) when used with reference to the Company, the common stock, no par value, of the Company; and (ii) when used with reference to any Person other than the Company, the class or series of capital stock or equity interest with the greatest voting power (in relation to any other classes or series of capital stock or
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equity interest) of such other Person or if such other Person is a Subsidiary of another Person, the Person who ultimately controls such first mentioned Person.

(q)    “Common Stock Equivalents” has the meaning set forth in Section 11(a)(iii).

(r)    “Company” has the meaning set forth in the Preamble of this Agreement.

(s)    “Counterparty” has the meaning set forth in Section 1(x).

(t)    “Current Market Price” of any security on any date means the average of the daily closing prices per share of such security for the 30 consecutive Trading Days immediately before, but not including, such date; provided, however, that if the “Current Market Price” of such security is determined during a period after the announcement by the issuer of such security of (i) a dividend or distribution on such security payable in shares of such security or securities convertible into such shares (other than the Rights); or (ii) any subdivision, combination or reclassification of such security, and before the expiration of the requisite 30 Trading Day period after the ex-dividend date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, in each such case, the “Current Market Price” shall be appropriately adjusted, as determined in good faith by the Board, in its sole discretion, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes, to take into account ex-dividend trading. If on any such date no market maker is making a market in such security or such security is not publicly held or not listed or traded, the “Current Market Price” means the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

Except as provided in this paragraph, the “Current Market Price” of the Preferred Stock shall be determined in accordance with the method set forth above. If the Preferred Stock is not publicly traded, the “Current Market Price” of the Preferred Stock shall be conclusively deemed to be the Current Market Price of the Common Stock of the Company as determined pursuant to the paragraph above (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one thousand. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, the “Current Market Price” of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the “Current Market Price” of one one-thousandth of a share of Preferred Stock shall be equal to the “Current Market Price” of one share of Preferred Stock divided by 1,000.

(u)    “Current Value” has the meaning set forth in Section 11(a)(iii).

(v)    “Definitive Acquisition Agreement” means any definitive written agreement entered into by the Company that is conditioned on the approval by the holders of not less than a majority of the outstanding shares of Common Stock at a meeting of the shareholders of the Company with respect to (i) a merger, consolidation, recapitalization, reorganization, share exchange, business combination or similar transaction involving the Company or (ii) the acquisition in any manner, directly or indirectly, of more than 50% of the consolidated total assets (including, without limitation, equity securities of its Subsidiaries) of the Company and its Subsidiaries.

(w)    “Demanding Shareholders” has the meaning set forth in Section 23(c)(i).

(x)    “Derivatives Contract” means a contract, including all related documentation, between two parties (the “Receiving Party” and the “Counterparty”) that is designed to produce economic benefits and risks to the Receiving Party that correspond substantially to the ownership by the Receiving Party of a number of shares of Common Stock specified or referenced in such contract (the number corresponding to such economic benefits and risks, the “Notional Common Shares”), regardless of whether obligations under such contract are required or permitted to be settled through the delivery of cash, Common Stock or other property, without regard to any short position under the same or any other Derivatives Contract. For the avoidance of doubt, interests in broad-based index options, broad-based index futures and broad-based publicly traded market baskets of stocks approved for trading by the appropriate federal governmental authority shall not be deemed “Derivatives Contracts.”

(y)    “Distribution Date” means the earlier of (i) the Close of Business on the tenth Business Day after the Stock Acquisition Date (or, if the tenth Business Day after the Stock Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) and (ii) the Close of Business on the tenth Business Day (or, if such tenth Business Day occurs before the Record Date, the Close of Business on the Record Date), or such later date as may be determined by the Board, in its sole discretion, before such time any Person becomes an Acquiring Person, after the date of the commencement by any Person (other than any Exempt Person) of, or of the first public announcement of the intention of any Person (other than any Exempt Person) to commence, a tender or exchange offer the consummation of which would result in such Person becoming the Beneficial Owner of 20% or more of the outstanding shares of Common Stock.

(z)    “Equivalent Preferred Stock” has the meaning set forth in Section 11(b).

(aa)    “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(ab)    “Exchange Act Regulations” means the General Rules and Regulations under the Exchange Act.

(ac)    “Exchange Date” has the meaning set forth in Section 7(a).

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(ad)    “Exchange Ratio” has the meaning set forth in Section 24(a).

(ae)    “Exempt Person” means (i) the Company or any of its Subsidiaries; (ii) any officers, directors and employees of the Company or any of its Subsidiaries solely in respect of such Person’s status or authority as such (including, without limitation, any fiduciary capacity); or (iii) any employee benefit plan of the Company or of any Subsidiary of the Company or any entity or trustee holding (or acting in a fiduciary capacity in respect of) shares of capital stock of the Company for or pursuant to the terms of any such plan, or for the purpose of funding other employee benefits for employees of the Company or any Subsidiary of the Company.

(af)    “Exemption Date” has the meaning set forth in Section 23(c)(iii).

(ag)    “Exercise Price” has the meaning set forth in Sections 4(a), 11(a)(ii) and 13(a).

(ah)    "Expiration Date” has the meaning set forth in Section 7(a).

(ai)    “Final Expiration Date” has the meaning set forth in Section 7(a).

(aj)    “Flip-In Event” means any event described in Section 11(a)(ii).

(ak)    “Flip-In Trigger Date” has the meaning set forth in Section 11(a)(iii).

(al)    “Flip-Over Event” means any event described in clause (x), (y) or (z) of Section 13(a).

(am)    “Grandfathered Person” means any Person which, together with all of its Related Persons, is, as of the date of this Agreement, the Beneficial Owner of 20% or more of the shares of Common Stock of the Company then outstanding. A Person ceases to be a “Grandfathered Person” if and when (i) such Person becomes the Beneficial Owner of less than 20% of the shares of Common Stock of the Company then outstanding; or (ii) such Person increases its Beneficial Ownership of shares of Common Stock of the Company to an amount equal to or greater than the greater of (A) 20% of the shares of Common Stock of the Company then outstanding and (B) the sum of (1) the lowest Beneficial Ownership of such Person as a percentage of the shares of Common Stock of the Company outstanding as of any time from and after the public announcement of this Agreement (other than as a result of an acquisition of shares of Common Stock by the Company) plus (2) one share of Common Stock of the Company. The foregoing definition shall grandfather the security or instrument underlying such Beneficial Ownership only in the type and form of the date of this Agreement and shall not grandfather any subsequent change, modification, swap or exchange of such security or instrument into a different type or form of security or instrument (unless such exchange is contemplated explicitly by the terms of such security or instrument). For the avoidance of doubt, the swap or exchange of contracts for differences for shares of Common Stock or other equity securities of the Company shall not be grandfathered under this Agreement.

(an)    “Minimum Tender Condition” has the meaning set forth in Section 1(vv)(iii).

(ao)    “NASDAQ” means the NASDAQ Stock Market.

(ap)    “Notional Common Shares” has the meaning set forth in Section 1(x).

(aq)    “NYSE” means the New York Stock Exchange.

(ar)    “Outside Meeting Date” has the meaning set forth in Section 23(c)(iii).

(as)    “Person” means any individual, firm, corporation, partnership (general or limited), limited liability company, limited liability partnership, association, unincorporated organization, trust or other legal entity, including, without limitation, (i) any syndicate or group deemed to be a Person under Section 13(d)(3) of the Exchange Act and Rule 13d-5(b) thereunder; and (ii) any successor (by merger or otherwise) of any such firm, corporation, partnership (general or limited), limited liability company, limited liability partnership, association, unincorporated organization, trust, or other group or entity.

(at)    “Preferred Stock” means the Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company, having the voting rights, powers, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations and restrictions set forth in the Articles of Amendment.

(au)    “Principal Party” has the meaning set forth in Section 13(b).

(av)    “Qualifying Offer” means an offer determined by a majority of the Board who are not officers of the Company and who are not Acquiring Persons or Affiliates or Associates, nominees or representatives of an Acquiring Person, in good faith and in its sole discretion, to be:

(i)    an offer that has commenced within the meaning of Rule 14d-2(a) under the Exchange Act;

(ii)    a fully financed all-cash tender offer or an exchange offer offering shares of Common Stock of the offeror, or a combination thereof, in each such case for any and all of the outstanding shares of Common Stock of the Company at the same per-share consideration;

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(iii)    an offer that is conditioned on a minimum of at least a majority of (A) the shares of Common Stock of the Company outstanding on a fully-diluted basis; and (B) the outstanding shares of Common Stock of the Company not held by the offeror (or such offeror’s Related Persons) being tendered and not withdrawn as of the offer’s expiration date, which condition shall not be waivable (the “Minimum Tender Condition”);

(iv)    an offer that is subject only to the Minimum Tender Condition and other customary terms and conditions, which conditions shall not include any financing, funding or similar conditions or any requirements with respect to the offeror or its representatives being permitted any due diligence with respect to the books, records, management, accountants or other outside advisers of the Company;

(v)    an offer pursuant to which the Company has received an irrevocable written commitment by the offeror that the offer, if it is otherwise to expire prior thereto, will be extended for at least 20 calendar days after any increase in the consideration offered or after any bona fide alternative offer is commenced;

(vi)    an offer pursuant to which the Company has received an irrevocable, legally binding written commitment of the offeror that the offer will remain open until at least the later of (1) the date the Board redeems the outstanding Rights or exempts such offer from the terms of this Agreement; (2) if no Special Meeting Demand has been received from the holders of a Requisite Percentage with respect to such offer, 10 calendar days after the end of the Board Evaluation Period; and (3) if a Special Meeting is duly requested in accordance with Section 23, 10 calendar days after the date of such Special Meeting or, if no Special Meeting is held within the Special Meeting Period, 10 calendar days after the last day of such Special Meeting Period;

(vii)    an offer pursuant to which the Company has received an irrevocable, legally binding written commitment of the offeror to consummate, as promptly as practicable upon successful completion of the offer, a second step transaction whereby all shares of Common Stock not tendered into the offer shall be acquired at the same consideration per share of Common Stock actually paid pursuant to the offer, subject to shareholders’ statutory appraisal rights, if any;

(viii)    an offer pursuant to which the Company has received an irrevocable, legally binding written commitment of the offeror that no amendments shall be made to the offer to reduce the consideration being offered or to otherwise change the terms of the offer in a way that is adverse to a tendering shareholder (other than extensions of the offer consistent with the terms thereof);

(ix)    For the purposes of the definition of Qualifying Offer, “fully financed” means that the offeror has sufficient funds for the offer and related expenses which shall be evidenced by (1) firm, unqualified, written commitments from responsible financial institutions having the necessary financial capacity, accepted by the offeror, to provide funds for such offer subject only to customary terms and conditions; (2) cash or cash equivalents then available to the offeror, set apart and maintained solely for the purpose of funding the offer with an irrevocable, legally binding written commitment being provided by the offeror to the Board to maintain such availability until the offer is consummated or withdrawn; or (3) a combination of the foregoing; which evidence has been provided to the Company before, or upon, commencement of the offer. If an offer becomes a Qualifying Offer in accordance with this definition, but subsequently ceases to be a Qualifying Offer as a result of the failure at a later date to continue to satisfy any of the requirements of this definition, such offer shall cease to be a Qualifying Offer, and the provisions of Section 23 shall no longer be applicable to such offer.

(aw)    “Qualifying Offer Resolution” has the meaning set forth in Section 23(c)(i).

(ax)    “Receiving Party” has the meaning set forth in Section 1(x).

(ay)    “Record Date” means the Close of Business on November 19, 2018.

(az)    “Redemption Date” has the meaning set forth in Section 7(a).

(ba)    “Redemption Period” has the meaning set forth in Section 23(a).

(bb)    “Redemption Price” has the meaning set forth in Section 23(a).

(bc)    “Related Person” means, as to any Person, any Affiliates or Associates of such Person.

(bd)    “Requisite Percentage” has the meaning set forth in Section 23(c)(i).

(be)    “Rights” has the meaning set forth in the Preamble of this Agreement.

(bf)    “Rights Agent” has the meaning set forth in the Preamble of this Agreement.

(bg)    “Rights Certificate” has the meaning set forth in Section 3(d).

(bh)    “Securities Act” means the Securities Act of 1933, as amended.

(bi)    “Special Meeting” has the meaning set forth in Section 23(c)(i).

(bj)    “Special Meeting Demand” has the meaning set forth in Section 23(c)(i).

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(bk)    “Special Meeting Period” has the meaning set forth in Section 23(c)(ii).

(bl)    “Spread” has the meaning set forth in Section 11(a)(iii).

(bm)    “Stock Acquisition Date” means the first date of public announcement (including, without limitation, the filing of any report pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that a Person has become an Acquiring Person, or such other date, as determined by the Board, in its sole discretion, on which a Person has become an Acquiring Person.

(bn)    “Subsidiary” means, with reference to any Person, any other Person of which (i) a majority of the voting power of the voting securities or equity interests is Beneficially Owned, directly or indirectly, by such first-mentioned Person or otherwise controlled by such first-mentioned Person; or (ii) an amount of voting securities or equity interests sufficient to elect at least a majority of the directors or equivalent governing body of such other Person is Beneficially Owned, directly or indirectly, by such first-mentioned Person, or otherwise controlled by such first-mentioned Person.

(bo)    “Substitution Period” has the meaning set forth in Section 11(a)(iii).

(bp)    “Summary of Rights” has the meaning set forth in Section 3(a).

(bq)    “Trading Day” means, in respect to any security, (i) if such security is listed or admitted to trading on any national securities exchange, a day on which the principal national securities exchange on which such security is listed or admitted to trading is open for the transaction of business; and (ii) if such security is not so listed or admitted, a Business Day.

(br)    “Triggering Event” means any Flip-In Event or any Flip-Over Event.

(bs)    “Trust” has the meaning set forth in Section 24(d).

(bt)    “Trust Agreement” has the meaning set forth in Section 24(d).

SECTION 2. Appointment of Rights Agent.

The Company hereby appoints the Rights Agent to act as rights agent for the Company and in accordance with the express terms and conditions hereof (and no implied terms or conditions), and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable, upon 10 calendar days’ prior written notice to the Rights Agent. If the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents under the provisions of this Agreement shall be as the Company reasonably determines, and the Company shall notify, in writing, the Rights Agent and any co-Rights Agents of such duties. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agents.

SECTION 3. Issue of Rights Certificates.

(a)    On the Record Date, or as soon as practicable thereafter, the Company will send (directly or, at the expense of the Company, through the Rights Agent or its transfer agent if the Rights Agent or transfer agent is directed by the Company and provided with all necessary information and documents) a copy of a Summary of Rights to Purchase Series A Junior Participating Preferred Stock in substantially the form attached hereto as Exhibit B and which may be appended to certificates that represent shares of Common Stock (the “Summary of Rights”), to each record holder of Common Stock as of the Close of Business on the Record Date (other than any Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of the Company or transfer agent or registrar for Common Stock. With respect to certificates representing shares of Common Stock (or Book Entry shares of Common Stock) outstanding as of the Record Date, until the Distribution Date, the Rights shall be evidenced by such shares of Common Stock registered in the names of the holders thereof together with the Summary of Rights, and not by separate Rights Certificates. With respect to Book Entry shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights shall be evidenced by the balances indicated in the Book Entry account system of the transfer agent for the Common Stock together with the Summary of Rights. Until the earlier of the Distribution Date and the Expiration Date, the transfer of any shares of Common Stock outstanding on the Record Date (whether represented by certificates or evidenced by the balances indicated in the Book Entry account system of the transfer agent for the Common Stock, and, in either case, regardless of whether a copy of the Summary of Rights is submitted with the surrender or request for transfer), shall also constitute the transfer of the Rights associated with such shares of Common Stock.

(b)    Rights shall be issued, without any further action, in respect of all shares of Common Stock that become outstanding (whether originally issued or delivered from the Company’s treasury) after the Record Date but before the earlier of the Distribution Date and the Expiration Date; provided, however, that Rights also shall be issued to the extent provided in Section 22. Confirmation and account statements sent to holders of Common Stock for Book Entry form or, in the case of certificated shares, certificates, representing such shares of Common Stock, issued after the Record Date shall bear a legend substantially in the following form:

“[This certificate] [These shares] also evidence[s] and entitle[s] the holder hereof to certain Rights as set forth in a Rights Agreement between Daktronics, Inc. (the “Company”), and Equiniti Trust Company (the “Rights Agent”), dated as of [·], 2018, as the same may be amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the
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Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights shall be evidenced by separate certificates and will no longer be evidenced by [this certificate] [these shares]. The Company will mail to the holder of [this certificate] [these shares] a copy of the Rights Agreement as in effect on the date of mailing without charge after receipt of a written request therefor.

Under certain circumstances, as set forth in the Rights Agreement, Rights that are Beneficially Owned by any Person who is, was or becomes an Acquiring Person or any Related Person thereof (as such capitalized terms are defined in the Rights Agreement), or specified transferees of such Acquiring Person (or Related Person thereof) may become null and void and will no longer be transferable.”

With respect to all certificates representing shares of Common Stock containing the foregoing legend in substantially similar form, until the earliest of the Distribution Date and the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone, registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any such certificate(s) shall also constitute the transfer of the Rights associated with the shares of Common Stock represented by such certificates.

With respect to Common Stock in Book Entry form for which there has been sent a confirmation or account statement containing the foregoing legend in substantially similar form, until the earliest of the Distribution Date and the Expiration Date, the Rights associated with the Common Stock shall be evidenced by such Common Stock alone, registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any such Common Stock shall also constitute the transfer of the Rights associated with such shares of Common Stock.

Notwithstanding this paragraph (b), the omission of the legend or the failure to send, deliver or provide the registered owner of shares of Common Stock a copy of the Summary of Rights shall not affect the enforceability of any part of this Agreement or the rights of any holder of the Rights.

If the Company purchases or otherwise acquires any shares of Common Stock after the Record Date but before the Distribution Date, any Rights associated with such shares of Common Stock shall be cancelled and retired so that the Company is not entitled to exercise any Rights associated wi