EXHIBIT 10.5

DAKTRONICS, INC.

2007 STOCK INCENTIVE PLAN

SECTION 1.

General Purpose of Plan; Definitions

1.1      General Purpose. The name of this plan is the Daktronics, Inc. 2007
Stock Incentive Plan (the “Plan”). The purpose of the Plan is to enable
Daktronics, Inc. (the “Company”) and its Subsidiaries to retain and attract
executives, other employees, members of the Board of Directors and Consultants
who contribute to the Company’s success by their ability, ingenuity and
industry, and to enable such individuals to participate in the long-term success
and growth of the Company by giving them a proprietary interest in the Company.

1.2      Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below; other terms are defined elsewhere in the Plan:

(a)      “Agreement ” means an agreement by and between the Company and a
Recipient under the Plan setting forth the terms and conditions of an Award.

(b)      “Award ” means an Option, Restricted Stock, Restricted Stock Unit,
Deferred Stock or any combination thereof granted pursuant to the terms of this
Plan.

(c)       “Board” means the Board of Directors of the Company, as it may be
comprised from time to time.

(d)      “Cause ” means, except as may otherwise be provided in the terms of an
Agreement or in a written employment agreement between the Company or a
Subsidiary of the Company and the Recipient:

(i)      a material breach of any written employment, service, confidentiality,
non-compete or similar agreement between the Company or a Subsidiary of the
Company and the Recipient;

(ii)     a material breach of any code of conduct established by the Company or
a Subsidiary of the Company;

(iii)    commission of a felony by a Recipient or the failure of a Recipient to
contest prosecution for a felony; or

(iv)    a Recipient’s willful misconduct, dishonesty, breach of fiduciary duty
or gross negligence involving the business or reputation of the Company or a
Subsidiary of the Company.

(e)       “Change in Control” means any of the following

(i)      Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) acquires or becomes a “beneficial owner” (as defined in Rule 13d-3
or any successor rule under the Exchange Act), directly or indirectly, of fifty
percent (50%) or more of the combined voting power of the Voting Securities;
provided, however, that the following shall not constitute a Change in Control
pursuant to this Section 1.2(e)(i):

(A)     any acquisition of Voting Securities or Stock of the Company directly
from the Company other than in connection with a transaction described in
Section 1.2(e)(iii) below;

(B)     any acquisition or beneficial ownership by the Company or a Subsidiary
of the Company;

(C)     any acquisition or beneficial ownership by any employee benefit plan (or
related trust) sponsored or maintained by the Company or one or more of its
Subsidiaries; or

 

A1

 

--------------------------------------------------------------------------------

(D)     any acquisition or beneficial ownership by any corporation with respect
to which, immediately following such acquisition, more than 50% of the combined
voting power of the Company’s then outstanding Voting Securities and the Stock
of the Company is then beneficially owned, directly or indirectly, by all or
substantially all of the persons who beneficially owned Voting Securities and
Stock of the Company immediately prior to such acquisition in substantially the
same proportions as their ownership of such Voting Securities and Stock, as the
case may be, immediately prior to such acquisition;

(ii)     A majority of the members of the Board of the Company shall not be
Continuing Directors;

(iii)    The consummation of a reorganization, merger or consolidation of the
Company or a statutory exchange of outstanding Voting Securities of the Company
unless, immediately following such reorganization, merger, consolidation or
exchange, all or substantially all of the persons who were the beneficial
owners, respectively, of Voting Securities and Stock of the Company immediately
prior to such reorganization, merger, consolidation or exchange beneficially
own, directly or indirectly, more than fifty percent (50%) of, respectively, the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors and the then outstanding shares of common
stock, as the case may be, of the corporation resulting from such
reorganization, merger, consolidation or exchange in substantially the same
proportions as their ownership immediately prior to such reorganization, merger,
consolidation or exchange, of the Voting Securities and Stock of the Company, as
the case may be;

(iv)    Approval by the stockholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the consummation of the sale or
other disposition of all or substantially all of the assets of the Company (in
one or a series of transactions), other than to a corporation with respect to
which, immediately following such sale or other disposition, more than 50% of,
respectively, the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and the then outstanding shares of common stock of such corporation is
then beneficially owned, directly or indirectly, by all or substantially all of
the persons who were the beneficial owners, respectively, of the Voting
Securities and Stock of the Company immediately prior to such sale or other
disposition in substantially the same proportions as their beneficial ownership
immediately prior to such sale or other disposition, of the Voting Securities
and Stock of the Company, as the case may be; or

 

(v)

Successive transactions of the types described in Section 1.2(e)(i)
through (iv).

(f)      “Code ” means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.

 

(g)

“Committee ” means the Compensation Committee of the Board.

(h)      “Company ” means Daktronics, Inc., a corporation organized under the
laws of the State of South Dakota (or any successor corporation).

(i)      “Consultant ” means any person providing bona fide services to the
Company or a Parent Corporation or a Subsidiary of the Company (other than
persons either providing services in connection with the offer or sale of
securities in a capital raising transaction or directly or indirectly promoting
or maintaining a market for the Company’s Stock) who is compensated for such
services and who is not an Employee of the Company or any Parent Corporation or
Subsidiary of the Company. A Consultant would include a Non-Employee Director.

 

(j)

“Continuing Directors” means:

 

(i)

individuals who, on the date hereof, are Directors of the Company;

 

A2

 

--------------------------------------------------------------------------------

(ii)     individuals elected as Directors of the Company subsequent to the date
hereof for whose election proxies shall have been solicited by the Board; or

(iii)    any individual elected or appointed by the Board to fill vacancies on
the Board caused by a death or resignation (but not by removal) or to fill
newly-created directorships;

provided, however, that a Continuing Director shall not include a Director whose
initial assumption of office is in connection with an actual or threatened
election contest, including, but not limited to, a consent solicitation,
relating to the election of the Directors of the Company.

(k)      “Deferred Stock” means an Award made pursuant to Section 7 below of the
right to receive Stock at the end of a specified deferral period or upon the
achievement of specified performance criteria.

 

(l)

“Director ” means a member of the Board.

(m)     “Disability ” means, except as may otherwise be provided in the terms of
an Agreement or in a written employment agreement between the Company or a
Subsidiary of the Company and the Recipient, the Recipient:

(i)      is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months;

(ii)     is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than three months under an accident and health
plan covering Employees of the Company; or

(iii)    when used in connection with the exercise of an Incentive Option
following termination of employment, has a disability within the meaning of
Section 22(e)(3) of the Code;

provided, that only to the extent necessary to satisfy Section 409A of the Code,
the Recipient has a “disability” or is “disabled” within the meaning of Section
409A of the Code.

 

(n)

“Effective Date” shall have the meaning set forth in Section 14 of the Plan.

(o)      “Employee ” means any person, including officers and Directors,
employed by the Company or any Subsidiary of the Company. The payment to a
Director by the Company of Directors’ fees shall not be sufficient to constitute
employment by the Company.

(p)      “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.

(q)      “Executive Officer” means an officer as defined in Rule 16a-1(f) under
the Securities Exchange Act of 1934.

 

(r)

“Fair Market Value” of Stock on any given date shall be determined by the
Committee as follows:

(i)      If the Stock is listed for trading on one or more national securities
exchanges, or is traded on The NASDAQ Stock Market (including The NASDAQ Global
Select Market, The NASDAQ Global Market, or The NASDAQ Capital Market), the
closing price on such national securities exchange or The Nasdaq Stock Market on
the day of the date in question or, if such Stock shall not have been traded on
such principal exchange on such date, the closing price on such principal
exchange on the first day after the date in question on which such Stock was so
traded;

 

A3

 

--------------------------------------------------------------------------------

(ii)     If the Stock is not listed for trading on a national securities
exchange or The NASDAQ Stock Market, but is traded in the over-the-counter
market, the closing bid price for such Stock on the day prior to the date in
question or, if there is no closing bid price for such Stock on such date, the
closing bid price on the first day prior thereto on which such price existed; or

(iii)    If neither Section 1.2(r)(i) nor (ii) is applicable, by any means
deemed fair and reasonable by the Committee in its sole discretion, which
determination shall be final and binding on all parties.

(s)      “Incentive Option” means any Award intended to be and designated as an
“incentive stock option” within the meaning of Section 422 of the Code and that
satisfies the requirements set forth therein.

(t)      “Non-Employee Director” means a non-employee Director within the
meaning of Rule 16b-3(b)(3) under the Exchange Act.

 

(u)

“Non-Qualified Option” means any Option that is not an Incentive Option.

 

(v)

“Option ” means any Award to purchase Stock granted pursuant to Section 5 of the
Plan.

(w)     “Outside Director” means a member of the Board who satisfies the
requirements of an outside director for purposes of Section 162(m) of the Code.

(x)      “Parent Corporation” means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.

 

(y)

“Recipient ” means any eligible person to whom an Award has been granted under
this Plan.

(z)      “Restricted Stock” means an Award of shares of Stock pursuant to
Section 6 below that is subject to restrictions as described therein.

(aa)    “Restricted Stock Unit” means an Award of the right to receive a share
of Stock granted pursuant to Section 6 of the Plan that is subject to
restrictions as described therein.

 

(bb)

“Stock ” means the no par value common stock of the Company.

(cc)    “Subsidiary ” means any corporation (other than the Company), foreign or
domestic, in an unbroken chain of corporations beginning with the Company if
each of the corporations (other than the last corporation in the unbroken chain)
owns stock possessing more than 50% of the total combined voting power of all
classes of stock in one of the other corporations in the chain.

(dd)    “Voting Securities” means the Company’s then outstanding securities
ordinarily entitled to vote in the election of Directors.

Section 2.

Administration

2.1      Authority. The Plan shall be administered by the Board or by the
Committee. If at any time no Committee shall be in office, then the Board shall
exercise the functions of the Committee specified in the Plan. The Board may
exercise any or all of the functions of the Committee specified in the Plan,
except that:

(a)      at such time as any Award is subject to the limitations under Section
162(m) of the Code and regulations promulgated thereunder, the Plan shall be
administered by a Committee consisting solely of Outside Directors;

 

A4

 

--------------------------------------------------------------------------------

(b)      at such time as the Company and its affiliates are subject to the
limitations under Section 16(b) of the Exchange Act, the Committee shall consist
solely of Non-employee Directors; and

(c)      the Plan shall be administered by a Committee that is comprised solely
of members who satisfy the applicable requirements of any stock exchange on
which the Stock may then be listed.

Subject to the foregoing, references in the Plan to the Committee shall also
include the Board, to the extent the context permits.

2.2      Powers. The Committee shall have the power and authority to grant
Awards pursuant to the terms of the Plan. In particular, the Committee shall
have the authority:

 

(a)

Recipients. To select Recipients to whom Awards may from time to time be granted
hereunder;

(b)       Amount. To determine the number of shares of Stock, units or other
measures to be covered by each such Award granted hereunder;

(c)       Terms and Conditions. To determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder
(including, but not limited to, any restriction on any Award and/or the Stock
relating thereto);

(d)       Amendment; Acceleration. To amend the terms of any Award theretofore
granted, prospectively or retroactively, to the extent such amendment is
consistent with the terms of the Plan, including to accelerate the date on which
any Award becomes exercisable or vested and to accelerate the lapse of
restrictions on any Award; provided that no such amendment shall impair the
rights of any Recipient without his, her or its consent except to the extent
authorized under the Plan;

(e)       Substitution. To substitute new Awards for previously granted Awards;
provided, however, that substituting new Awards for previously granted Options
having higher exercise prices shall not be permitted without prior shareholder
approval;

(f)       Determination. To make any other determination and take any other
action that the Committee deems necessary or desirable for the administration of
the Plan; and

(g)       Rules. To adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any Agreements relating thereto); and to otherwise
supervise the administration of the Plan.

2.3      Delegation. Except to the extent prohibited by applicable law or the
applicable rules of a stock exchange, the Committee may delegate the authority
to exercise the powers specified in Section 2.2(a), (b) and (c) above to the
Vice President of Human Resources or any Executive Officer of the Company;
provided, however, that such authority shall not be exercised by any one other
than the Committee with respect to persons who are either the chief executive
officer, chief financial officer, or any other Executive Officer of the Company
or with respect to any Director of the Company.

2.4      Decisions Binding; Limitation on Liability; Indemnification. All
decisions made by the Committee (or its delegate to the extent provided in
Section 2.3) pursuant to the provisions of the Plan shall be final, conclusive
and binding on all persons, including the Company and Recipients. No member of
the Board or the Committee, nor any officer or Employee of the Company acting on
behalf of the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan. To the full extent permitted by law, each member and former member of the
Board and the Committee and each person to whom the Board or the Committee
delegates or has delegated authority under this Plan shall be indemnified by the
Company against and from any loss, liability, judgment, damages, cost and
reasonable expense incurred by such member,

 

A5

 

--------------------------------------------------------------------------------

former member or other person by reason of any action taken, failure to act,
interpretation or determination made in good faith under or with respect to this
Plan.

Section 3.

Stock Subject to Plan

3.1      Shares Reserved for Issuance. The total number of shares of Stock
reserved and available for distribution under the Plan shall be four million
(4,000,000) shares of Stock of the Company, which may be used for any Option or
any type of other Award granted under the Plan. Such shares shall consist of
authorized and unissued shares of Stock of the Company. Shares of Stock subject
to Awards consisting of Options shall be counted against the number of shares in
the first sentence of this Section 3.1 as one share of Stock for every one share
of Stock subject to such Award. Each share of Stock subject to any other Award
that does not involve the payment by the Recipient to the Company of any cash or
Stock consideration to become the owner of the Stock, including Awards of
Deferred Stock, Restricted Stock or Restricted Stock Units, shall be counted
against the number of shares in the first sentence of this Section 3.1 as two
shares of Stock for every one share of Stock subject to such Award. To the
extent that a share of Stock that was subject to an Award described in the
foregoing sentence was counted as two shares of Stock against the number of
shares in the first sentence of this Section 3.1 pursuant to the preceding
sentence is recycled back into the Plan under Section 3.2, the Plan shall be
credited with two shares of Stock.

3.2      Share Counting. If any shares of Stock become available as a result of
canceled, unexercised, lapsed or terminated Awards under this Plan or by reason
of the purchase by or forfeiture of an Award to the Company, such shares again
shall be available for distribution in connection with future Awards under the
Plan. Upon a Stock-for-Stock exercise of an Award, the withholding of Stock for
the payment of the exercise price of an Award, the withholding of Stock for the
payment of taxes on an Award, or any similar transaction involving the
withholding of Stock, the shares of Stock used to pay the exercise price of an
Award or withheld shall not become available for future distribution under the
Plan.

3.3      Adjustments. Upon any change in the outstanding shares of Stock after
the Effective Date by reason of any stock dividend, stock split, reverse stock
split, reclassification, combination, exchange of shares or other similar
recapitalization of the Company, there shall be an appropriate adjustment to
(a) the number or kind of shares of Stock or other securities issued or reserved
for issuance pursuant to the Plan or pursuant to outstanding Awards, (b) the
exercise price of any Option or other Award, and/or (c) any other affected terms
of such Awards. Notwithstanding the foregoing, no fractional shares shall be
issued or paid for. No adjustment shall be made under this Section 3.3 upon the
issuance by the Company of any warrants, rights or options to acquire additional
Stock or of securities convertible into Stock unless such warrants, rights,
options or convertible securities are issued to all shareholders of the Company
on a proportionate basis.

3.4      Effect of Award. The grant of an Award pursuant to the Plan shall not
limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate or
transfer all or any part of its business or assets.

3.5      Application of Code Section 409A. If and to the extent that any
provision of an Award is required to comply with Section 409A of the Code, such
provision shall be administered and interpreted in a manner consistent with the
requirements of Section 409A. If and solely to the extent that any such
provision of an Award as currently written would conflict with Section 409A of
the Code, the Committee shall have the authority, without the consent of the
Recipient, to administer such provision and to amend the Award with respect to
such provision to the extent the Committee deems necessary for the purposes of
avoiding any portion of amounts owed to the Recipient being retroactively
included in the taxable income of the Recipient for any prior taxable year.

Section 4.

Eligibility

Officers, other Employees of the Company and its Subsidiaries, members of the
Board, and Consultants who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company and its Subsidiaries,
as determined by the Committee, are eligible to be granted Awards under the
Plan. Recipients under the Plan shall be selected from time to time by the
Committee, in its sole discretion or as otherwise provided in Section 2.3, from
among those eligible.

 

A6

 

--------------------------------------------------------------------------------

Section 5.

Option Awards

5.1      Option Types. Each Option shall be evidenced by a written Agreement, in
such form as the Committee may approve from time to time, which Agreement shall
be subject to the provisions of this Plan and to such other terms and conditions
as the Committee may deem appropriate. The Options granted under the Plan may be
either Incentive Options or Non-Qualified Options. No Option may be issued more
than ten (10) years after the date the Plan is approved by the shareholders of
the Company.

5.2      Non-Qualified Options. To the extent that any Option or portion of an
Option does not qualify as an Incentive Option, it shall constitute a separate
Non-Qualified Option.

5.3      Incentive Options; Interpretation. Notwithstanding anything in the Plan
to the contrary, no term of the Plan relating to an Incentive Option shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify either the Plan or any
Incentive Option under Section 422 of the Code. The preceding sentence shall not
preclude any modification or amendment to an outstanding Incentive Option,
whether or not such modification or amendment results in disqualification of
such Option as an Incentive Option, to the extent that the Committee determines
that such modification or amendment is necessary or appropriate.

5.4      Terms and Conditions. Options granted under the Plan shall be subject
to the following terms and conditions, as applicable, and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable:

(a)       Annual Limit on Incentive Options. The aggregate Fair Market Value
(determined as of the time the Option is granted) of the Stock with respect to
which an Incentive Option under this Plan or any other plan of the Company and
any Subsidiary or Parent Corporation is exercisable for the first time by a
person during any calendar year shall not exceed $100,000. To the extent any
Option is exercisable in excess of the foregoing limit in any calendar year,
such portion of the Option that is in excess of $100,000 shall be a
Non-Qualified Stock Option.

(b)       Option Exercise Price. Subject to the last two sentences of this
Section 5.4(b), the exercise price per share of Stock purchasable under an
Option shall be determined by the Committee at the time of grant and, if the
Committee does not fix the exercise price of the Option, the exercise price
shall be 100% of the Fair Market Value of the Stock on the date of grant.
However, the exercise price of an Option shall not be less than 100% of the Fair
Market Value of the Stock on the date of grant of such Option. If an Employee
owns or is deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of capital stock of the Company or any Parent Corporation or Subsidiary
and an Incentive Option is granted to such Employee, the Incentive Option
exercise price shall be no less than 110% of the Fair Market Value of the Stock
on the date of grant of such Incentive Option.

(c)       Option Term. Subject to the last two sentences of this Section 5.4(c),
the Committee shall fix the term of each Option and, if the Committee does not
fix the term of an Option, the term shall be ten (10) years from the date the
Option is granted, subject to earlier termination as otherwise provided herein.
However, no Option shall be exercisable more than ten years after the date of
grant of such Option. If an Employee owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of capital stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Option is granted to such Employee,
the term of such Incentive Option shall be no more than five (5) years from the
date of grant of such Incentive Option.

(d)       Exercisability. An Option shall be exercisable in accordance with such
terms and conditions and during such periods as determined by the Committee at
or after grant, subject to the restrictions stated in Section 5.4(a) above. The
Committee may also grant Options that become exercisable upon the attainment of
specified performance goals over a specified performance period. If the
Committee does not determine the time at which an Option shall be exercisable,
such Option shall be exercisable in equal installments of up

 

A7

 

--------------------------------------------------------------------------------

to 20% of the shares of Stock subject to the Option on and after the first
anniversary of the date of grant of the Option and up to an additional 20% of
the shares of Stock subject to the Option on and after the second, third, fourth
and fifth anniversary dates of the date of grant of the Option, subject to
earlier termination as otherwise provided herein. Notwithstanding anything in
the Plan to the contrary, no Option shall be exercisable after the expiration of
its term.

(e)       Method of Exercise. An Option may be exercised, in whole or in part,
at any time during the Option term, by giving written notice of exercise to the
Company, specifying the number of shares of Stock to be purchased. Such notice
shall be accompanied by payment in full of the exercise price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan’s purpose and
applicable law, including to the extent permitted by applicable law, delivery of
irrevocable instructions to a broker acceptable to the Company to promptly
deliver to the Company the amount of sale or loan proceeds to pay the entire
exercise price and any tax withholding resulting from such exercise. As
determined by the Committee at the time of grant or exercise, in its sole
discretion, payment in full or in part may also be made by tendering, by either
actual delivery of Stock or attestation, Stock already owned by the Recipient
for a period of time greater than six (6) months (or such other period
established from time to time by the Committee in order to avoid adverse
accounting treatment under generally accepted accounting principles) and that is
valued at Fair Market Value as of such time; provided, however, that in the case
of an Incentive Option, the right to make a payment in the form of already owned
shares of Stock may be authorized only at the time the Incentive Option is
granted. No Stock shall be issued upon exercise of an Option until full payment
therefor has been made. A Recipient shall generally have the rights to dividends
and other rights of a shareholder with respect to Stock subject to the Option
after the Recipient has given written notice of exercise, has paid in full for
such Stock, and, if requested, has given the representation described in
Section 11.1.

 

(f)

Transferability of Options.

(i)      No Incentive Option shall be transferable by the Recipient otherwise
than by will or by the laws of descent and distribution, and an Incentive Option
shall be exercisable during a Recipient’s lifetime only by such Recipient.

(ii)     The Committee may, in its discretion, authorize all or a portion of any
Nonqualified Option to be granted to a Recipient to be on terms which permit
transfer by such Recipient to: (A) the spouse, children or grandchildren of the
Recipient (“Immediate Family Members”), (B) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (C) a partnership or partnerships
in which such Immediate Family Members are the only partners, provided that: (1)
there is no consideration for any such transfer, (2) the Option pursuant to
which such Stock is granted has been approved by the Committee and expressly
provides for transfer in a manner consistent with this Section 5.4(f)(ii), and
(3) subsequent transfers of a transferred Option shall be prohibited. Following
transfer, any such Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that the
term “Recipient” herein shall in such event be deemed to refer to the
transferee, except that the events of termination of employment and service and
the provisions of Sections 5.4(g) and (h) hereof shall continue to be applied
with respect to the original Recipient, following which the Option shall be
exercisable by the transferee only to the extent, and for the periods, specified
in such Sections.

(iii)    Non-Qualified Options may be transferred to the spouse or former spouse
of the Recipient to the extent provided in a domestic relations order issued in
accordance with applicable state law.

(g)       Termination by Death or Disability. Unless the Option Agreement
provides otherwise or the Committee determines otherwise, if a Recipient’s
employment by or service to the Company or any Subsidiary or Parent Corporation
terminates by reason of the Recipient’s death or Disability, the Option may
thereafter be exercised, to the extent it was exercisable at the time of death
or Disability (or on such accelerated basis as the Committee shall determine at
or after grant), by the Recipient or the legal representative of the estate or
by the legatee of the Recipient under the will of the Recipient, but it may not
be exercised after one year from the date of such Disability or death or the
expiration of the stated term of the

 

A8

 

--------------------------------------------------------------------------------

Option, whichever period is shorter. In the event of termination of employment
or service by reason of the Recipient’s death or Disability, if an Incentive
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the Option will thereafter be treated as a
Non-Qualified Option. All Options or portions thereof that are not vested at the
time of termination shall automatically terminate at such time.

(h)       Other Termination. Unless the Option Agreement provides otherwise or
the Committee determines otherwise, if a Recipient’s employment by or service to
the Company or any Subsidiary or Parent Corporation terminates for any reason
other than the Recipient’s death or Disability, the Option may thereafter be
exercised by the Recipient to the extent it was exercisable at the time of such
termination for three months from the date of such termination or the expiration
of the stated term of the Option, whichever period is shorter, and the portions
of all Options that are not vested at the time of termination shall
automatically terminate at such time.

(i)       Option Cancellation or Repurchase. Notwithstanding any other
provisions of the Plan or any Agreement evidencing any outstanding Option, the
Company shall not be permitted to cancel any outstanding Options in exchange for
the issuance of any other Award or to repurchase outstanding Options if the per
share exercise price of the Option is higher than the Fair Market Value of the
Stock subject to the Options.

Section 6.

Awards of Restricted Stock and Restricted Stock Units

6.1      Grant. Awards of Restricted Stock and Restricted Stock Units may be
granted either alone or in addition to other Awards granted under the Plan. The
Committee shall determine to whom Restricted Stock and Restricted Stock Units
will be granted, the number of shares subject to Awards of Restricted Stock or
Restricted Stock Units, the times or other conditions within which such an Award
may be subject to forfeiture, and all other conditions of Awards of Restricted
Stock or Restricted Stock Units in addition to those contained in Section 6.4.
The Committee may also grant Restricted Stock and Restricted Stock Units in
which the restrictions lapse upon the attainment of specified performance goals
over a specified performance period.

6.2      Award Agreement. Each Award of Restricted Stock or Restricted Stock
Units shall be evidenced by a written Agreement, in such form as the Committee
may approve from time to time, which Agreement shall be subject to the
provisions of this Plan and to such other terms and conditions as the Committee
deems appropriate. The Recipient of an Award of shares of Restricted Stock or
Restricted Stock Units shall not have any rights with respect to such Award
unless and until such Recipient has executed an Agreement evidencing the Award,
has delivered a fully executed copy thereof to the Company, and has otherwise
complied with its then applicable terms and conditions.

6.3      Restricted Stock Award Certificate. Subject to the last sentence of
this Section 6.3, each Recipient of a Restricted Stock Award shall be issued a
stock certificate in respect of shares of Restricted Stock awarded under the
Plan. Such certificate shall be registered in the name of the Recipient and
shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award, substantially in the following form:

The transferability of this certificate and the shares of Stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
Daktronics, Inc. 2007 Stock Incentive Plan and an Agreement entered into between
the registered owner and the Company. Copies of such Plan and Agreement are on
file in the offices of the Secretary of the Company.

The Committee shall require that the stock certificates evidencing such shares
be held in custody by the Company or its designated agent for that purpose until
the restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock Award, the Recipient shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such Award. The Company may
issue shares of Restricted Stock without a stock certificate in book entry form
if it determines it can reasonably do so in compliance with the restrictions set
forth in the Agreement governing such Restricted Stock Award.

 

A9

 

--------------------------------------------------------------------------------

6.4      Restrictions and Conditions on Restricted Stock Awards. The shares of
Restricted Stock awarded pursuant to the Plan shall be subject to the following
restrictions and conditions:

(a)       Restriction Period. Subject to the provisions of this Plan and the
Award Agreement, during a period set by the Committee commencing with the date
of such Award (the “Restriction Period”), the Recipient shall not be permitted
to sell, transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee may provide for the lapse of such
restrictions in installments where deemed appropriate.

(b)       Rights as Shareholder. Except as provided in Sections 6.4(a) and (c),
or as otherwise provided in an applicable Award Agreement, the Recipient shall
have, with respect to the shares of Restricted Stock, all of the rights of a
shareholder of the Company, including the right to vote the shares and the right
to receive any cash dividends. The Committee, in its sole discretion or as
otherwise required by application of Section 409A of the Code, may require the
payment of cash dividends to be deferred and, if the Committee so determines,
reinvested in additional shares of Restricted Stock (to the extent shares are
available under Section 3.1). Certificates for shares of unrestricted Stock
shall be delivered to the Recipient promptly after, and only after, the period
of forfeiture shall have expired without forfeiture in respect of such shares of
Restricted Stock and any other conditions to the vesting of the Restricted Stock
have been met.

(c)       Performance Restrictions. Notwithstanding Section 6.4(b) above, any
Award of Restricted Stock based on the achievement of performance goals shall
not be considered outstanding for any purpose, and no dividends, voting or other
rights of a shareholder shall attach to such shares until such time as the
performance goals have been satisfied and the shares are issued to the Recipient
without restriction.

(d)       Termination of Employment or Service. Except to the extent provided in
the applicable Award Agreement, upon termination of employment or service of a
Recipient for any reason during the Restriction Period, all shares of Restricted
Stock then subject to restriction shall automatically terminate and be forfeited
by the Recipient. The Committee may, in its sole discretion, when it finds that
a waiver would be in the best interest of the Company, waive in whole or in part
any or all remaining restrictions with respect to the Recipient’s shares of
Restricted Stock.

(e)       Transferability. Subject to the provisions of this Plan and the Award
Agreement, Restricted Stock Awards may not be sold, assigned, transferred,
pledged or otherwise encumbered during the Restriction Period.

6.5      Terms and Conditions of Awards of Restricted Stock Units. The shares of
Restricted Stock Units awarded pursuant to the Plan shall be subject to the
following restrictions and conditions:

(a)       Vesting. At the time of the grant of Restricted Stock Units, the
Committee may impose such restrictions or conditions to the vesting of such
Restricted Stock Units as it, in its sole discretion, deems appropriate, to be
contained in the Award Agreement. The Committee may divide such Restricted Stock
Units into classes and assign different vesting conditions for each class. If
all conditions to the vesting of a Restricted Stock Unit are satisfied, and
except as provided in Section 6.5(c), upon the satisfaction of all vesting
conditions with respect to a Restricted Stock Unit, such Restricted Stock Unit
shall vest.

(b)       Shares Upon Vesting. Upon the vesting of Restricted Stock Units, the
Recipient shall be entitled to receive, within 30 days following the date on
which such Restricted Stock Units vest, one share of Stock for each Restricted
Stock Unit that so vests.

(c)       Termination of Employment or Service. Except to the extent provided in
the applicable Award Agreement, upon termination of a Recipient’s employment or
service for any reason, all Restricted Stock Units shall automatically terminate
and be forfeited by the Recipient. The Committee may, in its sole discretion,
when it finds that a waiver would be in the best interest of the Company, waive
in whole or in part any or all remaining restrictions with respect to the
Recipient’s Restricted Stock Units.

 

A10

 

--------------------------------------------------------------------------------

(d)       Transferability. Subject to the provisions of this Plan and the Award
Agreement, Restricted Stock Units may not be sold, assigned, transferred,
pledged or otherwise encumbered during the Restriction Period.

Section 7.

Deferred Stock Awards

7.1      Grant. Deferred Stock may be awarded either alone or in addition to
other Awards granted under the Plan. The Committee shall determine the duration
of the period (the “Deferral Period”) during which, and the conditions under
which, receipt of the Deferred Stock will be deferred, and the other terms and
conditions of the Award consistent with the terms of the Plan, in addition to
those contained in Section 7.2. The Committee may also condition the receipt of
Deferred Stock upon the attainment of specified performance goals. Each Award of
Deferred Stock shall be confirmed by, and subject to the terms of, an Agreement
executed by the Company and the Recipient.

7.2      Terms and Conditions. Shares of Deferred Stock awarded pursuant to this
Plan shall be subject to the following terms and conditions:

(a)       Transferability. Subject to the provisions of this Plan and the
applicable Award Agreement, Deferred Stock Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral Period. At the
expiration of the Deferral Period, share certificates shall be delivered to the
Recipient in a number equal to the shares covered by the Deferred Stock Award.

(b)       Rights as Shareholder. An Award of Deferred Stock shall not be
considered outstanding for any purpose, and no dividends, voting or other rights
of a shareholder shall attach to such shares until such time as the Deferral
Period has ended and the shares are issued to the Recipient.

(c)       Termination of Employment or Service. Except as provided in the
applicable Award Agreement, upon termination of employment or service for any
reason during the Deferral Period, the Award of Deferred Stock shall
automatically terminate and be forfeited by the Recipient. The Committee may, in
its sole discretion, when it finds that a waiver would be in the best interest
of the Company, waive in whole or in part any or all of the remaining deferral
limitations imposed hereunder with respect to any or all of the Recipient’s
Deferred Stock.

Section 8.

Change in Control

8.1      Automatic Acceleration. Upon the occurrence of a Change in Control,
except as otherwise provided in an applicable Agreement, all outstanding Awards
granted to a Recipient that have not theretofore vested shall immediately vest,
and all restrictions on such Awards shall immediately lapse, and each Option
granted to a Recipient that is outstanding at such time shall be come fully and
immediately exercisable.

8.2      Limitation on Change in Control Payments. Notwithstanding anything in
Section 8.1 or Section 9 to the contrary, if, with respect to a Recipient, the
acceleration of the exercisability of an Option or the payment of cash in
exchange for all or part of an Award as provided in Section 8.1 or Section 9
(which acceleration or payment could be deemed a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code), together with any other payments
which such Recipient has the right to receive, would constitute a “parachute
payment” (as defined in Section 280G(b)(2) of the Code) then, unless otherwise
provided in the applicable Award Agreement, such acceleration of exercisability
or vesting and payments pursuant to the Plan shall be reduced to the largest
amount as, in the sole judgment of the Committee, will result in no portion of
such payments being subject to the excise tax imposed by Section 4999 of the
Code.

Section 9.

Additional Change in Control Provisions

In addition to the provisions of Section 8, upon the occurrence of a Change in
Control, the Committee shall be obligated to do one of the following in order to
protect the interests of Recipients upon a Change in Control:

 

A11

 

--------------------------------------------------------------------------------

(a)       Substitution of Award. Make appropriate provision for the protection
of outstanding Awards granted under this Plan by the substitution, in lieu of
such Awards, of other Awards, which other Awards are designed to preserve the
value of the Awards granted under the Plan;

(b)       Cancellation of Options. With respect to any Option, declare, at least
twenty days prior to the Change in Control, and provide written notice to each
Recipient of the declaration, that each outstanding Option, whether or not then
exercisable, shall be cancelled at the time of, or immediately prior to the
occurrence of, the Change in Control (unless it shall have been exercised prior
to the occurrence of the Change in Control); and/or

(c)       Cash Payment. Cause payment to be made, within twenty days after a
Change in Control, in exchange for each cancelled Award to each Recipient of an
Award that is cancelled, of an amount of cash equal to the Fair Market Value for
each share of Stock covered by the cancelled Award, except that with respect to
any cancelled Option, cash equal to the amount (if any) by which the per share
transaction consideration, taking into account such factors as the Committee
deems appropriate in determining this value, exceeds the exercise price per
share of Stock covered by such Option.

Notwithstanding the foregoing, no Recipient of an Award shall be entitled to the
payment provided in this Section 9 if such Award has expired or was cancelled
pursuant to the terms of the Plan or the applicable Agreement.

Section 10.

Substitute Awards

10.1    Purpose. Awards may be granted under this Plan from time to time in
substitution for Awards held by Employees of other corporations who are about to
become Employees of the Company, or any Parent Corporation or Subsidiary
thereof, or whose employer is about to become a Subsidiary of the Company, as
the result of a merger or consolidation of the Company or its Subsidiary with
another corporation, the acquisition by the Company or its Subsidiary of all or
substantially all the assets of another corporation, the acquisition by the
Company or its Subsidiary of at least 50% of the issued and outstanding stock of
another corporation, or such other similar corporate transaction as determined
by the Committee, in its sole discretion.

10.2    Terms and Conditions. To the extent permitted by applicable law, the
terms and conditions of the substitute Award granted pursuant to Section 10.1
may vary from the terms and conditions set forth in this Plan to such extent as
the Committee at the time of the grant may deem appropriate to conform, in whole
or in part, to the provisions of the Stock Awards in substitution for which they
are granted; provided, however, with respect to Incentive Options, unless
otherwise determined by the Committee, no such variation shall be permitted that
affects the status of any such substitute Option as an Incentive Option.

Section 11.

General Provisions

11.1    Compliance With Laws. No Stock will be issued pursuant to the Plan
unless in compliance with applicable legal requirements including, without
limitation, those relating to securities laws and stock exchange listing
requirements. The Committee may require each Recipient receiving Stock pursuant
to an Award under the Plan to represent to and agree with the Company in writing
that such person is acquiring the Stock without a view to distribution thereof.

11.2    Stop Transfer Orders. All certificates for Stock delivered under the
Plan shall be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange Commission, any stock exchange upon which the
Stock is then listed, and any applicable federal or state securities laws, and
the Committee may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions. The issuance of Stock may be
effected on a non-certificated basis to the extent not prohibited by applicable
law or the applicable rules of any stock exchange upon which the Stock is then
traded.

11.3    No Rights as a Shareholder. Unless otherwise provided by the Committee,
in the Plan or in an Award Agreement or in any other written agreement between a
Recipient and the Company or a Subsidiary of the

 

A12

 

--------------------------------------------------------------------------------

Company, no Award shall entitle the Recipient to any cash dividend, voting or
other rights of a shareholder of the Company unless and until the date of
issuance under the Plan of any shares of Stock that are subject to such Award.

11.4    Effect of Transfer/Leave of Absence. For purposes of any Incentive
Option, the following events shall not be deemed a termination of employment:

(a)       Transfer. A transfer of an Employee from the Company to a Parent
Corporation or a Subsidiary, or a transfer of an Employee from a Parent
Corporation or a Subsidiary to the Company or any other Parent Corporation or
Subsidiary;

 

(b)

Leave of Absence. A leave of absence approved in writing by the Company; and;

(c)       Military Leave. A military leave in which the Employee’s right to
reemployment is guaranteed under the provisions of the Uniform Services
Employment and Reemployment Rights Act (USERRA) and regulations promulgated
thereunder.

11.5    Tax Withholding. Each Recipient shall, no later than the date as of
which any part of the value of an Award first becomes includable as compensation
in the gross income of the Recipient for federal income tax purposes, pay to the
Company, or make arrangements satisfactory to the Committee regarding payment
of, any federal, state or local taxes of any kind required by law to be withheld
with respect to the Award. The obligations of the Company under the Plan shall
be conditional on such payment or arrangements, and the Company, any Parent
Corporation and any Subsidiary shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due from
it to the Recipient. If the terms of an Award so permit, a Recipient may elect
by written notice to the Company to satisfy part or all of the withholding tax
requirements associated with the Award by:

(a)       Retain Stock. Authorizing the Company to retain from the number of
shares of Stock that would otherwise be deliverable to the Recipient, or

(b)       Delivering of Held Stock. Delivering to the Company from Stock already
owned by the Recipient, that number of shares having an aggregate Fair Market
Value equal to part or all of the tax payable by the Recipient under this
Section, and if shares of Stock are withheld, the amount withheld shall not
exceed the minimum required federal, state and FICA withholding amount.

Any such election shall be in accordance with, and subject to, applicable tax
and securities laws, regulations and rulings, accounting rules, regulations and
requirement and any other rules or regulations established by the Committee.

11.6    No Right to Employment, Service or Awards. The granting of an Award
under the Plan shall impose no obligation on the Company, its Subsidiary or any
Parent Corporation to continue the employment of a Recipient and shall not
lessen or affect the Company’s, its Subsidiary’s or its Parent Corporation’s
right to terminate the employment of such Recipient. Nothing in the Plan shall
interfere with or limit in any way the right of the Company, the Board or the
Company’s shareholders to terminate the directorship of any Director at any
time, nor confer upon any Director any right to continue to serve as a Director
of the Company. Nothing in the Plan shall interfere with or limit in any way the
right of the Company or the Board to terminate the service of any Consultant at
any time, nor confer upon any Consultant any right to continue to serve as a
Consultant to the Company. No Recipient or other person shall have any claim to
be granted any Award, and there is no obligation for uniform treatment of
Recipients or holders or beneficiaries of Awards. The terms and conditions of
Awards and the Committee’s determinations and interpretations with respect
thereto need not be the same with respect to each Recipient.

11.7    Other Benefit and Compensation Programs. Payments and other benefits
received by a Recipient under an Award shall not be deemed a part of a
Recipient’s regular, recurring compensation for purposes of any termination,
indemnity or severance pay laws and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan,
contract or similar arrangement provided by the Company, its Subsidiary or

 

A13

 

--------------------------------------------------------------------------------

its Parent Corporation, unless expressly so provided by such other plan,
contract or arrangement or the Committee determines that an Award or portion of
an Award should be included to reflect competitive compensation practices or to
recognize that an Award has been made in lieu of a portion of competitive cash
compensation.

11.8    Successors and Assigns. The Plan shall be binding on all successors and
assigns of the Company and a Recipient including, without limitation, the estate
of such Recipient and the executor, administrator or trustee of such estate, or
any receiver or trustee in bankruptcy or representative of the Recipient’s
creditors.

11.9

Nontransferability of Awards; Designation of Beneficiary.

(a)       Nontransferability. Unless otherwise provided in this Plan or in the
applicable Award Agreement, no Award or interest in an Award may be sold,
assigned, pledged (as collateral for a loan or as security for the performance
of an obligation or for any other purpose) or transferred by a Recipient or made
subject to attachment or similar proceedings otherwise than by will or by the
applicable laws of descent and distribution, except to the extent a Recipient
designates one or more beneficiaries on a Company-approved form, as set forth in
Section 11.9(b) of this Plan, who may exercise the Award or receive payment
under the Award after the Recipient’s death, and during a Recipient’s lifetime,
an Award may be exercised only by the Recipient.

(b)       Designation of Beneficiary. A Recipient may designate a beneficiary to
succeed to the Recipient’s Awards under the Plan in the event of the Recipient’s
death by filing a beneficiary form with the Company and, upon the death of the
Recipient, such beneficiary shall succeed to the rights of the Recipient to the
extent permitted by law, the terms of this Plan and the applicable Award
Agreement. In the absence of a validly designated beneficiary who is living at
the time of the Recipient’s death, the Recipient’s executor or administrator of
the Recipient’s estate shall succeed to the Awards, which shall be transferable
by will or pursuant to laws of descent and distribution.

11.10   International Recipients. With respect to Recipients who reside or work
outside the United States of America, the Committee may, in its sole discretion,
amend the terms of the Plan or adopt such modifications, procedures or subplans
with respect to such Recipients as are necessary or desirable to ensure the
viability of the benefits of the Plan, comply with applicable foreign laws or
obtain more favorable tax or other treatment for a Recipient, the Company, a
Subsidiary or a Parent Corporation; provided, however, that no such changes
shall apply to the Awards to Recipients who may be “covered employees” under
Section 162(m) of the Code or any successor thereto unless consistent with the
provisions thereof.

11.11   No Trust or Fund. The Plan is intended to constitute an “unfunded” plan.
Nothing contained herein shall require the Company to segregate any monies,
other property, or shares of Stock, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any Recipient,
and no Recipient shall have any rights that are greater than those of a general
unsecured creditor of the Company.

11.12   Severability. If any provision of the Plan or any Award Agreement shall
be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of the Plan or Award Agreement, and such Plan or
Award Agreement shall be construed and enforced as if the illegal or invalid
provision had not been included.

Section 12.

Term; Amendments and Termination

(a)       Term. This Plan shall commence on the Effective Date and shall
terminate on August 14, 2017 or at such earlier date as the Committee shall
determine, and no Award may be granted under the Plan after August 14, 2017. The
termination of this Plan shall not affect any Awards then outstanding under the
Plan.

(b)       Amendments. The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of a Recipient under an Award theretofore granted without the Recipient’s
or Recipient’s consent. The Board shall obtain approval of the Company’s
shareholders for any amendment that would require such approval in order to
satisfy the requirements of

 

A14

 

--------------------------------------------------------------------------------

Section 162(m) of the Code, Section 422 of the Code, stock exchange rules or
other applicable law. The Committee may amend the terms of any Award theretofore
granted prospectively or retroactively; however, subject to Sections 3, 8 and 9
of the Plan, no such amendment shall impair the rights of any Recipient without
his, her or its consent. Adjustments made by the Committee pursuant to Section 3
(relating to adjustments of Stock) and Section 9 shall not be subject to the
limitations of this Section 12. Notwithstanding the foregoing provisions of this
Section 12, neither the Plan nor any outstanding Option shall be amended to
decrease the exercise price of such Award unless first approved by the requisite
vote of the shareholders, and neither the Plan nor any outstanding Agreement
shall be amended in any way that would cause an outstanding Award that is not
subject to the tax described in Section 409A of the Code to be subject to such
tax.

Section 13.

Governing Law

To the extent that federal laws do not otherwise control, this Plan and all
determinations made and actions taken under this Plan shall be governed by the
laws of the State of South Dakota, without regard to the conflicts of law
provisions thereof, and construed accordingly.

Section 14.

Effective Date of Plan

The Plan shall be effective on the date it is approved by the Company’s
shareholders, which was August 15, 2007.

 

 

A15