UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 14a-11(c) or 14a-12
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DAKTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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DAKTRONICS, INC.
331 32nd Avenue
Brookings, South Dakota 57006
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
15 AUGUST 2001
To the Shareholders of Daktronics, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Daktronics,
Inc., will be held at Daktronics, Inc., 331 32nd Avenue, Brookings, South Dakota
57006 on Wednesday, August 15, 2001 at 7:00 p.m. Central Daylight Time, for the
following purposes:
1. To elect directors duly nominated for a term expiring in 2004:
James B. Morgan, Duane E. Sander, John L. Mulligan.
2. To ratify the appointment of McGladrey & Pullen, LLP as
independent auditors for the Company for the fiscal year
ending April 27, 2002.
3. To consider and vote upon a proposal to approve the Amendment
to the Amended and Restated Articles of Incorporation
increasing the shares authorized to be issued from 30,000,000
to 60,000,000.
4. To consider and vote upon a proposal to approve the
Daktronics, Inc. 2001 Stock Option Plan.
5. To consider and vote upon a proposal to approve the
Daktronics, Inc. 2001 Outside Directors Stock Option Plan.
6. To consider and act upon any other matters that may properly
come before the meeting or any adjournment thereof.
Only the shareholders of record of Daktronics Common Stock at the close of
business on 13 July 2001 will be entitled to receive notice of and to vote at
the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you plan to be
personally present at the meeting, please complete, date and sign the enclosed
proxy and return it promptly in the enclosed envelope. If you later desire to
revoke your proxy, you may do so at any time before it is exercised.
By order of the Board of Directors,
Duane E. Sander, Secretary
July 13, 2001
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SUBMIT YOUR PROXY BY
MAIL PRIOR TO THE MEETING. Shareholders who are present at the meeting may
withdraw their Proxy and vote in person if they so desire.
DAKTRONICS, INC.
TABLE OF CONTENTS
Pages
-----
Information about the meeting............................................... 1
Proposal #1-Elect Directors................................................. 2
Executive Compensation...................................................... 5
Performance Graph........................................................... 7
Report of the Compensation Committee........................................ 8
Report of the Audit Committee............................................... 9
Security Ownership of Certain Beneficial Owners and Management..............10
Proposal #2-Ratify Appointment of Independent Certified
Public Accountants..............................................11
Proposal #3-Approve Amendment to the Amended and Restated
Articles of Incorporation Increasing the
Number of Authorized Shares of Common Stock.....................11
Proposal #4-Approve 2001 Stock Option Plan..................................12
Proposal #5-Approve 2001 Outside Director Stock Option Plan.................14
Other Matters...............................................................15
Shareholder Proposals for the Next Annual Meeting...........................15
Appendix A - Charter of the Audit Committee.................................16
ii
DAKTRONICS, INC.
331 32nd Avenue
Brookings, South Dakota 57006
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 15, 2001
This Proxy Statement is furnished in connection with the solicitation
of the enclosed proxy by the Board of Directors of Daktronics, Inc.
("Daktronics" or the "Company") for use at the Annual Meeting of Shareholders to
be held on Wednesday, August 15, 2001, at Daktronics, Inc., 331 32nd Avenue,
Brookings, South Dakota at 7:00 p.m. Central Daylight Time, and at any
adjournment thereof, for the purposes set forth in the Notice of Annual Meeting
of Shareholders.
Shares of Common Stock represented by proxies in the form solicited
will be voted in the manner directed by a shareholder. If no direction is made,
the proxy will be voted (1) for election of the three nominees for James B.
Morgan, Duane E. Sander, John L. Mulligan, for terms expiring 2004, (2) for
ratification of appointment of McGladrey & Pullen, LLP as independent auditors
for the Company for the fiscal year ending April 27, 2002, (3) for approval of
the Amendment to the Amended and Restated Articles of Incorporation increasing
the shares authorized to be issued from 30,000,000 to 60,000,000, (4) for
approval of the Daktronics, Inc. 2001 Stock Option Plan, (5) for approval of the
Daktronics, Inc. 2001 Outside Directors Stock Option Plan. A shareholder may
revoke his or her proxy at any time before it is voted by delivering to the
Secretary of the Company a written notice of termination of the proxy's
authority, by filing with the Secretary of the Company another proxy bearing a
later date, or by appearing and voting at the meeting. This Proxy Statement and
the form of proxy enclosed are being mailed to shareholders commencing on or
about July 18, 2001.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed by the Company for the
meeting, and the number of shareholders present in person or by proxy will
determine whether or not a quorum is present. The inspectors of election will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum for all matters. Shares abstaining will
be treated as un-voted. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote by the
inspectors of election with respect to that matter. The three persons receiving
the most votes will be elected for directors and the other issues will be
determined by a majority of the votes cast.
Only the holders of the Company's Common Stock whose names appear of
record on the Company's books at the close of business on July 13, 2001 will be
entitled to vote at the annual meeting. At the close of business on June 27,
2001, a total of 18,067,950 shares after the effect of the May 24, 2001
two-for-one stock split of Common Stock were outstanding. The holders of
one-third of the shares of Common Stock issued and outstanding and entitled to
vote at the 2001 Annual Meeting, present in person or represented by proxy, will
constitute a quorum for the transaction of business. If a quorum should not be
present, the 2001 Annual Meeting may be adjourned from time to time until a
quorum is present. Holders of Common Stock are entitled to one vote per share on
all matters submitted to a vote of shareholders, except that with respect to the
election for directors every shareholder shall have the right to vote, in person
or by proxy, the number of shares owned by the holder for as many persons as
there are directors to be elected, or to cumulate the holder's votes by giving
one candidate the number of votes which is equal to the number of directors to
be elected multiplied by the number of the holder's shares, or by distributing
such cumulated votes among any number of candidates.
Participants in the Company's 401(k) plan who have Daktronics shares as
one of their 401(k) investment selections are entitled to instruct the trustee
of the 401(k) plan how to vote their shares of Common Stock. Each participant
will receive a voting instruction card to direct the trustee to vote that
participant's shares. If a participant does not timely return a completed voting
instruction card, the trustee will vote the shares allocated to that participant
in the same proportion as the shares which are voted by all participants under
the 401(k) plan.
Expenses in connection with the solicitation of proxies will be paid by
the Company. Proxies are being solicited primarily by mail, but, in addition,
officers and regular employees of the Company who will receive no extra
compensation for their services may solicit proxies by telephone, email or
personal calls. The Company may reimburse brokerage firms and others for their
expenses in forwarding solicitation materials to the beneficial owners of Common
Stock.
A copy of the Company's Annual Report for the fiscal year ended April
28, 2001 is being furnished to each shareholder with this Proxy Statement.
PROPOSAL #1 - ELECTION OF DIRECTORS
Pursuant to the Company's Articles of Incorporation, the Board of
Directors is divided into three classes serving staggered three-year terms
expiring at each successive annual meeting of shareholders. The terms of James
B. Morgan, John L. Mulligan and Duane E. Sander expire at the 2001 Annual
Meeting, Aelred J. Kurtenbach, Charles S. Roberts and Nancy D. Frame expire at
the 2002 Annual Meeting, and Frank J. Kurtenbach, James A. Vellenga and Roland
J. Jensen expire at the 2003 Annual Meeting.
The persons named in the accompanying proxy will vote for the election
of the three nominees described herein, unless authority to vote is withheld.
The Board of Directors has been informed that each of the three nominees is
willing to serve as a director; however, if any nominee should decline or become
unable to serve as a director for any reason, the proxy may be voted for such
other person as the proxies shall, in their discretion, determine.
The following table sets forth certain information as of July 13, 2001
concerning the three nominees for election as directors of the Company and the
continuing directors:
Name and Age Position with Company
- ------------ ---------------------
DIRECTORS FOR TERMS EXPIRING AT THE 2001 ANNUAL MEETING
James B. Morgan (54) President, Chief Operating Officer and
Director
Duane E. Sander (63) Secretary and Director
John L. Mulligan (62) Director
DIRECTORS FOR TERMS EXPIRING AT THE 2002 ANNUAL MEETING
Aelred J. Kurtenbach (67) Chairman, CEO and Director
Charles S. Roberts (76) Director
Nancy D. Frame (56) Director
NOMINEES FOR TERMS EXPIRING AT THE 2003 ANNUAL MEETING
Frank J. Kurtenbach (63) Vice President, Sales and Director
Roland J. Jensen (70) Director
James A. Vellenga (66) Director
2
AELRED J. KURTENBACH, PH.D. is a co-founder of the Company and has
served as a director of the Company since its incorporation. Dr. Kurtenbach is
currently serving as Chairman of the Board of Directors. He also served as
President of the Company until 1999. He served as Treasurer until 1993. Dr.
Kurtenbach has 43 years of experience in the fields of communication engineering
and control system design, technical services, computer systems, electrical
engineering education and small business management. Dr. Kurtenbach has B.S.,
M.S. and Ph.D. degrees in Electrical Engineering from South Dakota School of
Mines and Technology, the University of Nebraska and Purdue University,
respectively.
CHARLES S. ROBERTS, M.D. has served as a director of the Company since
1968. Prior to his retirement in 1991, Dr. Roberts was engaged in family
practice and internal medicine at the Brookings Clinic, Brookings, South Dakota.
NANCY D. FRAME was elected as a director in 1999. Prior to her
retirement, Ms. Frame was the Deputy Director of the United States Trade and
Development Agency in Washington, D.C., a position she held from 1986 to 1999.
From 1976 to 1986 she held various positions in the legal profession,
specializing in international trade and commercial law. She obtained her law
degree from Georgetown University, Washington, D.C.
FRANK J. KURTENBACH joined the Company in 1979 as Sales Manager of the
Standard Scoreboard Division, which was expanded to include other products in
1981. He has served as Sales Manager for the Company since 1982, as a director
since 1984 and as Vice President, Sales since November 1993. Mr. Kurtenbach has
a M.S. degree from South Dakota State University. Aelred Kurtenbach and Frank
Kurtenbach are brothers.
ROLAND J. JENSEN worked in various capacities from 1960 to 1990 with
Northern States Power Company, an electric and natural gas utility, ending his
service as Senior Vice President of Power Supply. From 1990 to his retirement in
January 1994, he was Chairman and CEO of NRG Energy, Inc., a Minneapolis-based
energy services company. Mr. Jensen has served as a director of the Company
since 1994.
JAMES A. VELLENGA was elected as a director in 1997. Mr. Vellenga is
currently the President, CEO and Chairman of the Board of Uptech Automation Inc.
From 1988 to 1998 he held various senior management positions at Aetrium Inc.,
most recently as the Vice President of Technology. Prior to joining Aetrium
Inc., Mr. Vellenga was a founder and Vice President of Operations of Lee Data
Corporation. During the formative years of the computer industry, (1957-1979)
Mr. Vellenga worked at Remington Rand Univac, Control Data Corporation and Data
100 Corporation involved in the design and management of computer products. Mr.
Vellenga holds a B.S. degree in Electrical Engineering from South Dakota State
University.
JAMES B. MORGAN joined the Company in 1969 as a part-time engineer
while earning his M.S. degree in Electrical Engineering from South Dakota State
University. Mr. Morgan became President and Chief Operating Officer of the
Company in 1999. He served as its Vice President, Engineering, with
responsibility for product development, contract design, project management for
customer contracts, and corporate information and scheduling systems, from 1976
to 1999. Mr. Morgan has also served as a director since 1984.
DUANE E. SANDER, PH.D. is a co-founder of the Company and has served as
a director and as Secretary of the Company since its incorporation. Dr. Sander
is currently employed at the South Dakota State University Foundation. He served
as Dean of Engineering at SDSU from 1990-1999, and taught electrical engineering
courses and directed biomedical research projects since 1967.
JOHN L. MULLIGAN was elected as a director of the Company in 1993.
Since 1995, he has been employed as Vice President and financial advisor with
Morgan Stanley Dean Witter, in the same capacity as when he was employed with
Mesirow Financial from late 1990 through mid 1993. In 1993 and 1994, he served
as principal of Mulligan Financial, a financial services firm that he founded.
From 1967 to March 1990, he served as President, Chairman, Chief Executive
Officer and director of American Western Corporation.
3
DIRECTOR COMPENSATION
The current non-employee directors of the Company include Mulligan,
Sander, Roberts, Jensen, Frame, and Vellenga. During fiscal 2001 each
non-employee director received, for their services as a director, a $2,000
retainer, $1,500 for each meeting attended in person, $500 for each committee
meeting attended in person (telephonic participation in all meetings at one-half
rate), and reimbursement of all out-of-pocket expenses incurred in attending
meetings. The non-employee directors also receive stock options under the
Company's 1993 Outside Directors Stock Option Plan as amended. In August 2000,
Mr. Jensen and Mr. Vellenga each received 12,000 shares for each of the three
years of their term under the 1993 Outside Directors Stock Option Plan as
amended, which are subject to vesting restrictions under the plan and have an
exercise price of $5.92 per share. The numbers of shares and the option price
have been adjusted to reflect the two-for-one stock splits declared December 7,
1999 and May 24, 2001. Dr. Sander does not receive any additional compensation
for serving as Secretary of the Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has an Audit Committee consisting
of John L. Mulligan (chair), James A. Vellenga and Duane E. Sander; and a
Compensation Committee consisting of Roland Jensen (chair), Charles S. Roberts,
and Nancy Frame. The Company has no standing nominating committee. The Board as
a whole performs the functions that would otherwise be delegated to a nominating
committee.
The Board of Directors held five regular and three telephone meetings
during fiscal 2001. All incumbent directors attended at least 75% of the Board
meetings. The Board also passed several resolutions during fiscal 2001 by
written consent.
The Audit Committee held three meetings in Fiscal 2001. The Audit
Committee reviews the activities of the Company's independent accountants and
the results of audits made by these professionals.
The Compensation Committee held one meeting during fiscal 2001. The
Compensation Committee is responsible for making recommendations to the Board of
Directors regarding compensation of the Company's executive officers and stock
option awards under the Company's 1993 Stock Option Plan as amended. None of the
members of the Compensation Committee are employees of the Company and all
executive officers that serve on the Board of Directors abstain from voting on
compensation affecting those executive officers that are Board members.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no compensation committee interlocks with other companies and
none of the members of the committee has been an officer, employee or insider of
the Company or its subsidiaries.
4
EXECUTIVE COMPENSATION
CASH AND OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Company's Chief
Executive Officer, and each of the other executive officers, whose total annual
salary and bonus exceeded $100,000 during fiscal 2001.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation(1) Awards
----------------------- --------
Fiscal Securities
Year All Other Underlying
Name and Principal Position Ended Salary Bonus(2) Compensation(3) Options(#)(4)
--------------------------- ----- -------- ------- --------------- -------------
Dr. Aelred J. Kurtenbach 2001 $271,154 $75,000 $3,750 30,000
Chief Executive Officer 2000 225,385 62,500 1,531 40,000
And Director 1999 181,131 52,500 3,390 100,000
James B. Morgan 2001 $222,571 $62,500 $3,000 24,000
President, Chief Operating 2000 181,217 50,000 1,577 32,000
Officer and Director 1999 142,569 37,500 3,192 32,000
Paul J. Weinand(5) 2001 $112,781 $28,170 $2,620 0
Treasurer and 2000 113,350 33,170 1,573 8,000
Chief Financial Officer 1999 112,680 33,170 2,748 8,000
Frank J. Kurtenbach 2001 $127,960 $33,000 $2,789 8,000
Vice President 2000 118,389 31,250 1,584 12,000
And Director 1999 104,585 27,800 2,571 12,000
- -----------------------
(1) Annual Compensation excludes personal benefits received by the named
person to the extent that the aggregate amounts thereof were less than
10% of the total of that person's annual salary and bonus.
(2) Reflects bonus earned during the fiscal year.
(3) Company match to employee contributions under the Company's 401(k)
Retirement and Savings Plan.
(4) The options have been retroactively adjusted to reflect the two-for-one
stock split declared December 7, 1999 and May 24, 2001.
(5) Paul Weinand has resigned from the Company to pursue other interests.
As of this printing, Aelred Kurtenbach is acting CFO and Becky Wittrock
is acting Treasurer.
5
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth information relating to stock options and stock
appreciation rights (SARs) awarded to the executive officers named in the
Summary Compensation Table under the Company's 1993 Stock Option Plan as amended
during fiscal 2001. No SARs have been awarded by the Company.
OPTION/SAR GRANTS IN FISCAL 2001
Individual Grants
---------------------------
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options/SARs Stock Price Appreciation for
Underlying Granted to Exercise or Option Term
Options/SARs Employees Base Price Expiration -----------------------------
Name Granted(#)(4) in 2001 ($/share)(4) Date 5% 10%
---- ------------- ----------- ------------ ---------- -- ---
Dr. Aelred J. Kurtenbach 30,000(1) 13.0% $8.4219 11/15/2005 $69,804 $154,250
James B. Morgan 24,000(2) 10.4% $7.6562 11/15/2010 115,541 292,802
Frank J. Kurtenbach 8,000(3) 3.4% $7.6562 11/15/2010 38,516 97,601
- ------------------
(1) The options were granted under the 1993 Stock Option Plan as amended
and become first exercisable as follows: 6,000 on November 15, 2001,
6,000 on November 15, 2002, 6,000 on November 15, 2003, 12,000 on
November 15, 2004.
(2) The options were granted under the 1993 Stock Option Plan as amended
and become first exercisable as follows: 4,800 on November 16, 2001,
4,800 on November 16, 2002, 4,800 on November 16, 2003, 4,800 on
November 16, 2004, and 4,800 on November 16, 2005.
(3) The options were granted under the 1993 Stock Option Plan as amended
and become first exercisable as follows: 1,600 on November 16, 2001,
1,600 on November 16, 2002, 1,600 on November 16, 2003, 1,600 on
November 16, 2004, and 1,600 on November 16, 2005.
(4) The options have been retroactively adjusted to reflect the two-for-one
stock splits declared December 7, 1999 and May 24, 2001.
OPTION/SAR EXERCISE AND HOLDINGS
The following table sets forth information relating to unexercised
options held as of April 28, 2001 by the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 2001
AND OPTION/SAR VALUES AT APRIL 28, 2001
Number of Unexercised Value of Unexercised
Shares Securities Underlying In-the Money
Acquired Options/SARs at 4/28/01(#)(1) Options/SARs at 4/28/01($)
on Value ----------------------------- ---------------------------
Name Exercise(#)(1) Realized($) Exercisable Un-exercisable Exercisable Un-exercisable
---- ------------- ------------- ----------- -------------- ----------- --------------
Dr. Aelred J. Kurtenbach 40,000 $ 175,320 78,400 131,600 $ 710,527 $ 908,653
James B. Morgan 0 0 159,200 80,800 1,558,993 552,758
Paul J. Weinand 128,800 918,338 8,640 10,560 81,711 87,744
Frank J. Kurtenbach 0 0 23,040 28,960 155,759 199,719
(1) The options have been retroactively adjusted to reflect the two-for-one
stock splits declared December 7, 1999 and May 24, 2001.
6
PERFORMANCE GRAPH
The following graph illustrates a comparison of cumulative total
returns for the Company vs. the NASDAQ Market Index and the Media General
Industry Group Index from April 26, 1996 to April 28, 2001. The graph assumes
$100 invested April 26, 1996 through April 28, 2001. No dividends were issued
during that time.
[PLOT POINTS GRAPH]
- --------------------------------------------------------------------------------
04/26/96 05/02/97 05/01/98 04/30/99 04/29/00 04/28/01
- --------------------- -------- -------- -------- -------- -------- --------
Daktronics, Inc. $100.00 $103.23 $209.68 $254.84 $467.74 $1202.63
- --------------------- -------- -------- -------- -------- -------- --------
MG Group Index $100.00 $118.87 $169.19 $165.85 $364.76 $230.70
- --------------------- -------- -------- -------- -------- -------- --------
NASDAQ Market Index $100.00 $106.59 $158.32 $209.07 $324.85 $181.39
- --------------------------------------------------------------------------------
7
REPORT OF THE COMPENSATION COMMITTEE
CASH COMPENSATION
DETERMINATION OF BASE SALARY The Company's compensation philosophy is
to target executive salaries close to the median market rate paid for comparable
positions within the Midwest region for similar size companies. The Compensation
Committee reviewed base salaries for executive officers in November 2000.
Company fiscal 2000 performance was also considered. Based upon this review, the
Committee approved adjusting the base salary of Aelred Kurtenbach 20% and the
base salaries of the other executive officers an average of 10%. Salaries are
reviewed annually.
DETERMINATION OF BONUS For fiscal 2001, the Committee chose a formula
based performance bonus plan for the executive officers. The bonus consists of
one month's salary provided that after tax earnings exceed 14.5% of beginning
stockholders equity. The bonus increases yearly with performance improvement to
a maximum bonus of three month's salary at the point that after tax earnings
exceed 18.5% of beginning stockholders equity. For Fiscal 2001, the executive
officers earned the maximum bonus under the plan.
EQUITY BASED COMPENSATION
In November 1993, the Board of Directors of the Company adopted the
Daktronics, Inc. 1993 Stock Option Plan (the "Option Plan"), which was approved
by the shareholders in December 1993 and amended in August 1998. The Committee
determines awards under this plan for executive officers and approves awards for
other employees based upon the recommendation of the Company's executive
officers. In November 2000, the Committee awarded Aelred Kurtenbach an option to
purchase a total of 30,000 shares of Common Stock and allowed 220,000 shares to
be granted per Aelred Kurtenbach's discretion (adjusted for May 24, 2001
two-for-one split).
The exercise price per share of these options was established as the
average between the closing bid and asked price quotations for the Common Stock
as reported by the National Association of Securities Dealers Automatic
Quotation System (NASDAQ) on November 16, 2000, which was $7.65625 (adjusted for
May 24, 2001 two-for-one split). Subject to accelerated vesting upon "change in
control" of the Company as defined in the Option Plan, the outstanding options
generally vest 20% each year commencing November 16, 2001.
The Committee's basis for these awards was the Company's performance,
as measured in increased net sales and results of operations, over the last
three years and review of awards by comparable companies. The number of options
granted to the executive officers, including the Chief Executive Officer, was
less than the average of comparable companies for similar positions. The terms
of these options, including duration, vesting, and exercise price were similar
to that of comparable companies.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee determined the Chief Executive Officer's compensation in
the same manner described above for all executive officers of the Company. The
Committee recommended Dr. Kurtenbach's salary be increased 20% to $300,000,
commencing November 2000. Based upon the bonus plan described above, Dr.
Kurtenbach earned a bonus of $75,000 for fiscal 2001.The Committee awarded to
Dr. Kurtenbach options to purchase 30,000 shares of Company Stock at exercise
price of $8.421875 (adjusted for May 24, 2001 two-for-one split).
COMPENSATION COMMITTEE
Roland J. Jensen, Chair
Charles S. Roberts
Nancy D. Frame
8
REPORT OF THE AUDIT COMMITTEE
The Board of Directors maintains an Audit Committee comprised of three
of the Company's outside directors. The Board of Directors and the Audit
Committee believe that the Audit Committee's current member composition
satisfies the rule of the National Association of Securities Dealers, Inc.
("NASD") that governs audit committees, including the requirement that audit
committee members all be independent directors.
In accordance with its written charter adopted by the Board of
Directors (set forth in Appendix A hereto), the Audit Committee assists the
Board of Directors with fulfilling its oversight responsibility regarding the
practices, quality and integrity of the accounting, auditing, and financial
reporting practices of the Company. In discharging its oversight
responsibilities regarding the audit process, the Audit Committee:
1. Reviewed and discussed the audited financial statements with
management;
2. Discussed with the independent auditors the material required
to be discussed by Statement on Auditing Standards No. 61; and
3. Reviewed the written disclosures and the letter from the
independent auditors required by the Independence Standards
Board's Standard No. 1, and discussed with the independent
auditors any relationships that may impact their objectivity
and independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended April 28, 2001 as filed with the Securities and Exchange
Commission.
AUDIT COMMITTEE
John L. Mulligan, Chair
James A. Vellenga
Duane E. Sander
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 28, 2001,
regarding the beneficial ownership of Common Stock of the Company by (i) each
person or group who is known by the Company to be the beneficial owner of more
than 5% of the outstanding Common Stock, (ii) all directors and nominees of the
Company, (iii) each individual named in the Summary Compensation Table and (iv)
all directors and executive officers of the Company as a group. The Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole voting and investment power (or
share such powers with his or her spouse) with respect to the shares, subject to
the information contained in the notes to the table.
Name and Address Percent of
(if applicable) of Shares Outstanding
Beneficial Owner Beneficially Owned(1) Shares(1)
- ---------------- --------------------- -----------
Daktronics, Inc.
401(k) Retirement and Savings Plan(2) .... 1,212,206 6.7%
James B. Morgan........................... 762,282(3) 4.2%
John L. Mulligan.......................... 53,000(4) *
Dr. Duane E. Sander(5).................... 800,400(6) 4.4%
Dr. Aelred J. Kurtenbach(5)............... 1,478,400(7) 8.2%
Charles S. Roberts, M.D................... 158,524(8) *
Frank J. Kurtenbach....................... 653,646(9) 3.6%
Roland J. Jensen.......................... 47,600(10) *
James A. Vellenga......................... 36,000(11) *
Paul J. Weinand........................... 153,474(12) *
Nancy D. Frame............................ 14,000(13) *
All executive officers and directors
as a group (10 persons)........ 4,157,326 23.1%
- -----------------------
* Represents less than 1%
(1) For purposes of this table, a person or group of persons is deemed to
beneficially own shares issuable upon the exercise of options that are
currently exercisable or that become exercisable within sixty days
after the date hereof.
(2) The Common Stock held by the Daktronics, Inc. 401(k) Retirement and
Savings Plan and allocated to the plan participants are voted by the
Trustee, according to the instructions of the plan respective
participants.
(3) Includes 159,200 shares issuable pursuant to currently exercisable
stock options and 18,162 shares held in the 401(k) plan.
(4) Includes 44,000 shares issuable pursuant to currently exercisable stock
options.
(5) Dr. Sander's and Dr. Kurtenbach's addresses are 331 32nd Avenue,
Brookings, South Dakota 57006.
(6) Includes (i) 36,000 shares issuable pursuant to currently exercisable
stock options, (ii) 352,040 shares owned by Dr. Sander's spouse and
(iii) 50,160 shares owned by Dr. Sander's son.
(7) Includes (i) 78,400 shares issuable to Dr. Kurtenbach pursuant to
currently exercisable stock options, (ii) 55,440 shares held through
the 401(k) plan, and (iii) 755,480 shares owned by Dr. Kurtenbach's
spouse.
(8) Includes 44,000 shares issuable pursuant to currently exercisable stock
options.
(9) Includes (i)23,040 shares issuable pursuant to currently exercisable
stock options and (ii) 14,884 shares held through the 401(k) plan.
(10) Includes 40,000 shares issuable pursuant to currently exercisable stock
options.
(11) Includes 28,000 shares issuable pursuant to currently exercisable stock
options.
(12) Includes (i) 8,640 shares issuable pursuant to currently exercisable
stock options and (ii) 8,036 shares held through the 401(k) plan.
(13) Includes 12,000 shares issuable pursuant to currently exercisable stock
options.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than ten percent
(10%) of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
(SEC), and furnish copies of those reports to the Company. Based solely on a
review of the copies of such forms furnished to the Company, and written
representations from the executive officers and directors, the Company believes
that all Section 16(a) filing requirements were complied with during fiscal
2001.
10
PROPOSAL #2 - RATIFY APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, at the recommendation of the Audit Committee,
recommends that the shareholders ratify the appointment of the McGladrey &
Pullen, LLP, as independent auditors for the Company for the year ending April
27, 2002. McGladrey & Pullen, LLP served as independent auditors for the Company
for the year ended April 28, 2001. McGladrey & Pullen, LLP provided services in
connection with the audit of the financial statements of the Company for the
year ended April 28, 2001, assistance with the Company's Annual Report submitted
to the Securities and Exchange Commission on Form 10-K and quarterly reports
filed with the Securities and Exchange commission, and consultation on matters
relating to accounting and financial reporting. Representatives of McGladrey &
Pullen, LLP are not expected to be present at the Annual Meeting.
AUDIT FEES
The aggregate fees billed by McGladrey & Pullen, LLP for professional
services rendered for the audit of annual financial statements, for assistance
with Form 10-K, review of quarterly Forms 10-Q, attendance at Audit Committee
meetings and consultation on audit and accounting matters were approximately
$98,000 for the year ended April 28, 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
McGladrey & Pullen, LLP or associated entities did not provide any
services to the Company for financial information systems design and
implementation for the fiscal year ended April 28, 2001.
ALL OTHER FEES
The aggregate fees billed by McGladrey & Pullen, LLP or associated
entities for all other non-audit services, including services in connection with
the Company's tax returns were $39,000 for the fiscal year ended April 28, 2001.
The Company's Audit Committee has considered whether provision of the
above non-audit services is compatible with maintaining the McGladrey & Pullen,
LLP's independence and has determined that such services are compatible with
maintaining McGladrey & Pullen, LLP's independence.
PROPOSAL #3 - APPROVE AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION INCREASING THE NUMER OF AUTHORIZED SHARES OF COMMON STOCK
The Company proposes to amend its Amended and Restated Articles of
Incorporation, to increase the aggregate number of authorized shares of Common
Stock of the Company from 30,000,000 to 60,000,000 shares, which will continue
to include 5,000,000 shares of undesignated stock. The Company expects to
continue to use its Common Stock for purposes of raising capital to support its
operations and granting options to employees and directors who contribute to the
success of the Company, including the shares in the proposed 2001 Stock Option
Plan described in Proposal #4 and the 2001 Outside Directors Stock Option Plan
described in Proposal #5.
11
Although the Company has no present plans, agreements or understandings
regarding the issuance of the proposed additional shares, the Board of Directors
recommends adoption of the amendment because the Company will have greater
flexibility in connection with possible future financing transactions,
acquisitions of other companies or business properties, stock dividends or
splits, employee benefit plans and other proper corporate matters. Moreover,
having such additional authorized shares available will give the Company the
ability to issue shares without the expense and delay of a special meeting of
shareholders. Such a delay might deprive the Company of the flexibility the
Board views as important in facilitating the effective use of the shares of
Common Stock. Except as otherwise required by applicable law, authorized but
un-issued shares of Common Stock may be issued at such times, for such purposes
and for such consideration as the Board of Directors may determine to be
appropriate, without further authorization by shareholders.
Since the issuance of additional shares of Common Stock, other than on a pro
rata basis to all current shareholders, would dilute the ownership interest of a
person seeking to obtain control of the Company, such issuance could be used to
discourage a change in control of the Company by making it more difficult or
costly. The Company is not aware of anyone seeking to accumulate Common Stock to
obtain control of the Company and has no present intention to use the additional
authorized shares to deter a change in control.
The Board of Directors unanimously recommends a vote FOR the proposal to approve
the amendment to the Company's Restated Articles of Incorporation increasing the
number of shares of the Company's authorized Common Stock from 30,000,000 shares
to 60,000,000 shares. Approval requires a vote in favor of the amendment by the
holders of a majority of the Company's outstanding shares of common stock.
PROPOSAL #4 - APPROVE 2001 STOCK OPTION PLAN
In November 1993, the Board of Directors adopted the Daktronics, Inc. 1993 Stock
Option Plan, which was approved by the Company's shareholders in December 1993
and amended in 1998. That plan was approved for ten years. The Board of
Directors has now approved a new plan, which includes 1,200,000 shares and will
expire at the end of the fiscal year 2011.
SUMMARY OF THE PLAN
Purpose The purpose of the Option Plan is to provide incentives to officers, key
employees of the Company and its subsidiaries and other persons who contribute
and are expected to contribute materially to the success of the Company. The
Option Plan provides a means of rewarding performance and to enhance the
interest of such persons in the company's continued success and progress by
providing them a proprietary interest in the Company.
Administration The Compensation Committee of the Board of Directors is
responsible for administration of the Option Plan. The Board of Directors has
general authority and discretion to determine the persons to whom options will
be granted, the exercise price, the time or times at which the options may be
exercised, and the number of shares to be subject to each option. In addition,
the Board may prescribe he terms applicable to each grant of an option.
Incentive Only incentive stock options (ISOs) within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), may be granted
under the Option Plan. Options may be granted only to key employees of the
Company and its subsidiaries and other persons who have contributed and are
expected to contribute materially to the success of the Company and its
subsidiaries.
Price The exercise price of shares of Common Stock subject to options granted
under the Option Plan is determined by the Board of Directors, and shall not be
less than 100% of the fair market value of the Company's Common Stock on the
date the option is granted. An option granted under the Option Plan vests at
such rate and upon such conditions as the Board may determine at the time the
option is granted.
12
Transfer No option granted under the Option Plan is transferable by the optionee
during his or her lifetime. Upon the death of disability of an optionee, the
optionee or his or her legal or personal representative or beneficiaries may
exercise an option to the extent exercisable by the optionee within ninety days
after the optionee's death or disability (but not later than the expiration of
the term of the option). In the event any option expires or is canceled,
surrendered or terminated without being exercised, the shares subject to such
option (or the unexercised portion thereof) will again be available for grant
under the Option Plan.
Payment Payment for the shares of Common Stock purchased upon the exercise of
options under the Option Plan must be made in full at the time the option is
exercised. The Board of Directors, at its discretion, may permit payment to be
made by the optionee's broker from the sale or loan proceeds for such shares or
any other securities the optionee may have in his or her account with the
broker.
Amendment The Option Plan may be amended by the Board of Directors, except that
without the affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present and entitled to vote at a meeting at which a
quorum is present, the Board of Directors, may not amend the Options Plan to:
(i) increase the aggregate number of shares of Common Stock which may be issued
and sold under the Option Plan (except such number of shares may be adjusted in
the event of a recapitalization, stock dividend or similar event), (ii) change
the manner of determining the option price, (iii) extend the period during which
the options may be granted, or (iv) change the requirements as to the person
eligible to receive options.
Tax Consequences Under the present federal tax regulations:
1. There will be no federal income tax consequences to either the Company
or the optionee upon the grant of an ISO, nor will an optionee's
exercise of an ISO result in federal income tax consequences to the
Company.
2. Although an optionee will not realize ordinary income upon his or her
exercise of an ISO, the excess of the fair market value of the shares
of Common Stock acquired at the time of exercise over the exercise
price will constitute an "item of tax preference" within the meaning of
Section 57 of the Code and thus, may result in the imposition of the
"alternative minimum tax" pursuant to Section 55 of the Code on the
optionee.
3. If an optionee does not dispose of the shares of Common Stock acquired
through the exercise of an ISO within two years from the date of the
date of the grant and within one year of the exercise of the ISO, any
gain realized upon a subsequent disposition of such shares will
constitute a long-term capital gain to the optionee at the capital gain
rate, the capital gain rate is reduced if the shares are held for 18
months from the date of exercise. If an optionee disposes of such
shares within two years from the date of the grant or within one year
of the date of exercise of the ISO, an amount equal to the lesser of
(i) the excess of the fair market value of such shares on the date of
the exercise over the exercise price, or (ii) the actual gain realized
upon such disposition will constitute ordinary income to the optionee
in the year of the disposition.
4. If such disposition is due to the death of the optionee, the ordinary
income treatment will not apply. Any additional gain upon such
disposition will be taxed as short-term capital gain. The Company will
receive a deduction in an amount equal to the amount constituting
ordinary income to the optionee.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the proposal to approve
the Daktronics, Inc. 2001 Stock Option Plan.
13
PROPOSAL #5 - APPROVE 2001 OUTSIDE DIRECTOR STOCK OPTION PLAN
In November 1993, the Board of Directors adopted the Daktronics, Inc. 1993
Outside Director Stock Option Plan, which was approved by the Company's
shareholders in December 1993 and amended in 1998. That plan was approved for
ten years. The Board of Directors has now approved a new plan, which includes
400,000 shares and will begin August 15, 2001 and expire at the end of the
fiscal year 2011.
SUMMARY OF THE PLAN
Purpose The purpose of the Director Option Plan is to (i) provide a portion of
the compensation to non-employee directors serving on the Company's Board of
Directors in the form of options to acquire the Company's Common Stock, (ii)
provide a means of attracting and retaining experienced non-employee directors,
and (ii) enhance the interest of non-employee directors in the Company's
continued success and progress by providing them a proprietary interest in the
Company.
Eligibility The Director Option Plan provides for the granting of stock options
to members of the Company's Board of Directors who are not and have not been
full-time employees of the Company or any of is subsidiaries (the "Non-Employee
Directors"). The following directors of the Company are the Non-Employee
Directors: Roland J. Jensen, John L. Mulligan, Charles S. Roberts, Duane E.
Sander, Nancy Frame, and James A. Vellenga.
Plan Under the terms of the amended 1993 Director Option Plan, each Non-Employee
Director is granted options to purchase 3,000 shares of the Common Stock for
each year the Director was elected to serve. This amount changed to 6,000
options for each year the Director was elected to serve with the two-for-one
stock split December 7, 1999 and to 12,000 options for each year the Director
was elected to serve with the two-for-one stock split May 24, 2001. Under the
terms of the proposed 2001 Director Option Plan, each Director would receive up
to 12,000 options for each year the Director was elected to serve. An aggregate
of 400,000 shares of the Company's Common Stock is reserved for issuance upon
exercise of options granted under the 2001 Director Option Plan.
Administration A committee consisting of the Chief Executive Officer and the
Chief Financial Officer is responsible for the administration of the Director
Option Plan. The Board of Directors has authorization to interpret the Director
Option Plan, but not to make grants under the Director Option Plan. The grant of
stock options is prescribed by the Director Option Plan.
Price The exercise price of shares of Common Stock subject to options granted
under the Director Option Plan is the fair market value of the Company's Common
Stock on the date the option is granted. An option granted under the Director
Option Plan vests at the time the option is granted, but may not be exercised
until one year after the date of grant. The term of options granted under the
Director Option Plan expires seven years after the date of grant.
Transfer No option granted under the Director Option Plan is transferable by the
optionee during his or her lifetime. In the event any option expires or is
canceled, surrendered or terminated without being exercised, the shares subject
to such option (or the unexercised portion thereof) will again be available for
grant under the Option Plan.
Payment Payment for the shares of Common Stock purchased upon the exercise of
options under the Option Plan must be made in full at the time the option is
exercised.
Amendment The Director Option Plan may be amended by the Board of Directors,
(but not more than every six months, unless the amendment is intended to conform
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder), except that the Board of Directors may
not amend the Director Options Plan to decrease the exercise price for shares
subject to options granted under the Director Option Plan (except that the
number of shares may be adjusted in the event of a recapitalization, stock
dividend or similar event).
14
Tax Consequences Under the present federal tax regulations, there will be no
federal income tax consequences to either the Company or the optionee upon the
grant of an option under the Director Option Plan. Upon exercise of such option,
the optionee will realize ordinary income in an amount equal to the excess of
the fair market value of the shares of Common Stock acquired over the exercise
price, and the Company will receive a corresponding tax deduction. The gain, if
any, realized upon a subsequent disposition of such shares will constitute
short-term or long-term capital gain depending upon the optionee's holding
period.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the proposal to approve
the Daktronics, Inc. 2001 Outside Director Stock Option Plan.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters that
may come before the meeting. However, if any matters other than those referred
to above should properly come before the meeting calling for a vote of the
shareholders, it is the intention of the persons named in the enclosed proxy to
vote such proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a shareholder to be presented at the 2001 Annual
Meeting must be received at the Company's principal executive offices, 331 32nd
Avenue, Brookings, South Dakota 57006, addressed to the Secretary of the
Company, not later than March 20, 2002.
BY ORDER OF THE BOARD OF DIRECTORS,
Duane E. Sander, Secretary
Dated: July 13, 2001
15
APPENDIX A: CHARTER OF THE AUDIT COMMITTEE
Organization There shall be a committee of the board of directors to be known as
the audit committee. The audit committee shall be composed of directors who are
independent of the management of the corporation and are free of any
relationship that, in the opinion of the board of directors, would interfere
with their exercise of independent judgment as a committee member.
Statement of Policy The audit committee shall provide assistance to the
corporate directors in fulfilling their responsibility to the shareholders,
potential shareholders, and investment community relating to corporate
accounting, reporting practices of the corporation, and the quality and
integrity of the financial reports of the corporation. In so doing, it is the
responsibility of the audit committee to maintain free and open means of
communication between the directors, the independent auditors, and the financial
management of the corporation.
Responsibilities In carrying out its responsibilities, the audit committee
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and to ensure to the directors and shareholders
that the corporate accounting and reporting practices of the corporation are in
accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
1. Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries.
2. Meet with independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the conclusion
thereof review such audit, including any comments or recommendations of
the independent auditors.
3. Review with the independent auditors, and financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the corporation, and elicit any recommendations
for the improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are desirable.
Particular emphasis should be given to the adequacy of such internal
controls to expose any payments, transactions, or procedures that might
be deemed illegal or otherwise improper. Further, the committee
periodically should review Company policy statements to determine their
adherence to the code of conduct.
4. Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the
shareholders. Any changes in accounting principles should be reviewed.
5. Provide sufficient opportunity for the independent auditors to meet
with the members of the audit committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the corporation's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
6. Review accounting and financial human resources and succession planning
within the Company.
7. Submit the minutes of all meetings of the audit committee to, or
discuss the matters discussed at each committee meeting with, the board
of directors.
8. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if,
in its judgment, that is appropriate.
16
DAKTRONICS, INC.
Annual Meeting of Shareholders - August 15, 2001
PROXY
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Aelred J. Kurtenbach and Duane E. Sander, or
either of them, as proxy of the undersigned, with full power of substitution,
for and in the name of the undersigned, to represent the undersigned at the
Annual Meeting of Shareholders of Daktronics, Inc., to be held at Daktronics,
Inc., 331 32nd Avenue, Brookings, South Dakota 57006 on Wednesday, August 15,
2001 at 7:00 p.m. Central Daylight Time, and at any adjournments thereof, and to
vote all stock of the undersigned, as designated below, with all the powers
which the undersigned would possess if personally at such meeting.
1. To elect directors duly nominated for a term expiring in 2004 (If you
wish to cumulate your votes as described in the Proxy Statement, please
contact Investor Relations at Daktronics, Inc. to record your vote):
James B. Morgan, Duane E. Sander, John L. Mulligan.
[ ] FOR [ ] WITHHELD FOR ALL [ ] WITHHELD FOR THE FOLLOWING ONLY
(Write nominee's name)_________________________
2. To ratify the appointment of McGladrey & Pullen, LLP as independent
auditors for the Company for the fiscal year ending April 27, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and vote upon a proposal to approve the Amendment to the
Amended and Restated Articles of Incorporation increasing the shares
authorized to be issued from 30,000,000 to 60,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To consider and vote upon a proposal to approve the Daktronics, Inc.
2001 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To consider and vote upon a proposal to approve the Daktronics, Inc.
2001 Outside Directors Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE GIVEN FOR
VOTING ON THE MATTERS ABOVE, THIS PROXY WILL BE VOTED FOR THE MATTERS ABOVE.
Shareholders who are present at the meeting may withdraw their Proxy and vote in
person if they so desire.
The undersigned acknowledges receipt of the Proxy Statement for the 2001 Annual
Meeting. Please sign below exactly as name(s) appears on this Proxy. If shares
are registered in more than one name, the signatures of all persons are
required. If a corporation, sign in full corporate name by a duly authorized
officer, stating title. If trustee, guardian, executor or administrator, sign in
official capacity, giving full title as such. If a partnership, sign in
partnership name by authorized person.
Date _________________, 2001
----------------------------
Signature
----------------------------
Signature if held jointly
PLEASE SIGN, DATE, AND RETURN THIS PROXY PROMPTLY. No postage is required if
returned in the enclosed envelope. This Proxy may also be returned via fax to
605/697-4700.