DAKTRONICS, INC.
AMENDED AND RESTATED
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, originally adopted, effective August 1, 1990, is hereby amended
in its entirety and restated, effective February 20, 2004, by and between
DAKTRONICS, INC., a corporation organized and existing under the laws of South
Dakota (the "Corporation"), and JAMES B. MORGAN ("Participant").
W I T N E S S E T H:
WHEREAS, the Corporation recognizes the benefits received by the Corporation as
a result of the experiences and insight provided by the Participant through his
employment with the Corporation; and
WHEREAS, the Corporation desires to reward the Participant for past and future
services to the Corporation.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto hereby
establish this deferred compensation agreement on the following terms and
conditions:
A. DEFINITIONS. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
1. "Accrued Benefit" shall be the sum of all amounts credited to
Participant's Deferred Account pursuant to this Agreement, together
with all net appreciation added thereto pursuant to the terms hereof,
as adjusted for any distributions made hereunder.
2. "Administrator" shall be the Chief Financial Officer of the
Corporation, or any successor thereto appointed by the Board of
Directors of the Corporation.
3. "Agreement" shall refer to this Daktronics, Inc. Deferred Compensation
Agreement, as amended.
4. "Beneficiary" shall refer to any person, estate or trust who, by
operation of law, or under the terms of the Agreement, or otherwise, is
entitled to receive any Accrued Benefit of Participant under the
Agreement.
5. "Change in Control" shall refer to the occurrence of any of the
following events:
a. The sale, lease, exchange or other transfer, directly or indirectly, of
all or substantially all of the assets of the Corporation (in one
transaction or in a series of related transactions) to a person or
entity that is not controlled by the Corporation,
b. The approval by the Corporation's shareholders of any plan or proposal
for the liquidation or dissolution of the Corporation;
c. Any person or entity becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended ("Exchange
Act")), directly or indirectly, of more than fifty percent (50%) of the
combined voting power of the outstanding securities of the Corporation
ordinarily having the right to vote at elections of directors who were
not beneficial owners of at least fifty percent (50%) of such combined
voting power as of the date the Corporation's Board of Directors
adopted the Option Plan, and
d. A merger or consolidation to which the Corporation is a party if the
shareholders of the Corporation immediately prior to the effective
date of such merger or consolidation have, solely on account of
ownership of securities of the Corporation at such time,
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange
Act) immediately following the effective date of such merger or
consolidation of securities of the surviving company representing
less than fifty percent (50%) of the combined voting power of
the surviving corporation's then outstanding securities ordinarily
having the right to vote at elections of directors.
6. "Deferred Account" shall refer to unfunded book entries maintained by
the Administrator reflecting the Accrued Benefit of Participant
hereunder. Provided, however, that the existence of such book entries
and of this Deferred Account shall not create or be deemed to create a
trust of any kind, or any fiduciary relationship between the
Corporation and Participant or any Beneficiary under this Agreement.
7. "Disability" shall refer to the Participant suffering from a physical
or mental condition which, as determined by a physician chosen by the
Administrator based upon appropriate medical results and examinations,
may be expected to result in death or be of long or indefinite duration
and which renders the Participant incapable of performing his customary
duties or other substantial duties for the Company.
8. "Effective Date" shall be February 20, 2004.
9. "ERISA" shall refer to the Employee Retirement Income Security Act of
1974, as amended.
10. "For Cause Termination" means the termination of the Participant's
employment with the Corporation after having engaged in any of the
following actions:
a. Gross negligence or willful misconduct in the performance of the
Participant's duties to the Corporation (other than as a result of a
disability) that has resulted or is likely to result in substantial and
material damage to the Corporation, provided however that no act or
failure to act by the Participant shall be considered "willful" if done
or omitted by Participant in good faith with reasonable belief that his
action or omission was in the best interests of the Corporation;
b. Commission of any act of fraud with respect to the Corporation; or
c. Conviction of a felony or a crime involving moral turpitude causing
material harm to the business and affairs of the Corporation.
11. "Forfeiture" refers to the portion or amount of the Participant's
Accrued Benefit that is forfeited pursuant to Section C of this
Agreement.
12. "IRC" shall refer to the Internal Revenue Code of 1986, as amended.
13. "Plan Year" shall refer to each calendar year.
14. "Retirement" shall refer to the termination of employment with the
Corporation by the Participant after the Participant (i) has attained
at least age 65 or (ii) has attained at least age 55 and has completed
at least 20 Years of Service with the Corporation.
15. "Retirement Age" shall refer to the Participant, while still employed
with the Corporation, (i) having attained at least age 65 or (ii)
having attained at least age 55 and having completed at least 20 Years
of Service with the Corporation.
16. "Years of Service" means the number of consecutive periods of twelve
(12) consecutive months during which the Participant has completed at
least 1,000 hours of service without a break in service.
B. CREDITING OF BENEFITS. The Corporation shall have the authority to
credit amounts to the Deferred Account of the Participant at any time
after the Effective Date. As of the Effective Date, the Corporation and
Participant agree and acknowledge that $347,332 has been credited to
the Participant's Deferred Account under the Agreement.
C. VESTING OF ACCRUED BENEFIT. The Participant shall become vested in the
Participant's Accrued Benefit in the following manner:
1. Vesting at Retirement Age. Subject to the provisions of Section C.4
below, Participant shall become vested in and acquire a nonforfeitable
right to his Accrued Benefit upon the date that the Participant has
attained the Retirement Age. If the Participant's employment with the
Corporation is terminated prior to the Participant's Retirement Age,
other than as a result of the death or Disability of the Participant,
the Participant's Deferred Account shall immediately be treated as a
Forfeiture and Participant shall have no further rights to any amounts
credited at any time to the Participant's Deferred Account.
2. Vesting Upon Death or Disability of Participant. Subject to the
provisions of Section C.4 below, and notwithstanding the provisions of
Section C.1, if the Participant's employment with the Company is
terminated as a result of the Participant's death or Disability, one
hundred percent (100%) of the Participant's Accrued Benefit Deferred
Account shall vest in the Participant or the Participant's Beneficiary,
as the case may be.
3. Vesting Upon Change in Control. Subject to the provisions of Section
C.4 below, and notwithstanding the provisions of Section C.1, upon the
occurrence of a Change in Control, one hundred percent (100%) of the
Participant's Accrued Benefit Deferred Account shall vest in the
Participant.
4. For Cause Termination. In the event of a For Cause Termination of the
Participant, all amounts credited to the Participant's Deferred Account
at any time, including any amounts that have been distributed to
Participant, shall immediately be treated as a Forfeiture and
Participant shall have no further rights to any amounts credited at any
time to Participant's Deferred Account.
D. INTEREST ON DEFERRED FEES. The Corporation hereby agrees that the
balance in the Deferred Account (as reduced for any distributions made
from the Deferred Account) shall be credited with interest at a rate
per annum equivalent to the interest rate in effect for five year
United States Treasury Notes (the "Treasury Rate") as of the first
business day on or next following the first day of the Plan Year.
Interest on the Deferred Account will be compounded annually. The
Treasury Rate for prospectively crediting interest shall be adjusted as
of each succeeding Plan Year.
E. DISTRIBUTION OF BENEFITS.
1. Distribution of Benefits. Once the Participant has ceased to be an
employee of the Corporation and has a vested Accrued Benefit,
whether such termination of employment results from voluntary or
involuntary termination, Disability or from the Participant's death,
the vested Accrued Benefit of the Participant shall be payable as set
forth in this Section. Distribution of the vested Accrued Benefit
will commence within sixty days after the date that the Participant
ceases to be an employee of the Corporation. The Participant shall
elect to receive distribution of his vested Accrued Benefit in one
of the following forms: (i) a single lump-sum distribution in
cash or (ii) an installment distribution consisting of
approximately equal annual cash installments over the five-year or
ten-year period commencing at the time that distribution is
to commence. The Participant shall elect a method of distribution
at the time that he becomes the Participant. Any such election
shall remain in effect until the election is properly modified or
revoked pursuant to the following paragraph. Provided, however,
that in the event of the Participant's death or Disability, the
Corporation, in its sole discretion, will be permitted (but in no
event obligated) to accelerate the payments to be made to the
Participant under this Agreement.
2. Subsequent Modifications of Elections. The Participant may
modify or revoke a prior distribution election by filing a new
distribution election with the Administrator. Any new election shall
become effective and shall supersede and revoke a prior election made
by the Participant only in the event that the Participant is
continuing to serve as an employee of the Corporation at least 180
days after the date that the new election is filed with the
Administrator. In the event that the Participant ceases to be an
employee of the Corporation less than 180 days after filing a new
election, the distribution election in effect for the Participant
shall be the most recent distribution election that was filed with
the Administrator at least 180 days prior to such termination of
employment.
3. Facility of Payment. If the Participant is under a legal disability
or, by reason of illness or mental or physical disability is,
in the opinion of the Administrator, unable to attend to the
Participant's personal financial matters, the Administrator may
make such payments in such of the following ways as the Administrator
shall determine: (i) directly to the Participant or Beneficiary,
(ii) to the legal representative of the Participant or Beneficiary, or
(iii) to a custodian for the benefit of the Participant or Beneficiary,
which custodian may be any person eligible to act for such person
(including but not limited to a relative by blood or marriage,
or a friend) under the applicable Uniform Custodial Trust Act.
Any payment made pursuant to this provisions shall be a complete
discharge of the obligations to the Participant under the Agreement.
F. DESIGNATION OF BENEFICIARY. Participant may designate from time to time
in writing one or more Beneficiaries, who will receive the his Accrued
Benefit in the event of the Participant's death. If Participant dies
without having made a Beneficiary designation, the Beneficiary of
Participant shall be deemed to be, in the following order of priority,
his: (i) spouse, (ii) lineal descendants, (iii) parents, or (iv)
estate.
G. CHANGE IN CONTROL. In the event of a Change in Control of the
Corporation, the Agreement shall automatically terminate and the
Accrued Benefit of Participant shall be immediately payable, unless a
majority of the entire board of directors of the Corporation as it
existed immediately prior to the Change in Control, shall agree to
continue to maintain the Agreement. Upon the occurrence of such an
agreement, the term "Corporation" as used in this Agreement shall be
deemed to refer to such successor or survivor corporation, firm or
person.
H. UNFUNDED ARRANGEMENT. The Corporation shall be under no requirement to
fund its obligations under this Agreement. The payments to Participant
or Beneficiary under this Agreement shall be made from assets which
shall continue, for all purposes, to be part of the general assets of
the Corporation and no person shall have, by virtue of the provisions
of this Agreement, any interest in such assets. To the extent that any
person acquires a right to receive payments from the Corporation under
the provisions of this Agreement, such rights shall be no greater than
the right of any unsecured general creditor of the Corporation.
In the event that, in its sole discretion, the Corporation decides to
informally fund its liabilities under this Agreement in whole or in
part, neither the Participant, the Participant's Beneficiary nor any
other persons shall have any rights whatsoever in such informal funding
vehicle. The Corporation shall be the sole owner and beneficiary of any
such assets and shall possess and may exercise all incidents for
ownership thereof. Further, any such assets shall not in any way be
considered to be security for the performance of the obligations of the
Corporation under this Agreement and shall be, and will remain, general
unpledged, unrestricted assets of the Corporation, and such rights
shall be no greater than the right of any unsecured general creditor of
the Corporation.
I. LIMITATION OF RIGHTS. Nothing contained in this Agreement
shall, in any manner, be construed to:
1. Limit in any way the right of the Corporation to terminate
Participant's employment with the Corporation at any time; or
2. Be evidence of any agreement or understanding, express or
implied, that the Corporation will employ Participant in any
particular position or at any particular rate of remuneration
or for any particular period of time.
J. ADMINISTRATION. The Agreement is to be administered by the
Administrator. Subject to the provisions of the Agreement, the
Administrator shall have sole authority, in its absolute
discretion, to do everything necessary or appropriate to
administer the Agreement, including, without limitation,
interpreting the Agreement. All decisions, determinations and
interpretations of the Administrator shall be final and binding on
the Participant. The Administrator shall be fully justified in
relying or acting in good faith upon any report made by the
independent public accountants of the Corporation and
upon any other information furnished in connection with this
Agreement by any person or persons other than himself or herself.
In no event shall any person who is or shall have been the
Administrator be liable for any determination made or other action
taken or omitted in reliance upon any such report or information, or
for any action taken or omitted, including the furnishing of
information, in good faith.
K. NO FIDUCIARY RELATIONSHIP. Nothing contained in this
Agreement, and no action taken pursuant to its provisions by
either party, shall create, or be construed to create, a trust
of any kind, or a fiduciary relationship between the
Corporation and the Participant or any other person.
L. SELECT GROUP OF EMPLOYEES. It is the intention of the
Corporation that this Agreement, together with any similar
plans or agreements that may be adopted by the Corporation,
shall be an unfunded plan maintained primarily for the purpose
of providing deferred compensation for a single member of a
select group of management or highly compensated employees of
the Corporation. All provisions of this Agreement shall be
construed and applied in order to carry out this intention.
M. BENEFITS NOT SUBJECT TO ALIENATION. Neither the Participant
nor any other person shall have any power or right to
voluntarily or involuntarily transfer, sell, alienate, assign,
pledge, mortgage, or otherwise encumber any part or all of the
amounts payable by the Corporation under this Agreement, nor
shall such amounts be subject to seizure by any creditor of
the Participant or any other person by a proceeding at law
(including, but not limited to, divorce proceedings) or in
equity, and no such benefits shall be transferable by
operation of law in the event of bankruptcy, insolvency or
death (except to the extent expressly provided in this
Agreement) of the Participant.
N. REVIEW OF CLAIMS.
1. The Participant or any other person who believes that he or
she is entitled to receive benefits under the Agreement may
make a written request for such benefits to the Administrator,
which for this purpose and for this purpose only shall be the
"named fiduciary" of the Agreement within the meaning of
Section 503 of ERISA.
2. Once a request for benefits has been made, the Administrator shall
review the claim for benefits. If the claim is wholly or partially
denied, notice of the decision shall be furnished to the
claimant within ninety (90) days after receipt of the claim,
unless special circumstances require an extension of up to an
additional ninety (90) days for processing the claim. If such an
extension of time for processing is required, written notice of
the extension shall be furnished to the claimant prior to the
termination of the initial 90-day period. This notice shall
indicate the circumstances requiring the extension of time and
the date by which the Administrator expects to render the final
decision. In the event that no notice of the denial of a claim is
furnished to the claimant under this subsection, the claim shall be
deemed denied and the claimant may request review under subsection
4 below.
3. If a claim is denied in whole or in part, notice of the
decision provided to the claimant shall contain: (i) the
specific reason or reasons for the denial; (ii) specific
reference to relevant provisions of the Agreement on which the
denial is based; (iii) a description of any additional
material or information necessary for the claimant to perfect
the claim together with an explanation of why such material or
information is necessary; and (iv) appropriate information as
to the steps to be taken if the claimant wishes to submit his
or her claim for review.
4. The Participant or any other person who has had a claim denied
under this Section shall be entitled to request the
Administrator to give further consideration to his or her
claim by filing with the Administrator a written request for
review. This request must contain a written statement of the
reasons why the claimant believes his or her claim should be
allowed. Any request for review must be filed with the
Administrator no later than sixty (60) days after receipt of
the notice of denial of the claim.
a. The request for review shall be in writing and shall include
specific reasons for the decision, as well as specific
references to the pertinent Agreement provisions on which the
decision is based.
b. Once a request for review has been made under this subsection, the
Administrator shall conduct a hearing to review the claim within the
next sixty (60) days, unless special circumstances require an
extension of the time for processing, in which case a decision
shall be rendered no later than one hundred twenty (120) days after
receipt of a request for review. If an extension of time for
review is required because of special circumstances, written
notice of the extension shall be furnished to the claimant
prior to the commencement of the extension. If the decision
on review is not furnished to the claimant within the sixty (60)
day period (or the 120-day period if an extension of time is required
because of special circumstances), the claim shall be deemed denied
on review.
O. MISCELLANEOUS.
1. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Corporation, and its successors and
assigns, and to the benefit of the Participant, and his heirs,
executors and administrators.
2. Separate Counterparts. This Agreement may be executed in
separate counterparts which shall collectively and separately
be considered one and the same Agreement.
3. Headings. The headings used in this Agreement are for the
purpose of convenience only, and no such heading shall be
considered in the construction of any provision of this
Agreement or any related instrument.
4. Good Faith. No employee or other member of the Corporation or
Administrator of the Corporation shall in any event be liable
to any person for any action taken or omitted to be taken in
connection with this Agreement, as long as such act or
omission to act is made in good faith.
5. Expenses. The expenses and cost of administration of the
Agreement shall be paid by the Corporation.
6. Amendment. This Agreement may only be amended by a written
agreement signed by the Corporation and the Participant.
7. Governing Law. The laws of the State of South Dakota shall
govern the validity of this Agreement, the construction of its
terms and interpretation of the rights and duties of the
parties hereunder.
8. Authorization to Withhold Taxes. The Corporation is authorized
in accordance with applicable law (i) to withhold from the
Participant's compensation any sums as may be necessary to
cover federal and state income, FICA, medicare or other taxes
which may be due with respect to any portion of the
Participant's Accrued Benefit, and (ii) to withhold from any
distribution to the Participant (or the Participant's estate,
as the case may be) such sums as may be necessary to cover
federal and state taxes which may be due with respect to such
distribution.
9. Superceding of Prior Agreements. This Agreement shall replace
and supersede any prior formal or informal arrangement or
discussion between the Corporation and the Participant
concerning the providing of deferred compensation to
Participant.
IN WITNESS WHEREOF, the parties adopted and executed this Agreement, as of the
day and year first above written.
CORPORATION: PARTICIPANT:
Daktronics, Inc.
By: /s/ William R Retterath /s/ James B. Morgan
--------------------- -------------------------
Its: Chief Financial Officer James B. Morgan