Incentive Option Plans

        The 2001 Daktronics Incentive Option Plan and the 1993 Daktronics Incentive Option Plan (the “Option Plans”) are intended to assist us in hiring and retaining well-qualified employees, consultants and other service providers by allowing them to participate in our ownership and growth through the grant of incentive and non-statutory stock options.  On June 20, 2007, options for an aggregate of 2,658,644 shares were outstanding under the Option Plans. If our shareholders approve the adoption of the 2007 Stock Incentive Plan at the Annual Meeting, we will grant no more options under the Option Plans. However, options then outstanding under the Option Plans will not be affected.

        The following is a summary of the terms of the Option Plans, and it is qualified by reference to the Option Plans, copies of which will be provided to shareholders upon request.

        Administration.  The Option Plans were administered by the Compensation Committee of the Board of Directors, which determined when and which employees, consultants and other service providers would be granted options and other awards under the Option Plans.  Subject to the provisions of the Option Plans, the Compensation Committee also determined the amount and terms of awards (including restrictions) and made all other determinations necessary or advisable for the administration of the Option Plans. 

        Employees of the Company and any of its affiliates were eligible for selection to receive options qualified as incentive stock options (“ISOs”) under Section 422 of the Code.  Employees, consultants and other service providers of the Company or its affiliates could be granted non-qualified options (“NQOs”), under the Option Plans.

        Shares Subject to the Option Plans.  The Option Plans provided that the total number of shares of our common stock that could be purchased upon the exercise of options did not exceed 3,200,000 shares, subject to adjustment.  The exercise price of an option or the value of an award granted under the Option Plans were and will be adjusted automatically upon any stock dividend or split, recapitalization, reclassification, combination, exchange of shares or other similar corporate change.

        Stock Options.  Upon the grant of an option, the Compensation Committee fixed the number of shares of our common stock that the optionee could purchase upon exercise of the option and the price at which the shares may be purchased.  With regard to ISOs, the exercise price could not be less than the “fair market value” of the common stock at the time the ISO was granted or 110% of such fair market value in certain cases.  Further, the aggregate fair market value of common stock (determined at the time the ISO is granted) subject to ISOs granted to an employee under all of our option plans that became exercisable for the first time by such employee during any calendar year could not exceed $100,000.  The exercise price of NQOs could be less than the fair market value of the common stock but not less than 85% of fair market value.  Each option was exercisable by the optionee only during the term fixed by the Compensation Committee, with such term ending not later than 10 years after the date of grant (in the case of ISOs).  Payment for shares upon exercise of any option could be made in cash, in shares of our common stock that have been owned for more than six months having an aggregate fair market value on the date of exercise which was not less than the exercise price of the option, or by a combination of cash and such shares, as described in the Option Plans.

        Options granted under the Option Plans were non-transferable except to the extent permitted by the agreement evidencing such option.  However, no ISO was transferable by any optionee other than by will or the laws of descent and distribution.  If, under the agreement evidencing any option, such option remained exercisable after the optionee’s death, it could be exercised to the extent permitted by such agreement by the personal representative of the optionee’s estate or by any person who acquired the right to exercise such option by bequest, inheritance or otherwise by reason of the optionee’s death.

        The following table sets forth information regarding grants of awards to the Named Executive Officers during 2006: