Daktronics (DA3) Risk Analysis

Our certificate of incorporation (the "Certificate of Incorporation"), by-laws, and other corporate governance documents, as well as the General Corporation Law of the State of Delaware (the "DGCL") and other applicable Delaware laws, contain protections that could have an anti-takeover effect and discourage, delay, or prevent a change in control or an acquisition that some stockholders may find attractive. These protections under Delaware law and our governance documents, which may make it more difficult for our stockholders to take certain corporate actions related to a change in control of the Company, include, without limitation: - the ability of our Board of Directors (the "Board" or the "Board of Directors"), without stockholder approval, to authorize and issue shares of stock with voting, liquidation, dividend, and other rights and preferences that are superior to our common stock;- the classification of our Board, which effectively prevents stockholders from electing a majority of the directors at any one meeting of stockholders;- the requirement for stockholders to provide advance notice to raise business matters or nominate directors at annual meetings of stockholders;- the prohibition of cumulative voting in the election of directors;- under the DGCL, stockholders who do not approve a change in control generally do not have the right, solely by reason of their dissent, to receive a judicially determined control premium or other premium for their shares, although appraisal rights may be available in certain transactions; and - in general, Section 203 of the DGCL prohibits us from engaging in a Business Combination (as defined below) with an Interested Stockholder (as defined below) for a period of three years after the date of the transaction in which the person became an Interested Stockholder unless: (i) our Board approved either the Business Combination or the transaction in which the stockholder became an Interested Stockholder prior to the date the interested stockholder became an Interested Stockholder; (ii) the Interested Stockholder acquires at least 85 percent of our common stock (excluding shares owned by our directors, officers, and certain participants in employee stock purchase plans) in the transaction in which it became an Interested Stockholder; or (iii) the business combination is approved by our Board and the affirmative vote of at least two-thirds of the votes entitled to be cast by disinterested stockholders at an annual or special meeting of our stockholders. The DGCL permits a corporation to opt out of, or choose not to be governed by, Section 203 of the DGCL by expressly stating so in its original certificate of incorporation (or subsequent amendment to its certificate of incorporation or bylaws approved by its stockholders). The Certificate of Incorporation does not contain a provision expressly opting out of the application of Section 203 of the DGCL. Therefore, the Company is subject to Section 203 of the DGCL . A "Business Combination" is defined under the DGCL broadly to include mergers, consolidations, asset sales, and other transactions resulting in a financial benefit to an interested stockholder. Section 203 of the DGCL generally defines an "Interested Stockholder" as an entity or person beneficially owning 15 percent or more of the outstanding voting stock of a corporation and any entity or person affiliated with or controlling or controlled by such entity or person. The above protections may deny our stockholders a premium on a sale of their common stock, which, in turn, may have a material adverse effect on the market price of our common stock.