Exhibit 10.2

 

2005 Compensation Arrangements for Named Executive Officers

 

Set forth is a summary of fiscal 2005 compensation arrangements between Fargo
Electronics, Inc. (the “Company”) and certain of its executive officers who are
expected to constitute the Company’s “named executive officers” (defined in
Regulation S-K Item 402(a)(3)) for the year.  Generally, the salaries of named
executive officers are set at industry averages and variable compensation is
provided for through stock options and cash bonuses. The form of compensation
provided to members of the named executive officers varies based on their
position and their ability to influence performance.  All of the Company’s
executive officers are at-will employees, whose compensation and employment
status may be changed at any time in the discretion of the Company’s Board of
Directors, subject only to the terms of the Amended and Restated Employment
Agreement between the Company and Mr. Holland, and the terms of the Officers
Agreements between the Company and the other executive officers (concerning a
change in control of the Company) (the forms of which have been filed as
exhibits to the Company’s annual report on Form 10-K).

 

The Compensation and Human Resources Committee has discretion to set executive
compensation at levels warranted by external, internal and individual
circumstances. The Committee has solicited through Mr. Holland, and reviewed
periodically, compensation surveys for officer positions in the electronics
industry. Although such data provides a base for comparison, it is not
necessarily used as the basis for the compensation actually awarded.

 

The Company’s executive officer compensation program can be separated into
several elements: base salary, annual cash incentive compensation, long-term
incentive compensation in the form of stock options, and various benefits,
including medical and retirement savings plans generally available to employees.

 

Base Salary

 

The Company’s policy is to set the base salaries of its executives at the
industry average.  Effective January 1, 2005, the named executive officers are
scheduled to receive the following annual base salaries in their current
positions:

 

Name and Current Position

 

Base Salary

 

 

 

 

 

Gary R. Holland

 

$

330,000

 

(Chairman of the Board of Directors, President and Chief Executive Officer)

 

 

 

 

 

 

 

Kathleen L. Phillips

 

$

175,000

 

(Marketing and Distribution)

 

 

 

 

 

 

 

Thomas C. Platner

 

$

175,000

 

(Engineering and Manufacturing)

 

 

 

 

 

 

 

Paul W.B. Stephenson

 

$

180,000

 

(Chief Financial Officer)

 

 

 

 

 

 

 

Jeffrey D. Upin

 

$

175,000

 

(Business Development, General Counsel and Secretary)

 

 

 

 

Annual Cash Incentive Compensation

 

The Compensation and Human Resources Committee establishes a bonus plan annually
for the Chief Executive Officer and all other Company employees.  For 2005, the
Company’s Compensation and

 

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Human Resources Committee approved, and the Board of Directors ratified, an
incentive bonus plan for all of our employees, known as the “Success Sharing
Bonus Plan” (the “SSB Plan”).  The SSB Plan is based on the Company’s overall
strategic, business and financial performance.

 

The following table illustrates the calculation of the Bonus Potential (as
defined in the SSB Plan) for each named executive officer.  The Bonus Potential
is multiplied by the Success Sharing Payout Percentage (determined by the Board
of Directors to be between 0% and 250%) to determine the actual bonus payout for
each employee.

 

Name

 

Annualized
Salary

 

Eligibility
Percentage

 

Bonus
Potential

 

Maximum Possible
Bonus Payout

 

 

 

 

 

 

 

 

 

(250% of Bonus Potential)

 

 

 

 

 

 

 

 

 

 

 

Gary R. Holland

 

$

330,000

 

40

%

$

132,000

 

$

330,000

 

 

 

 

 

 

 

 

 

 

 

Kathleen L. Phillips

 

$

175,000

 

30

%

$

52,500

 

$

131,250

 

 

 

 

 

 

 

 

 

 

 

Thomas C. Platner

 

$

175,000

 

30

%

$

52,500

 

$

131,250

 

 

 

 

 

 

 

 

 

 

 

Paul W.B. Stephenson

 

$

180,000

 

30

%

$

54,000

 

$

135,000

 

 

 

 

 

 

 

 

 

 

 

Jeffrey D. Upin

 

$

175,000

 

30

%

$

52,500

 

$

131,250

 

 

Further information regarding the SSB Plan is contained in Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed May 5, 2005.

 

Stock Options

 

Prior to 2003, the Company provided long-term incentive to its executive
officers primarily through the Company’s Amended and Restated 1998 Stock Option
and Grant Plan.  The 2003 Stock Incentive Plan was approved at the 2003 Annual
Meeting.  Under the Incentive Plan, the Compensation and Human Resources
Committee awards stock options to executive officers based on the number of
options and shares currently held by the executive and also on performance
factors similar to those used to determine salaries and annual cash incentives. 
Options generally vest over a period of four years and expire after seven to ten
years.  Options are generally granted with an exercise price equal to the fair
market value on the date of grant.  The Compensation and Human Resources
Committee has not fixed, or predetermined, the amount of shares to be available
for options grants in any year.

 

The Compensation and Human Resources Committee has indicated its belief that the
current equity holdings of the Company’s executive officers and employees are
enough to align the interests of the Company’s executive officers and employees
with those of the Company’s stockholders, and, as a result, did not grant any
stock options to executive officers or employees in 2004.

 

Benefits

 

The Company provides medical, dental and life and disability insurance benefits
as well as a 401(k) retirement plan (including a Company match as determined by
the Board of Directors) to its executive officers.  The same benefits are
available to all Company employees.

 

Mr. Holland receives an annual car allowance in the amount of $12,000 annually.

 

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