Exhibit 10.1




 




CONDITIONAL RELEASE 


from Pledge Agreement




 




This Conditional Release

is made effective as of August 27, 2002, by and among William H. Gibbs (“Borrower”)

and Fargo Electronics, Inc., a Delaware corporation (the “Company”).




 




A.            Borrower and the Company are parties to a Restricted

Stock Agreement, dated May 28, 1999, pursuant to which Borrower purchased

78,125 restricted shares (the “Shares”) of the Company’s common stock (as

adjusted to account for the Company’s five-for-eight reverse stock split

effective November 1999).  The Shares

became fully vested upon completion of the Company’s initial public offering in

February 2000.




 




B.            As consideration for the Shares, Borrower delivered to

the Company a Promissory Note, dated May 28, 1999 (the “Note”), in the principal

amount of $125,000, bearing interest on the unpaid balance thereof at the rate

six percent (6%) per annum, compounded annually.




 




C.            Borrower’s obligations to the Company under the Note are

secured by a Pledge Agreement, dated May 28, 1999 (the “Pledge Agreement”), pursuant

to which Borrower granted the Company a security interest in all of the Shares,

including all proceeds from the sale of the Shares.




 




D.            Borrower wishes to use the proceeds from the sale of a

portion of the Shares to pay off all principal and interest owing under the

Note, plus applicable taxes; and the Company wishes to permit the sale of a

portion of the Shares for such purposes, subject to the terms and conditions of

this Agreement.




 




NOW, THEREFORE, the

parties agree as follows:




 




1.             Release of Collateral.  Subject to the terms and conditions of this Agreement, the

Company hereby releases 25,000 of the Shares (the “Released Shares”) as

collateral under the Pledge Agreement and hereby terminates its security

interest in the Released Shares.  The

Pledge Agreement will remain in full force and effect with respect to the

balance of the Shares until the unpaid principal balance and accrued interest

under the Note is paid in full.




 




2.             Payment of Note. 

The Borrower agrees to cause his broker to remit a total of $149,452

(the “Pay-Off

Amount”) of the proceeds from the sale of the Released Shares

directly to the Company by wire transfer of immediately available funds as soon

as commercially possible following the sale of the Released Shares and to

deliver an instruction letter to his broker in the form attached hereto.  If the Released Shares are sold in multiple

increments over a period of more than one day, the Pay-Off Amount may be paid in

a single lump sum immediately following the sale of the last increment of the

Released Shares, but in no event later than September 3, 2002.




 




3.             Collateral; Default.  If Borrower fails to sell the full amount of the Released Shares

on or before August 31, 2002, Borrower agrees to return the unsold balance of

the Released Shares, together with the balance of the Shares, to the Company to

hold as collateral to secure Borrower’s remaining obligations under the Note as

provided for in the Pledge Agreement.  Borrower’s

failure to cause the proceeds from the sale of the Released Shares (not to

exceed the Pay-Off Amount) to be transmitted to the Company no later than

September 3, 2002 and, if the Note is not paid in full, also deliver to the

Company the unsold amount of the Released Shares and the balance of the Shares,

will be deemed an Event of Default under the Pledge Agreement.




 




4.             Representations and Warranties.  Borrower represents and warrants to the

Company that Borrower is the sole owner of the Shares (including the Released

Shares), free and clear of any lien, security interest, option or other charge

or encumbrance, except for the security interest of the Company.




 





























 




5.             No Modification of Note.  Nothing in this Agreement will be deemed to

constitute any modification of any term or provision of the Note or any renewal

or extension of the indebtedness represented by the Note.




 




6.             Compliance with Company Policy and Applicable Law.  Borrower agrees that any and all sales of

the Released Shares will be made in compliance with Rule 144 under the Securities

Act of 1933, as amended, Rule 10b-5 under the Exchange Act of 1934, as amended,

and the Company’s insider trading policy. 

Borrower agrees to notify the Company immediately upon the execution of

each trade in which the Released Shares are sold.




 




7.             Governing Law. 

This Agreement will governed by and construed in accordance with the

laws of the State of Minnesota.




 




The parties have executed

this Agreement effective as of August 27, 2002.




 




 




	

   


  	

   


  
	

  BORROWER


  	

   


  
	

   


  	

   


  
	

  /s/ William H. Gibbs


  	

   


  
	

  William H. Gibbs


  	

   


  
	

   


  	

   


  
	

   


  	

   


  
	

  FARGO ELECTRONICS, INC.


  	

   


  
	

   


  	

   


  
	

  By:


  	

  /s/ Jeffrey D. Upin


  	

   


  
	

   


  	

  Jeffrey D. Upin


  	

   


  
	

   


  	

  Vice

  President—Business Development & General Counsel


  	

   


  





 




 





























 




Instruction Letter




 




August 27, 2002




 




 




Salomon Smith Barney Inc.


Wells Fargo Plaza


401 B Street, Suite 2300


San Diego, CA 92101




 




Attn. Michael Del Vecchio




 




Dear Mr. Del Vecchio:




 




Pursuant to separate

instructions, you have been instructed to sell for my account no more than

25,000 shares (the “Shares”) of common stock of Fargo Electronics, Inc.

registered in my name.  You are hereby

instructed to pay to the Fargo Electronics, Inc. from the proceeds of the sale

of the Shares, and immediately upon completion of such sale, a total of

$149,452.00 by wire transfer of immediately available funds to the following

account:                                                                                                          .




 




 




	

  /s/ William H. Gibbs


  	

   


  
	

  William H. Gibbs