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


 


1





















 


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.


 


2