Document:

Exhibit 10.2

 

Supplement to Prospectus

Dated January 9, 2001

 

250,000 Shares of Common Stock

 

 

FARGO ELECTRONICS, INC.

6533
Flying Cloud Drive

Eden Prairie,
Minnesota 55344

 

 

Offered pursuant to the

Fargo Electronics, Inc. Employee Stock Purchase Plan

 

 

This document constitutes part of a prospectus
covering

securities that have been registered under the

Securities Act of 1933.

 

 

This document supplements the prospectus, dated January
9, 2001, of Fargo Electronics, Inc., a Delaware corporation, covering offers
and sales, from time to time, of shares of its common stock, par value $.01 per
share and Series C Preferred Stock purchase rights attached thereto, pursuant
to the company’s Employee Stock Purchase Plan.

 

This prospectus supplement describes an amendment to
the plan that will become effective as of December 8, 2005.

 

This amendment, which is described in more detail
below, decreases the discount at which shares are purchased under the plan. Eligible
employees and participants are urged to review this information carefully
before making a decision to participate or to continue to participate in the
plan.

 

 

The date of this prospectus
supplement is December 8, 2005

 

 

Amendment to the Fargo
Electronics, Inc. 2001 Employee Stock Purchase Plan

Effective December 8, 2005

 

Effective December 8,
2005, the Fargo Electronics Inc. 2001 Employee Stock Purchase Plan has been
amended as follows:

 

•                  Shares purchased with payroll
contributions under the plan will be purchased at a price equal to 95% of the “fair
market value” of a share on the termination date of the applicable offering
period. Prior to the amendment, shares were purchased at the lesser of 85% of
the “fair market value” on the commencement date or the termination date of the
applicable offering period.

 

As a result of the amendment
described above, participants will receive less of a discount on the shares
that they purchase under the plan. This amendment is the result of Fargo’s
board of directors’ review of the incentives provided by the plan, as well as
the accounting expenses associated with the plan and the impact of those
expenses on the company’s reported earnings under the new option accounting
rules that go into effect in the 2006 fiscal year.

 

In reviewing this
information, participants and potential participants are encouraged to review a
copy of the amended plan (available upon request), as well as a copy of the
original plan prospectus and prior applicable supplements.

 

Any questions regarding
these amendments or the plan should be directed to Jeffrey Upin, Fargo’s Vice
President of Business Development, General Counsel and Secretary, at 6533
Flying Cloud Drive, Eden Prairie, Minnesota 55344, telephone number (952)
946-8426.Exhibit 10.3

 

NON-EMPLOYEE DIRECTOR

RESTRICTED STOCK AWARD AGREEMENT

 

THIS AGREEMENT is entered into and effective as of
this          day of             ,
           (the “Date of
Grant”), by and between Fargo Electronics, Inc., a Delaware corporation (the “Company”),
and                               ,
a non-employee director of the Company (the “Grantee”).

 

A.            The
Company has adopted the Fargo Electronics, Inc. 2003 Stock Incentive Plan (the “Plan”)
authorizing the Board of Directors of the Company, or a committee as provided
for in the Plan (the Board or such a committee to be referred to as the “Committee”),
to grant restricted stock awards to employees (including officers and directors
who are also employees) of the Company or any Subsidiary (as defined in the
Plan) and non-employee directors.

 

B.            The
Company desires to provide an incentive to the Grantee, in the form of a grant
of a restricted stock award pursuant to the Plan, to encourage the Grantee’s
long-term performance for the Company and its stockholders as a non-employee
director and more closely align the Grantee’s interest in the Company with that
of the Company’s stockholders.

 

Accordingly, the parties agree as follows:

 

1.                                       Grant
of Award.

 

The Company hereby grants to the Grantee a restricted
stock award (the “Award”) consisting of Two Thousand One Hundred (2,100) shares
(the “Award Shares”) of the Company’s common stock, $0.01 par value (the “Common
Stock”), according to the terms and subject to the restrictions and conditions
hereinafter set forth and as set forth in the Plan. Reference to “Award Shares”
in this Agreement will be deemed to include the Dividend Proceeds (as defined
in Section 3.3 of this Agreement) with respect to such Award Shares that are
retained and held by the Committee as provided in Section 3.3 of this Agreement
and the Plan.

 

2.                                       Grant
Restriction.

 

2.1           Restriction
and Forfeiture. The Grantee’s right to retain the Award Shares will be
subject to the Grantee remaining in the continuous service of the Company as a
non-employee director for a period of three (3) years (the “Restriction Period”)
following the Date of Grant; provided, however, that such period restrictions
(the “Restrictions”) will lapse and terminate prior to end of the Restriction
Period with respect to installments of Award Shares to the extent and on such
dates as follows:

 

	
  Date of

  Restriction Lapse

  	
   

  	
  Number of Award Shares for

  Which Restrictions Lapse

  	
   

  
	
  May 2, 2007

  	
   

  	
  700

  	
   

  
	
  May 2, 2008

  	
   

  	
  700

  	
   

  
	
  May 2, 2009

  	
   

  	
  700

  	
   

  

 

 

2.2           Termination
of Directorship.

 

(a)           Termination
Due to Death or Disability. In the event the Grantee’s service as a
Director with the Company is terminated by reason of death or Disability (as
defined in the Plan), all outstanding Award Shares will become immediately
fully vested and non-forfeitable.

 

(b)           Termination
for Reasons Other Than Death or Disability. In the event that the Grantee’s
service as a Director with the Company is terminated for any reason other than
death or Disability, all outstanding Award Shares held by Grantee that have not
vested as of such termination will be terminated and forfeited and the
certificate(s) representing the non-vested portion of the Award Shares so
forfeited shall be canceled.

 

(c)           Modification
of Rights Upon Termination. Notwithstanding the other provisions of this
Section 2.2, upon a Grantee’s termination of service as a Director with the
Company, the Committee may, in its sole discretion (which may be exercised at
any time on or after the date of grant, including following such termination),
cause any or all of any outstanding Award Shares then held by such Grantee to
vest and/or continue to vest or become free of restrictions following such
termination of service, in each case in the manner determined by the Committee;
provided, however, that any modification of an Award upon a Grantee’s
termination of service will be subject to Section 8.4 of the Plan.

 

2.3           Change
in Control.

 

(a)           Impact
of Change in Control. If a Change in Control (as defined in the Plan) of
the Company occurs, then the Restrictions applicable to the Award Shares that
have been outstanding will become immediately fully vested and non-forfeitable,
subject to Section 10.3 of the Plan.

 

(b)           Limitation
on Change in Control Payments. Notwithstanding anything in this Section 2.3
to the contrary, if, with respect to a Grantee, acceleration of the vesting of
the Award Shares as provided above (which acceleration or payment could be
deemed a “payment” within the meaning of Section 280G(b)(2) of Internal
Revenue Code of 1986, as amended (the “Code”)), together with any other “payments”
that such Grantee has the right to receive from the Company or any corporation
that is a member of an “affiliated group” (as defined in Section 1504(a)
of the Code without regard to Section 1504(b) of the Code) of which the
Company is a member, would constitute a “parachute payment” (as defined in
Section 280G(b)(2) of the Code), then the “payments” to the Grantee as set
forth herein will be reduced to the largest amount as will result in no portion
of such “payments” being subject to the excise tax imposed by Section 4999 of
the Code; provided, however, that if the Grantee is subject to a separate
agreement with the Company or a Subsidiary that expressly addresses the
potential application of Sections 280G or 4999 of the Code (including, without
limitation, that “payments” under such agreement or otherwise will be reduced,
that the Grantee will have the discretion to determine which “payments” will be
reduced, that such “payments” will not be reduced or that such “payments” will
be “grossed up” for tax purposes), then this Section 2.3(b) will not apply, and
any “payments” to the Grantee pursuant to Section 2.3(a) of this Agreement will
be treated as “payments” arising under such separate agreement.

 

2

 

3.                                       Issuance
of Award Shares.

 

3.1           Privileges
of a Stockholder; Transferability. As soon as practicable after the
execution and delivery of this Agreement and the satisfaction of any conditions
to the effective issuance of such Award Shares (including, without limitation,
the conditions set forth in Section 3 of this Agreement and Section 7 of the
Plan), the Grantee will be recorded on the books of the Company as the owner of
the Award Shares, and the Company will issue one or more duly issued and
executed stock certificates evidencing the Award Shares. Except as provided in
Sections 7.1, 7.3, 7.4 and 11.3 of the Plan and this Agreement, the Grantee
will have all voting, dividend, liquidation and other rights with respect to
the Award Shares in accordance with their terms upon becoming the holder of
record of such Award Shares; provided, however, that prior to the lapse or
other termination of the Restrictions applicable to Award Shares, except as
provided in Section 11.3 of the Plan, such Award Shares will not be assignable
or transferable by the Grantee, either voluntarily or involuntarily, and may
not be subjected to any lien, directly or indirectly, by operation of law or
otherwise. Any attempt to transfer, assign or encumber the Award Shares other
than in accordance with this Agreement and the Plan will be null and void and
will void the Award, and all Award Shares for which the Restrictions have not
lapsed will be forfeited and immediately returned to the Company.

 

3.2           Escrow
of Award Share Certificates. To enforce the Restrictions imposed by this
Agreement and the Plan, until the Restrictions have lapsed with respect to the
Award Shares (a) the stock certificates evidencing the Award Shares will bear a
legend referring to the Restrictions and (b) the stock certificates evidencing the
Award Shares, together with duly endorsed stock powers, attached hereto as Exhibit
A, will be kept in the custody of the Company or its transfer agent or
evidence of stock ownership of such Award Shares will be maintained, together
with duly endorsed stock powers, in a certificateless book-entry stock account
with the Company’s transfer agent.

 

3.3           Dividends
and Other Distributions. Unless the Committee determines otherwise in its
sole discretion, other than regularly quarterly cash dividends, any dividends
or distributions with respect to the Award Shares, including stock dividends or
dividends in kind (all of which will collectively be referred to as “Dividend
Proceeds”) will be subject to the same risk of forfeiture and restrictions on
transfer as the forfeitable Award Shares in respect of which they are issued or
transferred, will be deposited, along with any necessary duly endorsed stock
powers, with the Company or its transfer agent, and will become Award Shares
for the purposes of this Agreement. The Committee may, in its sole discretion,
determine whether any interest will be paid on such Dividend Proceeds.

 

3.4           Lapse
of Restrictions; Issuance of Unrestricted Shares. Upon the vesting of any
Award Shares, such vested Award Shares will no longer be subject to forfeiture
as provided in Section 2.2 of this Agreement. Upon the vesting of any Award
Shares, all restrictions on such Award Shares will lapse, and the Company will,
subject to the provisions of the Plan, issue to the Grantee a certificate
evidencing the Award Shares that is free of any transfer or other restrictions
arising under this Agreement.

 

3.5           Service
as a Director. Nothing in this Agreement will interfere with or limit in
any way the right of the Company to terminate the service of the Grantee as a
Director at any time, nor confer upon the Grantee any right to continue in the
service of the Company as a Director for any particular period of time.

 

3

 

4.                                       Section
83(b) Election.

 

The Grantee hereby acknowledges that Grantee has been
informed that, with respect to the grant of the Award, an election may be filed
by the Grantee with the Internal Revenue Service, within 30 days of the Date of
Grant, electing pursuant to Section 83(b) of the Code to be taxed currently on
the fair market value of the Award on the Date of Grant. The Grantee
acknowledges that it is the Grantee’s sole responsibility to timely file the
election under Section 83(b) of the Code if the Grantee chooses to make such an
election. The Grantee has been advised that he or she should consult his or her
personal tax or financial advisor with any questions regarding whether to make
a Section 83(b) election. If the Grantee makes such an election, the Grantee
agrees to promptly provide the Company a copy of the election form.

 

5.                                       Adjustments.

 

In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other change in the
corporate structure or shares of the Company, the Committee (or, if the Company
is not the surviving corporation in any such transaction, the board of
directors of the surviving corporation), in order to prevent dilution or
enlargement of the rights of the Grantee, will make appropriate adjustment
(which determination will be conclusive) as to the number and kind of
securities or other property (including cash) subject to this Award.

 

6.                                       Subject
to Plan.

 

This Award and the Award Shares granted pursuant to
this Agreement have been granted under, and are subject to the terms of, the
Plan. The terms of the Plan are incorporated by reference in this Agreement in
their entirety, and the Grantee, by execution hereof, acknowledges having
received a copy of the Plan. The provisions of this Agreement will be
interpreted as to be consistent with the Plan, and any ambiguities in this
Agreement will be interpreted by reference to the Plan. In the event that any
provision of this Agreement is inconsistent with the terms of the Plan, the
terms of the Plan will prevail.

 

7.                                       Miscellaneous.

 

7.1           Binding
Effect. This Agreement will be binding upon the heirs, executors,
administrators and successors of the parties to this Agreement.

 

7.2           Governing
Law. This Agreement and all rights and obligations under this Agreement
will be construed in accordance with the Plan and governed by the laws of the
State of Minnesota, without regard to conflicts of laws provisions. The parties
to this Agreement agree that any legal proceeding related to this Agreement
will be brought in an appropriate Minnesota court and consent to the exclusive
jurisdiction of the court for this purpose.

 

7.3           Entire
Agreement. This Agreement and the Plan set forth the entire agreement and
understanding of the parties to this Agreement with respect to the grant and
vesting of this Award and the administration of the Plan and supersede all prior
agreements, arrangements, plans and understandings relating to the grant and
vesting of this Award and the administration of the Plan.

 

4

 

7.4           Code
Section 409A Compliance. If any provision of this Agreement would result in
the imposition of an excise tax under Section 409A of the Code and related
regulations and Treasury pronouncements (“Section 409A”), that provision will
be reformed to avoid imposition of the excise tax and no action taken to comply
with Section 409A will be deemed to impair a benefit under this Agreement.

 

7.5           Amendment
and Waiver. Other than as provided in the Plan, this Agreement may be
amended, waived, modified or canceled only by a written instrument executed by
the parties to this Agreement or, in the case of a waiver, by the party waiving
compliance.

 

The parties hereto have executed this Agreement
effective the day and year first above written.

 

 

	
   

  	
  FARGO ELECTRONICS, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By execution of
  this Agreement,

  	
  GRANTEE

  
	
  the Grantee
  acknowledges having

  	
   

  
	
  received a copy
  of the Plan.

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Name and
  Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

5

 

EXHIBIT A

 

STOCK POWER

 

For value received, I hereby sell, assign and transfer
unto                                       
                                                            
shares of the Common Stock of Fargo Electronics, Inc. standing in my name on
the books of said company represented by Certificate(s) Number(s)                   
herewith, and do hereby irrevocably constitute and appoint                                                 
attorney to transfer said stock on the books of said company with full power of
substitute in the premises.

 

 

	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Name and
  Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

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