RIMAGE CORPORATION STOCK OPTION AGREEMENT

EXHIBIT 10.3

RIMAGE CORPORATION

STOCK OPTION AGREEMENT

          THIS STOCK OPTION AGREEMENT (this “Agreement”) is made as of the Grant Date set forth below, by and between Rimage Corporation, a Minnesota corporation (the “Company”), and the Optionee named below (the “Optionee”), and is not issued pursuant to any existing Stock Incentive Plan of the Company.

           1.    Grant of Option .   The Company hereby grants to Optionee the right and option (the “Option”) to purchase all or any part of the aggregate number of shares of common stock of the Company set forth above (the “Option Shares”), at the Option Price per Share set forth above, on the terms and conditions set forth in this Agreement. The Option is not intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

           2.    Administration of Option .   The Option will be administered by the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”). Any or all functions of the Committee specified in this Agreement may be exercised by the Board unless this Agreement specifically states otherwise. The Committee has the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Option as it may, from time-to-time, deem advisable, to interpret the terms and provisions of this Agreement and to otherwise supervise the administration of the Option. The Committee may not take any action that would be treated as a “repricing” of the Option and may not amend or alter the Option without the written consent of Optionee. All decisions made by the Committee pursuant to this Agreement will be final, conclusive and binding on all persons, including the Company, its shareholders, members of the Board, Optionee and their respective estates and beneficiaries.

           3.    Term and Exercise of Option .

(a)        Installment Exercise Provisions . The term of the Option shall commence on the Grant Date set forth above and shall continue until the Expiration Date set forth above, unless earlier terminated as provided herein. Except as otherwise provided herein, the Option will be exercisable in cumulative installments as follows:

(i)        Up to 25% of the Option Shares may be purchased at any time after the one-year anniversary of the Grant Date and prior to termination of the Option;

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EXHIBIT 10.3

(ii)       Up to 50% of the Option Shares (less any shares previously purchased pursuant to the Option) may be purchased at any time on or after the second-year anniversary of the Grant Date and prior to termination of the Option;

(iii)        Up to 75% of the Option Shares (less any shares previously purchased pursuant to the Option) may be purchased at any time on or after the third-year anniversary of the Grant Date and prior to termination of the Option; and

(iv)      Up to 100% of the Option Shares (less any shares previously purchased pursuant to the Option) may be purchased at any time on or after the fourth-year anniversary of the Grant Date and prior to termination of the Option.

Neither Optionee nor Optionee’s legal representatives, legatees or distributees, as the case may be, will be, or will be deemed to be, a holder of any Option Shares for any purpose unless and until certificates for such shares are issued to Optionee or Optionee’s legal representatives, legatees or distributees, under the terms of this Agreement.

(b)        Method of Exercise .     The Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Option Shares in respect of which the Option is being exercised (the “Exercised Shares”) and such other representations and agreements as may be required by the Company. The Exercise Notice shall be signed by Optionee and shall be delivered in person or by certified mail to the principal financial officer of the Company in accordance with Section 11 of this Agreement. The Exercise Notice shall be accompanied by payment of the aggregate Option Price per Share. The Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Option Price per Share.

(c)        Method of Payment . Payment of the aggregate Option Price per Share shall be made by certified or bank check, or by any other form of legal consideration deemed sufficient by the Committee, including a properly executed Exercise Notice together with irrevocable instructions to a broker acceptable to the Company to promptly deliver to the Company the amount of sale proceeds to pay the aggregate Option Price per Share. As determined by the Committee, in its sole discretion, payment in full or in part may also be made in the form of unrestricted common stock of the company already owned by Optionee. Any same day sale or cashless exercise shall comply with regulations promulgated under the Securities Exchange Act and the Federal Reserve Board. No shares of common stock of the Company and no certificates for such shares shall be issued until full payment therefore has been made.

(a)       “Change in Control” of the Company shall mean a change in control which would be required to be reported in response to Item 5.01 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement, including without limitation, if:

(i)        any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities (other than an entity owned 50% or greater by the Company or an employee pension plan for the benefit of the employees of the Company);

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(ii)       there ceases to be a majority of the Board comprised of (i) individuals who, on the date of this Agreement, constituted the Board of the Company; and (ii) any new director who subsequently was elected or nominated for election by a majority of the directors who held such office prior to a Change in Control; or

(iii)      the Company disposes of at least 75% of its assets, other than (i) to an entity owned 50% or greater by the Company or any of its subsidiaries, or to an entity in which at least 50% of the voting equity securities are owned by the shareholders of the Company immediately prior to the disposition in substantially the same percentage or (ii) as a result of a bankruptcy proceeding, dissolution or liquidation of the Company.

(b)       Except as otherwise provided in this Agreement, if a Change in Control occurs, all previously unexercised Option Shares shall be exercisable in full, without regard to any installment exercise provisions; provided, however, that the Committee, in its sole and absolute discretion, may, with respect to any or all of such Option Shares, take any or all of the following actions to be effective as of the date of the Change in Control (or as of any other date fixed by the Committee occurring within the thirty (30) day period immediately preceding the date of the Change in Control, but only if such action remains contingent upon the effectuation of the Change in Control) (such date referred to as the “Action Effective Date”):

          (i)        Unilaterally cancel such Option Shares in exchange for whole and/or fractional shares of the common stock of the Company (or whole shares of common stock and cash in lieu of any fractional share of common stock) or whole and/or fractional shares of a successor (or whole shares of a successor and cash in lieu of any fractional share) that, in the aggregate, are equal in value to the produc