Exhibit 10.25

 

OPTION NO.:             

 

ROSETTA STONE INC.
2009 OMNIBUS INCENTIVE PLAN, AS AMENDED
NONQUALIFIED STOCK OPTION AWARD AGREEMENT

 

Rosetta Stone Inc., a Delaware corporation (the “Company”), hereby grants an
option to purchase shares of its Class B Common Stock, $.00005 par value, (the
“Stock”) to the optionee named below.  The terms and conditions of the Option
are set forth in the Nonqualified Stock Option Award Agreement and in the
Rosetta Stone Inc. 2009 Omnibus Incentive Plan, as amended, (the “Plan”).

 

Grant Date:

 

Name of Optionee:

 

Optionee’s Employee Identification Number:

 

Number of Shares Covered by Option:

 

Option Price per Share:

 

Recipient understands and agrees that this Non-Qualified Stock Option Award is
granted subject to and in accordance with the terms of the Rosetta Stone, Inc.
%%EQUITY_PLAN%-% (the “Plan”).  Recipient further agrees to be bound by the
terms of the Plan and the terms of the Non-Qualified Stock Option Award as set
forth in the Non-Qualified Stock Option Agreement and any Addenda to such
Non-Qualified Stock Option Agreement.  A copy of the Plan is available on
www.Etrade.com.

 

Nothing in this Notice or in the Non-Qualified Stock Option Agreement or in the
Plan shall confer upon Recipient any right to continue in service for any period
of specific duration or interfere with or otherwise restrict in any way the
rights of the Corporation (or any Parent or Subsidiary employing or retaining
Recipient) or of Recipient, which rights are hereby expressly reserved by each,
to terminate Recipient’s Service at any time for any reason, with or without
cause.

 

Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the Non-Qualified Stock Option Agreement.

 

ROSETTA STONE INC.

 

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ROSETTA STONE INC.
2009 OMNIBUS INCENTIVE PLAN, AS AMENDED

 

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

 

This NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) and the Cover
Sheet to which this Agreement is attached (the “Cover Sheet”) are entered into
between Rosetta Stone Inc., a Delaware corporation (the “Company”), and Optionee
(as that term is defined in the Covered Sheet).  The Board of Directors of the
Company has adopted, and the stockholders of the Company have approved, the
Rosetta Stone Inc. 2009 Omnibus Incentive Plan, as amended, (the “Plan”), the
terms of which are incorporated by reference herein in their entirety.  Any term
used in this Agreement that is not specifically defined herein shall have the
meaning specified in the Plan.

 

IT IS AGREED:

 

1.             Grant of Option. Subject to the terms of the Plan, this Agreement
and the Cover Sheet, on the Grant Date set forth on the Cover Sheet (the “Grant
Date”), the Company granted to Optionee an option (the “Option”) to purchase
that number of shares of the Company’s common stock, $.00005 par value (the
“Stock”), at the Option Price per Share of Stock set forth on the Cover Sheet
(the “Option Price”), subject to adjustment as provided in the Plan.

 

2.             Type of Option.  The Option is a nonqualified stock option which
is not intended to be governed by section 422 of the Code and will be
interpreted accordingly.

 

3.             Optionee’s Agreement.  In accepting the Option, Optionee accepts
and agrees to be bound by all the terms and conditions of the Plan which pertain
to nonqualified stock options granted under the Plan.

 

4.             Vesting of Option.  Subject to the provisions of the Plan and the
provision of this Agreement (including the requirement in Section 6 that
Optionee continue to be employed by the Company or a Subsidiary Corporation on
the dates set forth below), the Option will vest and become exercisable in
accordance with the following terms:

 

(a)           on the first anniversary of the Vesting Start Date (as set forth
on the Cover Sheet), and on each succeeding anniversary date of the Vesting
Start Date, the Option will vest with respect to, and may be exercised for up
to, one-fourth (1/4th) of the total number of shares of the Stock subject to the
Option as set forth on the Cover Sheet (the “Option Shares”), rounded to the
nearest whole number of shares, except that on the fourth anniversary of the
Vesting Start Date the Option shall vest with respect to the remaining number of
Option Shares for which the Option has not previously vested;

 

(b)           upon the termination of employment of the Optionee by the Company
without Cause or by the Optionee for Good Reason, in either case, within one
year following the occurrence of a Change in Control, any portion of the Option
Shares that have not previously vested will vest and the Option shall be
exercisable in full; and

 

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(c)           to the extent not exercised, installments of vested Option Shares
shall be cumulative and may be exercised in whole or in part.

 

5.             Manner of Exercise.

 

(a)           To the extent that the Option is vested and exercisable in
accordance with Section 4 of this Agreement, the Option may be exercised by
Optionee at any time, or from time to time, in whole or in part, on or prior to
the termination of the Option (as set forth in Section 6 of this Agreement) upon
payment of the Option Price for the Option Shares to be acquired in accordance
with the terms and conditions of this Agreement and the Plan.

 

(b)           If Optionee is entitled to exercise the vested and exercisable
portion of the Option, and wishes to do so, in whole or part, Optionee shall
(i) deliver to the Company a fully completed and executed notice of exercise, in
such form as may be designated by the Company in its sole discretion, specifying
the exercise date and the number of Option Shares to be purchased pursuant to
such exercise and (ii) remit to the Company in a form satisfactory to the
Company, in its sole discretion, the Option Price for the Option Shares to be
acquired on exercise of the Option, plus an amount sufficient to satisfy any
withholding tax obligations of the Company that arise in connection with such
exercise (as determined by the Company) in accordance with the provisions of the
Plan.

 

(c)           The Company’s obligation to deliver shares of the Stock to
Optionee under this Agreement is subject to and conditioned upon Optionee
satisfying all tax obligations associated with Optionee’s receipt, holding and
exercise of the Option.  Unless otherwise approved by the Committee, all such
tax obligations shall be payable in accordance with the provisions of the Plan.

 

(d)           The Company and its Affiliates and subsidiaries, as applicable,
shall be entitled to deduct from any compensation otherwise due to Optionee the
amount necessary to satisfy all such taxes.

 

(e)           Upon full payment of the Option Price and satisfaction of all
applicable tax obligations, and subject to the applicable terms and conditions
of the Plan and the terms and conditions of this Agreement, the Company shall
cause certificates for the shares purchased hereunder to be delivered to
Optionee or cause an uncertificated book-entry representing such shares to be
made.

 

6.             Termination of Option.  Unless the Option terminates earlier as
provided in this Section 6 the Option shall terminate and become null and void
at the close of business at the Company’s principal business office on the day
before the date of the tenth anniversary of the Grant Date (the “Option General
Expiration Date”).  If Optionee ceases to be an employee of the Company or any
Subsidiary Corporation for any reason the Option shall not continue to vest
after such cessation of service as an employee of the Company or Subsidiary
Corporation.

 

(a)           If Optionee ceases to be an employee of the Company or any
Subsidiary Corporation due to death or Disability, (i) the portion of the Option
that was exercisable on the date of such cessation shall remain exercisable for,
and shall otherwise terminate and become null and void at the close of business
at the Company’s principal business office on the day that

 

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is six (6) months after the date of such death or Disability, but in no event
after the Option General Expiration Date; and (ii) the portion of the Option
that was not exercisable on the date of such cessation shall be forfeited and
become null and void immediately upon such cessation.

 

(b)           If Optionee ceases to be an employee of the Company or a
Subsidiary Corporation due to Cause, all of the Option shall be forfeited and
become null and void immediately upon such cessation, whether or not then
exercisable.

 

(c)           If Optionee ceases to be an employee of the Company or a
Subsidiary Corporation for any reason other than death, Disability, or Cause,
(i) the portion of the Option that was exercisable on the date of such cessation
shall remain exercisable for, and shall otherwise terminate and become null and
void at the close of business at the Company’s principal business office on the
later of (x) the day that is sixty (60) days after the date of such cessation,
or (y) the day that is thirty (30) after any blackout period(s) under the
Company’s Insider Trading Compliance Policy (as in effect from time to time) to
the extent Optionee is then subject to any such blackout period(s), but in no
event after the Option General Expiration Date, and (ii) the portion of the
Option that was not exercisable on the date of such cessation shall be forfeited
and become null and void immediately upon such cessation.

 

(d)           Upon the death of Optionee prior to the expiration of the Option,
Optionee’s executors, administrators or any person or persons to whom the Option
may be transferred by will or by the laws of descent and distribution, shall
have the right, at any time prior to the termination of the Option to exercise
the Option with respect to the number of shares that Optionee would have been
entitled to exercise if he were still alive.

 

7.             Tax Withholding.  To the extent that the receipt of the Option,
this Agreement or the Cover Sheet, the vesting of the Option or the exercise of
the Option results in income to Optionee for federal, state, local or foreign
income, employment or other tax purposes with respect to which the Company or
its subsidiaries or any Affiliate has a withholding obligation, Optionee shall
deliver to the Company at the time of such receipt, vesting or exercise, as the
case may be, such amount of money as the Company or its subsidiaries or any
Affiliate may require to meet its obligation under applicable tax laws or
regulations, and, if Optionee fails to do so, the Company or its subsidiaries or
any Affiliate is authorized to withhold from the shares subject to the Option
(based on the Fair Market Value of such shares as of the date the amount of tax
to be withheld is determined) or from any cash or stock remuneration then or
thereafter payable to Optionee any tax required to be withheld by reason of such
taxable income, sufficient to satisfy the withholding obligation.

 

8.             Capital Adjustments and Reorganizations. The existence of the
Option shall not affect in any way the right or power of the Company or any
company the stock of which is awarded pursuant to this Agreement to make or
authorize any adjustment, recapitalization, reorganization or other change in
its capital structure or its business, engage in any merger or consolidation,
issue any debt or equity securities, dissolve or liquidate, or sell, lease,
exchange or otherwise dispose of all or any part of its assets or business, or
engage in any other corporate act or proceeding.

 

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9.             Employment Relationship. For purposes of this Agreement, Optionee
shall be considered to be in the employment of the Company, any Subsidiary
Corporation or any Affiliates as long as Optionee has an employment relationship
with the Company, any Subsidiary Corporation or any Affiliates.  The Committee
shall determine any questions as to whether and when there has been a
termination of such employment relationship, and the cause of such termination,
under the Plan and the Committee’s determination shall be final and binding on
all persons.

 

10.          Not an Employment Agreement.  This Agreement is not an employment
or service agreement, and no provision of this Agreement shall be construed or
interpreted to create an employment or other service relationship between
Optionee and the Company, its subsidiaries or any of its Affiliates or guarantee
the right to remain employed by the Company, its subsidiaries or any of its
Affiliates, for any specified term or require the Company, its subsidiaries or
any Affiliate to employ Employee for any period of time.

 

11.          No Rights As Stockholder.  Optionee shall not have any rights as a
stockholder with respect to any Option Shares until the date of the issuance of
such shares following Optionee’s exercise of the Option pursuant to its terms
and conditions and payment of all amounts for and with respect to the shares. 
No adjustment shall be made for dividends or other rights for which the record
date is prior to the date a certificate or certificates are issued for such
shares or an uncertificated book-entry representing such shares is made.

 

12.          Legend.  Optionee consents to the placing on the certificate for
any Option Shares of an appropriate legend restricting resale or other transfer
of such shares except in accordance with the Securities Act of 1933 and all
applicable rules thereunder.

 

13.          Notices.  Any notice, instruction, authorization, request, demand
or other communications required hereunder shall be in writing, and shall be
delivered either by personal delivery, by telegram, telex, telecopy or similar
facsimile means, by certified or registered mail, return receipt requested, or
by courier or delivery service, addressed to the Company at the Company’s
principal business office address to the attention of the Company’s General
Counsel and to Optionee at Optionee’s residential address as it appears on the
books and records of the Company, or at such other address and number as a party
shall have previously designated by written notice given to the other party in
the manner hereinabove set forth.  Notices shall be deemed given when received,
if sent by facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by facsimile means);
and when delivered (or upon the date of attempted delivery where delivery is
refused), if hand-delivered, sent by express courier or delivery service, or
sent by certified or registered mail, return receipt requested.

 

14.          Amendment and Waiver. Except as otherwise provided herein or in the
Plan or as necessary to implement the provisions of the Plan, this Agreement may
be amended, modified or superseded only by written instrument executed by the
Company and Optionee.  Only a written instrument executed and delivered by the
party waiving compliance hereof shall waive any of the terms or conditions of
this Agreement.  Any waiver granted by the Company shall be effective only if
executed and delivered by a duly authorized director or officer of the Company
other than Optionee.  The failure of any party at any time or times to require
performance of any provisions

 

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hereof shall in no manner effect the right to enforce the same.  No waiver by
any party of any term or condition, or the breach of any term or condition
contained in this Agreement, in one or more instances, shall be construed as a
continuing waiver of any such condition or breach, a waiver of any other
condition, or the breach of any other term or condition.

 

15.                               Dispute Resolution.  In the event of any
difference of opinion concerning the meaning or effect of the Plan or this
Agreement, such difference shall be resolved by the Committee.

 

16.                               Governing Law and Severability. The validity,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or interpretation of this
Agreement to the substantive law of another jurisdiction.  The invalidity of any
provision of this Agreement shall not affect any other provision of this
Agreement, which shall remain in full force and effect.

 

17.                               Transfer Restrictions. The Option Shares may
not be sold or otherwise disposed of in any manner that would constitute a
violation of any applicable federal or state securities laws.  Optionee also
agrees (a) that the Company may refuse to cause the transfer of Option Shares to
be registered on the applicable stock transfer records if such proposed transfer
would in the opinion of counsel satisfactory to the Company constitute a
violation of any applicable securities law and (b) that the Company may give
related instructions to the transfer agent, if any, to stop registration of the
transfer of the Option Shares.

 

18.                               Successors and Assigns.  This Agreement shall,
except as herein stated to the contrary, inure to the benefit of and bind the
legal representatives, successors and assigns of the parties hereto.

 

19.                               Counterparts.  This Agreement may be executed
in one or more counterparts, each of which shall be an original for all purposes
but all of which taken together shall constitute but one and the same
instrument.

 

20.                               Option Transfer Prohibitions.  The Option
granted to Optionee under this Agreement shall not be transferable or assignable
by Optionee other than by will or the laws of descent and distribution, and
shall be exercisable during Optionee’s lifetime only by him.

 

21.                               Definitions.  The words and phrases defined in
this Section 21 shall have the respective meanings set forth below throughout
this Agreement, unless the context in which any such word or phrase appears
reasonably requires a broader, narrower or different meaning.

 

(a)                                 “Cause” shall mean Optionee (i) committed a
felony or a crime involving moral turpitude or committed any other act or
omission involving fraud, embezzlement or any other act of dishonesty in the
course of his employment by the Company or an Affiliate which conduct damaged
the Company or an Affiliate; (ii) substantially and repeatedly failed to perform
duties of the office held by him or her as reasonably directed by the Company or
an Affiliate; (iii) committed gross negligence or willful misconduct with
respect to the Company or an Affiliate; (iv) committed a material breach of any
employment agreement between the Optionee and the Company or an Affiliate that
is not cured within ten (10) days after receipt of written

 

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notice thereof from the Company or the Affiliate, as applicable; (v) failed,
within ten (10) days after receipt by the Optionee of written notice thereof
from the Company or an Affiliate, to correct, cease or otherwise alter any
failure to comply with instructions or other action or omission which the Board
reasonably believes does or may materially or adversely affect the Company’s or
an Affiliate’s business or operations; (vi) committed misconduct which is of
such a serious or substantial nature that a reasonable likelihood exists that
such misconduct will materially injure the reputation of the Company or an
Affiliate; (vii) harassed or discriminated against the Company’s or an
Affiliate’s employees, customers or vendors in violation of the Company’s
policies with respect to such matters; (viii) misappropriated funds or assets of
the Company or an Affiliate for personal use or willfully violated the Company
policies or standards of business conduct as determined in good faith by the
Board; (ix) failed, due to some action or inaction on the part of the Optionee,
to have immigration status that permits the Optionee to maintain full-time
employment with the Company or an Affiliate in the United States in compliance
with all applicable immigration law; or (x) disclosed trade secrets of the
Company or an Affiliate.

 

(b)                                 “Change in Control” means (i) the
liquidation, dissolution or winding-up of the Company, (ii) the sale, license or
lease of all or substantially all of the assets of the Company, or (iii) a share
exchange, reorganization, recapitalization, or merger or consolidation of the
Company with or into any other corporation or corporations (or other form of
business entity) or of any other corporation or corporations (or other form of
business entity) with or into the Company, but excluding any merger effected
exclusively for the purpose of changing the domicile of the Company; provided,
however, that a Change in Control shall not include any of the aforementioned
transactions listed in clauses (i), (ii) and (iii) involving the Company or a
Subsidiary Corporation in which the holders of shares of the Company voting
stock outstanding immediately prior to such transaction or any Affiliate of such
holders continue to hold at least a majority, by voting power, of the capital
stock or, by a majority, based on fair market value as determined in good faith
by the Board, of the assets, in each case in substantially the same proportion,
of (x) the surviving or resulting corporation (or other form of business
entity), (y) if the surviving or resulting corporation (or other form of
business entity) is a wholly owned subsidiary of another corporation (or other
form of business entity) immediately following such transaction, the parent
corporation (or other form of business entity) of such surviving or resulting
corporation (or other form of business entity) or (z) a successor entity holding
a majority of the assets of the Company.  In addition, a Change in Control shall
not include a bona fide, firm commitment underwritten public offering of the
Stock pursuant to a registration statement declared effective under the
Securities Act of 1933, as amended.

 

(c)                                  “Disability” shall have the meaning
ascribed to such term in the Plan, as it may be amended from time to time.

 

(d)                                 “Good Reason” shall have the meaning
ascribed to such term in the Optionee’s employment agreement with the Company,
or, if none, the Optionee’s resignation from employment with the Company due to
(i) a material diminution in Optionee’s annual base salary, duties, authority or
responsibilities or (ii) relocation of the Optionee’s primary place of
employment to a geographic area more than fifty (50) miles from Optionee’s
then-current primary place of employment, without the Optionee’s consent;
provided that the Optionee has given thirty (30) days advance written notice to
the Company of the initial existence of the

 

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condition described in (i) and/or (ii) and the Company has not within such
thirty (30) day period remedied the condition.

 

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