Exhibit 10.27

 

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:

 

Vesting Start Date:

 

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.

 

Revised February 2012

 

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

 

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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 is six (6) months after the date of such death or Disability, but in no
event after the Option

 

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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) days 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.

 

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

 

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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 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

 

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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 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

 

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

 

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