Document:

Exhibit 10.16

 

CONFIDENTIAL EMPLOYMENT AGREEMENT

 

This CONFIDENTIAL EMPLOYMENT AGREEMENT (“Agreement”) is effective as of July 31, 2010, between Jay Peterson (“Executive”) and Thermon Holding Corp., a Delaware corporation (the “Company”).

 

WHEREAS, the parties desire to enter into this Agreement to memorialize the terms of the Offer Letter, dated July 7, 2010, between Executive and the Company (the “Offer Letter”), and to provide Executive with appropriate total compensation and performance-based incentives, and to retain Executive as an employee of the Company.

 

NOW, THEREFORE, in consideration for the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which both parties expressly acknowledge, Executive and the Company agree as follows:

 

1.             Employment.  Company hereby employs Executive as its Chief Financial Officer, and Executive agrees to remain so employed, upon the terms and conditions stated herein.  Executive’s employment will be “at-will,” without a fixed term, and may be terminated by the Company or by Executive at any time, with or without notice, for any reason or no reason (and no reason need be given), and, except as expressly provided in this Agreement, without obligation of severance or additional compensation.

 

2.             Duties and Responsibilities.  Executive shall perform such duties as are reasonably assigned to Executive by the Company’s Chief Executive Officer to whom Executive will report and shall be accountable.  Such duties will include those duties and responsibilities traditionally provided by a Chief Financial Officer  of a company, and may involve Company affiliates.  Executive shall faithfully, diligently, and competently perform such services to the reasonable satisfaction of the Company’s Chief Executive Officer, and Executive shall devote his full time and best efforts, skill, and attention to the diligent performance and discharge of such duties and responsibilities.

 

3.             Exclusivity and Conflict of Interest.  Executive’s employment with the Company shall be exclusive.  Accordingly, during Executive’s employment with the Company, Executive shall not engage in any business activity other than on the Company’s behalf without the express prior written approval of the Company’s Board of Directors.   It will not be a violation of this exclusivity provision for Executive to serve on charitable or civic boards or committees provided that such activity does not interfere with the performance of Executive’s duties and responsibilities under this Agreement.  Under no circumstance shall Executive engage in any activity that could create a conflict of interest between Executive and the Company or its affiliates.

 

4.             Base Salary.  For services rendered by Executive on the Company’s behalf during Executive’s employment, the Company will pay Executive a base salary (“Base Salary”) at the annual rate of $225,000, less customary withholding.  Base Salary may be changed periodically at the discretion of the Company’s Board of Directors, but may not be reduced below $225,000.  The Company will pay Executive’s pro-rata Base Salary on the Company’s regular paydays.

 

 

5.             Bonus.  Executive shall be eligible to receive an annual performance-based bonus (“Annual Bonus”), with a target award of forty percent (40%) of Executive’s Base Salary, based on the attainment of annual performance targets to be mutually agreed upon by Executive and the Board of Directors.   The Annual Bonus shall be paid within two and one-half months following the end of the fiscal year in which such bonus was earned, provided that if by such time the determination of whether the Annual Bonus was earned (and the calculation of the amount thereof) is not complete, the Annual Bonus, if any, shall be paid as soon as practicable after such determination and calculation is complete, but in no event later than the last day of December in which the fiscal year end occurs.  If Executive’s employment is terminated by the Company for reasons other than Cause (as defined in Section 8(d) below) or Executive resigns due to a Change of Control or a Significant Diminution of Duties (as defined in Section 8(e) and 8(g) below), and, based on the results of operations and financial performance of the Company for the entire fiscal year, Executive would have been entitled to an Annual Bonus in respect of such fiscal year had Executive remained employed by the Company on the last day of such fiscal year, Executive shall be entitled to a pro-rata portion of the Annual Bonus (payable at the time set forth above) based upon the portion of  the fiscal year during which Executive was employed (e.g., 9 months of employment = 75% of Annual Bonus).

 

6.             Vacation and Other Employment Benefits.  During Executive’s employment with the Company, Executive shall be entitled to four (4) weeks (20 days) of personal time off per calendar year (pro-rated for partial years), taken at times mutually acceptable to Executive and the Company.  In addition, Executive may participate in those other employee benefit plans that the Company may make generally available to its salaried employees provided that Executive otherwise meets the eligibility requirements of those plans.

 

7.             Expense Reimbursement.  Executive shall be entitled to reimbursement for ordinary, necessary and reasonable out-of-pocket business expenses which Executive incurs in connection with performing Executive’s duties under this Agreement, including reasonable business travel and meal expenses.  The reimbursement of all such expenses shall be made in accordance with the Company’s customary practice and policies (including presentation of evidence reasonably satisfactory to the Company of the amounts and nature of such expenses).

 

8.             Termination and Severance.

 

(a)           Anything contained in this Agreement to the contrary notwithstanding, should Executive resign his employment due to a Change of Control or a Significant Diminution of Duties or should the Company terminate Executive’s employment other than for Cause:

 

(i)                                     The Company shall pay Executive the Base Salary and any accrued employment benefit as required by applicable law, each pro-rated through Executive’s employment termination date;

 

(ii)                                  The Company shall pay Executive, in accordance with Section 5 above, any Annual Bonus earned from a prior year but not yet paid and any portion of the Annual Bonus from the fiscal year during

 

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which such termination occurs that is payable pursuant to Section 5 above;

 

(iii)                               The Company shall pay Executive for any unreimbursed business expenses incurred by Executive through Executive’s last day of employment pursuant to Section 7 above; and

 

(iv)                              Provided that Executive (A) signs a release of claims in form and substance satisfactory to the Company’s Board of Directors, and (B) does not otherwise violate this Agreement, the Company will pay Executive a lump sum equal to seventy-five percent (75%) of Executive’s annual Base Salary (i.e., nine months pay) on the 60th day following Executive’s termination of employment.  Executive shall not be entitled to any benefits under this Section 8(a) if, at the time Executive’s employment with the Company was terminated, grounds existed for the termination of Executive’s employment for Cause.

 

(b)           Should Executive’s employment with the Company terminate for any reason not specified in Section 8(a) above, the Company shall only pay (i) Executive’s Base Salary and any accrued employment benefit as required by applicable law (such accrued benefit, for clarity, not to include any Annual Bonus), each pro-rated through Executive’s employment termination date, and (ii) any unreimbursed business expenses incurred by Executive through Executive’s last day of employment pursuant to Section 7 above and shall have no other obligations with regard to the payment of compensation, severance, bonus or other amounts to Executive or Executive’s estate.

 

(c)           On or before the employment termination date, Executive shall return to the Company all of its and its affiliates’ property including all of the Company’s documents, keys, credit cards, computer software, and all copies thereof.

 

(d)           For purposes of this Agreement, “Cause” means any of the following, as reasonably determined by the Company’s Board of Directors and includes:  (i) the commission by Executive of a felony (or a crime involving moral turpitude); (ii) the theft, conversion, embezzlement or misappropriation by Executive of funds or other assets of the Company or any of its affiliates or any other act of fraud or dishonesty with respect to the Company or any of its affiliates (including acceptance of any bribes or kickbacks or other acts of self-dealing); (iii) intentional, grossly negligent, or unlawful misconduct by Executive which causes harm or embarrassment to the Company or any of its affiliates or exposes the Company or any of its affiliates to a substantial risk of harm or embarrassment; (iv) the violation by Executive of any law regarding employment discrimination or sexual harassment; (v) the failure by Executive to comply with any material policy generally applicable to Company employees, which failure is not cured within 30 days after notice to Executive; (vi) the repeated failure by Executive to follow the reasonable directives of the Chief Executive Officer or the Company’s Board of Directors, which failure is not cured within 30 days after notice to Executive; (vii) the unauthorized dissemination by Executive of confidential information in violation of

 

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Section 10 of this Agreement; (viii) any material misrepresentation or materially misleading omission in any resume or other information regarding Executive (including Executive’s work experience, academic credentials, professional affiliations or absence of criminal record) provided by or on behalf of Executive; (ix) the Company’s discovery that, prior to Executive’s employment with the Company, Executive engaged in conduct of the type described in clauses (i) through (iv) above; or (x) any other material breach by Executive of this Agreement that is not cured within 30 days after notice to Executive.

 

(e)           For purposes of this Agreement, “Change of Control” means the sale (in a single transaction or a series of related transactions) of Thermon Group Holdings, Inc., a Delaware corporation (“Parent”), to any Person (other than CHS Private Equity V LP, a Delaware limited partnership, or its affiliate) pursuant to which such Person acquires (i) all or substantially all of the assets of Parent and all of its wholly-owned subsidiaries (including the Company), determined on a consolidated basis, or (ii) a majority of the then outstanding shares of Parent’s common stock (whether by merger, consolidation, sale or transfer of shares, reorganization, recapitalization or otherwise); provided that Executive must notify the Company by written notice of his intention to terminate his employment after a Change of Control; and provided, further, that such notice shall be provided to the Company within one hundred and eighty (180) days of the Change of Control.

 

(f)            For purposes of this Agreement, “Person” means any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture or unincorporated organization.

 

(g)           For purposes of this Agreement, “Significant Diminution of Duties” means the assignment to Executive of any duties or responsibilities materially inconsistent with Executive’s position and title, or a material reduction in Executive’s responsibilities and authority, except in connection with the termination of Employee’s employment for Cause, disability or death; provided that Executive must notify the Company by written notice of his intention to terminate his employment for a Significant Diminution of Duties; and provided, further, that such notice shall be provided to the Company within thirty (30) days of the initial existence of the action constituting a Significant Diminution of Duties, and the Company shall have thirty (30) days to cure such action that created the Significant Diminution of Duties after receipt of such notice, it being understood that if the Company so cures such action, no Significant Diminution of Duties shall be deemed to have existed.

 

9.             Patents, Copyrights, Trademarks, and Other Property Rights.  Any and all inventions, improvements, discoveries, formulas, technology, business strategies, management, administration, and accounting systems, processes, and computer software relating to the Company’s or its affiliates’ business (whether or not patentable), discovered, developed, or learned by Executive during his employment with the Company or used by the Company or its affiliates in the conduct of their respective businesses are the sole and absolute property of Company and are “works made for hire” as that term is defined in the copyright laws of the United States.  The Company is the sole and absolute owner of all patents, copyrights, trademarks, and other property rights to those items and Executive will fully assist the Company

 

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to obtain the patents, copyrights, trademarks, or other property rights to all such inventions, improvements, discoveries, formulas, technology, business strategies, management, administration, and accounting systems, processes, or computer software.  Executive has been notified by the Company and understands that the foregoing provisions of this Section 9 do not apply to an invention for which no equipment, supplies, facilities, confidential, proprietary, or trade secret information of the Company or its affiliates was used and which was developed entirely on Executive’s own time, unless the invention:  (a) relates to the business of the Company or its affiliates or to their actual or demonstrably anticipated research and development, or (b) results from any work performed by Executive for the Company or its affiliates.

 

10.          Non-Disclosure and Use of Confidential and Proprietary Information.  The Company’s employment of Executive has resulted and will result in Executive’s exposure and access to confidential and proprietary information, to which the Company agrees to continue to provide Executive after this Agreement becomes effective, that includes (among other things) the Company’s and its affiliates’ formulas, processes, administration and accounting systems, computer software, customer lists, vendor lists, due diligence files, financial information, technology, business strategies, business track record, and personal information about the Company’s and its affiliates’ owners, directors, officers, and employees, which information is of great value to the Company, its affiliates, their owners, Directors, officers, and employees.   Executive shall not, other than on the Company’s behalf, at any time during Executive’s employment with the Company and thereafter, make available, divulge, disclose, or communicate in any manner whatsoever to any Person any such confidential or proprietary information, or use any such confidential or proprietary information for any purpose other than on the Company’s behalf, unless authorized to do so in writing by Company’s Chairman of the Board of Directors, required by law or court order, or such information has become publicly available other than by reason of a breach by Executive of this Section 10 or of another Person’s violation of an obligation not to disclose such information.  Should Executive be required by law or court order to disclose such confidential or proprietary information, Executive shall give the Company’s Chairman of the Board of Directors reasonable notice so as to allow the Company sufficient opportunity to challenge such application of the law or court order, or to otherwise attempt to limit the scope of such disclosure.  This Agreement applies to all confidential and proprietary information of the Company and its affiliates, regardless of when such information is or was disclosed to Executive.

 

11.          Restrictive Covenants.  During Executive’s employment with the Company and for a period of one (1) year after the termination of that employment, Executive agrees to not, directly or indirectly, other than on the Company’s behalf:

 

(a)           Engage or participate, in any country in the world in which the Company does business or has begun to formulate a plan to do business during the term of Executive’s employment with the Company, as an owner, partner, member, shareholder, independent contractor, employee, consultant, agent, advisor or (without limitation by the specific enumeration of the foregoing) otherwise in any business involving a Competitive Business Activity (as defined below), provided that nothing in this Section 11 shall prevent Executive from owning less than five percent (5%) of any class of publicly traded securities of any such business so long as such investment is passive and Executive has

 

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no other involvement with the issuer of such securities.  For purposes of this Agreement, “Competitive Business Activity” means the design, engineering, manufacture or sale of heat tracing systems  (for example, products involving the application of external heat to pipes, vessels, instruments or other equipment for the purposes of freeze protection, process temperature maintenance, environmental monitoring or surface snow and ice melting, heat tracing equipment, heat tracing tubing bundles, and heat tracing control systems), heat tracing system consultation, heat tracing system installation, and heat tracing system maintenance;

 

(b)           Solicit any customer or potential customer of the Company or any of its affiliates that Executive had contact with during the term of his employment with respect to the sale or provision of any Competitive Business Activity that the Company or its affiliates manufactured, sold, or was in the process of developing during Executive’s employment with the Company.  For purposes of this subsection 11(b), (i) a customer means any Person to which the Company or any of its affiliates sold products or rendered services within the 24 month period immediately preceding Executive’s employment termination date, and (ii) potential customer means any Person to which the Company or any of its affiliates solicited (or had active plans to solicit) within the 12 month period that immediately preceded Executive’s employment termination date; or

 

(c)           Induce or assist in the inducement of any individual or independent contractor (including sales representatives or agents) to terminate or otherwise limit their relationship with the Company or any of its affiliates.

 

The period of time in which Executive is required to act, or refrain from acting, pursuant to this Section 11 shall be tolled (shall not run) for so long as Executive is in breach of any of Executive’s obligations thereunder.

 

12.          Non-Disparagement.  At no time shall Executive, directly or indirectly, ever make (or cause to be made) any disparaging, derogatory or other negative or false statement regarding the Company, its affiliates, their products, services, practices, policies, operations, owners, directors, officers, partners, employees, sales representatives, or agents.  The Company shall direct the members of its Board of Directors and its senior executives to not make (or cause to be made) at any time, directly or indirectly, any disparaging, derogatory or other negative or false statement regarding Executive.

 

13.          Injunctive Relief.  Executive acknowledges and agrees that the covenants contained in Sections 9 - 12 above are reasonable in scope and duration, do not unduly restrict Executive’s ability to engage in Executive’s livelihood, and are necessary to protect the Company’s legitimate business interests (including without limitation, the protection of its confidential and proprietary information).  Without limiting the rights of the Company to pursue any other legal and/or equitable remedies available to it for any breach by Executive of the covenants contained in Sections 9 - 12 above, Executive acknowledges that a breach of those covenants would cause a loss to the Company for which it could not reasonably or adequately be compensated by damages in an action at law, that remedies other than injunctive relief could not fully compensate the Company for a breach of those covenants and that, accordingly, the Company shall be entitled to injunctive relief (without the requirement of posting a bond or other

 

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security) to prevent any breach or continuing breaches of Executive’s covenants as set forth in Sections 9 - 12 above.  It is the intention of the parties that if, in any action before any court empowered to enforce such covenants, any term, restriction, covenant, or promise is found to be unenforceable, then such term, restriction, covenant, or promise shall be deemed modified to the extent necessary to make it enforceable by such court to the fullest extent possible.  If any provision of this Agreement (including without limitation Sections 9 - 12) is held invalid or unenforceable for any reason (after any such modification or limitation pursuant to the preceding sentence, as applicable), such provision will be ineffective only to the extent of such invalidity or unenforceability without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

14.          The Company’s Disclosure to Executive’s Prospective or Subsequent Employers.  Executive expressly authorizes the Company to disclose this Agreement, any provision hereof, or any other policy or agreement between the Company and Executive to Executive’s prospective or subsequent employers.

 

15.          Mandatory Mediation.  Other than disputes involving the covenants and obligations set forth in Sections 9 - 12 above which may be directly filed in a court of competent jurisdiction, Executive and the Company agree that all other disputes and claims of any nature that Executive may have against the Company including all statutory, contractual, and common law claims (including all employment discrimination claims), and all other disputes and claims of any nature that the Company may have against Executive, will be submitted exclusively first to mandatory mediation in a mutually agreed-upon location, under the National Rules for the Resolution of Employment Disputes of the American Arbitration Association or under such other rules or under the auspices of such other organization as the parties may mutually agree.  All information regarding the dispute or claim or mediation proceedings, including any mediation settlement, shall not be disclosed by Executive, the Company, or any mediator to any third party without the written consent of the Company’s Chairman of the Board of Directors and Executive.

 

16.          Confidential Agreement.  Executive agrees not to disclose the terms of this Agreement to anyone other than to Executive’s attorney, accountant, or spouse without the express written consent of the Company’s Chairman of the Board of Directors or as otherwise required by law.  Should Executive disclose the terms of this Agreement to Executive’s attorney, accountant, spouse, or to another third party expressly approved by the Company’s Chairman of the Board of Directors, Executive shall ensure that those individuals abide by the confidentiality terms of this Section.

 

17.          Assignment.  The services rendered by Executive to the Company are unique and personal.  Accordingly, Executive may not assign any of the rights or delegate any of the duties or obligations under this Agreement.  This Agreement is enforceable by the Company and its affiliates and may, upon written notice to Executive, be assigned or transferred by the Company to, and shall be binding upon and inure to the benefit of, any parent, subsidiary or other affiliate of the Company or any Person which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets, stock or business of the Company.

 

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18.          Notices.  All notices hereunder shall be in writing and shall be delivered by hand, by facsimile (or photo or other electronic means), by local messenger or by reputable overnight courier.  Notices shall be deemed given: (1) when received, if delivered by hand or local messenger; (2) when sent, if sent by facsimile, photo or other electronic means during the recipient’s normal business hours; (3) on the first business day after being sent, if sent by facsimile, photo or other electronic means other than during the recipient’s normal business hours; and (4) one business day after being delivered to a reputable overnight courier for next day delivery.  A notice delivered by facsimile, photo or other electronic means shall only be effective on the date set forth above, however, if the notice is also given by hand, local messenger or courier no later than two business days after its delivery by facsimile, photo or other electronic means.  All notices shall be addressed as follows: (1) if to the Company: Thermon Holding Corp., 100 Thermon Drive, San Marcos, Texas 78667, fax: (512) 396-3627, attention: Rodney Bingham, Chief Executive Officer; with copies (which shall not constitute notice) to CHS Private Equity V LP, 10 South Wacker Drive, Suite 3175, Chicago, Illinois 60606, Attention:  Daniel J. Hennessy and Marcus J. George, Fax: (312) 876-3854; and Sidley Austin LLP, One South Dearborn, Chicago, Illinois 60603, fax: (312) 853-7036, attention: Roger R. Wilen and Jeffrey Smith; (2) if to Executive:  Jay Peterson, c/o Thermon Holding Corp., 100 Thermon Drive, San Marcos, Texas 78666, fax: (512) 754-2416; or (in each case) to such other addresses or addressees as may be designated by notice given in accordance with the provisions of this Section 18.

 

19.          Waiver.  The Company’s waiver of a breach by Executive of any provision of this Agreement or failure to enforce any such provision with respect to Executive shall not operate or be construed as a waiver of any subsequent breach by Executive of any such provision or of any other provision or of the Company’s right to enforce any such provision or any other provision with respect to Executive.  No act or omission of the Company shall constitute a waiver of any of its rights hereunder except for a written waiver signed by the Company’s Chairman of the Board of Directors.

 

20.          Governing Law.  This Agreement shall in all respects be governed by the substantive laws of the State of Texas without regard to its or any other state’s conflict of law rules.

 

21.          Amendment.  The terms of this Agreement may be modified only by a writing signed by both Executive and the Company’s Chairman of the Board of Directors.

 

22.          Post-Employment Effectiveness.  Executive expressly acknowledges that Sections 9 - 26 of this Agreement remain in effect after the termination of Executive’s employment with Company.

 

23.          Section 409A.  This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and shall be interpreted and construed consistently with such intent.  The payments to Executive pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible as short-term deferrals pursuant to Treasury regulation § 1.409A-1(b)(4).  To the extent the timing of any amount payable under this Agreement is determined by reference to Executive’s “termination of employment,” such term shall be deemed to refer to

 

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Executive’s “separation from service” within the meaning of Section 409A of the Code.  In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible, provided that in no event shall the Company be responsible for any such 409A Penalties.  Any reimbursement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by the Company under any applicable expense reimbursement policy, and shall be paid to Executive within 30 days following receipt of such expense reports, but in no event later than the last day of the calendar year following the calendar year in which Executive incurred the reimbursable expense. Any amount of expenses eligible for reimbursement during a calendar year shall not affect the amount of expenses eligible for reimbursement during any other calendar year. The right to any reimbursement pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.

 

24.          Entire Agreement.  This Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the matters described herein, and supersedes any and all prior and/or contemporaneous agreements and understandings, oral or written, between the parties, including, without limitation, the Offer Letter.

 

25.          Counterparts; Facsimiles.  This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one agreement.  A facsimile, photo or other electronic copy of this Agreement (or any counterpart hereof) shall be deemed to be an original.

 

26.          Construction.  The headings contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.  This Agreement shall not be construed strictly against the drafter (and any rule of construction to that effect shall not be applied).

 

* * * * * * *

 

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EXECUTIVE  AND  THE COMPANY  EACH REPRESENT AND WARRANT THAT EACH HAS  READ THIS AGREEMENT, EACH UNDERSTANDS ITS TERMS, AND EACH AGREES TO BE BOUND THEREBY.

 

IN WITNESS WHEREOF, the parties have executed this Confidential Employment Agreement as of the date first above written.

 

	
JAY PETERSON
    	
 
    	
THERMON HOLDING CORP.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
/s/ Jay Peterson
    	
 
    	
By:
    	
/s/ Rodney Binhgam
    
	
 
    	
 
    	
Name:
    	
Rodney Bingham
    
	
 
    	
 
    	
Its:
    	
President and Chief Executive
    

 

Peterson Confidential Employment AgreementExhibit 10.19

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”)  is effective as of January 25, 2011 between Rosetta Stone Ltd., a Delaware corporation (together with its successors and assigns, the “Company”),  and Helena Wong (“Executive”).

 

Recitals

 

A.                                   The Company and Executive desire to enter into an agreement pursuant to which the Company will employ Executive as its President, International subject to the terms and conditions of this Agreement.

 

Agreement

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the parties agree as follows:

 

1.                                      Employment.

 

The Company hereby engages Executive to serve as the President, International of the Company, and Executive agrees to serve the Company, during the Service Term (as defined in Section 4 below) in the capacities, and subject to the terms and conditions, set forth in this Agreement.

 

2.                                      Duties.

 

During the Service Term, Executive, as President, International of the Company, shall have all the duties and responsibilities customarily rendered by top international executives of companies of similar size and nature and such other duties and responsibilities as may be delegated from time to time by the Board or the Chief Executive Officer (“CEO”) in their sole discretion.  Executive will report to the CEO of the Company.

 

Executive will devote her best efforts and substantially all of her business time and attention (except for vacation periods and periods of illness or other incapacity) to the business of the Company and its Subsidiaries. With the consent of the CEO, Executive will be permitted to serve on the board of directors of other publicly traded companies so long as such service does not unreasonably interfere with her duties to the Company.

 

3.                                      Salary, Bonus, Benefits and Equity.

 

The CEO and the Board shall make all decisions related to Executive’s base salary and the payment of bonuses, if any.  Executive’s Annual Base Salary and other compensation will be reviewed by the CEO and the Board at least annually.

 

(a)                                  Base Salary.  During the Service Term, the Company will pay Executive a base salary (the “Annual Base Salary”) as the CEO and the Board may designate from time to time. The initial Annual Base Salary shall be at the rate of $300,000 per annum in accordance with the

 

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Company’s customary payroll practices (minus all applicable withholdings).  Executive’s Annual Base Salary for any partial year will be prorated based upon the number of days elapsed in such year.  The Annual Base Salary may be increased (but not decreased) from time to time during the Service Term by the Board based upon the Company’s and Executive’s performance.

 

(b)                                  Bonus and Relocation Assistance.

 

(i.)                  Executive shall be eligible to receive an annual bonus in accordance with Company bonus policy to be established by the Board of Directors from time to time (the “Annual Bonus”).  The Annual Bonus, if any, will be determined by the Board based upon the Company’s annual achievement of financial performance goals and other annual objectives as determined by the Board in good faith for each fiscal year of the Company.    The Annual Bonus target as a percentage of then-current Annual Base Salary, may be adjusted, but may not be less than 75% of the Executive’s then-current Annual Base Salary upon 100% achievement of the annual objectives as set out in the Company’s Executive Bonus Plan.

(ii.)               Executive shall receive a one-time signing bonus upon the date of hire in the amount of $35,000, subject to taxes and applicable withholdings. If Executive voluntarily terminates employment with Rosetta Stone (without Good Reason) within twelve (12) months of receiving the signing bonus Executive agrees to  reimburse  the Company pursuant to the following repayment schedule: (i)  termination within 180 days or less of the date of hire, 100% of the signing bonus shall be paid back to the Company; (ii) termination within 181 days - 270 days of the date of hire, 50% of the signing bonus shall be paid back to the Company; and (iii) termination within 271 days — 365 days of the date of hire, 25% of the signing bonus shall be paid back to the Company.

(iii.)            Executive will receive up to three (3) months of temporary furnished housing expense reimbursement from Rosetta Stone, as reasonably approved by the CEO in advance of expenses being paid.

 

(c)                                  Benefits.

 

(i.)                  Executive and, to the extent eligible, her dependents, shall be entitled to participate in and receive all benefits under any welfare or pension benefit plans and programs made available to the Company’s senior level executives or to its employees generally (including, without limitation, medical, disability and life insurance programs, accidental death and dismemberment protection, leave and participation in retirement plans and deferred compensation plans), subject, however, to the generally applicable eligibility and other provisions of the various plans and programs and laws and regulations in effect from time to time.

 

(ii.)               The Company shall reimburse Executive for all reasonable, ordinary and necessary business, travel and entertainment expenses incurred during the Service Term in the performance of her services hereunder in accordance with the policies of the Company as they are from time to time in effect. Executive,

 

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as a condition precedent to obtaining such payment or reimbursement, shall provide to the Company any and all statements, bills, or receipts evidencing the travel or out-of-pocket expenses for which Executive seeks payment or reimbursement, and any other information or materials, which the Company may from time to time reasonably require. The Company shall pay Executive the amount of such an expense by the last day of Executive’s taxable year following the taxable year in which Executive incurred such expense.  The expenses that are subject to reimbursement pursuant to this Section 3(c)(ii) shall not be limited as a result of when the expenses are incurred.  The amount of expenses eligible for reimbursement pursuant to this Section 3(c)(ii) during a given taxable year of Executive shall not affect the amount of expenses eligible for reimbursement in any other taxable year of Executive.  The right to reimbursement pursuant to this Section 3(c)(ii) is not subject to liquidation or exchange for another benefit.

 

(iii.)            Executive shall be entitled to paid vacation of up to 22 days per annum which shall accrue pro rata during the applicable year and shall be entitled to medical, disability, family and other leave in accordance with Company policies as in effect from time to time for senior executives.

 

(iv.)           Notwithstanding anything to the contrary contained above, the Company shall be entitled to terminate or reduce any employee benefit enjoyed by Executive pursuant to the provisions of this Section 3(c), but only if such reduction is part of an across-the-board reduction applicable to all executives of the Company who are entitled to such benefit.

 

(d)                                  Equity Awards. The Executive will receive a one-time, new hire equity grant of: 45,000 stock options, vested over four (4) years; and 12,500 restricted stock awards, vested over four (4) years.  Executive shall be eligible to receive subsequent annual grants of stock options and other equity awards in accordance with equity compensation arrangements established by the Board. The grants shall have such terms as are determined by the Board in accordance with the current stock plan in place at time of grant.

 

Executive will be eligible to participate in a pending executive long-term performance plan as approved by the Board.

 

4.                                      Employment Term.

 

Unless Executive’s employment under this Agreement is sooner terminated as a result of Executive’s resignation or termination in accordance with the provisions of Section 5 below, Executive’s term of employment (“Service Term”)  under this Agreement shall commence on the date hereof and shall continue for a period of one year, and at the end of each day it shall renew and extend automatically for an additional day so that the remaining Service Term is always one year; provided, however, that either party may terminate this Agreement pursuant to Section 5 below for any reason, with or without Cause or with or without Good Reason, as the case may be, at any time upon thirty (30) days prior written notice to the other party of its decision to terminate (except in the event of termination for Cause, whereupon Executive’s

 

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termination shall be effective immediately upon written notice thereof except for any required grace periods for “Cause” as otherwise set forth below).

 

5.                                      Termination.

 

Executive’s employment with the Company shall cease upon the first of the following events to occur:

 

(a)                                  Executive’s death.

 

(b)                                  Executive’s voluntary retirement at age 65 or older.

 

(c)                                  Executive’s disability, which means her incapacity due to physical or mental illness such that she is unable to perform the essential functions of her previously assigned duties where (1) such incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the concurring opinions of two licensed physicians (one selected by the Company and one by Executive), and (2) the CEO has determined, based on competent medical advice, that such incapacity will likely last for a continuous period of at six (6) months.  Any such termination for disability shall be only as expressly permitted by the Americans with Disabilities Act.

 

(d)                                  Termination by the Company by the delivery to Executive of a written notice from the CEO that Executive has been terminated (“Notice of Termination”) with or without Cause.  “Cause” shall mean termination for any of the following:

 

(i)                        Executive’s (A) commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty in the performance of her duties to the Company or fraud; (B) substantial and repeated failure to perform duties of the office held by Executive as reasonably directed by the Board or the CEO and not cured within ten (10) days after receipt of written notice thereof; (C) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries; (D) material breach of this Agreement not cured within ten (10) days after receipt of written notice thereof from the Company; (E) failure, within ten (10) days after receipt by Executive of written notice thereof from the Company, to correct, cease or otherwise alter any failure to comply with instructions or other action or omission which the Board or the CEO reasonably believes does or may materially or adversely affect its business or operations; (F) 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 its Subsidiaries if Executive were to remain employed by the Company; (G) harassing or discriminating against the Company’s employees, customers or vendors in violation of the Company’s policies with respect to such matters; (H) misappropriation of funds or assets of the Company for personal use or willful violation of Company policies or standards of business conduct as determined in good faith by the Board or the CEO; and/or (I) failure due to some action or inaction on the part of Executive to have immigration status that permits Executive to maintain full-time employment

 

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with the Company in the United States in compliance with all applicable immigration laws.

 

(e)                                  Executive’s voluntary resignation by the delivery to the Board of a written notice from Executive that Executive has resigned with or without Good Reason. “Good Reason” shall mean Executive’s resignation from employment with the Company within thirty (30) days after (i) a material diminution in Executive’s annual salary, duties, authority or responsibilities from the annual salary, duties, authority or responsibilities as in effect at the commencement of the Service Term, (ii) the Company’s failure to perform any material obligation undertaken by the Company to Executive hereunder after Executive has provided the Company with written notice of such failure and such failure has not thereafter been cured within ten (10) days of the delivery of such written notice or (iii) notice by the Company to Executive that her primary place of employment is to be relocated to a geographic area more than 50 miles from Arlington, VA without Executive’s consent.

 

6.                                      Rights on Termination.

 

(a)                                  If during the Service Term Executive’s employment is terminated under Section 5 above (x) by the Company without Cause or (y) by Executive with Good Reason, then:

 

(i)                        The Company shall pay to Executive, at the times specified in Section 6(a)(vii) below, the following amounts (the “Severance Payments”):

 

(1)                                  the Accrued Obligation;

 

(2)                                  Executive’s Annual Base Salary through the effective date of the termination of Executive’s employment (the “Termination Date”) for periods following her Separation From Service, to the extent not theretofore paid;

 

(3)                                  a lump sum in cash equal to the product of (x) 1/12 of the amount of the Annual Base Salary in effect immediately prior to the Termination Date and (y) 12; and

 

(4)                                  a lump sum in cash equal to the product of (x) the monthly basic life insurance premium applicable to Executive’s basic life insurance coverage immediately prior to the Termination Date and (y) 12.  Executive may, at her option, convert her basic life insurance coverage to an individual policy after the Termination Date by completing the forms required by the Company for this purpose.

 

(ii)                    The Company will pay, when due and payable under the Annual Bonus plan, the pro rata portion, if any, of Executive’s Annual Bonus earned up until such Termination Date.

 

(iii)                Upon your termination, you and your eligible dependents may elect health care coverage for up to 18 months from your last day of work at the Company pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA).  The Company will pay for up to twelve (12) months, on an after-tax basis, the portion of your COBRA premiums

 

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for such coverage that exceeds the amount that you would have incurred in premiums for coverage under the Company’s health plan if then employed by the Company.  Following the twelve (12) months of coverage, you will be responsible for all future premium payments to PayFlex should you wish to continue your COBRA coverage.   However, if you or your spouse becomes eligible for group health coverage sponsored by another employer or for any other reason your COBRA coverage terminates, the Company shall not be obligated to pay any portion of the premiums provided hereunder for periods after you become eligible for such other coverage or your COBRA coverage terminates.

 

(iv)                   Payments and benefits provided to Executive under this Section 6 (other than Accrued Obligations) are contingent upon Executive’s execution of a release substantially in the form of Exhibit A hereto.

 

(v)                       Executive shall not be permitted to specify the taxable year in which a payment described in this Section 6 shall be made to her.

 

(vi)                   The Company shall pay Executive the amounts specified in Section 6(a)(i)(1) within thirty (30) days after the Termination Date.  The Company shall pay to Executive the amounts specified in Sections 6(a)(i)(2), (3) and (4) on the date that is six months following the date of Executive’s Separation From Service unless an exemption is otherwise permitted under Section 409A.  Further, the Company shall pay to Executive, on the date that is six months following Executive’s Separation From Service, an additional interest amount equal to the amount of interest that would be earned on the amounts specified in Sections 6(a)(i)(2), (3) and (4) and, to the extent subject to a mandatory six-month delay in payment, the amounts specified in Section 6(a)(iii), for the period commencing on the date of Executive’s Separation From Service until the date of payment of such amounts, calculated using an interest rate equal to the six month U.S. Treasury Rate in effect on the date of Executive’s Separation From Service.

 

(b)                                  If the Company terminates Executive’s employment for Cause, if Executive dies or is disabled (as defined in Section 5(c) above), or if Executive resigns without Good Reason, the Company’s obligations to pay any compensation or benefits under this Agreement will cease effective as of the Termination Date and the Company shall pay to Executive the Accrued Obligation within thirty (30) days following the Termination Date.  The Company shall pay to Executive her Annual Base Salary for periods following her Separation From Service, to the extent not theretofore paid, within thirty (30) days following her Separation From Service if she is not a Specified Employee or on the date that is six months following her Separation From Service if she is a Specified Employee.  Following such payments, the Company shall have no further obligations to Executive other than as may be required by law or the terms of an employee benefit plan of the Company.

 

(c)                                  Notwithstanding the foregoing, the Company’s obligation to Executive for Severance Payments or other rights under either Sections 6(a) or (b) above shall cease if Executive is in violation of the provisions of Sections 8 or 9 below.

 

(d)                                  If the Executive retires at age 65 or older the Company shall pay the Executive’s Annual Base Salary through the retirement date and shall also pay when due and payable under the Annual Bonus plan the pro rata portion of any Annual Bonus that may have been earned by the Executive through the retirement date.  No other amounts will be payable by the Company.

 

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7.                                      Representations of Executive.

 

Executive hereby represents and warrants to the Company that the statements contained in this Section 7 are true and accurate as of the date of this Agreement.

 

(a)                                  Legal Proceedings.  Executive has not been (i) the subject of any criminal proceeding (other than a traffic violation or other minor offense) which has resulted in a conviction against Executive, nor is Executive the subject of any pending criminal proceeding (other than a traffic violation or other minor offense), (ii) indicted for, or charged in a court of competent jurisdiction with, any felony or crime of moral turpitude, (iii) the defendant in any civil complaint alleging damages in excess of $50,000, or (iv) the defendant in any civil complaint alleging sexual harassment, unfair labor practices or discrimination in the work place.

 

(b)                                  Securities Law.  Executive has not been found in a civil action by the Securities and Exchange Commission, Commodity Futures Trading Commission, a state securities authority or any other regulatory agency to have violated any federal, state or other securities or commodities law.

 

(c)                                  Work History; Immigration Status.  Executive’s resume, previously provided by Executive to the Company, is complete and correct in all material respects, and accurately reflects Executive’s prior work history. Executive has the full legal right to be employed on a full-time basis by the Company in the United States under all applicable immigration laws on the basis of the Company’s continued willingness to employ her on a full-time basis, and has provided the Company with evidence of legal immigration status and will do so at any time upon request. The Company will, if applicable, continue to cooperate with Executive in maintaining Executive’s work visa status and/or any mutually agreeable adjustment of status.

 

(d)                                  Employment Restrictions.  Executive is not currently a party to any non competition, non-solicitation, confidentiality or other work-related agreement that limits or restricts Executive’s ability to work in any particular field or in any particular geographic region, whether or not such agreement would be violated by this Agreement.

 

8.                                      Confidential Information; Proprietary Information, etc.

 

(a)                                  Obligation to Maintain Confidentiality.  Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of her employment with or performance of services for the Company or any of its Subsidiaries during the course of her performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the property of the Company and its Subsidiaries. Therefore, Executive agrees that, other than in the course of performance of her duties as an employee of the Company, she will not at any time (whether during or after Executive’s term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for her own account or permit to be utilized by any Person any Proprietary Information or records pertaining to the Company, its Subsidiaries and their respective business for any reason whatsoever without the CEO’s consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the

 

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aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executive’s acts or omissions to act. Executive agrees to deliver to the Company at the termination of her employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executive’s term of employment), all records pertaining to the Company, its Subsidiaries and their respective business which she may then possess or have under her control. Executive further agrees that any property situated on the Company’s or its Subsidiaries’ premises and owned by the Company or its Subsidiaries, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Subsidiaries and their personnel at any time with or without notice. Nothing in this Section 8(a) shall be construed to prevent Executive from using her general knowledge and experience in future employment so long as Executive complies with this Section 8(a) and the other restrictions contained in this Agreement.

 

(b)                                  Ownership of Property.  Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the Company’s or any of its Subsidiaries’ actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) in the course of her work for the Company or any of its Subsidiaries (including any of the foregoing that constitutes any Proprietary Information or records) (“Work Product”)  belong to the Company or such Subsidiary and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Subsidiary. Any copyrightable work prepared in whole or in part by Executive in the course of her work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Company or such Subsidiary shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to Company or such Subsidiary all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the CEO and perform all actions reasonably requested by the CEO (whether during or after Executive’s term of employment) to establish and confirm the Company’s or its Subsidiary’s ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments). Notwithstanding anything contained in this Section 8(b) to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on her own time without using the equipment, supplies or facilities of the Company or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that: (i) relate to the business of the Company or its Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (ii) result from any work that Executive performs for the Company or its Subsidiaries.

 

(c)                                  Third Party Information.  Executive understands that the Company and its Subsidiaries will receive from third parties confidential or proprietary information (“Third Party Information”)  subject to a duty on the Company’s and its Subsidiaries’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executive’s employment and thereafter, and without in any way limiting the provisions

 

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of Sections 8(a) and 8(b) above, Executive shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than personnel of the Company or its Subsidiaries who need to know such information in connection with their work for the Company or its Subsidiaries) or use, except in connection with her work for the Company or its Subsidiaries, Third Party Information unless expressly authorized by the CEO in writing.

 

(d)                                  Use of Information of Prior Employers, etc.  Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with her prior employers or other parties to whom Executive has an obligation of confidentiality.

 

(e)                                  Compelled Disclosure.  If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy.  Executive will cooperate fully with the Company and the Company’s representatives in any attempt by the Company to obtain any such protective order or other remedy. If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required; provided, however, that Executive will use her reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed.

 

9.                                      Noncompetition and Nonsolicitation.

 

(a)                                  Noncompetition. As long as Executive is an employee of the Company or any Subsidiary thereof, and for a period ending twelve (12) months following the Termination Date of Executive’s employment (the “Restrictive Covenant Period”),  Executive shall not, directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business competing with the business of producing and selling software used for learning foreign languages, including English as a foreign language or any other businesses then carried on by the Company or its Subsidiaries (the “Business”)  in any geographic area in which: (i) Executive acted as an employee of the Company or its Subsidiaries and had contact with the customers of the Company or its Subsidiaries during the 12-month period immediately preceding the Termination Date, and (ii) the Company or its Subsidiaries is conducting business or has conducted business during the Restrictive Covenant Period.

 

(b)                                  Nonsolicitation.  As long as Executive is an employee of the Company or any Subsidiary thereof, and during the Restrictive Covenant Period thereafter, Executive shall not directly or indirectly through another entity:  (i) induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way interfere with the relationship between the Company or any Subsidiary and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Subsidiary at any time during the 12-month period immediately preceding the Termination Date; (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation

 

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and the Company or any Subsidiary; (iv) solicit or provide services related to the Business to any Person who was a customer or client of the Company or any Subsidiary at any time during the 12-month period immediately preceding the Termination Date; or (v) solicit or provide services related to the Business to any Prospective Customer. For purposes hereof, a “Prospective Customer” means any Person whom the Company or any of its Subsidiaries has entertained discussions with to become a client or customer at any time during the 12-month period immediately preceding the Termination Date and who has not explicitly rejected a business relationship with the Company.

 

(c)           Acknowledgment.  Executive acknowledges that in the course of her employment with the Company and its Subsidiaries, she has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Subsidiaries. Executive further acknowledges that as the President, International, Executive has and will have direct or indirect responsibility, oversight or duties with respect to the businesses of the Company and its Subsidiaries and its and their current and prospective employees, vendors, customers, clients and other business relations, and that, accordingly, the geographical restriction contained in this Section 9 is reasonable in all respects and necessary to protect the goodwill and Proprietary Information of the Company and that without such protection the Company’s customer and client relations and competitive advantage would be materially adversely affected.  It is specifically recognized by Executive that her services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this Section 9, that Executive is directly responsible for the growth and development of the Company and the creation and preservation of the Company’s goodwill, that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement  with  Executive  without  the  restriction  of  this  Section 9.  Executive further acknowledges that the restrictions contained in this Section 9 do not impose an undue hardship on her and, since she has general business skills that may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of her livelihood. Executive further acknowledges that the provisions of this Section 9 are separate and independent of the other sections of this Agreement.

 

(d)           Enforcement, etc.  If, at the time of enforcement of Section 8 or 9 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area.  Because Executive’s services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, without limiting the generality of Section 12(f), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security).

 

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(e)           Submission to Jurisdiction.  The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in the Commonwealth of Virginia in any action or proceeding arising out of or relating to Section 8 and/or 9 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 8 and/or 9 of this Agreement in any other court. The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

 

GENERAL PROVISIONS

 

10.          Definitions.

 

“Accrued Obligation” means the sum of (a) Executive’s Annual Base Salary through the Termination Date for periods through but not following her Separation From Service and (b) any accrued vacation pay earned by Executive, in each case, to the extent not theretofore paid.

 

“Affiliate” means, with respect to any particular Person, any other Person controlling, controlled by or under common control with such particular Person. A Subsidiary of the Company shall be an Affiliate of the Company.

 

“Board” means the Board of Directors of the Company or any committee of the Board, such as the Compensation Committee, to which the Board has delegated applicable authority.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Person” means any individual or corporation, association, partnership, limited liability company, joint venture, joint stock or other company, business trust, trust, organization, university, college, governmental authority or other entity of any kind.

 

“Proprietary Information” means any and all data and information concerning the business affairs of the Company or any of its Subsidiaries and not generally known in the industry in which the Company or any of its Subsidiaries is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Subsidiaries businesses, but in any event Proprietary Information shall include, any of the Company’s and its Subsidiaries’ past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Subsidiaries businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Subsidiaries obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Subsidiaries, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important. Proprietary Information does not include any information that Executive has obtained from a

 

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Person other than an employee of the Company or a Subsidiary, which was disclosed to her without a breach of a duty of confidentiality.

 

“Section 409A” means section 409A of the Code and the final Department of Treasury regulations issued thereunder.

 

“Separation From Service” shall have the meaning ascribed to such term in Section 409A.

 

“Specified Employee” means a person who is a “specified employee” within the meaning of Section 409A, taking into account the elections made and procedures established in resolutions adopted by the Board.

 

“Subsidiary” means any company of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

 

11.          Notices.

 

Any notice provided for in this Agreement must be in writing and must be mailed, personally delivered or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated:

 

	
 
    	
If   to the Company:
    
	
 
    	
 
    
	
 
    	
Rosetta   Stone Ltd.
    
	
 
    	
1919   North Lynn Street
    
	
 
    	
7th Floor
    
	
 
    	
Arlington,   VA 22209
    
	
 
    	
Attention:   Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
With   a copy to
    
	
 
    	
 
    
	
 
    	
Rosetta   Stone Ltd.
    
	
 
    	
1919   North Lynn Street
    
	
 
    	
7th Floor
    
	
 
    	
Arlington,   VA 22209
    
	
 
    	
Attention:   SVP HR and General Counsel
    
	
 
    	
 
    
	
 
    	
If   to Executive:
    
	
 
    	
 
    
	
 
    	
Helena   Wong
    
	
 
    	
c/o   Rosetta Stone Ltd.
    
	
 
    	
1919   North Lynn Street
    
	
 
    	
7th Floor
    
	
 
    	
Arlington,   VA 22209
    

 

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or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when delivered or, if mailed, five (5) business days after deposit in the U.S. mail.

 

12.          Miscellaneous.

 

(a)           Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

(b)           Complete Agreement.  This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way, including, without limitation, that certain Executive Employment Agreement between the Company and Executive dated as of

 

(c)           Counterparts; Facsimile Transmission.  This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that its own telecopied signature will bind it and that it accepts the telecopied signature of each other party to this Agreement.

 

(d)           Successors and Assigns.  Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of the parties under this Agreement shall not be assignable without the prior written consent of the other party, except for assignments by operation of law and assignments by the Company to any successor of the Company by merger, consolidation, combination or sale of assets. Any purported assignment in violation of these provisions shall be void ab initio.

 

(e)           Choice of Law; Jurisdiction.  All questions or disputes concerning this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the Commonwealth of Virginia, without giving effect to any choice of law or conflict of law provision or rule (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Virginia.  The parties hereby: (i) submit to the non-exclusive jurisdiction of any state or federal court sitting in the Commonwealth of Virginia in any action or proceeding arising out of or relating to this Agreement; and (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court. Each party hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought. The

 

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parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

 

(f)            Remedies.  Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

 

(g)           Amendment and Waiver.  The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive.

 

(h)           Business Days.  If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.  The provisions of this Section 12(h) shall not apply to determine the date an amount is payable under Section 3(c)(ii) or 6.

 

(i)            Termination.  This Agreement (except for the provisions of Sections  1, 2, 3, 4, 12 and 13) shall survive the termination of Executive’s employment with the Company and shall remain in full force and effect after such termination.

 

(j)            No Waiver.  A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that such party would otherwise have on any future occasion. Neither failure to exercise nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

 

(k)           Insurance.  The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance with respect to Executive in any amount or amounts considered available provided, however, that such procurement of insurance does not restrict the amount of insurance that Executive may obtain for her own personal use. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that she has no reason to believe that her life is not insurable at rates now prevailing for healthy women of her age.

 

(l)            Withholding of Taxes on Behalf of Executive.  The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes (“Taxes”) imposed with respect to Executive’s

 

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compensation or other payments from the Company or any of its Subsidiaries or Executive’s ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.

 

(m)          Waiver of Jury Trial.  BOTH PARTIES TO THIS AGREEMENT AGREE THAT ANY ACTION, DEMAND, CLAIM OR COUNTERCLAIM RELATING TO THE TERMS AND PROVISIONS OF THIS AGREEMENT, OR TO ITS BREACH, MAY BE COMMENCED IN THE COMMONWEALTH OF VIRGINIA IN A COURT OF COMPETENT JURISDICTION.  BOTH PARTIES TO THIS AGREEMENT FURTHER AGREE THAT ANY ACTION, DEMAND, CLAIM OR COUNTERCLAIM SHALL BE RESOLVED BY A JUDGE ALONE, AND BOTH PARTIES HEREBY WAIVE AND FOREVER RENOUNCE THAT RIGHT TO A TRIAL BEFORE A CIVIL JURY.

 

13.          Certain Additional Payments by the Company.

 

(a)           Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by, or benefit from, the Company or an Affiliate or any person who acquires ownership or effective control or ownership of a substantial portion of the Company’s assets (within the meaning of section 280G of the Code) or by any Affiliate of such person, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 13) (a “Payment”) would be subject to the excise tax imposed by section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  Any Gross-Up Payment that the Company is required to make to reimburse Executive for federal, state and local taxes imposed upon Executive, including the amount of additional taxes imposed upon Executive due to the Company’s payment of the initial taxes on such amounts, shall be made by the Company by the end of Executive’s taxable year next following Executive’s taxable year in which Executive remits the related taxes to the taxing authority.

 

(b)           Subject to the provisions of Section 13(c), all determinations required to be made under this Section 13, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm that is (i) not serving as accountant or auditor for the person who acquires ownership or effective control or ownership of a substantial portion of the Company’s assets (within the meaning of section 280G of the Code) or any Affiliate of such person and (ii) agreed upon by the Company and Executive (the “Accounting Firm”).  The Accounting Firm shall provide detailed supporting calculations both to the Company and Executive within 15 business days after appointment by the Company and Executive and receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company.  All fees and expenses of the Accounting Firm shall be

 

15

 

borne solely by the Company.  Any Gross-Up Payment, as determined pursuant to this Section 13, shall be paid by the Company to Executive within five days after the receipt of the Accounting Firm’s determination and in no event later than the payment deadline specified in Section 13(a).  Any determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its remedies pursuant to Section 13(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.

 

(c)           Executive shall notify the Company in writing of any claim by the Internal Revenue Service, state or other taxing authority (“Taxing Authority”) that, if successful, would require the payment by the Company of the Gross-Up Payment (or an additional Gross-Up Payment) in the event the Taxing Authority seeks higher payment.  Such notification shall be given as soon as practicable, but no later than ten business days after Executive is informed in writing of such claim, and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid.  Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which she gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due).  If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:

 

(i)        give the Company any information reasonably requested by the Company relating to such claim,

 

(ii)       take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

 

(iii)     cooperate with the Company in good faith in order to effectively contest such claim, and

 

(iv)      permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred at any time during the period that ends ten years following the lifetime of Executive in connection with such proceedings and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax and income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this Section 13(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Taxing Authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to determination before any administrative

 

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tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  The Company shall not direct Executive to pay such a claim and sue for a refund if, due to the prohibitions of section 402 of the Sarbanes-Oxley Act of 2002, the Company may not advance to Executive the amount necessary to pay such claim.  The Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issues raised by the Taxing Authority.  The costs and expenses that are subject to be paid pursuant to this Section 13(c) shall not be limited as a result of when the costs or expenses are incurred.  The amounts of costs or expenses that are eligible for payment pursuant to this Section 13(c)(iv) during a given taxable year of Executive shall not affect the amount of costs or expenses eligible for payment in any other taxable year of Executive.  The right to payment of costs and expenses pursuant to this Section 13(c)(iv) is not subject to liquidation or exchange for another benefit.  Any payment due under this Section 13(c)(iv) to reimburse Executive for any taxes shall be made to Executive by the Company by the end of Executive’s taxable year following Executive’s taxable year in which Executive remits the related taxes to the applicable taxing authorities.

 

(d)           If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 13(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company’s complying with the requirements of Section 13(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto.  If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 13(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall not be required to be repaid.

 

14.          Compliance with IRC Section 409A.

 

This agreement is intended to comply with Section 409A and will be interpreted in a manner intended to comply with Section 409A, to the extent that the requirements of Section 409A are applicable thereto.  Notwithstanding anything herein to the contrary, (i) if at the time of Executive’s termination of employment with the Company she is a “specified employee” as defined in Section 409A (and any related regulations or other pronouncements thereunder) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six months following her termination of employment with the Company (or the earliest date as is permitted under Section 409A) and (ii) if any other payments of money or other benefits due to Executive hereunder

 

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could cause the application of an accelerated or additional tax under Section 409A, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Company, that does not cause such an accelerated or additional tax.

 

15.          Indemnification.

 

During and following the employment period, the Company shall indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive’s performance as an officer, director or employee of the Company or any of its Subsidiaries or in any other capacity, including any fiduciary capacity, in which Executive serves at the request of Company to the maximum extent permitted by applicable law and the Company’s By-Laws. Expenses incurred in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of Executive to repay such amount if it shall ultimately be determined that she is not entitled to be indemnified by the Company. To the extent that the Company reduces the indemnity rights provided for under its By-Laws after execution of this Agreement, the Company’s indemnity obligations hereunder shall be unaffected (to the extent permitted by applicable law).  The Company shall maintain an insurance policy covering Executive for actions taken by Executive as an officer, manager and/or director of Employer and its affiliates.  Such insurance shall be in an amount commensurate with the amounts maintained by the Company and its affiliates on its other officers, managers and/or directors.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

 

	
 
    	
Rosetta Stone Ltd.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Tom Adams
    
	
 
    	
Tom Adams, Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
/s/ Helena Wong
    
	
 
    	
Helena Wong
    

 

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EXHIBIT A

 

Form of Release

 

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Legal Release

 

This Legal Release (this “Agreement” or “Release”) is between Rosetta Stone Ltd. (the “Company”) and Helena Wong (“Executive”) (each a “Party,” and together, the “Parties”). For purposes of this Agreement “Effective Date” shall mean the date on which Executive signs this Agreement.

 

Recitals

 

A.                                   Executive and the Company are parties to an Employment Agreement to which this Release is appended as Exhibit A (the “Employment Agreement”).

 

B.                                     Executive wishes to receive the Severance Benefit described Section 6(a) of the Employment Agreement.

 

C.                                     Executive and the Company wish to resolve, except as specifically set forth herein, all claims between them arising from or relating to any act or omission predating the Separation Date defined below.

 

Agreement

 

The Parties agree as follows:

 

1.                                       Confirmation of Severance Benefit Obligation. The Company shall pay or provide to Executive the entire Severance Benefit, as, when and on the terms and conditions specified in the Employment Agreement.

 

2.                                       Legal Releases

 

(a)                                  Executive, on behalf of Executive and Executive’s heirs, personal representatives and assigns, and any other person or entity that could or might act on behalf of Executive, including, without limitation, Executive’s counsel (all of whom are collectively referred to as “Executive Releasers”), hereby fully and forever releases and discharges the Company, its present and future affiliates and subsidiaries, and each of their past, present and future officers, directors, employees, shareholders, independent contractors, attorneys, insurers and any and all other persons or entities that are now or may become liable to any Releaser due to any Executive Releasee’s act or omission, (all of whom are collectively referred to as “Executive Releasees”) of and from any and all actions, causes of action, claims, demands, costs and expenses, including attorneys’ fees, of every kind and nature whatsoever, in law or in equity, whether now known or unknown, that Executive Releasers, or any person acting under any of them, may now have, or claim at any future time to have, based in whole or in part upon any act or omission occurring on or before the Effective Date, without regard to present actual knowledge of such acts or omissions, including specifically, but not by way of limitation, matters which may arise at common law, such as breach of contract, express or implied, promissory estoppel, wrongful discharge, tortious interference with contractual rights, infliction of emotional distress, defamation, or under federal, state or local laws, such as the Fair Labor Standards Act, the Employee Retirement Income Security Act, the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Rehabilitation Act

 

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of 1973, the Equal Pay Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and any civil rights law of any state or other governmental body; PROVIDED, HOWEVER, that notwithstanding the foregoing or anything else contained in this Agreement, the release set forth in this Section shall not extend to: (i) any rights arising under this Agreement; (ii) any vested rights under any pension, retirement, profit sharing or similar plan; or (iii) Executive’s rights, if any, to indemnification, and/or defense under any Company certificate of incorporation, bylaw and/or policy or procedure, or under any insurance contract or any indemnification agreement with the Company, in connection with Executive’s acts and omissions within the course and scope of Executive’s employment with the Company.  Executive hereby warrants that Executive has not assigned or transferred to any person any portion of any claim which is released, waived and discharged above. Executive further states and agrees that Executive has not experienced any illness, injury, or disability that is compensable or recoverable under the worker’s compensation laws of any state that was not reported to the Company by Executive before the Effective Date, and Executive agrees not to not file a worker’s compensation claim asserting the existence of any such previously undisclosed illness, injury, or disability. Executive has specifically consulted with counsel with respect to the agreements, representations, and declarations set forth in the previous sentence. Executive understands and agrees that by signing this Agreement Executive is giving up any right to bring any legal claim against the Company concerning, directly or indirectly, Executive’s employment relationship with the Company, including Executive’s separation from employment.  Executive agrees that this legal release is intended to be interpreted in the broadest possible manner in favor of the Company, to include all actual or potential legal claims that Executive may have against the Company, except as specifically provided otherwise in this Agreement.

 

(b)                                 The Company, for itself, its affiliates, and any other person or entity that could or might act on behalf of it including, without limitation, its attorneys (all of whom are collectively referred to as “Company Releasers”), hereby fully and forever release and discharge Executive, Executive’s heirs, representatives, assigns, attorneys, and any and all other persons or entities that are now or may become liable to any Company Releaser on account of Executive’s employment with the Company or separation therefrom (all of whom are collectively referred to as “Company Releasees”) of and from any and all actions, causes of action, claims, demands, costs and expenses, including attorneys’ fees, of every kind and nature whatsoever, in law or in equity, whether now known or unknown, that the Company Releasers, or any person acting under any of them, may now have, or claim at any future time to have, based in whole or in part upon any act or omission relating to Employee’s employment with the Company or separation therefrom, without regard to present actual knowledge of such acts or omissions; PROVIDED, HOWEVER, that notwithstanding the foregoing or anything else contained in this Agreement, the release set forth in this Section shall not extend to: (i) any rights arising under this Agreement; (ii) a breach of fiduciary duty or other misconduct that renders Executive ineligible for indemnification by the Company under applicable law, or any right of recovery by the Company for Executive’s breach of fiduciary duty or misconduct in her capacity as a director of the Company under applicable law; or (iii) any claim or claims that the Company may have against Executive as of the Effective Date of which the Company is not aware as of the Effective Date because of willful concealment by Executive.  The Company understands and agrees that by signing this Agreement, it is giving up its right to bring any legal claim against Executive concerning, directly or indirectly, Executive’s employment relationship with the Company.  The Company agrees that this legal release is intended to be interpreted in the broadest possible

 

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manner in favor of Executive, to include all actual or potential legal claims that the Company may have against Executive relating to Employee’s employment with the Company or separation therefrom, except as specifically provided otherwise in this Agreement.

 

(c)                                  In order to provide a full and complete release, each of the Parties understands and agrees that this Release is intended to include all claims, if any, covered under this Paragraph 2 that such Party may have and not now know or suspect to exist in her or its favor against any other Party and that this Release extinguishes such claims.  Thus, each of the Parties expressly waives all rights under any statute or common law principle in any jurisdiction that provides, in effect, that a general release does not extend to claims which the releasing party does not know or suspect to exist in her favor at the time of executing the release, which if known by her must have materially affected her settlement with the party being released.

 

(d)                                 Executive acknowledges that she consulted with an attorney of her choosing before signing this the Employment Agreement and this Release, and that the Company provided her with no fewer than twenty-one (21) days during which to consider the provisions of the Employment Agreement and this Release and, specifically the release set forth at Paragraph 2(a), above, although Executive may sign and return the Release sooner if she so chooses.  Executive further acknowledges that she has the right to revoke this Release for a period of seven (7) days after signing it and that this Release shall not become effective until such seven (7)-day period has expired. Executive acknowledges and agrees that if she wishes to revoke this Release, she must do so in writing, and that such revocation must be signed by Executive and received by the Company in care of the Chair of the Board of Directors no later than 5 p.m. (Eastern Time) on the seventh (7th) day after Executive has signed this Release. Executive acknowledges and agrees that, in the event that she revokes this Release, she shall have no right to receive the Severance Benefit. Executive represents that she has read this Release, including the release set forth in Paragraph 2(a), above, affirms that this Release and the Employment Agreement provide her with benefits to which she would not otherwise be entitled, and understands its terms and that she enters into this Release freely, voluntarily, and without coercion.

 

3.                                       Executive acknowledges that she has received all compensation to which she is entitled for her work up to her last day of employment with the Company, and that she is not entitled to any further pay or benefit of any kind, for services rendered or any other reason, other than the Severance Benefit.

 

4.                                       Executive agrees that the only thing of value that she will receive by signing this Release is the Severance Benefit.

 

5.                                       The Parties agree that their respective rights and obligations under the Employment Agreement shall survive the execution of this Release.

 

6.                                       The parties understand and agree that this Agreement shall not be construed as an admission of liability on the part of any person or entity, liability being expressly denied.

 

7.                                       Executive represents and warrants to the Company that, prior to the Effective Date, Executive did not disclose to any person, other than to Executive’s spouse, tax advisor and counsel, the terms of this Agreement or the circumstances under which the matter that is the

 

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subject of this Agreement has been resolved.  After the Effective Date, neither Executive, counsel for Executive, nor any other person under Executive’s control shall disclose any term of this Agreement or the circumstances of Executive’s separation from the Company, except that Executive may disclose such information to Executive’s spouse, or as required by subpoena or court order, or to an attorney or accountant to the extent necessary to obtain professional advice.  Executive shall not be entitled to rely upon the foregoing exception for disclosures pursuant to subpoena or court order unless Executive has given the Company written notice, within three business days following service of the subpoena or court order.

 

8.                                       Executive covenants never to disparage or speak ill of the Company or any the Company product or service, or of any past or present employee, officer or director of the Company, nor shall Executive at any time harass or behave unprofessionally toward any past, present or future the Company employee, officer or director.

 

9.                                       Executive acknowledges that because of Executive’s position with the Company, Executive may possess information that may be relevant to or discoverable in connection with claims, litigation or judicial, arbitral or investigative proceedings initiated by a private party or by a regulator, governmental entity, or self-regulatory organization, that relates to or arises from matters with which Executive was involved during Executive’s employment with the Company, or that concern matters of which Executive has information or knowledge (collectively, a “Proceeding”). Executive agrees that Executive shall testify truthfully in connection with any such Proceeding, shall cooperate with the Company in connection with every such Proceeding, and that Executive’s duty of cooperation shall include an obligation to meet with the Company representatives and/or counsel concerning all such Proceedings for such purposes, and at such times and places, as the Company reasonably requests, and to appear for deposition and/or testimony upon the Company’s request and without a subpoena.  The Company shall reimburse Executive for reasonable out-of-pocket expenses that Executive incurs in honoring Executive’s obligation of cooperation under this Section 9.

 

10.                                 Miscellaneous Terms and Conditions

 

(a)                                  Each party understands and agrees that Executive or it assumes all risk that the facts or law may be, or become, different than the facts or law as believed by the party at the time Executive or it executes this Agreement.  Executive and the Company acknowledge that their relationship precludes any affirmative obligation of disclosure, and expressly disclaim all reliance upon information supplied or concealed by the adverse party or its counsel in connection with the negotiation and/or execution of this Agreement.

 

(b)                                 The parties warrant and represent that they have been offered no promise or inducement except as expressly provided in this Agreement, and that this Agreement is not in violation of or in conflict with any other agreement of either party.

 

(c)                                  All covenants and warranties contained in this Agreement are contractual and shall survive the closing of this Agreement.

 

(d) Successors and Assigns. This Agreement shall be binding in all respects upon, and shall inure to the benefit of, the parties’ heirs, successors and assigns.

 

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(e)                                  Governing Law. This Agreement shall be governed by the internal laws of the Commonwealth of Virginia, irrespective of the choice of law rules of any jurisdiction.

 

(f)                                    Should any provision of this Agreement be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. Notwithstanding the foregoing, if Section 2(a), above, is declared void or unenforceable, then this Agreement shall be null and void and both parties shall be restored to the positions that they occupied before the Agreement’s execution (meaning that, among other things, all sums paid by the Company pursuant to Section 1, above, shall be immediately refunded to the Company); provided that in such circumstances this Agreement and the facts and circumstances relating to its execution shall be inadmissible in any later proceeding between the parties, and the statutes of limitations applicable to claims asserted in the proceeding shall be deemed to have been tolled for the period between the Effective Date and 10 days after the date on which Section 2(a) is declared unenforceable.

 

(g)                                 This Agreement constitutes the entire agreement of the parties and a complete merger of prior negotiations and agreements.

 

(h)                                 This Agreement shall not be modified except in a writing signed by the parties.

 

(i)                                     Waiver.  No term or condition of this Agreement shall be deemed to have been waived, nor shall there be an estoppel against the enforcement of any provision of this Agreement, except by a writing signed by the party charged with the waiver or estoppel.  No waiver of any breach of this Agreement shall be deemed a waiver of any later breach of the same provision or any other provision of this Agreement.

 

(j)                                     Headings are intended solely as a convenience and shall not control the meaning or interpretation of any provision of this Agreement.

 

(k)                                  Pronouns contained in this Agreement shall apply equally to the feminine, neuter and masculine genders.  The singular shall include the plural, and the plural shall include the singular.

 

(l)                                     Each party shall promptly execute, acknowledge and deliver any additional document or agreement that the other party reasonably believes is necessary to carry out the purpose or effect of this Agreement.

 

(m)                               Any party contesting the validity or enforceability of any term of this Agreement shall be required to prove by clear and convincing evidence fraud, concealment, failure to disclose material information, unconscionability, misrepresentation or mistake of fact or law.

 

(n)                                 The parties acknowledge that they have reviewed this Agreement in its entirety and have had a full and fair opportunity to negotiate its terms and to consult with counsel of their own choosing concerning the meaning and effect of this Agreement.  Each party therefore waives all applicable rules of construction that any provision of this Agreement should

 

25

 

be construed against its drafter, and agrees that all provisions of the agreement shall be construed as a whole, according to the fair meaning of the language used.

 

(o)                                 Every dispute arising from or relating to this Agreement shall be tried only in the state or federal courts situated in the Commonwealth of Virginia.  The parties consent to venue in those courts, and agree that those courts shall have personal jurisdiction over them in, and subject matter jurisdiction concerning, any such action.

 

(p)                                 In any action relating to or arising from this Agreement, or involving its application, the party substantially prevailing shall recover from the other party the expenses incurred by the prevailing party in connection with the action, including court costs and reasonable attorneys’ fees.

 

(q)                                 This Agreement may be executed in counterparts, or by copies transmitted by telecopier, all of which shall be given the same force and effect as the original.

 

[SIGNATURES FOLLOW]

 

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NOTE: DO NOT SIGN THIS SUPPLEMENTAL LEGAL RELEASE UNTIL AFTER EXECUTIVE’S FINAL DAY OF EMPLOYMENT.

 

	
ROSETTA   STONE LTD.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Tom Adams, Chief Executive Officer
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
EXECUTIVE
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Helena Wong
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    
				

 

27

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