Document:

Exhibit 4.1

 

	
  NUMBER

  	
   

  	
  SHARES

  
	
  RST

  	
  

  	
   

  
	
   

  	
   

  	
   

  
	
  COMMON STOCK

  	
  ROSETTA STONE INC.

  	
  SEE
  REVERSE FOR CERTAIN DEFINITIONS

  
	
   

  	
   

  	
  CUSIP
  777780 10 7

  

 

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

 

THIS CERTIFIES THAT:

 

 

 

 

is the owner of

 

FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON
STOCK, $.00005 PAR VALUE PER SHARE, OF

 

ROSETTA STONE INC.

 

transferable
on the books of the Corporation in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
until countersigned by the Transfer Agent and registered by the Registrar.

Witness
the facsimile seal of the Corporation and the facsimile signatures of its duly
authorized officers.

 

Dated:

 

	
  

  	
  

  	
  

  
	
  SECRETARY

  	
   

  	
  CHIEF EXECUTIVE OFFICER AND PRESIDENT

  

 

COUNTERSIGNED AND REGISTERED:

CONTINENTAL
STOCK TRANSFER & TRUST COMPANY

(New York, NY)

TRANSFER
AGENT AND REGISTRAR

BY:

 

AUTHORIZED SIGNATURE

 

 

The
following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

 

	
  TEN
  COM

  	
  –
  as tenants in common

  	
  UNIF
  GIFT MIN ACT–                      Custodian

  
	
  TEN
  ENT

  	
  –
  as tenants by the entireties

  	
  (Cust)

  	
  (Minor)

  
	
  JT
  TEN

  	
  –
  as joint tenants with right

  	
  under Uniform Gifts to Minors

  
	
   

  	
   

  	
  of
  survivorship and not as

  	
  Act                       

  
	
   

  	
   

  	
  tenants
  in common

  	
  (State)

  

 

Additional abbreviations may also be used though not in the above list.

 

For value received,                                                                                   hereby
sell, assign and transfer unto

 

	
  PLEASE INSERT SOCIAL
  SECURITY OR OTHER

  IDENTIFYING NUMBER OF ASSIGNEE

  	
   

  

 

                                                                                                                                                                                                                        

 

                                                                                                                                                                                                                       

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE

 

                                                                                                                                                                                                  Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint                                                                                                                                                                                                                                                   

 

Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.

 

	
  Dated,

  	
   

  	
   

  

 

 

	
   

  	
   

  	
   

  
	
  SIGNATURE(S) GUARANTEED:

  	
  NOTICE:

  	
  THE
  SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
  THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR
  ENLARGEMENT, OR ANY CHANGE WHATEVER.

  

 

 

	
   

  	
   

  
	
  THE
  SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
  (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
  MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
  S.E.C. RULE 17Ad-15.Exhibit 10.8

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE
EMPLOYMENT AGREEMENT (this “Agreement”)  is made as of February 20,
2009, between Rosetta Stone Ltd., a Delaware corporation (together with its
successors and assigns, the “Company”),  and Tom Adams (“Executive”).

 

Recitals

 

A.                                   The
Company and Executive desire to enter into an agreement pursuant to which the
Company will employ Executive as its President and Chief Executive Officer
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 and Chief Executive Officer
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 and Chief Executive Officer of the
Company, shall have all the duties and responsibilities customarily rendered by
chief executive officers of companies of similar size and nature and such other
duties and responsibilities as may be delegated from time to time by the Board
in its sole discretion.  Executive will
report to the Board.

 

Executive will
devote his best efforts and substantially all of his 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 Board, Executive will be permitted to serve on the boards of
other companies so long as such service does not unreasonably interfere with
his duties to the Company.

 

3.                                      Salary,
Bonus and Benefits.

 

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 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 Board may designate from time to time. The initial
Annual Base Salary shall be at the rate of $350,000 per annum in accordance
with the 

 

 

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
Plan; Equity Awards.  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.  For 2009, Executive will be eligible to
receive an Annual Bonus of up to sixty percent (60%) of his 2009 Annual Base
Salary upon 100% achievement of 2009 annual objectives.  For subsequent years, the Annual Bonus target
as a percentage of then-current Annual Base Salary, may be adjusted, but may
not be less than 60% of the Executive’s then-current Annual Base Salary.

 

(c)                                  Benefits.

 

(i)                                    Executive
and, to the extent eligible, his 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 or entertainment expenses incurred during the Service Term in
the performance of his services hereunder in accordance with the policies of
the Company as they are from time to time in effect. Executive, 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 27 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.

 

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 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 his incapacity due to physical or mental illness such
that he is unable to perform the essential functions of his 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 Board 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 Board
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 his 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; (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 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;
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 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 his primary place of employment is to be
relocated to a geographic area more than 50 miles from Arlington, Virginia
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 his 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) 15;
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) 15.  Executive may, at his option, convert his
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)                            Subject to clause (iv),
for 15 months following the Termination Date the Company shall arrange to
provide Executive and his dependents medical insurance benefits substantially
similar to those provided to Executive and his dependents immediately prior to
the Termination Date (at no greater cost to Executive than such cost to
Executive in effect immediately prior to the Termination Date, or, if greater,
the cost to similarly situated active employees of the Company under the
applicable group health plan of the Company). 
Except for any reimbursements
under the applicable group health plan that are subject to a limitation on
reimbursements during a specified period, the amount of expenses eligible for
reimbursement under this Section 6(a)(iii), or in-kind benefits
provided, during Executive’s taxable year shall not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other
taxable year of Executive.  Executive’s
right to reimbursement or in-kind benefits pursuant to this Section 6(a)(iii) shall
not be subject to liquidation or exchange for another benefit.  To the extent that the payments or
reimbursements made pursuant to this Section 6(a)(iii) are
taxable to Executive and are not otherwise exempt from Section 409A, if
Executive is a Specified Employee, any amounts to which Executive would
otherwise be entitled under this Section 6(a)(iii) during the first six months
following the date of Executive’s Separation From Service shall be accumulated
and paid to Executive on the date that is six months following the date of his
Separation From Service.

 

(iv)                               Subject
to Executive’s group health plan coverage continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, the
benefits listed in clause (iii) of this Section 6(a) shall
be reduced to the extent benefits of the same type are received by or made
available to Executive during such period, and provided, further, that
Executive shall have the obligation to notify the Company that he is entitled
to or receiving such benefits.

 

(v)                                   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.

 

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

 

 

(vii)                           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. 
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 his Annual
Base Salary for periods following his Separation From Service, to the extent
not theretofore paid, within thirty (30) days following his Separation From
Service if he is not a Specified Employee or on the date that is six months
following his Separation From Service if he 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.

 

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 him 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 his employment with or performance of services for the Company
or any of its Subsidiaries during the course of his 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 his duties as an employee of the Company, he 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
his 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 Board’s consent,
unless and to the extent that (except as otherwise provided in the definition
of Proprietary Information) the 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 his 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 he may then possess or have under his 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 his 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) while employed by 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 his 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 Board and perform all actions reasonably requested by the Board (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 his 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 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 his work for the Company or its Subsidiaries,
Third Party Information unless expressly authorized by a member of the Board 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 his 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 his 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 fifteen (15) 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
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 his employment with the Company and its Subsidiaries, he 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 Chief
Executive Officer of the Company, Executive has and 

 

 

will have direct or indirect
responsibility, oversight or duties with respect to all of 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 his 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 him and, since he 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 his 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).

 

(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 his 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 Person other than an employee of the Company or a
Subsidiary, which was disclosed to him 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:  Chair of the Board of
Directors

 

With a copy to

 

Rosetta Stone Ltd.

1919 North Lynn Street

7th Floor

Arlington, VA 22209

Attention:  General Counsel

 

If to Executive:

 

Tom Adams

c/o Rosetta Stone Ltd.

1919 North Lynn Street

7th Floor

Arlington, VA 22209

 

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 May 22,
2006.

 

(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 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 his 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 he has
no reason to believe that his life is not insurable at rates now prevailing for
healthy men of his 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 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 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 he 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 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.                               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 he
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).

 

[Signature pages follow]

 

 

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

 

	
   

  	
  Rosetta Stone Ltd.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tom Adams

  

 

 

EXHIBIT A

 

Form of Release

 

 

Legal Release

 

This Legal Release (“Release”)
is between Rosetta Stone Ltd. (the “Company”)
and Tom Adams (“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 a 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 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 an 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 his 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 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 his 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 his favor at the time of executing the release, which if known by him
must have materially affected his settlement with the party being released.

 

(d)                                 Executive
acknowledges that he consulted with an attorney of his choosing before signing
this the Employment Agreement and this Release, and that the Company provided
him 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 he so chooses. 
Executive further acknowledges that he 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 he wishes to revoke this Release, he
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
he revokes this Release, he shall have no right to receive the Severance
Benefit. Executive represents that he has read this Release, including the
release set forth in Paragraph 2(a), above, affirms that this Release and the
Employment Agreement provide him with benefits to which he would not otherwise
be entitled, and understands its terms and that he enters into this Release
freely, voluntarily, and without coercion.

 

3.                                       Executive
acknowledges that he has received all compensation to which he is entitled for
his work up to his last day of employment with the Company, and that he 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 he 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 

 

 

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.

 

 

(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 

 

 

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]

 

 

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

 

	
  ROSETTA STONE LTD.

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tom Adams

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

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