Rosetta Stone 2009 Annual Report Download - page 104

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Table of Contents
ROSETTA STONE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. COMMON STOCK (Continued)
Dividends
Holders of each class of Common Stock are entitled to dividends, in cash or stock in the same form and per share amount as declared by the Board of
Directors.
Liquidation
In the event of any dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary, the holders of the Common Stock are
entitled to participate in the distribution of assets of the Company remaining after the provision for payment of all debts and liabilities of the Company and
after the Company has paid or set aside for payment on behalf of any class of stock having preference over the common stock in the event of dissolution,
liquidation or winding up.
Voting Rights
Each holder of Common Stock is entitled to cast one vote for each outstanding share of common stock on any matter properly considered and acted upon
by the stockholders, except in a vote for the election or removal of one or more directors of the Company for which the Common Stock may be voted, at
which each holder of one share of Common Stock is entitled to cast 0.653775 votes, and one vote for each outstanding share of Class B Convertible Common
Stock.
12. CONVERTIBLE PREFERRED STOCK
At December 31, 2008, the Company had outstanding 268,758 shares of Class A, Series A-1 Convertible Preferred Stock, 178,200 shares of Class A
Series A-2 Convertible Preferred Stock and 111,031 shares of Class B Convertible Preferred Stock, $0.001 par value per share.
On April 21, 2009, in conjunction with the Company's qualified underwritten initial public offering of common stock, its total outstanding preferred
shares in the amount of 557,989 automatically converted at a ratio of 26:1 into 14,507,714 shares of Common Stock and the then-existing classes of preferred
stock ceased to exist. At December 31, 2009, the Company had no preferred shares outstanding and the authorized preferred stock was undesignated blank
check preferred.
13. EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution 401(k) Plan (the "Plan"). The Company matches employee contributions to the Plan up to 4% of their
compensation that vest immediately. The Company recorded expenses for the Plan totaling $1.1 million and $0.9 million for the years ended December 31,
2009 and 2008, respectively.
14. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases many kiosks, copiers, parking spaces, buildings, a warehouse and office space under operating lease and site license arrangements,
some of which contain renewal options. The rental payments under some kiosk site licenses are based on a minimum rental plus a percentage of the kiosk's
sales in excess of stipulated amounts. Kiosk site licenses range from a period of one month to
F-28