Rosetta Stone 2010 Annual Report Download - page 104

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Table of Contents
ROSETTA STONE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. COMMITMENTS AND CONTINGENCIES (Continued)
The following table summarizes the accrued exit costs for the 1101 Wilson Boulevard facility (in thousands):
As of
December 31,
2010
As of
December 31,
2009
Accrued exit costs, beginning of period $ 1,019 $ 1,676
Costs incurred and charged/(credited) to expense (583) (8)
Principal reductions (436) (649)
Accrued exit costs, end of period $ — $ 1,019
Accrued exit cost liability:
Short-term $ — $ 504
Long-term — 515
Total $ — $ 1,019
Royalty Agreement
On December 28, 2006 the Company entered into an agreement to license software from a vendor for incorporation in software products that the
Company is developing. The agreement required a one-time, non-refundable payment of $0.3 million, which was expensed in full as research and
development costs during 2006 because the products in which the licensed software were to be incorporated into had not yet reached technological feasibility.
In addition, the agreement specifies that, in the event the software is incorporated into specified Company software products, royalties will be due at a rate of
20% of sales for those products up to an additional amount totaling $0.4 million. There were no additional royalty payments made under this agreement in
2010 or 2009.
Employment Agreements
The Company has agreements with certain of its executives and key employees which provide guaranteed severance payments upon termination of their
employment without cause. The severance payments range from six to fifteen months of base salary.
Litigation
In July 2009, the Company filed a lawsuit in the United States District Court for the Eastern District of Virginia against Google Inc., seeking, among
other things, to prevent Google from infringing upon its trademarks. In August 2010, the U.S. District Court for the Eastern District of Virginia issued its final
order dismissing our trademark infringement lawsuit against Google. The Company has appealed the District Court's decision to the U.S. Court of Appeals for
the Fourth Circuit. The Company has incurred, and may continue to incur material legal fees and other costs and expenses in pursuit of our claims against
Google.
On or about April 28, 2010, a purported class action lawsuit was filed against the Company in the Superior Court of the State of California, County of
Alameda for damages, injunctive relief and restitution in the matter of Michael Pierce, Patrick Gould, individually and on behalf of all others similarly
situated v. Rosetta Stone Ltd. and DOES 1 to 50. The complaint alleges that plaintiffs and
F-30