Rosetta Stone 2010 Annual Report Download - page 128

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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