Rosetta Stone 2011 Annual Report Download - page 195

notice thereof from the Company or the Affiliate, as applicable; (v) failed, within ten (10) days after receipt by the Optionee of written
notice thereof from the Company or an Affiliate, 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 the Company's or an Affiliate's
business or operations; (vi) committed 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 an Affiliate; (vii) harassed or discriminated against the
Company's or an Affiliate's employees, customers or vendors in violation of the Company's policies with respect to such matters; (viii)
misappropriated funds or assets of the Company or an Affiliate for personal use or willfully violated the Company policies or
standards of business conduct as determined in good faith by the Board; (ix) failed, due to some action or inaction on the part of the
Optionee, to have immigration status that permits the Optionee to maintain full-time employment with the Company or an Affiliate in
the United States in compliance with all applicable immigration law; or (x) disclosed trade secrets of the Company or an Affiliate.
(b) "Change in Control" means (i) the liquidation, dissolution or winding-up of the Company, (ii) the sale,
license or lease of all or substantially all of the assets of the Company, or (iii) a share exchange, reorganization, recapitalization, or
merger or consolidation of the Company with or into any other corporation or corporations (or other form of business entity) or of any
other corporation or corporations (or other form of business entity) with or into the Company, but excluding any merger effected
exclusively for the purpose of changing the domicile of the Company; provided, however, that a Change in Control shall not include
any of the aforementioned transactions listed in clauses (i), (ii) and (iii) involving the Company or a Subsidiary Corporation in which
the holders of shares of the Company voting stock outstanding immediately prior to such transaction or any Affiliate of such holders
continue to hold at least a majority, by voting power, of the capital stock or, by a majority, based on fair market value as determined in
good faith by the Board, of the assets, in each case in substantially the same proportion, of (x) the surviving or resulting corporation
(or other form of business entity), (y) if the surviving or resulting corporation (or other form of business entity) is a wholly owned
subsidiary of another corporation (or other form of business entity) immediately following such transaction, the parent corporation (or
other form of business entity) of such surviving or resulting corporation (or other form of business entity) or (z) a successor entity
holding a majority of the assets of the Company. In addition, a Change in Control shall not include a bona fide, firm commitment
underwritten public offering of the Stock pursuant to a registration statement declared effective under the Securities Act of 1933, as
amended.
(c) "Disability" shall have the meaning ascribed to such term in the Plan, as it may be amended from time to
time.
(d) "Good Reason" shall have the meaning ascribed to such term in the Optionee's employment agreement
with the Company, or, if none, the Optionee's resignation from employment with the Company due to (i) a material diminution in
Optionee's annual base salary, duties, authority or responsibilities or (ii) relocation of the Optionee's primary place of employment to a
geographic area more than fifty (50) miles from Optionee's then-current primary place of employment, without the Optionee's consent;
provided that the Optionee has given thirty (30) days advance written notice to the Company of the initial existence of the
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