Rosetta Stone 2011 Annual Report Download - page 201

2. Grant of Restricted Shares. Effective as of the Grant Date, the Company shall cause to be issued in Executive's
name the Shares as Restricted Shares. The Company shall cause electronic book entries evidencing the Restricted Shares, and any
shares of the Stock or rights to acquire shares of the Stock distributed by the Company in respect of Restricted Shares during any
Period of Restriction (the "Retained Stock Distributions"), to be issued in Executive's name. During the Period of Restriction such
electronic book entries shall contain a restrictive legend notation to the effect that ownership of such Restricted Shares (and any
Retained Stock Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and conditions
provided in the Plan and this Agreement. During the Period of Restriction any regular dividends paid in cash or property (other than
Retained Stock Distributions) with respect to the Restricted Shares and Retained Stock Distributions (the "Retained Cash
Distributions") shall not be paid to Executive but instead shall be accumulated by the Company until the date the Forfeiture
Restrictions applicable to the Restricted Shares and Retained Stock Distributions with respect to which such Retained Cash
Distributions shall have been made, paid, or declared shall have become vested and then on that date such Retained Cash Distributions
shall be paid to Executive. Executive shall have the right to vote the Restricted Shares awarded to Executive and to exercise all other
rights, powers and privileges of a holder of the Shares, with respect to such Restricted Shares, with the exception that (a) Executive
shall not be entitled to delivery of such Restricted Shares until the Forfeiture Restrictions applicable thereto shall have expired, (b) the
Company shall retain custody of all Retained Stock Distributions made or declared with respect to the Restricted Shares and Retained
Cash Distributions made or declared with respect to the Restricted Shares and the Retained Stock Distributions (and such Retained
Stock Distributions and Retained Cash Distributions shall be subject to the same restrictions, terms and conditions as are applicable to
the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Stock Distributions and
Restricted Cash Distributions shall have been made, paid, or declared shall have become vested, and such Retained Stock
Distributions and Retained Cash Distributions shall not bear interest or be segregated in separate accounts and (c) Executive may not
sell, assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Shares or any Retained Stock Distributions or any
Restricted Cash Distributions during the Period of Restriction. Upon issuance the book entry representing the Restricted Shares shall
be delivered to such depository as may be designated by the Committee as a depository for safekeeping until the forfeiture of such
Restricted Shares occurs or the Forfeiture Restrictions lapse, together with stock powers or other instruments of assignment, each
endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Shares and any securities
constituting Retained Stock Distributions which shall be forfeited in accordance with the Plan and this Agreement. In accepting the
award of the Shares set forth in this Agreement Executive accepts and agrees to be bound by all the terms and conditions of the Plan
and this Agreement.
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3. Transfer Restrictions. The Shares granted hereby may not be sold, assigned, pledged, exchanged, hypothecated or
otherwise transferred, encumbered or disposed of, to the extent then subject to the Forfeiture Restrictions. Any such attempted sale,
assignment, pledge, exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shall be void and
the Company shall not be bound thereby. Further, the Shares granted hereby that are no longer subject to Forfeiture Restrictions may
not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable securities laws. Executive also
agrees that the Company may (a) refuse to cause the transfer of the Shares to be registered on the applicable stock transfer records of
the Company if such proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of any
applicable securities law and (b) give related instructions to the transfer agent, if any, to stop registration of the transfer of the Shares.
The Shares are registered with the Securities and Exchange Commission under a Registration Statement on Form S-8. A Prospectus
describing the Plan and the Shares is available from the Company.
4. Vesting.
(a) The Shares that are granted hereby shall be subject to the Forfeiture Restrictions. The Forfeiture Restrictions shall
lapse as to the Shares that are granted hereby in accordance with the following sentence, provided that Employee's employment with
the Company or any subsidiaries or Affiliates has not terminated prior to the applicable lapse date. On the first anniversary of the
Vesting Start Date (as set forth on the Cover Sheet), and on each succeeding anniversary of the Vesting Start Date (each such
anniversary date being referred to as a "lapse date"), the Forfeiture Restrictions shall lapse with respect to one-fourth (1/4th) of the total
number of Shares granted hereby, rounded to the nearest whole number, except that on the fourth anniversary of the Vesting Start
Date the Forfeiture Restrictions shall lapse with respect to the then remaining number of Shares granted hereby for which the
Forfeiture Restrictions have not previously lapsed.
(b) Notwithstanding any other provision of this Agreement to the contrary, if a Change in Control occurs
andExecutive's employment is terminated by the Company without Cause or by Executive with Good Reason, in either case, within
one (1) year following the occurrence of the Change in Control, then all remaining Forfeiture Restrictions shall lapse as to the Shares
that are granted hereby upon the date the Executive's employment terminates. Notwithstanding any other provision in this Agreement
to the contrary, if (i) Executive's employment is terminated by the Company without Cause or by Executive with Good Reason or
(ii) Executive dies or incurs a Disability, all remaining Forfeiture Restrictions shall lapse as to the Shares that are granted hereby upon
the date the Executive's employment terminates.
(c) Upon the lapse of the Forfeiture Restrictions with respect to the Shares granted hereby the Company shall cause to
be delivered to Executive such Shares in electronic book entry form, and such Shares shall be transferable by Executive (except to the
extent that any proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of applicable
securities law).