Rosetta Stone 2014 Annual Report Download - page 136

Exhibit 10.26
Rosetta Stone Inc.
Policy on Recoupment of Performance Based Compensation
Effective January 1, 2014
I. Purpose
In the event of a material restatement or adjustment of the Company’s financial results (other than a restatement or
adjustment caused by a change to the applicable accounting rules or interpretations), the Company’s Compensation
Committee (“Committee”) believes it would be appropriate to review the circumstances that caused the restatement or
adjustment and consider issues of accountability. The purpose of this Policy on Recoupment of Performance Based
Compensation (“Policy”) is to provide that the Company may seek recoupment of performance-based compensation paid
to Executives if the restatement or adjustment is caused by the misconduct of one or more employees or former
employees of the Company.
For purposes of this Policy, “performance-based compensation” means each award or payment (whether in cash,
Company stock, a combination of cash and Company stock, or otherwise) of incentive compensation based on the
performance of the Company (including any business unit), any product, any service, any individual or any other
performance metric; provided, however, earned and approved grants under the Company’s 2013 Long Term Incentive Plan,
and any time based equity awards which are not performance based are not subject to this Policy.
II. Review and Remedies
In determining what remedies to pursue (if any) in the event of a restatement or adjustment, the Committee will take into
account all relevant facts and circumstances, including one or more of the following factors:
•The nature of the events that led to the restatement (i.e., negligence, fraud, or intentional misconduct);
•The conduct (by action or omission) of the Executives in connection with the events that led to the restatement or
adjustment;
•Whether the performance based compensation would have been lower if it had been based on the restated or
adjusted results;
•Financial and reputational harm to the Company;
•Actions necessary to prevent a recurrence of the misconduct;
•The costs and benefits to the Company of seeking recoupment;
•Fairness to the Company and the Executive(s);
•Any penalties imposed by law enforcement agencies, regulators or other authorities; and or
•Such other factors as the Committee may deem relevant in its sole discretion.
The Committee does not believe that it is possible to anticipate all possible cases in which recoupment may be appropriate.
Thus, the Committee reserves the discretion to evaluate each situation based on its individual facts and circumstances.
III. Remedies
The Committee will, to the extent permitted by law, seek, by written demand, recoupment from one or more Executives of
all or any portion of their respective performance-based compensation awarded and/or paid to the Executive during the
twelve (12) month period before the restatement or adjustment, and cause the cancellation of any outstanding stock options
and restricted or deferred stock awards, as it deems appropriate after review of the relevant facts and