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1.	Elect three Class III directors nominated by our Board of Directors to hold office until our Annual Meeting of Stockholders in 2018, or until their respective successors have been elected;

2.	Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015;

3.	Approve an amendment to the Rosetta Stone Inc. Amended and Restated 2009 Omnibus Incentive Plan, to increase the number of shares available for issuance under the Omnibus Incentive Plan, as amended;

4.	Conduct an advisory vote on the compensation of the named executive officers; and

5.	Consider any other matters that may properly be brought before the meeting.

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•	Patrick W. Gross, Marguerite W. Kondracke and Caroline J. Tsay are designated Class III Directors whose terms are scheduled to expire at our upcoming Annual Meeting. If re-elected at our upcoming Annual Meeting, Mr. Gross and Msses. Kondracke and Tsay will have terms that expire at our 2018 Annual Meeting of Stockholders;

•	A. John Hass, David Nierenberg and Steven P. Yankovich are designated Class I Directors whose terms will expire at our 2016 Annual Meeting of Stockholders; and

•	James P. Bankoff, Laurence Franklin and Laura L. Witt are designated Class II Directors whose terms will expire at our 2017 Annual Meeting of Stockholders.

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(1)	Mr. Bankoff served on the Audit Committee from May 20, 2014 until November 20, 2014. Mr. Bankoff was appointed to the Product and Technology Committee on November 20, 2014. Mr. Bankoff was re-appointed to the Audit Committee effective April 1. 2015.

(2)	Mr. Franklin was appointed to the Corporate Governance and Nominating Committee on May 20, 2014.

(3)	Mr. Gross was appointed to the Product and Technology Committee on November 20, 2014.

(4)	Mr. Hass was appointed to the Board and to the Audit Committee on November 18, 2014, and to the Compensation Committee on November 20, 2014. In connection with his appointment as the Interim President and Chief Executive Officer, Mr. Hass resigned from the Audit Committee and the Compensation Committee effective April 1, 2015.

(5)	Ms. Tsay was appointed to the Board on December 18, 2014, and to the Compensation Committee, Corporate Governance and Nominating Committee and Product and Technology Committee on February 12, 2015.

(6)	Ms. Witt was appointed to the Product and Technology Committee on November 20, 2014.

(7)	Mr. Yankovich was appointed to the Board on October 8, 2014 and to the Corporate Governance and Nominating Committee, as well as the Product and Technology Committee, on November 20, 2014.

(8)	The Product and Technology Committee was formed in November 2014 and did not hold any meetings in 2014.

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•	approving the appointment, retention and termination of our independent auditors, and approving the audit and non-audit services to be performed by our independent auditors;

•	evaluating the qualifications, performance and independence of our independent auditors;

•	monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

•	reviewing the adequacy and effectiveness of our internal control policies and procedures;

•	discussing the scope and results of the audit with the independent auditors and reviewing with management and the independent auditors our interim and year-end operating results; and

•	preparing the Audit Committee report required by the SEC to be included in our annual proxy statement.

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•	reviewing and approving compensation of our executive officers including annual base salary, annual incentive bonuses, specific goals, equity-based awards, executive employment agreements, severance and change in control arrangements, and any other special benefits, compensation or arrangements;

•	reviewing and approving annual goals and objectives, bonus criteria and equity guidelines for our executive officers;

•	reviewing and discussing annually with management our "Compensation Discussion and Analysis" disclosure required by SEC rules and regulations;

•	preparing the Compensation Committee report required by the SEC to be included in our annual proxy statement;

•	administering, reviewing and making recommendations with respect to our equity-based compensation plans; and

•	appointing, compensating and overseeing compensation consultants and other advisors.

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•	assisting our Board of Directors in identifying prospective director nominees and recommending director nominees for each annual meeting of stockholders to our Board of Directors;

•	reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our Board of Directors;

•	reviewing succession planning for our Chief Executive Officer;

•	overseeing the evaluation of our Board of Directors;

•	determining the compensation of our directors; and

•	recommending members for each committee of our Board of Directors.

•	providing advice and guidance to management regarding existing technologies used by the Company and technologies being considered for products and information systems;

•	making recommendations to management with respect to product development strategy; and

•	monitoring and advising the Board and management on current and emerging trends in technological innovations and industry standards.

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•	the candidate shall exhibit high standards of integrity, commitment, and independence of thought and judgment;

•	the candidate shall be committed to representing the long-term interests of our stockholders;

•	the candidate shall have sufficient time and availability to devote to the affairs of the Company, particularly in light of the number of boards on which the nominee may serve;

•	to the extent the candidate serves or has previously served on other boards, the candidate shall have a demonstrated history of contributing at board meetings; and

•	the candidate meets any other minimum qualifications and other criteria for board membership approved by our Board of Directors from time to time.

•	a majority of the Board of Directors is "independent" in accordance with the standards, if any, promulgated by the SEC, or any exchange upon which securities of the Company are traded, and any governmental or regulatory body exercising authority over the Company;

•	each of our Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee is comprised entirely of independent directors; and

•	at least one member of our Audit Committee shall have such experience, education and other qualifications necessary to qualify as an "audit committee financial expert" as defined by the rules of the SEC and financial sophistication requirements under NYSE rules.

•	whether the candidate has direct experience in our industry or in the markets in which we operate;

•	whether the candidate, if elected, assists in achieving a mix of Board members that represents a diversity of background and experience;

•	whether the candidate has experience at a strategic or policymaking level in a business, government, non-profit or academic organization of high standing;

•	whether the candidate is accomplished in his or her respective field, with strong credentials and recognition; and/or

•	whether the candidate is well-regarded in the community.

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•	an annual retainer for Board membership of $40,000 paid in cash or restricted stock units ("RSUs") at the choice of the director;

•	an annual retainer of $50,000 for chairing the Board of Directors, paid in cash or RSUs at the election of the Chairman of the Board;

•	an annual cash retainer of $20,000 for chairing the Audit Committee and $15,000 for chairing the Compensation Committee, the Corporate Governance and Nominating Committee, or the Product and Technology Committee;

•	an annual cash retainer of $10,000 for each Audit Committee member and $7,500 for each Compensation Committee member, each Corporate Governance and Nominating Committee member, and each Product and Technology Committee member;

•	the members and chairmen of any new committees that may be formed will be paid the same amounts as the members and chairmen of the Compensation Committee, the Corporate Governance and Nominating Committee;

•	$1,250 cash payment for each Board of Directors meeting, in excess of twelve per year, attended in person or by telephone lasting more than one hour;

•	$1,250 cash payment for each meeting of a committee, in excess of twelve per year, attended in person or by telephone lasting more than one hour; and

•	an annual grant of equity with a fair market value as of the date of grant of $110,000 comprised of:

•	50% stock options vesting quarterly over one year conditioned upon the director's continued service on our Board of Directors during that year; and

•	50% RSUs, which are fully vested upon issuance and will be paid out in shares of our common stock when the recipient director terminates his or her service on our Board of Directors.

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(1)

Represents the aggregate grant date fair value for option awards and RSU awards granted in the applicable year, computed in accordance with Accounting Standards Codification Topic 718, Compensation—Stock Compensation ("ASC 718"). Information about the assumptions used to value these awards can be found in Note 10 to the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015.

(2)	Represents options to acquire 9,571 shares of common stock granted on May 20, 2014 at an exercise price of $9.42 per share, which was the closing price per share of our common stock on the NYSE on the grant date. These options vest in four equal quarterly installments from the date of grant.

(3)	Represents 5,838 RSUs granted on May 20, 2014. The RSUs were fully vested upon grant and will be paid out in shares of our common stock when the recipient director terminates his or her service on our Board of Directors.

(4)	Messrs. Clough and Coleman resigned from our Board effective as of May 19, 2014 and, therefore, only received cash compensation for a partial year of service and no equity grant.

(5)	Cash payments were made directly to LF Enterprises LLC.

(6)	Mr. Hass was a non-employee director in 2014. Effective April 1, 2015, the Board of Directors appointed him as Interim President and Chief Executive Officer, at which time he became an employee of the Company.

(7)	Represents 11,146 RSUs granted on May 20, 2014. The RSUs were fully vested upon grant and will be paid out in shares of our common stock when Mr. Gross terminates his service on our Board of Directors.

(8)	Represents options to acquire 5,031 shares of common stock granted on November 18, 2014 at an exercise price of $9.04 per share, which was the closing price per share of our common stock on the NYSE on the grant date. These options vest in four equal quarterly installments from the date of grant.

(9)	Represents 3,067 RSUs granted on November 18, 2014. The RSUs were fully vested upon grant and will be paid out in shares of our common stock when Mr. Hass terminates his service on our Board of Directors.

(10)	Represents options to acquire 3,509 shares of common stock granted on December 18, 2014 at an exercise price of $10.84 per share, which was the closing price per share of our common stock on the NYSE on the grant date. These options vest in four equal quarterly installments from the date of grant.

(11)	Represents 2,140 RSUs granted on December 18, 2014. The RSUs were fully vested upon grant and will be paid out in shares of our common stock when the recipient director terminates his or her service on our Board of Directors.

(12)	Represents options to acquire 6,783 shares of common stock granted on October 6, 2014 at an exercise price of $8.23 per share, which was the closing price per share of our common stock on the NYSE on the grant date. These options vest in four equal quarterly installments from the date of grant.

(13)	Represents 4,137 RSUs granted on October 6, 2014. The RSUs were fully vested upon grant and will be paid out in shares of our common stock when the recipient director terminates his or her service on our Board of Directors.

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(1)	Mr. Hass was a non-employee director in 2014. Effective April 1, 2015, the Board of Directors appointed him as Interim President and Chief Executive Officer, at which time he became an employee of the Company.

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•	all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

•	the nominee's written consent to being named in the proxy statement as a nominee and to serving as a director if elected;

•

a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among the nominating stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert with them, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert with him, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K of the Exchange Act if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any of their respective affiliates or associates or persons acting in concert with any such person, were the "registrant" for purposes of such rule and the nominee were a director or executive officer of such registrant;

•	a completed questionnaire with respect to the background and qualification of the nominee and the background of any other person or entity on whose behalf the nomination is being made, the form of which questionnaire will be provided by our General Counsel and Secretary upon written request; and

•

a written representation and agreement, in the form provided by our General Counsel and Secretary upon written request, that the nominee is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the nominee, if elected as a director, will act or vote on any issue or question that has not been disclosed to us or that could limit or interfere with the nominee's ability to comply, if elected as a director, with the nominee's fiduciary duties under applicable law, is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than us with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as our director that has not been disclosed to us, and in the nominee's individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as our director, and will comply with all of our applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock trading policies and guidelines.

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•	a brief description of the business desired to be brought before the annual meeting;

•	the reasons for conducting such business at the annual meeting;

•	the text of the proposal or business, including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend our bylaws, the language of the proposed amendment;

•	any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made;

•	a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or persons, including their names, in connection with the proposal of such business by such stockholder; and

•	as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:

•	the name and address of such stockholder, as they appear on our books, and of such beneficial owner, if any;

•	the class or series and number of shares of our capital stock that are, directly or indirectly, owned beneficially and of record by such stockholder and by such beneficial owner;

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any option, warrant, convertible security, stock appreciation right ("SAR"), or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of our capital stock, whether or not such instrument or right shall be subject to settlement in the underlying class or series of our capital stock or otherwise directly or indirectly owned beneficially by such stockholder and by such beneficial owner, if any;

•	any other direct or indirect opportunity held or owned beneficially by such stockholder and by such beneficial owner, if any, to profit or share in any profit derived from any increase or decrease in the value of our shares;

•	any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder or beneficial owner, if any, has a right to vote any shares of any of our securities;

•	any short interest in any of our securities of the stockholder or beneficial owner;

•	any right to dividends on our shares of capital stock owned beneficially by such stockholder or such beneficial owner, if any, which right is separated or separable from the underlying shares;

•	any proportionate interest in shares of our capital stock or derivative instrument held, directly or indirectly, by a general or limited partnership in which such stockholder or such beneficial owner, if any, is a general partner or with respect to which such stockholder or such beneficial owner, if any, directly or indirectly, beneficially owns an interest in a general partner; and

•	any performance-related fees, other than an asset-based fee, to which such stockholder or such beneficial owner, if any, is entitled to based on any increase or decrease in the value of our shares or derivative instruments, if any, in each case with respect to the information required to be included in the notice.

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•	each of our named executive officers (as defined in "Compensation Discussion and Analysis");

•	each director and nominee;

•	all current directors, nominees and executive officers as a group; and

•	each stockholder beneficially owning more than 5% of our common stock.

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(1)	Includes 298,769 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015. Also includes 103,069 shares of restricted stock for which forfeiture restrictions are scheduled to lapse when Mr. Swad's employment with the Company ends on May 1, 2015. Mr. Swad served as our President and Chief Executive Officer until April 1, 2015.

(2)	Includes 54,880 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015. Also includes 38,796 shares of restricted stock that continue to be subject to forfeiture restrictions.

(3)	Mr. Ludwig served as our Senior Vice President, Consumer until his employment with the Company ended on April 1, 2015. As of that date, all of his unvested restricted common stock and unvested stock options were forfeited. Includes 12,241 shares of our common stock subject to vested options which were exercisable within 60 days of April 1, 2015.

(4)	Mr. Na's last day of employment with the Company was November 17, 2014. As of that date all of his shares of restricted common stock and options were forfeited.

(5)	Includes 64,060 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015. Also includes 29,567 shares of restricted stock that continue to be subject to forfeiture restrictions.

(6)	Includes 17,476 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015 and 10,816 shares of common stock underlying vested RSUs that will be issued to Mr. Bankoff upon the termination of his service on the Board.

(7)	Includes 60,340 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015, and 22,675 shares of common stock underlying vested RSUs that will be issued to Mr. Franklin upon the termination of his service on the Board.

(8)

Includes 62,470 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015 and 36,896 shares of common stock underlying vested RSUs that will be issued to Mr. Gross upon the termination of his service on the Board. Also includes 73,501 shares owned by Mr. Gross' spouse and 32,368 shares owned by the Stephanie Gross Trust as to which Mr. Gross disclaims beneficial ownership.

(9)

Includes 76,515 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015 and 3,067 shares of common stock underlying vested RSUs that will be issued to Mr. Hass upon the termination of his service on the Board. Also includes 45,600 shares of restricted stock that continue to be subject to forfeiture restrictions. Mr. Hass became our Interim President and Chief Executive Officer as of April 1, 2015.

(10)	Includes 23,976 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015 and 14,613 shares of common stock underlying vested RSUs that will be issued to Ms. Kondracke upon the termination of her service on the Board.

(11)

Includes 1,080 shares of common stock underlying vested RSUs (the "Nierenberg RSUs") that will be issued to Mr. Nierenberg upon the termination of his service on the Board. Also includes shares of common stock owned by The D3 Family Fund, L.P. ("Family Fund"), The D3 Family Bulldog Fund, L.P. ("Bulldog Fund"), and The DIII Offshore Fund, L.P. ("Offshore Fund"), for which the Nierenberg Investment Management Company, Inc. ("NIMCO") and the Nierenberg Investment Management Offshore, Inc. ("NIMO") serve as general partners. Mr. Nierenberg serves as the President of NIMCO and NIMO. Under the partnership agreements governing the funds, all compensation payable to Mr. Nierenberg for his Board service, including the Nierenberg RSUs, is required to be assigned to the funds. Accordingly, the Nierenberg

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(12)	Includes 878 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015 and 2,140 shares of common stock underlying vested RSUs that will be issued to Ms. Tsay upon the termination of her service on the Board.

(13)	Includes 29,970 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015 and 18,000 shares of common stock underlying vested RSUs that will be issued to Ms. Witt upon the termination of her service on the Board.

(14)	Includes 3,391 shares of our common stock subject to options which are exercisable within 60 days of April 21, 2015 and 4,137 shares of common stock underlying vested RSUs that will be issued to Mr. Yankovich upon the termination of his service on the Board.

(15)	Ownership information is based on the Schedule 13G/A filed with the SEC on February 13, 2015 by Ariel Investments, LLC, whose address is 200 E. Randolph Drive, Suite 2900, Chicago, Illinois 60601.

(16)

Ownership information is based on the Form 13D/A filed with the SEC on March 6, 2015 by Osmium Partners, LLC, Osmium Capital, LP, Osmium Capital II, LP, Osmium Spartan, LP, Osmium Diamond, LP, Osmium Special Opportunity Fund, LP and John H. Lewis, whose address is Osmium Partners, LLC, 300 Drakes Landing Road, Suite 172, Greenbrae, California 94904, Attention: John H. Lewis. For voting arrangements between the Company and Osmium parties, see “Corporate Governance - Nomination and Standstill Agreement and Appointment of A. John Hass III to the Board of Directors.”

(17)	Ownership information is based on Schedule 13G filed with the SEC on February 9, 2015 by Roumell Asset Management, LLC and James C. Roumell, whose address is 2 Wisconsin Circle, Suite 660, Chevy Chase, MD 20815.

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(1)	Mr. Ludwig held the position of Senior Vice President, Consumer from January 1, 2014 until his employment with the Company ended on April 1, 2015. Before January 1, 2014, Mr. Ludwig held the position of Vice President, North America Consumer.

(2)	Mr. Na was an employee of the Company from June 2, 2014 until his employment with the Company ended effective November 17, 2014.

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•	structuring our executive bonus plan (the "2014 Executive Bonus Plan") such that between 70% and 80% of the award target is based on financial performance metrics;

•	maintaining distinct bonus metrics for our line of business executives, which include Mr. Ludwig and Ms. Verses ("Line of Business Executives"), that are directly aligned with their scope of responsibility and reflect a commitment to compensate them based on their contributions to the Company's overall financial performance;

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executing against the 2013 Long Term Incentive Program (the "2013 LTIP"), which provides members of senior management the opportunity to earn cash and performance stock awards based on achievement relative to two-year cumulative corporate metrics for Bookings, Operating EBITDA, and Percentage Global Digital Sales, as defined below in “Compensation Discussion and Analysis – 2014 Compensation – 2013 Long Term Incentive

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committing to the Company's Policy on Recoupment of Performance Based Compensation ("Clawback Policy") that, in the event of a restatement of the Company's financial results other than a restatement caused by a change in applicable accounting principle, allows the Company to review the circumstances that caused the restatement and clawback certain performance-based incentive compensation wrongly awarded to an executive officer as a result of misconduct.

•	Clawback Policy. In 2014, the Compensation Committee implemented a Clawback Policy, described above, applicable to certain performance-based incentive compensation granted on or after January 1, 2014.

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No Tax Gross-ups in Employment Agreements.  Our existing employment agreements have been amended to eliminate previously existing excise tax gross-up provisions related to change of control payments subject to Section 280G and Section 4999 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). We do not maintain any contract or agreement with any NEO that obligates us to make any kind of tax gross-up payment.

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•	No Excessive Severance Payments.  Our termination arrangements with our NEOs do not call for excessive severance payments in cases of their termination of employment.

•	No Guaranteed Performance Based Bonuses.  We believe that performance-based bonuses should reflect actual performance of the Company and/or individual. Bonus guarantees undercut that notion, therefore, we do not guarantee performance-based bonus payments to our NEOs.

•	Double Trigger Vesting for Equity Awards.  Starting with equity awards granted in 2012, we implemented a policy that our equity awards would no longer vest upon consummation of a change in control, unless there is also a termination of service other than for cause or a voluntary resignation for good reason.

•	No Repricing or Replacing Outstanding Stock Options.  Repricing is not permitted under the Rosetta Stone Inc. Amended and Restated 2009 Omnibus Incentive Plan, as amended (the "2009 Plan"), without stockholder approval. We did not reprice or replace any of our outstanding stock options during 2014, nor any year prior to 2014.

•	Limited Use of Perquisites.  We do not believe in granting perquisites to our NEOs that are excessive in value or substantially different from the perquisites available to all our employees generally.

•	No Hedging or Pledging.  We have adopted a policy prohibiting the hedging and pledging of Company securities by any of our employees.

•	Stock Ownership Guidelines. We encourage our executives to hold a significant equity interest in the Company. Effective January 1, 2013, our stock ownership guidelines are as follows:

◦	Chief Executive Officer - equal in value to five times (5x) the base salary within five years of his or her appointment; and

◦	Senior Vice Presidents and above - equal in value to twice (2x) the base salary within five years of his or her appointment.

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(1)	GDFV is defined as the grant date fair value.

(2)	GDFV for Options was calculated based on the Black Scholes value on the date of grant.

(3)	GDFV for 2013 LTIP share awards was calculated based on the 2013 LTIP target number of Restricted Shares using the stock price at close on December 31, 2014 of $9.76. The 2013 LTIP target number of Restricted Shares can be found below in the section titled "2014 Compensation Decisions".

(4)	LTIP Cash Award is the 2013 LTIP target cash payout as detailed below in the section titled "2014 Compensation Decisions".

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(1)	Concur Technologies, OpenTable, and Vocus will drop off our peer group in 2015 due to ownership changes. Those companies remained public and filed proxy statements for 2013; therefore, we were able to continue to keep them in our peer group for 2014.

(1)	Mr. Ludwig was granted a promotion from Vice President, North America Consumer to Senior Vice President, Consumer, receiving a base salary increase to $275,000 effective January 1, 2014. On July 1, 2014, he received a base salary increase to $283,000 during the 2014 merit review process.

(2)	Mr. Na was hired on June 2, 2014 and his employment with the Company ended effective November 17, 2014.

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•	Mr. Swad's individual performance and contributions in 2013, and the Committee's desire to increase his variable performance based compensation;

•	The Committee's desire to better align Mr. Ludwig's salary with peer medians based on his expanded role and responsibilities following his promotion to Senior Vice President, Consumer effective January 1, 2014; and

•	Messrs. Pierno's and Ludwig's and Ms. Verses' individual performance and contributions in 2013, and the Committee's desire to more closely align his or her salary with peer medians.

(1)	For Messrs. Swad, Pierno and Na, the total annual cash incentive opportunity was based 70% on financial goals. For Mr. Ludwig and Ms. Verses, the total annual cash incentive opportunity was based 80% on financial goals, which included both corporate financial targets as well as their individual line of business metrics.

(2)	For Messrs. Swad, Pierno and Na, the total annual cash incentive opportunity was based 30% on non-financial strategic goals. For Mr. Ludwig and Ms. Verses, the total annual cash incentive opportunity was based 20% on non-financial strategic goals.

(3)	Mr. Swad's 2014 annualized base salary and bonus opportunity represent his salary and bonus opportunity as of December 31, 2014. Mr. Swad's bonus target increased from 100% to 110% of base salary, effective January 1, 2014.

(4)	Mr. Pierno's 2014 annualized base salary and bonus opportunity represent his salary and bonus opportunity as of December 31, 2014. Mr. Pierno's target bonus percentage was increased from 60% to 75% of base salary by the Compensation Committee in order to move his bonus target closer to peer medians, with an effective date of January 1, 2014.

(5)

Mr. Ludwig began participating in the 2014 Executive Bonus Plan mid-year. As such, his bonus opportunity represented in the chart above is annualized and based on his salary as of December 31, 2014. Mr. Ludwig was a participant in the Employee Incentive Plan for Consumer Sales ("EIPCS") from January 1, 2014 to June 30, 2014 at which time his base salary was $275,000. He became a participant in the 2014 Executive Bonus Plan as of July 1, 2014 and at which time his base salary increased to $283,000. His actual 2014 bonus targets, prorated based on his participation in each plan during 2014, are described below.

(6)	Mr. Na was hired on June 2, 2014, and his employment with the Company ended effective November 17, 2014. As such, his bonus opportunity represented in the chart above is annualized. His actual 2014 bonus target was prorated based on eligible time in the plan, in the amount of $89,753 (46% of the annualized target).

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(7)	Ms. Verses' 2014 annualized base salary and bonus opportunity represent her salary and bonus opportunity as of December 31, 2014. No changes were made to her annual target bonus percentage from 2013 to 2014.

•	33.33% on Global Enterprise & Education Cross Selling of approximately $28 million, of which we achieved 75%, for a funding payout of 25%, based on offering a product suite to our customers versus a single product, which opened the door to more customers and verticals; and

•	33.33% on Consumer Cross Selling of approximately $12 million, which we did not fully achieve, and the Compensation Committee therefore determined not to award a payout. While we successfully improved the functionality, navigation and number of products available to customers on our website we did not make our Consumer Cross Selling sales goal; and

•	33.33% on launch of Consumer kids literacy product(s) with bookings of approximately $3 million, of which we achieved 25% for a funding payout of 8.33%. Although we successfully launched Rosetta Stone® Kids Reading in November 2014, final year end sales results were below estimates primarily due to a later than scheduled launch date based on delays with product development.

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(1)	Mr. Swad did not receive a bonus payment under the 2014 Executive Bonus Plan as approved by the Compensation Committee.

(2)	Mr. Ludwig was a participant in the 2014 Executive Bonus Plan from July 1, 2014 to December 31, 2014, therefore his bonus payment was prorated based on his participation in the 2014 Executive Bonus Plan. He also received cash incentive awards for his participation in the 2014 EIPCS prior to July 1, 2014, totaling $75,616.

(3)	Mr. Na's employment with the Company ended effective November 17, 2014. His bonus payment was prorated based on the amount earned up until his last day of employment with the Company, in accordance with the terms of the 2014 Executive Bonus Plan.

(1)	Mr. Swad did not receive a bonus payment under the 2014 Executive Bonus Plan as approved by the Compensation Committee.

(2)	Mr. Ludwig was a participant in the 2014 Executive Bonus Plan from July 1, 2014 to December 31, 2014, therefore his bonus payment was prorated based on his participation in the 2014 Executive Bonus Plan.

(3)	Mr. Na's employment with the Company ended effective November 17, 2014. His bonus payment was prorated based on the amount earned up until his last day of employment with the Company, in accordance with the terms of the 2014 Executive Bonus Plan.

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•	Minimum: If the minimum threshold of each performance goal for the program period was achieved, then 50% of the targeted amount under the executive’s award for both performance stock awards and cash vested and became payable.

•	Target: If the target threshold of each Performance Goal for the program period was achieved, then 100% of the targeted amount under the executive’s award for both performance stock awards and cash vested and became payable.

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•	Maximum: If the maximum threshold for each Performance Goal for the program period was achieved, then 200% of the targeted amount under the executive’s award for both performance stock awards and cash vested and became payable.

•	CEO: Five times (5x) base salary; and

•	Senior Vice Presidents and above levels: Two times (2x) base salary

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•	long term incentive compensation value that is driven entirely by increases in stock price; and

•	low compensation levels exacerbated by performance-driven awards not paying out; including both annual bonus and long term incentive compensation.

•	the Compensation Committee's ability to exercise discretion to decrease incentive award payouts;

•	the use of an array of performance metrics across compensation programs (that is, bonuses are based on financial goals, non-financial strategic metrics and individual performance goals; 2013 LTIP awards are based on both Company operating performance and stock price; and new hire and annual equity incentives are driven by stock price gains);

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•	the fact that many of our executives hold significant vested equity stakes in the Company; and

•	the fact that the mix of compensation balances a short-term and long-term focus.

(1)

Represents the aggregate grant date fair value for restricted stock awards and stock option awards granted in the applicable year, computed in accordance with ASC 718. Information about the assumptions used to value these awards can be found in Stock-Based Compensation under Critical Accounting Policies and Estimates in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015.

(2)	For Mr. Swad, represents a cash award under the 2013 LTIP of $299,970 paid on or before February 15, 2015.

(3)	For Mr. Swad, represents insurance premiums the Company paid on his behalf under our group term life insurance policy and our health and welfare policies in the amount of $12,754 during the specified year, 401(k) matching contributions in the amount of $12,200 and other compensation in the amount of $4,882.

(4)	For Mr. Swad, represents insurance premiums the Company paid on behalf of the executive under our group term life insurance policy and our health and welfare policies in the amount of $11,447 during the specified year, 401(k) matching contributions in the amount of $10,200 and other compensation in the amount of $7,869.

(5)

In February 2012, Mr. Swad was appointed from the position of Chief Financial Officer to the positions of President and Chief Executive Officer. The amount listed in the 2012 Salary column above for Mr. Swad includes both (i) the prorated base salary earned by Mr. Swad as Chief Financial Officer (at his annualized base salary of $400,000) plus (ii) his prorated base salary earned as President and Chief Executive Officer, at an annual rate of $500,000.

(6)

In January 2012, the Compensation Committee granted special retention bonuses consisting of cash and equity awards to selected key members of our management team, including Mr. Swad and Ms. Verses, in order to retain key executives during the transformation of our business model, keeping them focused on our business objectives during the search for a successor to serve as our President and Chief Executive Officer. The retention cash awards were paid in single payments on December 31, 2012 contingent upon the applicable NEO remaining employed until December 31, 2012, or the earlier termination of his or her employment by us without cause.

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(7)	For Mr. Swad, represents insurance premiums paid by the Company on behalf of the employee under our group term life insurance policy and our health and welfare policies in the amount of $11,968, 401(k) matching contributions in the amount of $6,909 provided on behalf of Mr. Swad during the specified year and other compensation in the amount of $532.

(8)	For Mr. Pierno, represents a cash award under the 2013 LTIP of $63,994 paid on or before February 15, 2015 and a cash bonus in the amount of $130,953 under the 2014 Executive Bonus Plan.

(9)	For Mr. Pierno, represents insurance premiums the Company paid on his behalf under our group term life insurance policy and our health and welfare policies in the amount of $12,754 during the specified year and other compensation in the amount of $495.

(10)	For Mr. Pierno, represents insurance premiums the Company paid on his behalf under our group term life insurance policy and our health and welfare policies in the amount of $11,447 during the specified year and other compensation in the amount of $635.

(11)	Mr. Pierno joined the Company effective May 2012. His annualized base salary for 2012 was $320,000.

(12)	For Mr. Pierno, represents insurance premiums paid by the Company on behalf of the executive under our group term life insurance policy and our health & welfare policies in the amount of $7,979 during the specified year.

(13)	Mr. Ludwig became an Executive Officer in August 2014. Accordingly, prior year compensation information is not included in the Summary Compensation Table.

(14)	For Mr. Ludwig, represents a cash award under the 2013 LTIP of $42,396 paid on or before February 15, 2015; a cash bonus in the amount of $57,800 under the 2014 Executive Bonus Plan; and a cash incentives in the amount of $75,616 under the 2014 EIPCS.

(15)	For Mr. Ludwig, represents insurance premiums the Company paid on his behalf under our group term life insurance policy and our health and welfare policies in the amount of $12,332 during the specified year and other compensation in the amount of $4,838.

(16)	Mr. Na became an Executive Officer in August 2014. Accordingly, prior year compensation information is not included in the Summary Compensation Table.

(17)	Mr. Na joined the Company effective June 2, 2014. His annualized base salary for 2014 was $325,000.

(18)	Mr. Na received a signing bonus in the amount of $75,000 based on his hire date of June 2, 2014.

(19)	For Mr. Na, represents a prorated cash award under the 2014 Executive Bonus Plan, based on his eligible time in the Plan determined by his hire date of June 2, 2014 through his termination on November 17, 2014.

(20)

For Mr. Na, represents severance payments upon termination consisting of: 12 months of base salary in the amount of $325,000; 12 months of COBRA health benefit premiums in the amount of $10,341; 12 months of outplacement services in the amount of $8,600; 12 months of basic life insurance and AD&D premiums in the amount of $313; and other severance compensation in the amount of $3,445. Mr. Na also received insurance premiums the Company paid on his behalf under our group term life insurance policy and our health and welfare policies in the amount of $2,466 during the specified year.

(21)	For Ms. Verses represents a cash award under the 2013 LTIP of $59,994 paid on or before February 15, 2015 and a cash bonus in the amount of $181,019 under the 2014 Executive Bonus Plan.

(22)	For Ms. Verses, represents insurance premiums the Company paid on her behalf under our group term life insurance policy and our health and welfare policies in the amount of $2,051 during the specified year, 401(k) matching contributions in the amount of $12,200 and other compensation in the amount of $4,456.

(23)	For Ms.Verses, represents insurance premiums paid by the Company on behalf of the executive under our group term life insurance policy in the amount of $339 during the specified year, 401(k) matching contributions in the amount of $10,200 and other compensation in the amount of $7,632.

(24)	For Ms. Verses, represents insurance premiums the Company paid on her behalf under our group term life insurance policy and our health and welfare policies in the amount of $860 during the specified year; 401(k) matching contributions in the amount of $9,744 and other compensation in the amount of $521.

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(1)

Represents potential payouts under the 2014 Executive Bonus Plan, with the exception of payouts to our Line of Business Executives, 70% of which consisted of a financial component, and 30% of which consisted of a non-financial strategic goals component, as further described above under "Annual Cash Incentive Compensation." For all NEOs except Line of Business Executives, the financial portion of the bonus was based on achievement of the corporate financial goals. There were three components of the financial portion of the bonus: (i) achievement of the 2014 target Bookings (weighted at 40%); (ii) achievement of the 2014 target Adjusted EBITDA goal (weighted at 40%); and (iii) achievement of the 2014 target Percentage Global DTC Web Sales (weighted at 20%). For Mr. Ludwig, the financial portion of the bonus was based on achievement of Bookings, Adjusted EBITDA, target Percentage Global DTC Web Sales, and Cross Selling for his respective line of business, Global Consumer, and the corporate financial goals for the overall Company. For Ms. Verses, the financial portion of the bonus was based on achievement of target Bookings, Adjusted EBITDA, and E&E Cross Selling for her respective line of business, Global Enterprise & Education, and the corporate financial goals for the overall Company.

(2)	The 2013 LTIP concluded as of December 31, 2014, and all earned and approved awards have been granted.

(3)

With respect to the bonus plan in footnote (1), all NEOs' amounts in this column, under "Annual Cash," represent the lowest possible bonus payout if the Company were to achieve the threshold of financial targets, except for Mr. Ludwig and Ms. Verses, where this column represents the lowest payout if the Company and their respective line of business met the financial thresholds. As such, each NEO therefore earned 80% of the portion of his or her target bonus that was based on the financial targets (Company and, if applicable, line of business) assuming no payout in respect of the non-financial targets were earned and approved. There is no guarantee of payment under this plan, therefore zero is the absolute minimum payout under the plan parameters.

(4)

With respect to all NEOs, except Mr. Ludwig and Ms. Verses, amounts in this column, under "Annual Cash," represent the highest possible bonus payout if the Company were to achieve or exceed the maximum target or more of each of the financial targets described in footnote (1), with a maximum payout of 150% for each metric. For Ms. Verses this number represents the maximum payout if the Company and the respective line of business achieved or exceeded the maximum financial targets, with a payout of 150% for Company metrics, consistent with other NEOs, and 250% for the maximum payout of line of business metrics. For Mr. Ludwig the number represents the sum of the maximum payouts for his time in both the 2014 Executive Bonus Plan and the 2014 Employee Incentive Plan for Consumer Sales ("EIPCS"). For Mr. Ludwig's eligibility in the 2014 Executive Bonus Plan the calculation represents the maximum payout if the Company and the respective line of business achieved or exceeded the maximum financial targets, with a payout of 150% for Company metrics, consistent with other NEOs, and 250% for the maximum payout of line of business metrics. The calculation assumes maximum payout of 150% for all non-financial metrics for all NEOs. For all NEOs if achievement of one financial metric exceeded the threshold, and the other did not, the bonus would be funded for the metric that was achieved. Plan funding for the non-financial strategic targets was based on the attainment percentage of the

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(5)

For all NEOs, represents stock options and restricted stock awards granted to each NEO that vest over a period of time based on the individual's service to the Company. Awards granted on February 14, 2014 represent annual awards. The amount of each annual award was discretionary and intended to put each NEO's equity awards and total equity ownership at the median of their respective peers based on the third party compensation study conducted by Exequity and to give each of our NEOs significant equity ownership that was subject to vesting to provide forward retention value. Due to operational constraints (primarily share dilution concerns), we have been unable to provide equity grants equal to the median compared to our peer base. Our Compensation Committee intends to make grants of stock options and restricted stock subject to vesting or other forms of equity based awards to our executives as part of its annual review of our executives' compensation as described under the caption "Compensation Discussion and Analysis—Elements of our Executive Compensation Program—Equity Based Compensation" in order to continue to align their interests with those of our stockholders. Our Compensation Committee has adopted a formal stock ownership guideline policy for our executives. Our Compensation Committee considers the liquidity of the executives' equity ownership as an important part of the executives' perception of the value of the equity award as compensation.

(6)

Mr. Ludwig was a participant in the Employee Incentive Plan for Consumer Sales ("EIPCS") from January 1, 2014 to June 30, 2014. Mr. Ludwig's pro-rated target as a participant on the EIPCS plan from January 1, 2014 to June 30, 2014 is $103,125. The threshold payout for Mr. Ludwig on the EIPCS plan represents the lowest payout if the North America Consumer Sales line of business were to achieve the threshold of financial targets. As such, Mr. Ludwig would earn 75% of the portion of his target bonus that was based on the financial targets, assuming no payout in respect to the individual goal target, with a threshold payout of $61,875. This maximum payout for Mr. Ludwig on the EIPCS plan represents the highest possible payout if the North America Consumer line of business were to achieve or exceed the maximum target or more of the financial goals. As such, Mr. Ludwig would earn a maximum payout of 500% of the portion of his target bonus that was based on the financial targets and 150% maximum payout on the individual goals portion of his target bonus, with a maximum payout of $443,438.

(7)	Mr. Na was hired on June 2, 2014, and his last day of employment with the Company was November 17, 2014. As such, the annual cash threshold, target and maximum payout, represented in the chart above is prorated based on eligible time in the plan (46% of the annualized target).

(8)

Mr. Na received a new hire equity grant on June 2, 2014 in the form of Restricted Stock Awards ("RSAs") and option awards as approved by the Compensation Committee. Mr. Na's employment with the Company ended effective November 17, 2014. Therefore, the forfeiture restrictions on his RSAs did not lapse and such awards were forfeited pursuant to the terms of his stock award agreement. Mr. Na was not eligible for the 2014 Annual Equity Grant process due to his hire date in 2014.

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(1)	Options vested as to one-fourth of the total number of shares on February 22, 2013 and thereafter vest at the rate of one-quarter per annum.

(2)	Mr. Swad received 48,500 shares of restricted stock under the 2009 Plan on February 22, 2012 that vest in equal installments over four years.

(3)	Options vested as to one-fourth of the total number of shares on February 21, 2014 and thereafter vest at the rate of one-quarter per annum.

(4)	Mr. Swad received 13,633 shares of restricted stock under the 2009 Plan on February 21, 2013 that vest in equal annual installments over four years.

(5)	Options vested as to one-fourth of the total number of shares on February 14, 2015 and thereafter vest at the rate of one-quarter per annum.

(6)	Mr. Swad received 42,642 shares of restricted stock under the 2009 Plan on February 14, 2014 that vest equal annual installments over four years.

(7)	Options vested as to one-fourth of the total number of shares on May 4, 2013 and thereafter vest at the rate of one-quarter per annum.

(8)	Mr. Pierno received 15,000 shares of restricted stock under the 2009 Plan on May 4, 2012 that vest in equal annual installments over four years.

(9)	Mr. Pierno received 3,208 shares of restricted stock under the 2009 Plan on February 21, 2013 that vest in equal annual installments over four years.

(10)	Mr. Pierno received 15,050 shares of restricted stock under the 2009 Plan on February 14, 2014 that vest in equal annual installments over four years.

(11)	Options vested as to one-fourth of the total number of shares on May 26, 2012 and thereafter vest at the rate of one-quarter per annum.

(12)	Mr. Ludwig received 944 shares of restricted stock under the 2009 Plan on May 26, 2011 that vest in equal annual installments over four years.

(13)	Options vested as to one-fourth the total number of shares on February 23, 2013 and thereafter vest at the rate of one-quarter per annum.

(14)	Mr. Ludwig received 1,903 shares of restricted stock under the 2009 Plan on February 23, 2012 that vest in equal annual installments over four years.

(15)	Mr. Ludwig received 1,804 shares of restricted stock under the 2009 Plan on February 21, 2013 that vest in equal annual installments over four years.

(16)	Mr. Ludwig received 6,271 shares of restricted stock under the 2009 Plan on February 14, 2014 that vest in equal annual installments over four years.

(17)	Mr. Na's last day of employment with the Company was November 17, 2014 therefore his Options under the 2009 Plan did not vest and were canceled as of the date of his termination.

(18)	Mr. Na's last day of employment with the Company was November 17, 2014 therefore his restricted stock under the 2009 Plan did not vest and were canceled as of the date of his termination.

(19)	Options vested as to one-fourth of the total number of shares on October 5, 2012 and thereafter vest at the rate of one-quarter per annum.

(20)	Ms. Verses received 19,194 shares of restricted stock under the 2009 Plan on October 5, 2011 that vest in equal annual installments over four years.

(21)	Ms. Verses received 1,218 shares of restricted stock under the 2009 Plan on February 23, 2012 that vest in equal annual installments over four years.

(22)	Ms. Verses received 3,208 shares of restricted stock under the 2009 Plan on February 21, 2013 that vest in equal annual installments over four years.

(23)	Ms. Verses received 10,033 shares of restricted stock under the 2009 Plan on February 14, 2014 that vest in equal annual installments over four years.

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(1)	The value realized on exercise is determined by computing the difference between the stock price at the time the trade is executed on the date of exercise and the strike price of the options. This amount is multiplied by the number of stock options exercised.

(2)	The dollar amount in this column represents the number of shares vested multiplied by the closing price of the Company's stock on the date of vesting, and does not necessarily represent the cash value the NEOs realized in connection with their stock award agreement.

(3)	Pursuant to company instructions, Mr. Swad sold 12,048 shares to cover taxes associated with the restricted stock vesting and received 19,821 shares on January 1, 2014.

(4)	Pursuant to company instructions, Mr. Swad sold 12,822 shares to cover taxes associated with the restricted stock vesting and received 22,589 shares on January 1, 2014.

(5)	Pursuant to company instructions, Mr. Swad sold 1,697 shares to cover taxes associated with the restricted stock vesting and received 1,712 shares on February 21, 2014.

(6)	Pursuant to company instructions, Mr. Swad sold 4,708 shares to cover taxes associated with the restricted stock vesting and received 7,417 shares on February 22, 2014.

(7)	Pursuant to company instructions, Mr. Pierno sold 336 shares to cover taxes associated with the restricted stock vesting and received 466 shares on February 21, 2014.

(8)	Pursuant to company instructions, Mr. Pierno sold 1,269 shares to cover taxes associated with the restricted stock vesting and received 2,481 shares on May 2, 2014.

(9)	Pursuant to company instructions, Mr. Ludwig sold 1,127 shares to cover taxes associated with the restricted stock vesting and received 1,706 shares on January 1, 2014.

(10)	Pursuant to company instructions, Mr. Ludwig sold 190 shares to cover taxes associated with the restricted stock vesting and received 261 shares on February 21, 2014.

(11)	Pursuant to company instructions, Mr. Ludwig sold 203 shares to cover taxes associated with the restricted stock vesting and received 273 shares on February 23, 2014.

(12)	Pursuant to company instructions, Mr. Ludwig sold 81 shares to cover taxes associated with the restricted stock vesting and received 155 shares on May 26, 2014.

(13)	Pursuant to company instructions, Mr. Ludwig sold 174 shares to cover taxes associated with the restricted stock vesting and received 391 shares on October 15, 2014.

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(14)	Mr. Na's employment with the Company ended effective November 17, 2014. Therefore, the forfeiture restrictions on his restricted stock awards did not lapse and such awards were forfeited pursuant to the terms of his stock award agreement.

(15)	Pursuant to company instructions, Ms. Verses sold 705 shares to cover taxes associated with the restricted stock vesting and received 1,065 shares on January 1, 2014.

(16)	Pursuant to company instructions, Ms. Verses sold 336 shares to cover taxes associated with the restricted stock vesting and received 466 shares on February 21, 2014.

(17)	Pursuant to company instructions, Ms. Verses sold 110 shares to cover taxes associated with the restricted stock vesting and received 195 shares on February 23, 2014.

(18)	Pursuant to company instructions, Ms. Verses sold 1,626 shares to cover taxes associated with the restricted stock vesting and received 3,172 shares on October 5, 2014.

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(1)	Represents benefits payable upon the NEOs' termination by the Company without cause or resignation for good reason as described in the preceding section, Employment Arrangements with Named Executive Officers, within one year following a change in control event.

(2)

Represents a severance payment equal to 18 months of Mr. Swad's base salary in the amount of $772,500; $30,951 in COBRA premium costs paid on his behalf for 18 months; a lump sum payment of $470 for 18 months of basic life insurance and AD&D premiums; and $5,750 in outplacement services. Mr. Swad did not receive a bonus payment under the 2014 Executive Bonus Plan as approved by the Compensation Committee.

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(3)	Represents acceleration of Mr. Swad's unvested restricted stock awards granted on (i) February 22, 2012 of 24,250 shares of our common stock, (ii) February 21, 2013 of 10,224 shares of our common stock and (iii) February 14, 2014 of 42,642 shares of our common stock, each of which will accelerate vesting upon a termination of Mr. Swad's employment without cause.

(4)

Represents unvested restricted shares detailed in (3) above, in addition to acceleration of unvested options to purchase 62,500 shares of our common stock, granted on February 22, 2012, with an exercise price of $8.76 per share, which would all accelerate vesting upon a change in control of our Company and a termination of his employment by the Company without cause or by Mr. Swad for good reason, as defined in the preceding section, Employment Arrangements with Named Executive Officers, within one year of the change in control event.

(5)	Mr. Swad was eligible for the 2013 LTIP award earned and approved for payout on or before February 15, 2015. The 2013 LTIP value in this chart represents the actual cash and equity award value as earned and approved, with the performance stock awards valued at the closing stock price of $9.32 on the date of grant, February 2, 2015.

(6)	Represents a severance payment equal to 12 months of Mr. Pierno's base salary in the amount of $340,000; $20,634 in COBRA premium costs paid on his behalf for 12 months; a lump sum payment of $313 for 12 months of basic life insurance and AD&D premiums; $5,750 in outplacement services; and $130,953 in bonus payment earned as of December 31, 2014.

(7)	Represents acceleration of Mr. Pierno's unvested restricted stock award granted on May 4, 2012 of 7,500 shares of our common stock, each of which will accelerate vesting upon a termination of Mr. Pierno's employment by the Company without cause or by Mr. Pierno for good reason.

(8)

Represents vesting acceleration set forth in (7) above plus Mr. Pierno's unvested restricted stock award of 2,406 shares of our common stock granted on February 21, 2013, and unvested restricted stock award of 15,050 shares of our common stock granted on February 14, 2014, that would accelerate vesting upon change in control of our company and a termination of Mr. Pierno's employment by the Company without cause or by Mr. Pierno for good reason, as defined above, within one year of the change in control event.

(9)	Mr. Pierno was eligible for the 2013 LTIP award earned and approved for payout on or before February 15, 2015. The 2013 LTIP value in this chart represents the actual cash and equity award value as earned and approved, with the performance stock awards valued at the closing stock price of $9.32 on the date of grant, February 2, 2015.

(10)	In connection with his termination without cause effective April 1, 2015, Mr. Ludwig received severance payments consistent with this table.

(11)

Represents a severance payment equal to 12 months of Mr. Ludwig's base salary in the amount of $283,000; $20,634 in COBRA premium costs paid on his behalf for 12 months; a lump sum payment of $295 for 12 months of basic life insurance and AD&D premiums; $5,750 in outplacement services; $57,800 in bonus payment earned as of December 31, 2014; and $8,701 in cash incentives for his participation in the EIPCS.

(12)

Represents vesting acceleration for unvested restricted stock award of 236 shares of our common stock granted on May 26, 2011, unvested restricted stock award of 952 shares of our common stock, granted on February 23, 2012, and unvested restricted stock award of 1,353 shares of our common stock granted on February 21, 2013, unvested restricted stock award of 6,271 shares of our common stock granted on February 14, 2014, plus unvested options to purchase 1,642 shares of our common stock with an exercise price of $8.95, which would accelerate vesting upon change in control of our company and a termination of Mr. Ludwig's employment by the Company without cause or by Mr. Ludwig for good reason, as defined above, within one year of the change in control event.

(13)	Mr. Ludwig was eligible for the 2013 LTIP award earned and approved for payout on or before February 15, 2015. The 2013 LTIP value in this chart represents the actual cash and equity award value as earned and approved, with the performance stock awards valued at the closing stock price of $9.32 on the date of grant, February 2, 2015.

(14)	In connection with his termination without cause effective November 17, 2014, Mr. Na received severance payments consistent with this table. All equity grants awarded during Mr. Na's tenure were canceled prior to December 31, 2014 based on his stock award agreement.

(15)

Represents a severance payment equal to 12 months of Ms. Verses' base salary in the amount of $340,000; a lump sum payment of $313 for 12 months of basic life insurance and AD&D premiums; $5,750 in outplacement services; and $181,019 in bonus payment earned as of December 31, 2014. Ms. Verses is not enrolled in our health and welfare benefits programs and therefore would not receive any COBRA continuation.

(16)	Represents acceleration of Ms. Verses' unvested restricted stock award of 4,798 shares of our common stock, granted on October 5, 2011, plus unvested restricted stock of 609 shares of our common stock, granted on February 23, 2012, which will accelerate vesting upon a termination of Ms. Verses' employment by the Company without cause or by Ms. Verses for good reason.

(17)

Represents vesting acceleration set forth in (17) above plus unvested options to purchase 1,576 shares of our common stock, granted on February 23, 2012, with an exercise price of $8.95 per share, plus Ms. Verses' unvested restricted stock of 2,406 shares of our common stock, granted on February 21, 2013, and unvested restricted stock of 10,033 shares of our common stock, granted on February 14, 2014, that would accelerate vesting upon change in control of our company and a termination of Ms. Verses' employment by the Company without cause or by Ms. Verses for good reason, as defined above, within one year of the change in control event.

(18)	Ms. Verses was eligible for the 2013 LTIP award earned and approved for payout on or before February 15, 2015. The 2013 LTIP value in this chart represents the actual cash and equity award value as earned and approved, with the performance stock awards valued at the closing stock price of $9.32 on the date of grant, February 2, 2015.

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•	Adds 1,200,000 shares to the 2009 Plan by increasing the maximum aggregate number of shares of common stock in respect of which awards may be granted under the 2009 Plan from 7,377,674 shares to 8,577,674 (of which approximately 2,732,880 shares would be available for grant if our stockholders approve this Amendment);

•	Increases the aggregate number of shares of our common stock with respect to which incentive stock options may be granted under the 2009 Plan to 8,577,674 shares; and

•	Increases how much Full Value Awards will count against the flexible share pool from a ratio of 1.47-to-1 to 1.75-to-1, Under the amended multiplier, an award of 100 shares of restricted stock, for example, would reduce the number of shares remaining available for issuance under the 2009 Plan by 175 shares.

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•	accelerate the time at which some or all of the awards then outstanding may be exercised so that such awards may be exercised in full for a limited period of time on or before a specified date, after which all such awards that remain unexercised shall terminate;

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•

require the mandatory surrender to our Company of some or all of the then outstanding awards as of a specified date, in which event the Committee will then cancel such awards and our Company will pay to each such holder an amount of cash per share equal to the excess, if any, of the per share price offered to stockholders of our Company in connection with such transaction over the exercise prices under such awards for such shares;

•	have some or all outstanding awards assumed or have a new award of a similar nature substituted for some or all of the then outstanding awards;

•

provide that the number and class or series of our shares of common stock covered by an award will be adjusted so that such award when exercised will then cover the number and class or series of our common stock or other securities or property to which the holder of such award would have been entitled pursuant to the terms of the agreement or plan relating to such transaction if the holder of such award had been the holder of record of the number of shares of our common stock then covered by such award; or

•	make such adjustments to awards then outstanding as the Committee deems appropriate to reflect such transaction.

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(1)

Awards granted under the 2009 Plan to our executive officers and employees are discretionary and are not subject to set benefits or amounts, and we have not approved any awards that are conditioned on stockholder approval of this Proposal No. 3. Accordingly, we cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to our executive officers or employees under the 2009 Plan.

(2)

Pursuant to our current non-employee director compensation policy, each of our then current non-employee directors will receive an annual equity grant with a fair market value as of the date of grant of $110,000, comprised of 50% stock options and 50% RSUs granted under the 2009 Plan. The number of shares subject to such awards granted under the 2009 Plan is determined on the basis of the fair market value of our common stock on the date of grant and, therefore, is not determinable at this time. Our then current non-employee directors also have the choice to elect their annual retainers in either cash or restricted stock units ("RSUs"), at the discretion of the director. Accordingly, we cannot currently determine the number of shares subject to awards that may be granted in the future to our directors under the 2009 Plan.

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(1)

As of February 27, 2015, the Company had 1,706,806 shares remaining available for grant under its equity compensation plans and the following equity awards were outstanding: 2,597,416 stock options, with a weighted average exercise price of $12.44 and a weighted average remaining term of 8 years, as well as 704,627 Full Value Awards, which consisted of 580,121 restricted stock awards and 124,506 RSUs.

(2)	Represents nonqualified stock options outstanding under the Rosetta Stone Inc. 2006 Stock Incentive Plan.

(3)	Represents the weighted-average exercise price of the outstanding nonqualified stock options, excluding the RSUs which can be exercised for no consideration.

(4)	In addition to our 2009 Plan, we maintain the Rosetta Stone Inc. 2006 Stock Incentive Plan, which was previously approved by our stockholders in 2006 prior to our initial public offering. No new awards will be made under the 2006 plan and awards that are forfeited will not be made available for future awards.

(5)	Represents nonqualified stock options outstanding under the Rosetta Stone Inc. Amended and Restated 2009 Omnibus Incentive Plan.

(6)	Represents RSU awards outstanding under the Amended and Restated 2009 Omnibus Incentive Plan.

(7)	Represents number of securities available for award under the Amended and Restated 2009 Omnibus Incentive Plan.

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(a)	the closing sale price of the Stock on that date, if the Stock is traded on that date, or

(b)	the closing sale price of the Stock on the last trading date immediately preceding that date, if the Stock is not traded on that date;

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