NOMINATION AND SUPPORT AGREEMENT

This Nomination and Support Agreement (this “Agreement”, dated November 18, 2014 (the “Effective Date”), is between John H. Lewis (“Lewis”), Osmium Partners, LLC (“Osmium Partners”), Osmium Capital, LP (“Fund I”), Osmium Capital II, LP (“Fund II”), Osmium Spartan, LP (“Fund III”), Osmium Diamond, LP (Fund IV”), and Osmium Special Opportunity Fund, LP (“Fund V”), and Rosetta Stone Inc. (the “Company”). Fund I, Fund II, Fund III, Fund IV, and “Fund V”, may be each referred to herein as a “Fund” and collectively as the “Funds”. The Funds, Osmium Partners and Lewis, may be each referred to herein as an “Osmium Party” and collectively as the “Osmium Parties”). The Osmium Parties and the Company may be each referred to herein as a “Party” and, collectively, as the “Parties”.

WHEREAS, Osmium Partners serves as the general partner of each of the Funds;

WHEREAS, Lewis is the managing member and controlling member of Osmium Partners;

WHEREAS, the Osmium Parties collectively own in excess of ten percent of the Company’s outstanding common stock (the “Common Stock”);

WHEREAS, the Company and Lewis have engaged in various discussions and communications concerning the Company’s business and other matters;

WHEREAS, the Company and the Osmium Parties have determined to come to an agreement with respect to the appointment of Arthur John Hass III as a director of the Company and certain other matters, as provided in this Agreement. For the sake of clarity, Mr. Hass is not an Osmium Party as of the Effective Date.

NOW, THEREFORE, in consideration of and reliance upon the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1.    Board Representation and Board Matters.

(a)    No later than two business days following the execution of this Agreement, the Company will take all action necessary to appoint Mr. Hass to the Company’s Board of Directors (the “Board”) and the Audit Committee of the Company’s Board (the “Audit Committee”). Mr. Hass’s continued membership on the Company Audit Committee is subject to his continuing to meet the independence requirements of the Audit Committee as determined from time to time by the Company’s Board.

(b)    Subject to the terms of this Agreement, Mr. Hass will be appointed to the Board as a Class I Director having a term expiring on the date of the Company’s 2016 Annual Meeting of Stockholders (the “2016 Annual Meeting”).

(c)    Each of the Osmium Parties agree during the Standstill Period (defined below):

(i)    not to, and to cause each of their respective Affiliates and Associates (each as defined herein) not to, conduct a proxy contest for the election of directors with respect to the Company’s 2015 Annual Meeting of Stockholders (the “2015 Annual Meeting”) or any other subsequent annual meeting of stockholders of the Company during the Standstill Period (an “Applicable Meeting”); and

(ii)     to cause all Voting Securities (as defined herein) owned by the Osmium Parties and their Affiliates and Associates, directly or indirectly, whether owned of record or Beneficially Owned (as defined in herein) to be voted for, or to abstain from voting for, all of the directors nominated by the Board for election at the 2015 Annual Meeting and each Applicable Meeting and all other “routine” matters at such meetings supported by the Board; and

Nothing in this Agreement shall limit the right of the Osmium Parties to vote all Voting Securities in the sole and absolute discretion of the Osmium Party for “non-routine” matters including, without limitation, matters related to the implementation of takeover defenses, amendments to the Company’s articles of incorporation or bylaws that diminish stockholder rights, strategic transactions or new or amended incentive compensation plans submitted for stockholder approval.

(d)    As a condition to Mr. Hass’s appointment to the Board, Mr. Hass has provided, concurrently with the execution of this Agreement to the Company an executed consent from to serve as a director if so elected, completed D&O Questionnaire in the form provided to Mr. Hass, and an executed irrevocable resignation as director of the Company in the form attached hereto as Exhibit A

(e)    As a further condition to Mr. Hass’s appointment to the Board, Mr. Hass shall have agreed to, as promptly as practicable upon request of the Company after the date hereof, prior to and as a condition to his appointment to the Board, provide to the Company such additional information as the Company is entitled to receive from members of the Board and as is required to be disclosed in the Company’s proxy statement under applicable law.

(f)    Notwithstanding the foregoing, if at any time after the Effective Date, (A) the Osmium Parties, together with each of their respective Affiliates and Associates (not including any Non-Controlled Portfolio Company (defined below), (1) ceases collectively to Beneficially Own, an aggregate of at least 5% of the outstanding Common Stock of the Company as of such date, or (2) materially breaches this Agreement, or (B) Mr. Hass materially breaches the Director Agreement, dated November 18, 2014, between him and the Company (the “Director Agreement”), or any other agreement between him and the Company or any of the laws, New York Stock Exchange rules applicable to the Company’s directors or any other Company Board Requirement (as defined

below), then, in the case of either clause (A) or clause (B), at the request of the Company, the Osmium Parties shall take all reasonable efforts to cause Mr. Hass to promptly tender his resignation from the Board and any committee of the Board on which he then sits and the Company shall have no further obligations under this Agreement or otherwise with respect to Mr. Hass. As used herein a “Non-Controlled Portfolio Company” means a company in which the Osmium Parties have invested capital, but for which the Osmium Parties and their Affiliates (y) Beneficially Own less than a majority of the outstanding equity and voting interests of such Company and (z) have the right to nominate or elect less than a majority of the board of directors or other governing body of such Company.

In addition, if at any time, any one stockholder shall own more than 50% of the then outstanding Voting Securities of the Company, at the request of the Company, the Osmium Parties shall take reasonable efforts to cause Mr. Hass to promptly tender his resignation from the Board and any committee of the Board on which he then sits and the Company shall have no further obligations under this Agreement or otherwise with respect to Mr. Hass.

For purposes of this Agreement: the terms “Affiliate” and “Associate” shall have the meanings set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except that they shall exclude any Non-Controlled Portfolio Company and the terms “person” or “persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability or unlimited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature.

Upon the execution of this Agreement, each of the Osmium Parties irrevocably agrees not to during the Standstill Period (i) nominate any person for election at the 2015 Annual Meeting or any Applicable Meeting, (ii) submit any proposal for consideration at, or bring any other business before, the 2015 Annual Meeting or any Applicable Meeting, directly or indirectly, or (iii) initiate, encourage or subject to their voting rights in Section 1(c) above, participate in any “withhold” or similar campaign with respect to the 2015 Annual Meeting or any Applicable Meeting, directly or indirectly, and shall not permit any of its Affiliates or Associates to do any of the items in this Section 1.

None of the Osmium Parties shall publicly or privately encourage or support any other stockholders to take any of the actions described in this Section 1(f); provided, that this sentence shall not preclude the Osmium Parties from privately communicating with the management or board members of the Company orally.  In addition, during the Standstill Period, Mr. Lewis and the Chief Executive Officer of the Company commit to communicate with at least a monthly call to discuss general business ideas as it relates to the Company. Mr. Lewis can communicate factual public information in a manner consistent with the other terms and intent of this Agreement. .

At all times while serving as a member of the Board, Mr. Hass shall comply with all policies, procedures, processes, codes, rules, standards and guidelines applicable to Board members, including the Company’s code of business conduct and ethics, securities trading policies, anti-hedging policies, Regulation FD-related policies, director confidentiality policies and corporate governance guidelines (collectively, the “Company Board Requirements”).

2.    Certain Other Matters.

(a) Mr. Hass shall be entitled to resign from the Board at any time in his discretion. For purposes of this Agreement, the “Standstill Period” shall mean the period from the date of this Agreement until the latest of (A) the six month anniversary of the Effective Date, (B) sixty days after Mr. Hass is no longer serving as a director of the Company, and (C) if Mr. Hass is a director at all times until the time nominations are due for the 2016 Annual Meeting, and is nominated and agrees to serve on the Company’s slate of director nominees for the 2016 Annual Meeting, the period from the printing of the proxy statement for that Meeting until the conclusion of that Meeting; provided that in no event shall the Standstill Period extend beyond the date of the 2016 Annual Meeting.

(b)    During the Standstill Period, each Osmium Party shall not, directly or indirectly, and each Osmium Party shall cause Mr. Hass and each other Osmium Affiliate and Associate not to, directly or indirectly (it being understood and agreed that the following restrictions shall not apply to Mr. Hass’s discussions solely among other members of the Board and/or management of the Company):

(i)    solicit proxies or written consents of stockholders or conduct any other type of referendum (binding or non-binding) with respect to, or from the holders of, the Voting Securities (as defined below), or become a “participant” (as such term is defined in Instruction 3 to Item 4 of Schedule 14A promulgated under the Exchange Act) in or assist any person or entity that is not a Party (a “Third Party”) in any “solicitation” of any proxy, consent or other authority (as such terms are defined under the Exchange Act) to vote any shares of the Voting Securities (other than such encouragement, advice or influence that is consistent with the Board’s recommendation in connection with such matter);

(ii)    encourage, advise or influence any other person or assist any Third Party in so encouraging, assisting or influencing any person with respect to the giving or withholding of any proxy, consent or other authority to vote or in conducting any type of referendum (other than such encouragement, advice or influence that is consistent with Company management’s recommendation in connection with such matter);

(iii)    form or join in a partnership, limited partnership, syndicate or other group, including a “group” as defined under Section 13(d) of the Exchange Act, with respect to the Voting Securities (for the avoidance of doubt, excluding any group composed solely of Osmium Parties and their Affiliates and Associates), or otherwise support or participate in any effort by a Third Party with respect to the matters set forth in Section 2(b);

(iv)    present at any annual meeting or any special meeting of the Company’s stockholders or through action by written consent any proposal for consideration for action by stockholders or seek the removal of any member of the Board or propose any nominee for election to the Board or seek representation on the Board; or call or request the calling of a special meeting of stockholders or action by stockholders through written consent;

(v)    grant any proxy, consent or other authority to vote with respect to any matters (other than to the named proxies included in the Company’s proxy card for any annual meeting or special meeting of stockholders) or deposit any Voting Securities of the Company in a voting trust or subject them to a voting agreement or other arrangement of similar effect with respect to any annual meeting except as provided in Section 1(c), special meeting of stockholders or action by written consent (excluding customary brokerage accounts, margin accounts, prime brokerage accounts and the like);

(vi)    make any request for the Company’s stock ledger, a list of its stockholders, or other books and records of the Company under Section 220 of the Delaware General Corporation Law or otherwise (provided that this clause (vi) shall not limit Mr. Hass’ rights to reasonably request information solely in his capacity as a director of the Company);

(vii)    in any manner, directly or indirectly, make, or cause to be made, or in any way encourage any other person to make or cause to be made, any public statement or public announcement, including in any document or report filed with or furnished to the Securities and Exchange Commission or through the press, media, analysts or other persons, that disparages, defames or slanders, or otherwise constitutes an ad hominem attack on, the Company, or the Company’s subsidiaries, Affiliates, successors, assigns, officers (including any former officer and any person who serves on or following the date of this Agreement as an officer), directors (including any former director and any person who serves on or following the date of this Agreement as a director), or employees.

(viii)    institute, solicit, assist or join, as a party, any litigation, arbitration or other proceeding against or involving the Company or any of its current or former directors or officers (including derivative actions), other than an action to enforce the provisions of this Agreement instituted in accordance with and subject to Section 7;

(ix)    without the prior approval of the Board, separately or in conjunction with any other person or entity in which it is or proposes to be either a principal, partner or financing source or is acting or proposes to act as broker or agent for compensation, propose (publicly, privately or to the Company) or participate in, effect or seek to effect, any tender offer or exchange offer, merger, acquisition, reorganization, restructuring, recapitalization or other business combination involving the Company or any of its subsidiaries or its or their securities or a material amount of the assets or businesses of the Company, any of the Company’s Affiliates, or any subsidiary, business, venture or division of the foregoing, or encourage, initiate or support any other Third Party in any such activity;

(x)    purchase or cause to be purchased or otherwise acquire or agree to acquire Beneficial Ownership of any Voting Securities, if in any such case, immediately after the taking of such action, the Osmium Parties and their Affiliates and Associates would, in the aggregate, collectively Beneficially Own, or have an economic interest in, an amount that would exceed 16.5% of the then outstanding shares of Common Stock of the Company (the “Share Limit”); provided, however, that if the closing sales price per share of the Company’s Common Stock on the New York Stock Exchange shall be less than $6.50 per share for more than five consecutive trading days, the Share Limit shall increase to 19.9% until the closing sales price per share of the Company’s Common

Stock on the New York Stock Exchange shall again be above $6.50 on any trading day, at which time it shall automatically be reduced to the then outstanding shares of Common Stock of the Company Beneficially owned by the Osmium Parties and their Affiliates and Associates as of the first date on which the closing sales price per share of the Company’s Common Stock on the New York Stock Exchange shall again be above $6.50;

(xi)    enter into any discussions, negotiations, agreements, arrangements or understandings with any Third Party with respect to the matters set forth in this Section 2(b); or

(xii)    request, directly or indirectly, any amendment or waiver of the foregoing in a manner that would reasonably likely require public disclosure by any Osmium Party or any of their respective Affiliates or Associates or the Company.

As used in this Agreement, the term “Voting Securities” shall mean the Common Stock, and any other securities of the Company entitled to vote in the election of directors, or securities convertible into, or exercisable or exchangeable for Common Stock or other securities, whether or not subject to the passage of time or other contingencies.

As used in this Agreement, the term “Beneficial Ownership” of “Voting Securities” means ownership of: (i) Voting Securities and (ii) rights or options to own or acquire any Voting Securities (whether such right or option is exercisable immediately or only after the passage of time or upon the satisfaction of one or more conditions (whether or not within the control of such person), compliance with regulatory requirements or otherwise), and includes all Voting Securities which such person or any of such person’s Affiliates or Associates has or shares the right to vote or dispose. For purposes of this Section, no person shall be, or be deemed to be, the “Beneficial Owner” of, or to “Beneficially Own,” any securities Beneficially Owned by any director of the Company to the extent such securities were acquired directly from the Company by such director as or pursuant to director compensation for serving as a director of the Company.

3.    Public Announcements. Promptly following the execution of this Agreement, the Company shall issue a press release in the form attached hereto as Exhibit B (the “Press Release”) and the Osmium Parties shall amend their filing on Schedule 13D in the form attached as Exhibit C hereto. Neither the Company nor any Osmium Party nor any Affiliates or Associates of any Osmium Party shall make or cause to be made any public announcement or statement that is inconsistent with or contrary to the statements made in the Press Release and the Schedule 13D, except as required by law or the rules of any stock exchange or with the prior written consent of the other party.

4.    Confidentiality. The Osmium Parties understand and agree that as a condition to Mr. Hass becoming a director of the Company, Mr. Hass was required to sign the Director Agreement and that Mr. Hass may not provide any nonpublic information concerning the Company to any Osmium Party or any other Third Party without the Company’s prior written consent and each Osmium Party agrees not to (a) cause or request Mr. Hass to breach the Director Agreement or (b) receive any nonpublic information concerning the Company from Mr. Hass.

5.    Representations and Warranties of All Parties. Each of the Parties represents and warrants to the other Parties that: (a) such Party has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder; (b) this Agreement has been duly and validly authorized, executed and delivered by it and is a valid and binding obligation of such Party, enforceable against such Party in accordance with its terms; and (c) this Agreement will not result in a violation of any terms or conditions of any agreements to which such person is a Party or by which such Party may otherwise be bound or of any law, rule, license, regulation, judgment, order or decree governing or affecting such Party.

6.    Representations and Warranties of the Osmium Parties. The Osmium Parties represent and warrant to the Company that Mr. Hass:

(a)    does not, and will not during the Standstill Period, receive any compensation from any Osmium Party other than returns on his investment in the Funds equal to the returns that would be received by other investors in the Funds with similar investments and will not receive any other compensation from any Osmium Party or its Affiliates or Associates related to the Company;

(b)    does not, and will not, have during the Standstill Period any investment authority with any Osmium Party;

(c)    has no ownership interest in any Osmium Party other than his interest as a limited partner in certain of the Funds and will receive no ownership interest in any Osmium Party except in connection with his investment in the Funds, which ownership interest shall be the same as other limited partners that invest the same amount in the funds;

(d)    has no access to trade positions that is not otherwise available to limited partners of the Fund either on an ongoing basis or upon request; and

(e)    has no access to material non-public information made available to the Osmium Parties by any of its portfolio companies or companies it would consider investing in unless specifically allowed in writing by both that company and the applicable Osmium Party.  For the elimination of doubt, the assumption would be that this access would not typically be sought.

7.    Miscellaneous. The Parties recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, each Party agrees that in addition to other remedies the other Parties shall be entitled to at law or equity or pursuant to this Agreement, the other Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement exclusively in the federal and state courts located in Wilmington, Delaware. In the event that any action shall be brought in equity to enforce the provisions of this Agreement, no party shall allege, and each party hereby waives the defense, that there is an adequate remedy at law. Furthermore, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the state and federal courts located in Wilmington, Delaware in the event any dispute arises out of this Agreement or the transactions

contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the state and federal courts located in Wilmington, Delaware, and each of the Parties irrevocably waives the right to trial by jury, (d) agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief and (e) irrevocably consents to service of process by a reputable overnight mail delivery service, signature requested, to the address of such Party set forth in Section 10 or as otherwise provided by applicable law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.

8.    No Waiver. Any waiver by any Party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a Party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that Party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

9.    Entire Agreement. This Agreement and the other agreements referenced in this agreement contain the entire understanding of the Parties with respect to the subject matter hereof and may be amended only by an agreement in writing executed by the Parties.

10.    Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be in writing and shall be deemed validly given, made or served, if (a) given by facsimile and email, when such facsimile and email is transmitted to the facsimile number set forth below and sent to the email address set forth below and the appropriate confirmation is received or (b) if given by any other means, when actually received during normal business hours at the address specified in this subsection:

if to the Company:        

Rosetta Stone Inc.

1919 North Lynn St., 7th Floor

Arlington, Virginia 22209

Facsimile: (540) 432-0953

Email: ***@*** and

***@***                    

Attention: Steve Swad, Chief Executive Officer and

                    Bruce Ghrist, Acting General Counsel

With a copy to (which shall not constitute notice):

Norton Rose Fulbright

1301 McKinney, Suite 5100

Houston, Texas 77010

Facsimile: 713 ###-###-####

Email: ***@***

Attention: Brian Fenske

                

if to any Osmium Party:

    

Osmium Partners, LLC

300 Drakes Landing Road #172

Greenbrae, CA 94904

Facsimile: 415 ###-###-####

Email: ***@***

Attention: John Lewis

        

With a copy to (which shall not constitute notice):

Crowell Morning

275 Battery Street, 23^rd Floor

San Francisco, California 94111

Facsimile: 415 ###-###-####

Email: ***@***

Attention: Murray Indick

11.    Severability. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon the legality or enforceability of any other provision of this Agreement.

12.    Counterparts. This Agreement may be executed in two or more counterparts, which together shall constitute a single agreement.

13.    Successors and Assigns. This Agreement shall not be assignable by any of the Parties. This Agreement, however, shall be binding on and inure to the benefit of successors of the Parties.

14.    No Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties and is not enforceable by any other persons.

15.    Fees and Expenses. Neither the Company, on the one hand, nor the Osmium Parties, on the other hand, will be responsible for any fees or expenses of the other in connection with this Agreement.

16.    Interpretation and Construction. Each of the Parties acknowledges that it has been represented by counsel of its choice throughout all negotiations that have preceded the execution of this Agreement and the other documents and agreements referenced in this Agreement, and that it has executed the same with the advice of said independent counsel. Each Party and its counsel cooperated and participated in the drafting and preparation of this Agreement and the other documents and agreements referenced in this Agreement, and any and all drafts relating thereto exchanged among the parties shall be deemed the work product of all of the Parties and may not be construed against any Party by reason of its drafting or preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement or other documents or agreements referenced in this Agreement against any Party that drafted or prepared it is of no application and is hereby expressly waived by each of the Parties, and any controversy over interpretations of this Agreement or the other documents or agreements referenced in this Agreement shall be decided without regards to events of drafting or preparation. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The term “including” shall be deemed to mean “including without limitation” in all instances.