Fairfield Language Technologies, Creator of Rosetta Stone(R) Language-Learning Software, Completes Management Buyout

Private Equity Firms ABS Capital Partners and Norwest Equity Partners Attracted by Leading Language-Learning Software Product

Fairfield Language Technologies (FLT), creator of the revolutionary CD-ROM and online immersion-based Rosetta Stone® language-learning software, acclaimed for its speed, power and effectiveness, today announced that it has completed a management buyout led by private equity firms ABS Capital Partners (ABS Capital) and Norwest Equity Partners (NEP). Terms of the agreement were not disclosed.

Founded in 1992 and profitable since its inception, FLT has grown rapidly, increasing revenues by more than 400 percent during the last three years. This transaction will allow the company to continue to fuel its growth and meet the ever-increasing demands for its award-winning products.

The global market for language-learning products and services is estimated to be $100 billion. This market is expected to continue to grow due to several powerful market trends, including globalization, increasing immigration, the growing penetration of computers and Internet access in schools and homes, greater acceptance of self study as a learning method, increasing numbers of language-learning and travel enthusiasts, and the global economic advantages of learning a new language -- especially learning English in Asia.

Rosetta Stone is the most recognized language-learning software brand in the market. It distinguishes itself from other language-learning tools by helping users develop everyday proficiency naturally, the same way people learn their first language -- by linking new words with real-world objects and events. The company's Dynamic Immersion(TM) method uses thousands of real-life color images to convey the meaning of spoken and written phrases in the program. Its carefully sequenced structure, use of native speakers and ability to provide instantaneous feedback teaches new languages without ineffective memorization, translation or tedious grammar drills.

"Fairfield Language Technologies created a superior language-learning solution with our Rosetta Stone software, and I am very pleased that our market-leading position has attracted the interest of strong investment partners like ABS Capital and Norwest Equity Partners," said Tom Adams, CEO of FLT. "These are experienced investors who have helped build and grow significant companies, and our management team looks forward to working with them as we take Rosetta Stone to the next level."

The company employs more than 400 people in three offices located in Harrisonburg, Va.; Fairfax, Va.; and Windsor, England, as well as in specialty retail locations across the United States.

Millions of language learners in more than 150 countries are already using the Rosetta Stone® software. "Language learning will continue to play a crucial role in an increasingly global world," said Laura Witt, partner at ABS Capital. "Fairfield Language Technologies offers a winning solution to both consumers and institutions that is differentiated, engaging and effective. We are pleased to be working with the company to build on their already proven success."

"Fairfield Language Technologies has attracted a very high-quality management team, and that team has grown the company significantly with a unique and sustainable business model," said Steve Farsht, partner at NEP. "We are enthusiastic about their opportunities and abilities to achieve their goals."

Madison Capital Funding provided the debt financing portion of this transaction. BNY Capital Markets, Inc., an affiliate of The Bank of New York, acted as exclusive financial advisor to FLT in connection with this transaction.

About the Investors

ABS Capital Partners

ABS Capital Partners is a private equity firm that was founded in 1990 to invest in mid- to later-stage growth companies in order to create significant, market-leading companies. The firm's investment strategy focuses on companies in the healthcare, technology, business services, and media and communications sectors. Its investment professionals partner with strong management teams to help build businesses with substantial revenues, near-term profitability and solid customer bases. The firm has created long-term value for management and investors. ABS Capital Partners leverages over 100 years of combined investing and operating experience among its partners and provides a range of investment structures, including expansion financings, management buyouts and recapitalizations. With an extensive history and knowledge of equity and mergers and acquisitions markets, ABS Capital Partners provides strategic guidance and helps companies to capitalize on their business opportunities. ABS Capital Partners has $1.5 billion under management and nine investing partners within offices in Baltimore, San Francisco and Boston. Over the past twelve years, ABS Capital Partners has backed industry leaders including AMISYS Managed Care Systems Corporation (now McKesson Corporation), American Radio Systems Corp, Corporate Express, Inc. (a Buhrmann company), DoubleClick, Inc., OTG Software, Inc. (now Legato Systems, Inc.), NeuStar, Inc., and Transition Systems, Inc. (now Eclipsys Corp.). Additional information can be found at: www.abscapital.com.

Norwest Equity Partners

Founded in 1961, Norwest Equity Partners (NEP) is a leading private equity firm that focuses on equity investments in profitable and growing middle market companies primarily through management buyouts, recapitalizations and growth financings. The firm's criteria for consideration includes $10 million or greater of EBITDA and equity investments between $20 million and $80 million. With $3 billion in capital under management, the firm is currently investing NEP VIII, its $800 million fund. With offices in Minneapolis and Los Angeles, NEP has earned a reputation as one of the premier private equity investment firms in the United States. Additional information can be found at www.nep.com.

About Rosetta Stone

Rosetta Stone

Fairfield Language Technologies publishes Rosetta Stone, the revolutionary CD-ROM and online language-learning software acclaimed for the speed, power and effectiveness of its Dynamic Immersion(TM) method. Teaching 29 languages to millions of people in over 150 countries throughout the world, Rosetta Stone is the key to language-learning success. For the second year in a row, Fairfield Language Technologies is one of the fastest growing technology companies as ranked by Deloitte and Touche. The company was founded in 1992 on two core beliefs: that the natural way people learn native languages as children remains the most successful method for learning new languages; and that interactive technology can replicate and activate that immersion method powerfully for learners of any age. The company is based in Harrisonburg, Va. For more information, visit www.RosettaStone.com.

Rosetta Stone and Dynamic Immersion are trademarks of Fairfield Language Technologies.

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