Shutterfly 2009 Annual Report Download - page 102

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SHUTTERFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 — Intellectual Property Cross-Licensing Agreement
On September 17, 2008, the Company entered into a multi-million dollar cross-
licensing agreement for intellectual property with a digital
imaging company. Under the terms of the agreement, the digital imaging company has rights to use the Company’
s current and pending patented
technology and processes. In addition, the Company has rights to use certain of the digital imaging company’
s pending patented technology and
processes. As consideration for the rights under the agreement, the digital imaging company will pay fees due under the agreement in two
installments of which the first installment was paid in September 2008 and the remaining installment is due in September 2009. Such amounts
are and will be recognized as a reduction of general and administrative expense as each installment becomes due and payable.
On February 8, 2008, the Company entered into a multi-million dollar cross-
licensing agreement for intellectual property with American
Greetings, Inc (“AGI”). Under the terms of the agreement, AGI has rights to use the Company’
s current and pending patented technology and
processes. In addition, the Company has rights to use certain of AGI’s current and pending patented technology and processes.
As consideration
for the rights under the agreement, AGI will pay fees due under the agreement in three installments of which the first installment was paid in
February 2008 and the remaining two installments are due in March 2009, and March 2010. Such amounts will be recognized as a reduction of
general and administrative expense as each installment becomes due and payable.
Note 11 — Employee Benefit Plan
In 2000, the Company established a 401(k) plan under the provisions of which eligible employees may contribute an amount up to 50% of
their compensation on a pre-tax basis, subject to IRS limitations. The Company matches employees’ contributions at the discretion of the Board.
In 2008 and 2007, there were no discretionary contributions. In 2006, the Company made a discretionary contribution of $63,000.
100