Related Party Transactions

12 Months Ended

Dec. 31, 2011

Related Party Transactions

Related Party Transactions

11. RELATED PARTY TRANSACTIONS

On June 13, 2008, the Company entered into an intangible asset license agreement (the "Intangible Asset License Agreement") with MS Real Estate Management Company ("MSRE"), an entity owned by Martha Stewart. The Intangible Asset License Agreement is retroactive to September 18, 2007 and has a five-year term.

Pursuant to the Intangible Asset License Agreement, the Company pays an annual fee of $2.0 million to MSRE for the perpetual, exclusive right to use Ms. Stewart's lifestyle intangible asset in connection with Company products and services and to access various real properties owned by Ms. Stewart during the term of the agreement. On February 8, 2010, the Company executed an amendment to the Intangible Asset License Agreement. Pursuant to the amendment, for 2010 only, the annual fee of $2.0 million that was otherwise payable on or about September 15, 2010 was reduced to $1.95 million and paid in two installments, the first of which was $0.95 million and was paid on February 9, 2010; and the remainder of which was paid on September 15, 2010 as originally scheduled. The $2.0 million annual fee for 2011 was paid on September 15, 2011.

MSRE is responsible, at its expense, to maintain and landscape the properties in a manner consistent with past practices; provided, however, that the Company is responsible for approved business expenses associated with security and telecommunications systems and security personnel related to Ms. Stewart at the properties, and must reimburse MSRE for up to $0.1 million of approved and documented household expenses. In each of the years ended December 31, 2011 and 2010, the Company reimbursed MSRE $0.1 million for approved and documented household expenses.

The Company also reimbursed MSRE for certain costs borne by MSRE associated with various Company business activities which were conducted at properties covered by the Intangible Asset License Agreement. For 2011, reimbursements for these costs were insignificant. For 2010, the Company reimbursed MSRE $0.1 million for these costs. No similar costs were reimbursed in 2009.

On February 28, 2001, the Company entered into a Split-Dollar Agreement with Martha Stewart and The Martha Stewart Family Limited Partnership (the "MS Partnership"), under which the Company agreed to pay a significant portion of the premiums on whole life policies insuring Ms. Stewart. The policies were owned by and benefited the MS Partnership. Due to uncertainty as to whether such arrangements constituted prohibited loans to executive officers and directors after the enactment of the Sarbanes-Oxley Act in 2002, the Split-Dollar Agreement was amended so that the Company would not be obligated to make further premium payments after 2002.

Because the intent of the agreement was frustrated by the enactment of Sarbanes-Oxley and so that the parties could realize the existing cash surrender value of the policies rather than risking depleting the future surrender value, the Company, Ms. Stewart and the MS Partnership terminated the Split-Dollar Agreement, as amended, effective November 9, 2009. In connection with the termination, the MS Partnership agreed to surrender and cancel the policies subject to the Split-Dollar Agreement for their cash surrender value as of such date. As part of the arrangement the Company reimbursed the MS Partnership approximately $0.3 million for the premiums paid towards the policies (which amount, if determined to be taxable, would be subject to a tax gross-up).

In April 2009, the Company entered into an amended and restated employment agreement (the "2009 Employment Agreement") with Martha Stewart which replaced the existing agreement between the Company and Ms. Stewart that was scheduled to expire in September 2009. The 2009 Employment Agreement expires March 31, 2012. The Company expects to enter into an extension of Ms. Stewart's employment agreement prior to its expiration. During the term of the 2009 Employment Agreement, Ms. Stewart is entitled to talent compensation of $2.0 million per year. In addition, she is entitled to an annual bonus in an amount determined by the Compensation Committee, with a target bonus equal to $1.0 million and a maximum annual bonus of 150% of the target amount. Ms. Stewart received a $3.0 million make whole/retention payment in connection with the execution of the agreement, which amount is subject to pro-rata forfeiture in the event Ms. Stewart terminates the agreement without good reason or the Company terminates the agreement with cause. Separately, Ms. Stewart's compensation includes a portion of personnel costs paid by the Company for individuals performing work on her behalf.

For discussion of agreements with Charles A. Koppelman, the Company's Executive Chairman, see Note 9, Employee and Non-Employee Benefit and Compensation Plans, specifically under Non-Employee Equity Compensation,

Related party compensation expense includes salary, bonus and non-cash equity compensation as determined under ASC Topic 718. Alexis Stewart, the daughter of Martha Stewart, is a beneficial owner of more than 10% of the Company's stock. She has been employed by the Company and has served as a co-host of a Company television show and a co-host of a Company radio show. The Company paid Alexis Stewart aggregate compensation of $0.3 million, $0.4 million and $0.4 million in 2011, 2010 and 2009, respectively. The Company has also employed certain other members of Martha Stewart's and Charles Koppelman's family. Aggregate compensation for these employees was $0.7 million, $0.7 million and $0.6 million in 2011, 2010 and 2009, respectively.

Prior to the sale of its interest in WeddingWire and recording the other-than-temporary loss on its investment in pingg, the Company had determined that these cost-based investments represented interests in VIEs. See Note 2, Summary of Significant Accounting Policies, specifically under Investments in other non-current assets, for further discussion. The Company derived digital advertising revenues from these VIEs, a portion of which were payable to the VIEs. For 2011, total revenues and payables from these investments were $0.1 million and $0.2 million, respectively. For 2010, total revenues and payables from these investments were $0.5 million and $0.2 million, respectively.

For the years ended December 31, 2011, 2010 and 2009, respectively, the Company made charitable contributions of $30,000, $20,000, and $40,000 to a foundation with which Martha Stewart is affiliated.