Green Mountain Coffee Roasters (GMCR)

3. License and Distribution Agreements

In February 2001, the Company entered into a series of agreements (Agreements) with Ueshima Coffee Co., Ltd. (UCC). The purpose of the Agreements was to facilitate the manufacture and sale of the Company's beverage systems in Japan and other Asian markets. As a result of the Agreements, the Company owns a 10% interest in a corporate joint venture, which has been accounted for under the cost method, and executed certain license and distribution agreements with UCC for the sale of its products. As required by the terms of the licensing agreement, the Company received an advance royalty of $240,790 upon the agreement's execution. This advance royalty amount is being recognized in income on a straight-line basis over the five-year term of the agreement. Amortization of the deferred royalty amounted to $48,158 per year, during 2005, 2004 and 2003. The current portion of the deferred royalty is classified in accounts payable and accrued expenses. The long-term portion is classified in other liabilities. At December 31, 2005 and 2004, the total amount of the deferred royalty was $20,065 and $68,223, respectively. During 2005 and 2004, the Company received $542,477 and $422,619, respectively, in royalty payments from UCC.