Virgin Media 2006 Annual Report Download - page 124

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. Related Party Transactions (Continued)
• W.R. Huff Asset Management Co., L.L.C., through its managed accounts and affiliates, is one of the principal stockholders
and in that manner controlled 6.9% of our common stock as of December 31, 2006 (based on SEC filings). In addition,
William R. Huff is a member of our board of directors and the president of the managing member of W.R. Huff Asset
Management Co., L.L.C.
Virgin Enterprises Limited
On April 3, 2006, we entered into a trademark license agreement with Virgin Enterprises Limited under which we are entitled to
use certain Virgin trademarks within the United Kingdom and Ireland. The agreement is an exclusive license covering a number of
aspects of our consumer and a large part of our content businesses, including the provision of communications services (such as
internet, television, fixed line telephony, and upon the acquisition of Virgin Mobile, mobile telephony), the acquisition and branding
of sports, movie and other premium television content, and the branding and sale of certain communications equipment related to our
consumer businesses, such as set top boxes and cable modems. The agreement provides for a royalty of 0.25% per annum of our
revenue from the relevant businesses, subject to a minimum annual royalty of £8.5 million (the royalty would have been £9 million
based on our combined historical NTL and Telewest 2005 revenues including revenue from Virgin Mobile and our subsidiary
Virgin.net). The agreement replaces the existing license agreement under which our subsidiary Virgin.net was entitled to use the
Virgin brand in relation to its internet business. The agreement has a term of 30 years. It can be terminated after 10 years on one year’s
notice, and it is subject to earlier termination by us in certain other circumstances, including (subject to specified payments) upon a
change of control. The agreement also entitled Virgin Media and its subsidiaries to use a corporate name that includes the Virgin
name. Under a related agreement, Virgin Enterprises Limited has the right to propose a candidate to fill a seat on our board. Pursuant
to this right, Virgin Enterprises Limited proposed Gordon McCallum who was appointed to our board. During the year ended
December 31, 2006, we incurred expenses of £5.8 million for charges in respect of brand licensing and promotion of which £2.5
million was payable at the year end.
With effect from February 8, 2007 we agreed in principle with Virgin Enterprises Limited to extend the trademark license
agreement to enable a portion of our content business, formerly known as Flextech Television Limited, to use the name Virgin Media
Television to create, manage and distribute our wholly−owned television program services, such as Living and Bravo. The proposed
agreement provides for a royalty of 0.25% per annum of our content revenue, subject to a minimum annual royalty of £200,000.
We also have agreements with Virgin Retail Limited, an affiliate of Virgin Enterprises Limited, in respect to sales of our
communications services (such as internet, television, fixed line telephone and mobile telephone services), through the various Virgin
Megastores outlets. We incurred expenses of £1.8 million for charges in respect to these stores of which £1.2 million was payable at
the year end. As part of the agreement, Virgin Retail Limited pass through proceeds on sales of handsets, vouchers and other stock
items to us. We recognized revenues totaling £5.7 million during the year of which £2.2 million was receivable at the end of the year.
As a licensee of the “Virgin’’ brand name, we participate in mutually beneficial activities with other “Virgin’’ branded
companies. These arrangements are in the ordinary course of business and on arm's length terms.
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007