Earthlink 2008 Annual Report Download - page 296

HELIO, INC. and HELIO LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
17. Related Party Transactions (continued)
In December 2006, the Operating Company and SKT entered into a terminal services agreement whereby SKT agreed to provide certain
software development, delivery and support pertaining to device-specific services to be marketed or otherwise sold to the Company’s end
members (the “Terminal Services Agreement”). Aggregate fees under the Terminal Services Agreement were $3.1 million, which include
ongoing software and related device support and troubleshooting for two years beginning in March 2007. Payment terms under the Terminal
Services Agreement included $2.5 million due upon execution and the remaining $0.7 million due in February 2007. Services under the
Terminal Services Agreement were completed as of December 31, 2006 and accounted for under FAS 86. $3.1 million of fees under the
Terminal Services Agreement were paid during the period ending December 31, 2007.
In January 2007, the Operating Company and Cyworld entered into an agreement whereby Cyworld agreed to provide development for
a mobile version of the Cyworld Korea service application to be offered on devices by the Company (the “Agreement”). Aggregate fees
including initial development costs and monthly operation fee the under the Agreement were $0.3 million, which was paid and charged to
expense in 2007.
In March 2007, the Operating Company and SKT entered into a technical support agreement whereby SKT would provide technical and
system operational support on CCBS, beginning in January 2007 and continuing through December 2007, for an aggregate fee of $1.6 million
(the “March 2007 Agreement”). The aggregate $1.6 million in fees for services under the March 2007 Agreement are included in the
Company’s statements of operations for the period ended December 31, 2007, of which $1.2 million was paid to SKT during the period ended
December 31, 2007.
In June 2007, the Operating Company and SKT entered into a development agreement whereby SKT agreed to provide certain software
development for a mobile web browser diagnostic tool to be used by the Company (the “Development Agreement”). Aggregate fees under the
Development Agreement were $0.1 million, which was paid and charged to expense in 2007.
In June 2007, the Operating Company and SKT entered into a services agreement whereby SKT would provide consulting support on
the design of the Company’
s electronic data warehouse beginning in June 2007 and continuing through August 2007 for an aggregate fee of $0.1
million (the “Data Warehouse Consulting Agreement”). The aggregate $0.1 million in fees for support under the Data Warehouse Consulting
Agreement are included in the Company’s statements of operations for the period ended December 31, 2007, all of which was paid to SKT
during the period ended December 31, 2007.
Effective June 2007, the Operating Company entered into a services and software license agreement with an affiliate of SKT for added
functionality and enhancement around its original CCBS Agreement (the “CCBS 3.0 Agreement”). Aggregate fees under the CCBS 3.0
Agreement were $1.6 million and services began in the second quarter of 2007 and continued into the third quarter of 2007. The CCBS 3.0
Agreement was principally being capitalized as equipment additions as prescribed under SOP 98-1. At December 31, 2007 capitalized costs of
$1.6 million associated with the CCBS 3.0 Agreement were included in property and equipment on the Company’s balance sheets. During the
period ending December 31, 2007, $0.5 million of the CCBS 3.0 Agreement fees had been paid.
In July 2007, the Company entered into two separate $30.0 million convertible notes payable agreements with EarthLink and SKT.
Both notes are exchangeable at anytime prior to the maturity date for preferred membership units in the Company. The conversion may be for
the full note amount, or portion thereof, and may include accrued and unpaid interest amounts. The initial exchange price is $3.00 per
membership unit and is subject to periodic adjustment by the Company under certain circumstances (as defined). In addition, the Company is
entitled to make reductions of the exchange price in certain circumstances, as defined in the note agreement. As of December 31, 2007, the
convertible notes payable plus accrued interest was $62.6 million. See Note 9 for additional information.
Effective September 2007, the Operating Company entered into a services and software license agreement with an affiliate of SKT for
added functionality and enhancement around its original CCBS Agreement (the “CCBS 4.0 Agreement”). Aggregate fees under the CCBS 4.0
Agreement were $0.9 million and services began in the third quarter of 2007 and continued through the fourth quarter of 2007. The CCBS 4.0
Agreement was principally being capitalized as equipment additions as prescribed under SOP 98-1. At December 31, 2007 capitalized costs of
$0.9 million associated with the CCBS 4.0
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