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To: Terry Maloney who wrote (24)	12/6/2001 6:40:40 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 445

Terry - Don, he'll pay the $100M, because the dilution of existing shareholders doesn't affect him ... he's still getting the entire company, with cash intact. (Whether or not this dilution would adversely affect the existing shareholders depends on the market cap "at current prices" ... if it's greater than $98,039,216.69 or so, they'd actually benefit -g) No fair! The market is never wrong. -g- You're correct. The key point is that the relationship between the company as an entity and its shareholders as its owners must be understood. When an outsider bids for an entire company, the existing details of the distribution of shares cannot have any effect on his valuation of the company. Think of the buyer as paying a total price to a bank and the bank being the only one of the two who needs to know anything about who owns how many shares, etc., as it pays off the shareholders. When the bonus is paid in cash, this cash comes from the company coffers and not only reduces the value of the company, but that reduction in value is also directly reflected in the value of each and every existing shareholder's share. When the bonus is paid in stock, the existing shareholders still suffer the same economic harm, but the harm is in the form of dilution, as they now have new partners. This is the real reason that an additional compensation expense line cannot be added. The existing shareholders collectively either suffer $2M worth of harm in a cash reduction of the value of what they own, or $2M worth of harm as their ownership proportion is diluted. Trying to count this harm twice is simply illogical and wrong. Regards, Don PS: To All - Please provide any counter-arguments that you may have. There are a number of them possible.