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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: M. Charles Swope who wrote (41301)	9/30/2002 12:07:27 AM
From: Wolff	Read Replies (1) \| Respond to of 41369

Swope, perhaps the SEC filings would help educate yourself to do more than a knee-jerk fear reaction. FYI, CNBC implied that AOL was going to be spoken to when Ashcroft announced the Homestore proceedings. CNBC left an air that AOL was negatively involved. AOL and CNBC are direct competitors. A reading of the SEC filing then, or the more recent ones I provide below indicate that it is Homestore that has the burden. I encourage you to read and think, rather than be spooked by things you don't understand. If that fails, you can ask quesions. Perhaps you think its OK for CNBC to report unconfirmed rumors with Negative implications about AOL, during trading, I on the other hand think there is little excuse for CNBC to not pull up the latest filings and check for AOL proceedings, it takes all of 3 minutes to do. By not fact checking their stories, CNBC would be failing maintain a trust. Filing Date: 8/12/2002 edgar-online.com AOL Distribution Agreement In April 2000, the Company entered into a five-year distribution agreement with AOL. In exchange for entering into this agreement, the Company paid AOL $20.0 million in cash and issued to AOL approximately 3.9 million shares of its common stock. In the agreement, the Company has guaranteed that the 30-day average closing price, related to approximately 64%, 18% and 18% of the shares it issued, will be $65.64 per share on July 31, 2003 and $68.50 per share on July 31, 2004 and July 31, 2005, respectively. This guarantee only applies to shares that continue to be held by AOL at the end of each respective guarantee period. AOL has stated that, at June 30, 2002, it continued to hold all of these shares. In 2000, the Company had recorded $189.8 million as non-current distribution obligation, which represents the fair market value of the approximately 3.9 million shares of the Company’s common stock issued upon entering the agreement and the guarantee of the stock. The difference between the total guaranteed amount and the liability recorded is being recorded as other expense over the term of the agreement. In connection with the guarantee, the Company established a $90.0 million letter of credit and is required to pledge an amount equal to the outstanding portion of the letter of credit. As of June 30, 2002, the Company had pledged $92.9 million in investments towards this letter of credit which is classified as restricted cash on the balance sheet. This letter of credit can be drawn against by AOL in the event our 30-day average closing price is less than $65.64 on July 31, 2003 and $68.50 on July 31, 2004 and July 31, 2005. The aggregate amount of cash payments the Company could be required to make in performing under this agreement is limited to $90.0 million. Any additional obligation to AOL could be paid in cash or Company common stock at the Company’s discretion. If the Company chooses to satisfy the excess amount in Company common stock, the value of the shares issued to AOL must be equal to 112.5% of the 30-day average closing price of the Company’s common stock. If the amount the Company is required to pay AOL at July 31, 2003 exceeds $90.0 million, the distribution agreement with AOL will expire. In the event that an issuance of Company common stock might have a material adverse effect on the Company or its other agreements, or would require stockholder approval, the Company would consider, at that time, what actions it might take. Legal proceedings In October 2001, the Company filed a demand for arbitration with AOL relating to a distribution agreement. The Company claims that AOL has breached the distribution agreement by failing to meet its contractual obligations to build 18 specific promotions for the Company and to deliver guaranteed Homestore impressions to AOL users. The Company also claims that AOL breached the duty of good faith and fair dealing in the contract by disregarding its contractual commitments. The Company also claims that AOL’s conduct violated the contractual guarantees of exclusivity, premier partnership and prominent partnership for the Company. In the arbitration, the Company seeks a declaration that AOL breached the distribution agreement; that the Company may terminate or rescind the contract and receive damages and other appropriate relief; that the Company may terminate the contract without AOL having any right to the $90.0 million letter of credit issued in favor of AOL in connection with the distribution agreement and that the Company would have no further obligations under the distribution agreement. The arbitration took place in mid-July 2002 and the Company is awaiting the results, which are not expected until the fourth quarter of 2002.