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Homestore, AOL reach compromise

The online real-estate company settles a contract dispute with America Online and signs a new 18-month marketing agreement with the Internet giant.

Online real-estate company Homestore has settled a contract dispute with America Online, and has signed a new 18-month marketing agreement with the Internet giant.

The settlement and the new deal solve some problems for both companies. Homestore has lost several executive team members in an accounting controversy that involved its deal with AOL. Meanwhile, AOL has been struggling with a declining advertising market.

As part of the deal announced Thursday, Homestore and AOL agreed to terminate an earlier marketing pact, which would have ended in July 2003. Homestore will pay AOL $7.5 million in cash and will let AOL draw on a $90 million line of credit secured by Homestore's balance sheet.

The two companies had been in arbitration over the earlier contract. The settlement also eliminates Homestore's responsibility to provide AOL with "make whole" payments worth around $57 million.

The new marketing deal, which runs through June 2004, makes Homestore the exclusive provider of real estate listings at AOL. AOL has also agreed to promote Homestore throughout its sites and integrate its services in a new real estate area on AOL. As part of the deal, Homestore will pay AOL $22.5 million over the life of the contract.

Separately this week, a former executive of Homestore agreed to plead guilty to one criminal count of securities fraud and settle a civil inside-trading charge brought by the Securities and Exchange Commission.

Jeffrey Kalina, Homestore's former senior manager of mergers and acquisitions, was the fourth Homestore executive to enter a plea related to an ongoing investigation into allegations of overstated advertising revenue by Homestore.

Homestore operates such sites as, and