EXHIBIT 10.2

 

EXECUTION COPY

 

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STOCK TRANSFERS AND FUTURE PAYMENTS AGREEMENT

 

BETWEEN

 

AMERICA ONLINE, INC.,

 

GATEWAY, INC.

 

AND

 

EMACHINES, INC.

 

DATED AS OF NOVEMBER 1, 2004

 

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TABLE OF CONTENTS

 

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ARTICLE I

    

Common Stock

    

SECTION 1.01.

 

Common Stock Value

   2

SECTION 1.02.

 

Postponement of Payment Obligations

   3

SECTION 1.03.

 

Payment of 2004 Amounts

   3

SECTION 1.04.

 

Share Payments

   3

SECTION 1.05.

 

Limitation on Share Payments

   4

SECTION 1.06.

 

Right of First Refusal; Right to Purchase

   4

ARTICLE II

    

Post-2004 Strategic Alliance Agreements Payments

    

SECTION 2.01.

 

Discharge of Future Payments

   6

SECTION 2.02.

 

Future Amounts Option

   7

SECTION 2.03.

 

True-Up

   10

SECTION 2.04.

 

Stock Pledge

   10

SECTION 2.05.

 

Release of Restrictions on the Transfer of Time Warner Inc. Stock

   11

ARTICLE III

    

General Provisions

    

SECTION 3.01.

 

Assignment

   12

SECTION 3.02.

 

No Third-Party Beneficiaries

   12

SECTION 3.03.

 

Attorney Fees

   12

SECTION 3.04.

 

Notices

   12

SECTION 3.05.

 

Interpretation; Exhibits and Schedules; Certain Definitions

   12

SECTION 3.06.

 

Counterparts; Effectiveness

   13

SECTION 3.07.

 

Entire Agreement; Amendment of Strategic Alliance Agreements

   14

SECTION 3.08.

 

Severability

   14

SECTION 3.09.

 

Consent to Jurisdiction

   14

SECTION 3.10.

 

Governing Law

   15

SECTION 3.11.

 

Waiver of Jury Trial

   15

SECTION 3.12.

 

Date of Payment

   16

Exhibit A - Form of Pledge Agreement

 

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GLOSSARY OF DEFINED TERMS

 

Term

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Defined in

Section

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2004 Amounts

   1.02

A Derived Common

   Recitals

Additional Amount

   2.02(c)(iii)

Agreement

   Preamble

AOL

   Preamble

AOL Right

   1.03

Bankruptcy Event

   2.03

Common Stock

   Recitals

Delivery Date

   1.04(a)

Excess 2004 Amounts

   1.05

Future Amounts

   2.01

Gateway

   Preamble

Gateway Acquisition Right

   1.06(b)

Gateway Acquisition Right Exercise Notice

   1.06(b)

Gateway Right

   2.02(a)

Gateway Right Exercise Notice

   2.02(b)

Gateway Right Payment Amount

   2.02(c)

Gateway Right Payment Date

   2.02(b)

LIBOR

   2.02(c)(ii)

Market Price

   1.01

Net Proceeds

   2.04(b)

 

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Payment Calculation Date

   2.02(c)(i)

Payment Date

   2.01

Pledge Agreement

   2.04(a)

Pledged Collateral

   Exhibit A

Pledged Stock

   Exhibit A

Right of First Refusal Amount

   1.06

Shares Payment

   1.03

Stock Purchase Agreement

   Recitals

Strategic Alliance Agreements

   Recitals

Supplemental Payment Date

   2.02(d)

Transfer

   2.04(b)

Value Per Common Share

   1.01

 

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STOCK TRANSFERS AND FUTURE PAYMENTS AGREEMENT dated as of November 1, 2004 (this
“Agreement”), among AMERICA ONLINE, INC., a Delaware corporation (“AOL”),
GATEWAY, INC., a Delaware corporation (“Gateway”) and eMachines, Inc., a
Delaware corporation (“eMachines”).

 

Simultaneously with entering into this Agreement, AOL and Gateway are entering
into a Stock Purchase Agreement dated as of the date of this Agreement (the
“Stock Purchase Agreement”) pursuant to which Gateway will purchase from Seller,
and Seller will sell to Purchaser, 41,771.27 shares of Series A Preferred Stock
and 50,000 shares of Series C Preferred Stock. Capitalized terms used but not
defined herein shall have the meanings set forth in the Stock Purchase
Agreement.

 

Immediately following the automatic conversion on December 24, 2004, of AOL’s
8,227.73 shares of Series A Preferred Stock not being sold as part of the
Acquisition into shares of Common Stock, par value $0.01 per share, of Gateway
(the “A Derived Common”), AOL will own shares of A Derived Common and 2,725,026
shares of other Common Stock, par value $0.01 per share, of Gateway
(collectively with the A Derived Common, the “Common Stock”).

 

AOL, Gateway and certain of its affiliates are parties to the following
agreements: (a) the Amended and Restated Strategic Alliance Agreement dated as
of December 22, 1999, including any and all amendments and related letter
agreements and distribution agreements entered into by and between AOL and
Gateway, and (b) the following agreements entered into by and between AOL and
eMachines, Inc.: the Marketing Agreement dated June 17, 1999, the Marketing
Agreement dated December 17, 2001, and the Amended and Restated Marketing
Agreement dated as of December 18, 2003 (collectively, the “Strategic Alliance
Agreements”).

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As a condition to its willingness to enter into the Stock Purchase Agreement and
as consideration for the agreements of the parties contained therein, AOL is
entering into this Agreement.

 

In order to satisfy the condition described in the preceding paragraph, Gateway
and eMachines wish to enter into this Agreement.

 

Accordingly, in consideration of the mutual covenants and agreements set forth
herein and in the Stock Purchase Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

 

ARTICLE I

 

Common Stock

 

SECTION 1.01. Common Stock Value. Solely for purposes of this Agreement, each
share of Common Stock owned by AOL shall be deemed to have a value equal to
$5.16882 (the “Value Per Common Share”); provided that, notwithstanding the
foregoing provisions of this Section 1.01, (a) in the event the Fair Market
Value (as defined in the Investment Agreement) on December 24, 2004 (the “Market
Price”), exceeds $8.99350 but does not exceed $10.07272, the Value Per Common
Share of each share of A Derived Common shall be equal to $5.16882 multiplied by
a fraction, the numerator of which is 444.76566 and the denominator of which is
the quotient of $4,000 divided by the Market Price, and (b) in the event the
Market Price exceeds $10.07272, the Value Per Common Share of each share of A
Derived Common shall be equal to $5.78908 (it being understood that the shares
of Common Stock other than A Derived Common shall have a value of $5.16882, and
any adjustment affected pursuant to this proviso shall not affect the Value Per
Common Share of any shares of Common Stock other than the A Derived Common). AOL
and Gateway agree that, to the extent AOL is to transfer shares of Common Stock
to Gateway pursuant to this Agreement, AOL will deliver all shares of A Derived
Common that AOL owns to Gateway prior to delivering any other shares of Common
Stock that AOL owns.

 

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SECTION 1.02. Postponement of Payment Obligations. Notwithstanding the terms of
any Strategic Alliance Agreement, all obligations of AOL to pay any and all
amounts due and payable by AOL under any Strategic Alliance Agreement that have
accrued or will accrue during the six-month period ending December 31, 2004,
including any profit share, revenue share and bounty payments and any other
fees, interest and costs (“2004 Amounts”) shall be postponed to the extent
otherwise due and payable by AOL until the earlier of (a) December 24, 2004 and
(b) the termination of the Stock Purchase Agreement in accordance with its
terms, at which time all such amounts that have become due and payable as of
such date shall be due and payable on such date.

 

SECTION 1.03. Payment of 2004 Amounts. Subject to Section 1.05, to the extent
any 2004 Amounts are or become due and payable by AOL on December 24, 2004, AOL
will, subject to Applicable Law, deliver shares of Common Stock then owned by
AOL to Gateway to pay such amounts in accordance with Section 1.04. Subject to
Section 1.05 and Applicable Law, AOL may, at its option, any time and from time
to time, after December 24, 2004, transfer and deliver shares of Common Stock to
Gateway to pay 2004 Amounts (the “AOL Right”) that become due and payable after
December 24, 2004; provided, that in no event shall the AOL Right be exercisable
after June 30, 2007. AOL may exercise the AOL Right by providing Gateway with
irrevocable written notice of exercise of the AOL Right, which notice shall
specify the number of shares of Common Stock to be delivered by AOL to Gateway.
Any such payments of 2004 Amounts with shares of Common Stock pursuant to this
Section 1.03 are referred to as “Share Payments”.

 

SECTION 1.04. Share Payments. (a) AOL shall make Share Payments by delivering on
the applicable delivery date to Gateway at 7565 Irvine Center Drive, Irvine,
California 92618, certificates representing the lesser of (i) the remaining
number of shares of Common Stock that AOL may be obligated to deliver pursuant
to Section 1.05 and (ii) the number of shares of Common Stock (A) required to be
delivered pursuant to the first sentence of Section 1.03 or (B) specified in the
notice of exercise of the AOL Right delivered pursuant to the third sentence of
Section 1.03, as applicable, in each case, duly endorsed

 

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in blank or accompanied by stock powers duly endorsed in blank in proper form
for transfer. AOL shall make such delivery within three Business Days of the
applicable contractual due date of such 2004 Amounts (each such date of
delivery, a “Delivery Date”). Upon delivery of such shares of Common Stock, (i)
the aggregate amount of 2004 Amounts payable by AOL shall be permanently reduced
by an amount equal to the number of shares of Common Stock so delivered
multiplied by the applicable Value Per Common Share, (ii) AOL’s obligation to
pay such amounts shall be permanently discharged and (iii) Gateway and eMachines
hereby irrevocably waive any rights they may have at any time to receive any
further payment in respect of such 2004 Amounts so paid. Upon such delivery of
shares of Common Stock, AOL shall no longer be the owner of such shares or
retain any rights with respect to such shares.

 

(b) AOL represents and warrants as of the date hereof and on each Delivery Date,
with respect to the shares of Common Stock delivered to Gateway by AOL on such
Delivery Date, that (i) AOL, directly or through one or more wholly owned
subsidiaries, is the record owner of such shares and has good and valid title to
the Shares, free and clear of all Liens and (ii) assuming Gateway has the
requisite power and authority to be the lawful owner of such shares, upon
delivery to Gateway on such Delivery Date of certificates representing such
shares, duly endorsed by AOL for transfer to Gateway, and upon the discharge of
2004 Amounts in an aggregate amount equal to the number of such shares so
delivered multiplied by the applicable Value Per Common Share, good and valid
title to such shares will pass to Gateway, free and clear of any Liens, other
than those arising from acts of Gateway or its affiliates.

 

SECTION 1.05. Limitation on Share Payments. AOL shall not be required to
deliver, shares of Common Stock in payment of an aggregate amount of 2004
Amounts in excess of $33,000,000. To the extent the aggregate amount of 2004
Amounts exceeds $33,000,000 (“Excess 2004 Amounts”), such excess shall be
applied to reduce the Gateway Right Payment Amount in accordance with Section
2.02(c).

 

SECTION 1.06. Right of First Refusal; Right to Purchase. (a) If AOL proposes to
sell, transfer, pledge, assign or otherwise dispose of any shares of Common
Stock

 

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that it owns as of the date of this Agreement (including any shares issued upon
conversion of Series A Preferred Stock on December 24, 2004) to a third party at
any time on or prior to June 30, 2007, AOL shall give Gateway twenty Business
Days notice of such sale, transfer, pledge, assignment or other disposition,
which notice shall specify the number of shares to be sold (including the number
of shares of A Derived Common) and the aggregate consideration to be paid for
such shares by such third party. Within ten Business Days of receipt of such
notice, Gateway may elect to purchase all or a portion of such shares at a price
equal to (x) in the case of a sale, transfer or other disposition, or pledge or
assignment for consideration, the lesser of (a) the applicable Value Per Common
Share multiplied by the number of shares Gateway elects to purchase and (b) an
amount of cash equal to (i) the aggregate consideration to be paid for such
shares by such third party, divided by (ii) the number of shares to be sold,
transferred or otherwise disposed of to such third party, multiplied by (iii)
the number of shares Gateway elects to purchase and (y) in the case of a pledge
or assignment without consideration, the applicable Value Per Common Share
multiplied by the number of shares Gateway elects to purchase (such price as
determined in accordance with the preceding clause (x) or (y), as applicable,
the “Right of First Refusal Amount”), by delivering a notice of such election to
AOL. If Gateway delivers such notice of election, AOL shall, within five
Business Days from the date of such notice of election deliver to Gateway at
7565 Irvine Center Drive, Irvine, California 92618, certificates representing
the shares of Common Stock specified in such notice of sale, duly endorsed in
blank or accompanied by stock powers duly endorsed in blank in proper form for
transfer and such Right of First Refusal Amount shall, at Gateway’s option, be
payable in cash upon such delivery or accrued and added to the Gateway Right
Payment Amount pursuant to Section 2.02(c)(ii)(B).

 

(b) Gateway shall have the right, at its option exercised by giving AOL notice
(the “Gateway Acquisition Right Exercise Notice”) of such exercise on or after
June 1, 2007 but on or prior to June 30, 2007, to acquire (the “Gateway
Acquisition Right”) up to a number of shares of Common Stock equal to (i) the
number of shares of Common Stock that AOL owns as of the date of this Agreement

 

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(including any shares issued upon conversion of the Series A Preferred Stock),
less (ii) the number of shares of Common Stock delivered to Gateway from and
after the date of this Agreement, at a price equal to the applicable Value Per
Common Share for each share of A Derived Common or other Common Stock. Such
shares shall be transferred free and clear of all Liens, other than those
arising from acts of Gateway or its affiliates. AOL shall, within five Business
Days of receipt of the Gateway Acquisition Right Exercise Notice, deliver to
Gateway at 7565 Irvine Center Drive, Irvine, California 92618, certificates
representing the shares of Common Stock subject to the exercise of the Gateway
Acquisition Right as set forth in the Gateway Acquisition Right Exercise Notice,
and on the date of such delivery, Gateway shall deliver to AOL payment, by wire
transfer to a bank account designated in writing by AOL (such designation to be
made at least two Business Days prior to such date of delivery), in immediately
available funds in an amount equal to (x) the number of shares of Common Stock
Gateway elects to purchase pursuant to the Gateway Acquisition Right Exercise
Notice, multiplied by (y) the applicable Value Per Common Share.

 

ARTICLE II

 

Post-2004 Strategic Alliance Agreements Payments

 

SECTION 2.01. Discharge of Future Payments. Subject to Section 2.02, all
obligations of AOL to pay any and all amounts due and payable by AOL under any
Strategic Alliance Agreement that accrue after December 31, 2004, including any
profit share, revenue share and bounty payments and any other fees, interest and
costs (other than costs and expenses incurred by Gateway or eMachines in respect
of enforcement of their respective rights under any Strategic Alliance Agreement
for which Gateway or eMachines is entitled to reimbursement from AOL under the
terms of such agreement) (“Future Amounts”) shall be deemed to have been paid by
AOL and shall be credited against the Gateway Right Payment Amount in accordance
with Section 2.02(c)(i)(B) when and as they become due (each date upon which any
such payment becomes due, a “Payment Date”) and AOL’s obligation to pay such
Future Amounts shall be permanently discharged on such Payment Date. Gateway
hereby irrevocably waives any right it may have at any time

 

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to receive any further payment in respect of such Future Amounts after such
Payment Date; provided; that Gateway’s and eMachine’s respective rights to
enforce the Strategic Alliance Agreement shall not be otherwise prejudiced.

 

SECTION 2.02. Future Amounts Option. (a) Gateway shall have the option to
terminate the application of Section 2.01 (the “Gateway Right”) with respect to
any Future Amounts in respect of which the Payment Date has not theretofore
occurred. Upon either (i) payment in full of the Gateway Right Payment Amount in
accordance with Section 2.02(b) or (ii) the Gateway Right Payment Amount
otherwise being reduced to $0, the provisions of Section 2.01 shall be of no
further force and effect in respect of (x) Future Amounts in respect of which
the Payment Date has not yet occurred on the date of receipt by AOL of the full
amount of the Gateway Right Payment Amount and which are not the subject of any
credit given under Section 2.02(d) (as determined by their inclusion in any
calculation required to be made pursuant to the last paragraph of Section
2.02(d)), and (y) Future Amounts maturing on such Payment Date to the extent in
excess of the Gateway Right Payment Amount on such date before giving effect to
such payments.

 

(b) Gateway may exercise the Gateway Right by providing AOL with written notice
of exercise of the Gateway Right (the “Gateway Right Exercise Notice”). The
Gateway Right Exercise Notice shall state (i) the Gateway Right Payment Amount
(calculated in accordance with Section 2.02(c)) being so paid and (ii) the date
on which the Gateway Right Payment will be made (the “Gateway Right Payment
Date”), which shall be a date no more than five and no less than three Business
Days after the Payment Calculation Date in respect of which the Gateway Right
Payment Amount is calculated pursuant to Section 2.02(c). Gateway shall deliver
to AOL on the Gateway Right Payment Date payment in cash, by wire transfer to a
bank account designated in writing by AOL no less than two Business Days prior
to the Gateway Right Payment Date, immediately available funds in an amount
equal to the Gateway Right Payment Amount being so paid.

 

(c) The “Gateway Right Payment Amount” as of any date (the “Payment Calculation
Date”) shall be an amount equal to:

 

(i) an amount, if positive, equal to (A) $97,000,000, minus (B) the aggregate
amount of all Future Amounts in respect of which the applicable Payment Date has
occurred as of such date, minus (C) any Excess 2004 Amounts in respect of which
the applicable Payment Date has occurred as of such date, minus (D) any cash
payments made by Gateway to AOL solely for purpose of reducing the Gateway Right
Payment Amount (including any Net Proceeds), plus

 

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(ii) an amount equal to (A) a purchase price adjustment equal to a rate per
annum equal to (x) 1.0% plus (y) the six-month London Interbank Offered Rate (as
quoted in The Wall Street Journal) (“LIBOR”) on the Closing Date for the period
commencing on the Closing Date to and including June 30, 2005, with such rate
(but not the margin specified in clause (x) above) to be adjusted on July 1,
2005, and on each successive six month interval thereafter, to the six-month
LIBOR rate as so quoted on such date (computed on the basis of a 360-day year
and the actual number of days elapsed) of the daily average amount of the
Gateway Right Payment Amount from the Closing Date to the applicable Payment
Calculation Date, plus (B) the aggregate Right of First Refusal Amount accrued
and not paid in cash in connection with all exercises by Gateway of its right of
first refusal under Section 1.06, plus

 

(iii) if the Gateway Right Payment Amount has not been paid to AOL on or prior
to June 30, 2005, an amount equal to 100% of the sum of the amounts calculated
in accordance with the preceding clauses (i) and (ii)(A) as of June 30, 2005
(less any credit that would have been made pursuant to clauses (d)(i) and (ii)
below if the Gateway Right Payment Amount would have been reduced to $0 on such
date), which amount shall either be (x) increased by the amount calculated in
accordance with the last paragraph of the following clause (d) if Gateway is
required to make a payment to AOL pursuant to such paragraph of clause (d) or
(y) decreased by the amount calculated in accordance with the last paragraph of
the following clause (d) if AOL is required to make a payment to Gateway
pursuant to such paragraph of clause (d) (the

 

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“Additional Amount”); provided that to the extent the Additional Amount would
otherwise be less than $10,000,000 or greater than $50,000,000, the Additional
Amount shall be increased or reduced, as applicable, to such amount.

 

(d) Notwithstanding anything to the contrary in this Agreement or any Strategic
Alliance Agreement, (i) the final Gateway Right Payment Date and (ii) each of
June 30, 2005 and June 30 2007 (provided that on such date the Gateway Right
Payment Amount would be reduced to $0), shall be deemed to be a “Payment Date”
pursuant to this Agreement (the “Supplemental Payment Date”), and the Future
Amounts to be credited against the Gateway Right Payment Amount on such
Supplemental Payment Date pursuant to Section 2.02(c)(i)(B) above shall be equal
to:

 

(i) 66.66% of the Future Amounts accrued during the calendar quarter last ended
prior to such Supplemental Payment Date in respect of which the Payment Dates
occurred during the then current calendar quarter, multiplied by

 

(ii) (A) in the case such Supplemental Payment Date occurs on the last day of
any calendar quarter, 1.0 or, (B) in the case of any other Supplemental Payment
Date, a fraction, the numerator of which is the actual number of days elapsed in
such then current calendar quarter (including such Supplemental Payment Date)
and the denominator of which is the aggregate number of days in such then
current calendar quarter.

 

If a Supplemental Payment Date occurs, or an adjustment is affected, pursuant to
the preceding provisions of this clause (d), then on the contractual due date
under the applicable Strategic Alliance Agreement(s) governing such Future
Amounts that were the subject of such Supplemental Payment Date, (x) AOL shall
pay to Gateway in cash the amount (if any) by which the actual amount of such
Future Amounts is determined pursuant to the terms of such Strategic Alliance
Agreement(s) to exceed the Future Amounts credited to the Gateway Right Purchase
Amount pursuant to this clause (d), and (y) Gateway shall pay to AOL in cash the
amount (if any) by which the Future Amounts credited against the Gateway Right
Payment Amount pursuant

 

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to this clause (d) exceeds the actual amount of such Future Amounts as
determined pursuant to the terms of such Strategic Alliance Agreement(s). All
calculations pursuant to Section 2.02(c)(iii) shall be made after giving effect
to this paragraph.

 

SECTION 2.03. True-Up. If (a) the Gateway Right Payment Amount exceeds $0 as of
June 30, 2007 or (b)any Bankruptcy Event occurs, then Gateway shall deliver to
AOL payment in cash, by wire transfer to a bank account designated in writing by
AOL, immediately available funds in an amount equal to the Gateway Right Payment
Amount calculated pursuant to Section 2.2(c) as of such date. A “Bankruptcy
Event” means (i) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (A) liquidation, reorganization or other relief
in respect of Gateway, or of substantially all of its assets, under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (B) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Gateway or for substantially
all of its assets, and, in any such case, such proceeding or petition shall
continue undismissed or unstayed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered or (ii) Gateway shall (A)
voluntarily commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (B) consent
to the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in the preceding clause (i), (C) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Gateway or for substantially all of its
assets, (D) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (E) make a general assignment for the
benefit of creditors or (F) take any action that could have a similar effect to,
or could cause, any of the foregoing.

 

SECTION 2.04. Stock Pledge. (a) Simultaneous with the Closing, Gateway shall
duly execute and deliver a Pledge Agreement in substantially the form of Exhibit
A to

 

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this Agreement (the “Pledge Agreement”), pursuant to which Gateway shall pledge
all of the Pledged Stock (which shall not be less than 812,396 shares), and the
other Pledged Collateral and shall deliver to AOL all Pledged Stock (together
with executed and undated stock powers) required to be delivered thereunder to
secure Gateway’s obligations under Section 2.03.

 

(b) Gateway shall not sell, transfer, pledge, assign or otherwise dispose of
(collectively, “Transfer”), or enter into any Contract, option or other
arrangement with respect to the Transfer of, any Pledged Stock to or with any
person, except Gateway may Transfer Pledged Stock solely for cash in an orderly
transaction at fair market value; provided that 100% of the Net Proceeds from
such Transfer (or, if less, an amount equal to the Gateway Right Purchase Amount
as of such date) are paid directly to AOL by the transferee or its agent on the
date of settlement of such Transfer to the extent necessary to reduce the
Gateway Right Payment Amount as of such date to $0. For purposes of this
Agreement, “Net Proceeds” means the cash proceeds received in respect of a
Transfer of Pledged Stock, net of all reasonable fees and out of pocket expenses
paid by Gateway to third parties (other than affiliates) to the extent that such
fees and expenses are attributable to such Transfer.

 

(c) In the event Gateway Transfers, or proposes to Transfer, all or any portion
of the Pledged Stock in a transaction not prohibited by this Agreement, AOL
shall take such action and execute any such documents as may be reasonably
requested by Gateway to release any Liens created by the Pledge Agreement in
respect of such Pledged Stock. In addition, AOL will take such actions as are
reasonably requested by Gateway to terminate the Liens and security interests
created by the Pledge Agreement upon the payment in full of the Gateway Right
Payment Amount or the reduction of the Gateway Right Payment Amount to $0.

 

SECTION 2.05. Release of Restrictions on the Transfer of Time Warner Inc. Stock.
From and after the Closing Date, all restrictions on the sale, transfer, pledge,
assignment or other disposition of any shares of capital stock of Time Warner
Inc. and any equity securities dividended or transferred to Gateway in respect
thereof

 

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owned by Gateway or any of its Affiliates, whether under the Investment
Agreement, including all of the provisions of Section 4.12 of the Investment
Agreement, or any other Contract to which AOL or one of its affiliates is a
party, shall be terminated and shall be of no further force or effect.

 

ARTICLE III

 

General Provisions

 

SECTION 3.01. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party without the prior
written consent of the other party hereto. Any attempted assignment in violation
of this Section 3.01 shall be void.

 

SECTION 3.02. No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their successors and permitted assigns and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto and such successors assigns, any legal or
equitable rights hereunder.

 

SECTION 3.03. Attorney Fees. A party in breach of this Agreement and the
unsuccessful party in any dispute, action, claim or defense thereof, shall, on
demand, indemnify and hold harmless the other party for and against all
reasonable out-of-pocket expenses, including legal fees, incurred by such other
party by reason of the enforcement and protection of its rights under this
Agreement. The payment of such expenses is in addition to any other relief to
which such other party may be entitled.

 

SECTION 3.04. Notices. All notices or other communications required or permitted
to be given hereunder to AOL or Gateway shall be delivered and deemed given as
set forth in Section 7.04 of the Stock Purchase Agreement and any such notices
to be given hereunder to eMachines shall be delivered to Gateway as set forth in
Section 7.04 of the Stock Purchase Agreement.

 

SECTION 3.05. Interpretation; Exhibits and Schedules; Certain Definitions. The
headings contained in

 

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this Agreement, in any Exhibit or Schedule hereto and in the table of contents
to this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning as defined in this Agreement. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. When a
reference is made in this Agreement to a Section, Subsection, Exhibit or
Schedule, such reference shall be to a Section or Subsection of, or an Exhibit
or Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation”. The words “hereby”, “hereof”, “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The words “date
hereof” shall refer to the date of this Agreement. The term “or” is not
exclusive. The word “extent” in the phrase “to the extent” shall mean the degree
to which a subject or other thing extends, and such phrase shall not mean simply
“if”. The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms. Any agreement or instrument defined
or referred to herein or in any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended, modified
or supplemented. References to a person are also to its permitted successors and
assigns.

 

SECTION 3.06. Counterparts; Effectiveness. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party; provided
that this Agreement (other than Section 1.02 and Article III) shall not become
effective until the Closing.

 

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SECTION 3.07. Entire Agreement; Amendment of Strategic Alliance Agreements. (a)
This Agreement, the Stock Purchase Agreement, the Pledge Agreement and the other
Ancillary Agreements, along with the Schedules and Exhibits hereto and thereto,
contain the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter. None of the parties shall be
liable or bound to any other party in any manner by any representations,
warranties or covenants relating to such subject matter except as specifically
set forth herein or in the Ancillary Agreements.

 

(b) AOL, Gateway and eMachines agree that Articles I and II of this Agreement
shall constitute an amendment and waiver of the provisions of the Strategic
Alliance Agreements solely to the extent necessary to carry out the stated
intent of this Agreement, with all such Strategic Alliance Agreements remaining
in full force and effect in all other respects; provided; that, notwithstanding
the foregoing, in no event shall the rights, remedies or agreements provided for
in any such Strategic Alliance Agreement be deemed amended, waived or diminished
by this Agreement (other than Section 1.02) to the extent the Closing does not
occur.

 

SECTION 3.08. Severability. If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to
any person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or the remaining
portion thereof) or the application of such provision to any other persons or
circumstances.

 

SECTION 3.09. Consent to Jurisdiction. Each party irrevocably submits to the
non-exclusive jurisdiction of (a) the Supreme Court of the State of New York,
New York County, and (b) the United States District Court for the

 

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Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement, any Ancillary Agreement or any
transaction contemplated hereby or thereby. Each party agrees to commence any
such action, suit or proceeding brought in the State of New York either in the
United States District Court for the Southern District of New York or if such
suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each party further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party’s respective address set forth
above shall be effective service of process for any such action, suit or
proceeding. Each party irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement, any Ancillary Agreement or the transactions contemplated hereby and
thereby in (i) the Supreme Court of the State of New York, New York County, or
(ii) the United States District Court for the Southern District of New York, and
hereby and thereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

 

SECTION 3.10. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.

 

SECTION 3.11. Waiver of Jury Trial. Each party hereby waives to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement, any Ancillary Agreement or any transaction
contemplated hereby or thereby. Each party (a) certifies that no representative,
agent or attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto have
been induced to enter into this Agreement and

 

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the Ancillary Agreements, as applicable, by, among other things, the mutual
waivers and certifications in this Section 3.11.

 

SECTION 3.12. Date of Payment. Any amount to be paid in cash pursuant to this
Agreement shall be deemed to have been paid (a) on the date such amount has been
received by the party to be paid, or (b) on the date such payment was first sent
in the manner and to the account required by this Agreement if such payment is
not received by the party to be paid on the same day such payment was sent, so
long as (i) the delay in receipt of such amount was the result of any cause
beyond the reasonable control of the party required to send such payment and
without its fault or negligence, such as acts of God, acts of civil or military
authority, embargoes, epidemics, war, riots, insurrections, fires, explosions,
earthquakes, floods or any failure in electrical systems and (ii) the amount is
received within seven days of the date such amount was first sent.

 

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IN WITNESS WHEREOF, AOL and Gateway have duly executed this Agreement as of the
date first written above.

 

AMERICA ONLINE, INC.,

by

 

/s/ Steven Swad

--------------------------------------------------------------------------------

Name:

 

Steven Swad

Title:

 

Chief Financial Officer

GATEWAY, INC.,

by

 

/s/ Roderick M. Sherwood III

--------------------------------------------------------------------------------

Name:

 

Roderick M. Sherwood III

Title:

 

Senior Vice President & Chief Financial Officer

EMACHINES, INC.,

by

 

/s/ Roderick M. Sherwood III

--------------------------------------------------------------------------------

Name:

 

Roderick M. Sherwood III

Title:

 

Senior Vice President & Chief Financial Officer

 

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