Document:

Stock Purchase Agreement

 EXHIBIT 10.1 
  
 EXECUTION COPY 
  

  
 STOCK PURCHASE AGREEMENT 
  
 BETWEEN 
  
 AMERICA ONLINE, INC. 
  
 AND 
  
 GATEWAY, INC. 
  
 DATED AS OF NOVEMBER 1, 2004 
  

 TABLE OF CONTENTS 
  

					
	 	 	 	  	Page

	ARTICLE I	  	 
		
	Purchase and Sale of Shares; Closing; Series C Preferred Stock	  	 
			
	 SECTION 1.01.
	 	Purchase and Sale of the Shares	  	1
	 SECTION 1.02.
	 	Closing Date	  	1
	 SECTION 1.03.
	 	Transactions To Be Effected at the Closing	  	2
		
	ARTICLE II	  	 
		
	Representations and Warranties Relating to Seller and the Shares	  	 
			
	 SECTION 2.01.
	 	Organization, Standing and Power	  	2
	 SECTION 2.02.
	 	Authority; Execution and Delivery; Enforceability	  	2
	 SECTION 2.03.
	 	No Conflicts; Consents	  	3
	 SECTION 2.04.
	 	Litigation	  	4
	 SECTION 2.05.
	 	The Shares	  	4
		
	ARTICLE III	  	 
		
	Representations and Warranties of Purchaser	  	 
			
	 SECTION 3.01.
	 	Organization, Standing and Power	  	4
	 SECTION 3.02.
	 	Authority; Execution and Delivery; Enforceability	  	5
	 SECTION 3.03.
	 	No Conflicts; Consents	  	5
	 SECTION 3.04.
	 	Litigation	  	6
	 SECTION 3.05.
	 	Certain Transactions	  	6
		
	ARTICLE IV	  	 
		
	Covenants	  	 
			
	 SECTION 4.01.
	 	Reasonable Best Efforts; Failure to Close	  	6
	 SECTION 4.02.
	 	Expenses; Transfer Taxes	  	8
	 SECTION 4.03.
	 	Brokers or Finders	  	8
	 SECTION 4.04.
	 	Publicity	  	9
	 SECTION 4.05.
	 	Preferred Stock	  	9
	 SECTION 4.06.
	 	Further Assurances	  	9
		
	ARTICLE V	  	 
		
	Conditions Precedent	  	 
			
	 SECTION 5.01.
	 	Conditions to Each Party's Obligation	  	10
	 SECTION 5.02.
	 	Conditions to Obligation of Purchaser	  	10

  

 i 

					
	 	 	 	  	Page

	 SECTION 5.03.
	 	Conditions to Obligation of Seller	  	11
	 SECTION 5.04.
	 	Frustration of Closing Conditions	  	11
		
	ARTICLE VI	  	 
		
	Termination, Amendment and Waiver	  	 
			
	 SECTION 6.01.
	 	Termination	  	12
	 SECTION 6.02.
	 	Effect of Termination	  	12
	 SECTION 6.03.
	 	Amendments and Waivers	  	13
		
	ARTICLE VII	  	 
		
	General Provisions	  	 
			
	 SECTION 7.01.
	 	Assignment	  	13
	 SECTION 7.02.
	 	No Third-Party Beneficiaries	  	13
	 SECTION 7.03.
	 	Attorney Fees	  	14
	 SECTION 7.04.
	 	Notices	  	14
	 SECTION 7.05.
	 	Interpretation; Exhibits and Schedules; Certain Definitions	  	15
	 SECTION 7.06.
	 	Counterparts	  	16
	 SECTION 7.07.
	 	Entire Agreement	  	16
	 SECTION 7.08.
	 	Severability	  	17
	 SECTION 7.09.
	 	Consent to Jurisdiction	  	17
	 SECTION 7.10.
	 	Governing Law	  	18
	 SECTION 7.11.
	 	Waiver of Jury Trial	  	18
	 SECTION 7.12.
	 	 Date of Payment
	  	18

  
 Exhibit A - Form of Series A Preferred
Stock Amendment 
  

 ii 

 Page 
  
 GLOSSARY OF DEFINED TERMS 
  

			
	 Term

	  	Defined in
Section

	 Acquisition
	  	1.01
		
	 Agreement
	  	Preamble
		
	 affiliate
	  	7.05(b)
		
	 Ancillary Agreements
	  	2.02
		
	 Applicable Law
	  	2.03
		
	 Business Day
	  	7.05(b)
		
	 Closing
	  	1.02
		
	 Closing Date
	  	1.02
		
	 Consent
	  	2.03
		
	 Contract
	  	2.03
		
	 Governmental Entity
	  	2.03
		
	 Investment Agreement
	  	3.05
		
	 Judgment
	  	2.03
		
	 Liens
	  	2.03
		
	 person
	  	7.05(b)
		
	 Proceedings
	  	2.04
		
	 Purchaser
	  	Preamble
		
	 Purchaser Material Adverse Effect
	  	3.03
		
	 Purchase Price
	  	1.01
		
	 Seller
	  	Preamble
		
	 Seller Material Adverse Effect
	  	2.03

  

 iii 

 Page 
  

			
	 Series A Preferred Stock
	  	Recitals
		
	 Series C Preferred Stock
	  	Recitals
		
	 Shares
	  	Recitals
		
	 subsidiary
	  	7.05(b)

  

 iv 

 STOCK PURCHASE AGREEMENT 
  
 STOCK PURCHASE AGREEMENT dated as of November 1, 2004 (this “Agreement”), between AMERICA ONLINE,
INC., a Delaware corporation (“Seller”) and GATEWAY, INC., a Delaware corporation (“Purchaser”). 
  
 Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser, 41,772.27 shares of Series A Preferred Stock, par value $0.01 per
share, of Purchaser (the “Series A Preferred Stock”) and 50,000 shares of Series C Preferred Stock, par value $0.01 per share, of Purchaser (the “Series C Preferred Stock” and, together with the Series A Preferred Stock, the
“Shares”). 
  
 Seller and Purchaser are simultaneously
entering into the Stock Transfers and Future Payments Agreement dated as of the date of this Agreement. 
  
 In consideration of the foregoing agreements and the premises and mutual covenants and obligations set forth herein, the parties hereby agree as follows:

  
 ARTICLE I  
  
 Purchase and Sale of Shares; Closing; Series C Preferred Stock

  
 SECTION 1.01. Purchase and Sale of the Shares. On the
terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell, transfer and deliver to Purchaser, free and clear of all Liens, and Purchaser shall purchase from Seller, the Shares for an aggregate purchase price of
$185,630,852 in cash (the “Purchase Price”), payable as set forth below in Section 1.03. The purchase and sale of the Shares is referred to in this Agreement as the “Acquisition”. 
  
 SECTION 1.02. Closing Date. The closing of the Acquisition (the
“Closing”) shall take place at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019, at 10:00 a.m. on December 22, 2004 (subject to the satisfaction (or, to the extent permitted by Applicable Law,
the waiver by the parties entitled to the benefits thereof) of the conditions set forth in Article V 

 as of such date) or at such other place, time or date as shall be agreed between Seller and Purchaser. The date on which
the Closing occurs is referred to in this Agreement as the “Closing Date”. 
  
 SECTION 1.03. Transactions To Be Effected at the Closing. At the Closing: 
  
 (a) Seller shall deliver to Purchaser certificates representing the Shares, duly endorsed in blank or accompanied by stock powers duly
endorsed in blank in proper form for transfer; and 
  
 (b) Purchaser shall deliver to Seller payment, by wire transfer to a bank account designated in writing by Seller (such designation to be made at least two Business Days prior to the Closing Date), immediately available funds in an amount
equal to the Purchase Price. 
  
 ARTICLE II  
  
 Representations and Warranties Relating to Seller and the Shares

  
 Seller hereby represents and warrants that: 
  
 SECTION 2.01. Organization, Standing and Power. Seller is duly
organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority to enable it to own the Shares. 
  
 SECTION 2.02. Authority; Execution and Delivery; Enforceability. Seller has full power and authority to execute this
Agreement and the other agreements and instruments executed and delivered in connection with this Agreement, including the agreements referred to in the recitals to this Agreement and any agreements delivered pursuant to such agreements (the
“Ancillary Agreements”) to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Acquisition and the other transactions contemplated hereby and thereby. The execution and delivery by Seller
of this Agreement and the Ancillary Agreements to which it is a party, the performance of its obligations hereunder and thereunder and the consummation by Seller of the Acquisition and the other transactions contemplated hereby and thereby have been
duly 
  

 2 

 authorized by all necessary corporate action. Seller has duly executed and delivered this Agreement and prior to the
Closing will have duly executed and delivered each Ancillary Agreement to which it is a party, and this Agreement constitutes, and each Ancillary Agreement to which it is a party will after the Closing constitute, its legal, valid and binding
obligation, enforceable against it in accordance with its terms. 
  
 SECTION 2.03. No Conflicts; Consents. The execution and delivery by Seller of this Agreement do not, the execution and delivery by Seller of each Ancillary Agreement to which it is a party will not, and the consummation of the
Acquisition and the other transactions contemplated hereby and thereby and the performance by Seller of its obligations hereunder and thereunder will not, conflict with, or result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any mortgages, liens, security interests, charges, easements, leases,
subleases, covenants, rights of way, options, claims, restrictions or encumbrances of any kind (collectively, “Liens”) upon any of the properties or assets of Seller under, any provision of (i) the certificate of incorporation or
by-laws of Seller or any of its subsidiaries, (ii) any contract, lease, license, indenture, agreement, commitment or other arrangement (a “Contract”) to which Seller or any of its subsidiaries is a party or by which any of their
respective properties or assets is bound or (iii) any judgment, injunction, order or decree (“Judgment”) or statute, law, ordinance, rule or regulation (“Applicable Law”) applicable to Seller or any of its
subsidiaries or any of their properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and could not reasonably be expected to have a material adverse effect on
the ability of Seller to perform its obligations under this Agreement and the Ancillary Agreements or on the ability of Seller to consummate the Acquisition and the other transactions contemplated hereby or thereby (a “Seller Material
Adverse Effect”). No material consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration or filing with, any Federal, state, local or foreign government or any court of competent
jurisdiction, 
  

 3 

 administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a
“Governmental Entity”) is required to be obtained or made by or with respect to Seller or any of its subsidiaries in connection with the execution, delivery and performance of this Agreement or any Ancillary Agreement or the
consummation of the Acquisition or the other transactions contemplated hereby and thereby. 
  
 SECTION 2.04. Litigation. There are not any (a) outstanding Judgments against Seller or any of its subsidiaries, (b) suits, actions or proceedings (“Proceedings”) pending or, to the knowledge
of Seller, threatened against Seller or any of its subsidiaries or (c) investigations by any Governmental Entity that are, to the knowledge of Seller, pending or threatened against Seller or any of its subsidiaries that, in any case, individually or
in the aggregate, have had or could reasonably be expected to have a Seller Material Adverse Effect. 
  
 SECTION 2.05. The Shares. Seller is the record owner of the Shares and has good and valid title to the Shares, free and clear of all Liens.
Assuming Purchaser has the requisite power and authority to be the lawful owner of the Shares, upon delivery to Purchaser at the Closing of certificates representing the Shares, duly endorsed by Seller for transfer to Purchaser, and upon
Seller’s receipt of the Purchase Price, good and valid title to the Shares will pass to Purchaser, free and clear of any Liens, other than those arising from acts of Purchaser or its affiliates. 
  
 ARTICLE III  
  
 Representations and Warranties of Purchaser 
  
 Purchaser hereby represents and warrants that: 
  
 SECTION 3.01. Organization, Standing and Power. Purchaser is duly
organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority to enable it to own, lease or otherwise hold its properties and assets and to carry on its
business as currently conducted. 
  

 4 

 SECTION 3.02. Authority; Execution and Delivery; Enforceability. Purchaser has full power and
authority to execute this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Acquisition and the other transactions contemplated hereby and thereby. The execution
and delivery by Purchaser of this Agreement and the Ancillary Agreements to which it is a party, the performance of its obligations hereunder and thereunder and the consummation by Purchaser of the Acquisition and the other transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action. Purchaser has duly executed and delivered this Agreement and prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is a party,
and this Agreement constitutes, and each Ancillary Agreement to which it is a party will after the Closing constitute, its legal, valid and binding obligation, enforceable against it in accordance with its terms. 
  
 SECTION 3.03. No Conflicts; Consents. The execution and delivery by
Purchaser of this Agreement do not, the execution and delivery by Purchaser of each Ancillary Agreement to which it is a party will not, and the consummation of the Acquisition and the other transactions contemplated hereby and thereby and the
performance by Purchaser of its obligations hereunder and thereunder will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Purchaser or any of its subsidiaries under, any provision of (i) the certificate of incorporation or
by-laws of Purchaser or any of its subsidiaries, (ii) any Contract to which Purchaser or any of its subsidiaries is a party or by which any of their respective properties or assets is bound or (iii) any Judgment or Applicable Law applicable to
Purchaser or any of its subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and could not reasonably be expected to have
a material adverse effect on the ability of Purchaser to perform its obligations under this Agreement and the Ancillary Agreements or on the ability of Purchaser to consummate the 
  

 5 

 Acquisition and the other transactions contemplated hereby or thereby (a “Purchaser Material Adverse
Effect”). No Consent of or registration, declaration or filing with any Governmental Entity is required to be obtained or made by or with respect to Purchaser or any of its subsidiaries in connection with the execution, delivery and
performance of this Agreement or any Ancillary Agreement or the consummation of the Acquisition or the other transactions contemplated hereby and thereby. 
  
 SECTION 3.04. Litigation. There are not any (a) outstanding Judgments against Purchaser or any of its subsidiaries, (b) Proceedings pending or, to
the knowledge of Purchaser, threatened against Purchaser or any of its subsidiaries or (c) investigations by any Governmental Entity that are, to the knowledge of Purchaser, pending or threatened against Purchaser or any of its subsidiaries that, in
any case, individually or in the aggregate, have had or could reasonably be expected to have a Purchaser Material Adverse Effect. 
  
 SECTION 3.05. Certain Transactions. To the knowledge of any executive officer of Purchaser, as of the date of this Agreement, there is no material
non-public definitive agreement or letter of intent (or active negotiations of any such definitive agreement or letter of intent) regarding (a) a Change of Control of Purchaser (as defined in the Investment Agreement made as of the 20th day of
October, 1999, by and between Purchaser and Seller (the “Investment Agreement”)) or (b) a strategic alliance between Purchaser and a major computer manufacturer outside the ordinary course of business. 
  
 ARTICLE IV 
  
 Covenants 
  
 SECTION 4.01. Reasonable Best Efforts; Failure to Close. (a) On the terms and subject to the conditions of this Agreement, each party shall use its
reasonable best efforts to cause the Closing to occur, including taking all reasonable actions necessary to comply promptly with all legal requirements that may be imposed on it or any of its affiliates with respect to the Closing. Without limiting
the foregoing, each party shall use its reasonable best efforts to cause the Closing to occur on December 22, 2004. 
  

 6 

 (b) If (i) the Closing does not occur on December 22, 2004 (A) due to a breach by Purchaser of
Purchaser’s obligation to close the Acquisition and the other transactions contemplated by this Agreement in the manner and at the time contemplated by this Agreement or (B) solely as a result of the failure of the conditions set forth in
Section 5.03 to be satisfied (or waived by Seller) or (ii) the Closing does occur, in either case, all restrictions under any Contract with Purchaser or any of its affiliates on the sale, transfer, pledge or other disposition of any shares of
capital stock of Purchaser and any equity securities dividended or transferred to Seller in respect thereof owned by Seller or any of its affiliates, whether under the Investment Agreement, including all of the provisions of Section 4.11 of the
Investment Agreement, or any other Contract to which Purchaser or one of its affiliates is a party (other than, if the Closing occurs, the restrictions set forth in Section 1.06 of the Stock Transfers and Future Payments Agreement dated as of the
date hereof among Seller, Purchaser and eMachines, Inc.), shall be terminated and shall be of no further force or effect from and after such date, and Purchaser shall use its reasonable best efforts to remove any legends on the certificates
representing such shares of capital stock or equity securities that refer to such restrictions, including the second paragraph of the legend set forth in Section 3.15 of the Investment Agreement. 
  
 (c) If the Closing does not occur on December 22, 2004 (i) due to a breach by
Seller of Seller’s obligation to close the Acquisition and the other transactions contemplated by this Agreement in the manner and at the time contemplated by this Agreement or (ii) solely as a result of the failure of the conditions set forth
in Section 5.02 to be satisfied (or waived by Purchaser), (A) all shares of capital stock of Purchaser and any equity securities dividended or transferred to Seller in respect thereof owned by Seller or any of its Affiliates shall cease to be
convertible and/or redeemable at the option of AOL and (B) all restrictions under any Contract with Seller or any of its affiliates on the sale, transfer, pledge or other disposition of any shares of capital stock of Seller and any equity securities
dividended or transferred to Purchaser in respect thereof owned by Purchaser or any of its affiliates, whether under the Investment Agreement, including all of the provisions 
  

 7 

 of Section 4.12 of the Investment Agreement, or any other Contract to which Purchaser or one of its affiliates is a
party, shall be terminated and shall be of no further force or effect from and after such date, and Seller shall use its reasonable best efforts to remove any legends on the certificates representing such shares of capital stock or equity securities
that refer to such restrictions, including the second paragraph of the legend set forth in Section 2.15 of the Investment Agreement. 
  
 (d) Seller and Purchaser expressly agree that the provisions of Sections 4.01(b) and (c) shall (i) be in addition to, and shall not impair or in any way
limit the ability of either party to obtain, any remedy (at law or in equity) otherwise available to such party for a breach of the terms and provisions of this Agreement and (ii) not be deemed to release either party from any liability for any
breach by such party of the terms and provisions of this Agreement. 
  
 SECTION 4.02. Expenses; Transfer Taxes. (a) Except as otherwise provided for in this Agreement (including Section 7.03) or the Ancillary Agreements, whether or not the Closing takes place, all costs and expenses incurred in
connection with this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby shall be paid by the party incurring such expense, including all costs and expenses incurred pursuant to Section 4.01. 
  
 (b) All transfer taxes applicable to the transfer of the Shares shall be paid
one-half by Seller and one-half by Purchaser. Each party shall use reasonable best efforts to avail itself of any available exemptions from any such taxes or fees, and to cooperate with the other parties in providing any information and
documentation that may be necessary to obtain such exemptions. 
  
 SECTION 4.03. Brokers or Finders. Each of Purchaser and Seller represent, as to itself and its affiliates, that no agent, broker, investment banker or other firm or person is or will be entitled to any broker’s or finder’s
fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement including the Acquisition. 
  

 8 

 SECTION 4.04. Publicity. No public release or announcement concerning the transactions
contemplated hereby shall be issued by any party unless such party has used commercially reasonable efforts to obtain the prior consent of the other party to such release or announcement (which consent shall not be unreasonably withheld), except as
such release or announcement may be required by Applicable Law (including the filing and announcement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, that would be required in the event the Closing does not occur), court
process or the rules or regulations of any United States or foreign securities exchange or self regulatory authority, in which case the party required to make the release or announcement shall, to the extent feasible and permitted by Applicable Law,
allow the other party reasonable time to comment on such release or announcement in advance of such issuance. 
  
 SECTION 4.05. Preferred Stock. (a) Seller and Purchaser agree that any Purchase Notice (as defined in the Certificate of the Voting Powers,
Designations, Preferences, Rights, Qualifications, Limitations and Restrictions of the Series C Preferred Stock) that Seller may deliver shall be of no force or effect if the Closing shall occur or if the Closing shall not occur and Section
4.01(c)(A) shall apply. 
  
 (b) Purchaser shall issue and deliver
to Seller on December 24, 2004, the number of shares of Purchaser’s common stock required to be issued and delivered to Seller pursuant to the Certificate of the Voting Powers, Designations, Preferences, Rights, Qualifications, Limitations and
Restrictions of the Series A Preferred Stock upon the automatic conversion of the Series A Preferred Stock Seller retains immediately after the Closing. 
  
 SECTION 4.06. Further Assurances. From time to time, as and when requested by any party, each party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions, as may reasonably be necessary to consummate the transactions contemplated by this Agreement. 
  

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 ARTICLE V 
  
 Conditions Precedent 
  
 SECTION 5.01. Conditions to Each Party’s Obligation. The obligation of Purchaser to purchase and pay for the Shares and the obligation of
Seller to sell the Shares to Purchaser is subject to the satisfaction or waiver on or prior to the Closing of the following conditions: 
  
 (a) Governmental Approvals. All authorizations, consents, orders or approvals of, or declarations or filings with, or expirations
of waiting periods imposed by, any Governmental Entity necessary for the consummation of the Acquisition and the other transactions contemplated by this Agreement shall have been obtained or filed or shall have occurred. 
  
 (b) No Injunctions or Restraints. No Applicable Law
or Judgment enacted, entered, promulgated, enforced or issued by any Governmental Entity or other legal restraint or prohibition preventing the consummation of the Acquisition or the other transactions contemplated by this Agreement shall be in
effect. 
  
 SECTION 5.02. Conditions to Obligation of
Purchaser. The obligation of Purchaser to purchase and pay for the Shares is subject to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of the following conditions: 
  
 (a) Representations and Warranties. The
representations and warranties of Seller in this Agreement and the Ancillary Agreements that are qualified as to materiality or Seller Material Adverse Effect shall be true and correct, and such representations and warranties that are not qualified
as to materiality or Seller Material Adverse Effect shall be true and correct in all material respects, in each case, as of the date hereof and as of the Closing Date as though made on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct, or true and correct in all material respects, as applicable, on and as of such earlier date). 
  

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 Purchaser shall have received a certificate signed by an authorized officer of Seller to such effect.

  
 (b) Performance of Obligations of
Seller. Seller shall have performed or complied in all material respects with all obligations and covenants required by this Agreement and the Ancillary Agreements to be performed or complied with by Seller by the time of the Closing, and
Purchaser shall have received a certificate signed by an authorized officer of Seller to such effect. 
  
 SECTION 5.03. Conditions to Obligation of Seller. The obligation of Seller to sell the Shares is subject to the satisfaction (or waiver by Seller)
on or prior to the Closing Date of the following conditions: 
  
 (a) Representations and Warranties. The representations and warranties of Purchaser made in this Agreement and the Ancillary Agreements that are qualified as to materiality or Purchaser Material Adverse Effect
shall be true and correct, and such representations and warranties that are not qualified as to materiality or Purchaser Material Adverse Effect shall be true and correct in all material respects, in each case, as of the date hereof and as of the
Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct, or true and correct in all
material respects, as applicable, on and as of such earlier date). Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect. 
  
 (b) Performance of Obligations of Purchaser. Purchaser shall have performed or complied in all
material respects with all obligations and covenants required by this Agreement and the Ancillary Agreements to be performed or complied with by Purchaser by the time of the Closing, and Seller shall have received a certificate signed by an
authorized officer of Purchaser to such effect. 
  
 SECTION 5.04.
Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure of any condition set forth in this Article V to be satisfied if such failure was caused by such party’s failure to act in good faith or to use its
reasonable best efforts to cause the Closing to occur. 
  

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 ARTICLE VI 
  
 Termination, Amendment and Waiver 
  
 SECTION 6.01. Termination. (a) Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the Acquisition and
the other transactions contemplated by this Agreement abandoned at any time prior to the Closing: 
  
 (i) by mutual written consent of Seller and Purchaser; 
  
 (ii) by Seller if any of the conditions set forth in Sections 5.01 or 5.03 shall have become incapable of fulfillment, and shall not have been waived by
Seller; 
  
 (iii) by Purchaser if any of the conditions set forth
in Sections 5.01 or 5.02 shall have become incapable of fulfillment, and shall not have been waived by Purchaser; or 
  
 (iv) by Seller or Purchaser, if the Closing does not occur on or prior to December 22, 2004; 
  
 provided, however, that the party seeking termination pursuant to clause (ii), (iii) or (iv) is not then in material breach of
any of its representations, warranties, covenants or agreements contained in this Agreement. 
  
 In the event of termination by Seller or Purchaser pursuant to this Section 6.01, written notice thereof shall forthwith be given to the other and the transactions contemplated by this Agreement shall be terminated,
without further action by any party. 
  
 SECTION 6.02. Effect
of Termination. If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in Section 6.01, this Agreement shall become null and void and of no further force and effect, except for the provisions of (i)
Section 4.01(b) relating to restrictions on the transfer of Purchaser’s stock, (ii) Section 4.01 (c) relating to the termination of the right to convert or redeem Purchaser’s 
  

 12 

 securities and restrictions on transfer of Seller’s stock, (iii) Section 4.02 relating to certain expenses, (iv)
Section 4.03 relating to finder’s fees and broker’s fees, (v) Section 4.04 relating to publicity, (vi) Section 6.01 and this Section 6.02, and (vii) Article VII. Nothing in this Section 6.02 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement. It is expressly understood and agreed
by the parties hereto that Purchaser and Seller shall be entitled to equitable relief, including the remedy of specific performance, with respect to any breach or attempted breach of this Agreement, including a breach of a party’s obligation to
close the Acquisition and the other transactions contemplated by this Agreement in the manner and at the time contemplated by this Agreement upon satisfaction (or waiver) of the conditions set forth in Article V. 
  
 SECTION 6.03. Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the parties hereto. By an instrument in writing Purchaser, on the one hand, or Seller, on the other hand, may waive compliance by the other with any term or provision of this
Agreement that such other party was or is obligated to comply with or perform. 
  
 ARTICLE VII 
  
 General
Provisions 
  
 SECTION 7.01. 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 parties hereto. Any attempted assignment in violation of this Section 7.01 shall be void. 
  
 SECTION 7.02. 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 and assigns, any legal or
equitable rights hereunder. 
  

 13 

 SECTION 7.03. 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 reasonable 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 7.04. Notices. All notices or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered by hand or sent by facsimile or sent, postage prepaid, by registered, certified or express mail or recognized overnight courier service and shall be deemed given when so delivered by hand or facsimile, or if mailed,
three days after mailing (one Business Day in the case of express mail or overnight courier service), as follows: 
  

	 	(i)	if to Purchaser, 

  
 Gateway, Inc. 
 7565 Irvine Center Drive

 Irvine, California 92618 
 Phone: (949) 471-7000 
 Fax: (949) 471-7020 
 Attention: General Counsel 
  
 with a copy to: 
  
 Kaye Scholer LLP 
 1999 Avenue of the Stars, Suite 1700 
 Los
Angeles, California 90076 
 Phone: (310) 788-1070 
 Fax: (310) 788-1200 
 Attention: Barry Dastin, Esq.; and 
  

	 	(ii)	if to Seller, 

  
 America Online, Inc. 
 22000 AOL Way

 Dullles, Virginia 20166 
 Phone: (703) 265-1311 
 Fax: (703) 265-1105 
 Attention: Deputy General Counsel 
  

 14 

 with copies to: 
  

Time Warner Inc. 
 One Time Warner Center 
 New York, New York 10019 
 Phone: (212) 484-8000 
 Fax: (212) 484-7167 
         (212) 484-7151 
 Attention: General Counsel 
                   Treasurer; and 
  
 Cravath, Swaine & Moore LLP 
 825 Eighth Avenue 
 New York, New York 10019 
 Phone: (212)474-1000 
 Fax: (212)474-3700 
 Attention: Faiza J. Saeed, Esq. 
  
 SECTION 7.05. Interpretation; Exhibits and Schedules; Certain Definitions. (a) The headings contained in 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 
  

 15 

 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. 
  
 (b) For all purposes hereof the following terms shall
have the following meanings: 
  
 “affiliate” of
any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person. 
  
 “Business Day” means any day, other than a Saturday, Sunday or one on which banks are authorized by
Applicable Law to close in New York, New York. 
  
 “person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity. 
  
 “subsidiary” of any person means another person, an amount of the voting securities, other voting ownership
or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first person or by another subsidiary of such first person. 
  
 SECTION 7.06. Counterparts. 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 parties. 
  
 SECTION 7.07. Entire Agreement. This Agreement and the Ancillary Agreements, along with the Schedules and Exhibits hereto and thereto, contain the entire agreement and understanding among the parties hereto
with respect to 
  

 16 

 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. 
  
 SECTION 7.08. 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 7.09. 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 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. 
  

 17 

 SECTION 7.10. 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 7.11. 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 the Ancillary Agreements, as applicable, by, among other things, the mutual waivers and certifications in this Section 7.11. 
  
 SECTION 7.12. 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. 
  

 18 

 IN WITNESS WHEREOF, Seller and Purchaser 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

  

 19Stock Transfers and Future Payments Agreement

 EXHIBIT 10.2 
  
 EXECUTION COPY 
  

  
 STOCK TRANSFERS AND FUTURE PAYMENTS AGREEMENT

  
 BETWEEN 
  
 AMERICA ONLINE, INC., 
  
 GATEWAY, INC. 
  
 AND 
  
 EMACHINES, INC. 
  
 DATED AS OF NOVEMBER 1, 2004 
  

 TABLE OF CONTENTS 
  

					
	 	 	 	  	Page

	 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

  

 i 

 GLOSSARY OF DEFINED TERMS 
  

			
	 Term

	  	 Defined in
 Section

	 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)

  

 ii 

			
	 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

  

 iii 

 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”).

 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. 
  

 2 

 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

  

 3 

 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 
  

 4 

 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 
  

 5 

 (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 
  

 6 

 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 
  

 7 

 (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 
  

 12 

 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. 
  

 13 

 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 
  

 14 

 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 
  

 15 

 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. 
  

 16 

 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

  

 17

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