Document:

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                                                                    EXHIBIT 10.8

                                  Confidential
                               MARKETING AGREEMENT
                               -------------------

     This Marketing Agreement (the "Agreement"), dated as of June 17, 1999 (the
"Effective Date"), is between America Online, Inc. ("AOL"), a Delaware
corporation, with offices at 22000 AOL Way, Dulles, Virginia 20166, and
eMachines, Inc. ("eMachines"), a Delaware corporation, with offices at 14350
Myford Drive, Suite 100, Irvine, California 92606. AOL and eMachines may be
referred to individually as a "Party" and collectively as "Parties."

                                  INTRODUCTION
                                  ------------

     AOL and eMachines each desires to enter into an marketing relationship
whereby eMachines will distribute and promote certain products and or services
that are owned, operated, distributed or authorized to be distributed by or
through AOL or any of its Affiliates pursuant to the terms and conditions
contained herein. Defined terms used but not defined in the body of the
Agreement will be as defined on Exhibit A attached hereto.
                                ---------

                                      TERMS
                                      -----

     1.   eMachines Distribution of the AOL Software. eMachines shall distribute
          ------------------------------------------
          the AOL Software through all Products, and any other products
          subsequently agreed upon by the Parties. eMachines shall load the AOL
          Software onto each Product (including, without limitation, any new
          builds of the Products during the Term) by burning the AOL Software
          into the hard drive or other applicable storage mechanism of such
          Products. The AOL Software to be loaded shall include, in each case,
          the then-current version of the AOL Classic Service, the CompuServe
          Service, Netscape Navigator Browser Software, AIM Software, and ICQ
          Software (replacing, if necessary, any older versions of such software
          contained in the online services folder or similar area on the
          Products). The AOL Software for each respective AOL Service shall each
          be fully installed in each Product (i.e., not in setup.exe file form),
          provided, however, that eMachines' bundling obligations under this
          Section 1 shall not commence until eMachines' June 1999 product build
          cycle that is scheduled for retail distribution in early August, 1999.
          eMachines shall use best efforts, including but not limited to, making
          the necessary revisions to software preloads in order to meet such
          schedule and in no event shall the bundling obligations hereunder
          commence later than September, 1999. The AOL Software combined with
          the Products is sometimes referred to herein as the "Bundled
          Products".

     2.   eMachines Promotion of the AOL Software.
          ---------------------------------------

          2.1  Desktop Icons. For each Bundled Product, eMachines shall include
               -------------
               one desktop icon (outside of, and in addition to the placements
               within, the online services folder and ICW) for each AOL Service
               and prominent shortcuts for the AOL Classic Service, the
               CompuServe Service, Netscape Navigator Browser, AIM Service and
               ICQ Service from the "Start" menu and, with respect to the AOL
               Classic Service and the CompuServe Service, the "Task
<PAGE>

               Bar" of the Bundled Products (including, with respect to the
               desktop icon, any future items with similar functionality).

          2.2  Online Services Folder. The AOL Classic Service shall have the
               ----------------------
               first position within the "online services folder" (or successor
               or replacement product) on each Product. The CompuServe Service
               shall have the second position within the "online services
               folder" (or successor or replacement product) on each Product,
               provided that upon the launch date of eMachines.Net,
               eMachines.Net shall have the first position within the "online
               services folder", AOL Services shall have the second position
               within the "online services folder", and the Compuserve Service
               shall have the third position within the "online services
               folder".

          2.3  Packaging. eMachines shall prominently promote the AOL Services
               ---------
               on and in the packaging of the Bundled Products through (a)
               insertion of the documentation, brochures, and similar materials
               related to use of the AOL Classic Service, the CompuServe
               Service, Netscape Navigator Browser, AIM Service and ICQ Service
               which AOL will provide to eMachines for distribution to end users
               of the Bundled Products (the "Documentation"), (b) insertion of
               CD-ROM pack-ins containing the AOL Classic Software and
               CompuServe Software which AOL will provide to eMachines, and (c)
               display of AOL-supplied stickers on the Products (e.g., on-box,
               on-package, on-monitor). AOL will provide said materials, at its
               expense, delivered to the point of manufacture of the Products.

          2.4  Internet Connection Wizard. eMachines will include the AOL
               --------------------------
               Classic Service and the CompuServe Service within the Internet
               Connection Wizard (or successor or replacement product) (the
               "ICW") on each Bundled Product with the "most prominent and
               favorable promotion" (as described below). For purposes of the
               preceding sentence, the term "most prominent and favorable
               promotion" shall mean that (a) the AOL Classic Service and the
               CompuServe Service shall have the first and second positions,
               respectively, in any list of Interactive Services which appears
               within the ICW on the Bundled Products, provided, that after the
               launch date of eMachines.Net, eMachines.Net shall have the first
               position in any list of Interactive Services and AOL Classic
               Service and Compuserve Service will move to the second and third
               positions, respectively, (b) until the launch date of
               eMachines.Net, the AOL Classic Service shall be the default
               Interactive Service which is automatically selected when a user
               opens a page which contains a list of Interactive Services (i.e.,
               AOL shall be highlighted within the list of Interactive Services
               and information regarding the AOL Classic Service, and no other
               Interactive Service, shall appear in the adjacent window) and (c)
               no information regarding any Interactive Service (other than the
               AOL Classic Service, CompuServe Service, or eMachines.Net) shall
               appear when one of such AOL Services is highlighted on a page
               within the ICW which contains a list of Interactive Services.
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          2.5  Exclusivity; Preferred Placement. During the Exclusive Period,
               --------------------------------
               eMachines agrees that, other than eMachines.Net, the AOL Services
               shall be the only Interactive Services to be bundled or otherwise
               distributed with the Products; provided that notwithstanding the
               foregoing, eMachines shall be permitted to distribute through the
               Products Microsoft's Internet Explorer and any Interactive
               Services sponsored by Microsoft only to the extent eMachines is
               so obligated under agreements in connection with its use of
               Microsoft Windows and the license of the Microsoft operating
               system (the "Microsoft Agreements"). In addition, eMachines shall
               give AOL thirty (30) days written notice prior to a review of the
               eMachines.Net connectivity provider (currently to be provided by
               UUNet) (the "Connectivity Provider Review") and shall give AOL
               the opportunity to bid on becoming the eMachines.Net connectivity
               provider and shall otherwise allow AOL to participate in the
               negotiations during the Connectivity Provider Review. With
               respect to eMachines' obligations under the Microsoft Agreement
               to promote certain other Interactive Services on the Products and
               with respect to eMachines.Net, eMachines agrees that the AOL
               Services shall be promoted no less favorably than such
               Interactive Services on the Products. During the term of this
               Agreement or until otherwise addressed in Section 19 of this
               Agreement, eMachines shall not change the default portal of
               eMachines.Net (i.e. Netscape Netcenter) without the prior written
               consent of AOL, such consent shall be in AOL's sole discretion.
               Notwithstanding the provisions of this Section 2, eMachines
               obligations under this Agreement are subject to the Microsoft
               Agreements, its existing Agreement with UUNet, and its existing
               agreement with Trigem and with regard to any future agreements
               between eMachines and Microsoft Corporation, eMachines shall not
               subscribe to or make available a Microsoft sponsored Interactive
               Service unless obligated to do so under eMachines' license of the
               Microsoft operating system.

     3.   Trademark License. eMachines shall be entitled to use the Marks in
          -----------------
          connection with the fulfillment of its obligations hereunder.

     4.   Payments. AOL shall pay eMachines a fee of thirty-five dollars
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          (US$35.00) for each Qualified New Member to the AOL Classic Service
          acquired through the distribution of the Bundled Products. AOL shall
          pay eMachines a fee of forty dollars (US$40.00) for each Qualified New
          Member to the Compuserve Service acquired through the distribution of
          the Bundled Products. AOL shall pay such amounts to eMachines on a
          quarterly basis, within thirty (30) days of the end of each calendar
          quarter. For the purposes hereof, a "Qualified New Member" shall mean
          any person or entity who registers for the AOL Classic Service or the
          CompuServe Service during the Term using eMachines' special promotion
          identifier and who pays the then-standard fees required for membership
          to the AOL Classic Service or the CompuServe Service through at least
          three (3) consecutive billing cycles (not including any standard free
          trial period). Notwithstanding this Section 4, eMachines hereby agrees
          and acknowledges that AOL shall have no bounty payment obligations
          with respect to
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          customers who subscribe to the Compuserve Service in connection
          with the Consumer Rebate Offer described in Section 13.

     5.   Expenses. Except as otherwise expressly provided for herein, eMachines
          --------
          shall be responsible for the costs and expenses associated with its
          marketing, promotion and distribution of the AOL Software through the
          Bundled Products.

     6.   AOL Materials. AOL shall, at its expense, provide to eMachines the AOL
          -------------
          Software, documentation and related promotional materials to be
          included by eMachines within the Bundled Products (the "AOL
          Deliverables") delivered at AOL's expense, to the point of manufacture
          of the Products. The AOL Software and the CompuServe Software will be
          delivered in the form of a master diskette or CD-ROM to be pre-loaded
          by eMachines on each Product. eMachines acknowledges and agrees that
          AOL requires at least thirty (30) days to complete the preparation and
          delivery of the AOL Deliverables. eMachines shall use commercially
          reasonable efforts to order sufficient quantities of the AOL
          Deliverables and allow AOL at least thirty (30) days lead-time to
          develop and deliver such orders. AOL shall use commercially reasonable
          efforts to provide eMachines with the requested AOL Deliverables
          within thirty (30) days of receiving an order for such AOL
          Deliverables from eMachines.

     7.   Testing. eMachines shall test the AOL Software and shall notify AOL of
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          its acceptance or rejection of such software within twenty (20)
          business days of its receipt of such software, and shall cooperate
          with AOL on a timely, priority basis in order to report and resolve
          issues associated with the testing process. eMachines shall not
          distribute any Bundled Products hereunder without AOL's prior written
          approval.

     8.   Reporting. From time to time upon AOL's request (but no more than once
          ---------
          every quarter), eMachines shall provide AOL with a report, in a
          detailed format reasonably satisfactory to AOL, setting forth (i) the
          total number of Bundled Products distributed and sold, and (ii) future
          forecasts regarding distribution and sales of Bundled Products. AOL
          shall provide eMachines with quarterly reports setting forth the
          number of Qualified New Members acquired by AOL through the
          distribution of the Bundled Products in the preceding quarter, and
          eMachines shall have right to an independent third party audit of such
          quarterly reports.

     9.   International Distribution. The Parties agree that the provisions of
          --------------------------
          this Agreement shall also be applicable to Canadian distribution of
          the Bundled Products (including any variations of Products distributed
          in Canada, e.g., with respect to name or model number). For any other
          country (outside of the United States and Canada) in which AOL or an
          Affiliate offers an Interactive Service, the Parties will use best
          efforts (subject to the written agreement of any applicable Affiliate)
          to enter into an addendum to extend this Agreement to such other
          country on appropriate terms, and in the event that the parties cannot
          reach an agreement with respect to a particular country within sixty
          days of beginning negotiations in such county, but in no event less
          that six (6) months from the Effective Date, the exclusivity
          provisions contained in this Agreement with respect to such country
          shall be removed, provided, that with
<PAGE>

          respect to entering an agreement in Japan, the parties acknowledge
          that eMachines has an existing partner in Japan ("Hikari") and the
          parties shall make good faith efforts to reach an agreement within
          sixty days of the Effective Date under which Hikari's retail outlets
          shall be an integral part of the distribution channels under such
          agreement, and if the parties, despite such good faith efforts, cannot
          reach a three party agreement, the exclusivity provisions of this
          agreement with respect to Hikari in Japan shall be removed. A standard
          form of such addendum shall be made available to eMachines upon
          request. In addition, AOL and eMachines shall discuss and use best
          efforts to enter into an agreement to launch a consumer rebate program
          in England whereby eMachines computers shall be exclusively bundled
          with a Consumer Rebate Offer for a commitment to a UK/AOL Service for
          distribution as promptly as possible following the Effective Date.

     10.  Direct Mail. eMachines shall provide AOL with access to eMachines'
          -----------
          direct mail or other customer lists, to the extent such lists exist,
          excluding subscribers to eMachines.Net service, for AOL's mailing and
          acquisition efforts. Notwithstanding Section 10 of the Standard Terms,
          defined in Section 21, eMachines shall remain free to use and dispose
          in its sole discretion its customer lists and information.

     11.  Additional Activities. eMachines and AOL shall use good faith efforts
          ---------------------
          to work together on additional promotional activities on a
          case-by-case basis with the goal of maximizing registration of
          Qualified New Members and selling Bundled Products (i.e., cooperative
          contribution to the Parties promotional efforts, promotion in
          traditional media, other products and peripherals, etc.). eMachines
          agrees to promote the AOL Services in all of its media advertising to
          the extent it has the ability to influence the creative content of
          such advertisements, except for (i) promotions surrounding
          eMachines.Net, (ii) promotions that interfere with any non-competitive
          third party cooperative advertising programs, and (iii) promotions
          that have an unreasonable material effect on the cost of the
          underlying advertisement campaign. Further, in eMachines' development
          of Products other than laptop and desktop computers, eMachines shall
          use commercially reasonable best efforts (with AOL's reasonable
          cooperation) to make all such Products compatible with one or more AOL
          Services.

     12.  Warrants and Investment.
          -----------------------

          12.1 Grant of Warrants. Subject to the closing of the AOL Investment
               -----------------
               (as defined below), eMachines hereby grants to AOL warrants (the
               "Warrants") representing the right for a five-year period to
               purchase such shares of eMachines common stock equal to the value
               of Twelve Million Five Hundred Thousand dollars (US$12,500,000)
               divided by the eMachines' Stock Price, defined below. eMachines
               Stock Price shall equal (X) a number equal to the price per share
               of eMachines' common stock during an initial public offering of
               its common stock (an "IPO"), multiplied by a factor of 1.25,
               provided that the eMachines Stock Price shall be no less than a
               number equal to the initial issuance price per share of the
               Series A Preferred Stock of eMachines
<PAGE>

               multiplied by a factor of 1.25, or (Y) in any other scenario
               besides an IPO, a number equal to the price per share of
               eMachines' common stock based on a One Billion Two Hundred Fifty
               Million dollar (US$1,250,000,000) valuation of eMachines on a
               post-money number of shares basis. If eMachines does not satisfy
               the requirements of the AOL Investment Review by July 15, 1999,
               pursuant to Section 12.5 of this Agreement, then AOL will receive
               twenty five percent (25%) warrant coverage in the Series A
               Financing as long as AOL elects to invest no less than Thirty
               Million dollars (US$30,000,000). If eMachines requests AOL in
               writing to invest less than Fifty Million Dollars (US$50,000,000)
               in the Series A Financing or does not permit AOL to invest prior
               to December 31, 1999, eMachines shall issue the full Warrant
               regardless of the size of AOL's investment so long as AOL invests
               the amount requested by eMachines in a timely manner, provided
               that, in the event that eMachines does not satisfy the
               requirements of the AOL Investment Review and the requested
               investment by AOL is on terms less favorable than those proposed
               in the PPM, then AOL shall receive the full warrants whether or
               not it invests.

          12.2 Vesting of Warrants. All Warrants granted to AOL hereunder shall
               -------------------
               vest upon the issuance of the Warrants, discussed in Section 12.4
               of this Agreement, and shall contain a cashless exercise
               provision.

          12.3 Terms and Conditions. Any shares of stock acquired by AOL upon
               --------------------
               exercise of the Warrants shall possess rights, preferences, and
               privileges that are no less favorable than the rights,
               preferences, and privileges accorded to holders of Common Stock
               of the Company. Additionally, AOL shall be entitled to the same
               registration rights as the current common stockholders of
               eMachines (including Form S-1 and Form S-3 demand registration
               rights and piggyback registration rights), in connection with any
               shares of stock received upon exercise of the Warrants.

          12.4 Final Agreement. The provisions of this Section 12 contain all of
               ---------------
               the principal and essential terms and conditions of the Warrants
               to be issued to AOL hereunder, and without limiting the
               foregoing, as soon as practicable, but in no event later than
               five (5) days after the closing of the AOL Investment eMachines
               shall issue a warrant in a form reasonably acceptable to AOL;
               notwithstanding, in the event that the Warrant is not issued by
               the date five (5) days after the AOL Investment and on such date
               AOL is performing its obligations hereunder without material
               breach then after such date the Warrants shall be deemed to have
               been issued in accordance herewith and AOL shall have the right
               to cease performance of its obligations hereunder until such time
               as eMachines shall have issued the Warrants.

          12.5 AOL Investment. AOL, subject to AOL's Investment Review, defined
               --------------
               below, will purchase ("AOL Investment") Fifty Million dollars
               (US$50,000,000) of preferred stock of eMachines in its Series A
               financing (the "Series A Financing") in accordance with the terms
               and conditions set forth in the
<PAGE>

               Summary of Terms included in the Confidential Offering Memorandum
               of eMachines dated May 14, 1999 (the "PPM"), provided, however,
               that AOL shall have board observer rights as set forth in such
               documentation and the terms of the AOL Investment shall be no
               less favorable than the terms contained in the PPM. AOL's
               Investment Review shall mean the following:

     (X) AOL's approval, not to be unreasonably withheld, of the following
matters related to the Series A Financing: (i) the lead investor of the Series A
Financing, (ii) the additional co-investors of the Series A Financing, provided
that the list of co-investors or their affiliates (with the exception of any
affiliates of Comcast Interactive Capital Group) delivered to AOL prior to the
Effective Date and attached as Exhibit C have been previously approved by AOL;
(iii) the size of the Series A Financing, provided that One Hundred and Fifty
Million (US$150,000,000) is hereby approved by AOL, and (iv) approval of the
terms and conditions of the definitive documents related to the Series A
Financing, provided that to the extent the terms and conditions of such
documents are generally applicable to all investors of the Series A Financing,
the terms and conditions of such documents are presumed to be reasonable; and
(Y) AOL's approval, not to be unreasonably withheld, of the following due
diligence matters (i) review of the audited December 31, 1998, and March 31,
1999 financial quarters of eMachines, (ii) the review of the interim financial
statements from the end of the March 31, 1999 quarter up to May 31, 1999, (iii)
confirmation from Trigem that it has the ability and commitments in place to
satisfy the production requirements of eMachines as represented in the Business
Plan of the PPM for years 1999 and 2000, and (iv) no material adverse change in
the operations and financial condition of eMachines from the Effective Date
until the closing of the AOL Investment.

     13.  eMachines Consumer Rebate Offer.  eMachines and AOL hereby agree to
          -------------------------------
participate in a program offering consumers a rebate in accordance with the
terms and conditions set forth on Exhibit B attached hereto.

     14.  Term, Renewal, Termination.
          --------------------------

          14.1 Term. Unless earlier terminated, as set forth herein, the initial
               ----
               term of this Agreement will be five (5) years from the Effective
               Date (the "Initial Term").

          14.2 Renewal. This Agreement may be renewed for an additional five (5)
               -------
               year term (the "Renewal Period") upon mutual written agreement of
               the parties as set forth in Section 14.3 below. If this Agreement
               has not otherwise been terminated under this Agreement prior to
               the end of the Initial Term, AOL shall (A) extend the payment to
               eMachines of the revenue share under the eCommerce Package,
               defined in Section 16, for keyboards and Desktop channels only
               and AOL shall not be responsible to pay eMachines $.50 per each
               member per month under the eCommerce Package; and (B) continue to
               pay eMachines a fee of three dollars (US$3.00) per month for each
               consumer who participated in the Rebate Offer Contract described
               in Section 13 (or other amounts as relate to any agreed upon
               modification to the Consumer Rebate Offer) for the remainder of
               such consumer's continuous membership to the appropriate AOL
               Service whether or not the Parties elect to enter into a
<PAGE>

               Renewal Period. Further, eMachines will be paid bounties for
               those customers that activated their membership during the term
               of the Agreement but become Qualified New Members after
               termination of the Agreement.

          14.3 Declaration of Intent. Each Party is required to deliver to the
               ---------------------
               other Party no later than thirty (30) days prior to the fourth
               (4th) anniversary of the Effective Date of this Agreement a
               written notice stating whether or not such Party intends to
               negotiate in good faith for a Renewal Period. In the event that
               AOL declares in its notice that it is not interested in
               negotiating in good faith for a Renewal Period and eMachines
               declares in its notice that it is interested in negotiating in
               good faith for a Renewal Period, then on the fourth (4th)
               anniversary of the Effective Date, the Exclusive Period shall
               terminate.

          14.4 Termination for Breach. Except as expressly provided elsewhere in
               ----------------------
               this Agreement, either Party may terminate this Agreement at any
               time in the event of a material breach of the Agreement by the
               other Party which remains uncured after thirty (30) days written
               notice thereof to the other Party (or such shorter period as may
               be specified elsewhere in this Agreement). In the event this
               Agreement is terminated upon the material breach of the Agreement
               by AOL, AOL will (A) extend the payment to eMachines of the
               revenue share under the eCommerce Package, defined in Section 16,
               for keyboards and Desktop channels only and AOL shall not be
               responsible to pay eMachines $.50 per each member per month under
               the eCommerce Package; (B) continue to pay eMachines a fee of
               three dollars (US$3.00) per month for each consumer who
               participated in the Rebate Offer Contract described in Section 13
               (or other amounts as relate to any agreed upon modification to
               the Consumer Rebate Offer) for the remainder of such consumer's
               continuous membership to the appropriate AOL Service; and (C) pay
               bounties for those customers that activated their membership
               during the term of the Agreement but become Qualified New Members
               after termination of the Agreement.

          14.5 Termination for Bankruptcy/Insolvency. Either Party may terminate
               -------------------------------------
               this Agreement immediately following written notice to the other
               Party if the other Party (i) ceases to do business in the normal
               course, (ii) becomes or is declared insolvent or bankrupt, (iii)
               is the subject of any proceeding related to its liquidation or
               insolvency (whether voluntary or involuntary) which is not
               dismissed within ninety (90) calendar days or (iv) makes an
               assignment for the benefit of creditors.

15.  Promotional Materials/Press Releases. Each Party will submit to the other
     ------------------------------------
     Party, for its prior written approval, which will not be unreasonable
     withheld or delayed, any marketing, advertising, press releases, and all
     other promotional materials related to the transactions contemplated
     hereunder and/or referencing the AOL Services and the AOL Software or the
     other Party and/or its trade names, trademarks, and the AOL Services marks
     (the "Materials"). Each Party will solicit and reasonably consider the
     views of the other Party in designing and implementing such Materials.
<PAGE>

          16.  E-Commerce Package. During the Term of this Agreement, eMachines
               ------------------
               and AOL agree to work together to create a package (the
               "eCommerce Package") to sell to third parties that shall include:

                 (a) Keyboard keys: eMachines will manufacture a keyboard which
                     -------------
provides one touch access to the internet through keyboard keys, or the
functional equivalent, if a user is an AOL or Compuserve subscriber, which (1)
shall initially be dedicated and point directly to a related destinations
designated by AOL and (2) that the technical design of the keyboard buttons
allows the Parties to modify the initial URL or other programming with which it
is was originally shipped.

                 (b) Desktop "channels": The parties agree to work together with
                     ------------------
a 3rd party software developer to create a desktop tool containing designated
promotional space and links which (1) shall initially be dedicated and point
directly to a related destinations designated by AOL and (2) that the technical
design of the promotional space and links allows the Parties to modify the
initial URL or other programming with which it is was originally shipped.

                 (c) AOL Services buttons/links (i.e. pop-ups) that will contain
promotional space and links the technical design of the promotional space and
allows the Parties to modify the initial URL or other programming with which it
is was originally shipped.

                 (d) Pricing: The Parties agree to split the revenue evenly
                     -------
(i.e. 50% for each party) derived from the sale of any piece of the eCommerce
Package, net of standard commissions paid to third parties and that upon launch
of the eCommerce Package, AOL shall pay eMachines $.50 per each member per month
against eMachines share of the revenue to be derived from sales of the eCommerce
Package.

          17.  Customer Service. During the Term of this Agreement, eMachines
               ----------------
               and AOL agree to work together to develop a program (the "Call
               Center Acquisition Program") to enable additional new member
               registrations to the AOL Services.

          18.  Technical Support. AOL will be responsible for providing all
               -----------------
               technical support and customer service relating to the consumers'
               use of the appropriate AOL products and services as bundled under
               this Agreement and the Consumer Rebate Offer and eMachines will
               be responsible for the providing all technical support and
               customer service relating to the consumers' use of the Products
               and eMachines' services under this Agreement.

          19.  Netscape Portal. The parties hereto shall agree, to be added as
               ---------------
               an addendum of this Agreement, within 30 days of the Effective
               Date, to develop a customized Netcenter portal which shall
               include a custom Netcenter homepage (the "Custom Netcenter Home
               Page"), registration process for eMachines.Net, and a process for
               transitioning the allocation of revenues and users between the
               Parties at the end of term of such agreement. Such addendum shall
               include the following terms:
<PAGE>

               (a) AOL and eMachines shall work together to create a portal to
(i) maximize member experience/retention, (ii) maximize revenue, and (iii) meet
the objective of launching the eMachines.Net Interactive Service within 90 days
of the Effective Date.

               (b) AOL shall create a discrete area (the "eMachines Area") on
the Custom Netcenter Home Page whereby eMachines shall possess complete
flexibility to create eMachines' specific channels as desired and to arrange
third party relationships if so desired, including the ability to sell custom
channel space to these partners in return for e-commerce revenues for those
referrals and click-throughs. In order to maintain consistency with the
successful Netcenter programming model, the promotion of these sold partnerships
is envisioned as a feature frame on the Custom Netcenter Home Page containing a
prominent link to an eMachines "Commerce Partner" aggregation site and a
rotating photo/text promotion featuring partner special offers. For these
eMachines derived sales, eMachines will have control of the deal terms and shall
retain 100% of the revenue. Should AOL sell space within the eMachines Area, AOL
and eMachines will split the revenue (percentages to be determined) from those
sales. The parties agree that sales in this area will not be to competitors of
either AOL or eMachines, nor will it be to sites that are improper (i.e.
pornography sites, etc.).

               (c) AOL shall pay eMachines 50% of incremental advertising and
eCommerce revenue, net of commissions, derived from the traffic driven to the
Netcenter portal content areas through the eMachines.Net. Such payments will be
a product of CPM (typically between $5-25 depending on AOL's ability to sell the
advertising and commerce space at a premium), click through rate, sell through
rate and characteristics of portal use by the eMachines.Net users. Provided,
however, eMachines shall have the right to sell desktop channels, keyboard keys
and desktop icons, in a form similar to those keyboard keys and desktop channels
contemplated in Section 16 of this document, to third parties on systems sold
under eMachines.Net offers without payment to AOL. Such sales are subject to the
same terms and conditions outlined above with respect to links to competitive
and inappropriate sites.

               (d) eMachines.Net will at not any time co-brand or market
eMachines.net service with a connectivity provider that is a retail branded
Interactive Service, including but not limited to any marketing, advertising,
press releases and all other promotional materials, other than AOL without the
prior written consent of AOL, such consent shall be in AOL's sole discretion.

          20.  Hardware Development and Sales. eMachines and AOL agree to work
               ------------------------------
               together to develop a special bundle or SKU that is offered
               exclusively through AOL's sales efforts for AOL members, such
               products to be available at wholesale prices to AOL for AOL's use
               in reselling to AOL members AOL shall consider auctioning
               eMachines closeout products on the AOL Classic Service. AOL and
               eMachines may explore co-development of new Internet devices and
               products that work with AOL's existing DSL and Broadband
               technologies and services on a case by case basis.

          21.  Standard Terms and Conditions. This Agreement incorporates by
               -----------------------------
               reference AOL's standard legal terms & conditions (the "Standard
               Terms"), including terms related to licenses, representations and
               warranties, confidentiality, limitation of liability,
               disclaimers, indemnifications, use of AOL member information and
               miscellaneous
<PAGE>

               legal terms. The Standard Terms appear at keyword "Standard
               Marketing Terms 2" on the America Online(R) brand commercial
               online service and at http://mediaspace.aol.com/markterm2.html on
               AOL.com. A hard copy of the Standard Terms will be provided to
               eMachines upon written request. eMachines acknowledges that it
               has been provided an opportunity to review the Standard Terms and
               agrees to be bound by them. For purposes of the Standard Terms,
               (a) the defined term "Service" shall include both the AOL
               Services, and (b) the defined term "Software" shall include the
               AOL Software. Notwithstanding the foregoing, to the extent that
               Section 10 of Standard Terms contradicts the terms of the other
               provisions of this Agreement, the other provisions of this
               Agreement shall control.

          22.  Counterparts. This Agreement may be executed in counterparts,
               ------------
               each of which will be deemed an original and all of which
               together will constitute one and the same document.

                    (the following page is a signature page)
<PAGE>

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the Effective Date.

AMERICA ONLINE, INC.                        eMACHINES

By: /s/ David M. Colburn                       By: /s/ Stephen Dukker
   --------------------------------            -----------------------------

Print Name: David M. Colburn                Print Name: Stephen Dukker
           ------------------------                    ---------------------

Title: Senior Vice President                Title: President and CEO
      -----------------------------               --------------------------
<PAGE>

                                    EXHIBIT A

                                   DEFINITIONS
                                  -----------

     "Affiliate" shall mean an entity in which AOL holds at least a nineteen
percent (19%) equity interest.

     "AIM Service" shall mean the AOL-branded service, currently available
through the Internet, that enables end-users of such service to exchange, in
real-time, private, personalized messages with, and to monitor the online status
of, other end-users of such service and AOL Members.

     "AIM Software" shall mean the client software (U.S. version) developed and
distributed by AOL that enables end-users to access and use the AIM Service, and
any updates, patches, new version and bug fixes thereto.

     "AOL Services" shall include the following services (each an "AOL Service")
the AOL Classic Service, the CompuServe Service, Netscape Navigator Browser, AIM
Service and ICQ, and such other services as AOL may designate to eMachines in
writing during the Term.

     "AOL Classic Service" shall mean the U.S. version of the America Online(R)
brand commercial online service.

     "AOL Classic Software" shall mean the proprietary software used to connect
to and use the U.S. version of the America Online(R) brand service.

     "AOL Software" shall mean the AOL Classic Software, the CompuServe
Software, the Netscape Navigator Software, the AIM Software, the ICQ Software,
and such other software for an AOL Service as AOL may designate to eMachines in
writing during the Term.

     "CompuServe Service" shall mean the U.S. version of the CompuServe(R) brand
commercial online service.

     "CompuServe Software" shall mean the proprietary software used to connect
to and use the U.S. version of the CompuServe(R) brand service.

     Eligible Computer Product shall mean the following Products of eMachines:
all desktop and laptop computers purchased from a Qualified Retailer.

     "Exclusive Period" shall mean the Term of this Agreement, unless such
Exclusive Period is sooner terminated pursuant to Section 14.3.

     eMachines.Net shall mean the eMachines' branded Interactive Service, with
connectivity services currently to be provided by UUNet and with Netscape
Netcenter as the default portal.

     "ICQ" shall mean the standard narrow-band English language version of the
ICQ brand communications and messaging service available in the U.S.
<PAGE>

     "ICQ Software" shall mean the client software developed and distributed by
AOL that enables end-users to access and use ICQ, and any updates, patches, new
version and bug fixes thereto.

     "Interactive Service" shall mean any entity offering one or more of the
following: (i) online or Internet connectivity services (e.g., an Internet
service provider); (ii) an interactive site or service featuring a broad
selection of aggregated third party interactive content or navigation thereto
(e.g., an online service or search and directory service) and/or marketing a
broad selection of products and/or services across numerous interactive commerce
categories (e.g., an online mall or other leading online commerce site); and
(iii) communications software capable of serving as the principal means through
which a user creates, sends and receives electronic mail or real time online
messages.

     "Marks" shall mean the following tradenames, trademarks and service marks:
"America Online(R)" service, "AOL Canada/TM/" service, "AOL(R)"
service/software, AOL's triangle logo, the "CompuServe(R)" service/software and
logo, Netscape Navigator(R), ICQ/TM/, and AOL Instant Messenger/TM/.

     "Netscape Navigator Browser" shall mean the commercially release executable
code of Netscape Navigator.

     "Netscape Navigator Software" shall mean shall mean the client software
that enables end-users to access and use Netscape Navigator, and any updates,
patches, new version and bug fixes thereto.

     "Products" shall mean any personal desktop and laptop computers
manufactured, marketed and/or sold by eMachines (or its affiliates) during the
Term and any devices manufactured, marketed and/or sold by eMachines (or its
affiliates) during the Term to the extent such devices are compatible with any
Interactive Service.

     "Qualified Purchaser" shall mean any individual or entity who during the
Rebate Offer Period (as defined below) (a) during the Rebate Offer Period,
purchases an Eligible Computer Product, (b) is qualified by the Bank for the
Consumer Rebate Offer through a credit approval process administered by the
respective Qualified Retailer and the Bank at the time of the purchase, (c)
registers for a new account for the Compuserve Service in the United States
utilizing the Compuserve Software preloaded on the Eligible Computer Product,
(d) agrees to the Rebate Offer Contract (which shall include, without
limitation, a commitment to remain a Compuserve Service member and pay the
associated membership fee to the Bank for three (3) years) mails the Rebate
Offer Contract to the designated fulfillment house, (e) is eighteen years or
older and a resident of one of the fifty (50) United States or Washington D.C.
and (f) such other conditions as the Parties and the Bank may reasonably
determine.

     "Rebate Offer Contract" shall mean that certain contract between the
consumer and the Bank containing the terms and conditions of the Consumers
obligation to remain a Compuserve Service member and pay the associated
membership fee to the Bank for three (3) years) and the Bank's obligations to
such consumer.
<PAGE>

                                    EXHIBIT B

                              CONSUMER REBATE OFFER

     A.  Consumer Rebate Offer.  AOL shall use commercially reasonable efforts
         ---------------------
          to enter, promptly as possible following the Effective Date, an
          agreement with a financial institution ___________ (the "Bank") (the
          "Joint Marketing Agreement") whereby the Bank will offer (the
          "Consumer Rebate Offer") to Qualified Purchasers. Notwithstanding the
          above sentence, AOL shall use commercially reasonable efforts to
          launch a consumer rebate offer (the "Consumer Rebate Offer") on a test
          basis (including no less than two (2) national Computer Retail Chains)
          by July 1, 1999; deploy a launch at Staples, Inc. by July 8, 1999; and
          deploy a full channel launch by July 18, 1999. The Consumer Rebate
          Offer will consist of three separate programs whereby under one
          program Qualified Purchasers will receive two hundred dollars
          (US$200.00) for a three year commitment at $19.95 (the "$200
          Program"), under a separate program Qualified Purchasers will receive
          three hundred dollars (US$300.00) for a three year commitment at
          $19.95 (the "$300 Program"), and under a third program, Qualified
          Purchasers will receive four hundred dollars (US$400.00) for a three
          year commitment at $21.95 (US$400.00) (the "$400 Program"); provided
          that, after October 31, 1999, AOL shall have the right to increase the
          standard monthly dollar amount commitment to the Compuserve Service of
          Qualified Purchasers under the $200 Program and the $300 Program to
          $21.95. If AOL increases its standard pricing for the Compuserve
          Service to or above such amount and either (A) AOL's payment to
          eMachines for the $200 Program and $300 Program in Section B below
          shall increase by $1.00 (e.g., $6.00 and $3.00, respectively); or (B)
          eMachines can elect to continue the $19.95 offer to Qualified
          Purchasers under the $200 Program and the $300 Program,

     B.   provided that eMachines receives no increase in the monthly revenue
          share under Section B and eMachines represents the program as a
          special discount provided by eMachines in order to discount the
          generally available Compuserve Service subscription rates and AOL
          shall have the right to reasonably approve any marketing and
          promotional material connected to such program to ensure proper
          messaging of such an offer. The Parties hereby agree to enter into any
          additional agreements that may be necessary to implement the Consumer
          Rebate Offer discussed herein. Upon execution of this Agreement,
          eMachines shall provide AOL with a list of retailers that will be
          participating in the Consumer Rebate Offer ("Qualified Retailers"),
          provided, that eMachines shall have the opportunity to update such
          list by delivering fifteen (15) days written notice to AOL of such
          revisions, subject to AOL's reasonable approval. eMachines may be a
          Qualified Retailer to the extent eMachines sells an Eligible Computer
          Product directly to a Qualified Purchaser and advertises the Consumer
          Rebate Offer during the Rebate Offer Period.

     B.  Payments.  AOL hereby agrees to pay eMachines a fee of (i) five dollars
         --------
(US$5.00) per month for each consumer participating in the Consumer Rebate Offer
under the $200 Program, (ii) two dollars (US$2.00) per month for each consumer
participating in the Consumer Rebate Offer under the $300 Program and (iii)
seventy five cents (US$.75) per month for each consumer participating in the
Consumer Rebate Offer under the $400 Program. After completion of the three year
Rebate Offer Contract with respect to a Qualified Purchaser, AOL agrees to pay
eMachines a fee of three dollars (US$3.00) per month for each such purchaser for
the remainder of such purchaser's continuous membership to the CompuServe
Service (other than if such purchaser reduces his or her membership to a
generally available limited use plan intended
<PAGE>

for low volume users). AOL shall pay such amounts to eMachines on a monthly
basis, within thirty (30) days of the end of each month. In addition, to the
extent that AOL provides and funds a consumer rebate offer through a national
computer retailer similar to the terms of the Consumer Rebate Offer with the
purchase of an eMachines desktop or laptop computer that does not contain any
revenue share (e.g., ongoing payments from AOL) to such retailer (the "Portable
Rebate Offer"), then AOL hereby agrees to pay eMachines the fees payable under
this Section B applicable to such rebate amount; to the extent that the Parties
develop a system whereby AOL will be able to track the number of consumers
participating in a Portable Rebate Offer, which system the parties agree to use
commercially reasonable efforts to develop. In the event AOL provides an ongoing
revenue share to retailers and cannot prevent the offer from preempting the
eMachines revenue share under this Section B, then the exclusivity in Section D
of this Agreement with respect to any retailer is removed, and notwithstanding
Section 2 of the Agreement, eMachines shall not be restricted from placing an
Interactive Services provider in connection with a consumer rebate offer on the
desktop.

     C.  Promotion of Consumer Rebate Offer.  eMachines will submit to AOL, for
         ----------------------------------
its prior written approval, any marketing, advertising, press releases, and all
other promotional materials related to the transactions contemplated hereunder
and/or referencing the other Party and/or its trade names, trademarks, and
service marks (the "Materials"). Each Party will solicit and reasonably consider
the views of the other Party in designing and implementing such Materials.
eMachines, subject to the prior written approval of AOL, shall provide the
Qualified Retailers with the following ("Promotional Deliverables"): (i)
provision of point of sale merchandising (tear pads, shelf talkers, flyers,
danglers) and (ii) pre-approved ad slick for use in POP, to be used in
circulars. eMachines shall use its best efforts to ensure that each Qualified
Retailer provides sufficient space within its store where the Consumer Rebate
Offers will be prominently and regularly displayed. AOL shall have final
approval on all descriptions of the Consumer Rebate Offer and use of the Marks.

     D.  Service Provider.  eMachines agrees, other than eMachines.Net, that the
         ----------------
AOL Services shall be the only Interactive Services to be bundled with any
eMachines Consumer Rebate Offer.

     E.  Rebate Offer Period.  The Rebate Offer Period shall be a two (2) year
         -------------------
period commencing from the launch date (to be determined by eMachines, AOL and
the Bank), provided that at AOL's sole discretion, AOL may elect to extend the
Rebate Offer Period. For the Rebate Offer Period, AOL shall ensure that the
Consumer Rebate Offer is no less favorable than any AOL Services rebate offers
of a substantially similar structure (i.e., a rebate offer whereby a third party
financial institution shall pay qualified consumers and AOL a lump sum payment
and eMachines shall receive monthly payments from AOL for each consumer
participating in such rebate offer, taking into account all terms with respect
to such offer including, without limitation, the consumer offer terms, the terms
between AOL and the retailer or OEM, and any third party financing terms). In
addition, AOL shall use reasonable efforts to provide advance notice to
eMachines of other AOL Services rebate offers during the term and give eMachines
the opportunity to structure a rebate offer under similar terms. Over the course
of the five year term, the Parties agree to work together to develop new and/or
additional consumer offers with the intention of (a) meeting market and consumer
conditions and expectations; (b) maintaining competitiveness for both parties in
their respective marketplace; and (c) maintaining financially viable business
models. Such consumer offers could include an extension of the existing Consumer
Rebate Offer, the introduction of additional consumer rebate offers and/or the
replacement of the existing Consumer Rebate Offer with a new consumer rebate
offer(s). Such consumer offers to be similar in structure to the original
Consumer Rebate Offer and could include AOL Classic Service, CompuServe Service
and/or eMachines.Net. The Parties acknowledge that this agreement to work
together in the development of future consumer rebate offers does not mean that
the Parties must match the economic terms of other consumer rebate offers in the
marketplace.
<PAGE>

                                    EXHIBIT C

                 LIST OF CO-INVESTORS TO THE SERIES A FINANCING

Amerindo Investment Advisors
Banque Paribas
Bowman Capital Management
Chelsey Capital
Comcast Interactive Capital Group
Credit Suisse First Boston
Franklin Templeton
Hikari Tsushin
Omega Venture Partners
Rho Management
RRE Investors
Van Wagoner Capital Management
<PAGE>

AOL Standard Marketing Terms & Conditions (v.2)

Standard Legal Terms & Conditions

1. Agreement. MP acknowledges that these Standard Terms and Conditions are
   ---------
expressly referenced in and made a part of the Marketing Agreement which has
been executed by AOL and MP (the "Marketing Agreement", and collectively with
these Standard Terms and Conditions, the "Agreement"). Any defined term used in
these Standard Terms and Conditions without definition, shall have the meaning
ascribed to such term in the Marketing Agreement.

2. License. AOL hereby grants MP a non-exclusive license to distribute and
   -------
promote the Software and Documentation through the Bundled Products during the
Term, solely to the limited extent and for the express purposes contemplated
hereunder.

3. Trademark License. Solely in connection with the marketing, promotion
   -----------------
and distribution obligations specified in this Agreement, and subject to the
other provisions of this Agreement, MP shall be entitled to use the Marks,
provided that MP (a) does not create a unitary composite mark involving a Mark
without the prior written approval of AOL; and (b) displays symbols and notices
clearly and sufficiently indicating the trademark status and ownership of the
Marks in accordance with applicable trademark law and practice. In using the
Marks, MP acknowledges and agrees that: (i) the Marks are and shall remain the
sole property of AOL; (ii) MP shall not now or in the future contest the
validity of the Marks; (iii) nothing in this Agreement shall confer in MP any
right of ownership in the Marks; and (iv) MP acknowledges that its utilization
of the Marks will not create in it, nor will it represent it has, any right,
title or interest in or to such Marks other than the licenses expressly granted
herein.

4. Quality Standards. MP agrees that the nature and quality of its products
   -----------------
and services supplied in connection with the Marks shall conform to quality
standards communicated in writing by AOL for use of its trademarks. MP agrees to
supply to AOL, upon request, with a reasonable number of samples of any
materials publicly disseminated by MP which utilize the Marks. MP shall comply
with all applicable laws, regulations and customs and obtain any required
government approvals pertaining to use of the Marks.

5. Infringement Proceedings. MP agrees to promptly notify AOL of any
   ------------------------
unauthorized use of the Marks of which it has actual knowledge. AOL shall have
the sole right and discretion to bring proceedings alleging infringement of the
Marks or unfair competition related thereto; provided, however, that MP agrees
to provide AOL with its reasonable cooperation and assistance with respect to
any such infringement proceedings.

6. Ownership. MP acknowledges that the Software, Documentation and any
   ---------
other AOL Deliverables and any enhancements and improvements thereto are and
shall remain the exclusive property of AOL and MP shall not in any way alter,
interfere with or modify the Software, the Service functionality, user interface
or experience. Except as explicitly described in this Agreement, MP shall have
no rights to copy, use, reverse engineer, reproduce, display, modify or transfer
the Software, Documentation or any other AOL Deliverables, or any derivative
works thereof.

7. Representations and Warranties. Each Party represents and warrants to
   ------------------------------
the other Party that: (i) such Party has the full corporate right, power and
authority to enter into this Agreement and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not violate any agreement to which such Party is a party or by which it is
otherwise bound; (iii) when executed and delivered by such Party, this Agreement
will constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms; and (iv) such Party
acknowledges that the other Party makes no representations, warranties or
agreements related to the subject matter hereof that are not expressly provided
for in this Agreement. MP further represents that the content of the Products
will neither infringe on any copyright, U.S. patent or any other third party
right nor violate any applicable law or regulation.

8. Confidentiality. During the term of this Agreement, and for a period of
   ---------------
three (3) years following expiration or termination of this Agreement, each
Party acknowledges that Confidential Information may be disclosed to the other
Party during the course of this Agreement. Each Party agrees that it will take
reasonable steps, at least substantially equivalent to the steps it takes to
protect its own
<PAGE>

proprietary information, to prevent the duplication or disclosure of
Confidential Information of the other Party, other than by or to its employees
or agents who must have access to such Confidential Information to perform such
Party's obligations hereunder, who will each agree to comply with this section.
Notwithstanding the foregoing, either Party may issue a press release or other
disclosure containing Confidential Information without the consent of the other
Party, to the extent such disclosure is required by law, rule, regulation or
government or court order. In such event, the disclosing Party will provide at
least five (5) business days prior written notice of such proposed disclosure to
the other Party. For the purposes hereof, "Confidential Information" shall mean
any information relating to or disclosed in the course of the Agreement, which
is or should be reasonably understood by the receiving Party to be confidential
or proprietary to the disclosing Party, including, but not limited to, the terms
of the Agreement, information about AOL Members, technical processes and
formulas, source codes, product designs, sales, cost and other unpublished
information, product and business plans, projections, and marketing data.
"Confidential Information" will not include information (a) already lawfully
known to or independently developed by the receiving Party, (b) disclosed in
published materials, (c) generally known to the public, or (d) lawfully obtained
from any third party.

9. Limitation of Liability; Disclaimer; Indemnification.
   ----------------------------------------------------

9.1 Liability. UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE
    ---------
OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY
DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES), ARISING FROM BREACH OF THE AGREEMENT, THE USE OR INABILITY TO USE THE
SERVICE, OR ARISING FROM ANY OTHER PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT
LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS
("COLLECTIVELY, "DISCLAIMED DAMAGES"); PROVIDED THAT EACH PARTY WILL REMAIN
LIABLE TO THE OTHER PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE CLAIMED BY A
THIRD PARTY AND ARE SUBJECT TO INDEMNIFICATION PURSUANT TO SECTION 9.3.

9.2 No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
    ------------------------
AGREEMENT, NEITHER PARTY MAKES ANY, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE PRODUCTS,
THE SERVICE, THE SOFTWARE OR DOCUMENTATION, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.

9.3 Indemnity. AOL agrees to defend, indemnify and hold MP and the
    ---------
officers, directors, agents, affiliates, distributors, franchisees and employees
(the "Affiliated Parties") of MP harmless against any loss, damage, expense, or
cost, including reasonable attorneys fees (including allocated costs for in-
house legal services) ("Liabilities") arising out of any claim, demand,
proceeding, or lawsuit by a third party based on any assertion that the Software
breaches the patent, copyright, trademark, trade secret or other proprietary
right of such third party. MP agrees to defend, indemnify and hold AOL and the
Affiliated Parties of AOL harmless against any Liabilities arising out of any
claim, demand, proceeding, or lawsuit by a third party based on any assertion
that a Product breaches the patent, copyright, trademark, trade secret or other
proprietary right of such third party. Either Party will defend, indemnify, save
and hold harmless the other Party and its Affiliated Parties from any and all
Liabilities arising out of any claim, demand, proceeding or lawsuit by a third
party resulting from the indemnifying Party's material breach of any duty,
representation, or warranty of this Agreement, except where Liabilities result
from the gross negligence or knowing and willful misconduct of the other Party.

9.4 Claims. Each Party agrees to (i) promptly notify the other Party in
    ------
writing of any indemnifiable claim and give the other Party the opportunity to
defend or negotiate a settlement of any such claim at such other Party's
expense, and (ii) cooperate fully with the other Party, at that other Party's
expense, in defending or settling such claim. AOL reserves the right, at its own
expense, to assume the exclusive defense and control of any matter otherwise
subject to indemnification by MP hereunder.

9.5 Acknowledgment. AOL and MP each acknowledges that the provisions of
    --------------
this Agreement were negotiated to reflect an informed, voluntary allocation
between them of all risks (both known and unknown) associated with the
transactions contemplated hereunder. The provisions of this Section 9 will be
enforceable independent of and severable from any other enforceable or
unenforceable provision of this Agreement.

10. Solicitation of AOL Members. (a) During the term of the Agreement and
    ---------------------------
for a two year period thereafter, MP will not use the Service or any other
product or service owned, operated, distributed or
<PAGE>

authorized to be distributed by or through AOL or its Affiliates worldwide (the
"AOL Network") (including, without limitation, the e-mail network contained
therein) to solicit any authorized user of the AOL Network, including any
sub-accounts using the AOL Network under an authorized master account ("an AOL
Member") on behalf of another Interactive Service. More generally, MP will not
send unsolicited, commercial e-mail (i.e., "spam") through or into AOL's
products or services, absent a Prior Business Relationship. For purposes of this
Agreement, a "Prior Business Relationship" will mean that the AOL Member to whom
commercial e-mail is being sent has voluntarily either (i) engaged in a
transaction with MP or (ii) provided information to MP through a contest,
registration, or other communication, which included clear notice to the AOL
Member that the information provided could result in commercial e-mail being
sent to that AOL Member by MP or its agents. Any commercial e-mail to be sent
through or into AOL's products or services shall also be subject to AOL's
then-standard restrictions on distribution of bulk e-mail (e.g., related to the
time and manner in which such e-mail can be distributed through or into the AOL
product or service in question).

(b) MP shall ensure that its collection, use and disclosure of information
obtained from AOL Members under this Agreement ("Member Information") complies
with (i) all applicable laws and regulations and (ii) AOL's standard privacy
policies, available on the America Online(R) brand commercial online service at
the keyword term "Privacy" (or any successor keyword) (or, in the case of an MP
interactive site or area (e.g., MP's site on the Internet) that is linked to a
specific area of the AOL Network that MP developed, manages or markets, MP's
standard privacy policies so long as such policies are prominently published on
the site and provide adequate notice, disclosure and choice to users regarding
MP's collection, use and disclosure of user information). MP will not disclose
Member Information collected hereunder to any third party in a manner that
identifies AOL Members as end users of an AOL product or service or use Member
Information collected under this Agreement to market another Interactive
Service.

11. Excuse. Neither Party will be liable for, or be considered in breach of
    ------
or default under this Agreement on account of, any delay or failure to perform
as required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.

12. Independent Contractors. AOL and MP are independent contractors.
    -----------------------
Neither AOL nor MP is an agent, representative or partner of the other. Neither
AOL nor MP will have any right, power or authority to enter into any agreement
for or on behalf of, or incur any obligation or liability of, or to otherwise
bind, the other. This Agreement will not be interpreted or construed to create
an association, agency, joint venture or partnership between AOL and MP or to
impose any liability attributable to such a relationship upon either AOL or MP.

13. Notice. Any notice, approval, request, authorization, direction or other
    ------
communication under this Agreement will be given in writing and will be
deemed to have been delivered and given for all purposes: (i) on the delivery
date if delivered by electronic mail on the AOL Network (to screenname
"AOLNotice@aol.com" in the case of AOL), through a confirmed facsimile or if
delivered personally to the Party to whom the same is directed; (ii) one (1)
business day after deposit with a commercial overnight carrier, with written
verification of receipt, or (iii) five (5) business days after the mailing date,
whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available, to the person(s) specified below at
the address of the Party set forth in the first paragraph of the Agreement. In
the case of AOL, such notice will be provided to both the Senior Vice President
for Business Affairs (fax no. 703-265-1206) and the Deputy General Counsel (fax
no. 703-265-1105), each at the address of AOL set forth in the first paragraph
of the Marketing Agreement. In the case of MP, except as otherwise specified
herein, the notice address shall be the address for MP set forth in the first
paragraph of the Marketing Agreement, with the other relevant notice
information, including the recipient for notice and, as applicable, such
recipient's fax number or e-mail address, to be as reasonable identified by AOL.

14. No Waiver. The failure of either Party to insist upon or enforce strict
    ---------
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement will not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same will be
and remain in full force and effect.

15. Return of Information. Upon the expiration or termination of this Agreement,
    ---------------------
each Party will, upon the written request of the other Party, return or destroy
(at the option of the Party receiving the request) all confidential information,
documents, manuals and other materials specified by the other Party.

16. Survival. Sections 8 through 23 of these Standard Terms and Conditions
    --------
will survive the completion, expiration, termination or cancellation of this
Agreement.
<PAGE>

17. Entire Agreement. This Agreement sets forth the entire agreement and
    ----------------
supersedes any and all prior agreements of the Parties with respect to the
transactions set forth herein. Neither Party will be bound by, and each Party
specifically objects to, any term, condition or other provision which is
different from or in addition to the provisions of this Agreement (whether or
not it would materially alter this Agreement) and which is proffered by the
other Party in any correspondence or other document, unless the Party to be
bound thereby specifically agrees to such provision in writing.

18. Amendment. No change, amendment or modification of any provision of
    ---------
this Agreement will be valid unless set forth in a written instrument signed by
the Party subject to enforcement of such amendment, and in the case of AOL, by
an executive of at least the same standing as the executive who signed the
Agreement.

19. Further Assurances. Each Party will take such action (including, but
    ------------------
not limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by any other Party for the implementation or continuing
performance of this Agreement.

20. Assignment. MP will not assign this Agreement or any right, interest or
    ----------
benefit under this Agreement without the prior written consent of AOL. Subject
to the foregoing, this Agreement will be fully binding upon, inure to the
benefit of and be enforceable by the Parties hereto and their respective
successors and assigns.

21. Construction; Severability. In the event that any provision of this
    --------------------------
Agreement conflicts with the law under which this Agreement is to be construed
or if any such provision is held invalid by a court with jurisdiction over the
Parties to this Agreement, (i) such provision will be deemed to be restated to
reflect as nearly as possible the original intentions of the Parties in
accordance with applicable law, and (ii) the remaining terms, provisions,
covenants and restrictions of this Agreement will remain in full force and
effect.

22. Injunctive Relief; Remedies. MP acknowledges a violation of this Agreement
    ---------------------------
could cause irreparable harm to AOL for which monetary damages may be difficult
to ascertain or an inadequate remedy. MP therefore agrees that AOL will have the
right, in addition to its other rights and remedies, to seek and obtain
injunctive relief for any violation of this Agreement. Except where otherwise
specified, the rights and remedies granted to a Party under this Agreement
are cumulative and in addition to, and not in lieu of, any other rights or
remedies which the Party may possess at law or in equity.

23. Applicable Law; Jurisdiction. This Agreement will be interpreted, construed
    ----------------------------
and enforced in all respects in accordance with the laws of the Commonwealth of
Virginia except for its conflicts of laws principles. Each Party irrevocably
consents to the exclusive jurisdiction of the courts of the Commonwealth of
Virginia and the federal courts situated in the Commonwealth of Virginia, in
connection with any action to enforce the provisions of this Agreement, to
recover damages or other relief for breach or default under this Agreement, or
otherwise arising under or by reason of this Agreement.

24. Statements to Third Parties. MP shall not make, publish, or otherwise
    ---------------------------
communicate, or cause to be made, published, or otherwise communicated, any
deleterious remarks to any third parties concerning AOL or its Affiliates,
directors, officers, employees or agents.

25. Export Controls. Both Parties will adhere to all applicable laws,
    ---------------
regulations and rules relating to the export of technical data and will not
export or re-export any technical data, any products received from the other
Party or the direct product of such technical data to any proscribed country
listed in such applicable laws, regulations and rules unless properly
authorized.

26. Headings. The captions and headings used in this Agreement are inserted
    --------
for convenience only and will not affect the meaning or interpretation of this
Agreement.<PAGE>

                                 EXHIBIT 10.18

                                eMachines, Inc.

                      DONALD LA VIGNE EMPLOYMENT AGREEMENT

     This Agreement is entered into as of the Effective Date (as hereafter
defined) by and between eMachines, Inc. (the "Company"), and Donald La Vigne
(the "Executive").

     WHEREAS, upon the effectiveness of the merger (the "Effective Date") of
eMachines Acquisition Corp, a wholly owned subsidiary of the Company, with and
into FreePC, Inc. (the "Merger"), FreePC, Inc. ("FreePC") will become a wholly
owned subsidiary of the Company;

     WHEREAS, Executive was employed by FreePC, Inc. ("FreePC") prior to the
Merger;

     WHEREAS, the Company desires to employ Executive in the capacity of
Executive Vice President, Strategy and Business Development of the Company, and
Executive desires to accept such employment; and

     WHEREAS the parties desire and agree to enter into an employment
relationship by means of this Agreement;

NOW THEREFORE in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:

     1.   Duties and Scope of Employment.
          ------------------------------

          (a) Positions and Duties. Effective as of the Effective Date,
              --------------------
Executive will serve as Executive Vice President, Strategy and Business
Development of the Company. Executive will render such business and professional
services in the performance of his duties, consistent with Executive's position
within the Company, as shall reasonably be assigned to him by the Chief
Executive Officer of the Company and the Company's Board of Directors (the
"Board") and shall include, but not be limited to, being responsible for all
aspects of corporate strategy, marketing, Internet sales, business development,
international expansion and legal. The period of Executive's employment under
this Agreement is referred to herein as the "Employment Term."

          (b) Obligations. During the Employment Term, Executive will perform
              -----------
his duties faithfully and to the best of his ability and will devote his full
business efforts and time to the Company. Executive will be permitted to serve
on up to two (2) Boards of Directors, provided such services does not interfere
with the performance of Executive's duties hereunder nor create or involve a
conflict of interest with respect to the Company. Otherwise, for the duration of
the Employment Term, Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board.

<PAGE>

     2.   At-Will Employment. The parties agree that the Executive's employment
          ------------------
with the Company will be "at-will" employment and may be terminated at any time
with or without cause or notice. Executive understands and agrees that neither
his job performance nor promotions, commendations, bonuses or the like from the
Company give rise to or in any way serve as the basis for modification,
amendment, or extension, by implication or otherwise, of his employment with the
Company.

     3.   Compensation.
          ------------

          (a) Base Salary. During the Employment Term, the Company will pay
              -----------
Executive as compensation for his services a base salary at the annualized rate
of $199,000 (the "Base Salary"). The Base Salary will be paid periodically in
accordance with the Company's normal payroll practices and be subject to the
usual, required withholding.

          (b) Stock Option. As of the Effective Date, Executive will be granted
              ------------
a stock option, which will be, to the extent possible under the $100,000 rule of
Section 422(d) of the Internal Revenue Code of 1986, as amended (the "Code") an
"incentive stock option" (as defined in Section 422 of the Code), to purchase
250,000 shares of the Company's Common Stock at an exercise price to be
determined by the Company's Board of Directors on the date of grant (the
"Option"). The Option will vest as to 20% of the shares subject to the Option
one year after the date of grant, and as to 20% of the shares subject to the
Option each anniversary thereafter, so that the Option will be fully vested and
exercisable five (5) years from the date of grant, subject to Executive's
continued service to the Company on the relevant vesting dates. The Option will
be subject to the terms, definitions and provisions of the Company's Stock Plan
(the "Option Plan") and the stock option agreement by and between Executive and
the Company (the "Option Agreement"), both of which documents are incorporated
herein by reference.

     4.   Employee Benefits. During the Employment Term, Executive will be
          -----------------
entitled to participate in the employee benefit plans currently and hereafter
maintained by the Company of general applicability to other senior executives of
the Company, including, without limitation, the Company's group medical, dental,
vision, disability, life insurance, and flexible-spending account plans. The
Company reserves the right to cancel or change the benefit plans and programs it
offers to its employees at any time.

     5.   Expenses.  The Company will reimburse Executive for reasonable travel,
          --------
entertainment or other expenses incurred by Executive in the furtherance of or
in connection with the performance of Executive's duties hereunder, in
accordance with the Company's expense reimbursement policy as in effect from
time to time.

     6.   Treatment of FreePC Options.  Executive and the Company agree that
          ---------------------------
FreePC's obligations under the Restricted Stock Purchase Agreement dated January
25, 1999 and the Option Agreement dated February 1, 1999 (the "Option Agreement"
and collectively with the Restricted Stock Purchase Agreements, the "Assumed
Agreements"), as limited and otherwise elaborated in this Section 6, with
respect to any options or restricted stock purchase rights granted by FreePC to
Executive prior to the Merger (the "FreePC Options") shall be assumed by the
Company on the Effective Date in accordance with and subject to the terms and
conditions of the Agreement and Plan

                                      -2-
<PAGE>

of Reorganization dated November 24, 1999 by and among eMachines Acquisition
Corp., Inc., FreePC and the Company (the "Merger Agreement") entered into in
connection with the Merger.

          (a) As consideration for this Agreement, Executive agrees to waive all
existing acceleration rights under the Assumed Agreements concerning the FreePC
Options, except as set forth in Sections 6(b) and 7 hereof and except that
Executive and the Company hereby agree that subject to the approval of holders
of more than 75% of the shares of Stock of FreePC outstanding prior to the
Merger, on the Effective Date the vesting of the FreePC Options shall accelerate
with respect to all of the 250,000 options provided for in the Option Agreement
and a total of 502,734 shares of FreePC Common Stock purchased pursuant to the
other Assumed Agreements, which number represents 3.25% of the shares for each
month that Executive was an employee of FreePC prior to December 31, 1999. On or
as promptly as practicable after the Effective Date, and if the Executive shall
exercise such FreePC Options on the Effective Date, such 752,734 shares of
FreePC Common Stock shall be exchanged in accordance with the terms of the
Merger Agreement into (i) the number of shares of Company Common Stock arrived
at by multiplying the product of 0.7 and the Exchange Ratio (as defined in the
Merger Agreement) by 752,734, and (ii) warrants to purchase the number of shares
of Company Common Stock arrived at by multiplying the product of 0.3 and the
Exchange Ratio (as defined in the Merger Agreement) by 752,734. Such warrants
shall be exercisable at the Warrant Price, during the period and otherwise as
set forth in the Merger Agreement and, if the Executive shall not elect and
notify the Company as set forth in Section 6(c) hereof, shall expire as set
forth in the Merger Agreement even with respect to shares that had not vested
prior to such expiration.

          (b) After giving effect to Section 6(a) hereof, and subject to the
approval of holders of more than 75% of the shares of Stock of FreePC
outstanding prior to the Merger (in the absence of which approval on the
Effective Date the vesting of the FreePC Options shall accelerate with respect
to all of the Executive's FreePC Options), the unvested shares of Company Common
Stock exchanged in the Merger for Executive's unvested FreePC Options shall have
the same vesting schedule as is currently provided in the applicable Assumed
Agreement with the number of shares of Company Common Stock that vest upon each
vesting date such that the number of shares of Company Common Stock that vest
upon each vesting date shall be 72,266 shares of Company Common Stock multiplied
by the product of 0.7 and the Exchange Ratio. After giving effect to Section
6(a) hereof, and subject to the approval of holders of more than 75% of the
shares of Stock of FreePC outstanding prior to the Merger (in the absence of
which approval on the Effective Date the vesting of the FreePC Options shall
accelerate with respect to all of the Executive's FreePC Options), the warrants
to purchase shares of Company Common Stock exchanged in the Merger for
Executive's unvested FreePC Options shall have the same vesting schedule as is
currently provided in the applicable Assumed Agreement with the number of shares
of Company Common Stock that vest upon each vesting date such that the warrants
to purchase shares of Company Common Stock that vest upon each vesting date
shall be 72,266 shares of Company Common Stock multiplied by the product of 0.3
and the Exchange Ratio; provided, however, that if the Executive shall not elect
                        --------  -------
and notify the Company as set forth in Section 6(c) hereof, the warrants shall
expire as set forth in the Merger Agreement and the Executive shall have no
right thereafter to purchase any shares of Company Common Stock not purchased by
exercise of the warrants prior to such expiration, even with respect to shares
that had not vested prior to such expiration.

                                      -3-
<PAGE>

          (c) As soon as practicable after the Effective Date, the Company shall
deliver to the Executive an appropriate notice stating that the expiration date
of the warrants issued to Executive pursuant to the Merger Agreement with
respect to the FreePC Options exchanged as aforesaid shall be extended, if the
Executive so elects and so notifies the Company, to the dates which are, in the
case of each warrant or portion thereof, one month following the vesting of each
FreePC Option exchanged therefor. If the Executive does not make such election,
rights to purchase shares of Company Common Stock obtained by Executive in the
Merger may be irretrievably lost without compensation.

     7.  Severance.
         ---------

         (a) Involuntary Termination. If Executive's employment with the
             -----------------------
Company terminates as a result of an "Involuntary Termination" (as defined
herein) at any time within twelve (12) months of the Effective Date or at any
time within twelve (12) months after a "Change of Control" (as defined herein),
then (i) all unvested shares of Company Common Stock exchanged for Executive's
FreePC Options in the Merger shall become fully vested, (ii) all Company Common
Stock subject to a right of repurchase by the Company (or its successor) that
was purchased by Executive pursuant to the Assumed Agreements and exchanged for
FreePC Options in the Merger shall have such right of repurchase lapse with
respect to all of the shares, and (iii) all warrants to purchase shares of
Company Common Stock exchanged in the Merger for Executive's unvested FreePC
Options shall become fully vested.

         (b) Other Termination. If Executive's employment with the Company
             -----------------
terminates voluntarily by Executive, or other than as described in Section 7(a)
at any time, then (i) all vesting of the Company Common Stock and warrants to
purchase Company Common Stock exchanged in the Merger for FreePC Options will
terminate immediately and all payments of compensation by the Company to
Executive hereunder will terminate immediately (except as to amounts already
earned) and (ii) Executive will only be eligible for severance benefits in
accordance with the Company's established policies as then in effect.

     8.  Definitions.
         -----------

         (a) Cause. For purposes of this Agreement, "Cause" is defined as (i)
             -----
misappropriation or embezzlement of Company funds or an act of fraud upon the
Company made by Executive in connection with Executive's responsibilities as an
employee under this Agreement, (ii) Executive's conviction of, or plea of
nolo contendere to, a felony (iii) Executive's gross misconduct in connection
---------------
with Executive's responsibilities as an employee under this Agreement or (iv)
Executive's continued willful failure to substantially perform his employment
duties under this Agreement or any other continued failure to substantially
perform his duties under this Agreement that causes material harm to the
Company, but only in each case, after Executive has received a written demand
for performance from the Company which specifically sets forth the factual basis
for the Company's belief that Executive has not substantially performed his
duties under this Agreement and after Executive has had thirty (30) days after
receipt of such written demand to cure such nonperformance.

                                      -4-
<PAGE>

          (b) Change of Control. For purposes of this Agreement, "Change of
              -----------------
Control" of the Company is defined as: (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 50% or more of
the total voting power represented by the Company's then outstanding voting
securities; or (ii) a change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" will mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but will not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or (iii) the date of the consummation of a merger
or consolidation of the Company with any other corporation that has been
approved by the stockholders of the Company, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company; or (iv)
the date of the consummation of the sale or disposition by the Company of all or
substantially all the Company's assets.

          (c) Involuntary Termination. "Involuntary Termination" shall mean (i)
              -----------------------
without the Executive's express written consent, a reduction of the Executive's
duties, position or responsibilities relative to the Executive's duties,
position or responsibilities in effect immediately prior to such reduction, or
the removal of the Executive from such position, duties and responsibilities,
unless the Executive is provided with comparable duties, position and
responsibilities; provided, however, that a reduction in duties, position or
responsibilities solely by virtue of the Company being acquired and made part of
a larger entity (as, for example, when the Chief Financial Officer of the
Company remains as such following a Change of Control but is not made the Chief
Financial Officer of the acquiring corporation) shall not constitute an
"Involuntary Termination;"; (ii) without the Executive's express written
consent, a material reduction of the facilities and perquisites (including
office space and location) available to the Executive immediately prior to such
reduction; (iii) a reduction by the Company of the Executive's base salary as in
effect immediately prior to such reduction; (iv) any reduction by the Company in
the kind or level of employee benefits to which the Executive is entitled
immediately prior to such reduction with the result that the Executive's overall
benefits package is reduced; (v) without the Executive's express written
consent, the relocation of the Executive to a facility or a location more than
fifty (50) miles from his current location; (vi) any purported termination of
the Executive by the Company which is not effected for Cause; (vii) without
Executive's prior written consent, Executive is required to report to any
officer, employee or representative other than the CEO of the Company; or (viii)
if Stephen Dukker is neither the President or CEO of the Company.

     9.   Confidential Information. Executive agrees to enter into the Company's
          ------------------------
standard Confidential Information and Invention Assignment Agreement (the
"Confidential Information Agreement") upon commencing employment hereunder.

                                      -5-
<PAGE>

    10. Assignment. This Agreement will be binding upon and inure to the benefit
        ----------
of (a) the heirs, executors and legal representatives of Executive upon
Executive's death and (b) any successor of the Company. Any such successor of
the Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose, "successor" means any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Executive's right to compensation or other benefits will be null
and void.

    11. Notices. All notices, requests, demands and other communications called
        -------
for hereunder shall be in writing and shall be deemed given (i) on the date of
delivery if delivered personally, (ii) one (1) day after being sent by a well
established commercial overnight service, or (iii) four (4) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:

    If to the Company:

    eMachines, Inc.
    14350 Myford Road, Suite 100
    Irvine, California 93606-1002

    Attn: Chief Executive Officer
    ----
    Fax:  (714)-505-5065

    If to Executive:

    Donald S. La Vigne
    1615 N. Laurel Ave. #110
    Los Angeles, CA  90046

    12. Severability.  In the event that any provision hereof becomes or is
        ------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.

                                      -6-
<PAGE>

     13.    Arbitration.
            -----------

            (a) Executive agrees that any dispute or controversy arising out of,
relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof, shall be
settled by binding arbitration to be held in , California in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator will be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction. Unless otherwise required by law, the losing party in any
arbitration proceeding shall pay all of the arbitrator's fees and costs.

            (b) The arbitrator(s) will apply California law to the merits of any
dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings will be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. The Executive hereby consents
to the personal jurisdiction of the state and federal courts located in
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.

            (c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THIS AGREEMENT.

    14.    Integration.  This Agreement, together with the Option Plan, Option
           -----------
Agreement, the Confidential Information Agreement and the Merger Agreement
represents the entire agreement and understanding between the parties as to the
subject matter herein and supersedes all prior or contemporaneous agreements
whether written or oral.  No waiver, alteration, or modification of any of the
provisions of this Agreement will be binding unless in writing and signed by
duly authorized representatives of the parties hereto.

    15.    Tax Withholding. All payments made pursuant to this Agreement will be
           ---------------
subject to withholding of applicable taxes.

    16.    Governing Law. This Agreement will be governed by the laws of the
           -------------
State of California (with the exception of its conflict of laws provisions).

    17.    Acknowledgment. Executive acknowledges that he has had the oppor-
           --------------
tunity to discuss this matter with and obtain advice from his private attorney,
has had has had sufficient time to, and has carefully read and fully understands
all the provisions of this Agreement, and is knowingly and voluntarily entering
into this Agreement.

                                      -7-
<PAGE>

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by their duly authorized officers, as of the day and year
first above written.

     eMachines, Inc.

     By:  /s/ Stephen Dukker            Date: 1/14/00
          ------------------                 --------------------------
     Title:   Chief Executive Officer

     Donald S. La Vigne

      /s/ Donald S. La Vigne            Date:  1/14/00
     -----------------------                 --------------------------

                                      -8-

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