EXHIBIT 10.18
NON-COMPETITION
AGREEMENT
Dated as of January 30,
2004
by and between
MR. LAP SHUN (JOHN)
HUI
and
GATEWAY, INC.
NON-COMPETITION
AGREEMENT
This NON-COMPETITION AGREEMENT,
dated as of January 30, 2004 (this “ Agreement
”), is hereby entered into by and between Mr. Lap Shun (John)
Hui (the “ Individual ”) and Gateway, Inc., a
Delaware corporation (“ Gateway ”). Capitalized
terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Merger Agreement (as
described below).
WHEREAS, concurrently herewith
Gateway, Gateway Sub, LLC, a Delaware limited liability company and
a wholly owned subsidiary of Gateway, Gateway Sub II, LLC, a
Delaware limited liability company and a wholly owned subsidiary of
Gateway, the Individual and EM Holdings, Inc., a Delaware
corporation (“ eMachines ”), entered into an
Agreement and Plan of Merger, dated as of the date hereof (the
“ Merger Agreement ”);
WHEREAS, eMachines is engaged in the
“Business” (as defined herein) throughout the United
States, Canada and other parts of the world;
WHEREAS, the Individual is a
stockholder of eMachines and has acquired valuable trade secrets
and other confidential and proprietary information relating to the
business and the operation of eMachines;
WHEREAS, the Individual’s
covenant not to compete, as reflected in this Agreement, is an
essential part of the transactions contemplated by the Merger
Agreement;
WHEREAS, the Individual holds a
substantial number of the issued and outstanding shares of capital
stock of eMachines that, pursuant to the terms of the Merger
Agreement, will be exchanged for the Merger Consideration, and
therefore the Individual has a material economic interest in the
consummation of the transactions contemplated by the Merger
Agreement; and
WHEREAS, concurrently with the
execution of the Merger Agreement, in order to protect the goodwill
related to eMachines and as a condition and an inducement to
Gateway’s willingness to enter into the Merger Agreement and
consummate the transactions contemplated by the Merger Agreement,
the Individual has agreed to the non-competition and
non-solicitation covenants and the other agreements provided for in
this Agreement.
NOW, THEREFORE, in consideration of
the foregoing and to induce Gateway to consummate the transactions
contemplated by the Merger Agreement, the receipt and sufficiency
of which are hereby acknowledged, and with the knowledge that no
other good or valuable consideration has been offered to or
received by the Individual in connection with the execution of this
Agreement, the Individual hereby covenants and agrees as
follows:
ARTICLE I
NON-COMPETITION
1.1 Effective Time . This
Agreement is conditioned upon the occurrence of and shall become
effective concurrently with the Closing. This Agreement shall be
null and void ab initio should the transactions contemplated
by the Merger Agreement not be consummated for any
reason.
1.2 Non-Competition . During
the three-year period commencing with the Closing Date (the “
Restricted Period ”), the Individual shall not,
anywhere in the Business Area (as defined below), directly or
indirectly, (i) engage in the design, manufacture, distribution and
repair of personal computers (the “ Business ”)
for the Individual’s own account; (ii) enter the employ of,
or render any services to a Competing Business; or (iii) become
interested in any Competing Business in any capacity, including as
an individual, partner, stockholder, member, officer, director,
principal, agent, trustee or consultant, provided ,
however , the Individual may own, directly or indirectly,
solely as a passive investment, up to, but not more than, one
percent (1%) of any class of securities of any Competing Business
(but without otherwise participating in the activities of such
Person) if such securities are listed on a national securities
exchange or have been registered under Section 12(g) of the
Exchange Act. As used herein, “ Business Area ”
shall mean all of the United States, Canada and all other parts of
the world in which Gateway is conducting its business as of the
date hereof and has conducted its Business within the twelve months
preceding the date hereof. As used herein, “ Competing
Business ” means a Person or division of such Person
whose principal business is the Business, but specifically
excluding any retailer or division of any retailer.
1.3 Non-Interference . During
the Restricted Period, the Individual shall not, directly or
indirectly, solicit, induce, encourage or attempt to solicit,
encourage or induce any Person known to the Executive to be an
employee (or to have been an employee within the then immediately
preceding twelve (12) month period) of Gateway or eMachines or any
of their respective Subsidiaries to terminate his or her employment
or other relationship with Gateway or eMachines or any of their
respective Subsidiaries for any purposes whatsoever,
provided , however , that the foregoing provision
will not prevent the Individual from hiring any such person (i) who
contacts the Individual on his or her own initiative without any
direct or indirect solicitation by or encouragement from the
Individual, (ii) as a result of placing general advertisements in
trade journals, newspapers or similar publications which are not
directed at Gateway, eMachines or their respective affiliates or
employees, or (iii) as a result of the efforts of executive
recruiters who contact such person on their own initiative without
any encouragement from or on behalf of the Individual relating to
Gateway, eMachines or their respective affiliates or
employees.
1.4 Non-Solicitation . During
the Restricted Period, the Individual shall not, directly or
indirectly, solicit, induce, encourage or attempt to solicit,
induce or encourage any Person who is (or has been within the then
immediately preceding twelve (12) month period) a customer, client,
vendor, supplier or consultant of Gateway or eMachines or any of
their Subsidiaries to decrease the amount of business he, she or it
conducts, or terminate his, her or its
3
relationship, with Gateway or eMachines or any
of their Subsidiaries for any purpose whatsoever.
1.5 Restrictive Covenants .
Individual, by and through eMachines (taken as a whole, together
with its Subsidiaries and its parent), is a person whose principal
business is the Business. The Individual acknowledges that (i)
pursuant to the Merger Agreement, Gateway will acquire eMachines,
including eMachines’ assets and goodwill, and will carry on
the Business that previously had been conducted by eMachines and
the Individual and (ii) the restrictive covenants and the other
agreements contained in this Agreement are an essential part of the
transactions contemplated by the Merger Agreement. The Individual
represents, warrants, acknowledges and agrees that he or she has
been fully advised by counsel in connection with the negotiation,
preparation, execution and delivery of this Agreement and the
transactions contemplated by this Agreement. Accordingly, the
Individual agrees to be bound by the restrictive covenants and the
other agreements contained in this Agreement to the maximum extent
permitted by law, it being the intent and spirit of the parties
that the restrictive covenants and the other agreements contained
herein shall be valid and enforceable in all respects, and, subject
to the terms and conditions of this Agreement, mutually dependent
upon the obligations of Gateway to pay the Merger Consideration due
under the Merger Agreement. The Individual further agrees that
Gateway, in entering into the Merger Agreement, has relied on the
covenants of the Individual as set forth in this Agreement and that
Gateway would not have entered into the Merger Agreement if the
Individual had not agreed to be fully bound by the provisions of
this Agreement. However, Gateway and the Individual agree that if
any provision of this Agreement is found to be unenforceable due to
restrictions unreasonable in scope, duration or geographical area,
then the appropriate court may reform any such provision so that
the restrictions in it are reasonable and enforceable.
1.6 No Additional Obligations of
the Individual Excused . All of the provisions of Article I of
this Agreement are in addition to any other written agreements
on
