EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
on September 1, 2004, by and between xXxxx.xxx, Inc., a Delaware corporation
("eCost"), and PC Mall, Inc., a Delaware corporation ("PC Mall").
WHEREAS, eCost is currently a subsidiary of PC Mall;
WHEREAS, eCost is considering an initial public offering of its Common Stock ("IPO");
WHEREAS, PC Mall will own not less than eighty percent (80%) of the
issued and outstanding shares of eCost common stock (the "Retained Shares")
following the IPO;
WHEREAS, subject to the terms and conditions set forth in that certain
Master Separation and Distribution Agreement (the "Master Separation and
Distribution Agreement"), by and between PC Mall and eCost, dated as of the date
hereof, PC Mall intends to distribute to its stockholders, approximately six
months following the closing of the IPO, all of the Retained Shares in a
tax-free distribution (the "Distribution"); and
WHEREAS, eCost and PC Mall desire to establish terms and conditions for
the registration for public resale of the Retained Shares after the IPO and
prior to the Distribution in the event the Master Separation and Distribution
Agreement is terminated or PC Mall otherwise determines not to effect the
Distribution.
NOW, THEREFORE, in consideration of the premises and mutual promises
and representations contained herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the parties hereto do mutually
covenant, stipulate and agree as follows:
Section 1. Definitions.
The following terms shall have the following meanings unless the
context otherwise indicates:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Business Day" means a day on which The Nasdaq Stock Market is open for
business.
"Demand Registration" means a registration of Registrable Shares under
the Act pursuant to a Registration Request given under Section 2 hereof.
"Indemnified Persons" shall have the meaning given in Section 9 hereof.
"Maximum Amount" shall have the meaning given in Section 6 hereof.
"NASDAQ" means the Nasdaq National Market of The Nasdaq Stock Market.
"Piggyback Registration" means registration of Registrable Shares under
the Act pursuant to Section 3 hereof.
"Piggyback Request" means a written request to eCost pursuant to
Section 3 hereof for the registration of Registrable Shares pursuant to the Act.
"Priority" shall have the meaning given in Section 6 hereof.
"Registration Expenses" shall have the meaning given in Section 5
hereof.
"Registration Request" means a written request to eCost pursuant to
Section 2 hereof for Demand Registration of Registrable Shares pursuant to the
Act.
"Registrable Shares" means the Fourteen Million (14,000,000) Shares
covered by this Agreement which will be owned by PC Mall after the IPO and prior
to the Distribution, such number to be equitably adjusted in the event of a
stock split, stock dividend, or combination or reclassification of Shares.
"Selling Expenses" shall have the meaning given in Section 5 hereof.
"Shares" means shares of the Common Stock, $0.001 par value, of eCost.
"SEC" means the Securities and Exchange Commission.
Section 2. Demand Registration.
(a) At any time during the period beginning one hundred eighty-one
(181) days following the IPO and prior to the Distribution or, should the Master
Separation and Distribution Agreement be terminated prior to the Distribution,
at any time thereafter, PC Mall may submit a Registration Request for Demand
Registration covering all or part of the Registrable Shares, which request must
request registration of at least Three Million (3,000,000) Shares. The
Registration Request shall state the number of Registrable Shares to be
registered and the intended plan of distribution thereof. eCost shall be
obligated to honor Registration Requests to register Registrable Shares pursuant
to this Section 2 on a total of only five (5) occasions. A request withdrawn
pursuant to Subsection 2(c) hereof or deemed to be a Piggyback Registration
pursuant to Subsection 2(d) hereof shall not be counted as a Registration
Request for this purpose. eCost shall be deemed to have satisfied its obligation
under this Section 2 with respect to a Registration Request if a registration
statement filed pursuant to a Registration Request becomes effective under the
Act and remains effective for the period required hereby, or if the failure of
such a registration statement to become or remain effective results primarily
from any action or inaction of PC Mall.
Subject to the conditions and limitations of Section 4 hereof, eCost
will use its commercially reasonable efforts to file a registration statement
under the Act registering the Registrable Shares covered by a Registration
Request within forty-five (45) days after it receives such Registration Request
unless such Registration Request is withdrawn as permitted by Subsection 2(c)
hereof.
(b) The right to Demand Registration is subject to the procedures in
Section 4 hereof and the following additional conditions and limitations:
(i) PC Mall may withdraw the Registrable Shares from a
Registration Request at any time prior to the time the registration statement
becomes effective, provided that eCost may ignore a notice of withdrawal made
within twenty four (24) hours of the time the registration statement becomes
effective. Following such a withdrawal, eCost shall not take any further action
to register the withdrawn Registrable Shares, and shall not be obligated to
register any Registrable Shares if the number of non-withdrawn Registrable
Shares is less than Three Million (3,000,000) Shares. However, except as
otherwise provided in Subsection 2(c) or (d) hereof, a Registration Request,
once made, shall count as having been made for purposes of Subsection 2(a),
unless it is withdrawn by PC Mall within fifteen (15) days after having been
made or it is withdrawn before eCost devotes any significant efforts to the
preparation of the registration statement.
(ii) No Registration Request may be made within ninety (90)
days after the effective date of a registration statement filed by eCost under
the Act covering an underwritten public offering of its equity securities
(except for the registration statement relating to the IPO);
(iii) Unless otherwise agreed to by eCost, any Demand
Registration must relate to a firm commitment underwriting for which the
managing underwriter shall be reasonably satisfactory to eCost (such
satisfaction not to be withheld unreasonably) or a non-underwritten offering on
a "shelf" basis in accordance with Rule 415 under the Act.
(iv) eCost shall be permitted to use any registration form
available to it for the registration of Registrable Shares, and shall not be
obligated to include in the prospectus any information that may be incorporated
by reference or that is not required to be included therein by the applicable
registration form.
(v) No Registration Request may be made by PC Mall if the
amount of shares proposed to be sold could be sold by PC Mall without limitation
under Rule 144 under the Act.
(c) Notwithstanding the foregoing, if eCost is aware at the time it
receives a Registration Request that a registered public sale of Shares is being
contemplated or is in the process of being prepared (except as provided in
Section 7 hereof), it will notify PC Mall of the relevant facts, and PC Mall
shall have the right to withdraw the Registration Request by written notice
given to eCost within ten (10) days after eCost's notice under this Subsection
2(c), in which case such Registration Request will be deemed not to have been
made for purposes of Subsection 2(a).
(d) For an additional ninety (90) days following the date on which PC
Mall may first submit a Registration Request for Demand Registration, eCost will
be entitled to include Shares in any Demand Registration and to reduce the
number of Shares to be sold by PC Mall thereunder to a minimum of twenty percent
(20%), collectively, of the total offering plus any underwriters' over-allotment
option. If, as a result of this cutback procedure, the number of Shares sold by
PC Mall in such offering constitutes less than the number of Shares requested to
be registered by PC Mall, the registration would be treated as a Piggyback
Registration under Section 3 below, and a Registration Request will be deemed
not to have been made for purposes of Subsection 2(a) hereof.
Section 3. Piggyback Registration. If at any time following one hundred
eighty (180) days after the IPO eCost proposes to register any Shares under the
Act for sale to the public by eCost or any other person (except as provided in
Section 7 hereof), eCost shall, not less than fifteen (15) days prior to the
proposed date of filing of a registration statement under the Act, give written
notice to PC Mall of its intention to do so. A Piggyback Request from PC Mall
shall state the number of Registrable Shares requested to be registered. If
eCost receives a Piggyback Request from PC Mall given within fifteen (15) days
after eCost's notice under this Section 3, eCost, subject to the conditions and
limitations of Section 4 hereof, will use its commercially reasonable efforts to
cause the Registrable Shares covered by Piggyback Request to be so registered
under the Act in the proposed registration statement if the proposed
registration statement becomes effective, but eCost shall have no obligation to
cause, or use any efforts to cause, any such registration statement to become
effective. Registrable Shares covered by a Piggyback Request shall be sold
pursuant to the same plan of distribution that applies to the majority of the
other Shares covered by such registration statement, except to the extent that
eCost otherwise agrees in writing. The rights to Piggyback Registration granted
by this Section 3 may be exercised an unlimited number of occasions following
the IPO. No Piggyback Request may be made by PC Mall if the amount of Shares
proposed to be sold could be sold by PC Mall without limitation under Rule 144
under the Act.
Section 4. Registration Procedures.
(a) If eCost is required by the provisions of Section 2 to effect Demand Registration of any Registrable Shares, eCost
will promptly:
(i) To the extent required by Section 2, prepare and file with
the SEC a registration statement (which shall be on Form S-3, unless eCost does
not qualify for use of Form S-3 in such registration, in which case such
registration statement shall be on any other available form selected by eCost)
with respect to such Registrable Shares and thereafter use its commercially
reasonable efforts to cause such registration statement to become effective
promptly.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period of one hundred twenty (120) days (excluding any days during which the
right to sell shares is suspended pursuant to Subsection 4(b) hereof) or such
lesser period as may be necessary to comply with the provisions of the Act with
respect to the disposition of all Registrable Shares covered by such
registration statement in accordance with the plan of distribution set forth in
such registration statement;
(iii) Comply with Rule 424 under the Act relating to filing of
prospectuses and furnish to each seller and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale of the Registrable Shares covered by such
registration statement;
(iv) If the offering is to be underwritten, eCost and PC Mall
shall enter into a written agreement with any managing underwriter selected in
the manner herein provided in such form and containing such provisions as are
satisfactory to eCost and PC Mall (such satisfaction not to be withheld
unreasonably), and as are customary in the securities business for such an
arrangement between such underwriter, such seller and corporations of eCost's
size and investment stature and eCost shall take such other actions as PC Mall
shall reasonably request in order to expedite or facilitate the disposition of
such Registrable Shares;
(v) Furnish, at the request of PC Mall, on the date that the
underwriting agreement is signed and on the date that Registrable Shares are
delivered to the underwriters for sale pursuant to such registration: (A) an
opinion of counsel representing eCost for the purposes of such registration,
dated such dates, respectively, addressed to the underwriters and to PC Mall,
stating that such registration statement has become effective under the Act and
that (I) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act, and (II) the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Act (except that such counsel need not express any opinion as to the financial
statements or any other financial statements, notes thereto and related
schedules and other financial and statistical data contained or incorporated by
reference therein, and (III) to such other effects as reasonably may be
requested by counsel for the underwriters or by PC Mall or its counsel, and (B)
a "comfort letter" in customary form dated such dates from the independent
public accountants retained by eCost, addressed to the underwriters and to PC
Mall, stating that they are independent public accountants within the meaning of
the Act and that, in the opinion of such accountants, the financial statements
of eCost included or incorporated by reference in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Act, and
such letter shall additionally cover such other financial matters as are
customary to cover in such a letter (including information as to the period
ending no more than five (5) business days prior to the date of such letter)
with respect to the registration statement in respect of which such letter is
being given as such underwriters reasonably may request;
(vi) Upon receipt of such confidentiality agreements as eCost
may reasonably request, make available for inspection by PC Mall, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by PC Mall or
underwriter, all financial and other records, pertinent corporate documents and
properties of eCost, and cause eCost officers, directors and employees to supply
all information reasonably requested by PC Mall or any underwriter, attorney,
accountant or agent in connection with such registration statement, in each case
in order to confirm disclosures contained in the registration statement or
incorporated therein by reference;
(vii) Give PC Mall two (2) days' advance notice of its anticipated filing date of the registration statement and
amendments thereto;
(viii) Use commercially reasonable efforts to cause the
Registrable Shares covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable PC Mall thereof to consummate the disposition of such
Registrable Shares;
(ix) Comply with all applicable rules and regulations of the
SEC, and make generally available to its security holders, as soon as reasonably
practicable no later than the date the Form 10-Q or Form 10-K, as the case may
be, covering the fourth fiscal quarter of eCost commencing after the effective
date of the registration statement, is required to be filed with the SEC, an
earnings statement covering the period of at least twelve (12) consecutive
months beginning with the first day of eCost's first calendar quarter commencing
after the effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder;
(x) Provide a transfer agent and registrar, which may be the
same entity as the transfer agent, for all the Registrable Shares covered by
such registration statement not later than the effective date of such
registration statement;
(xi) Permit PC Mall to participate through counsel reasonably
acceptable to eCost in the preparation of such registration statement and, if
specifically requested by such counsel, in discussions between eCost and the SEC
or its staff with respect to such registration statement, and to include in such
registration statement material, furnished to eCost in writing, which in the
written opinion of such counsel is necessary to include in order to avoid
potential liability for PC Mall;
(xii) Use commercially reasonable efforts to cause all such
Registrable Shares covered by such registration statement to be listed or quoted
on the principal securities exchange (including NASDAQ) on which similar
securities issued by eCost are then listed or quoted, if the listing or quoting
of such Registrable Shares is then permitted under the rules of such exchange;
(xiii) If there is a stop order relating to or suspension of
the effectiveness of the registration statement, use commercially reasonable
efforts to have the stop order or suspension of effectiveness withdrawn as
promptly as practicable;
(xiv) Use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to its
security holders an earnings statement satisfying the provisions of Section
11(a) of the Act, no later than forty-five (45) days after the end of any twelve
(12) month period (or ninety (90) days, if such period is a fiscal year) (A)
commencing at the end of any fiscal quarter in which the Registrable Shares are
sold to underwriters in a firm or best efforts underwritten offering, or (B) if
not sold to underwriters in such an offering, beginning with the first month of
the first fiscal quarter of eCost commencing after the effective date of the
registration statement, which statements shall cover such twelve (12) month
period; and
(xv) Use commercially reasonable efforts to register or
qualify the Registrable Shares covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the sellers of Registrable
Shares or the managing underwriter reasonably shall request; provided, however,
that eCost shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process or taxation in any such
jurisdiction.
(b) Notwithstanding the foregoing, eCost may delay filing a
registration statement otherwise required to be filed pursuant to this Agreement
and may withhold efforts to cause a registration statement covering Registrable
Shares to become effective, for up to sixty (60) days in the aggregate during
any twelve (12) month period, if eCost determines in good faith that such
registration statement might (i) interfere with or affect the negotiation or
completion of any transaction that is being contemplated by eCost (whether or
not a final decision has been made to undertake such transaction) at the time
the right to delay is exercised, or (ii) involve initial or continuing
disclosure obligations that might not be in the best interest of eCost's
stockholders. If, after a registration statement becomes effective, eCost
notifies the holders of Registrable Shares covered by such registration
statement that eCost considers it appropriate for the registration statement to
be amended or supplemented, the holders of such Registrable Shares shall suspend
any further sales of their Registrable Shares until eCost advises them that the
registration statement has been amended or supplemented. eCost may give such
advice if there exists at any time material non-public information relating to
eCost that, in the reasonable opinion of eCost's Board of Directors, would be
prejudicial to eCost or its stockholders to be disclosed at that time. eCost
agrees with PC Mall that it will use commercially reasonable efforts to amend or
supplement the registration statement, as required to permit sales of the
Registrable Shares covered thereby to resume within ninety (90) days as promptly
as is practicable after it has given the notice referred to in the preceding
sentence. The ninety (90) day time period referred to in Subsection 4(a)(ii)
hereof during which the registration statement must be kept current after its
effective date shall be extended for an additional number of Business Days equal
to the number of Business Days during which the rights to sell shares was
suspended pursuant to the preceding sentence, but in no event will eCost be
required to update the registration statement after the date that its obligation
to register Registrable Shares terminates pursuant to Section 8 hereof.
(c) The provisions of Subsections 4(a)(iii), (iv) and (vii), 4(b)
(except that eCost will have no obligation to amend or supplement the
registration statement), and 4(d) hereof shall also apply to Piggyback
Registrations pursuant to Section 3 hereof.
(d) In connection with each registration hereunder, PC Mall will (i)
furnish promptly to eCost in writing such information with respect to themselves
and the proposed distribution by PC Mall as reasonably shall be requested by
eCost in order to assure compliance with federal and applicable state securities
laws, and (ii) comply with all applicable rules promulgated by the SEC or any
securities exchange (including NASDAQ).
(e) Before filing a registration statement covering Registrable Shares,
a prospectus constituting a part thereof or amendments or supplements thereto,
shall be furnished to counsel for PC Mall, including in such registration
statement copies of all such documents proposed to be filed, all of which shall
be subject to the approval of such counsel in the exercise of such counsels'
reasonable judgment.
(f) If any registration statement covering Registrable Shares refers to
PC Mall by name or otherwise as the holder of any securities of eCost, then PC
Mall shall have the right to require (i) the insertion therein of language, in
form and substance satisfactory to eCost (such satisfaction not to be withheld
unreasonably), to the effect that PC Mall's holding of Shares is not to be
construed as a recommendation by PC Mall of the investment quality of the Shares
covered thereby and that such holding does not imply that PC Mall will assist in
meeting any future financial requirements of eCost, or (ii) in the event that
such reference to PC Mall by name or otherwise is not in the judgment of eCost,
as advised by counsel, required by the Act or any similar federal statute or any
state "blue sky" or securities law then in force, the deletion of the reference
to PC Mall.
Section 5. Expenses.
(a) All expenses incurred by eCost in complying with Section 2 hereof,
including without limitation all registration and filing fees, printing expense,
fees and disbursements of counsel and independent public accountants for eCost,
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or "blue sky" laws (other than those which by law must be
paid by the selling security holders), fees of securities exchanges or the
National Association of Securities Dealers, Inc., fees of transfer agents and
registrars, but excluding any Selling Expenses, are called "Registration
Expenses." All underwriting discounts, selling commissions and transfer taxes
applicable to the sale of outstanding shares and any legal fees and expenses of
counsel or other advisers and agents of the holders of Registrable Shares being
registered are called "Selling Expenses." PC Mall will pay all Registration
Expenses and all Selling Expenses.
(b) All expenses incurred by eCost in complying with Section 3 hereof,
including without limitation all registration and filing fees, printing expense,
fees and disbursements of counsel and independent public accountants for eCost,
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or "blue sky" laws (other than those which by law must be
paid by the selling security holders), fees of securities exchanges or the
National Association of Securities Dealers, Inc., fees of transfer agents and
registrars, but excluding any Selling Expenses, are called "Registration
Expenses." All underwriting discounts, selling commissions and transfer taxes
applicable to the sale of outstanding shares and any legal fees and expenses of
counsel or other advisers and agents of the holders of Registrable Shares being
registered are called "Selling Expenses." eCost will pay all Registration
Expenses. All Selling Expenses shall be borne by PC Mall.
Section 6. Marketing Arrangements.
(a) Except as otherwise provided in Section 2(d), if (i) PC Mall
requests registration of Registrable Shares, (ii) the offering proposed to be
made is to be an underwritten public offering, and (iii) the managing
underwriter of such public offering furnishes a written opinion that the total
amount of securities to be included in such offering would exceed the maximum
amount of securities (the "Maximum Amount") (as specified in such opinion) which
can be marketed at a price reasonably related to the then-current market value
of such securities (or the anticipated market price, if no trading market then
exists) and without materially and adversely affecting such offering or the
trading market for Shares, then eCost and PC Mall shall have a right to
participate in such offering in the following order of priority (a "Priority")
until the number of Shares included in the offering reaches the Maximum Amount,
and no additional Shares will be included in the registration statement:
First Priority shall be to eCost for Shares to be sold for the account
of eCost, except to the extent that Shares are registered pursuant to a
Registration Request for Demand Registration pursuant to Section 2 hereof, in
which case the Second Priority shall be followed.
Second Priority shall be to PC Mall pursuant to a Registration Request
for Demand Registration pursuant to Section 2 hereof.
Third Priority shall be to eCost for Shares to be sold for the account
of eCost that do not qualify for First Priority.
Fourth Priority shall be to holders of Shares who have a contractual
right granted to such holders prior to the date hereof to have Shares registered
pursuant to a registration statement initiated on their request or demand on
terms comparable to Section 2 hereof.
Fifth Priority shall be to holders of Shares who have a contractual
right granted to such holder on or prior to the date hereof to have their Shares
registered pursuant to piggyback or incidental rights on terms comparable to
Section 3 hereof (in a registration statement that such holders do not have a
right to initiate), including PC Mall's Piggyback Rights under this Agreement.
Sixth Priority shall be to all other holders of Shares in any sequence
that may be agreed upon among the holders of such Shares and/or eCost.
To the extent that some but not all of the Shares owned by persons
within any of the Priorities listed above are not included within the Maximum
Amount, the Shares to be included in the registration statement shall be
allocated pro rata to holders in such Priority in proportion to the respective
numbers of Shares each such person in such Priority wishes to include in the
registration statement.
(b) eCost represents and warrants that it has not granted any
registration rights or entered into any agreements obligating it to register any
of its securities under the Act that are inconsistent with the foregoing
priorities.
(c) eCost agrees that it will not incur any future obligations to
register Shares under the Act that are inconsistent with the Priorities in this
Section 6.
Section 7. Exceptions to eCost's Obligations. The right to Demand
Registration and Piggyback Registration shall not apply if, in the opinion of
counsel for eCost, such registration would jeopardize the tax-free status of the
Distribution. In addition, the right to Piggyback Registration and the
provisions of Subsection 2(c) hereof shall not apply, unless eCost otherwise
agrees in writing, to any registration statement:
(a) to be filed on a registration form which is unavailable for the
registration of Registrable Shares;
(b) relating primarily to Shares to be offered pursuant to (i) an
employee benefit plan, or (ii) a dividend or interest reinvestment plan
(including such a plan that has an open enrollment or cash investment feature);
(c) relating to Shares to be issued in the acquisition of another
business, through a merger, consolidation, exchange of securities or otherwise;
(d) relating to eCost securities to be issued for a consideration other
than solely cash;
(e) relating to eCost securities to be offered primarily to existing
security holders of eCost, through a "rights offering" or otherwise;
(f) relating primarily to eCost securities to be issued on the exercise
of options, warrants and similar rights, or on the conversion or exchange of
other securities, issued by eCost or any other person;
(g) relating primarily to debt securities of eCost, including debt
securities that are convertible or exchangeable for equity securities of eCost;
or
(h) that may become effective automatically upon filing with the SEC pursuant to Rule 462 under the Act or otherwise.
Section 8. Termination of Registration Rights. Notwithstanding the
foregoing provisions, eCost's obligation to register Registrable Shares under
this Agreement shall terminate as to any particular Registrable Shares (a) on
the date of the Distribution, (b) when such Registrable Shares have been sold in
an offering registered under the Act or in a sale exempt from registration under
the Act, (c) when such Registrable Shares shall have been effectively registered
under the Act for a period of at least ninety (90) days, or (d) when a written
opinion, to the effect that such Registrable Shares may be sold without
registration under the Act or applicable state law and without restriction as to
the quantity and manner of such sales, shall have been received from counsel for
eCost which counsel is reasonably acceptable to the owner of such Registrable
Shares (which satisfaction shall not be withheld unreasonably).
Section 9. Indemnification.
(a) In the event of any registration of Registrable Shares under the
Act pursuant to this Agreement, eCost will, and hereby does, indemnify and hold
harmless, to the fullest extent permitted by law, the seller of any Registrable
Shares covered by such registration statement, each person or entity that
participates as an underwriter or qualified independent underwriter/pricer
("independent underwriter"), if any, in the offering or sale of such securities,
each officer, director or partner of such underwriter or independent
underwriter, and each other person, if any, who controls such seller or any such
underwriter within the meaning of the Act (collectively, the "Indemnified
Persons"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses (including fees of counsel and any amounts paid in any
settlement effected with eCost's consent, which consent shall not be
unreasonably withheld) to which such Indemnified Persons may become subject
under the Act, common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof), or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which Registrable Shares were registered under the
Act or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if eCost shall
have filed with the SEC any amendment thereof or supplement thereto), or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or (iii)
any violation by eCost of any federal or state rule or regulation applicable to
eCost and relating to action required of or inaction by eCost in connection with
any such registration. eCost will reimburse Indemnified Persons for any
reasonable legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding. Notwithstanding the foregoing, eCost shall not
be liable to any Indemnified Person to the extent that any such loss, claim,
damage, liability (or action or proceeding, whether commenced or threatened, in
respect thereof) or expense arises out of or is based upon (i) any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to eCost by
or on behalf of any such Indemnified Person, for use in the preparation of the
registration statement or (ii) the failure of any such Indemnified Person to
comply with any legal requirement applicable to any such Indemnified Person to
deliver a copy of a prospectus or any supplements or amendments thereto after
eCost has made such documents available to such persons, and it is established
that delivery of such prospectus, supplement or amendment would have cured the
defect giving rise to such loss, claim, damage, liability or expense. Such
indemnity and reimbursement of expenses shall remain in full force and effect
following the transfer of Registrable Shares by such seller.
(b) eCost, as a condition to including any Registrable Shares in any
registration statement filed in accordance with this Agreement, shall have
received an undertaking reasonably satisfactory to it from the prospective
seller of such Registrable Shares and any underwriter or independent
underwriter, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Subsection 9(a)) eCost and its directors and officers and
each person controlling eCost within the meaning of the Act and all other
prospective sellers and their directors, officers, general and limited partners
and respective controlling persons with respect to any statement or alleged
statement in or omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement
thereto, if such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to eCost or its representatives by or on behalf of such seller or underwriter
for use in the preparation of such registration statement; provided, however,
that the aggregate amount which any such seller or prospective seller shall be
required to pay pursuant to such undertaking shall be limited to the amount of
the net proceeds received by such person upon the sale of the Registrable Shares
pursuant to the registration statement giving rise to such claim.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding with respect to which a
claim for indemnification may be made pursuant to this Section 9, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 9, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; and provided, further
that the indemnifying party shall not be entitled to so participate or so assume
the defense if, in the indemnified party's reasonable judgment, a conflict of
interest between the indemnified party and the indemnifying party exists in
respect of such claim. After notice from the indemnifying party to such
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party under this
Section 9 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof unless the indemnifying
party has failed to assume the defense of such claim or to employ counsel
reasonably satisfactory to such indemnified party; and provided, further, that
the indemnified parties shall have the right to employ one counsel to represent
such indemnified parties if, in such indemnified parties' reasonable judgment, a
conflict of interest between the indemnified parties and the indemnifying
parties exists in respect of such claim, and in that event the fees and expenses
of such separate counsel shall be paid by the indemnifying party; and provided,
further, that if, in the reasonable judgment of any of the indemnified parties,
a conflict of interest between such indemnified parties and any other
indemnified parties exists in respect of such claims, such indemnified parties
shall be entitled to additional counsel or counsels and the indemnifying party
shall be obligated to pay the fees and expenses of such additional counsel or
counsels. No indemnified party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimants or plaintiffs to such indemnified party of a release
from all liability in respect to such claim or litigation. No indemnifying party
will be liable for any settlement effected without its prior written consent.
(d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
Subsections 9(a) and (b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in Subsections 9(a) and (b) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other hand in connection
with statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 9 were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of
this Section 9. The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
Section 9 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim (which shall be limited as provided in Subsection 9(c) if
the indemnifying party has assumed the defense of any such action in accordance
with the provisions thereof which is the subject of this Section 9). No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Notwithstanding anything in this Section 9 to
the contrary, no indemnifying party (other than eCost) shall be required
pursuant to this Section 9 to contribute any amount in excess of the proceeds
received by such indemnifying party from the sale of Registrable Shares in the
offering to which the losses, claims, damages or liabilities of the indemnified
parties relate.
(e) The provisions of this Section 9 shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract and shall remain in full force and effect following
the transfer of the Registrable Shares by any such party.
Section 10. Compliance with Rule 144.
(a) At the request of PC Mall and if PC Mall proposes to sell
Registrable Shares in compliance with Rule 144 under the Act ("Rule 144"), or
any similar rule, eCost shall (a) forthwith furnish to PC Mall a written
statement as to its compliance with the filing requirements of the SEC as set
forth in such Rule and (b) make such additional filings with the SEC as will
enable PC Mall to make sales of Registrable Shares pursuant to such Rule.
(b) With a view to making available to PC Mall the benefits of Rule 144
under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit PC Mall to sell securities of eCost to
the public without registration, eCost agrees to (i) comply with the provisions
of paragraph (c)(1) of Rule 144; and (ii) file with the Commission in a timely
manner all reports and other documents required to be filed with the Commission
pursuant to Section 13 or 15(d) under the Exchange Act by companies subject to
either of such sections, irrespective of whether eCost is then subject to such
reporting requirements
Section 11. Miscellaneous.
(a) Binding and Benefit. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns, except that no party may assign or
transfer its rights or obligations under this Agreement without the prior
written consent of the other parties hereto; provided, however, that the
obligation to register Registrable Shares shall be enforceable by direct or
remote transferees of Registrable Shares now owned by PC Mall only if the
transfer results from the death of any person, a gift made without consideration
or the transfer of all or substantially all of the assets of an entity, by
merger, consolidation, asset sale or otherwise. Without limiting the foregoing,
any transferee of Registrable Shares must agree in writing to be bound by the
provisions of Subsection 6(c) hereof.
(b) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California, without reference to
choice of law principles, including matters of construction, validity and
performance.
(c) Notices. Except as expressly otherwise provided herein, all
notices, requests, demands, waivers and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally or by facsimile transmission or mailed (certified or
registered mail, postage prepaid, return receipt requested):
If to PC Mall, to: PC Mall, Inc.
0000 Xxxx 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
If to eCOST: xXXXX.xxx, Inc.
0000 Xxxx 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
or to such other person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date on which hand
delivered, upon transmission of the facsimile transmission by the sender and
issuance by the transmitting machine of a confirmation slip confirming that the
number of pages constituting the notice have been transmitted without error, or
on the third business day following the date on which so mailed, except for a
notice of change of address, which shall be effective only upon receipt thereof.
In the case of a notice sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above. However, such mailing shall in no way alter the time at
which the facsimile notice is deemed received. In no event shall the provision
of notice pursuant to this Section 8.4 constitute notice for service of process.
(d) Entire Agreement. This Agreement, the Master Separation and
Distribution Agreement, the other ancillary agreements and the exhibits and
schedules referenced or attached thereto constitute the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of or by and between the parties hereto in respect of such subject
matter and may not be amended except by a written instrument hereafter signed by
each of the parties hereto.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed an original, and
such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
XXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxx
----------------------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
PC MALL, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
