EXHIBIT 10.56 MASTER SEPARATION AND DISTRIBUTION AGREEMENT

EXHIBIT 10.56

 

MASTER SEPARATION AND DISTRIBUTION AGREEMENT

 

between

 

PC MALL, INC.

 

and

 

eCOST.COM, INC.

 

Dated as of September 1, 2004

 

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

(continued)

 

 

-ii-

TABLE OF CONTENTS

(continued)

 

 

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MASTER SEPARATION AND DISTRIBUTION AGREEMENT

 

THIS MASTER SEPARATION AND DISTRIBUTION AGREEMENT (this “ Agreement ”), dated as of September 1, 2004, is by and between PC Mall, Inc., a Delaware corporation (“ PC Mall ”), and eCOST.com, Inc., a Delaware corporation (“ eCOST ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I hereof.

 

WHEREAS , eCOST intends to offer and sell for its own account in an initial public offering (the “ IPO ”) a limited number of shares of its common stock, par value $0.001 per share (the “ eCOST Common Stock ”), and in furtherance thereof, eCOST has filed a registration statement for the eCOST Common Stock to be sold in the IPO with the SEC;

 

WHEREAS , PC Mall desires to contribute or otherwise transfer, and to cause certain of its Subsidiaries to contribute or otherwise transfer, certain Assets and Liabilities associated with the eCOST Business to eCOST (the “ Contribution ”);

 

WHEREAS , PC Mall intends, approximately six (6) months following the closing of the IPO, to distribute to holders of PC Mall common stock, par value $0.001 per share, all of the outstanding shares of eCOST Common Stock then owned directly or indirectly by PC Mall in a transaction intended to qualify as a tax-free spin-off under Section 355 of the Code (the “ Distribution ”);

 

WHEREAS , PC Mall and eCOST intend that the contribution of Assets by PC Mall to eCOST pursuant to Section 2.1, the assumption of Liabilities by eCost pursuant to Section 2.2 and the Distribution, taken together, will qualify as a reorganization for U.S. federal income tax purposes pursuant to which no gain or loss will be recognized by PC Mall or its stockholders under Section 355, 361(b)(3), 368(a)(1)(D) and related provisions of the Code, and that this Agreement is intended to be, and is hereby adopted as, a plan of reorganization under Section 368 of the Code;

 

WHEREAS , PC Mall, through its Subsidiaries, has historically provided various services to eCOST, and in connection with the separation of PC Mall and eCOST, the parties desire to enter into certain relationships which will continue on a transitional basis; and

 

WHEREAS , it is appropriate and desirable to set forth the principal corporate transactions required to effect the separation, the IPO, the Distribution, and certain other agreements that will govern certain matters relating to the IPO and the Distribution and the relationship of PC Mall and eCOST following the IPO and the Distribution.

 

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NOW, THEREFORE , in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the receipt and adequacy of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

For the purpose of this Agreement the following terms shall have the following meanings:

 

“ Action ” means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

 

“ Administrative Services Agreement ” means that certain Administrative Services Agreement to be entered into between eCOST and a Subsidiary of PC Mall, effective as of the Closing Date, as such agreement may be amended from time to time.

 

“ Affiliate ” of any Person means a Person that controls, is controlled by, or is under common control with such Person. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

 

“ AF Services ” means AF Services, Inc., a wholly-owned subsidiary of PC Mall, and any successor thereto.

 

“ AF Services Software License Agreement ” means that certain Software License Agreement to be entered into between eCOST and AF Services, effective as of the Closing Date, as such agreement may be amended from time to time.

 

“ Agent ” means the distribution agent to be appointed by PC Mall to distribute to the stockholders of PC Mall pursuant to the Distribution the shares of eCOST Common Stock held by PC Mall.

 

“ Agreement ” means this Separation and Distribution Agreement, including all of the Schedules hereto.

 

“ Ancillary Agreements ” means the Contribution Agreement; Tax Allocation and Indemnification Agreement; Employee Matters Agreement; Administrative Services Agreement; Product Sales, Inventory Management and Order Fulfillment Agreement; Information Technology Systems Usage and Services Agreement; License Agreements; Registration Rights Agreements; and Sublease Agreement; each in the form set forth in Schedule A hereto, including any exhibits, schedules, attachments, tables or other appendices thereto, and each agreement and other instrument contemplated therein or herein.

 

“ Annual Financial Statements ” has the meaning set forth in Section 8.1(a)(v) of this Agreement.

 

“ Applicable Deadline ” has the meaning set forth in Section 10.3(b) of this Agreement.

 

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“ Arbitration Act ” means the United States Arbitration Act, 9 U.S.C. §§ 1-14, as the same may be amended from time to time.

 

“ Arbitration Demand Date ” has the meaning set forth in Section 10.3(a) of this Agreement.

 

“ Arbitration Demand Notice ” has the meaning set forth in Section 10.3(a) of this Agreement.

 

“ Assets ” means assets, properties and rights (including goodwill and rights arising under Contracts), wherever located (including in the possession of vendors, other Persons or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person.

 

“ Bad Act ” has the meaning set forth in Section 2.2 of this Agreement.

 

“ Closing ” means the receipt by eCOST of the net proceeds of the IPO in accordance with the terms of the Underwriting Agreement.

 

“ Closing Date ” means the first time at which any shares of eCOST Common Stock are sold to the Underwriters pursuant to the IPO in accordance with the terms of the Underwriting Agreement.

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Consents ” means any consent, waiver or approval from, or notification requirements to, any third party.

 

“ Contracts ” means any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment that is binding on any Person or any part of its property under applicable law.

 

“ Contribution ” has the meaning set forth in the Recitals to this Agreement.

 

“ Contribution Agreements ” means the agreements entered into by and between PC Mall and certain of its Subsidiaries, on the one hand, and eCOST on the other hand, pursuant to which the Contribution will be effected.

 

“ CPR ” means the Center for Public Resources.

 

“ Distribution ” means the distribution by PC Mall on a pro rata basis to holders of PC Mall Common Stock of all of the outstanding shares of eCOST Common Stock owned directly or indirectly by PC Mall on the Distribution Date as set forth in Article V.

 

“ Distribution Date ” means the date determined pursuant to Section 4.1 of this Agreement on which the Distribution occurs.

 

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“ eCOST ” has the meaning set forth in the Preamble to this Agreement.

 

“ eCOST Adjusted Exercise Price to Market Ratio ” has the meaning set forth in Schedule 4.5(5).

 

“ eCOST Assets ” means all right, title and interest of the PC Mall Group (including, for purposes of this definition, any member of the eCOST Group) in and to:

 

(a) any Assets reflected on the audited balance sheet of eCOST contained in the Registration Statement or the accounting records supporting such balance sheet, and any Assets acquired by or for eCOST, the eCOST Business or any member of the eCOST Group subsequent to the date of such balance sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any dispositions of any of such Assets subsequent to the date of such balance sheet;

 

(b) any and all Assets of the PC Mall Group (including, for purposes of this definition, any member of the eCOST Group) that are used exclusively or held for use exclusively in the eCOST Business; and

 

(c) any and all Assets that are expressly listed, scheduled or otherwise clearly described in a Contribution Agreement or any other Ancillary Agreement as Assets to be transferred to eCOST or any other member of the eCOST Group.

 

“ eCOST Business ” means the business of eCOST as currently or historically conducted or as proposed to be conducted.

 

“ eCOST Common Stock ” means Common Stock, $0.001 par value per share, of eCOST.

 

“ eCOST Group ” means eCOST, each Subsidiary of eCOST and each other Person that is either controlled directly or indirectly by eCOST immediately after the Closing Date or that is contemplated to be controlled by eCOST.

 

“ eCOST Indemnitees ” has the meaning set forth in Section 6.3 of this Agreement.

 

“ eCOST Liabilities ” means the following:

 

(a) any and all Liabilities to the extent arising out of or relating to the eCOST Business or the eCOST Assets, in each case whether such Liabilities arise or accrue prior to, on or after the Closing Date (other than any Tax-related Liabilities that are specifically retained by PC Mall under the Tax Allocation and Indemnification Agreement and any employee-related Liabilities that are specifically retained by PC Mall under the Employee Matters Agreement);

 

(b) any and all Liabilities to the extent arising out of or relating to the operation of any business conducted by any member of the eCOST Group at any time after the Closing Date;

 

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(c) any and all Liabilities that are expressly listed, scheduled or otherwise clearly described in a Contribution Agreement or any other Ancillary Agreement as Liabilities to be assumed by eCOST or any member of the eCOST Group; and

 

(d) all obligations of the eCOST Group under or pursuant to this Agreement, any Ancillary Agreement or any other instrument entered into in connection herewith or therewith.

 

“ eCOST Public Documents ” has the meaning set forth in Section 8.1(a)(viii) of this Agreement.

 

“ eCOST Shared Contract ” means any Contract included in the eCOST Assets relating in part to the PC Mall Business.

 

“ eCost Warrant ” has the meaning set forth in Section 4.5(a) of this Agreement.

 

“ eCOST’s Auditors ” has the meaning set forth in Section 8.1(b)(i) of this Agreement.

 

“ Effective Time ” means 5:00 p.m., Eastern Standard Time or Eastern Daylight Time (whichever shall be then in effect), on the Distribution Date.

 

“ Employee Matters Agreement ” means that certain Employee Matters Agreement entered into between PC Mall and eCOST effective as of the Effective Time, as such agreement may be amended from time to time.

 

“ Environmental Law ” means any federal, state, local, foreign or international statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, common law (including tort and environmental nuisance law), legal doctrine, order, judgment, decree, injunction, requirement or agreement with any Governmental Authority, now or hereafter in effect relating to health, safety, pollution or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or to emissions, discharges, releases or threatened releases of any substance currently or at any time hereafter listed, defined, designated or classified as hazardous, toxic waste, radioactive or dangerous, or otherwise regulated, under any of the foregoing, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any such substances, including the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendments and Reauthorization Act and the Resource Conservation and Recovery Act, and comparable provisions in state, local, foreign or international law.

 

“ Environmental Liabilities ” means all Liabilities relating to, arising out of or resulting from any Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, governmental response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

 

“ Escalation Notice ” has the meaning set forth in Section 10.2(a) of this Agreement.

 

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“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

“ Existing Agreements ” means (i) the Administrative Services Agreement dated January 1, 2003 between eCOST and AF Services, Inc.; (ii) the Cash Management Agreement dated January 1, 2003 between eCOST and AF Services, Inc.; (iii) the Merchandising Services Agreement dated January 1, 2003 between eCOST and Mall Marketing, Inc.; and (iv) the Product Sales, Inventory Management and Order Fulfillment Agreement dated January 1, 2003 between eCOST and AF Services, Inc.

 

“ Financial Statements ” means the Annual Financial Statements and the Quarterly Financial Statements, collectively.

 

“ GAAP ” means U.S. generally accepted accounting principles, consistently applied.

 

“ Governmental Approval ” means any notice, report or other filing to be made, or any consent, registration, approval, permit or authorization to be obtained from, any Governmental Authority.

 

“ Governmental Authority ” shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority.

 

“ Group ” means the eCost Group or the PC Mall Group, as applicable.

 

“ Indemnifying Party ” has the meaning set forth in Section 6.4(a) of this Agreement.

 

“ Indemnitee ” has the meaning set forth in Section 6.4(a) of this Agreement.

 

“ Indemnity Payment ” has the meaning set forth in Section 6.4(a) of this Agreement.

 

“ Information ” means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

 

“ Information Technology Services Agreement ” means that certain Information Technology Systems Usage and Services Agreement to be entered into between eCOST and a Subsidiary of PC Mall, effective as of the Closing Date, as such agreement may be amended from time to time.

 

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“ Insurance Policies ” means the insurance policies written by insurance carriers unaffiliated with PC Mall pursuant to which eCOST (or their respective officers or directors) will be insured parties after the Closing Date.

 

“ Insurance Proceeds ” means those monies: (a) received by an insured from an insurance carrier, or (b) paid by an insurance carrier on behalf of the insured, in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof.

 

“ Intended Transferee ” has the meaning set forth in Section 2.5(b) of this Agreement.

 

“ Intended Transferor ” has the meaning set forth in Section 2.5(b) of this Agreement.

 

“ IPO ” means the initial public offering by eCOST of shares of eCOST Common Stock pursuant to the IPO Registration Statement.

 

“ IPO Effective Date ” means the date on which the IPO Registration Statement is declared effective by the SEC.

 

“ IPO Registration Statement ” means the registration statement on Form S-1 (No. 333-115199) filed under the Securities Act, pursuant to which the eCOST Common Stock to be issued in the IPO will be registered, together with all amendments thereto.

 

“ Letter Ruling ” has the meaning set forth in Section 4.3(b) of this Agreement.

 

“ Liabilities ” means any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exonerations, covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations, and other liabilities, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, and including those arising under any law, rule, regulation, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all costs and expenses, whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions), order or consent decree of any Governmental Authority or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, including those arising under this Agreement or any Ancillary Agreement, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person.

 

“ License Agreements ” means the AF Services Software License Agreement and the PC Mall Software License Agreement.

 

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“ PC Mall ” has the meaning set forth in the Preamble to this Agreement.

 

“ PC Mall Adjusted Exercise Price to Market Ratio ” has the meaning set forth in Schedule 4.5(3) of this Agreement.

 

“ PC Mall Adjusted Warrant ” has the meaning set forth in Section 4.5(a) of this Agreement.

 

“ PC Mall Annual Statements ” has the meaning set forth in Section 8.1(b)(i) of this Agreement.

 

“ PC Mall Business ” means the businesses or operations of the PC Mall Group other than the eCOST Business.

 

“ PC Mall Common Stock ” means the Common Stock, $0.001 par value per share, of PC Mall.

 

“ PC Mall Group ” means PC Mall and each Person (other than any member of the eCOST Group) that is an Affiliate of PC Mall immediately after the Closing Date.

 

“ PC Mall Indemnitees ” has the meaning set forth in Section 6.2 of this Agreement.

 

“ PC Mall Liabilities ” means the Liabilities of PC Mall other than the eCOST Liabilities.

 

“ PC Mall Public Filings ” has the meaning set forth in Section 8.1(a)(xii) of this Agreement.

 

“ PC Mall Records ” shall have the meaning set forth in Section 9.1(b) of this Agreement.

 

“ PC Mall Shared Contract ” means any Contract relating in part to the eCOST Business not included in the eCOST Assets.

 

“ PC Mall Software License Agreement ” means that certain Software License Agreement entered into between eCOST and PC Mall, effective as of February 25, 1999, as such agreement may be amended from time to time.

 

“ PC Mall Warrant ” has the meaning set forth in Section 4.5(a) of this Agreement.

 

“ PC Mall’s Auditors ” has the meaning set forth in Section 8.1(b)(i) of this Agreement.

 

“ Person ” means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

 

“ Pre-Distribution Exercise Price to Market Price Ratio ” has the meaning set forth in Schedule 4.5(1.) of this Agreement.

 

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“ Prime Rate ” means the rate which Chase Manhattan Bank (or any successor thereto or other major money center commercial bank agreed to by the parties hereto) announces from time to time as its prime lending rate, as in effect from time to time.

 

“ Product Sales, Inventory Management and Order Fulfillment Agreement ” means that certain Product Sales, Inventory Management and Order Fulfillment Agreement to be entered into between eCOST and a Subsidiary of PC Mall, effective as of the Closing Date, as such agreement may be amended from time to time.

 

“ Prospectus ” means each preliminary, final or supplemental prospectus forming a part of the IPO Registration Statement.

 

“ Quarterly Financial Statements ” has the meaning set forth in Section 8.1(a)(iv) of this Agreement.

 

“ Record Date ” means the close of business on the date to be determined by the PC Mall Board of Directors as the record date for determining stockholders of PC Mall entitled to receive shares of eCOST Common Stock in the Distribution.

 

“ Registration Rights Agreements ” means the Registration Rights Agreements to be entered into between eCOST and each of PC Mall and Frank F. Khulusi, effective as of the Closing Date, as such agreements may be amended from time to time.

 

“ Representatives ” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants or attorneys.

 

“ SEC ” means the U.S. Securities and Exchange Commission or any successor agency.

 

“ Securities Act ” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

 

“ Security Interest ” means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.

 

“ Sublease Agreement ” means that certain Amended and Restated Sublease Agreement entered into between PC Mall and eCOST, effective as of the date hereof, as such agreement may be amended from time to time.

 

“ Subsidiary ” of any person means any corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided , however , that no Person that is not directly or indirectly wholly owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person.

 

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“ Tax ” or “ Taxes ” has the meaning set forth in the Tax Indemnification and Allocation Agreement.

 

“ Tax Control ” means the definition “control” set forth in Section 368(c) of the Code (or in any successor statute or provision), as such definition may be amended from time to time.

 

“ Tax-Free Status ” has the meaning set forth in the Tax Indemnification and Allocation Agreement.

 

“ Tax Indemnification and Allocation Agreement ” means the Tax Indemnification and Allocation Agreement, dated as of the date hereof, by and among PC Mall and eCOST.

 

“ Tax Opinion ” has the meaning set forth in the Tax Indemnification and Allocation Agreement.

 

“ Third Party Claim ” has the meaning set forth in Section 6.5(a) of this Agreement.

 

“ Underwriters ” means the managing underwriters for the IPO.

 

“ Underwriting Agreement ” means the underwriting agreement to be entered into among eCOST and the Underwriters with respect to the IPO.

 

“ Unforeseen Damages ” has the meaning set forth in Section 6.9(b) of this Agreement.

 

ARTICLE II

 

CONTRIBUTION AND ASSUMPTION

 

2.1. Contribution of eCOST Assets . Unless otherwise provided in this Agreement or in any Ancillary Agreement, on the Closing Date, PC Mall will (and PC Mall will cause its applicable Subsidiaries to) assign, transfer and convey to eCOST and its applicable Subsidiaries, and eCOST will (and eCOST will cause its applicable Subsidiaries to) receive and accept from PC Mall and its applicable Subsidiaries, all of PC Mall’s and its applicable Subsidiaries’ right, title and interest in and to any eCOST Assets. Such assignments, transfers and conveyances will be effective at such times as provided in each respective Ancillary Agreement and will be subject to the terms and conditions of this Agreement and any applicable Ancillary Agreement.

 

2.2. Assumption of Liabilities . Unless otherwise provided in this Agreement or in any Ancillary Agreement, on the Closing Date, eCOST will assume, and on a timely basis pay, perform, satisfy and discharge all eCOST Liabilities in accordance with their respective terms. eCOST will be responsible for all eCOST Liabilities, regardless of (a) when or where such Liabilities arose or arise, (b) whether the facts on which such Liabilities are based occurred on, prior to or subsequent to the Closing Date, (c) where or against whom such Liabilities are asserted or determined, (d) whether asserted or determined on, prior to or subsequent to the Closing Date, or (e) whether arising from or alleged to arise from negligence, recklessness, violation of law, fraud or misrepresentation (each, a “ Bad Act ”) by any member of the PC Mall Group, the eCOST Group or any of their respective past or

 

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present Representatives; provided , however , that this clause 2.2(e) will not limit eCOST’s right to make a claim against a PC Mall Group member for Liabilities suffered by it to the extent that such Liabilities are a direct result of a Bad Act committed by a PC Mall Group member subsequent to the Closing Date; provided further , however , that eCOST’s right to make such a claim may otherwise be limited in any Ancillary Agreement. Such assumptions of eCOST Liabilities will be effective at such times as provided in each respective Ancillary Agreement and will be subject to the terms and conditions of this Agreement and any applicable Ancillary Agreement.

 

2.3. Closing Date; Deliveries . In furtherance of the assignment, transfer and conveyance of the eCOST Assets and the assumption of the eCOST Liabilities as set forth in this Agreement and the Ancillary Agreements, unless otherwise provided in this Agreement or in any Ancillary Agreement, on the Closing Date, the parties will execute and deliver, and they will cause their respective Subsidiaries and Representatives, as applicable, to execute and deliver: (a) each of the Contribution Agreements and other Ancillary Agreements; (b) such bills of sale, stock powers, certificates of title, assignments of Contracts, subleases and other instruments of transfer, conveyance and assignment as, and to the extent, necessary or convenient to evidence the transfer, conveyance and assignment to eCOST of all of PC Mall’s (or, as applicable, its Subsidiaries’) right, title and interest in and to the eCOST Assets; and (c) such assumptions of Contracts and other instruments of assumption as, and to the extent, necessary or convenient to evidence the valid and effective assumption of the eCOST Liabilities by eCOST.

 

2.4. No Representations or Warranties . eCOST acknowledges and agrees that, except as expressly set forth in this Agreement or any Ancillary Agreement, (a) no member of the PC Mall Group is making any representations or warranties in this Agreement or any Ancillary Agreement, express or implied, as to the condition, quality, merchantability or fitness of any eCOST Asset transferred pursuant to this Agreement, any Ancillary Agreement or any other agreement contemplated hereby or thereby, (b) all such eCOST Assets will be transferred on an “as is,” “where is” basis, and (c) eCOST will bear the economic and legal risks that any conveyance will prove to be insufficient to vest in it good and marketable title, free and clear of any security interest, pledge, lien, charge, claim or other encumbrance of any nature whatsoever.

 

2.5. Transfers Not Effected on Closing Date .

 

(a) The parties acknowledge and agree that some of the transfers contemplated by this Article II may not be effected on the Closing Date due to the inability of the parties to obtain necessary consents or approvals or the inability of the parties to take certain other actions necessary to effect such transfers on the Closing Date. To the extent any transfers contemplated by this Article II have not been fully effected on the Closing Date, each of PC Mall and eCOST will cooperate and use commercially reasonable efforts (and will cause the applicable members of its respective Group to use such efforts) to obtain any necessary consents or approvals or take any other actions necessary to effect such transfers as promptly as practicable following the Closing Date.

 

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(b) Nothing in this Agreement will be deemed to require the transfer or assignment of any Contract or other Asset by PC Mall or one of its Subsidiaries (an “ Intended Transferor ”) to eCOST or one of its Subsidiaries (an “ Intended Transferee ”) to the extent that such transfer or assignment would constitute a material breach of such Contract or cause forfeiture or loss of such Asset; provided , however , that even if such Contract or other Asset cannot be so transferred or assigned, such Contract or other Asset will be deemed an eCOST Asset solely for purposes of determining whether any Liability is an eCOST Liability.

 

(c) If an attempted assignment would be ineffective or would impair an Intended Transferee’s rights under any such eCOST Asset so that the Intended Transferee would not receive all such rights, then the parties will use commercially reasonable efforts to provide to, or cause to be provided to, the Intended Transferee, to the extent permitted by law, the rights of any such eCOST Asset and take such other actions as may reasonably be requested by the other party in order to place the Intended Transferee, insofar as reasonably possible, in the same position as if such eCOST Asset had been transferred as contemplated hereby. In connection therewith, (i) the Intended Transferor will promptly pass along to the Intended Transferee when received all benefits derived by the Intended Transferor with respect to any such eCOST Asset, and (ii) the Intended Transferee will pay, perform and discharge on behalf of the Intended Transferor all of the Intended Transferor’s obligations with respect to any such eCOST Asset in a timely manner and in accordance with the terms thereof which it may do without breach. If and when such consents or approvals are obtained or such other required actions have been taken, the transfer of the applicable eCOST Asset will be effected in accordance with the terms of this Agreement and any applicable Ancillary Agreement.

 

2.6. Shared Contracts . The parties agree as follows:

 

(a) At the written request of eCOST, PC Mall will, and will cause other members of the PC Mall Group to, to the extent permitted by the applicable PC Mall Shared Contract and applicable law, make available to eCOST or applicable members of the eCOST Group the benefits and rights under the PC Mall Shared Contracts (except where the benefits or rights under such PC Mall Shared Contracts are specifically provided pursuant to an Ancillary Agreement) which are substantially equivalent to the benefits and rights enjoyed by the PC Mall Group under each PC Mall Shared Contract for which such request is made by eCOST, to the extent such benefits relate to the eCOST Business; provided , however , that the applicable members of the eCOST Group will assume and discharge (or promptly reimburse PC Mall for) the obligations and liabilities under the relevant PC Mall Shared Contracts associated with the benefits and rights so made available to them.

 

(b) At the written request of PC Mall, eCOST will, and will cause other members of the eCOST Group to, to the extent permitted by the applicable eCOST Shared Contract and applicable law, make available to PC Mall or applicable members of the PC Mall Group the benefits and rights under the eCOST Shared Contracts (except where the benefits or rights under such eCOST Shared Contracts are specifically provided pursuant to an Ancillary Agreement) which are substantially equivalent to the benefits and rights enjoyed by the eCOST Group under each eCOST Shared Contract for which such request is made by PC Mall, to the extent such benefits relate to the PC Mall Business; provided , however , that the applicable members of the PC Mall Group will assume and discharge (or promptly reimburse eCOST for)

 

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the obligations and liabilities under the relevant eCOST Shared Contracts associated with the benefits and rights so made available to them.

 

The parties’ rights and obligations pursuant to this Section 2.6 will terminate upon the earliest to occur of (i) the Distribution Date, (ii) the termination of PC Mall’s obligation to effect the Distribution pursuant to Article XII, and (iii) with respect to any PC Mall Shared Contract or eCOST Shared Contract in particular, such time that the arrangement pursuant to this Section 2.6 is no longer permitted thereunder.

 

2.7. Inter-Group Indebtedness . On or prior to the Closing Date, each party will repay, and each party will cause each of its Subsidiaries to repay, as applicable, its respective Inter-Group Indebtedness in accordance with the terms of such Inter-Group Indebtedness.

 

ARTICLE III

 

THE IPO AND ACTIONS PENDING THE IPO

 

3.1. Transactions Prior to the IPO . Subject to the conditions specified in Section 3.3, PC Mall and eCOST shall use their commercially reasonable efforts to consummate the IPO. Such actions shall include, but not necessarily be limited to, those specified in this Section 3.1. eCOST shall file such amendments or supplements to the IPO Registration Statement as may be necessary in order to cause the same to become and remain effective as required by law or by the Underwriters, including, but not limited to, filing such amendments to the IPO Registration Statement as may be required by the Underwriting Agreement, the SEC or federal, state or foreign securities laws. PC Mall and eCOST shall also cooperate in preparing, filing with the SEC and causing to become effective a registration statement registering the eCOST Common Stock under the Exchange Act, and any registration statements or amendments thereto which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the IPO, the Distribution or the other transactions contemplated by this Agreement or the Ancillary Agreements.

 

(a) eCOST shall enter into the Underwriting Agreement, in form and substance reasonably satisfactory to eCOST and PC Mall and shall comply with its obligations thereunder.

 

(b) PC Mall and eCOST shall consult with each other and the Underwriters regarding the timing, pricing and other material matters with respect to the IPO.

 

(c) eCOST shall use commercially reasonable efforts to take all such action as may be necessary or appropriate under state securities and blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the IPO.

 

(d) eCOST shall prepare, file and use commercially reasonable efforts to seek to make effective, an application for listing of the eCOST Common Stock issued in the IPO on the Nasdaq National Market, subject to official notice of issuance.

 

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(e) eCOST shall participate in the preparation of materials and presentations as the Underwriters shall deem necessary or desirable.

 

(f) eCOST shall pay all third party costs, fees and expenses relating to the IPO, all of the reimbursable expenses of the Underwriters pursuant to the Underwriting Agreement, all of the costs of producing, printing, mailing and otherwise distributing the Prospectus, as well as the Underwriters’ discount as provided in the Underwriting Agreement.

 

3.2. Proceeds of the IPO . The IPO will be a primary offering of eCOST Common Stock, and eCOST shall use the net proceeds of the IPO in the manner described in the Registration Statement.

 

3.3. Conditions Precedent to Consummation of the IPO . As soon as practicable after the date of this Agreement, the parties hereto shall use commercially reasonable efforts to satisfy the following conditions to the consummation of the IPO. The obligations of the parties to consummate the IPO shall be conditioned on the satisfaction, or waiver by PC Mall, of the following conditions:

 

(a) The IPO Registration Statement shall have been declared effective by the SEC, and there shall be no stop order in effect with respect thereto.

 

(b) The actions and filings with regard to state securities and blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) described in Section 3.1 shall have been taken and, where applicable, have become effective or been accepted.

 

(c) The eCOST Common Stock to be issued in the IPO shall have been approved for listing on the Nasdaq National Market, subject only to official notice of issuance.

 

(d) eCOST shall have entered into the Underwriting Agreement and all conditions to the obligations of eCOST and the Underwriters shall have been satisfied or waived.

 

(e) PC Mall shall be satisfied in its sole discretion that it will possess Tax Control of eCOST immediately following the IPO, and all other matters regarding the Tax-Free Status will, to the extent applicable as of the time of the IPO, be satisfied or can reasonably be anticipated to be satisfied, and there shall be no event or condition that is likely to cause any of such conditions not to be satisfied as of the time of the Distribution or thereafter.

 

(f) No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the IPO or any of the other transactions contemplated by this Agreement or any Ancillary Agreement shall be in effect.

 

(g) Such other actions shall have been taken as the parties hereto may, based upon the advice of counsel, reasonably request to be taken prior to the IPO in order to assure the successful completion of the IPO and the other transactions contemplated by this Agreement.

 

(h) This Agreement shall not have been terminated.

 

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ARTICLE IV

 

THE DISTRIBUTION

 

4.1. The Distribution .

 

(a) PC Mall intends, following the consummation of the IPO, to complete the Distribution no sooner than one hundred eighty (180) days following the completion of the IPO (the “ Distribution Date ”). PC Mall will, in its sole and absolute discretion, determine the date of the consummation of the Distribution and all terms of the Distribution, including without limitation, the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing of and conditions to the consummation of the Distribution. In addition, PC Mall may, at any time and from time to time until the completion of the Distribution, modify or change the terms of the Distribution, including, without limitation, by accelerating or delaying the timing of the consummation of all or part of the Distribution. eCOST will cooperate with PC Mall in all respects to accomplish the Distribution and will, at PC Mall’s direction, promptly take any and all actions necessary or desirable to effect the Distribution, including, without limitation, to the extent necessary, the registration under the Securities Act and the Exchange Act of the eCOST Common Stock on an appropriate registration form or forms to be designated by PC Mall. PC Mall will select any investment banker(s) and manager(s) in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors for PC Mall, provided , however , that nothing in this Agreement will prohibit eCOST from engaging (at its own expense) its own financial, legal, accounting and other advisors in connection with the Distribution.

 

(b) Subject to Section 4.3 hereof, on or prior to the Distribution Date, PC Mall will deliver to the Agent for the benefit of holders of record of PC Mall Common Stock on the Record Date, a single stock certificate, endorsed by PC Mall in blank, representing all of the outstanding shares of eCOST Common Stock then owned directly or indirectly by PC Mall, and shall cause the transfer agent for the shares of PC Mall Common Stock to instruct the Agent to distribute on the Distribution Date the appropriate number of such shares of eCOST Common Stock to each such holder or designated transferee or transferees of such holder.

 

(c) Subject to Section 4.4, each holder of PC Mall Common Stock on the Record Date (or such holder’s designated transferee or transferees) will be entitled to receive in the Distribution a number of shares of eCOST Common Stock equal to the number of shares of PC Mall Common Stock held by such holder on the Record Date multiplied by a fraction, the numerator of which is the number of shares of eCOST Common Stock beneficially owned by PC Mall on the Record Date and the denominator of which is the number of shares of PC Mall Common Stock outstanding on the Record Date.

 

(d) eCOST and PC Mall, as the case may be, will provide to the Agent all share certificates and any information required in order to complete the Distribution on the basis specified above.

 

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(e) Following the Effective Time, and until such eCOST Common Stock is duly transferred in accordance with applicable law, eCOST will regard the Persons entitled to receive such eCOST Common Stock as record holders of eCOST Common Stock in accordance with the terms of the Distribution without requiring any action on the part of such Persons. eCOST agrees that, subject to any transfers of such stock, (i) each such holder will be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the shares of eCOST Common Stock then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive one or more certificates representing, or other evidence of ownership of, the shares of eCOST Common Stock then held by such holder.

 

4.2. Actions Prior to the Distribution .

 

(a) PC Mall and eCOST shall prepare and mail, prior to the Distribution Date, to the holders of PC Mall Common Stock, such information concerning eCOST, its business, operations and management, the Distribution and such other matters as PC Mall shall reasonably determine and as may be required by law. PC Mall and eCOST will prepare, and eCOST will, to the extent required under applicable law, file with the SEC any such documentation and any requisite no action letters which PC Mall determines are necessary or desirable to effectuate the Distribution and PC Mall and eCOST shall each use commercially reasonable efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.

 

(b) PC Mall and eCOST shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution.

 

(c) PC Mall and eCOST shall take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 4.3 (subject to Sections 4.3(d)) to be satisfied and to effect the Distribution on the Distribution Date.

 

(d) eCOST shall prepare and file, and shall use commercially reasonable efforts to have approved, an application for the listing on the Nasdaq National Market, subject to official notice of issuance, (i) the eCOST Common Stock to be distributed in the Distribution, (ii) the shares of eCOST Common Stock covered by eCOST Options to be issued pursuant to the terms of the Employee Matters Agreement, and (iii) the shares of eCOST Common Stock covered by the warrants to be issued pursuant to Section 4.5 hereof.

 

4.3. Conditions to Distribution . The consummation of the Distribution will be subject to Section 12.2 and the satisfaction, or waiver by PC Mall in its sole and absolute discretion, of the conditions set forth in this Section 4.3. Any determination by PC Mall regarding the satisfaction or waiver of any of such conditions will be conclusive. For the avoidance of doubt, in the event that PC Mall determines not to consummate the Distribution because one or more of such conditions is not satisfied or for any other reason, such determination by PC Mall will not impact the effectiveness of the IPO.

 

(a) A Tax Opinion from Morrison & Foerster LLP shall have been obtained in form and substance satisfactory to PC Mall in its sole discretion, and shall be confirmed at the

 

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Distribution Date, to the effect that, among other things, the Contribution and the Distribution taken together will qualify as a reorganization for U.S. federal income tax purposes pursuant to which no gain or loss will be recognized by PC Mall or PC Mall’s stockholders under Sections 355, 361(b)(3), 368(a)(1)(D) and related provisions of the Code.

 

(b) If PC Mall, in its sole discretion, decides to seek a private letter ruling from the Internal Revenue Service to the same effect as the Tax Opinion (the “ Letter Ruling ”), the Letter Ruling shall have been obtained in form and substance satisfactory to PC Mall, and shall continue in effect, consistent with the conclusions set forth in Section 4.3(a).

 

(c) Any material Governmental Approvals and Consents necessary to consummate the Distribution shall have been obtained and be in full force and effect.

 

(d) No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution shall be in effect and no other event outside the control of PC Mall shall have occurred or failed to occur that prevents the consummation of the Distribution.

 

(e) The eCOST Common Stock to be distributed in the Distribution shall have been accepted for listing on the Nasdaq National Market, subject to official notice of issuance.

 

(f) No other events or developments shall have occurred subsequent to the Closing Date that, in the sole judgment of the Board of Directors of PC Mall, would result in the Distribution having a material adverse effect on PC Mall or on the stockholders of PC Mall.

 

The foregoing conditions are for the sole benefit of PC Mall and shall not give rise to or create any duty on the part of PC Mall or the PC Mall Board of Directors to waive or not waive any such condition.

 

4.4. Fractional Shares . As soon as practicable after the Distribution Date, PC Mall shall direct the Agent to determine the number of whole shares and fractional shares of eCOST Common Stock allocable to each holder of record or beneficial owner of PC Mall Common Stock as of the Record Date, to aggregate all such fractional shares and sell the whole shares obtained thereby at the direction of PC Mall either to PC Mall, in open market transactions or otherwise, in each case at then prevailing trading prices, and to cause to be distributed to each such holder or for the benefit of each such beneficial owner to which a fractional share shall be allocable such holder’s or owner’s ratable share of the proceeds of such sale, after making appropriate deductions of the amount required to be withheld for U.S. federal income tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale. PC Mall and the Agent shall use commercially reasonable efforts to aggregate the shares of PC Mall Common Stock that may be held by any beneficial owner thereof through more than one account in determining the fractional share allocable to such beneficial owner.

 

4.5. Adjustment of PC Mall Warrants .

 

(a) As of the Distribution Date, each warrant to purchase PC Mall Common Stock that is outstanding as of the Record Date and not exercised prior to the Distribution Date

 

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(each a “ PC Mall Warrant ”) shall be adjusted as set forth in this Section 4.5. Each PC Mall Warrant shall be converted, as of the Distribution Date, into two warrants: a warrant (the “ PC Mall Adjusted Warrant ”) to purchase the same number of shares of PC Mall Common Stock covered by the PC Mall Warrant and as to which the PC Mall Warrant has not been exercised as of the Distribution Date, and a warrant (the “ eCOST Warrant ”) to purchase a number of shares of eCOST Common Stock equal to the PC Mall Warrant times a fraction, the numerator of which is the total number of shares of eCOST Common Stock distributed to PC Mall stockholders in the Distribution and the denominator of which is the total number of shares of PC Mall Common Stock outstanding on the Record Date. The terms of the PC Mall Adjusted Warrant and the eCOST Warrant (other than the exercise price and the number of shares) shall be substantially the same as the PC Mall Warrant.

 

(b) The exercise prices per share for each PC Mall Adjusted Warrant and the eCOST Warrant shall be established, as set forth in Schedule 4.5 hereto, in a manner so that: (a) the aggregate “intrinsic value” ( i.e. the market value of the stock underlying the warrant, less the exercise price of such warrant, multiplied by the number of shares then covered by such warrant) after the Distribution of the PC Mall Adjusted Warrant plus the eCOST Warrant is not greater than the intrinsic value of the related PC Mall Warrant immediately prior to the Distribution, and (b) the ratio of the exercise price per warrant to the market value per share after the Distribution is not lower than the ratio of the exercise price of the PC Mall Warrant to the market value per share of PC Mall Common Stock immediately prior to the Distribution. The determination of the exercise prices for each PC Mall Adjusted Warrant and eCOST Warrant shall be made by PC Mall as advised by its professional advisors.

 

(c) The eCOST Warrants to be granted pursuant to this Section 4.5 shall be issued by eCOST as soon as practicable following the Distribution Date, and eCOST shall take all corporate action and make all required filings under applicable state blue sky laws and the Securities Act to (i) issue the eCOST Warrants as required under this Section 4.5 and (ii) comply with applicable registration and qualification requirements under the Securities Act and applicable state securities laws (or exemptions from such registration or qualification requirements) with respect to the issuance of such eCOST Warrants and the eCOST Common Stock underlying the eCOST Warrants, subject in each case to the receipt by eCOST of investment representations and other information from the holders of the PC Mall Warrants reasonably necessary to effect such registration or qualification or qualify for an exemption from such registration or qualification requirements.

 

ARTICLE V

 

ANCILLARY AGREEMENTS

 

5.1. Ancillary Agreements . Prior to the date hereof, PC Mall, through its subsidiaries, has provided to eCOST certain services, including administrative services (accounting, human resources, tax services, legal and treasury), inventory management and order fulfillment, credit card processing, information systems operation and administration, advertising services and use of office space pursuant to the Existing Agreements. eCOST, on the one hand, and PC Mall or its Affiliates, on the other hand, will enter into the Ancillary Agreements pursuant to which PC Mall or such Affiliates of PC Mall will provide certain services to eCOST

 

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on a transitional basis as described in the Ancillary Agreements. Effective as of the date hereof, each of eCOST and PC Mall (or its Affiliates) will execute and deliver each of the Ancillary Agreements.

 

5.2. Termination of Existing Agreements . Effective as of the date hereof, eCOST shall, and PC Mall shall cause its applicable subsidiary to, mutually terminate each of the Existing Agreements.

 

ARTICLE VI

 

MUTUAL RELEASE; INDEMNIFICATION

 

6.1. Release of Pre-Closing Claims .

 

(a) Except as provided in Section 6.1(c), effective as of the Closing Date, eCOST does hereby, for itself, its respective Affiliates (other than any member of the PC Mall Group), successors and assigns, and all Persons who at any time prior to the Closing Date have been stockholders, directors, officers, agents or employees of any member of the eCOST Group (in each case, in their respective capacities as such), remise, release and forever discharge each of PC Mall, its respective Affiliates (other than any member of the eCOST Group), successors and assigns, and all Persons who at any time prior to the Closing Date have been stockholders, directors, officers, agents or employees of PC Mall (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any Contract, by operation of law or otherwise, existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Closing Date, including in connection with the transactions and all other activities to implement the IPO or the Distribution, between eCOST and PC Mall (including any contractual arrangements or arrangements existing or alleged to exist between them on or before the Closing Date).

 

(b) Except as provided in Section 6.1(c), effective as of the Closing Date, PC Mall does hereby, for itself and its Affiliates (other than any member of the eCOST Group), successors and assigns, and all Persons who at any time prior to the Closing Date have been stockholders, directors, officers, agents or employees of any member of the PC Mall Group (in each case, in their respective capacities as such), remise, release and forever discharge eCOST, the respective members of the eCOST Group, their respective Affiliates (other than any member of the PC Mall Group), successors and assigns, and all Persons who at any time prior to the Closing Date have been stockholders, directors, officers, agents or employees of any member of the eCOST Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Closing Date, including in connection with the transactions and all other activities to implement the IPO or the Distribution,

 

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between eCOST and PC Mall (including any contractual arrangements or arrangements existing or alleged to exist between them on or before the Closing Date).

 

(c) Nothing contained in Section 6.1(a) or (b) shall impair any right of any Person to enforce this Agreement or any Ancillary Agreement. Nothing contained in Section 6.1(a) or (b) shall release any Person from:

 

(i) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement;

 

(ii) any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of any other Group prior to the Closing Date;

 

(iii) any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of another Group;

 

(iv) any Liability that the parties may have with respect to indemnification or contribution pursuant to this Agreement for claims brought against the parties by third Persons, which Liability shall be governed by the provisions of this Article VI and Article VII and, if applicable, the appropriate provisions of the Ancillary Agreements;

 

(v) in the case of PC Mall or any member of the PC Mall Group, the capital contribution due to eCOST in the amount of $2,543,000 as reflected on the balance sheet of eCOST as of the date hereof;

 

(vi) in the case of eCOST, outstanding unpaid amounts as of the Closing Date advanced to eCOST for working capital and fixed asset purchases; or

 

(vii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 6.1; provided that the parties agree not to bring suit or permit any of their Subsidiaries to bring suit against any Person with respect to any Liability to the extent that such Person would be released with respect to such Liability by this Section 6.1 but for the provisions of this clause (vii).

 

(d) eCOST shall not make, and shall not permit any member of the eCOST Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against PC Mall or any member of the PC Mall Group or any other Person released pursuant to Section 6.1(a), with respect to any Liabilities released pursuant to Section 6.1(a). PC Mall shall not, and shall not permit any member of the PC Mall Group, to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against eCOST or any member of the eCOST Group, or any other Person released pursuant to Section 6.1(b), with respect to any Liabilities released pursuant to Section 6.1(b).

 

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(e) It is the intent of each of PC Mall and eCOST by virtue of the provisions of this Section 6.1 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Closing Date, between or among eCOST or any member of the eCOST Group, on the one hand, and PC Mall or any member of the PC Mall Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Closing Date), except as expressly set forth in Section 6.1(c). At any time, at the request of any other party, each party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof.

 

(f) The parties acknowledge that they have been advised by legal counsel, with respect to, and are familiar with, the provisions of California Civil Code Section 1542 (“ Section 1542 ”) which provides as follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNO