EXHIBIT 10.6
INFORMATION TECHNOLOGY SYSTEMS USAGE AND SERVICES AGREEMENT
THIS INFORMATION TECHNOLOGY SYSTEMS USAGE AND SERVICES AGREEMENT (this
"Agreement") is entered into on September 1, 2004 by and between AF Services,
Inc., a Delaware corporation ("AF Services"), and eCOST.com, Inc., a Delaware
corporation ("eCOST").
WHEREAS, eCOST obtains certain information technology and support services from AF Services;
WHEREAS, eCOST is considering an initial public offering of its Common Stock ("IPO"); and
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WHEREAS, eCOST desires to continue to obtain certain information
technology and support services from AF Services, and AF Services desires to
continue to provide such services following the IPO as more fully set forth
herein.
NOW, THEREFORE, for and in consideration of the promises and the
obligations undertaken by the parties pursuant hereto, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, AF Services and eCOST hereby agree as follows:
ARTICLE I
ENGAGEMENT OF AF SERVICES; duties
1.1 Engagement. Effective as of the closing date of the IPO (the "Effective
Date"), eCOST hereby retains AF Services to perform the information technology
and support services set forth on Exhibit A attached hereto, including such
services as may be related, ancillary, or necessary to perform such services
(each, a "Service", and collectively, the "Services").
1.2 Duties and Rights.
(a) AF Services Obligations.
(i) AF Services hereby covenants and agrees that it shall, during the term of
this Agreement, perform the Services. AF Services covenants and agrees that it
shall maintain accurate records and accounts of all transactions, data, files
and information relating to the Services performed pursuant to this Agreement.
Such records and accounts shall contain such information as would normally be
examined by an independent accountant in performing a complete audit pursuant
to United States generally accepted auditing standards for the purpose of
certifying financial statements, and as would normally be required by a
government taxing authority in order to verify provision of the Services.
(ii) AF Services shall perform the Services pursuant to this Agreement in a
manner and at a level of service substantially similar to that provided by AF
Services to eCOST prior to the date hereof and shall exercise the same care
and skill as it exercises in performing similar services for other
subsidiaries of PC Mall. In the event AF Services engages third parties to
perform one or more Services under the supervision of AF Services pursuant to
Section 1.2(c), AF Services shall cause such third parties to perform such
Service under the same applicable performance standard.
(b) eCOST Obligations. eCOST hereby covenants and agrees that it shall pay AF
Services for Services in accordance with Article III. eCOST further covenants
and agrees that it shall provide AF Services with all documents and
information necessary for AF Services to perform the Services pursuant to this
Agreement. To the extent required, eCOST shall authorize AF Services to
perform such actions as may be necessary for the performance of the Services.
(c) Right to Subcontract. In the performance of its obligations hereunder, AF
Services shall have the right, in its sole discretion, to subcontract its
rights and responsibilities to any third party, provided that AF Services
shall remain responsible for the performance of any such third party.
(d) No Additional Resources. Unless otherwise agreed in writing, AF Services
shall not be required to perform the Services at a level that is substantially
greater than the level of use required by eCOST immediately prior to the
Effective Date. Without limiting the foregoing, in connection with the
performance of the Services, in no event shall AF Services be required to hire
any additional employees, maintain the employment of any specific employee, or
purchase, lease or license any additional equipment or intellectual property.
1.3 Independent Contractors. The relationship of AF Services and eCOST
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (a) constitute the parties as
partners, joint venturers, co-owners or otherwise as participants in a joint or
common undertaking; (b) create the relationship of principal and agent between
the parties; (c) prevent AF Services from entering into any other business; or
(d) allow AF Services to create or assume obligations on behalf of or in the
name of eCOST. Except as provided herein, all financial obligations associated
with each party's businesses are the sole responsibility of each respective
party, and nothing in this Agreement is intended to make either party
responsible for the financial obligations of the other.
1.4 Additional Services. From time to time after the Effective Date, the parties
may identify additional services that AF Services will provide to eCOST in
accordance with the terms and conditions of this Agreement ("Additional
Services"). The parties shall create an Exhibit for each Additional Service
setting forth a description of the Additional Service, the charge, if any,
applicable thereto, and any other applicable terms and conditions with respect
to such Additional Service. In order to become a part of this Agreement, such
Exhibit must be executed by a duly authorized representative of each party, at
which time such Additional Service shall be deemed to constitute a "Service" for
purposes hereof and shall be subject to the terms and conditions of this
Agreement. For the avoidance of doubt, the parties may, but shall not be
required to, agree on Additional Services during the term of this Agreement.
Notwithstanding anything to the contrary in the foregoing or elsewhere in this
Agreement, any service actually performed by AF Services upon a written or
verbal request by eCOST in connection with this Agreement shall be deemed to
constitute a "Service" for purposes of Sections 5.1 and 5.2.
1.5 Cooperation; Consents; Alternatives.
(a) Cooperation and Consents. The parties will use good faith efforts to
cooperate with each other in all matters relating to the provision and receipt
of the Services, including, without limitation, cooperating in connection with
obtaining all consents, approvals licenses or sublicenses reasonably necessary
in order for AF Services to perform the Services. eCOST shall be solely
responsible for any costs incurred by AF Services in connection with obtaining
such consents or approvals or procuring such licenses or sublicenses.
(b) Alternatives. In the event that AF Services reasonably believes that it is
unable to provide any Service because of a failure to obtain any consent,
approval, license or sublicense, the parties shall in good faith discuss and
agree to an alternative approach; provided that, in no event shall AF Services
be required to provide such Service until such time that the parties have
agreed to an alternative approach or the relevant consent, approval, license
or sublicense has been obtained. eCOST shall be solely responsible for any
increased cost in providing a Service resulting from any agreed alternative
approach.
1.6 Defined Terms. Capitalized terms used and not otherwise defined herein shall
have the meanings given to them in that certain Master Separation and
Distribution Agreement (the "Master Separation and Distribution Agreement"), by
and between PC Mall, Inc., a Delaware corporation ("PC Mall") and eCost, dated
as of the date hereof.
ARTICLE II
SYSTEMS USAGE
2.1 Telecommunications. During the term of this Agreement, AF Services shall
provide eCOST continued usage of the telecommunications systems, including the
Internet pipe, inbound toll free telephone calls, outbound local and long
distance telephone calls and the circuits associated with the foregoing, not to
exceed eCOST's historical levels of usage, and systems configuration for the
same ("Telecommunications Usage").
2.2 Hardware and Software. During the term of this Agreement, AF Services shall
provide eCOST continued usage of computer hardware and software systems, not to
exceed eCOST's historical levels of usage, and configuration for the same
("Hardware and Software Usage").
ARTICLE III
FEES
3.1 Fees for Services; Fees for Hardware and Software Usage. In consideration of
AF Services' performance of the Services and provision of the Hardware and
Software Usage, eCOST shall pay AF Services a monthly fee equal to Forty
Thousand Dollars ($40,000) (the "Monthly Fee").
3.2 Telecommunications Usage Fees. eCOST shall reimburse AF Services monthly for
the actual costs incurred by AF Services for providing the Telecommunications
Usage to eCOST (the "Telecommunications Fee").
3.3 Invoicing. AF Services shall invoice eCOST on a monthly basis for the
Monthly Fee and the Telecommunications Fee. Such invoices shall set forth the
applicable fees, and provide reasonable detail regarding each of such fees. AF
Services' invoices shall be due and payable by eCOST, in immediately available
funds and as an electronic funds transfer or by such other manner mutually
agreed by the parties, not later than fifteen (15) days after the date of
invoice. Late payments under this Article III shall bear interest at the prime
rate plus two percent (2%) per annum or the maximum amount permitted by
applicable law, whichever is less.
3.4 Additional Systems Costs. Notwithstanding anything to the contrary in this
Agreement, to the extent that AF Services would be required to pay any amounts
to acquire additional hardware, license additional third-party software, pay any
third-party transfer fees or purchase additional third-party services related to
the foregoing, to provide the Services, Telecommunications Usage or Hardware and
Software Usage to eCOST ("Additional Systems Costs"), eCOST shall be responsible
for payment of any such Additional Systems Costs.
3.5 Taxes. All amounts payable for Services provided hereunder are exclusive of
any taxes. All taxes and other charges imposed by any taxing authority on any
Service provided hereunder shall be added to the appropriate invoice and shall
be payable by eCOST in accordance with Section 3.3.
3.6 Audit Adjustments. In the event of a tax audit adjustment relating to the
pricing of any Service provided pursuant to this Agreement in which it is
determined by a taxing authority that any of the fees charged hereunder,
individually or in combination, did not constitute an arm's length payment, the
parties will in good faith discuss and agree to make adjustments to the
applicable fees in order to achieve arm's length pricing. Any adjustment made
pursuant to this Section 3.6 shall be reflected in each party's books and
records, and shall create a right to receive payment, in the case of the party
that either overpaid or was under-compensated (as applicable), and an obligation
to make payment, in the case of the party that either underpaid or was
over-compensated (as applicable), in accordance with Section 3.3.
ARTICLE IV
TERM; TERMINATION;
OBLIGATIONS OF AF SERVICES UPON TERMINATION
4.1 Term. The term of this Agreement shall commence on the Effective Date and
shall continue for a period of two (2) years, unless earlier terminated in
accordance with Section 4.2 below.
4.2 Termination.
(a) Agreement. This Agreement shall be terminated upon the occurrence of any of
the following events:
(i) Upon the mutual agreement of eCOST and AF Services;
(ii) Upon one-hundred eighty (180) days written notice, with or without cause,
by either party;
(iii) Upon thirty (30) days written notice of non-payment from AF Services to
eCOST, unless eCOST pays all overdue amounts, together with interest, within
twenty-one (21) days of such notice; or
(iv) Upon thirty (30) days written notice of material breach from eCOST Services
to AF Services, unless AF Services cures such breach within twenty-one (21) days
of such notice (provided that such notice shall indicate the nature and basis of
such breach, with reference to the applicable provisions of this Agreement and
eCOST's intention to terminate this Agreement in the event that AF Services has
not cured such breach within such twenty-one (21) day period).
4.3 Termination Obligations. Termination or expiration of this Agreement shall
not affect, negate or obviate any obligation of either party to the other
arising prior to the date of such termination or expiration. By a date that is
reasonably practical prior to the date of termination or expiration of this
Agreement, AF Services shall transfer to eCOST all data, records, files and
other information, in whatever format maintained, solely concerning eCOST and
the performance of the Services. AF Services shall provide reasonable access to
such data, records, files and information, and shall support eCOST and respond
to eCOST inquiries as reasonably necessary to allow eCOST to understand,
interpret and use all such data, records, files and information, so that eCOST
may provide for, after the date of such termination or expiration, the
performance of the Services by either itself or a third party.
4.4 Survival. The terms and conditions of the following provisions will survive
the termination or expiration of this Agreement: Article II; Sections 1.4, 4.3,
4.4, 5.1, 5.2 and 5.3; Article VII; and Article VIII.
ARTICLE V
LIMITATION OF LIABILITY; Warranty disclaimer; force majeure
5.1 Limitation of Liability. EXCEPT WITH RESPECT TO LOSSES OR DAMAGES ACTUALLY
SUFFERED OR INCURRED BY ECOST AS A RESULT OF AF SERVICES' WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE IN PROVIDING THE SERVICES, AF SERVICES OR ANY AFFILIATE THEREOF
SHALL HAVE NO LIABILITY FOR DAMAGES IN CONNECTION WITH THIS AGREEMENT AND THE
SERVICES PROVIDED HEREUNDER, REGARDLESS OF THE FORM OF ACTION GIVING RISE TO
SUCH LIABILITY (WHETHER UNDER CONTRACT, TORT, STATUTORY OR OTHERWISE). TO THE
EXTENT PERMITTED BY APPLICABLE LAW AND NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, NEITHER AF SERVICES NOR ANY AFFILIATE THEREOF SHALL
BE LIABLE FOR ANY INDIRECT, EXEMPLARY, SPECIAL, CONSEQUENTIAL OR INCIDENTAL
DAMAGES OF ANY KIND, OR FOR ANY DAMAGES RESULTING FROM LOSS OR INTERRUPTION OF
BUSINESS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE PROVISION OF THE SERVICES OR AF SERVICES' PERFORMANCE UNDER THIS
AGREEMENT, HOWEVER CAUSED, EVEN IF AF SERVICES HAS BEEN ADVISED OF OR SHOULD
HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES.
5.2 Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, AF
SERVICES MAKES NO, AND DISCLAIMS ALL, WARRANTIES, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT, WITH RESPECT TO THE SERVICES. AF
SERVICES MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY, SUITABILITY
OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR USE.
5.3 Force Majeure.
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(a) Definition. "Force Majeure Event" means any event or condition, not existing
as of the date of this Agreement, not reasonably foreseeable as of such date
and not reasonably within the control of AF Services, which prevents in whole
or in material part the performance by AF Services of its obligations
hereunder or which renders the performance of such obligations so difficult or
costly as to make such performance commercially unreasonable. Without limiting
the foregoing, the following will constitute a Force Majeure Event: acts of
state or governmental action, riots, disturbance, war, strikes, lockouts,
slowdowns, prolonged shortage of energy supplies, epidemics, fire, flood,
hurricane, typhoon, earthquake, lightning and explosion.
(b) Release of AF Services. Upon being affected by a Force Majeure Event and
after notice to eCOST, AF Services will be released without any liability on
its part from the performance of its obligations under this Agreement, but
only to the extent and only for the period that its performance of such
obligations is prevented by such Force Majeure Event. Such notice must include
a reasonable description of the nature and cause of the Force Majeure Event.
AF Services will as soon as reasonably practical notify eCOST at such time
that it is no longer affected by the Force Majeure Event and is able to resume
providing Services.
(c) Cover. eCOST is entitled, following the occurrence of the Force Majeure
Event and the receipt of notice from AF Services in accordance with Section
5.3(b), to contract or provide for the performance of the Services otherwise
performed by AF Services hereunder. Upon notice of termination of the Force
Majeure Event, eCOST shall consent to AF Services resuming performance of the
Services and obligations hereunder.
5.4 Work Product.
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(a) Ownership. As used herein, the term "Work Product" means all materials,
software, tools, data, inventions, works of authorship, documentation and
other innovations of any kind, including, without limitation, any improvements
or modifications to AF Services' proprietary computer software programs and
related materials, that AF Services, or personnel working for or through AF
Services, may make, conceive, develop or reduce to practice, alone or jointly
with others, in the course of performing the Services or as a result of such
Services, whether or not eligible for patent, copyright, trademark, trade
secret or other legal protection. eCOST agrees that all Work Product shall be
the property of AF Services and hereby assigns all rights it may have in the
Work Product and in all related patents, patent applications, copyrights, mask
work rights, trademarks, trade secrets, rights of priority and other
proprietary rights to AF Services. eCOST acknowledges that AF Services, in its
sole discretion, shall have the right to license the Work Product or any
portion thereof, and incorporate the Work Product or any portion thereof into
AF Services products, for use by other licensees or customers of AF Services.
At AF Services' request and expense, eCOST shall assist and cooperate with AF
Services in all reasonable respects and shall execute documents, give
testimony and take further acts as reasonably requested by AF Services to
acquire, transfer, maintain and enforce patent, copyright, trademark, mask
work, trade secret and other legal protection for the Work Product.
(b) License of Work Product. Subject to eCOST's performance of its obligations
hereunder, AF Services hereby grants to eCOST a worldwide, non-exclusive,
non-transferable license to use, within eCOST's enterprise only, the Work
Product solely for eCOST's internal business purposes. eCOST shall not,
without the written consent of AF Services: (i) decompile, disassemble or
otherwise reverse engineer the Work Product or any portion thereof; or (ii)
rent, lease, sublicense, sell, transfer or otherwise grant rights in or to the
Work Product (in whole or in part) to any third party in any form.
(c) Reservation of Rights. Except as otherwise expressly provided herein,
nothing in this Agreement shall be deemed to grant, directly or by
implication, estoppel or otherwise, any right or license with respect to any
technology or other intellectual property rights, and each party retains all
right, title and interest in and to their respective technologies and other
intellectual property rights.
ARTICLE VI
REQUESTS FOR INFORMATION
AF Services shall, at eCOST's cost and expense, provide reasonable
access to eCOST to any documents, records, data or information reasonably
requested by eCOST concerning eCOST or the Services provided hereunder as soon
as reasonably practicable after the receipt of a written request therefor from
eCOST or its authorized representatives. In addition, upon reasonable notice
from eCOST and at eCOST's cost and expense, AF Services shall provide authorized
representatives of eCOST with reasonable access to the books and records
maintained by AF Services that pertain to the Services provided hereunder.
ARTICLE VII
CONFIDENTIALITY
Each party shall hold, and shall cause its employees, accountants,
attorneys and other authorized representatives to hold, in confidence, and shall
otherwise not disclose to anyone other than each of their respective
accountants, attorneys and other authorized representatives, together with such
other individuals or organizations as may from time to time be authorized in
writing by the other party or as may otherwise be required by any administrative
body or required by law, all documents, records, data and information of each
party ("Confidential Information") disclosed by such party to the other party in
connection with the performance of this Agreement. Confidential Information
shall not include information that (1) is already or otherwise becomes publicly
available through no act of receiving party; (2) is lawfully received by
receiving party from third parties subject to no restriction of disclosure; or
(3) can be shown by receiving party to have been independently developed by such
party. Each party shall promptly notify the other party of any subpoena or other
request or demand made to such party seeking documents, records, data or
information concerning the other party or the Services provided hereunder, and
shall resist production of any such materials consistent with its obligations
pursuant to this Article. Neither party shall use the Confidential Information
of the other party except to exercise its rights and perform its obligations
hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances. AF Services and eCOST agree, upon the reasonable request
of the other, to execute, acknowledge and deliver any and all such further
instruments, and to do and perform any and all such other acts as may be
necessary or appropriate in order to carry out the intent and purposes of this
Agreement.
8.2 Waivers or Modifications. No waiver, modification or cancellation of any
term or condition of this Agreement shall be effective unless executed in
writing by the party to be charged therewith. No written waiver shall excuse the
performance of any act(s) other than those specifically referred to therein. A
waiver of any breach by any party hereunder shall not constitute a waiver of any
subsequent breach(es) by such party hereunder.
8.3 Governing Law. This Agreement shall be governed by the laws of the State of
California (regardless of the laws that might otherwise govern under applicable
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, construction, effect, performance and remedies.
8.4 Notices. 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 AF Services, to: AF Services, Inc.
2555 West 190th Street, Suite 204
Torrance, California 90504
Attention: President
Fax No.: (310) 630-3462
If to eCOST: eCOST.com, Inc.
2555 West 190th Street, Suite 106
Torrance, California 90504
Attention: Chief Executive Officer
Fax No.: (310) 630-3578
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.
8.5 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, such provision will be fully severed and this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof will remain in full force and effect and will not be affected
by the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
will be added automatically as part of this Agreement a provision as similar in
its terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable.
8.6 Entire Agreement. This Agreement, the Master Separation and Distribution
Agreement, the other Ancillary Agreements and the exhibits and schedules
referenced or attached hereto and 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.
8.7 Assignment. Except to the extent expressly provided herein, neither party
has the right to, directly or indirectly, in whole or in part, assign, delegate,
convey or otherwise transfer, whether voluntarily, involuntarily or by operation
of law, its rights and obligations under this Agreement, except with the prior
written approval of the other party. Any such prohibited action will be null and
void. Notwithstanding anything to the contrary in the foregoing, AF Services
shall have the right to assign this Agreement without eCOST's prior approval to
any successor of AF Services in connection with a corporate reorganization.
8.8 Binding Agreement. This Agreement is binding upon, and inures to the benefit
of, the parties and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer on any person, other than the
parties or their respective successors, any rights, remedies or liabilities
under this Agreement.
8.9 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.
8.10 No Impairment of Rights. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder will impair such right, power
or privilege, nor will any single or partial exercise of any such right, power
or privilege preclude any further exercise thereof or the exercise of any other
right, power or privilege.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
AF SERVICES, INC.
By: /s/ Simon Abuyounes
Name: Simon Abuyounes
Title: President
ECOST.COM, INC.
By: /s/ Adam W. Shaffer
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Name: Adam W. Shaffer
Title: Chief Executive Officer
Exhibit A
The Services shall include information technology and support services for the
ordinary course operation of the current configuration of eCOST systems
(software, hardware and network), consistent with historic use levels, including
maintenance and basic technical support. Software enhancements/modifications,
additional bandwidth, including Internet circuits and hardware, and any related
acquisition and installation services shall not be included in the Services
initially contemplated by this Agreement.
