-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GawTf8xdHy1yk1HHpxeeJn/TU17kGsxUQsHVShAxshEcE1PSygvZFgu8cIOK5N1t OxQnqjzWa7gCVj5h6o0hCQ== 0000950109-00-001589.txt : 20000427 0000950109-00-001589.hdr.sgml : 20000427 ACCESSION NUMBER: 0000950109-00-001589 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990201 ITEM INFORMATION: FILED AS OF DATE: 20000426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL SPORTS INC CENTRAL INDEX KEY: 0000828750 STANDARD INDUSTRIAL CLASSIFICATION: RUBBER & PLASTICS FOOTWEAR [3021] IRS NUMBER: 042958132 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-16611 FILM NUMBER: 608817 BUSINESS ADDRESS: STREET 1: 1075 FIRST AVE STREET 2: RTE 3 INDUSTRIAL PARK CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6102653229 MAIL ADDRESS: STREET 1: 1075 FIRST AVE CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 8-K/A 1 AMENDMENT NO. 2 TO FORM 8-K/A ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 2 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934. Date of Report: February 1, 1999 ---------------------------------- (Date of earliest event reported) GLOBAL SPORTS, INC. (Exact name of registrant as specified in its charter) Delaware 0-16611 04-2958132 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation or organization) File Number) Identification Number) 1075 First Avenue, King of Prussia, PA 19406 (Address of principal executive offices) (Zip Code) (610) 265-3229 (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) ================================================================================ PURPOSE OF AMENDMENT The Registrant previously filed certain of its material contracts as exhibits to its Current Report on Form 8-K filed December 28, 1999. The Registrant requested confidential treatment as to certain portions of the contracts. The Registrant hereby amends Item 7 of its Current Report on Form 8-K, as set forth in the pages attached hereto. ITEM 7 Exhibit No. Description - ----------- ----------- 10.1 + E-Commerce Agreement dated February 1, 1999 by and between Global Sports Interactive, Inc. ("GSI") and Michigan Sporting Goods Distributors, Inc. 10.2 + E-Commerce Management Agreement dated March 10, 1999 by and between GSI and The Athlete's Foot Stores, Inc. 10.3 + E-Commerce Agreement dated March 23, 1999 by and between GSI and Dunham's Athleisure Corporation 10.4 + E-Commerce Management Agreement by and between GSI and Sport Chalet, Inc. 10.5 +** E-Commerce Venture Agreement (the "TSA Venture Agreement") dated May 7, 1999 by and between GSI and The Sports Authority, Inc. ("TSA") 10.6 +** Amendment No. 1 to E-Commerce Venture Agreement dated May 14, 1999 by and between GSI and TSA 10.7 +** License Agreement dated May 14, 1999 by and among TSA, The Sports Authority Michigan, Inc. and TheSportsAuthority.com, Inc. ("TSA.com") 10.8 + E-Commerce Services Agreement dated May 14, 1999 by and between GSI and TSA.com 10.9 + E-Commerce Agreement dated May 14, 1999 by and among TSA and TSA.com **Previously filed. 2 - ----------- + Confidential treatment has been requested as to certain portions of this exhibit. The omitted portions have been separately filed with the Securities and Exchange Commission. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned, hereunto duly authorized. GLOBAL SPORTS, INC. DATE: April 26, 2000 By: /s/ Michael G. Rubin ---------------------- Michael G. Rubin Chairman of the Board & Chief Executive Officer DATE: April 26, 2000 By: /s/ Jordan M. Copland ---------------------- Jordan M. Copland Executive Vice President & Chief Financial Officer 4 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 10.1+ E-Commerce Agreement dated February 1, 1999 by and between Global Sports Interactive, Inc. ("GSI") and Michigan Sporting Goods Distributors, Inc. 10.2+ E-Commerce Management Agreement dated March 10, 1999 by and between GSI and The Athlete's Foot Stores, Inc. 10.3+ E-Commerce Agreement dated March 23, 1999 by and between GSI and Dunham's Athleisure Corporation 10.4+ E-Commerce Management Agreement by and between GSI and Sport Chalet, Inc. 10.5+** E-Commerce Venture Agreement (the "TSA Venture Agreement") dated May 7, 1999 by and between GSI and The Sports Authority, Inc. ("TSA") 10.6+** Amendment No. 1 to E-Commerce Venture Agreement dated May 14, 1999 by and between GSI and TSA 10.7+** License Agreement dated May 14, 1999 by and among TSA, The Sports Authority Michigan, Inc. and TheSportsAuthority.com, Inc. ("TSA.com") 10.8+ E-Commerce Services Agreement dated May 14, 1999 by and between GSI and TSA.com 10.9+ E-Commerce Agreement dated May 14, 1999 by and among TSA and TSA.com - -------------- **Previously filed. + Confidential treatment has been requested as to certain portions of this exhibit. The omitted portions have been separately filed with the Securities and Exchange Commission. 5 EX-10.1 2 E-COMMERCE AGREEMENT DATED FEBRUARY 1, 1999 Confidential Treatment has been requested with respect to portions of the agreement indicated with an asterisk [*]. A complete copy of this agreement, including the redacted terms, has been separately filed with the Securities and Exchange Commission. E COMMERCE AGREEMENT -------------------- THIS E - Commerce Agreement dated the 1st day of February, 1999 by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and Michigan Sporting Goods Distributors, Inc., a Michigan corporation (hereinafter referred to as "Retailer") with an address of 3070 Shaffer S.E., Grand Rapids, Michigan, 49512. W I T N E S S E T H: WHEREAS, GSI is in the business of creating and operating all aspects of an E-Commerce Shopping Experience, including servicing and fulfilling the on-line retail sales of selected merchants; and WHEREAS, Retailer desires to enter into an exclusive agreement with GSI pursuant to which GSI will act as an Outsourcing Company providing the Retailer's on-line customers the complete E-Commerce Shopping Experience, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 1. DEFINITIONS. As used herein, the following terms shall have the following ----------- meaning: 1.1 "Advertising Co-op and Discretionary Funds" shall mean amounts earned by or allocated to the Retailer by its vendors, the purpose of which is to advertise that vendor's brand or to use at the Retailer's discretion. 1.2 "Anticipation Discounts" shall mean discounts granted by a vendor to a retailer in exchange for the retailer's payment of an invoice prior to the retailer's usual terms of payment. 1.3 "Categories" shall mean the various types of product groups (e.g. athletic footwear, camping, in line skates, etc.) offered for sale by the Retailer in its Land Based stores. 1.4 "Closeout Merchandise" shall mean end of season or excess merchandise that is priced at a greater than normal discount. 1.5 "Complete URL Integration" shall mean the display of Retailer's URL in all of Retailer's marketing and communications. 1.6 "Confidential Information" shall mean as that term is defined in paragraph 7.1 of this Agreement. 1.7 "Cross Promotion" shall mean the use of the Retailer's URL, name and logo on other than the Retailer's Web Site for the purpose of promoting the Retailer's Web Site. 1.8 "Customary Pricing Structure" shall mean the policy generally employed by the Retailer in determining the prices of merchandise in its Land Based Stores. 1.9 "Customer Data" shall mean as that term is defined in paragraph 4.1 of this Agreement. 1.10 "Data Bases" shall mean as that term is defined in paragraph 4.2 of this Agreement. 1.11 "Defective Allowance" shall mean a discount granted by a manufacturer to a retailer as a result of defective merchandise received by the retailer and pursuant to which, the retailer also retains the merchandise. 1.12 "Disclosing Party" shall mean the party disclosing Confidential Information. 1.13 "Domain Name" shall mean as that term is defined in paragraph 1.1 of the Web Site Development Agreement (as hereinafter defined). 1.14 "E-Commerce" shall mean the Retailer's specific business conducted through the Internet. 1.15 "E-Commerce Orders" shall mean the orders for merchandise placed by customers of the Retailer's Web Site. 1.16 "E-Commerce Outsourcing Partner" shall mean GSI. 1.17 "E-Commerce Shopping Experience" shall mean the shopping for and purchasing of merchandise through the Internet. 1.18 "Flight Date" shall mean the date on which Retailer's advertising is scheduled to run for the first time. 1.19 "Force Majeure Event" shall mean as that term is defined in Article 18 of this Agreement. 1.20 "GSI Content" shall mean as defined in paragraph 1.6 of the Web Site Development Agreement. 1.21 "In Line Merchandise" shall mean current merchandise available to be carried by the Retailer in its Land Based Stores from Retailer's current or future vendors. 1.22 "Internet" shall mean the collection of interconnected networks that all use the TCP/IP protocols. 2 1.23 "Land Based Stores" shall mean the Retailer's traditional stores located in shopping districts, strip shopping centers and shopping malls. 1.24 "Land Based Stores Gift Certificates" shall mean gift certificates offered for sale on the Retailer's Web Site for merchandise sold only in Retailer's Land Based Stores. 1.25 "Launch Date" shall mean the date on which GSI commences operation of the Retailer's Web Site to the public. 1.26 "Markdowns" shall mean merchandise in Retailer's inventory offered for sale at less than the price it was originally offered for. 1.27 "Milestone Delivery Schedule" shall mean as defined in paragraph 1.5 of the Web Site Development Agreement. 1.28 "On Line Customer Loyalty Programs" shall mean programs established to encourage repeat business from on line customers. 1.29 "On Line Merchandise" shall mean merchandise to be sold on the Retailer's Web Site. 1.30 "Outsourcing Company" shall mean a company which provides E-Commerce Services for traditional Retailers. 1.31 "Price Matching" shall mean a Retailer's policy pursuant to which it addresses another retailer's lower price on a particular item of merchandise. 1.32 "Production Schedule" shall mean as defined in paragraph 1.9 of the Web Site Development Agreement. 1.33 "Project Manager" shall mean an employee of Retailer's who is assigned exclusively to work with GSI in supplying GSI with Retailer Content, except as may otherwise be permitted pursuant to paragraph 3.14 below. 1.34 "Receiving Party" shall mean the party receiving Confidential Information. 1.35 "Retailer Content" shall mean as defined in paragraph 1.10 of the Web Site Development Agreement. 1.36 "Retailer's Net Cost" shall mean the amount paid by the Retailer for merchandise from its vendors after deductions for Defective Allowances, volume allowances, freight allowances and any trade discounts offered by vendors, but excluding cash or anticipation discounts and any marketing funds granted to Retailer by a manufacturer as an overall marketing allowance. 3 1.37 "Retailer's Warehouse" shall mean the place at which Retailer receives delivery of merchandise from its vendors. 1.38 "Revenue Share" shall mean as defined in paragraph 3.8 of this Agreement. 1.39 "Special Makeups" shall mean merchandise manufactured for the Retailer exclusively. 1.40 "Term" shall be as defined in Section 2.2 of this Agreement. 1.41 "Term Year" shall mean a consecutive twelve month period occurring during the Term, the first of which shall commence on the Launch Date and terminate twelve months thereafter, and subsequently shall occur every twelve months thereafter. 1.42 "URL" shall mean the address of the Web Site on the Internet. 1.43 "Web" shall mean the World Wide Web. 1.44 "Web Site" shall mean as defined in paragraph 1.11 of the Web Site Development Agreement. 1.45 "Web Site Development Agreement" shall mean the agreement by and between GSI and Retailer attached to this Agreement as Exhibit "A". 2. AGREEMENT AND TERM ------------------ 2.1 Agreement. During the Term GSI shall provide the Retailer with those --------- Web Site services as hereinafter specified. 2.2 Term. The Term of this Agreement shall commence upon the execution ---- of this Agreement by both parties and shall expire ten (10) years after the Launch Date ("Expiration Date") without any notice. GSI shall use reasonable efforts to advise Retailer ten days prior to the expected Launch Date. The Launch Date shall occur between the period of October 1, 1999 and December 1, 1999 ("Commencement Period"). GSI's obligation to commence operation of the Web Site during the Commencement Period shall be contingent on Retailer complying with the deadlines set forth on the Milestone Delivery Schedule set forth on Attachment A to the Web Site Development Agreement and on the Production Schedule to be agreed upon by the parties. Retailer acknowledges the urgency of complying with the deadlines set forth in the Milestone Delivery Schedule and the Production Schedule and shall give GSI its full cooperation to ensure that such deadlines are satisfied. Notwithstanding anything contained herein to the contrary, in the event that the Retailer does not comply with such deadlines and GSI has given Retailer written notice of its failure to comply, then, for each day of such non compliance, the Commencement Period shall be extended by one day. 4 2.3 Outside Launch Date. Notwithstanding anything contained herein to the ------------------- contrary, in the event that the Launch Date does not occur by December 1, 2000, and the delay is not the result of the Retailer's failure to provide GSI with Retailer Content necessary to complete the Retailer's Web Site, then this Agreement shall automatically terminate and neither party shall have any further liability or obligations hereunder. 3. OBLIGATIONS AND RIGHTS OF THE PARTIES ------------------------------------- 3.1 Creation of Retailer's Web Site. ------------------------------- a. GSI, at no cost to the Retailer, shall create, maintain and operate a Web Site for the Retailer on the Web in accordance with the specifications attached to the Web Site Development Agreement. In connection therewith, simultaneous herewith, Retailer and GSI shall execute the Web Site Development Agreement. b. The Web Site shall contain the Retailer's E-Commerce Shopping Experience, the URL of which shall be www.Retailer.com. In addition, the Web Site shall contain any or all of the following information, as the Retailer shall elect: corporate information (e.g. historic background, mission statement, names of officers and directors), store locator, public financial information (e.g. SEC filings, annual reports), press releases, community programs, employment opportunities for in store or corporate positions, frequently asked questions and a "contact us" section. c. Following the initial completion of the Web Site, the Retailer shall have the right to update the content thereof as follows: 1) Employment Opportunities - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to update the employment opportunity portion of the Web Site as frequently as it desires. 2) Public Financial Information - a) Stock Prices - Will be updated daily by a link to another web site offering such information. b) SEC Filings and Annual Reports - SEC filings will be provided by a link so long as the government makes such filings available at no cost. Both SEC filings and annual reports will be provided only if available in portable 5 document format; in the alternative, GSI will provide the consumer with a form in order to request such information from the Retailer's investor relationship department. 3) Store Locators - Will be updated by GSI as such information changes and is provided by Retailer. 4) Frequently Asked Questions - Will be updated by GSI monthly as such questions changed and are provided by Retailer. 5) Corporate Information - Will be updated by GSI as such information changes and is provided by Retailer. 6) Community Programs - Will be updated by GSI as such information changes and is provided by Retailer. 7) Press Releases - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to post press releases on its Web site as it desires. Retailer shall defend and hold harmless GSI, its employees, officers and directors, from any liability arising from the posting of press releases on the Retailer's Web Site. 8) "Contact Us" Section - Will be updated by GSI as such information changes and is provided by Retailer. 3.2 Creation and Maintenance of the Retailer's Web Site. --------------------------------------------------- GSI shall create and maintain a Web Site for the Retailer. Commencing with the execution of this Agreement and continuing through the Term, the Retailer, shall cooperate with GSI so as to enable GSI to create and maintain for the Retailer's consumers, the Retailer's Web Site. In connection therewith, the Retailer shall supply GSI with the Retailer Content (as that term is defined in the Web Site Development Agreement) required pursuant to the terms of the Web Site Development Agreement. This shall include, but not be limited to printed marketing information, data, text, audio files, video files, graphics and other assets necessary to create and maintain the Retailer's Web Site. 3.3 Sale of Merchandise on the Retailer's Web Site. ---------------------------------------------- a. GSI shall have the right to offer for sale on the Retailer's Web Site all Categories of merchandise 6 offered for sale by the Retailer in its Land Based Stores, as permitted by Retailer's vendors; provided however, in no event shall GSI offer firearms for sale on the Retailer's Web Site, or any Category of merchandise considered immoral, pornographic or offensive in Retailer's reasonable opinion. b. Within the Categories, GSI shall have the right to offer for sale: 1) current in line merchandise ordered by the Retailer from its vendors; and 2) current in line merchandise not carried by the Retailer in its Land Based Stores, but available in those Categories carried by the Retailer; provided however, no products will be offered for sale on Retailer's Web Site which the Retailer would not be authorized to sell by the manufacturer in its Land Based Stores; and 3) Special Make-Ups; and 5) Closeout Merchandise; and 6) Markdowns of Retailer's inventory 7) Gift Certificates for On Line Merchandise (Items 1) through 7) are hereinafter referred to as "On Line Merchandise"] c. In addition, GSI shall have the right to offer for sale Land Based Stores Gift Certificates for merchandise available in the Retailer's Land Based Stores. These certificates shall be provided to GSI on consignment as set forth in Paragraph 3.6 below. d. Notwithstanding anything contained herein to the contrary, in those instances where Retailer is required to order merchandise for GSI from a vendor, Retailer shall not be required to do so if it would violate the terms of any written dealer agreement which Retailer may have with a vendor or any verbal dealer agreement which Retailer may have with a vendor if such verbal agreement provides that the Retailer may sell that vendor's brands in only certain Land Based Stores designated by the vendor; provided however, Retailer shall use its best efforts to obtain all consents required to permit the sale of such merchandise on the Retailer's Web Site. 3.4 Prices of On-Line Merchandise. GSI shall offer the On-Line Merchandise ----------------------------- for sale on the Retailer's Web Site on the following basis: 7 a. If the On-Line Merchandise is the same as offered for sale in the Retailer's Land Based Stores, then it shall be offered for sale on-line [*]. In order to facilitate this pricing, Retailer shall [*]; provided however, [*] Retailer acknowledges that this is essential in order to [*]. b. If the On-line Merchandise is not offered for sale in the Retailer's Land Based Stores, then, [*]. c. If the Retailer offers the same merchandise at different prices in its Land Based Stores, then [*] but in no event at [*]. d. GSI shall add all applicable taxes and at its discretion, may add reasonable handling and delivery charges which are consistent with industry practice; provided however, GSI shall not charge Retailer's customers any more for shipping and handling than it charges any other retailer's customers. e. In order to ensure that GSI may [*] Retailer shall furnish GSI with copies of all [*] at least [*] prior to its [*] if possible, and in all other cases, promptly after [*] is available. f. The parties shall cooperate with each other so that the entire pricing process between GSI and Retailer may be accomplished electronically. g. Retailer acknowledges that GSI, unless it elects to do so, [*]. In such event, [*] shall have the right to [*] 3.5 GSI's Supply of On Line Merchandise. ----------------------------------- a. Invoicing and Shipping of On Line Merchandise. --------------------------------------------- 1) At such time as directed by GSI, the Retailer shall notify its vendors of In Line Merchandise, Special Make-Ups and Closeouts, that a) GSI is the Retailer's E - Commerce Outsourcing Partner; b) the vendors, for the benefit of the Retailer, should sell their merchandise to GSI at the same prices, with the same Advertising Co-op and Discretionary Funds and on the same terms and conditions as they sell their merchandise to Retailer; and c) such merchandise should be shipped and invoiced directly to GSI. The form of such notification shall be prepared by GSI and approved by Retailer, such consent not to be unreasonably delayed or withheld. 2) In the event that a vendor deems it more efficient to invoice Retailer for such merchandise, then the Retailer shall place the order for GSI, invoice GSI 8 at Retailer's Net Cost, and GSI shall pay Retailer within thirty days of shipment to GSI. In such instances, GSI shall also pay the Retailer its pro rata share (based upon that portion of the shipment purchased by the Retailer for GSI as it relates to the entire shipment received by the Retailer from that vendor) of the actual freight costs from the manufacturer to the Retailer's point of receipt and the actual freight costs from the Retailer's point of receipt to GSI's fulfillment facility. Further, for such merchandise which GSI purchases from Retailer at Retailer's Net Cost, if the purchases in any Term Year exceed [*] then GSI shall pay an annual administrative fee equal to [*] of those purchases in excess of [*]; provided however, should the purchases in any Term Year exceed [*], then Retailer shall have no obligation to order any additional merchandise on GSI's behalf during that Term Year. Such administrative fee shall be added to Retailer's invoices to GSI for merchandise purchased by GSI from Retailer. 3) At such time as the annual purchases exceed [*], and until any balance owing to Retailer is reduced below [*], Retailer may request GSI to secure such orders with a letter of credit ("Letter of Credit") drawn on a lending institution reasonably acceptable to Retailer. In addition, should Retailer become dissatisfied with GSI's financial condition applying reasonable commercial standards, then Retailer may refuse to order merchandise for GSI unless Retailer secures such orders with a Letter of Credit or provides Retailer with other collateral reasonably acceptable to Retailer. b. In Line Merchandise. The Retailer shall advise GSI, no later ------------------- than two business days of placing a purchase order with a vendor, of the Category, item ordered, net cost, Retailer's retail price and expected day of delivery to the Retailer's Warehouse. c. Special Make-Ups. No later than two business days after ordering ---------------- Special Make-Ups, Retailer shall advise GSI and furnish GSI with a sample of the Special Make-Ups and advise GSI of the net cost, color selection and size range. GSI shall have the right to purchase up to [*] per cent of the Special Make-Up, proportionately as to size and color, as ordered by the Retailer, at Retailer's Net Cost. GSI shall have five business days to advise Retailer whether it desires to order any of the Special Make-Ups and, if so, the quantity thereof. d. Closeout Merchandise. Retailer shall advise GSI no later than -------------------- two business days after issuing a purchase 9 order for Closeout Merchandise from a vendor. At that time, Retailer shall advise GSI of the cost, sizes and colors available and GSI shall have two business days to advise Retailer that it will purchase, at Retailer's Net Cost, up to [*] per cent of the Closeout Merchandise to be received by Retailer, proportionately as to size and color, as ordered by Retailer. Notwithstanding anything contained herein to the contrary, GSI recognizes that there may be instances where there will be an insufficient amount of a particular item of Closeout Merchandise to warrant selling such merchandise on line. In such instances the Retailer shall not be required to offer such items of Closeout Merchandise to GSI to sell on line; provided however, the Retailer acknowledges that GSI does not anticipate that this will occur on a regular basis and this should be the exception rather than the usual occurrence. e. Markdowns. In the event that the Retailer has available ---------- Markdowns which it would like to offer for sale on its Web Site solely at its discretion, it shall notify GSI and ship the Markdowns to GSI's fulfillment center. The Markdowns shall be shipped to GSI on consignment only. Retailer shall set the selling prices on the Markdowns; provided however, that GSI shall have no obligation to offer any Markdowns for sale on the Retailer's Web Site which GSI deems, in its sole discretion, would be inappropriate. Retailer shall receive [*] of the proceeds received from the sale of any Markdowns when sold, which shall be calculated as follows: [*] of the sale price plus the Retailer's [*] Revenue Share. By way of example only, if Retailer consigns an athletic shoe to GSI with an original price of $75.00 and a Markdown price of $50.00, if the Markdown is sold, Retailer shall receive [*] ([*] of $50.00 and [*] of $50.00). GSI shall account to Retailer for the sale of any Markdowns at the same time that it accounts to the Retailer for Retailer's Revenue Share. f. Administrative and Handling Fee. With respect to any merchandise ------------------------------- purchased by GSI pursuant to paragraphs 3.5 c. or d. above, on which Retailer is first required to accept delivery and repack for shipment to GSI, Retailer shall be paid an administrative fee equal to [*] of GSI's purchase order (excluding freight and taxes). g. The parties shall cooperate with each other so that the entire process set forth in paragraphs 3.5 a, b, c, d, and e between GSI and Retailer may be accomplished electronically. 10 3.6 Land Based Stores Gift Certificates. GSI shall offer for sale on the ----------------------------------- Retailer's Web Site gift certificates for merchandise in Retailer's Land Based Store. Retailer shall furnish such gift certificates to GSI on consignment. GSI shall remit to Retailer [*] of all proceeds received from the sale of Land Based Stores Gift Certificates, the balance being retained by GSI as its fee and to cover all costs, including credit card fees. GSI shall account to Retailer for all sales of such certificates at the same time as it accounts to Retailer for Retailer's Revenue Share. 3.7 Processing of Customer Orders. GSI shall be solely responsible for ----------------------------- processing all E - Commerce business. GSI will promptly process E - Commerce Orders received from the Retailer's Web Site. GSI shall take the customer's credit card number at such time as the merchandise is ordered. GSI shall charge the customer's credit card at the time the merchandise is shipped. The order will appear on the customer's credit card under the name of "Retailer.com" and proceeds shall be deposited into GSI's designated bank account for full credit to GSI. GSI will make all arrangements for delivery of merchandise purchased on the Retailer's Web Site. 3.8 Payment and Accounting of Revenue Share to Retailers. ---------------------------------------------------- The Retailer shall receive a [*] per cent share of the revenue ("Revenue Share") on the amount of all E - Commerce Orders (excluding taxes, delivery, handling, and net of returns); provided, however, should [*]. Within fifteen (15) days of the end of each calendar month during the Term, GSI shall account to the Retailer for the sale of all On Line Merchandise from the Retailer's Web Site. At the time of such accounting, GSI shall remit to the Retailer its Revenue Share earned from the sale of On Line Merchandise on the Retailer's Web Site during the prior month. Within ninety (90) days of the end of each calendar year, GSI shall provide the Retailer with a statement certified by its independent auditors and setting forth the Revenue Share earned by the Retailer during the prior calendar year. For a period of one year after the Retailer receives such certified statement from GSI, Retailer, on one occasion, shall have the right to audit the books and records of GSI with respect to the Retailer's Revenue Share earned during the calendar year to which the certified statement relates. Such audit shall be conducted at GSI's principal office located in the continental United States on two weeks prior notice to GSI. In the event that the audit reveals that the Revenue Share was understated, GSI shall within thirty days of completion of the audit, pay to the Retailer the remaining balance of the Revenue Share for the period audited plus interest at the prime rate of interest as provided for in The Wall Street Journal on the date of the audit's certification. In addition, in the event that the audit reveals that the Revenue Share is understated by more 11 than [*] per cent for the calendar year in question, GSI shall pay the additional amount owing and pay for the reasonable audit costs and this shall be Retailer's sole remedy. 3.9 Service of On Line Customers. GSI shall be responsible for providing ---------------------------- all customer service relating to sales from the Retailer's Web Site. 3.10 Return of On Line Merchandise. GSI's return policy shall be consistent ----------------------------- with the Retailer's return policy, or, at GSI's option, more liberal than Retailer's policy. With each shipment of merchandise, GSI shall specifically instruct all customers that all merchandise purchased on line may not be returned to the Retailer's Land Based Stores and may only be returned in accordance with the instructions enclosed; provided however, in the rare instance a customer desires to return On Line Merchandise to one of the Retailer's Land Based Stores, the Retailer, in order to maximize customer relations, shall accept such merchandise for return in accordance with the Retailer's return policy, and return the merchandise to GSI's fulfillment center. At the next such time that GSI pays the Retailer pursuant to paragraph 3.8 above, and upon receipt of such merchandise, GSI shall credit the Retailer the amount refunded by the Retailer to the customer and the actual freight charges incurred by Retailer in order to return the merchandise to GSI. 3.11 On Line Customer Loyalty Programs. GSI shall have the right to --------------------------------- establish On Line Customer Loyalty Programs in order to encourage continued on line purchases. Customer Loyalty Programs established by GSI shall be used only in connection with on line purchases and Retailer's customer loyalty programs shall be used only in connection with purchases at the Retailer's Land Based Stores. 3.12 Cross Promotion. With Retailer's consent, not to be unreasonably --------------- withheld or delayed, GSI shall have the right to use Retailer's URL, name and logo to cross promote Retailer's Web Site with other businesses in order to promote Retailer's Web Site; provided however, GSI shall not promote Retailer's Web Site on any other sporting good retailer's web site, or on any other web site which would generally be considered immoral, pornographic or offensive. 3.13 Price Matching. In the event that the Retailer, at its Land Based -------------- Stores offers a "Price Matching" policy, GSI's management shall have the right to use and adopt such policy for the Retailer's Web Site; provided however, GSI shall not under any circumstance, advertise or market the availability of this policy, and may offer it to customers only in GSI's sole discretion. 3.14 Project Manager. Within thirty days of the execution of this --------------- Agreement, but in no event later than sixty days after such 12 execution, Retailer, at its expense, shall hire or reassign one of its existing employees, to act as Project Manager to work exclusively with GSI in creating and maintaining the Retailer's Web Site. Commencing with the Project Manager's hiring and continuing through the Term, the Project Manager shall be the Retailer's liaison with GSI and shall be responsible for supplying GSI with the Retailer Content and such other information as may reasonably be required of the Retailer in order to create and maintain the Retailer's Web Site in the most efficient manner. Notwithstanding anything contained herein to the contrary, at such time as the Retailer's Web Site is operating in accordance with the terms of this Agreement, the Project Manager may attend to other duties for the Retailer provided that at no time shall the Project Manager fail to perform the functions required of the Project Manager hereunder to the satisfaction of GSI, as determined by GSI in its sole discretion. 4. ON-LINE DATA AND DATABASES -------------------------- 4.1 Ownership of Data. Any and all data ("Customer Data") related to ----------------- Retailer's customers (including customer names and other identifying information such as addresses, phone numbers and e-mail addresses, credit card numbers, and descriptions of the items and quantities of items purchased) that is collected by GSI shall be owned [*]. 4.2 Ownership of Databases. All data structures, data schema, database ---------------------- dictionaries, attributes, validation tests for each element, table sizes and formats, access requirements, data dependencies and other elements involving the storage of Data on the Web Site and all refinements, updates, releases, improvements and enhancements thereto, all intellectual property rights embedded therein and all applications created specifically for use of the data and Retailer Content (collectively, the "Databases") shall, as between GSI and Retailer, be the sole and exclusive property of GSI. 4.3 Delivery of Customer Data to Retailer. From time to time, but no more ------------------------------------- than four (4) times per calendar year, Retailer may request that GSI provide to Retailer any or all of the following information collected from the Customer Data: a. customer's names; b. customer's addresses; c. customer's phone number; d. customer's e-mail address; e. items purchased; f. amount spent; g. information as to how customer reached Web Site; h. refers; i. unique visitors to site; j. page views per site; k. top ten most viewed pages; l. bottom ten least viewed pages; 13 m. time of day traffic patterns; n. sales by product and brand; o. customer comments and complaints; p. additional information at GSI's discretion. Upon receipt of such request, GSI shall provide the Customer Data to Retailer in a mutually agreeable, commercially standard format, either via diskette, CD-ROM, electronically, or via another mutually agreeable method. GSI shall use commercially reasonable efforts to ensure that the Customer Data provided to Retailer accurately and completely reflects the Customer Data in the Web Site, but GSI shall have no obligation to check the accuracy, validity or integrity of the Customer Data and except as set forth in this Section 4.3, the Customer Data is provided "AS-IS". 4.4 Restrictions on Use of Customer Data. Each party shall treat the ------------------------------------ Customer Data as Confidential Information of the other party in accordance with the provisions of Article 7. Neither party may sell, lend, or license the Customer Data to third parties without the prior written consent of the other party, which consent may be withheld at the sole discretion of the other party; provided however, Retailer grants to GSI the right to combine all retailers' Customer Data to form trends and overall research as to the on line shopping habits of consumers. At Retailer's request, GSI shall make such aggregated information, which is not retailer specific in any manner, available to Retailer for Retailer's own use. Such information shall be considered Confidential Information in Retailer's possession and may not be disclosed by Retailer to any third party. 4.5 Reporting of Customer Sales. Notwithstanding anything contained --------------------------- herein to the contrary, commencing three months after the Launch Date, GSI shall provide Retailer with an application pursuant to which Retailer will be able to obtain on line, information concerning its sale of On Line Merchandise during the prior week. 5. ADVERTISING AND MARKETING ------------------------- The Retailer shall,commencing no later than October 1, 1999, and continuing during the Term, at no cost to GSI provide for Complete URL Integration in its advertising and marketing by: 5.1 prominently including as part of all of its print media (including but not limited to newspapers, periodicals, circulars, billboards, print materials, letterhead, business cards, shopping bags, cash register receipts and arena advertising) its URL, www.Retailer.com.; and 14 5.2 prominently including, at the end of its television advertising, its URL; and 5.3 mentioning its URL at the end of all radio advertisements. All advertisements and marketing appearing in newspapers, circulars and periodicals shall contain the following disclaimer: "Merchandise offered on line may differ slightly from our retail stores". 6. ADVERTISING COOP AND DISCRETIONARY FUNDS ---------------------------------------- 6.1 During the Term, GSI shall use all Advertising Co-op and Discretionary Funds received by GSI directly from vendors as a result of the purchase of merchandise for the Retailer's Web Site exclusively, to promote the Retailer's Web Site, as GSI shall elect. All such proposed advertisements shall be submitted to the Retailer for the Retailer's approval as to content and design. The Retailer shall have forty eight hours from receipt to either approve or disapprove. In the event that the Retailer disapproves, it shall advise GSI specifically as to why and GSI shall attempt to address the Retailer's concerns and resubmit the proposal to Retailer for its approval, which shall again have forty eight hours from receipt to approve or disapprove. This procedure shall continue until the advertisement has been approved or replaced. In all instances where approval is requested of the Retailer, in the event the Retailer does not respond within the aforementioned forty eight hours, Retailer shall be deemed to have granted approval. 6.2 Any Advertising Co-op and Discretionary Funds received by the Retailer through the Retailer's purchase of product for GSI, ultimately for the Retailer's Web Site, may be retained by the Retailer; provided however, Retailer acknowledges that it is preferential for Retailer's vendors to sell to GSI directly and Retailer shall use its best efforts to so convince its vendors, ultimately simplifying the purchasing process. 6.3 Retailer shall retain from vendors any non item driven marketing funds. Retailer authorizes GSI to seek incremental marketing funds from vendors related solely to Web Site activity. Any such incremental marketing funds shall belong exclusively to GSI and shall be used in accordance with paragraph 6.1 above. 7. CONFIDENTIALITY --------------- 7.1 Confidential Information. Each party acknowledges that, in connection ------------------------ with the performance of this Agreement, it may receive Confidential Information of the other party. For the purpose of this Agreement, "Confidential Information" shall mean information or materials that the party receiving the 15 information (the "Receiving Party") knows or has reason to know is the confidential or proprietary information of the party disclosing the information (the "Disclosing Party"), either because such information is marked or otherwise identified by the Disclosing Party as confidential or proprietary, has commercial value, or is not generally known in the Disclosing Party's trade or industry. Confidential Information shall include, without limitation: (a) concepts and ideas relating to the development and distribution of content in any medium; (b) trade secrets, drawings, inventions, know- how, software programs, and software source documents; (c) information regarding plans for research, development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublished financial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; and (d) existence of any business discussions, negotiations or agreements between the parties. 7.2 Confidentiality. The Receiving Party hereby agrees: (i) to hold and --------------- maintain in strict confidence all Confidential Information of the Disclosing Party and not to disclose it to any third party; and (ii) not to use any Confidential Information of the Disclosing Party except as permitted by this Agreement or as may be necessary for the Receiving Party to perform its obligations under this Agreement. The Receiving Party will use at least the same degree of care to protect the Disclosing Party's Confidential Information as it uses to protect its own Confidential Information of like importance, and in no event shall such degree of care be less than reasonable care. The obligations and restrictions imposed by this Article 7 shall terminate thirty (30) months after the expiration or termination of this Agreement. 7.3 Exceptions. Notwithstanding the foregoing, the parties agree that ---------- Confidential Information will not include any information that: (i) was in the public domain at the time it was communicated to the Receiving Party by the Disclosing Party; (ii) entered the public domain subsequent to the time it was communicated to the Recipient by the Disclosing Party through no fault of the Receiving Party; (iii) was in the Receiving Party's possession free of any obligation of confidence at the time it was communicated to the Receiving Party by the Disclosing Party; (iv) was rightfully communicated to the Receiving Party by a third party, free of any obligation of confidence, subsequent to the time it was communicated to the Receiving Party by the Disclosing Party; (v) was developed by employees or agents of the Receiving Party independently of and without reference to any information communicated to the Receiving Party by the Disclosing Party; or (vi) was communicated by the Disclosing Party to an unaffiliated third party free of any obligation of confidence. In addition, the Receiving Party may disclose the Disclosing Party's Confidential Information in response to a valid order by a 16 court or other governmental body, as otherwise required by law, or as necessary to establish the rights of either party under this Agreement. 7.4 Confidentiality of this Agreement. Retailer acknowledges that --------------------------------- the terms and conditions of this Agreement constitute Confidential Information which shall be governed by the terms of this Article 7. 7.5 Confidentiality of Customer Data and Retailer's Policies. -------------------------------------------------------- GSI acknowledges that it will be receiving from Retailer, and generating on line, Confidential Information critical to the Retailer's business and concerning Retailer's customers and various information concerning the operation of Retailer's business including but not limited to net purchasing prices, advertising co-op and discretionary fund amounts, specific marketing plans, specific on line sales and delivery dates of merchandise. GSI recognizes its obligation to keep such information confidential. Therefore, all GSI employees who may have access to any such Confidential Information will be required to execute confidentiality agreements and GSI shall use its best efforts to enforce the terms thereof. Such confidentiality agreements will specifically provide that the employee shall not discuss with any other retailers who may or may not be customers of GSI, any information concerning the Retailer or its customers. Prior to having the confidentiality agreement executed by any employees, GSI shall submit the form of confidentiality agreement to Retailer for its review and approval, such approval not to be unreasonably withheld or delayed. Further, GSI acknowledges it is presently a wholly owned subsidiary of Global Sports, Inc., a Delaware corporation ("Global"), and therefore affiliated with other subsidiaries of Global. GSI therefore represents and warrants to Retailer that it will establish a "Need to Know" policy with respect to such Confidential Information and only disseminate such Confidential Information to those employees and members of GSI's management who have a specific need to know such Confidential Information. In those instances, prior to the dissemination of such Confidential Information to those individuals, they will be required to execute confidentiality agreements specifically prohibiting such disclosure of such Confidential Information to anyone. 8. EXCLUSIVE WEB AGREEMENT ----------------------- During the Term, the Retailer, any subsidiary of the Retailer, shall not sell any sporting goods merchandise on the Internet (including the Web), nor use itself or allow a third party to use its URL, name or logo on the Web for the purpose of facilitating the sale of merchandise on the Web other than through GSI. 9. URL, NAME AND LOGO USAGE ------------------------ 17 During the Term, the Retailer hereby grants to GSI the exclusive right to use, copy, modify and display the Retailer's name, logo and URL and such other names and logos as the Retailer owns and as may be listed on Schedule "1" attached hereto and made a part hereof, on the Retailer's Web Site, on invoices and packing slips, in connection with credit card charges, a toll free Web site customer service telephone line, and generally in connection with the operation of GSI's on-line business; provided however, GSI shall have no right to modify Retailer's name, logo or URL without Retailer's consent. Such Schedule shall be modified from time to time during the Term to add any new names and logos which the Retailer may register with the United States Patent and Trademark Office. The Retailer further grants to GSI the right to register a fictitious name of "Retailer.com" for the sole purpose of conducting business on the Retailer's Web Site and www.Retailer.com for the purpose of registering an Internet Domain Name on behalf of the Retailer. Retailer shall execute whatever documents are necessary in connection with such registrations. 10. REPRESENTATIONS AND WARRANTIES. ------------------------------- 10.1 Retailer represents and warrants that at all times during the Term hereof: a. it has or will have the full right to grant to GSI the right to use its URL, names and logos as discussed in Article 9 above, including its Domain Name; and b. Retailer is authorized to advertise and market on its Web Site the brands of merchandise to be sold thereon; c. Prior to the Effective Date, if not already completed, Retailer shall register and maintain the Domain Name "Retailer.com" with Network Solutions or any similar successor entity. Retailer shall list itself as the owner and billing contact for the Domain Name "Retailer.com" and Retailer shall list GSI as the administrative and technical contact for the Domain Name "Retailer.com". 10.2 GSI represents and warrants that: a. as of the execution of this Agreement, GSI is a wholly owned subsidiary of Global Sports, Inc., which is registered under the Securities Exchange Act of 1934, as amended; and b. no later than the Launch Date, GSI shall own, or have the valid right to use the software, hardware, processes, trade secrets, or other property used or to be used in the development, maintenance and operation of the Retailer's Web Site and that no such use will infringe on any copyright, U.S. patent, trademark or any other proprietary right of any third party. 18 10.3 Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement (excluding vendor agreements) or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 11. INDEMNIFICATION --------------- 11.1 Retailer, at its own cost and expense, shall defend, indemnify and hold harmless GSI and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys fees and court costs) arising as a consequence of GSI providing services pursuant to this Agreement a) from or related to a claim that GSI infringes a third party copyright, trademark or trade secret as a consequence of GSI's services to Retailer pursuant to this Agreement, or b) from Retailer's gross negligence, wilful or intentional misconduct. 11.2 GSI, at its own cost and expense, shall defend, indemnify and hold harmless Retailer and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys fees and court costs) arising a) from a claim made by any consumer that is related in any way to the Retailer's Web Site or GSI's services to Retailer provided pursuant to this Agreement, or b) from GSI's gross negligence, wilful or intentional misconduct and arising as a consequence of GSI providing services pursuant to this Agreement, or c) from a claim by any local, state or federal governmental unit that any sales or use tax is due as a result of the sale of merchandise on Retailer's Web Site. GSI's liability under this provision shall not be limited by the provisions of Section 14 hereof entitled "Limitation Upon Damages". 11.3 Retailer shall have sole control of any defense of any claim made pursuant to Section 11.1 above, but GSI shall cooperate with Retailer in providing such defense. 11.4 GSI shall have sole control of any defense of any claim made pursuant to Section 11.2 above, but Retailer shall cooperate with Retailer in providing such defense. 19 11.5 Any party seeking indemnification shall notify the other party as soon as possible after such party seeking indemnification becomes aware of the claim. 12. INSURANCE --------- 12.1 GSI shall maintain in full force and effect products liability insurance coverage for merchandise sold on Retailer's Web Site in an amount of not less than [*] per occurrence. Such policy shall name Retailer as an additional insured. 12.2 GSI shall deliver to Retailer certificates of insurance which stipulate that no less than ten days notice will be given to Retailer prior to the termination of the policy. 13. TERMINATION ----------- 13.1 Termination for Cause by Either Party. This Agreement may be ------------------------------------- terminated by either party in the event of any material breach of any of the terms and conditions of this Agreement by the other party which breach continues in effect after the breaching party has been provided with written notice of breach and ninety (90) days to cure such breach and fails to cure such breach. As used herein, "material breach" shall mean a failure by a party to this Agreement to perform any of its obligations the effect of which would substantially impair the value of this Agreement to the other party. By way of example only and not by way of limitation, GSI's failure to operate the Retailer's Web Site according to commercially reasonable standards as they may develop during the Term of this Agreement or failure to pay the Retailer its Revenue Share (or any other amount due to Retailer hereunder), would be a material breach of this Agreement by GSI. Retailer's failure to comply with its obligations pursuant to Section 5 above, or failure to provide GSI with the Retailer Content necessary to construct and/or maintain the Retailer's Web Site, would be a material breach of the Retailer's obligations under this Agreement. 13.2 Termination for Cause Only by GSI. GSI may terminate this Agreement --------------------------------- without any notice to Retailer upon the occurrence of any of the following events: a. any representation or warranty contained herein becomes materially false or misleading; or b. a material change in the Retailer's business or business policies the effect of which would be to substantially impair the value of this Agreement to GSI, as determined by GSI in its sole reasonable judgment. 20 13.3 Termination Without Cause by Either Party. In the absence of a ----------------------------------------- material breach, this Agreement may only be terminated by the expiration of the Term, as may be extended pursuant to Section 2.3 above. In the event that the Agreement is terminated pursuant to this paragraph 13.3, Retailer shall have the right for a period of thirty days after such termination, to advise GSI that it desires to obtain a non exclusive license to utilize the software necessary for Retailer to continue to operate its own web site. The parties shall negotiate, in good faith, to reach an agreement which is satisfactory to both parties; provided however, in the event that the parties are unable to reach an agreement pursuant to which GSI would grant Retailer a non exclusive license as aforementioned, then GSI shall have no liability hereunder. 14. LIMITATIONS UPON LIABILITY -------------------------- UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS' USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS' RELIANCE ON OR USE OF INFORMATION, SERVICES OR MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE UNDER THIS AGREEMENT FOR MORE THAN THE GREATER OF A) [*], OR B) THE AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. IN ADDITION, RETAILER SHALL BE ENTITLED TO SEEK EQUITABLE RELIEF FROM THE COURT. THE REMEDIES SET FORTH IN THIS ARTICLE 14 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN TWELVE (12) MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 15. PROPERTY RIGHTS AND OWNERSHIP ----------------------------- The Retailer's Web Site shall consist of, and shall operate in conjunction with, multiple elements, all of which are subject to certain intellectual property rights. The parties' respective rights with respect to such elements shall be as set forth below. For purposes of this Agreement, the term "Ownership" shall refer to ownership of all right, title and interest in and to the respective elements, including, but not limited to, all patent, copyright, trade secret, trademark and any other similar intellectual property rights therein, as applicable. 15.1 Retailer's URL shall be owned solely by the Retailer; 21 15.2 Retailer's Web Site shall be owned solely by GSI; 15.3 Software developed for the Retailer's Web Site, shall be owned solely by GSI, subject to any authorizations to use and approvals obtained by the Retailer and granted to GSI. With respect to intellectual property owned by each of them, Retailer and GSI shall both have rights associated with the ownership of intellectual property, including the right to copyright web sites and domains. 16. GSI'S TWENTY DAY PERIOD TO EXECUTE ---------------------------------- Retailer shall execute this Agreement first and deliver such executed Agreement to GSI which shall thereafter have twenty days from receipt to countersign the Agreement. During such twenty day period, Retailer shall have no right to withdraw the agreements which it executed and delivered to GSI. 17. DISCONTINUANCE OR REGULATION OF THE INTERNET. --------------------------------------------- Retailer acknowledges and agrees that the Internet (including without limitation the Web) is a network of private and public networks, that GSI has no control over the Internet, and that GSI is not liable for the discontinuance of operation of any portion of the Internet or possible regulation of the Internet which might restrict or prohibit the operation of the Web site. 18. FORCE MAJEURE ------------- In the event that either party is unable to perform any of its obligations under this Agreement or to enjoy any of its benefits because of any event beyond the control of the affected party including, but not limited to, natural disaster, acts of God, actions or decrees of governmental bodies or failure of communications lines or networks (a "Force Majeure Event"), the party who has been so affected shall promptly give written notice to the other party and shall use its best efforts to resume performance. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the duration of such Force Majeure Event. 19. WAIVER ------ No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party 22 against whom enforcement of such waiver is sought and then only to the extent expressly specified. 20. PRESS RELEASES -------------- All voluntary public announcements concerning the transactions contemplated by this Agreement shall be mutually acceptable to both GSI and Retailer. Unless required by law, neither GSI on the one hand, and Retailer on the other hand, shall make any public announcement or issue any press release concerning the transactions contemplated by this Agreement without the prior written consent of GSI or Retailer, respectively. With respect to any announcement that any of the parties is required by law to issue, such party shall, to the extent possible under the circumstances, review the necessity for and the contents of the announcement with the other party before issuing the announcement; provided however, if either party cannot obtain the consent of the other party in a timely manner, the party required to comply with law may issue the press release or public announcement without obtaining the consent of the other party. 21. GOVERNING LAW ------------- This Agreement, the rights and obligations of the parties hereto, and any claims or disputes thereto, shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania (excluding the choice of law rules thereof). 22. ASSIGNMENT ---------- Retailer shall have no right to assign this Agreement without the prior written consent of GSI; provided, that Retailer shall have the right to assign this Agreement to any person or entity that acquires or succeeds to all or substantially all of such party's business or assets upon written notice to the other party. 23. COUNTERPARTS ------------ This Agreement may be signed in several counterparts, each of which shall be deemed an original, and all of which when taken together, shall be deemed a complete instrument. 24. ENTIRE AGREEMENT ---------------- This Agreement, including the Web Development Agreement, represents the entire agreement of the parties with respect to the subject matter hereof and may not be modified, except in writing, executed by all of the parties hereto. This Agreement supersedes all prior writings of the parties with respect to this subject matter. 25. JURISDICTION ------------ Should GSI file any legal action concerning this Agreement, the exclusive jurisdiction and venue of any dispute that arises hereunder shall be in the Court of Common Pleas of Montgomery 23 County, Pennsylvania or the United States District Court for the Eastern District of Pennsylvania. Should Retailer file any legal action concerning this Agreement, the exclusive jurisdiction and venue of any dispute that arises hereunder shall be in the state courts of the State of Michigan or the United States District Court for the Western District of Michigan. 26. INDEPENDENT CONTRACTORS ----------------------- The relationship of the parties herein shall hereunder be that of independent contractors and nothing herein shall be construed to create a joint venture or partnership. 27. SIGNING ------- The parties executing this Agreement represents and warrants that they have full corporate authority to do so. 28. BINDING EFFECT -------------- This Agreement shall be binding upon the parties hereto, their successors and permitted assigns. 29. HEADINGS -------- Section headings contained in this Agreement are inserted for convenience or reference only and shall not be deemed to be a part of this Agreement for any other purpose. 30. DISCLAIMER OF WARRANTIES ------------------------ EXCEPT AS TO THE EXPRESS WARRANTIES CONTAINED IN THIS AGREEMENT, GSI MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, IN FACT OR IN LAW WITH RESPECT TO THE CREATION AND MAINTENANCE OF THE PRODUCT AND SERVICES PROVIDED FOR HEREUNDER, AND DISCLAIMS ALL OTHER WARRANTIES. RETAILER ACKNOWLEDGES AND AGREES THAT GSI HAS NOT MADE, NOR DOES HEREBY MAKE, ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED. 31. NOTICES ------- Any notices or writings to be sent hereunder shall be in writing and shall be by personal delivery, facsimile transmission or by certified or registered mail, return receipt requested, and shall be deemed given upon the earlier of actual receipt, five (5) days after deposit in the mail, or receipt by sender of confirmation of facsimile transmission. Notices shall be sent to the following addresses (or such other address as either party may specify in writing): IF TO GSI: 555 South Henderson Road King of Prussia, PA 19406 24 Attention: President Copy to: David S. Mandel, Esq. Astor Weiss Kaplan & Rosenblum, LLP The Bellevue Broad & Walnut Streets 6th Floor Philadelphia, Penna., 19102 IF TO RETAILER: Michigan Sporting Goods Distributors, Inc. 3070 Shafer S.E. Grand Rapids, Michigan, 49512 Copy to: Robert Diamond, Esquire VARNUM RIDDERING SCHMIDT & HOWLETT P.O. Box 352 Grand Rapids, MI 49501-0352 (SIGNATURES CONTAINED ON THE FOLLOWING PAGE) IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement with intent to be legally bound hereby,the date and year written below. GLOBAL SPORTS INTERACTIVE, INC.: MICHIGAN SPORTING GOODS DISTRIBUTORS INC. BY: /s/ Michael Rubin BY: /s/ Bruce A. Ullery --------------------------- ----------------------------- Title: President Title: Pres/CEO ------------------------ ------------------------- Date: 3/19/99 Date: Feb. 1, 1999 ------------------------- -------------------------- 25 EXHIBIT A WEB SITE DEVELOPMENT AGREEMENT ------------------------------ THIS Web site Development Agreement ("Agreement") dated the 1st day of February, 1999 (the "Services Start Date") by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and Michigan Sorting Goods Distributors Inc.(hereinafter referred to as "Retailer") with an address of 3070 Shaffer S.E., Grand Rapids, Michigan, 49512 W I T N E S S E T H: WHEREAS, GSI and Retailer have entered into a E - Commerce Agreement pursuant to which GSI shall provided certain E - Commerce services to Retailer, including the development and maintenance of a web site; and WHEREAS, the parties have elected to enter into this Agreement in order to set forth the terms and conditions pursuant to which GSI shall develop a web site for Retailer. NOW, THEREFORE, in consideration of the mutual promises and terms herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged; and intending to be legally bound hereby, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Domain Name" means the domain name specified for the Web site by Retailer from time to time. The initial Domain Name is specified in Attachment A. 1.2 "E-Commerce Agreement" means the E-Commerce Agreement by and between Retailer to which this Agreement is attached as Exhibit A. 1.3 "Features Set" means the requirements set forth in Attachment A, as amended or supplemented in accordance with this Agreement. 1.4 "Intellectual Property Rights" means any and all now known or hereafter known tangible and intangible (a) rights associated with works of authorship throughout the universe, including but not limited to copyrights, moral rights, and mask-works, (b) trademark and trade name rights and similar rights, (c) trade secret rights, (d) patents, designs, algorithms and other industrial property rights, (e) all other intellectual and industrial property rights (of every kind and nature throughout the universe and however designated) (including logos, "rental" rights and rights to remuneration), whether arising by operation of law, contract, license, or otherwise, and (f) all registrations, initial applications, renewals, 26 extensions, continuations, divisions or reissues hereof now or hereafter in force (including any rights in any of the foregoing). 1.5 "Milestone Delivery Schedule" means the schedule for development of the Web site set forth in Attachment A. 1.6 "GSI Content" means all text, pictures, sound, graphics, video and other data and assets supplied by Retailer to GSI, as such materials may be modified from time to time. 1.7 "GSI Products" means, collectively, the GSI Tools, the GSI Content and the GSI Work Product. 1.8 "GSI Tools" means any tools, both in object code and source code form, which GSI has already developed or which GSI independently develops or licenses from a third party, excluding any tools which GSI creates pursuant to this Agreement. By way of example, GSI Tools may include, without limitation, toolbars for maneuvering between pages, search engines, Java applets, and ActiveX controls. 1.9 "Production Schedule" shall mean the schedule agreed upon by the parties for the production of the Retailer's Web site, including the delivery of the Retailer Content and GSI Content by Retailer to GSI. 1.10 "Retailer Content" means the Domain Name and all text, pictures, sound, graphics, video and other data and assets supplied by Retailer to GSI, as such materials may be modified from time to time. 1.11 "Services" means the services provided by GSI hereunder to develop, host and maintain the Web site, in accordance with this Agreement. 1.12 "Web site" means, collectively, the E - Commerce Shopping Experience and the Retailer Content made available on web pages under the Domain Name. 1.13 "GSI Work Product" means all HTML files, Java files, graphics files, animation files, data files, technology, scripts and programs, both in object code and source code form, all documentation and any other deliverable used by GSI to create the Web site. 2. WEB SITE DEVELOPMENT SERVICES 2.1 Delivery of Initial Retailer Content. As soon as reasonably possible, GSI and Retailer shall agree upon a Production Schedule for the delivery by Retailer to GSI of the Retailer Content that Retailer intends for GSI to incorporate into the Web site. The parties acknowledge that Retailer will be able to deliver certain "static" information, such as store locations, promptly to GSI, and other Retailer Content, such as certain merchandise to be sold on the Retailer's Web site, at a later date closer to the Launch Date. The Retailer Content shall be in the format(s) designated by GSI. Upon Retailer's request, GSI shall assist Retailer in 27 the conversion of the Retailer Content into an acceptable form for use by the Web site. 2.2 Web site Development Services. At no cost to Retailer, GSI shall provide design, programming and other consulting Services as specified in Attachment A to create the Web site. GSI will provide the Web site to Retailer in accordance with the Milestone Delivery Schedule. 2.3 Project Liaisons. Each party's primary contact for development efforts shall be the project liaisons specified in Attachment A or the person otherwise designated in writing by Retailer or GSI, as the case may be. 2.4 Acceptance. GSI shall make available final versions of the Web site for Retailer's review and acceptance. Retailer shall have ten (10) days to review and evaluate the Web site (the "Acceptance Period") to assess whether it substantially meets the Features Set. During the Acceptance Period, Retailer shall identify in writing to GSI all aspects of the Web site that do not substantially conform to the Features Set. Upon receipt of Retailer's list of non-conformities, GSI shall correct promptly all such non-conformities so that the Web site does substantially conform to the Features Set and GSI shall extend the Acceptance Period for a second ten (10) day Acceptance Period during which Retailer shall confirm that all non-conformities that were previously identified have been corrected. Notwithstanding the foregoing, the Web site shall be deemed accepted upon the earlier of: (i) its use in commerce; (ii) Retailer's failure to articulate any non-conformities during an Acceptance Period; or (iii) Retailer's acceptance of the Web site. 3. WEB HOSTING AND MAINTENANCE SERVICES Following Retailer's acceptance of the Web site pursuant to Section 2.4, GSI shall provide the following web hosting and maintenance Services: 3.1 Hosting Services. GSI shall load the Web site onto server(s) that are connected to the Internet and readily accessible via the Web through use of the Domain Names. GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner. 3.2 Retailer Content. GSI shall upload all Retailer Content, including updates, to the Web site within seven days of delivery to GSI. Upon GSI's prior written consent, Retailer may electronically transmit or upload Retailer Content directly to the Web site. 3.3 Maintenance Services. GSI shall maintain the Web site so that it functions in a reasonably error free manner and in accordance with practices and standards that are commercially reasonable for Internet retail sales, as they may develop during the term of this Agreement. Upon notification of an error in the Web site or of a non-conformity between the Web site and the Features Set, whether from Retailer or from any user of the Web site, GSI shall promptly commence an investigation into the reported error, and GSI shall, upon reproducing such error, use reasonable commercial 28 efforts to correct such error in a timely fashion. During such Maintenance Services, GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner, provided, however, GSI may, -------- ------- during low usage periods, temporarily block access to the Web site to perform Web site maintenance during periodic maintenance windows. 4. ADDITIONAL SERVICES 4.1 Search Engine Registration. When GSI makes the Web Site available to Retailer, GSI shall register the Web Site and Domain Name with all applicable search engines, at GSI's discretion. In addition, provided that there is no additional charges imposed, GSI shall register the Web Site on those search engines requested by Retailer. 4.2 Domain Name Assistance. If requested by Retailer, GSI shall cooperate with Retailer in registering the Domain Name with InterNIC. Retailer shall own all right, title and interest in and to the Domain Name and all Intellectual Property Rights related thereto. Unless otherwise specified by Retailer, GSI shall, at Retailer's expense, assist Retailer in registration of the Domain Name. 5. CONSIDERATION In consideration for Retailer entering into the E Commerce Agreement, at no cost to Retailer, GSI shall perform the Services set forth in this Agreement. 29 6. TERM AND TERMINATION 6.1 Term. The term of this Agreement shall be conterminous with the term of the E- Commerce Agreement. In absence of a material breach, this Agreement may only be terminated by the expiration of the term. 6.2 Termination. Termination of this Agreement shall be governed by the terms of Article 13 of the E -Commerce Agreement. 7. WARRANTIES AND DISCLAIMERS. 7.1 Cross Warranties. Retailer warrants as to the Retailer Content, and GSI warrants as to the GSI Products, that any materials and updates or enhancements there to shall not: (a) infringe on the Intellectual Property Rights of any third party or any rights of publicity or privacy; (b) violate any law, statute, ordinance or regulation (including without limitation the laws and regulations governing export control, unfair competition, antidiscrimination or false advertising); (c) be defamatory, trade libelous, unlawfully threatening or unlawfully harassing; (d) be obscene, pornographic or indecent. 7.2 Representations and Warranties of Each Party. Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 7.3 Year 2000. GSI warrants that the Web site shall not suffer any material adverse effect as a result of a failure in any GSI Work Product or GSI Tools to be Y2K Compliant. A product or service which is "Y2K Compliant" is one that provides accurate results using data having date ranges spanning from January 1, 1980 through December 31, 2019 (the "Y2K Period"). By way of example and not of limitation, "Y2K Compliant" means, with respect to a product or service, that it can currently and shall, during the Y2K Period, continue to (a) manage and manipulate data involving all dates within the Y2K Period (including the fact that the year 2000 is a leap year) without functional or data abnormality related to such dates; (b) manage and manipulate data involving all dates within the Y2K Period without inaccurate results related to such dates; (c) have user interfaces and data fields formatted to distinguish between dates within the Y2K Period; and (d) accurately identify and either reject or correct invalid date data during the Y2K Period. Provided a party otherwise complies with this Section 7.4, it will not be liable to the other party for any failure to perform obligations under this Agreement to the extent such failure arises from a 30 failure to be Y2K Compliant that (1) affects the non-performing party's customers or suppliers or (2) is beyond its reasonable control (e.g., a failure ---- to be Y2K Compliant affecting a governmental entity). 7.4 Disclaimer. THE WARRANTIES MADE IN THIS SECTION 7 ARE MADE IN LIEU OF ALL OTHER EXPRESS WARRANTIES, WHETHER ORAL OR WRITTEN AND EXCEPT AS SET FORTH IN THIS SECTION 7, GSI MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 8. OWNERSHIP 8.1 Ownership of GSI Products. Retailer hereby acknowledges and agrees that as between Retailer and GSI, GSI owns all right, title and interest in and to the GSI Products and all applicable Intellectual Property Rights thereto. This Agreement confers no ownership interest in the GSI Products to Retailer. 8.2 Ownership of Retailer Content. GSI hereby acknowledges and agrees that as between GSI and Retailer, Retailer owns all right, title and interest in and to the Retailer Content and all applicable Intellectual Property Rights thereto. Except for a limited non-exclusive license during the term to use the Retailer Content solely to perform its obligations hereunder, this Agreement confers no ownership interest in the Retailer Content to GSI. 9. LIMITATION UPON LIABILITY. UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS' USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS' RELIANCE ON OR USE OF INFORMATION, SERVICES OR MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE UNDER THIS AGREEMENT FOR MORE THAN THE GREATER OF A) [*] OR B) THE AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. IN ADDITION, RETAILER SHALL BE ENTITLED TO SEEK EQUITABLE RELIEF FROM THE COURT. THE REMEDIES SET FORTH IN THIS ARTICLE 9 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN TWELVE (12) MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 10. INDEMNITY. 10.1 Retailer Indemnity. Subject to Section 10.3, Retailer shall defend, indemnify and hold GSI harmless against any third party claim, action, suit or proceeding: (i) Retailer's gross negligence, willful or 31 intentional misconduct; or (ii) any breach by Retailer of the warranties set forth in Sections 7.1 or 7.2. 10.2 GSI Indemnity. Subject to Section 10.3, GSI shall defend, indemnify and hold Retailer harmless against any third party claim, action, suit or proceeding arising from: (i) GSI's gross negligence, willful or intentional misconduct; or (ii) any breach by GSI of the warranties set forth in Sections 7.1 or 7.2. GSI's liability hereunder shall not be limited by the provisions of Section 9 above. 10.3 Mechanic of Indemnities. The indemnifying party's obligations are conditioned upon the indemnified party: (a) giving the indemnifying party prompt written notice of any claim, action, suit or proceeding for which the indemnified party is seeking indemnity; (b) granting control of the defense and settlement to the indemnifying party; and (c) reasonably cooperating with the indemnifying party at the indemnifying party's expense 11. MISCELLANEOUS. 11.1 Incorporation of Certain Provisions of the E-Commerce Agreement. Sections 7, 8, 12, and Sections 17 through 29, inclusive, of the E-Commerce Agreement are hereby incorporated in their entirety into this Agreement. 11.2 Interpretation of Agreements. With respect to the subject matter hereof, the E-Commerce Agreement shall control any conflict between the terms of this Agreement and the E-Commerce Agreement. 11.3 Definitions. Any terms not specifically defined in this Agreement shall be construed in accordance with the definitions given such terms in the E-Commerce Agreement, or if such terms are not defined in the E-Commerce Agreement, then such terms shall be construed in accordance with their every day, common meaning. IN WITNESS WHEREOF, each of the parties have caused their duly authorized representatives to enter into this Agreement to be effected on the Services Start Date. GLOBAL SPORTS INTERACTIVE, INC.: MICHIGAN SPORTING GOODS DISTRIBUTORS INC. By: /s/ Michael Rubin By: /s/ Bruce A. Ullery ------------------------ ------------------------- Title: President Title: Pres/CEO -------------------------- ------------------------- Date: 2/19/99 Date: Feb. 1, 1999 -------------------------- ------------------------- Name: Michael Rubin Name: Bruce A. Ullery --------------------------- -------------------------- (Please type or print) (Please type or print) 32 Attachment A (TO BE COMPLETED) Domain Name: Format of Retailer Content: Project Liaisons: For GSE.C: For Retailer: FEATURES SET - ------------ 1. PRODUCT SEARCH 2. BROWSE CATEGORIES 3. RECOMMENDATION TOOLS 4. ADVANCE PRODUCT PRESENTATION 5. SHOPPING CART 6. GIFT GIVING FUNCTIONALITY 7. REMOTE PUBLISHING TOOLS FOR HUMAN RESOURCES AND PRESS ROOM 8. SALES TAX CONFIGURATION 9. PRODUCT REVIEWS 10. 24/7 CUSTOMER SUPPORT 11. AFFILIATE PROGRAM FUNCTIONALITY 12. ON LINE GIFT CERTIFICATES 13. LAND BASED STORES GIFT CERTIFICATES 14. STORE LOCATOR 15. FINANCIAL INFORMATION 16. FREQUENTLY ASKED QUESTIONS 17. COMMUNITY PROGRAMS 18. COMPANY PROFILE 19. ON LINE ORDER STATUS MILESTONE DELIVERY SCHEDULE: - --------------------------- TASK ESTIMATED COMPLETION DATE - ---- ------------------------- DISCOVERY AND PLANNING MARCH 15, 1999 COMMENCE ENGINE ENGINEERING JULY 31, 1999 ESTABLISH FULFILLMENT CAPABILITIES APRIL 30, 1999 RETAILER WEB SITE DEVELOPMENT JULY 31, 1999 QUALITY CONTROL REVIEW AND REVISIONS AUGUST 21, 1999 ALPHA TESTING SEPTEMBER 1, 1999 BETA (SOFT LAUNCH) SEPTEMBER 30, 1999 WEB SITE LAUNCH TO GENERAL PUBLIC OCTOBER 1 - DECEMBER 1,1999 MEDIA AND PROMOTIONS OCTOBER 1 - DECEMBER 1,1999 SCHEDULE 1 TO E - COMMERCE AGREEMENT ------------------------------------ RETAILER'S TRADEMARKS, TRADENAMES AND LOGOS TO ---------------------------------------------- 33 - ---- MC SPORTS - ---- MC Sports has their name and logo as a registered trademark. 34 EX-10.2 3 E-COMMERCE MANAGEMENT AGREEMENT DATED MARCH 10, 1999 Confidential Treatment has been requested with respect to portions of the agreement indicated with an asterisk [*]. A complete copy of this agreement, including the redacted terms, has been separately filed with the Securities and Exchange Commission. E COMMERCE MANAGEMENT AGREEMENT ------------------------------- THIS E - Commerce Agreement dated the 10th day of March, 1999 by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and The Athlete's Foot Stores, Inc., a Pennsylvania corporation (hereinafter referred to as "Retailer") with an address of 1950 Vaughn Road, Kennesaw, Georgia, 30144. W I T N E S S E T H: WHEREAS, GSI is in the business of creating and operating all aspects of an E-Commerce Shopping Experience, including servicing and fulfilling the on-line retail sales of selected merchants; and WHEREAS, Retailer desires to enter into an exclusive agreement with GSI pursuant to which GSI will act as an Outsourcing Company providing the Retailer's on-line customers the complete E-Commerce Shopping Experience, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 1. DEFINITIONS. As used herein, the following terms shall have the following ----------- meaning: 1.1 "Advertising Co-op and Discretionary Funds" shall mean amounts earned by or allocated to the Retailer by its vendors, the purpose of which is to advertise that vendor's brand or to use at the Retailer's discretion. 1.2 "Categories" shall mean the various types of product groups (e.g. athletic footwear, camping, in line skates, etc.) offered for sale by the Retailer in its Land Based stores. 1.3 "Closeout Merchandise" shall mean end of season or excess merchandise that is priced at a greater than normal discount. 1.4 "Complete URL Integration" shall mean the display of Retailer's URL in all of Retailer's marketing and communications. 1.5 "Confidential Information" shall mean as that term is defined in paragraph 7.1 of this Agreement. 1.6 "Cross Promotion" shall mean the use of the Retailer's URL, name and logo on other than the Retailer's Web Site for the purpose of promoting the Retailer's Web Site. 1.7 "Customary Pricing Structure" shall mean the policy generally employed by the Retailer in determining the prices of merchandise in its Land Based Stores. 1.8 "Customer Data" shall mean as that term is defined in paragraph 4.1 of this Agreement. 1.9 "Data Bases" shall mean as that term is defined in paragraph 4.2 of this Agreement. 1.10 "Defective Allowance" shall mean a discount granted by a manufacturer to a retailer as a result of defective merchandise received by the retailer and pursuant to which, the retailer also retains the merchandise. 1.11 "Disclosing Party" shall mean the party disclosing Confidential Information. 1.12 "Domain Name" shall mean as that term is defined in paragraph 1.1 of the Web Site Development Agreement (as hereinafter defined). 1.13 "E-Commerce" shall mean the Retailer's specific business conducted through the Internet. 1.14 "E-Commerce Orders" shall mean the orders for merchandise placed by customers of the Retailer's Web Site. 1.15 "E-Commerce Outsourcing Manager" shall mean GSI. 1.16 "E-Commerce Shopping Experience" shall mean the shopping for and purchasing of merchandise through the Internet. 1.17 "Flight Date" shall mean the date on which Retailer's advertising is scheduled to run for the first time. 1.18 "Force Majeure Event" shall mean as that term is defined in Article 19 of this Agreement. 1.19 "GSI Content" shall mean as defined in paragraph 1.5 of the Web Site Development Agreement. -2- 1.20 "In Line Merchandise" shall mean current merchandise available to be carried by the Retailer in its Land Based Stores from Retailer's current or future vendors. 1.21 "Internet" shall mean the collection of interconnected networks that all use the TCP/IP protocols. 1.22 "Land Based Stores" shall mean the Retailer's stores located in shopping districts, strip shopping centers and shopping malls. 1.23 "Land Based Stores Gift Certificates" shall mean gift certificates offered for sale on the Retailer's Web Site for merchandise sold only in Retailer's Land Based Stores. 1.24 "Launch Date" shall mean the date on which GSI commences operation of the Retailer's Web Site to the public. 1.25 "Markdowns" shall mean merchandise in Retailer's inventory offered for sale at less than the price it was originally offered for. 1.26 "Milestone Delivery Schedule" shall mean as defined in paragraph 1.5 of the Web Site Development Agreement. 1.27 "On Line Customer" shall mean Retailer's customer who browses for or purchases On Line Merchandise on the Retailer's Web Site. 1.28 "On Line Customer Loyalty Programs" shall mean programs established to encourage repeat business from On Line Customers. 1.29 "On Line Merchandise" shall mean merchandise to be sold on the Retailer's Web Site. 1.30 "Outsourcing Company" shall mean a company which provides E-Commerce Services for traditional Retailers. 1.31 "Price Matching" shall mean a Retailer's policy pursuant to which it addresses another retailer's lower price on a particular item of merchandise. 1.32 "Private Label" shall mean a tradename owned by the Retailer under which name the Retailer manufactures merchandise for sale in its retail stores. 1.33 "Production Schedule" shall mean as defined in paragraph 1.9 of the Web Site Development Agreement. -3- 1.34 "Project Manager" shall mean an employee of Retailers who is assigned exclusively to work with GSI in supplying GSI with Retailer Content. 1.35 "Receiving Party" shall mean the party receiving Confidential Information. 1.36 "Retailer Content" shall mean as defined in paragraph 1.10 of the Web Site Development Agreement. 1.37 "Retailer's Net Cost" shall mean the amount paid by the Retailer for merchandise from its vendors after deduction of cash or anticipation discounts, marketing allowance, Defective Allowance, volume allowance and any other discount offered by vendors, but excluding any marketing funds granted to Retailer by a manufacturer as an overall marketing allowance and not based upon the number of units or dollars purchased. 1.38 "Retailer's Warehouse" shall mean the place at which Retailer receives delivery of merchandise from its vendors. 1.39 "Special Makeups" shall mean merchandise manufactured for the Retailer exclusively. 1.40 "Term" shall be as defined in Section 2.2 of this Agreement. 1.41 "URL" shall mean the address of the Web Site on the Internet. 1.42 "Web" shall mean the World Wide Web. 1.43 "Web Site" shall mean as defined in paragraph 1.12 of the Web Site Development Agreement. 1.44 "Web Site Development Agreement" shall mean the agreement by and between GSI and Retailer attached to this Agreement as Exhibit "A". 2. AGREEMENT AND TERM ------------------ 2.1 Agreement. During the Term GSI shall provide the Retailer with those --------- Web Site services as hereinafter specified. 2.2 Term. The Term of this Agreement shall commence upon the execution of this Agreement and shall expire five (5) years after the Launch Date ("Expiration Date"). GSI shall use reasonable efforts to advise Retailer ten days prior to -4- the expected Launch Date. The Launch Date shall occur between the period of October 1, 1999 and December 1, 1999 ("Commencement Period"); provided however, GSI shall use reasonable efforts to have a "soft launch" at some time during September, 1999. GSI's obligation to commence operation of the Web Site during the Commencement Period shall be contingent on Retailer complying with the deadlines set forth on the Milestone Delivery Schedule set forth on Attachment B to the Web Site Development Agreement and on the Production Schedule to be agreed upon by the parties. Retailer acknowledges the urgency of complying with the deadlines set forth in the Milestone Delivery Schedule and the Production Schedule and shall give GSI its full cooperation to ensure that such deadlines are satisfied. Notwithstanding anything contained herein to the contrary, in the event that the Retailer does not comply with such deadlines and GSI has given Retailer written notice of its failure to comply, then, for each day of such non compliance, the Commencement Period shall be extended by one day. 2.3 Extension of Term. At the end of the Term, this Agreement shall ----------------- automatically renew itself for an additional five year (5) period ("First Renewal Period") unless at least ninety (90) days prior to the expiration of the original Term, either party advises the other that they have elected not to renew this Agreement for the "First Renewal Period" in which event, this Agreement shall terminate at the end of the original five year Term. Thereafter, this Agreement shall automatically renew itself from year to year unless terminated by GSI or Retailer with written notice to the other party no later than ninety (90) days prior to the expiration of the then current Term, as such Term may have been extended. 3. OBLIGATIONS AND RIGHTS OF THE PARTIES ------------------------------------- 3.1 Creation of Retailer's Web Site. ------------------------------- a. GSI, at its own expense, shall create, maintain and operate a Web Site for the Retailer on the Web in accordance with the specifications attached to the Web Site Development Agreement. In connection therewith, simultaneous herewith, Retailer and GSI shall execute the Web Site Development Agreement. b. The Web Site shall contain the Retailer's E-Commerce Shopping Experience, the URL of which shall be www.The Athlete's Foot.com. In addition, the Web Site shall contain any or all of the -5- following information, as the Retailer shall elect: corporate information (e.g. historic background, mission statement, names of officers and directors), store locator, public financial information (e.g. SEC filings, annual reports), press releases, community programs, employment opportunities for in store or corporate positions, frequently asked questions and a "contact us" section. c. Following the initial completion of the Web Site, the Retailer shall have the right to update the content thereof as follows: 1) Employment Opportunities - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to update the employment opportunity portion of the Web Site as frequently as it desires. 2) Public Financial Information - a) Stock Prices - Will be updated daily by a link to another web site offering such information. b) SEC Filings and Annual Reports - SEC filings will be provided by a link so long as the government makes such filings available at no cost. Both SEC filings and annual reports will be provided only if available in portable document format; in the alternative, GSI will provide the consumer with a form in order to request such information from the Retailer's investor relations department. 3) Store Locators - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 4) Frequently Asked Questions - Will be updated by GSI monthly and Retailer provides GSI with such information. 5) Corporate Information - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 6) Community Programs - Will be updated by GSI as such information changes and Retailer provides GSI with such information. -6- 7) Press Releases - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to post press releases on its Web site as it desires. Retailer shall defend and hold harmless GSI, its employees, officers and directors, agents and representatives from any liability arising from the posting of press releases on the Retailer's Web Site. 8) "Contact Us" Section - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 9) "Tom Brunick Section" - Will include "tech tips", research and development information, and a rating system in addition to a "link" to any new relevant articles published by Brunick (in the alternative, GSI may publish the article on the Web Site). This section will be updated as information is furnished to GSI by the Retailer. 10) Miscellaneous - In addition, Retailer shall have the right to have GSI add additional content for the benefit of selling merchandise on the Retailer's Web Site. d. GSI's use of Retailer's URL, Retailer's Content and any other Retailer information or material, whether confidential or not, shall be granted and continue only for the Term of this Agreement and shall not be used beyond the end of such Term. 3.2 Creation and Maintenance of the Retailer's Web Site. GSI shall create --------------------------------------------------- and maintain a Web Site for the Retailer. Commencing with the execution of this Agreement and continuing through the Term, as may be extended, the Retailer, shall cooperate with GSI so as to enable GSI to create and maintain for the Retailer's consumers, the Retailer's Web Site. In connection therewith, the Retailer shall supply GSI with the Retailer Content (as that term is defined in the Web Site Development Agreement) required pursuant to the terms of the Web Site Development Agreement. This shall include, but not be limited to printed marketing information, data, text, audio files, video files, graphics and other assets necessary to create and maintain the Retailer's Web Site as more fully set forth on Attachment A to the Web Site Development Agreement. Notwithstanding anything contained herein to the contrary, and except as it -7- relates to Special Make - Ups, it shall be GSI's responsibility to produce and maintain all camera ready product information for use on the Retailer's Web Site and Retailer shall have no responsibility therefor. With respect to Special Make - Ups, Retailer shall be responsible to provide GSI with sample product only in a sufficient amount of time to allow GSI to produce camera ready product information. 3.3 Sale of Merchandise on the Retailer's Web Site. ----------------------------------------------- a. GSI, on behalf of the Retailer shall offer for sale on the Retailer's Web Site all Categories of merchandise offered for sale by the Retailer in its Land Based Stores. Notwithstanding anything contained herein to the contrary, in no event shall GSI offer firearms for sale on the Retailer's Web Site. In addition, if, as a result of a legitimate stated business purpose, should Retailer disapprove of any item listed for sale on the Retailer's Web Site, and which is not listed for sale in the Retailer's Land Based Stores, upon five days prior notice from Retailer, GSI shall remove such item from the Retailer's Web Site. b. Within the Categories, GSI, on behalf of the Retailer shall have the right to offer for sale: 1) current in line merchandise ordered by the Retailer from its vendors; and 2) current in line merchandise not carried by the Retailer in its Land Based Stores, but available in those Categories carried by the Retailer; provided however, no products will be offered for sale on Retailer's Web Site which a) the Retailer would not be authorized by the manufacturer to sell in its Land Based Stores, ; and b) would not be in accordance with the same type, quality and price of merchandise carried by the Retailer in its Land Based Stores; and 3) Special Make-Ups (manufactured for the Retailer exclusively and not carried on any other retailer's web site; and 4) Closeout Merchandise (but only if the Retailer sells Closeout Merchandise in its Land Based Stores; otherwise GSI shall not offer for sale Closeout Merchandise on the Retailer's Web Site); and 5) Markdowns of Retailer's inventory; and 6) Gift Certificates for On Line Merchandise ("On Line Gift Certificates") -8- [Items 1) through 6) are hereinafter referred to as "On Line Merchandise"] c. In addition, GSI, on behalf of the Retailer, shall offer for sale on the Retailer's Web Site, Land Based Stores Gift Certificates for merchandise available in the Retailer's Land Based Stores. Notwithstanding anything contained herein to the contrary, Retailer may elect not to offer Land Based Stores Gift Certificates for sale on its Web Site by notifying GSI of its decision not to do so no later than August 1, 1999 ("Notification Deadline"); provided however, Retailer may extend the Notification Deadline until January 1, 2000 by notifying GSI of its election to do so no later than August 1, 1999. d. In those instance where a written dealer agreement prohibits Retailer from selling a particular vendor's merchandise except in the Retailer's Land Based Stores, Retailer shall use its reasonable efforts to obtain all consents required to permit the sale of such merchandise on the Retailer's Web Site. 3.4 Prices of On-Line Merchandise. GSI, on behalf of the Retailer, shall ----------------------------- offer the On-Line Merchandise for sale on the Retailer's Web Site on the following basis: a. If the On-Line Merchandise is the same as offered for sale in the Retailer's Land Based Stores, then it shall be offered for sale on-line [*]. In order to facilitate this pricing, Retailer shall [*]. Retailer acknowledges that this is essential in order to [*]; and b. If the On-line Merchandise is not offered for sale in the Retailer's Land Based Stores, then, [*] will use reasonable efforts to [*]; provided however, upon five days prior notice to [*]. c. If the Retailer offers the same merchandise at different prices in its Land Based Stores, then [*] but in no event at [*]. d. GSI, on behalf of Retailer, shall add and collect all applicable taxes and GSI, at its discretion and for its own account, may add reasonable handling and delivery charges which are consistent with industry practice. -9- e. In order to ensure that GSI may [*], Retailer shall furnish GSI with copies of all [*] at least [*] prior to its [*]. f. The parties shall cooperate with each other so that the entire pricing process between GSI and Retailer may be accomplished electronically. g. The parties agree that from time to time, the Retailer may carry an item of merchandise at [*]. In those instances, [*] shall have the right to [*] In such event, [*] shall have the right to [*]. 3.5 GSI's Supply of On Line Merchandise. ----------------------------------- a. Invoicing and Shipping of On Line Merchandise. Retailer shall ---------------------------------------------- make available merchandise to GSI in one of the following three manners: 1) GSI, after consulting with the Retailer, will advise Retailer of the merchandise that it desires to order and Retailer will place such order with the vendor and invoice GSI at its net cost and direct the vendor to drop ship the merchandise to GSI; or 2) GSI, after consulting with the Retailer, will advise Retailer of the merchandise that it desires to order and the Retailer will direct the vendor to sell its merchandise directly to GSI at the same prices as the merchandise as is sold to Retailer, with the same Advertising Co-op and Discretionary Funds and on the same terms and conditions as they sell their merchandise to the Retailer; or 3) If either alternative 1) or 2) is not available, then the Retailer shall order the merchandise for GSI along with the Retailer's regular order, having it delivered to the Retailer's warehouse and thereafter shipped to GSI, and invoice GSI at its net cost, plus the pro rata cost of the freight from the vendor to the Retailer based upon that portion of the shipment purchased by the Retailer for GSI as it relates to the entire shipment received by the Retailer from that vendor). Thereafter, the Retailer shall ship the merchandise to GSI, freight collect, per GSI's instructions. b. In Line Merchandise. The Retailer shall advise GSI, no later -------------------- than ten days after placing a purchase order with a vendor, of the Category, item ordered, net cost, Retailer's retail price and -10- expected day of delivery to the Retailer's Warehouse. c. Special Make-Ups. No later than ten days after ordering Special ----------------- Make-Ups or Private Labels, Retailer shall advise GSI and furnish GSI with a sample of the Special Make-Ups or Private Labels and advise GSI of the net cost, color selection and size range. GSI shall have the right to purchase up to [*] per cent of the Special Make-Up or Private Label, proportionately as to size and color, as ordered by the Retailer. GSI shall have five business days to advise Retailer whether it desires to order any of the Special Make-Ups or Private Labels and, if so, the quantity thereof. Special Make-Ups and Private Labels shall be exclusive to Retailer's Web Site and shall not be made available for sale on the web site of any other retailer for whom GSI operates a web site. Retailer shall supply GSI with a sample of the Special Make-Ups and Private Labels ordered by GSI for sale on the Retailer's Web Site within ten days of obtaining such sample. Notwithstanding anything contained herein to the contrary, GSI recognizes that there may be instances where there will be an insufficient amount of a particular item of Special Make-Ups or Private Labels to warrant selling such merchandise on line. In such instances the Retailer shall not be required to offer such Special Make-Ups or Private Labels for sale on line; provided however, the Retailer acknowledges that with respect to Special Make-Ups or Private Labels ordered by Retailer for chainwide distribution, GSI does not anticipate that this will occur on a regular basis and this should be the exception rather than the usual occurrence. Further, GSI acknowledges that the Retailer may not be able to offer for sale on line certain Special Make-Ups or Private Labels which are not available in all of the Retailer's stores. d. Closeout Merchandise. Retailer shall advise GSI no later than --------------------- ten business days after issuing a purchase order for Closeout Merchandise from a vendor. At that time, Retailer shall advise GSI of the cost, sizes and colors available and GSI shall have five business days after receipt of such information to advise Retailer that it will -11- purchase, at Retailer's net cost, up to [*] per cent of the Closeout Merchandise to be received by Retailer, proportionately as to size and color, as ordered by Retailer. Notwithstanding anything contained herein to the contrary, GSI recognizes that there may be instances where there will be an insufficient amount of a particular item of Closeout Merchandise to warrant selling such merchandise on line. In such instances the Retailer shall not be required to offer such items of Closeout Merchandise for sale on line; provided however, the Retailer acknowledges that GSI does not anticipate that this will occur on a regular basis and this should be the exception rather than the usual occurrence. Any Closeout Merchandise purchased by GSI from Retailer shall be offered for sale by Retailer only on the Retailer's Web Site. e. Markdowns. In the event that the Retailer has available ---------- Markdowns which it would like to offer for sale on its Web Site solely at its discretion, it shall notify GSI and ship the Markdowns to GSI's fulfillment center. The Markdowns shall be shipped to GSI on consignment only. Retailer shall set the selling prices on the Markdowns; provided however, that GSI on behalf of the Retailer shall have no obligation to offer any Markdowns for sale on the Retailer's Web Site which GSI deems, in its sole discretion, would be inappropriate. Retailer shall retain [*] of the selling price received from the sale of any Markdowns when sold (excluding applicable taxes and shipping and handling charges; the remainder of [*] plus shipping and handling charges shall be retained by GSI as its management fee in connection with the sale of the Markdowns. Any applicable tax collected by GSI on behalf of Retailer shall be deposited into a separate account as more fully discussed in paragraph 3.9 below, and remitted by GSI to the appropriate taxing authority. GSI shall account to Retailer for the sale of any Markdowns at the same time that it accounts to the Retailer for sale of other On Line Merchandise on the Retailer's Web Site. The amount of proceeds from the sale of arkdowns shall not be considered the sale of On Line Merchandise for the purpose of determining the amount to be remitted to Retailer pursuant to paragraph 3.8 below. -12- f. With the exception of Markdowns and Land Based Gift Certificates, which shall be governed by the provisions of paragraphs 3.5 e. and 3.6 hereof respectively, and as part of the performance of its obligations under this Agreement, GSI shall sell to the Retailer, and the Retailer shall purchase from GSI all merchandise to be sold by the Retailer on the Retailer's Web Site at a price equal to [*] per cent of the selling price (excluding applicable taxes, shipping and handling) at which such On Line Merchandise is sold to the Retailer's On Line Customer. g. Attached hereto as Schedule "2" is a schedule which summarizes the various levels of management fees to be paid to GSI by the Retailer depending upon the type of On Line Merchandise sold on the Retailer's Web Site. h. The parties shall cooperate with each other so that the entire process set forth in paragraphs 3.5 a, b, c, d and e between GSI and Retailer may be accomplished electronically. 3.7 Processing of Customer Orders. GSI shall be solely responsible for ----------------------------- processing all E - Commerce business for the Retailer. GSI will promptly process E - Commerce Orders received from the Retailer's Web Site. GSI shall take the customer's credit card number at such time as the merchandise is ordered. GSI, on behalf of the Retailer's account discussed in paragraph 3.9 below, shall charge the customer's credit card with the amount of the order (including taxes, shipping and handling) at the time the merchandise is shipped. The order will appear on the customer's credit card under the name of "Retailer tradename.com" and proceeds from the sale shall be deposited into Retailer's designated bank account at the bank designated by GSI for full credit to Retailer. GSI will make all arrangements for delivery of merchandise purchased on the Retailer's Web Site. 3.8 GSI's Management Fee. For and in consideration of the services to be -------------------- rendered by GSI to Retailer hereunder, GSI shall be paid a management fee ("Management Fee") equal to [*] per cent of the sales price of all On Line Merchandise for all On Line Merchandise sold, excluding however, the sale of Markdowns and Land Based Gift Certificates, the management fee for which shall be governed by paragraphs 3.5 e. and 3.6 a. respectively. GSI's Management Fee, including any management fee to GSI as a result of the sale of Markdowns or Land Based Gift -13- Certificates shall be paid pursuant to the provisions of paragraph 3.9 below. 3.9 Payment and Accounting from the Sale of On - Line Merchandise. The ------------------------------------------------------------- proceeds from the sale of On Line Merchandise on the Retailer's Web Site shall be deposited into a bank account ("Web Account") in the Retailer's name at GSI's designated bank ("Bank"). The Web Account shall be owned by the Retailer and shall require two signatures in order to withdraw funds. Signatures on such account shall be one employee of GSI and one employee of the Retailer. Notwithstanding anything contained herein to the contrary GSI's designated employee shall have an irrevocable power of attorney over the Web Account and the Tax Account, as hereinafter discussed. No other funds shall be deposited into the Web Account except for credit card proceeds from the sale of On Line Merchandise, Land Based Stores Gift Certificates and On Line Gift Certificates on Retailer's Web Site and no other sums shall be deposited into the Tax Account except applicable taxes collected from the sale of On Line Merchandise, Land Based Stores Gift Certificates and On Line Gift Certificates on the Retailer's Web Site. From each transaction, GSI shall be paid daily the sum of a) the cost ([*] of the sale amount) of the On Line Merchandise sold to Retailer's On Line Customers, b) Retailer's Management Fee ([*] of the sale amount) and c) GSI's shipping and handling charge to the On Line Customer (collectively, "GSI's Entitlement"), if any. Retailer shall give the Bank irrevocable instructions to a) debit the Web Account daily for the amount owed to GSI, as so directed by GSI, and to credit GSI's designated account for such amount; and b) to debit the Retailer's Web Account and to credit the Retailer's especially established tax account ("Tax Account") daily with the amount of any applicable tax collected. Any interest earned on the Web Account or the Tax Account shall belong solely to GSI and any charges imposed by the Bank as a result of such accounts, shall be paid by GSI. Retailer shall have no right to offset from GSI's Entitlement any amount which Retailer may believe is owing to Retailer from GSI and Retailer shall obtain from its secured lenders (as they may vary from time to time) and deliver to GSI within fifteen days of the execution of this Agreement by Retailer, a waiver to claim a security interest in either the Web Account or the Tax Account. In addition, Retailer shall give the Bank irrevocable instructions to wire to the Retailer the amount determined ("Retailer's Operating Income") by GSI to be remaining from the sale of On Line Merchandise, Land Based Stores Gift Certificates and On Line Gift Certificates from the Retailer's Web Site after the -14- deduction of GSI's Entitlement on the fifteenth day following the end of each month; provided however, effective October 1, 2000, the Retailer may request that it receive Retailer's Operating Income weekly and in such event, GSI agrees that the payments shall be made weekly to Retailer commencing within thirty days after receipt of such notice. The amount of the Retailer's Operating Income each month shall be certified by GSI's chief financial officer and a copy of the accounting shall be furnished to the Retailer no later than the fifteenth day following the end of each month. Retailer shall not be entitled to receive any revenue related to the operation of the Retailer's Web Site other than the Retailer's Operating Income. Any other revenue generated in connection with the operation of the Retailer's Web Site shall belong solely to GSI. By way of example only, if Retailer sells a pair of athletic shoes on its Web Site for one hundred ($100.00) dollars, plus a five ($5.00) dollar shipping and handling charge, the total deposit to the Bank account is one hundred and five ($105.00) dollars. GSI's Entitlement shall be [*]([*] of $100.00, [*] of $100.00 and reimbursement of the $5.00 shipping and handling fee) and Retailer's Operating Income shall equal the remaining [*] after payment of the Retailer's cost of On Line Merchandise, GSI's management fee and the shipping and handling charge. The Retailer's Operating Income and GSI's Entitlement shall also take into account the amounts owing pursuant to paragraph 3.5 e. and 3.6 above. GSI shall be responsible to collect any applicable sales taxes resulting from the sale of On Line Merchandise, if any. GSI shall complete all required sales tax forms and submit them on the Retailer's behalf. GSI shall indemnify, save and hold harmless Retailer from any taxes, interest and penalties which may arise as a result of GSI's failure to pay or timely pay any sales tax resulting from the sale of On Line Merchandise. GSI shall be in charge of any audit conducted by any taxing authority as it relates to the sale of On Line Merchandise. Within ninety (90) days of the end of each calendar year, GSI shall provide the Retailer with a statement certified by its independent auditors and setting forth the total On Line Sales, the Retailer's Operating Income and GSI's -15- Entitlement therefrom. For a period of two years after the Retailer receives such certified statement from GSI, Retailer, on one occasion, shall have the right to audit the books and records of GSI with respect to the Retailer's Operating Income and GSI's Entitlement paid during the calendar year to which the certified statement relates. Such audit shall be conducted at GSI's principal office located in the continental United States on two weeks prior notice to GSI. In the event that the audit reveals that the Retailer's Operating Income were understated, GSI shall within thirty days of completion of the audit, pay to the Retailer the remaining balance of the Retailer's Operating Income for the period audited plus interest at the prime rate of interest as provided for in The Wall Street Journal on the date of the audit's certification. In addition, in the event that the audit reveals that the Retailer's Operating Income is understated by more than [*] per cent for the calendar year in question, GSI shall pay the additional amount owing and pay for the reasonable audit costs and this shall be Retailer's sole remedy. 3.10 Service of On Line Customers. GSI shall be responsible for providing ---------------------------- all customer service relating to sales from the Retailer's Web Site, which shall be provided in a manner consistent with that provided by other reputable on line retailers. Retailer reserves the right, to conduct, no more than four times annually, surveys of its on line customers for the purpose of providing its On Line Customers with better customer service. The surveys shall be conducted in a manner consistent with those then being conducted by the Retailer in its Land Based Stores, as applicable to e-commerce. 3.11 Return of On Line Merchandise. Retailer's return policy for On Line ----------------------------- Merchandise shall be consistent with the Retailer's return policy for its Land Based Stores. With each shipment of merchandise, GSI shall specifically instruct all customers that all merchandise purchased on line may not be returned to the Retailer's Land Based Stores and may only be returned in accordance with the instructions enclosed; provided however, in the rare instance a customer desires to return On Line Merchandise to one of the Retailer's Land Based Stores, the Retailer, in order to maximize customer relations, shall accept such merchandise for return in accordance with the Retailer's return policy, and return the merchandise to GSI's fulfillment center. GSI shall pay the Retailer the amount of GSI's Entitlement with respect to such merchandise, as well as an amount equal to the Retailer's -16- freight cost for returning the merchandise to GSI's fulfillment center. Should GSI receive the return of On Line Merchandise, GSI shall reimburse the Retailer the amount of the GSI Entitlement paid to GSI with respect to that transaction, as well as the applicable tax refunded to the On Line Customer, and such sums shall be deposited to the Web Account. 3.12 On Line Customer Loyalty Programs. GSI shall have the right to --------------------------------- establish On Line Customer Loyalty Programs in order to encourage continued on line purchases. The On Line Customer Loyalty Programs established by GSI for Retailer shall be consistent with that program established by Retailer for use in its Land Based Stores. In addition, the Customer Loyalty Programs established by GSI shall be used only in connection with on line purchases and Retailer's customer loyalty programs shall be used only in connection with purchases at the Retailer's Land Based Stores. Notwithstanding anything contained herein to the contrary, GSI shall not establish any On Line Customer Loyalty Programs without first obtaining the approval of Retailer, which approval shall not be unreasonably withheld. Retailer shall respond to a request for such approval from GSI within seven days of receiving the request. In the event Retailer fails to timely respond, GSI shall furnish Retailer with a notice marked "second request". If Retailer does not respond within two business days, GSI's request shall be deemed granted. The Retailer recognizes that it may be beneficial to each party to consolidate the customer loyalty programs. GSI therefore agrees that should the Retailer elect to do so, then GSI will work with the Retailer in good faith to develop such a program provided that it does not have a substantial negative economic impact on GSI. 3.13 Cross Promotion. GSI shall have the right to use Retailer's URL, name --------------- and logo to cross promote Retailer's Web Site with other businesses in order to promote Retailer's Web Site; provided however, GSI shall not promote Retailer's Web Site on any other sporting good retailer's web site, or on any other web site which would generally be considered immoral, pornographic or offensive. Notwithstanding anything contained herein to the contrary, GSI shall not establish any Cross Promotions without first obtaining the approval of Retailer, which shall not be unreasonably withheld. Retailer shall respond to a request for such approval from GSI within seven days of receiving the request. In -17- the event Retailer fails to timely respond, GSI shall furnish Retailer with a notice marked "second request". If Retailer does not respond within two business days, GSI's request shall be deemed granted. 3.14 Price Matching. In the event that the Retailer, at its Land Based -------------- Stores offers a "Price Matching" policy, GSI's management shall have the right to use and adopt such policy for the Retailer's Web Site; provided however, GSI shall not under any circumstance, advertise or market the availability of this policy, and may offer it to customers only in GSI's sole discretion. 3.15 Project Manager. Promptly after the execution of this Agreement, but --------------- in no event later than sixty days after such execution, Retailer, at its expense, shall hire or reassign one of its existing employees, to act as Project manager to work exclusively with GSI in creating and maintaining the Retailer's Web Site. Commencing with the Project Manager's hiring and continuing through the Term, as may be extended, the Project Manager shall be the Retailer's liaison with GSI and shall be responsible for supplying GSI with the Retailer Content and such other information as may reasonably be required of the Retailer in order to create and maintain the Retailer's Web Site in the most efficient manner. 4. ON-LINE DATA AND DATABASES -------------------------- 4.1 Ownership of Data. Any and all data ("Customer Data") related to ----------------- Retailer's customers (including customer names and other identifying information such as addresses, phone numbers and e-mail addresses, credit card numbers, and descriptions of the items and quantities of items purchased) that is collected by GSI shall be owned [*]. 4.2 Ownership of Databases. All data structures, data schema, database ---------------------- dictionaries, attributes, validation tests for each element, table sizes and formats, access requirements, data dependencies and other elements involving the storage of Data on the Web Site and all refinements, updates, releases, improvements and enhancements thereto, all intellectual property rights embedded therein and all applications created specifically for use of the data and Retailer Content (collectively, the "Databases") shall, as between GSI and Retailer, be the sole and exclusive property of GSI; provided however, that should Retailer provide GSI with Databases or other assets, then upon the termination of this Agreement, such Databases and other assets shall be returned to Retailer. -18- 4.3 Delivery of Customer Data to Retailer. From time to time, but no more ------------------------------------- than four (4) times per calendar year, Retailer may request that GSI provide to Retailer any of certain information collected from the Customer Data; provided however, GSI shall provide Retailer with on- line access to such information which Retailer shall have the ability to access at such times as it desires. The type of information which shall be available from Retailer's Customer Data shall be as follows: a. customer's names; b. customer's addresses; c. customer's phone number; d. customer's e-mail address; e. items purchased; f. amount spent; g. information as to how customer reached Web Site; h. refers; i. unique visitors to site; j. page views per site; k. top ten most viewed pages; l. bottom ten least viewed pages; m. time of day traffic patterns; n. sales by product and brand; o. customer comments and complaints (shall be furnished on a monthly basis); p. additional information at GSI's discretion. If the Retailer requests that GSI provide such information, GSI shall provide the Customer Data to Retailer in a mutually agreeable, commercially standard format, either via diskette, CD-ROM, electronically, or via another mutually agreeable method. GSI shall use commercially reasonable efforts to ensure that the Customer Data provided to Retailer accurately and completely reflects the Customer Data in the Web Site, but GSI shall have no obligation to check the accuracy, validity or integrity of the Customer Data and except as set forth in this Section 4.3, the Customer Data is provided "AS-IS". 4.4 Restrictions on Use of Customer Data. Each party shall treat the ------------------------------------ Customer Data as Confidential Information of the other party in accordance with the provisions of Article 7. Neither party may sell, lend, or license the Customer Data to third parties without the prior written consent of the other party, which consent may be withheld at the sole discretion of the other party; provided however, Retailer grants to GSI the right to combine all -19- retailers' Customer Data to form trends and overall research as to the on line shopping habits of consumers. The parties acknowledge that the Customer Data referred to herein refers only to Customer Data gathered from On Line Customers and shall not be applicable to customer data gathered by the Retailer from its customers at its Land Based Stores. 5. ADVERTISING AND MARKETING ------------------------- The Retailer shall, commencing no later than October 1, 1999, and continuing during the Term, and any extensions thereof, at no cost to GSI provide for Complete URL Integration in its advertising and marketing by: 5.1 prominently including as part of all of its print media including but not limited to newspapers, periodicals, circulars, billboards, print materials, letterhead, business cards, shopping bags, cash register receipts and arena advertising) its URL, www.Retailer.com.; and 5.2 prominently including, at the end of its television advertising, its URL; and 5.3 mentioning its URL at the end of all radio advertisements. All advertisements and marketing appearing in newspapers, circulars and periodicals shall contain the following disclaimer: "On Line Merchandise offerings may vary from products offered in The Athlete's Foot store. 6. ADVERTISING CO-OP AND DISCRETIONARY FUNDS ----------------------------------------- 6.1 In the event that GSI purchases merchandise pursuant to paragraph 3.5a.1) or 3.5a.3) above, and in the event that the Retailer receives from any vendor an Advertising Co-op or Discretionary Funds, the Retailer shall pay or credit to GSI an amount equal to the Advertising Co-op or Discretionary Funds received by the Retailer for merchandise for and on behalf of GSI. The amount to be paid or credited to GSI shall be determined by multiplying the amount of merchandise purchased by the Retailer from that vendor by a fraction, the numerator of which is the amount of purchases derived from that vendor's product on the Retailer's On-Line Shopping Pages, and the denominator of which is the sum of the amount of the Retailer's purchases derived from that vendor from both in-store and on-line sales ("GSI's Share"). Within sixty (60) days of the end of each -20- calendar year, the Retailer shall provide GSI with a statement certified by its chief financial officer as to such sums received by the Retailer from vendors during the prior calendar year, and such supporting data so as to support the conclusions set forth in the statement. At the same time, the Retailer shall pay to GSI an amount equal to the GSI's Share. GSI shall have the right to audit the books and records of the Retailer with respect to such sums. Such audit shall be conducted at the Retailer's principal office located in the continental United States. 6.2 In the event that GSI purchases merchandise from Retailer's vendors pursuant to paragraph 3.5a. 2) above and GSI receives Advertising Co- op or Discretionary Funds from such vendor as a result of such purchase, then such funds received by GSI shall belong to GSI. 6.3 During the Term and any extensions thereof, GSI shall use all Advertising Co-op and Discretionary Funds received by GSI pursuant to paragraph 6.1 and 6.2 above, to exclusively promote the Retailer's Web Site, as recommended by GSI and approved by GSI. This shall include both on line and traditional advertising of the Retailer's Web Site. All such proposed advertisements shall be submitted to the Retailer for the Retailer's approval as to content and design. The Retailer shall have five days from receipt to either approve or disapprove. In the event that the Retailer disapproves, it shall advise GSI specifically as to why and GSI shall attempt to address the Retailer's concerns and resubmit the proposal to Retailer for its approval, which shall again have forty eight hours from receipt to approve or disapprove. This procedure shall continue until the advertisement has been approved or replaced. In all instances where approval is requested of the Retailer, in the event the Retailer does not respond within the aforementioned forty eight hours, Retailer shall be deemed to have granted approval. 7. CONFIDENTIALITY --------------- 7.1 Confidential Information. Each party acknowledges that, in connection ------------------------ with the performance of this Agreement, it may receive Confidential Information of the other party. For the purpose of this Agreement, "Confidential Information" shall mean information or materials that is clearly marked "confidential" or the Receiving Party knows has reason to know is the confidential or proprietary information of the Disclosing Party, either because a) such information is marked or otherwise -21- identified by the Disclosing Party as confidential or proprietary, or b) such information has commercial value and is not generally known in the Disclosing Party's trade or industry. Confidential Information shall include, without limitation: (a) concepts and ideas relating to the development and distribution of content in any medium; (b) trade secrets, drawings, inventions, know-how, software programs, and software source documents; (c) information regarding plans for research, development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublished financial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; and (d) existence of any business discussions, negotiations or agreements between the parties. 7.2 Confidentiality. The Receiving Party hereby agrees: (i) to hold and --------------- maintain in strict confidence all Confidential Information of the Disclosing Party and not to disclose it to any third party; and (ii) not to use any Confidential Information of the Disclosing Party except as permitted by this Agreement or as may be necessary for the Receiving Party to perform its obligations under this Agreement. The Receiving Party will use at least the same degree of care to protect the Disclosing Party's Confidential Information as it uses to protect its own Confidential Information of like importance, and in no event shall such degree of care be less than reasonable care. The obligations and restrictions imposed by this Article 7 shall terminate five (5) years after the expiration or termination of this Agreement. 7.3 Exceptions. Notwithstanding the foregoing, the parties agree that ---------- Confidential Information will not include any information that: (i) was in the public domain at the time it was communicated to the Receiving Party by the Disclosing Party; (ii) entered the public domain subsequent to the time it was communicated to the Recipient by the Disclosing Party through no fault of the Receiving Party; (iii) was in the Receiving Party's possession free of any obligation of confidence at the time it was communicated to the Receiving Party by the Disclosing Party; (iv) was rightfully communicated to the Receiving Party by a third party, free of any obligation of confidence, subsequent to the time it was communicated to the Receiving Party by the Disclosing Party; (v) was developed by employees or agents of the Receiving Party independently of and without reference to any information communicated to the Receiving Party by the Disclosing Party; or (vi) was communicated by the Disclosing Party -22- to an unaffiliated third party free of any obligation of confidence. In addition, the Receiving Party may disclose the Disclosing Party's Confidential Information in response to a valid order by a court or other governmental body, as otherwise required by law, or as necessary to establish the rights of either party under this Agreement; provided however, in the event that the Receiving Party receives a demand to disclose such Confidential Information in connection with a legal action or proceeding, the Receiving Party, if possible, shall first notify the Disclosing Party of the demand in order to provide the Disclosing Party an opportunity to seek a protective order. 7.4 Confidentiality of this Agreement. Retailer acknowledges that the --------------------------------- terms and conditions of this Agreement constitute Confidential Information which shall be governed by the terms of this Article 7. 7.5 Confidentiality of Customer Data and Retailer's Policies. GSI -------------------------------------------------------- acknowledges that it will be receiving from Retailer, and generating from the performance of its obligations under this Agreement, Confidential Information critical to the Retailer's business and concerning Retailer's customers and various information concerning the operation of Retailer's business including but not limited to net purchasing prices, advertising co-op and discretionary fund amounts, specific marketing plans, specific on line sales and delivery dates of merchandise. GSI recognizes its obligation to keep such information confidential. Therefore, all GSI employees who may have access to any such Confidential Information will be required to execute confidentiality agreements and GSI shall use its best efforts to enforce the terms thereof. Such confidentiality agreements will specifically provide that the employee shall not discuss with any other retailers who may or may not be customers of GSI, any information concerning the Retailer or its customers. Further, GSI acknowledges it is associated with other subsidiaries of GSI's parent corporation, Global Sports, Inc. GSI therefore represents and warrants to Retailer that it will establish a "Need to Know" policy with respect to such Confidential Information and only disseminate such Confidential Information to those employees and members of GSI's management who have a specific need to know such Confidential Information. In those instances, prior to the dissemination of such Confidential Information to those individuals, they will be required to execute confidentiality agreements specifically prohibiting such disclosure of such -23- Confidential Information to anyone, except as otherwise permitted by the terms of this Agreement. 8. EXCLUSIVE WEB AGREEMENT ----------------------- During the Term and any extensions thereof, the Retailer, any subsidiary of the Retailer, shall not sell any sporting goods merchandise on the Internet (including the Web), nor use itself or allow a third party to use its URL, name or logo on the Web for the purpose of facilitating the sale of merchandise on the Web other than through GSI. Notwithstanding anything contained herein to the contrary, should GSI be unable to satisfy the Retailer's web site requirements with respect to specialized matters such as franchise or corporate information, the Retailer shall have the right to establish a second web site incorporating the name "The Athlete's Foot" which GSI shall provide a link to from the Retailer's Web Site; provided however, under no circumstances shall Retailer sell any merchandise on such second web site. 9. URL, NAME AND LOGO USAGE ------------------------ During the Term, the Retailer hereby grants to GSI the exclusive right to use, copy, modify and display the Retailer's name, logo and URL and such other names and logos as the Retailer owns and as may be listed on Schedule "1" attached hereto and made a part hereof, on the Retailer's Web Site, on invoices and packing slips, in connection with credit card charges, a toll free Web site customer service telephone line, and generally in connection with the operation of GSI's on-line business; provided however, GSI shall have no right to modify Retailer's name, logo or URL without Retailer's consent. Such Schedule shall be modified from time to time during the Term to add any new names and logos which the Retailer may register with the United States Patent and Trademark Office. GSI acknowledges that Retailer has already registered and owns the URL,"The Athlete's Foot.com". The Retailer, however, grants to GSI the right to register the fictitious name of "The Athlete's Foot.com" for the sole purpose of conducting business on the Retailer's Web Site and to use the URL, "The Athlete's Foot.com", for the sole purpose of operating the Retailer's Web Site in accordance with the terms of this Agreement. The Retailer also gives GSI the right to register other URLs containing the name "The Athlete's Foot" provided that GSI first obtains Retailer's consent. Retailer shall execute whatever documents are necessary in connection with such registration. -24- 10. REPRESENTATIONS AND WARRANTIES. ------------------------------- 10.1 Retailer represents and warrants that at all times during the Term hereof or any extensions thereof: a. it has or will have the full right to grant to GSI the right to use its URL, names and logos as discussed in Article 9 above, including its Domain Name; and b. Retailer is authorized to advertise and market on its Web Site the brands of merchandise to be sold thereon; c. Prior to the Launch Date, if not already completed, Retailer shall register and maintain the Domain Name "Retailer.com" with Network Solutions or any similar successor entity. Retailer shall list itself as the owner and billing contact for the Domain Name "Retailer.com" and Retailer shall list GSI as the administrative and technical contact for the Domain Name "Retailer.com". d. neither the Retailer nor its secured lenders shall at any time have any interest in the Web Account or Tax Account. 10.2 Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 11. INDEMNIFICATION --------------- 11.1 Retailer, at its own cost and expense, shall defend, indemnify and hold harmless GSI and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys fees and court costs) arising as a consequence of GSI providing services pursuant to this -25- Agreement a) from or related to a claim that GSI infringes a third party copyright, trademark or trade secret relating to Retailer's tradename or any other name set forth on Schedule 1 to this Agreement; or b) from Retailer's gross negligence, wilful or intentional misconduct. 11.2 GSI, at its own cost and expense, shall defend, indemnify and hold harmless Retailer and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys fees and court costs) arising a) from a claim made by any consumer that is related in any way to the Retailer's Web Site or GSI's services to Retailer provided pursuant to this Agreement, but excluding a claim for which GSI would have the right to indemnification pursuant to Paragraph 11.1 above, or b) from GSI's gross negligence, wilful or intentional misconduct and arising as a consequence of GSI providing services pursuant to this Agreement. 11.3 Retailer shall have sole control of any defense of any claim made pursuant to Section 11.1 above, but GSI shall cooperate with Retailer in providing such defense. 11.4 GSI shall have sole control of any defense of any claim made pursuant to Section 11.2 above, but Retailer shall cooperate with Retailer in providing such defense. 11.5 Any party seeking indemnification shall notify the other party as soon as possible after such party seeking indemnification becomes aware of the claim. 12. INSURANCE --------- 12.1 GSI, at its expense, shall maintain in full force and effect products liability insurance coverage for merchandise sold on Retailer's Web Site. Such policy shall insure Retailer and name GSI as an additional insured. 12.2 GSI shall deliver to Retailer certificates of insurance which stipulate that no less than ten days notice will be given to Retailer prior to the termination of the policy. 13. RETAILER'S FRANCHISEES ---------------------- The Retailer has both company owned and franchised locations. The Retailer represents and warrants to GSI that its franchise agreements prohibit its franchisees from selling merchandise -26- on the Internet. The Retailer shall enforce all its rights under its franchise agreements to prevent its franchisees from selling merchandise on the Internet. In addition, the Retailer shall use its best efforts to obtain the same Complete URL Integration from its franchisees as the Retailer is introducing in all of its marketing and communications. 14. TERMINATION ----------- 14.1 Termination for Cause by Either Party. This Agreement may be ------------------------------------- terminated by either party in the event of any material breach of any of the terms and conditions of this Agreement by the other party which breach continues in effect after the breaching party has been provided with written notice of breach and ninety (90) days to cure such breach and fails to cure such breach. As used herein, "material breach" shall mean a failure by a party to this Agreement to perform any of its obligations the effect of which would substantially impair the value of this Agreement to the other party. By way of example only and not by way of limitation, GSI's failure to operate the Retailer's Web Site according to commercially reasonable standards as they are established today and as they may continue to develop during the Term of this Agreement or failure to provide customer service equivalent to that provided by other reputable on line retailers, or any of its representations or warranties being materially false or misleading at the time given, would be a material breach of this Agreement by GSI. Retailer's failure to comply with its obligations pursuant to Section 5 above, or failure to provide GSI with the Retailer Content necessary to construct and/or maintain the Retailer's Web Site, would be a material breach of the Retailer's obligations under this Agreement. 14.2 Termination for Cause Only by GSI. GSI may terminate this Agreement --------------------------------- by giving sixty days prior written notice to Retailer of its election to terminate upon the occurrence of any of the following events: a. any representation or warranty contained herein becomes materially false or misleading; or b. a material change in the Retailer's business or business policies as determined by GSI in its sole reasonable judgment; or 14.3 Termination Without Cause by Either Party. In the absence of a ----------------------------------------- material breach, this Agreement may only be terminated by the expiration of the Term, as may be extended pursuant to Section 2.3 above. -27- 15. LIMITATIONS UPON LIABILITY -------------------------- UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS' USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS' RELIANCE ON OR USE OF INFORMATION, SERVICES OR MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE UNDER THIS AGREEMENT FOR AN AMOUNT THAT EXCEEDS, IN THE AGGREGATE THE AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. IN ADDITION, RETAILER SHALL BE ENTITLED TO SEEK EQUITABLE RELIEF FROM THE COURT. THE REMEDIES SET FORTH IN THIS ARTICLE 14 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN TWELVE (12) MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 16. PROPERTY RIGHTS AND OWNERSHIP ----------------------------- The Retailer's Web Site shall consist of, and shall operate in conjunction with, multiple elements, all of which are subject to certain intellectual property rights. The parties' respective rights with respect to such elements shall be as set forth below. For purposes of this Agreement, the term "Ownership" shall refer to ownership of all right, title and interest in and to the respective elements, including, but not limited to, all patent, copyright, trade secret, trademark and any other similar intellectual property rights therein, as applicable. 16.1 Retailer's URL shall be owned solely by the Retailer; 16.2 Retailer's Web Site shall be owned solely by GSI; provided however any assets furnished to GSI by Retailer shall remain the exclusive property of Retailer and shall be returned to Retailer upon the termination of this Agreement; 16.3 Software developed for the Retailer's Web Site, shall be owned solely by GSI, subject to any authorizations to use and approvals obtained by the Retailer and granted to GSI. -28- With respect to intellectual property owned by each of them, Retailer and GSI shall both have rights associated with the ownership of intellectual property, including the right to copyright web sites and domains; provided however, that GSI acknowledges that, except with the prior written consent of the Retailer, which Retailer may withhold in its discretion, GSI shall have no right to copyright, license or trademark the Retailer's tradename, trademark or logo. 17. GRANT OF WARRANT TO RETAILER ---------------------------- Upon execution of this Agreement by Retailer, and acceptance thereof by GSI, prior to the announcement of GSI's e-commerce initiative, GSI will deliver to Retailer a warrant to purchase shares of Global Sports, Inc., the parent corporation of GSI, in accordance with the terms set forth in the Warrant Term Sheet attached hereto as Exhibit "B". 18. GSI'S TWENTY DAY PERIOD TO EXECUTE ---------------------------------- Retailer shall execute this Agreement first and deliver such executed Agreement to GSI which shall thereafter have twenty days from receipt to countersign the Agreement. During such twenty day period, Retailer shall have no right to withdraw the agreements which it executed and delivered to GSI. 19. DISCONTINUANCE OR REGULATION OF THE INTERNET. --------------------------------------------- Retailer acknowledges and agrees that the Internet (including without limitation the Web) is a network of private and public networks, that GSI has no control over the Internet, and that GSI is not liable for the discontinuance of operation of any portion of the Internet or possible regulation of the Internet which might restrict or prohibit the operation of the Web site. 20. FORCE MAJEURE ------------- In the event that either party is unable to perform any of its obligations under this Agreement or to enjoy any of its benefits because of any event beyond the control of the affected party including, but not limited to, natural disaster, acts of God, actions or decrees of governmental bodies or failure of communications lines or networks (a "Force Majeure Event"), the party who has been so affected shall promptly give written notice to the other party and shall use its best efforts to resume performance. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the duration of such Force Majeure Event. -29- 21. WAIVER ------ No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified. 22. PRESS RELEASES -------------- All voluntary public announcements concerning the transactions contemplated by this Agreement shall be mutually acceptable to both GSI and Retailer. Unless required by law, neither GSI on the one hand, and Retailer on the other hand, shall make any public announcement or issue any press release concerning the transactions contemplated by this Agreement without the prior written consent of GSI or Retailer, respectively. With respect to any announcement that any of the parties is required by law to issue, such party shall, to the extent possible under the circumstances, review the necessity for and the contents of the announcement with the other party before issuing the announcement; provided however, if either party cannot obtain the consent of the other party in a timely manner, the party required to comply with law may issue the press release or public announcement without obtaining the consent of the other party. 23. GOVERNING LAW ------------- In the event that either party commences any proceeding pursuant to this Agreement, the rights and obligations of the parties hereto, and any claims or disputes thereto, shall be governed by and construed in accordance with the laws of the State of Georgia (excluding the choice of law rules thereof). 24. ASSIGNMENT ---------- Retailer shall have no right to assign this Agreement without the prior written consent of GSI; provided, that Retailer shall have the right to assign this Agreement to any person or entity that acquires or succeeds to all or substantially all of such party's business or assets upon written notice to GSI. -30- In addition, at the request of GSI, the Retailer shall establish a wholly owned subsidiary for the purpose of operating the Retailer's on line business in accordance with the terms of this Agreement, and at that time, the Retailer shall assign its rights under this Agreement to the subsidiary and the subsidiary shall assume all of the Retailer's obligations hereunder; provided however, the Retailer shall not be released from the performance of any of its obligations hereunder. GSI shall make such recommendation only if it believes, in good faith, and acting upon the advise of its regularly retained certified public accountant, that such an assignment would minimize the sales tax that may be required to be charged to the users of the Retailer's Web Site, thereby benefitting the Retailer's business. 25. COUNTERPARTS ------------ This Agreement may be signed in several counterparts, each of which shall be deemed an original, and all of which when taken together, shall be deemed a complete instrument. 26. ENTIRE AGREEMENT ---------------- This Agreement, including the Web Development Agreement, represents the entire agreement of the parties with respect to the subject matter hereof and may not be modified, except in writing, executed by all of the parties hereto. This Agreement supersedes all prior writings of the parties with respect to this subject matter. 27. JURISDICTION ------------ Should either party commence any proceeding pursuant to this Agreement, the exclusive jurisdiction and venue of any such dispute shall be in the state courts of Georgia or the United States District Court for the ______________ District of Georgia. 28. INDEPENDENT CONTRACTORS ----------------------- The relationship of the parties herein shall hereunder be that of independent contractors and nothing herein shall be construed to create a joint venture or partnership. 29. SIGNING ------- -31- The parties executing this Agreement represents and warrants that they have full corporate authority to do so. 30. BINDING EFFECT -------------- This Agreement shall be binding upon the parties hereto, their successors and permitted assigns. 31. HEADINGS -------- Section headings contained in this Agreement are inserted for convenience or reference only and shall not be deemed to be a part of this Agreement for any other purpose. 32. DISCLAIMER OF WARRANTIES, EXCLUDING EXPRESS WARRANTIES ------------------------------------------------------ EXCEPT AS TO THE EXPRESS WARRANTIES CONTAINED IN THIS AGREEMENT, GSI MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, IN FACT OR IN LAW WITH RESPECT TO THE CREATION AND MAINTENANCE OF THE PRODUCT AND SERVICES PROVIDED FOR HEREUNDER, AND DISCLAIMS ALL OTHER WARRANTIES. RETAILER ACKNOWLEDGES AND AGREES THAT GSI HAS NOT MADE, NOR DOES HEREBY MAKE, ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED. 33. NOTICES ------- Any notices or writings to be sent hereunder shall be in writing and shall be by personal delivery, facsimile transmission or by certified or registered mail, return receipt requested, and shall be deemed given upon the earlier of actual receipt, five (5) days after deposit in the mail, or receipt by sender of confirmation of facsimile transmission. Notices shall be sent to the following addresses (or such other address as either party may specify in writing): IF TO GSI: 555 South Henderson Road King of Prussia, PA 19406 Attention: President Copy to: David S. Mandel, Esq. Astor Weiss Kaplan & Rosenblum, LLP The Bellevue Broad & Walnut Streets 6th Floor Philadelphia, Penna., 19102 IF TO RETAILER: 1950 Vaughn Road, Kennesaw, Georgia, 30144. Attention: President -32- Copy to: James W. Butler, III, Esquire Arnall, Golden & Gregory, LLP 2800 One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia, 30309 [SIGNATURES CONTAINED ON THE FOLLOWING PAGE] -33- IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to enter into this Agreement with intent to be legally bound hereby, the date and year first above written. GLOBAL SPORTS INTERACTIVE, INC.: THE ATHLETE'S FOOT STORES, INC.: BY: /s/ Michael Rubin BY: /s/ Douglas P. Haensel --------------------------- --------------------------- Title: President Title: Executive VP & CFO ------------------------ ------------------------ Date: 3/19/99 Date: 3/10/99 ------------------------- ------------------------- -34- EXHIBIT A WEB SITE DEVELOPMENT AGREEMENT ------------------------------ THIS Web site Development Agreement ("Agreement") dated the ____ day of ______________, 1999 (the "Services Start Date") by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and The Athlete's Foot Group, Inc. (hereinafter referred to as "Retailer") with an address of 1950 Vaughn Road, Kennesaw, Georgia, 30144. W I T N E S S E T H: WHEREAS, GSI and Retailer have entered into a E - Commerce Agreement pursuant to which GSI shall provided certain E - Commerce services to Retailer, including the development and maintenance of a web site; and WHEREAS, the parties have elected to enter into this Agreement in order to set forth the terms and conditions pursuant to which GSI shall develop a web site for Retailer. NOW, THEREFORE, in consideration of the mutual promises and terms herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged; and intending to be legally bound hereby, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Domain Name" means the domain name specified for the Web site by Retailer from time to time. The initial Domain Name is specified in Attachment B. 1.2 "E-Commerce Agreement" means the E-Commerce Management Agreement by and between Retailer to which this Agreement is attached as Exhibit A. 1.3 "Features Set" means the requirements set forth in Attachment B, as amended or supplemented in accordance with this Agreement. 1.4 "Intellectual Property Rights" means any and all now known or hereafter known tangible and intangible (a) rights associated with works of authorship throughout the universe, -35- including but not limited to copyrights, moral rights, and mask-works, (b) trademark and trade name rights and similar rights, (c) trade secret rights, (d) patents, designs, algorithms and other industrial property rights, (e) all other intellectual and industrial property rights (of every kind and nature throughout the universe and however designated) (including logos, "rental" rights and rights to remuneration), whether arising by operation of law, contract, license, or otherwise, and (f) all registrations, initial applications, renewals, extensions, continuations, divisions or reissues hereof now or hereafter in force (including any rights in any of the foregoing). 1.5 "Milestone Delivery Schedule" means the schedule for development of the Web site set forth in Attachment B. 1.6 "GSI Content" means all text, pictures, sound, graphics, video and other data and assets supplied by Retailer to GSI, as such materials may be modified from time to time. 1.7 "GSI Products" means, collectively, the GSI Tools, the GSI Content and the GSI Work Product. 1.8 "GSI Tools" means any tools, both in object code and source code form, which GSI has already developed or which GSI independently develops or licenses from a third party, excluding any tools which GSI creates pursuant to this Agreement. By way of example, GSI Tools may include, without limitation, toolbars for maneuvering between pages, search engines, Java applets, and ActiveX controls. 1.9 "Production Schedule" shall mean the schedule agreed upon by the parties for the production of the Retailer's Web site, including the delivery of the Retailer Content and GSI Content by Retailer to GSI. 1.10 "Retailer Content" means the Domain Name and all text, pictures, sound, graphics, video and other data and assets supplied by Retailer to GSI, as such materials may be modified from time to time. 1.11 "Services" means the services provided by GSI hereunder to develop, host and maintain the Web site, in accordance with this Agreement. 1.12 "Web site" means, collectively, the E - Commerce Shopping Experience and the Retailer Content made available on web pages under the Domain Name. 1.13 "GSI Work Product" means all HTML files, Java files, graphics files, animation files, data files, technology, scripts and programs, both in object code and source code form, all -36- documentation and any other deliverable used by GSI to create the Web site. 2. WEB SITE DEVELOPMENT SERVICES 2.1 Delivery of Initial Retailer Content. As soon as reasonably possible, GSI and Retailer shall agree upon a Production Schedule for the delivery by Retailer to GSI of the Retailer Content that Retailer intends for GSI to incorporate into the Web site. The parties acknowledge that Retailer will be able to deliver certain "static" information, such as store locations, promptly to GSI, and other Retailer Content, such as certain merchandise to be sold on the Retailer's Web site, at a later date closer to the Launch Date. The Retailer Content shall be in the format(s) designated by GSI as set forth on Attachment C hereto. Upon Retailer's request, GSI shall assist Retailer in the conversion of the Retailer Content into an acceptable form for use by the Web site. Any Retailer Data furnished by Retailer to GSI, shall be returned by GSI upon the termination of this Agreement. 2.2 Web site Development Services. At no cost to Retailer, GSI shall provide design, programming and other consulting Services as specified in Attachment B to create the Web site. GSI will provide the Web site to Retailer in accordance with the Milestone Delivery Schedule. 2.3 Project Liaisons. Each party's primary contact for development efforts shall be the project liaisons specified in Attachment B or the person otherwise designated in writing by Retailer or GSI, as the case may be. 2.4 Acceptance. GSI shall make available final versions of the Web site for Retailer's review and acceptance. Retailer shall have ten (10) days to review and evaluate the Web site (the "Acceptance Period") to assess whether it substantially meets the Features Set. During the Acceptance Period, Retailer shall identify in writing to GSI all aspects of the Web site that do not substantially conform to the Features Set. Upon receipt of Retailer's list of non-conformities, GSI shall correct promptly all such non-conformities so that the Web site does substantially conform to the Features Set and GSI shall extend the Acceptance Period for a second ten (10) day Acceptance Period during which Retailer shall confirm that all non-conformities that were previously identified have been corrected. Notwithstanding the foregoing, the Web site shall be deemed accepted upon the earlier of: (i) its use in commerce, provided however, GSI shall not use the Retailer's Web site in commerce without the Retailer's consent, which shall not be unreasonably withheld or delayed; (ii) Retailer's failure to articulate any non-conformities during an Acceptance Period; or (iii) Retailer's acceptance of the Web site; -37- or (iv) GSI's demonstration that all non-conformities have been corrected. The acceptance procedures set forth in this Paragraph 2.4 shall also apply to any material modifications made to the Retailer's Web site during the Term of the E-Commerce Agreement. As used herein, "material modifications" shall mean alterations which significantly change the overall design of the Retailer's Web site and do not include the changes contemplated by Paragraph 3.1 c. of the E - Commerce Agreement. 3. WEB HOSTING AND MAINTENANCE SERVICES Following Retailer's acceptance of the Web site pursuant to Section 2.4, GSI shall, at no cost to Retailer, provide the following web hosting and maintenance Services: 3.1 Hosting Services. GSI shall load the Web site onto server(s) that are connected to the Internet and readily accessible via the Web through use of the Domain Names. GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner. 3.2 Retailer Content. GSI shall upload all Retailer Content, including updates, to the Web site within seven days of delivery to GSI. Upon GSI's prior written consent, Retailer may electronically transmit or upload Retailer Content directly to the Web site. 3.3 Maintenance Services. GSI shall maintain the Web site so that it functions in a reasonably error free manner. Upon notification of an error in the Web site or of a non-conformity between the Web site and the Features Set, whether from Retailer or from any user of the Web site, GSI shall promptly commence an investigation into the reported error, and GSI shall, upon reproducing such error, use reasonable commercial efforts to correct such error in a timely fashion. During such Maintenance Services, GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner, provided, however, GSI may, during low usage periods, -------- ------- temporarily block access to the Web site to perform Web site maintenance during periodic maintenance windows. -38- GSI shall use its best efforts to notify Retailer not less than forty eight hours in advance of any planned maintenance of the Retailer's Web site which will cause GSI to close down the Web site. In the event that GSI is forced to close the Retailer's Web site as a result of an emergency, GSI shall use its best efforts to advise Retailer of the emergency within twenty four hours after it occurs. 4. ADDITIONAL SERVICES 4.1 Search Engine Registration. When GSI makes the Web site available to Retailer, GSI shall register the Web Site and Domain Name with all applicable search engines, at GSI's discretion. 4.2 Domain Name Assistance. If requested by Retailer, GSI shall cooperate with Retailer in registering the Domain Name with InterNIC. Retailer shall own all right, title and interest in and to the Domain Name and all Intellectual Property Rights related thereto. Unless otherwise specified by Retailer, GSI shall, at Retailer's expense, assist Retailer in registration of the Domain Name. 5. CONSIDERATION In consideration for Retailer entering into the E Commerce Agreement, at no cost to Retailer, GSI shall perform the Services set forth in this Agreement. 6. TERM AND TERMINATION 6.1 Term. The term of this Agreement shall be conterminous with the term of the E- Commerce Agreement. In absence of a material breach, this Agreement may only be terminated by the expiration of the term. 6.2 Termination. Termination of this Agreement shall be governed by the terms of Article 14 of the E - Commerce Agreement. 7. WARRANTIES AND DISCLAIMERS. 7.1 Cross Warranties. Retailer warrants as to the Retailer Content, and GSI warrants as to the GSI Products, that any materials and updates or enhancements there to shall not: (a) infringe on the Intellectual Property Rights of any third party or any rights of publicity or privacy; (b) violate any law, statute, ordinance or regulation (including without limitation the laws and regulations governing export control, unfair competition, antidiscrimination or false advertising); (c) be defamatory, trade -39- libelous, unlawfully threatening or unlawfully harassing; (d) be obscene, pornographic or indecent. 7.2 Representations and Warranties of Each Party. Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 7.3 Year 2000. GSI warrants that the Web site shall not suffer any material adverse effect as a result of a failure in any GSI Work Product or GSI Tools to be Y2K Compliant. A product or service which is "Y2K Compliant" is one that provides accurate results using data having date ranges spanning from January 1, 1980 through December 31, 2019 (the "Y2K Period"). By way of example and not of limitation, "Y2K Compliant" means, with respect to a product or service, that it can currently and shall, during the Y2K Period, continue to (a) manage and manipulate data involving all dates within the Y2K Period (including the fact that the year 2000 is a leap year) without functional or data abnormality related to such dates; (b) manage and manipulate data involving all dates within the Y2K Period without inaccurate results related to such dates; (c) have user interfaces and data fields formatted to distinguish between dates within the Y2K Period; and (d) accurately identify and either reject or correct invalid date data during the Y2K Period. Provided a party otherwise complies with this Section 7.4, it will not be liable to the other party for any failure to perform obligations under this Agreement to the extent such failure arises from a failure to be Y2K Compliant that (1) affects the non-performing party's customers or suppliers or (2) is beyond its reasonable control (e.g., a failure --- to be Y2K Compliant affecting a governmental entity). 7.4 Disclaimer. THE WARRANTIES MADE IN THIS SECTION 7 ARE MADE IN LIEU OF ALL OTHER EXPRESS WARRANTIES, WHETHER ORAL OR WRITTEN AND EXCEPT AS SET FORTH IN THIS SECTION 7, GSI MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. -40- 8. OWNERSHIP 8.1 Ownership of GSI Products. Retailer hereby acknowledges and agrees that as between Retailer and GSI, GSI owns all right, title and interest in and to the GSI Products and all applicable Intellectual Property Rights thereto. This Agreement confers no ownership interest in the GSI Products to Retailer. 8.2 Ownership of Retailer Content. GSI hereby acknowledges and agrees that as between GSI and Retailer, Retailer owns all right, title and interest in and to the Retailer Content and all applicable Intellectual Property Rights thereto. Except for a limited non-exclusive license during the term to use the Retailer Content solely to perform its obligations hereunder, this Agreement confers no ownership interest in the Retailer Content to GSI. 9. LIMITATION UPON LIABILITY. UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS' USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS' RELIANCE ON OR USE OF INFORMATION, SERVICES OR MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE UNDER THIS AGREEMENT FOR AN AMOUNT THAT EXCEEDS, IN THE AGGREGATE THE AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. THE REMEDIES SET FORTH IN THIS SECTION 9 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN TWELVE (12) MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 10. INDEMNITY. 10.1 Retailer Indemnity. Subject to Section 10.3, Retailer shall defend, indemnify and hold GSI harmless against any third party claim, action, suit or proceeding: (i) Retailer's gross negligence, willful or intentional misconduct; or (ii) any breach by Retailer of the warranties set forth in Sections 7.1 or 7.2. 10.2 GSI Indemnity. Subject to Section 10.3, GSI shall defend, indemnify and hold Retailer harmless against any third -41- party claim, action, suit or proceeding: (i) GSI's gross negligence, willful or intentional misconduct; or (ii) any breach by GSI of the warranties set forth in Sections 7.1 or 7.2. 10.3 Mechanic of Indemnities. The indemnifying party's obligations are conditioned upon the indemnified party: (a) giving the indemnifying party prompt written notice of any claim, action, suit or proceeding for which the indemnified party is seeking indemnity; (b) granting control of the defense and settlement to the indemnifying party; and (c) reasonably cooperating with the indemnifying party at the indemnifying party's expense 11. MISCELLANEOUS. 11.1 Incorporation of Certain Provisions of the E-Commerce Agreement. Sections 7, 8, 12, and Sections 18 through 30, inclusive, of the E-Commerce Agreement are hereby incorporated in their entirety into this Agreement. 11.2 Interpretation of Agreements. With respect to the subject matter hereof, the E-Commerce Agreement shall control any conflict between the terms of this Agreement and the E-Commerce Agreement. 11.3 Definitions. Any terms not specifically defined in this Agreement shall be construed in accordance with the definitions given such terms in the E- Commerce Agreement, or if such terms are not defined in the E-Commerce Agreement, then such terms shall be construed in accordance with their every day, common meaning. IN WITNESS WHEREOF, each of the parties have caused their duly authorized representatives to enter into this Agreement to be effected on the Services Start Date. GLOBAL SPORTS INTERACTIVE, INC.: THE ATHLETE'S FOOT STORES, INC.: By: /s/ Michael Rubin By: /s/ Douglas P. Haensel -------------------------- ---------------------------- Title: President Title: Executive VP & CFO ------------------------ ------------------------- Date: 3/19/99 Date: 3/10/99 ------------------------ Name: Michael G. Rubin Name: Douglas P. Haensel ------------------------ ------------------------- (Please type or print) (Please type or print) -42- ATTACHMENT A RETAILER'S ASSET REQUIREMENTS Product Assets Elements: Product Assets should include names, UPCs and prices. No product photography or description are required. Store Locations Store location information should include address, phone number and fax numbers. Corporate Assets Corporate Assets may include the following: . Press Releases . Frequently Asked Questions . Contact Information . Jobs Information . Community Programs Information . Annual Reports . Corporate Identity materials including logo All above information may be submitted at the retailer's discretion, excluding the corporate identity materials and logos, which are mandatory. -43- Attachment B (TO BE COMPLETED) Domain Name: Format of Retailer Content: Project Liaisons: For GSE.C: For Retailer: FEATURES SET - ------------ 1. PRODUCT SEARCH 2. BROWSE CATEGORIES 3. RECOMMENDATION TOOLS 4. ADVANCE PRODUCT PRESENTATION 5. SHOPPING CART 6. GIFT GIVING FUNCTIONALITY 7. REMOTE PUBLISHING TOOLS FOR HUMAN RESOURCES AND PRESS ROOM 8. SALES TAX CONFIGURATION 9. PRODUCT REVIEWS 10. 24/7 CUSTOMER SUPPORT 11. AFFILIATE PROGRAM FUNCTIONALITY 12. ON LINE GIFT CERTIFICATES 13. LAND BASED STORES GIFT CERTIFICATES 14. STORE LOCATOR 15. FINANCIAL INFORMATION 16. FREQUENTLY ASKED QUESTIONS 17. COMMUNITY PROGRAMS 18. COMPANY PROFILE 19. ON LINE ORDER STATUS MILESTONE DELIVERY SCHEDULE: - --------------------------- TASK ESTIMATED COMPLETION DATE - ---- ------------------------- DISCOVERY AND PLANNING MARCH 15, 1999 COMMENCE ENGINE ENGINEERING JULY 31, 1999 ESTABLISH FULFILLMENT CAPABILITIES APRIL 30, 1999 RETAILER WEB SITE DEVELOPMENT JULY 31, 1999 QUALITY CONTROL REVIEW AND REVISIONS AUGUST 21, 1999 ALPHA TESTING SEPTEMBER 1, 1999 BETA (SOFT LAUNCH) SEPTEMBER 30, 1999 WEB SITE LAUNCH TO GENERAL PUBLIC OCTOBER 1 - DECEMBER 1,1999 MEDIA AND PROMOTIONS OCTOBER 1 - DECEMBER 1,1999 -44- ATTACHMENT C ASSET SUBMISSION GUIDELINES This section details how to submit assets. Source Assets and Final Assets - ----------------------------------------------------------------------------- We require source files for all assets. This means if an image is originally constructed as a layered RGB Photoshop file at 100x500 pixels, we need that file, even if the final file is a flattened 4-bit GIF at 20x100. We allow the submission of final assets in some cases, but only by prior arrangement and only in addition to an up-to-date source file. All submitted assets are subject to review and verification by production staff. Media and Format - ----------------------------------------------------------------------------- We routinely receive assets in the following media and formats. Digital Media - ----------------------------------------------------------------------------- Media: SyQuest 44mb, 88mb, 200mb, CD-ROM (including PhotoCD), Zip, Jaz, 3.5" floppy. Format: Win16, Win-32, or Macintosh File Formats: Text: Raw, MS Word 95, RTF, HTML Bitmap Graphics: Photoshop, TIFF, PCD (PhotoCD), EPS, PICT (JPEG and GIF for final files only and only along with source files) PostScript Graphics: EPS, Illustrator (7.0 preferred) Video: QuickTime Audio: WAV, AIFF, MIDI Non-Digital Media - ------------------------------------------------------------------------------ -45- Contact us to discuss needs and capabilities before submitting any non-digital assets. Asset Submission - ------------------------------------------------------------------------------ We prefer to receive assets via FTP (file transfer protocol) although we gladly accept assets via standard package delivery services (i.e., FedEx, USPS, UPS, etc.). Submission via FTP FTP Area: ftp.globalsportsinteractive.com Assets should be left in "Incoming" which is a level below the initial directory. Once assets have been transferred, e-mail confirmation is required. Submission via Package Delivery If you wish to submit assets via standard package delivery services, please address the package to this address: Address TBD If you are submitting hard assets like brochures, photographs, etc. please be sure to ship them in a reinforced container to prevent damage to the assets while in transit. If you are submitting digital media like SyQuests, Zip disks, Jaz disks, etc., be sure to ship them in a well-padded, reinforced container. -46- SCHEDULE 1 TO E - COMMERCE AGREEMENT ------------------------------------ RETAILER'S TRADEMARKS, TRADENAMES AND LOGOS -------------------------------------------- -47-
- ----------------------------------------------------------------------------------------------------------------------------------- COUNTRY MARK NAME CLASS/DESCRIPTION APPL'N NO./ FILING DATE - ----------------------------------------------------------------------------------------------------------------------------------- U.S.A. Footprints Design 42--retail shoe stores. 74/716,312 8/16/95 U.S.A. Make It Fly 35--retail store services featuring footwear and clothing. 75/309,378 6/16/97 U.S.A. Nobody Knows The Athlete's Foot 42--retail athletic clothing and footwear store services. 74/647,424 Like The Athlete's Foot 3/16/95 U.S.A. Old Winged Foot Design 25--athletic footwear. 75/199,624 11/18/96 U.S.A. Old Winged Foot Design 25--t-shirts, warm-up suits, tennis suits, running or jogging 74/267,064 suits, socks, headwear, wrist bands, athletic jerseys, golf 4/20/92 shirts, running shorts and running singlets. U.S.A. Old Winged Foot Design 42--retail athletic clothing and footwear store services. 74/375,449 5/5/93 U.S.A. Sports Wrap 42--retail athletic clothing and footwear store services. 74/419,293 8/2/93 U.S.A. The Athlete's Foot 42--retail athletic clothing and footwear store services. 73/813,640 7/20/89 U.S.A. The Athlete's Foot 35--rendering assistance in connection with the establishment 15,491 and/or operation of retail stores for selling athletic shoes, 3/11/74 and athletic clothing, which stores do business under the prominently displayed term "The Athlete's Foot" - --------------------------------------------------------- COUNTRY MARK NAME REG. NO./ REG. DATE - --------------------------------------------------------- U.S.A. Footprints Design 1,988,625 7/23/96 U.S.A. Make It Fly 2,193,462 10/6/98 U.S.A. Nobody Knows The Athlete's Foot 1,953,326 Like The Athlete's Foot 1/30/96 U.S.A. Old Winged Foot Design 2,201,976 11/3/98 U.S.A. Old Winged Foot Design 1,781,509 7/13/93 U.S.A. Old Winged Foot Design 1,821,855 2/15/94 U.S.A. Sports Wrap 1,889,497 4/11/95 U.S.A. The Athlete's Foot 1,631,948 1/15/91 U.S.A. The Athlete's Foot 1,094,685 6/27/78
1
- ----------------------------------------------------------------------------------------------------------------------------------- COUNTRY MARK NAME CLASS/DESCRIPTION APPL'N NO./ REG. NO./ FILING DATE REG. DATE - ------------------------------------------------------------------------------------------------------------------------------------ U.S.A. The Athlete's Foot 25--athletic wear such as t-shirts, warm-up suits, tennis suits, 73/282,193 1,634,135 running and jogging suits, socks, headwear, wrist bands, jerseys 10/17/80 2/5/91 and shirts sold through stores specializing in the sale of athletic shoes and clothing. U.S.A. The Athlete's Foot 25--athletic footwear. 74/592,031 2,209,347 10/28/94 12/8/98 U.S.A. The Athlete's Foot and 42--retail athletic clothing and footwear store services. 73/816,593 1,632,670 Old Winged Foot Design 8/1/89 1/22/91 U.S.A. The Athlete's Foot and 25--t-shirts, warm-up suits, tennis suits, running or jogging suits, 74/028,604 1,631,686 Old Winged Foot Design socks, headwear, wrist bands, athletic jerseys, golf shirts, running 2/13/90 1/15/91 shorts and running singlets. U.S.A. The Athlete's Foot and 41--providing a web site featuring educational information about 75/506,670 Old Winged Foot Design Applicant's business and about athletic footwear and associated 6/22/98 physical and sporting activities U.S.A. The Locker Room 35--retail store services. 75/639,474 2/5/99
2 SCHEDULE 2 TO E-COMMERCE MANAGEMENT AGREEMENT TYPE OF ON LINE RETAILER'S OPERATING MANAGEMENT COST OF GOODS MERCHANDISE INCOME FEE TO RETAILER IN LINE [*] [*] [*] SPECIAL MAKE-UPS [*] [*] [*] CLOSEOUTS [*] [*] [*] MARKDOWNS [*] [*] N/A LAND BASED GIFT CERTIFICATES [*]** [*] N/A ON LINE GIFT CERTIFICATES*** [*]**** [*] [*] * Retailer supplies markdown inventory ** Retailer supplies gift certificates *** Excluding those redeemed for Markdowns, which shall be treated as a sale of Markdowns as indicated above, **** GSI supplies gift certificate, and Retailer purchases inventory from GSI at such time as the certificate is purchased EXHIBIT "B" WARRRANT TERM SHEET 1. Grant of Warrants As part of its E-Commerce Initiative, Global Sports, Inc. ("Global") intends to provide all sporting goods and/or athletic footwear and apparel retailers who execute a contract with Global to become part of Global's E-Commerce Initiative (the "Retailers") prior to the public announcement of such initiative the opportunity to receive warrants to purchase shares of Global common stock based on the terms and conditions outlined in this Term Sheet. 2. Amount of Warrants Warrants will be granted for a total exercise amount of [*]. Each Retailer will receive a warrant to purchase its pro rata share of the total exercise amount based on the proportion that such Retailer's net sales (including sales by such Retailer's franchisees, if any) for its most recent fiscal year bears to the total net sales of all Retailers participating in the E-Commerce Initiative (including sales by all such Retailers' franchisees, if any). 3. Security Warrant to purchase Global common stock. The period during which the warrant may be exercised will be one year from the date of public announcement of Global's E-Commerce Initiative. The warrant and the shares of common stock issuable upon exercise of the warrant will be offered and sold to the Retailers pursuant to an exemption from the Securities Act of 1933, as amended. As a result, such shares will be restricted securities within the meaning of that Act, and the resale of such shares will be subject to certain restrictions, including a one year holding period. 4. Warrant Exercise Price The warrant exercise price will be equal to the average of the closing bid and asked prices for a share of Common Stock for the 20 trading days ending on the trading day immediately preceding the public announcement of Global's E-Commerce Initiative. 5. Issuance of Warrants Global will issue the warrants to participating Retailers effective as of the public announcement of Global's E-Commerce Initiative which is expected to occur by March 31, 1999. 6. Confidentiality This Term Sheet is not to be disclosed to any party other than the employees or advisors of the Retailers receiving this Term Sheet who need to know the terms set forth herein for the purpose of evaluating such Retailer's participation in Global's E-Commerce Initiative. 7. Other This Term Sheet is only intended to serve as a general outline of the major terms of Global's proposed grant of warrants in accordance with the terms and conditions set forth herein. This Term Sheet does not constitute an offer or sale of the shares by Global. This Term Sheet does not constitute a commitment or binding agreement to grant such securities. such commitment or binding agreement can only be created by definitive agreements which will need to be negotiated and executed. EX-10.3 4 E-COMMERCE AGREEMENT DATED MARCH 23, 1999 Confidential Treatment has been requested with respect to portions of the agreement indicated with an asterisk [*]. A complete copy of this agreement, including the redacted terms, has been separately filed with the Securities and Exchange Commission. E COMMERCE AGREEMENT -------------------- THIS E - Commerce Agreement dated the 23rd day of March, 1999 by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and Dunham's Athleisure Corporation (hereinafter referred to as "Retailer") with an address of 5000 Dixie Highway, Waterford, Michigan. W I T N E S S E T H: WHEREAS, GSI is in the business of creating and operating all aspects of an E-Commerce Shopping Experience, including servicing and fulfilling the on-line retail sales of selected merchants; and WHEREAS, Retailer desires to enter into an exclusive agreement with GSI pursuant to which GSI will act as an Outsourcing Company providing the Retailer's on-line customers the complete E-Commerce Shopping Experience, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 1. DEFINITIONS. As used herein, the following terms shall have the following ----------- meaning: 1.1 "Advertising Co-op and Discretionary Funds" shall mean amounts earned by or allocated to the Retailer by its vendors, the purpose of which is to advertise that vendor's brand or to use at the Retailer's discretion. 1.2 "Categories" shall mean the various types of product groups (e.g. athletic footwear, camping, in line skates, etc.) offered for sale by the Retailer in its Land Based stores. 1.3 "Closeout Merchandise" shall mean end of season or excess merchandise that is priced at a greater than normal discount. 1.4 "Complete URL Integration" shall mean the display of Retailer's URL in all of Retailer's marketing and communications. 1.5 "Confidential Information" shall mean as that term is defined in paragraph 7.1 of this Agreement. 1.6 "Cross Promotion" shall mean the use of the Retailer's URL, name and logo on other than the Retailer's Web Site for the purpose of promoting the Retailer's Web Site. 1.7 "Customary Pricing Structure" shall mean the policy generally employed by the Retailer in determining the prices of merchandise in its Land Based Stores. 1.8 "Customer Data" shall mean as that term is defined in paragraph 4.1 of this Agreement. 1.9 "Data Bases" shall mean as that term is defined in paragraph 4.2 of this Agreement. 1.10 "Defective Allowance" shall mean a discount granted by a manufacturer to a retailer as a result of defective merchandise received by the retailer and pursuant to which, the retailer also retains the merchandise. 1.11 "Disclosing Party" shall mean the party disclosing Confidential Information. 1.12 "Domain Name" shall mean as that term is defined in paragraph 1.1 of the Web Site Development Agreement (as hereinafter defined). 1.13 "E-Commerce" shall mean the Retailer's specific business conducted through the Internet. 1.14 "E-Commerce Orders" shall mean the orders for merchandise placed by customers of the Retailer's Web Site. 1.15 "E-Commerce Outsourcing Partner" shall mean GSI. 1.16 "E-Commerce Shopping Experience" shall mean the shopping for and purchasing of merchandise through the Internet. 1.17 "Flight Date" shall mean the date on which Retailer's advertising is scheduled to run for the first time. 1.18 "Force Majeure Event" shall mean as that term is defined in Article 18 of this Agreement. 1.19 "GSI Content" shall mean as defined in paragraph 1.6 of the Web Site Development Agreement. 2 1.20 "In Line Merchandise" shall mean current merchandise available to be carried by the Retailer in its Land Based Stores from Retailer's current or future vendors. 1.21 "Internet" shall mean the collection of interconnected networks that all use the TCP/IP protocols. 1.22 "Land Based Stores" shall mean the Retailer's stores located in shopping districts, strip shopping centers and shopping malls. 1.23 "Land Based Stores Gift Certificates" shall mean gift certificates offered for sale on the Retailer's Web Site for merchandise sold only in Retailer's Land Based Stores. 1.24 "Launch Date" shall mean the date on which GSI commences operation of the Retailer's Web Site to the public. 1.25 "Markdowns" shall mean merchandise in Retailer's inventory offered for sale at less than the price it was originally offered for. 1.26 "Milestone Delivery Schedule" shall mean as defined in paragraph 1.5 of the Web Site Development Agreement. 1.27 "On Line Customer Loyalty Programs" shall mean programs established to encourage repeat business from on line customers. 1.28 "On Line Merchandise" shall mean merchandise to be sold on the Retailer's Web Site. 1.29 "Outsourcing Company" shall mean a company which provides E-Commerce Services for traditional Retailers. 1.30 "Price Matching" shall mean a Retailer's policy pursuant to which it addresses another retailer's lower price on a particular item of merchandise. 1.31 "Production Schedule" shall mean as defined in paragraph 1.9 of the Web Site Development Agreement. 1.32 "Project Manager" shall mean an employee of Retailers who is assigned exclusively to work with GSI in supplying GSI with Retailer Content. 1.33 "Receiving Party" shall mean the party receiving Confidential Information. 3 1.34 "Retailer Content" shall mean as defined in paragraph 1.10 of the Web Site Development Agreement. 1.35 "Retailer's Net Cost" shall mean the amount paid by the Retailer for merchandise from its vendors after deduction of cash or anticipation discounts, marketing allowance, Defective Allowance, volume allowance and any other discount offered by vendors, but excluding any marketing funds granted to Retailer by a manufacturer as an overall marketing allowance and not based upon the number of units or dollars purchased. 1.36 "Retailer's Warehouse" shall mean the place at which Retailer receives delivery of merchandise from its vendors. 1.37 "Revenue Share" shall mean as defined in paragraph 3.8 of this Agreement. 1.38 "Special Make-Ups" shall mean merchandise manufactured for the Retailer exclusively. 1.39 "Term" shall be as defined in Section 2.2 of this Agreement. 1.40 "URL" shall mean the address of the Web Site on the Internet. 1.41 "Web" shall mean the World Wide Web. 1.42 "Web Site" shall mean as defined in paragraph 1.12 of the Web Site Development Agreement. 1.43 "Web Site Development Agreement" shall mean the agreement by and between GSI and Retailer attached to this Agreement as Exhibit "A". 2. AGREEMENT AND TERM ------------------ 2.1 Agreement. During the Term GSI shall provide the Retailer with those --------- Web Site services as hereinafter specified. 2.2 Term. The Term of this Agreement shall commence upon the execution of ---- this Agreement and shall expire ten (10) years after the Launch Date ("Expiration Date"). GSI shall use reasonable efforts to advise Retailer ten days prior to the expected Launch Date. The Launch Date shall occur between the period of October 1, 1999 and December 1, 1999 ("Commencement Period"); provided however, unless 4 the delay is caused by Retailer, in no event shall the Launch Date of Retailer's Web Site be later than thirty days after GSI launches its first retailer's web site. GSI's obligation to commence operation of the Web Site during the Commencement Period shall be contingent on Retailer complying with the deadlines set forth on the Milestone Delivery Schedule set forth on Attachment B to the Web Site Development Agreement and on the Production Schedule to be agreed upon by the parties. Retailer acknowledges the urgency of complying with the deadlines set forth in the Milestone Delivery Schedule and the Production Schedule and shall give GSI its full cooperation to ensure that such deadlines are satisfied. Notwithstanding anything contained herein to the contrary, in the event that the Retailer does not comply with such deadlines and GSI has given Retailer written notice of its failure to comply,then, for each day of such non compliance, the Commencement Period shall be extended by one day. 2.3 Extension of Term. At the expiration of the Term, this Agreement ----------------- shall automatically terminate unless extended by the mutual agreement of both parties. 3. OBLIGATIONS AND RIGHTS OF THE PARTIES ------------------------------------- 3.1 Creation of Retailer's Web Site. ------------------------------- a. GSI, at its own expense, shall create, maintain and operate a Web Site for the Retailer on the Web in accordance with the specifications attached to the Web Site Development Agreement. In connection therewith, simultaneous herewith, Retailer and GSI shall execute the Web Site Development Agreement. b. The Web Site shall contain the Retailer's E-Commerce hopping Experience, the URL of which shall be www.Retailer.com. In addition, the Web Site shall contain any or all of the following information, as the Retailer shall elect: corporate information (e.g. historic background, mission statement, names of officers and directors), store locator, public financial information (e.g. SEC filings, annual reports), press releases, community programs, employment opportunities for in store or corporate positions, frequently asked questions and a "contact us" section. 5 c. Following the initial completion of the Web Site, the Retailer shall have the right to update the content thereof as follows: 1) Employment Opportunities - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to update the employment opportunity portion of the Web Site as frequently as it desires. 2) Public Financial Information - a) Stock Prices - Will be updated daily by a link to another web site offering such information. b) SEC Filings and Annual Reports - SEC filings will be provided by a link so long as the government makes such filings available at no cost. Both SEC filings and annual reports will be provided only if available in portable document format; in the alternative, GSI will provide the consumer with a form in order to request such information from the Retailer's investor relations department. 3) Store Locators - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 4) Frequently Asked Questions - Will be updated by GSI monthly and Retailer provides GSI with such information. 5) Corporate Information - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 6) Community Programs - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 7) Press Releases - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to post press releases on its Web site as it desires. Retailer shall defend and hold harmless GSI, its employees, officers and directors, agents and representatives from any liability arising from the posting of press releases on the Retailer's Web Site. 6 8) "Contact Us" Section - Will be updated by GSI as such information changes and Retailer provides GSI with such information. d. GSI's use of Retailer's URL, Retailer's Content and any other Retailer information or material, whether confidential or not, shall be granted and continue only for the Term of this Agreement and shall not be used beyond the end of such Term. 3.2 Creation and Maintenance of the Retailer's Web Site. ---------------------------------------------------- GSI shall create and maintain a Web Site for the Retailer. Commencing with the execution of this Agreement and continuing through the Term, as may be extended, the Retailer, shall cooperate with GSI so as to enable GSI to create and maintain for the Retailer's consumers, the Retailer's Web Site. In connection therewith, the Retailer shall supply GSI with the Retailer Content (as that term is defined in the Web Site Development Agreement) required pursuant to the terms of the Web Site Development Agreement. This shall include, but not be limited to printed marketing information, data, text, audio files, video files, graphics and other assets necessary to create and maintain the Retailer's Web Site as more fully set forth on Attachment A to the Web Site Development Agreement. Notwithstanding anything contained herein to the contrary, and except as it relates to Special Make- Ups, it shall be GSI's responsibility to produce and maintain all camera ready product information for use on the Retailer's Web Site and Retailer shall have no responsibility therefor. With respect to Special Make- Ups, Retailer shall be responsible to provide GSI with sample product only in a sufficient amount of time to allow GSI to produce camera ready product information. 3.3 Sale of Merchandise on the Retailer's Web Site. ------------------------------------------------ a. GSI shall have the right to offer for sale on the Retailer's Web Site all Categories of merchandise offered for sale by the Retailer in its Land Based Stores Notwithstanding anything contained herein to the contrary, in no event shall GSI offer firearms for sale on the Retailer's Web Site. In addition, should Retailer disapprove of any items listed for sale on the Retailer's Web Site, and which are not listed for sale in the Retailer's Land Based Stores, upon five days prior notice from Retailer, GSI shall remove such item from the Retailer's Web Site. 7 b. Within the Categories, GSI shall have the right to offer for sale: 1) current in line merchandise ordered by the Retailer from its vendors; and 2) current in line merchandise not carried by the Retailer in its Land Based Stores, but available in those Categories carried by the Retailer; provided however, no products will be offered for sale on Retailer's Web Site which the Retailer would not be authorized to sell by the manufacturer in its Land Based Stores; and 3) Special Make-Ups; and 5) Closeout Merchandise; and 6) Markdowns of Retailer's inventory 7) Gift Certificates for On Line Merchandise [Items 1) through 7) are hereinafter referred to as "On Line Merchandise"] c. In addition, GSI shall have the right to offer for sale Land Based Stores Gift Certificates for merchandise available in the Retailer's Land Based Stores. These certificates shall be provided to GSI on consignment as set forth in Paragraph 3.6 below. Notwithstanding anything contained herein to the contrary, Retailer may elect not to offer Land Based Stores Gift Certificates for sale on its Web Site by notifying GSI of its decision no later than August 1, 1999. d. In those instance where a written dealer agreement prohibits Retailer from selling a particular vendor's merchandise except in the Retailer's Land Based Stores, Retailer shall use its reasonable efforts to obtain all consents required to permit the sale of such merchandise on the Retailer's Web Site. e. Within each Category, 1) provided that Retailer is authorized by the vendor to carry such item of merchandise; and 2) subject to GSI's rights pursuant to paragraph 3.4 g. below, GSI shall offer for sale on the Retailer's Web Site any item of merchandise offered for sale by a retailer on its web site and for whom GSI operates its web site. 3.4 Prices of On-Line Merchandise. GSI shall offer the On-Line ----------------------------- Merchandise for sale on the Retailer's Web Site on the following basis: 8 a. If the On-Line Merchandise is the same as offered for sale in the Retailer's Land Based Stores, then it shall be offered for sale on-line at the same price as offered in Retailer's Land Based Stores. In order to facilitate this pricing, Retailer shall [*]. Retailer acknowledges that this is essential in order to [*]; and b. If the On-line Merchandise is not offered for sale in the Retailer's Land Based Stores, but is offered for sale on another retailer's web site operated by GSI then, subject to GSI's rights pursuant to paragraph 3.4 g. below, [*] at a price equal to [*] c. If the Retailer offers the same merchandise at different prices in its Land Based Stores, then [*], but in no event shall such price be [*]; provided however, upon five days prior notice from Retailer, GSI may [*]. d. GSI shall add all applicable taxes and at its discretion, may add reasonable handling and delivery charges which are consistent with industry practice. e. In order to ensure that GSI may [*] Retailer shall furnish GSI with copies of all [*] at least [*] prior to its [*]. f. The parties shall cooperate with each other so that the entire pricing process between GSI and Retailer may be accomplished electronically. g. Retailer acknowledges that GSI, unless it elects to do so, [*]. In such event, [*] shall have the right to [*]. In addition, if pursuant to this paragraph, GSI elects not to carry an item on a retailer's web site, GSI shall promptly remove such item from Retailer's Web Site. h. In the event that [*] subject to GSI's rights pursuant to paragraph 3.4 g. above, [*] shall have the right to [*]. 3.5 GSI's Supply of On Line Merchandise. ----------------------------------- a. Invoicing and Shipping of On Line Merchandise. At such time as ---------------------------------------------- directed by GSI, the Retailer shall notify its vendors of In Line Merchandise, Special Make-Ups and Closeouts, that 1) GSI is the Retailer's E-Commerce Outsourcing Partner; 2) the vendors, for the benefit of the Retailer, should 9 sell their merchandise to GSI at the same prices, with the same Advertising Co-op and Discretionary Funds and on the same terms and conditions as they sell their merchandise to Retailer; provided however, Retailer cannot assure GSI that with respect to merchandise shipped to Retailer on consignment, that vendors will provide GSI the same accommodation; and 3) such merchandise should be shipped and invoiced directly to GSI. The form of such notification shall be prepared by GSI and approved by Retailer. In the event that a vendor deems it more efficient to invoice Retailer for such merchandise, then the Retailer and GSI shall agree on the terms and conditions on which Retailer is willing to place such order for GSI at the Retailer's net cost. If the parties are able to agree on such terms and conditions, then Retailer shall thereafter order the merchandise and GSI shall pay for it as agreed. In such instances, GSI shall also pay the Retailer its pro rata share (based upon that portion of the shipment purchased by the Retailer for GSI as it relates to the entire shipment received by the Retailer from that vendor) of the actual freight costs from the manufacturer to the Retailer's point of receipt and the actual freight costs from the Retailer's point of receipt to GSI's fulfillment facility. b. In Line Merchandise. The Retailer shall advise GSI, no later -------------------- than ten days after placing a purchase order with a vendor, of the Category, item ordered, net cost, Retailer's retail price and expected day of delivery to the Retailer's Warehouse. c. Special Make-Ups. No later than five business days after ordering ----------------- Special Make-Ups, Retailer shall advise GSI of the net cost, color selection and size range of such Special Make-Ups. GSI shall have the right to purchase up to [*] per cent of the Special Make-Up, proportionately as to size and color, as ordered by the Retailer. GSI shall have five business days to advise Retailer whether it desires to order any of the Special Make-Ups and, if so, the quantity thereof. Special Make-Ups shall be exclusive to Retailer's Web Site and shall not be made available for sale on the web site of any other retailer for whom GSI operates a web site. Retailer shall supply GSI with a sample of the Special Make-Ups ordered by GSI for sale on the Retailer's Web Site within ten days of obtaining such sample. 10 Notwithstanding anything contained herein to the contrary, GSI recognizes that there may be instances where there will be an insufficient amount of a particular item of Special Make-Ups to warrant selling such merchandise on line. In such instances the Retailer shall not be required to offer such Special Make-Ups to GSI to sell on line; provided however, the Retailer acknowledges that with respect to Special Make-Ups ordered by Retailer for chainwide distribution, GSI does not anticipate that this will occur on a regular basis and this should be the exception rather than the usual occurrence. Further, GSI acknowledges that the Retailer may not be able to offer GSI certain Special Make-Ups which are not available in all of the Retailer's stores. d. Closeout Merchandise. Retailer shall advise GSI no later than --------------------- five business days after issuing a purchase order for Closeout Merchandise from a vendor. At that time, Retailer shall advise GSI of the cost, sizes and colors available and GSI shall have five business days after receipt of such information to advise Retailer that it will purchase, at Retailer's net cost, up to [*] per cent of the Closeout Merchandise to be received by Retailer, proportionately as to size and color, as ordered by Retailer. Notwithstanding anything contained herein to the contrary, GSI recognizes that there may be instances where there will be an insufficient amount of a particular item of Closeout Merchandise to warrant selling such merchandise on line. In such instances the Retailer shall not be required to offer such items of Closeout Merchandise to GSI to sell on line; provided however, the Retailer acknowledges that GSI does not anticipate that this will occur on a regular basis and this should be the exception rather than the usual occurrence. Any Closeout Merchandise purchased by GSI from Retailer shall be offered for sale by Retailer only on the Retailer's Web Site. e. Markdowns. In the event that the Retailer has available Markdowns ---------- which it would like to offer for sale on its Web Site solely at its discretion, it shall notify GSI and ship the Markdowns to GSI's fulfillment center. The Markdowns shall be shipped to GSI on consignment only. Retailer shall set the selling prices on the Markdowns; provided however, 11 that GSI shall have no obligation to offer any Markdowns for sale on the Retailer's Web Site which GSI deems, in its sole discretion, would be inappropriate. Retailer shall receive [*] of the proceeds received from the sale of any Markdowns when sold, which shall be calculated as follows: [*]of the sale price plus the Retailer's [*] Revenue Share. By way of example only, if Retailer consigns an athletic shoe to GSI with an original price of $75.00 and a Markdown price of $50.00, if the Markdown is sold, Retailer shall receive [*] ([*] of $50.00 and [*] of $50.00). GSI shall account to Retailer for the sale of any Markdowns at the same time that it accounts to the Retailer for Retailer's Revenue Share. f. The parties shall cooperate with each other so that the entire process set forth in paragraphs 3.3 a, b, c, and d between GSI and Retailer may be accomplished electronically. g. In the event that GSI elects to open retail outlets in order to sell remaining On Line Merchandise, GSI covenants that during the Term of this Agreement, it will not open such an outlet within a ten mile radius of any Land Based Store owned and operated by the Retailer. 3.6 Land Based Stores Gift Certificates. Subject to Retailer's rights set ------------------------------------ forth in 3.3 c. above, GSI shall offer for sale on the Retailer's Web Site gift certificates for merchandise in Retailer's Land Based Store. Retailer shall furnish such gift certificates to GSI on consignment. GSI shall remit to Retailer 90.5% of all proceeds received from the sale of Land Based Stores Gift Certificates, the balance being retained by GSI as its fee and to cover all costs, including credit card fees. GSI shall account to Retailer for all sales of such certificates at the same time as it accounts to Retailer for Retailer's Revenue Share from the sale of On Line Merchandise (excluding Land Based Stores Gift Certificates). The amount of proceeds from the sale of Land Based Stores gift certificates shall not be included in calculating Revenue Share. 3.7 Processing of Customer Orders. GSI shall be solely responsible for ----------------------------- processing all E - Commerce business. GSI will promptly process E - Commerce Orders received from the Retailer's Web Site. GSI shall take the customer's credit card number at such time as the merchandise is ordered. GSI shall charge the customer's credit card at the time the merchandise is shipped. The 12 order will appear on the customer's credit card under the name of "Retailer.com" and proceeds shall be deposited into GSI's designated bank account for full credit to GSI. GSI will make all arrangements for delivery of merchandise purchased on the Retailer's Web Site. 3.8 Payment and Accounting of Revenue Share to Retailers. ---------------------------------------------------- The Retailer shall receive a [*] per cent share of the revenue ("Revenue Share") on the amount of all E-Commerce Orders (excluding taxes, delivery, handling, and net of returns); provided, however, should [*] Within ten (10) days after the end of each calendar month during the Term (with the exception of the end of December, which shall be thirty days), GSI shall account to the Retailer for the sale of all On Line Merchandise from the Retailer's Web Site. At the time of such accounting, GSI shall remit to the Retailer its Revenue Share earned from the sale of On Line Merchandise on the Retailer's Web Site during the prior month. Remittance shall be by the wire transfer of funds to an account designated by Retailer. Within ninety (90) days of the end of each calendar year, GSI shall provide the Retailer with a statement certified by its independent auditors and setting forth the Revenue Share earned by the Retailer during the prior calendar year. For a period of two years after the Retailer receives such certified statement from GSI, Retailer, on one occasion, shall have the right to audit the books and records of GSI with respect to the Retailer's Revenue Share earned during the calendar year to which the certified statement relates. Such audit shall be conducted at GSI's principal office located in the continental United States on two weeks prior notice to GSI. In the event that the audit reveals that the Revenue Share was understated, GSI shall within thirty days of completion of the audit, pay to the Retailer the remaining balance of the Revenue Share for the period audited plus interest at the prime rate of interest as provided for in The Wall Street Journal on the date of the audit's certification. In addition, in the event that the audit reveals that the Revenue Share is understated by more than [*] per cent for the calendar year in question, GSI shall pay the additional amount owing and pay for the reasonable audit costs and this shall be Retailer's sole remedy. In the event that the audit reveals that the Revenue Share is underreported by more than [*] per cent in any year, then that shall be considered a material breach of this Agreement by GSI entitling Retailer to exercise its remedies set forth in paragraph 13.1 below. 13 3.9 Service of On Line Customers. GSI shall be responsible for providing ---------------------------- all customer service relating to sales from the Retailer's Web Site. 3.10 Return of On Line Merchandise. GSI's return policy shall be ----------------------------- consistent with the Retailer's return policy. With each shipment of merchandise, GSI shall specifically instruct all customers that all merchandise purchased on line may not be returned to the Retailer's Land Based Stores and may only be returned in accordance with the instructions enclosed; provided however, in the rare instance a customer desires to return On Line Merchandise to one of the Retailer's Land Based Stores, the Retailer, in order to maximize customer relations, shall accept such merchandise for return in accordance with the Retailer's return policy, and return the merchandise to GSI's fulfillment center. At the next such time that GSI pays the Retailer pursuant to paragraph 3.8 above, and upon receipt of such merchandise, GSI shall credit the Retailer the amount refunded by the Retailer to the customer and the actual freight charges incurred by Retailer in order to return the merchandise to GSI. 3.11 On Line Customer Loyalty Programs. GSI shall have the right to --------------------------------- establish On Line Customer Loyalty Programs in order to encourage continued on line purchases. Customer Loyalty Programs established by GSI shall be used only in connection with on line purchases and Retailer's customer loyalty programs shall be used only in connection with purchases at the Retailer's Land Based Stores. Notwithstanding anything contained herein to the contrary, GSI shall not establish any On Line Customer Loyalty Programs without first obtaining the approval of Retailer. Retailer shall respond to a request for such approval from GSI within seven days of receiving the request. In the event Retailer fails to timely respond, GSI shall furnish Retailer with a notice marked "second request". If Retailer does not respond within two business days, GSI's request shall be deemed granted. 3.12 Cross Promotion. GSI shall have the right to use Retailer's URL, name --------------- and logo to cross promote Retailer's Web Site with other businesses in order to promote Retailer's Web Site; provided however, GSI shall not promote Retailer's Web Site on any other sporting good retailer's web site, or on any other web site which would generally be considered immoral, pornographic or offensive. Notwithstanding anything contained herein to the contrary, GSI shall not establish any Cross Promotions without first obtaining the approval of Retailer. Retailer shall respond to a request for such 14 approval from GSI within seven days of receiving the request. In the event Retailer fails to timely respond, GSI shall furnish Retailer with a notice marked "second request". If Retailer does not respond within two business days, GSI's request shall be deemed granted. 3.13 Price Matching. In the event that the Retailer, at its Land Based -------------- Stores offers a "Price Matching" policy, GSI's management shall have the right to use and adopt such policy for the Retailer's Web Site; provided however, GSI shall not under any circumstance, advertise or market the availability of this policy, and may offer it to customers only in GSI's sole discretion. 3.14 Project Manager. Promptly after the execution of this Agreement, but --------------- in no event later than sixty days after such execution, Retailer, at its expense, shall hire or reassign one of its existing employees, to act as Project Manager to work exclusively with GSI in creating and maintaining the Retailer's Web Site. Commencing with the Project Manager's hiring and continuing through the Term, as may be extended, the Project Manager shall be the Retailer's liaison with GSI and shall be responsible for supplying GSI with the Retailer Content and such other information as may reasonably be required of the Retailer in order to create and maintain the Retailer's Web Site in the most efficient manner. 4. ON-LINE DATA AND DATABASES -------------------------- 4.1 Ownership of Data. Any and all data ("Customer Data") related to ----------------- Retailer's customers (including customer names and other identifying information such as addresses, phone numbers and e-mail addresses, credit card numbers, and descriptions of the items and quantities of items purchased) that is collected by GSI shall be owned [*]. 4.2 Ownership of Databases. All data structures, data schema, database ---------------------- dictionaries, attributes, validation tests for each element, table sizes and formats, access requirements, data dependencies and other elements involving the storage of Data on the Web Site and all refinements, updates, releases, improvements and enhancements thereto, all intellectual property rights embedded therein and all applications created specifically for use of the data and Retailer Content (collectively, the "Databases") shall, as between GSI and Retailer, be the sole and exclusive property of GSI. 4.3 Delivery of Customer Data to Retailer. From time to time, but no more ------------------------------------- than four (4) times per calendar year, 15 Retailer may request that GSI provide to Retailer any or all of the following information collected from the Customer Data: a. customer's names; b. customer's addresses; c. customer's phone number; d. customer's e-mail address; e. items purchased; f. amount spent; g. information as to how customer reached Web Site; h. refers; i. unique visitors to site; j. page views per site; k. top ten most viewed pages; l. bottom ten least viewed pages; m. time of day traffic patterns; n. sales by product and brand; o. customer comments and complaints (shall be furnished on a monthly basis); p. additional information at GSI's discretion. Upon receipt of such request, GSI shall provide the Customer Data to Retailer in a mutually agreeable, commercially standard format, either via diskette, CD-ROM, electronically, or via another mutually agreeable method. GSI shall use commercially reasonable efforts to ensure that the Customer Data provided to Retailer accurately and completely reflects the Customer Data in the Web Site, but GSI shall have no obligation to check the accuracy, validity or integrity of the Customer Data and except as set forth in this Section 4.3, the Customer Data is provided "AS-IS". 4.4 Restrictions on Use of Customer Data. Each party shall treat the ------------------------------------ Customer Data as Confidential Information of the other party in accordance with the provisions of Article 7. Neither party may sell, lend, or license the Customer Data to third parties without the prior written consent of the other party, which consent may be withheld at the sole discretion of the other party; provided however, Retailer grants to GSI the right to combine all retailers' Customer Data to form trends and overall research as to the on line shopping habits of consumers. Prior to furnishing such Customer Data to a third party, GSI shall provide Retailer a copy thereof, which Retailer may retain for its own personal use in connection with the operation of its business. If Retailer finds any Customer Data reported therein which is so regionally specific that an executive in the sporting goods industry could reasonably identify the Retailer from such Customer Data, Retailer may, within ten days of receipt, notify GSI, and GSI shall amend the Customer Data to delete such 16 references which are objectionable to Retailer on those grounds. 5. ADVERTISING AND MARKETING ------------------------- The Retailer shall,commencing no later than October 1, 1999, and continuing during the Term, and any extensions thereof, at no cost to GSI provide for Complete URL Integration in its advertising and marketing by: 5.1 prominently including as part of all of its print media including but not limited to newspapers, periodicals, circulars, billboards, print materials, letterhead, business cards, shopping bags, cash register receipts and arena advertising) its URL, www.Retailer.com.; and 5.2 prominently including, at the end of its television advertising, its URL; and 5.3 mentioning its URL at the end of all radio advertisements. Notwithstanding anything contained herein to the contrary, the Retailer may a) exhaust its present inventory of print media and b) rerun existing television and radio advertisements that do not contain the Retailer's URL, but all new orders of print media and all new productions of television and/or radio advertisements shall prominently contain the Retailer's URL. All advertisements and marketing appearing in newspapers, circulars and periodicals shall contain the following disclaimer: "On Line Merchandise offerings may vary from products offered in Dunham's store." 6. ADVERTISING COOP AND DISCRETIONARY FUNDS ---------------------------------------- 6.1 During the Term and any extensions thereof, GSI shall use all Advertising Co-op and Discretionary Funds received by GSI directly from vendors as a result of the purchase of merchandise for the Retailer's Web Site exclusively, to promote the Retailer's Web Site, as GSI shall elect. All such proposed advertisements shall be submitted to the Retailer for the Retailer's approval as to content and design. The Retailer shall have five business days from receipt to either approve or disapprove. In the event that the Retailer disapproves, it shall advise GSI specifically as to why and GSI shall attempt to address the Retailer's concerns and resubmit the proposal to Retailer for its approval, which shall again have forty eight hours from receipt to approve or disapprove. This procedure shall continue until the advertisement has been 17 approved or replaced. In all instances where approval is requested of the Retailer, in the event the Retailer does not respond within the aforementioned forty eight hours, Retailer shall be deemed to have granted approval. 6.2 Any Advertising Co-op and Discretionary Funds received by the Retailer through the Retailer's purchase of product for GSI, ultimately for the Retailer's Web Site, may be retained by the Retailer; provided however, Retailer acknowledges that it is preferential for Retailer's vendors to sell to GSI directly and both Retailer and GSI shall request Retailer's vendors to do so. 6.3 Retailer shall retain from vendors any non item driven marketing funds; however, Retailer shall use its reasonable efforts to obtain from vendors incremental marketing funds based upon an increase in the sale of the vendor's merchandise on the Retailer's Web Site. Any such incremental marketing funds shall belong to GSI and shall be used in accordance with paragraph 6.1 above. 7. CONFIDENTIALITY --------------- 7.1 Confidential Information. Each party acknowledges that, in connection ------------------------ with the performance of this Agreement, it may receive Confidential Information of the other party. For the purpose of this Agreement, "Confidential Information" shall mean information or materials that is clearly marked "confidential" or the Receiving Party knows has reason to know is the confidential or proprietary information of the Disclosing Party, either because a) such information is marked or otherwise identified by the Disclosing Party as confidential or proprietary, or b) such information has commercial value and is not generally known in the Disclosing Party's trade or industry. Confidential Information shall include, without limitation: (a) concepts and ideas relating to the development and distribution of content in any medium; (b) trade secrets, drawings, inventions, know- how, software programs, and software source documents; (c) information regarding plans for research, development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublished financial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; and (d) existence of any business discussions, negotiations or agreements between the parties. 7.2 Confidentiality. The Receiving Party hereby agrees: (i) to hold and --------------- maintain in strict confidence all 18 Confidential Information of the Disclosing Party and not to disclose it to any third party; and (ii) not to use any Confidential Information of the Disclosing Party except as permitted by this Agreement or as may be necessary for the Receiving Party to perform its obligations under this Agreement. The Receiving Party will use at least the same degree of care to protect the Disclosing Party's Confidential Information as it uses to protect its own Confidential Information of like importance, and in no event shall such degree of care be less than reasonable care. The obligations and restrictions imposed by this Article 7 shall terminate five (5) years after the expiration or termination of this Agreement. 7.3 Exceptions. Notwithstanding the foregoing, the parties agree that ---------- Confidential Information will not include any information that: (i) was in the public domain at the time it was communicated to the Receiving Party by the Disclosing Party; (ii) entered the public domain subsequent to the time it was communicated to the Recipient by the Disclosing Party through no fault of the Receiving Party; (iii) was in the Receiving Party's possession free of any obligation of confidence at the time it was communicated to the Receiving Party by the Disclosing Party; (iv) was rightfully communicated to the Receiving Party by a third party, free of any obligation of confidence, subsequent to the time it was communicated to the Receiving Party by the Disclosing Party; (v) was developed by employees or agents of the Receiving Party independently of and without reference to any information communicated to the Receiving Party by the Disclosing Party; or (vi) was communicated by the Disclosing Party to an unaffiliated third party free of any obligation of confidence. In addition, the Receiving Party may disclose the Disclosing Party's Confidential Information in response to a valid order by a court or other governmental body, as otherwise required by law, or as necessary to establish the rights of either party under this Agreement; provided however, in the event that the Receiving Party receives a demand to disclose such Confidential Information in connection with a legal action or proceeding, the Receiving Party, if possible, shall first notify the Disclosing Party of the demand in order to provide the Disclosing Party an opportunity to seek a protective order. 7.4 Confidentiality of this Agreement. Retailer and GSI acknowledge that --------------------------------- the terms and conditions of this Agreement constitute Confidential Information which shall be governed by the terms of this Article 7. 19 7.5 Confidentiality of Customer Data and Retailer's Policies. -------------------------------------------------------- GSI acknowledges that it will be receiving from Retailer, and generating from the performance of its obligations under this Agreement, Confidential Information critical to the Retailer's business and concerning Retailer's customers and various information concerning the operation of Retailer's business may include net purchasing prices, advertising co-op and discretionary fund amounts, specific marketing plans, specific on line sales and delivery dates of merchandise. GSI recognizes its obligation to keep such information confidential. Therefore, all GSI employees who may have access to any such Confidential Information will be required to execute confidentiality agreements and GSI shall use its best efforts to enforce the terms thereof. Such confidentiality agreements will specifically provide that the employee shall not discuss with any other retailers who may or may not be customers of GSI, any information concerning the Retailer or its customers. Further, GSI acknowledges it is associated with other subsidiaries of GSI's parent corporation, Global Sports, Inc. GSI therefore represents and warrants to Retailer that it will establish a "Need to Know" policy with respect to such Confidential Information and only disseminate such Confidential Information to those employees and members of GSI's management who have a specific need to know such Confidential Information. In those instances, prior to the dissemination of such Confidential Information to those individuals, they will be required to execute confidentiality agreements specifically prohibiting such disclosure of such Confidential Information to anyone, except as otherwise permitted by the terms of this Agreement. 8. EXCLUSIVE WEB AGREEMENT ----------------------- During the Term and any extensions thereof, the Retailer, any subsidiary of the Retailer, shall not sell any sporting goods merchandise on the Internet (including the Web), nor use itself or allow a third party to use its URL, name or logo on the Web for the purpose of facilitating the sale of merchandise on the Web other than through GSI. Notwithstanding anything contained herein to the contrary, should Retailer be acquired by another established retailer who changes the name of Retailer to the acquirer's tradename, and should such acquirer have an existing web site,then this Agreement shall become non exclusive for the remainder of the Term. In addition, should Retailer acquire another retailer which has a web site, and change the name of that retailer to 20 Retailer's tradename, then Retailer shall cease to use the acquired retailer's web site. If Retailer acquires another retailer which has a web site, and does not change the name of that Retailer to Retailer's tradename, then Retailer may continue to use the acquired retailer's web site. 9. URL, NAME AND LOGO USAGE ------------------------ During the Term, the Retailer hereby grants to GSI the exclusive right to use, copy, modify and display the Retailer's name, logo and URL and such other names and logos as the Retailer owns and as may be listed on Schedule "1" attached hereto and made a part hereof, on the Retailer's Web Site, on invoices and packing slips, in connection with credit card charges, a toll free Web site customer service telephone line, and generally in connection with the operation of GSI's on-line business; provided however, GSI shall have no right to modify Retailer's name, logo or URL without Retailer's consent. Such Schedule shall be modified from time to time during the Term to add any new names and logos which the Retailer may register with the United States Patent and Trademark Office. Retailer shall register the fictitious name "Retailer.com" and grants to GSI the exclusive right to use such name for the sole purpose of conducting business on the Retailer's Web Site. Retailer shall also register the domain name www.Retailer.com and grants to GSI the exclusive right to use such domain name in connection with the operation of the Retailer's Web Site. GSI's exclusive rights shall terminate at the end of the Term of this Agreement. 10. REPRESENTATIONS AND WARRANTIES. ------------------------------- 10.1 Retailer represents and warrants that at all times during the Term hereof or any extensions thereof: a. it has or will have the full right to grant to GSI the right to use its URL, names and logos as discussed in Article 9 above, including its Domain Name; and b. Prior to the Launch Date, if not already completed, Retailer shall register and maintain the Domain Name "Retailer.com" with Network Solutions or any similar successor entity. Retailer shall list itself as the owner and billing contact for the Domain Name "Retailer.com" and Retailer shall list GSI as the administrative and technical contact for the Domain Name "Retailer.com". 21 10.2 Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 10.3 GSI represents and warrants that at all times during the term hereof or any extensions thereof: a. No other Full Line Sporting Goods E-Commerce Partner (as hereinafter defined) of GSI [*]. Notwithstanding anything contained herein to the contrary, Retailer acknowledges that, a Full Line Sporting Goods E-Commerce Partner of GSI [*] and, as such, should that Full Line Sporting Goods E-Commerce Partner of GSI [*]. By way of example only, the terms of this representation and warranty shall not apply to [*]. As used herein, a Full Line Sporting Goods E-Commerce Partner shall refer to a sporting goods retailer which carries in its Land Based Stores, merchandise in a variety of Categories such as (by way of example only) baseball, basketball, golf, bowling, football, hockey, aerobics and fishing. b. As of the Launch Date and continuing throughout the Term, GSI shall have a minimum, including Retailer, of 1) [*] Full Line Sporting Goods E-Commerce Partners, each (excluding Retailer) with annual Land Based Store Sales of more than [*] dollars [*] ; and 2) [*] other sporting good E-Commerce partners, which are either a) Full Line Sporting Goods E-Commerce Partners or b) Specialty Store E-Commerce Partners (as hereinafter defined) so that the total Land Based Store sales of all of GSI's E-Commerce Partners annually exceed [*] dollars [*]. As used herein, "Specialty Store E-Commerce Partners" shall mean sporting goods retailers which sell limited categories of sporting goods (i.e. 22 athletic footwear) and are not considered a Full Line Sporting Goods E-Commerce Partner. In determining the annual Land Based Store Sales of a retailer, the sales of all franchisees shall be included. In the event that GSI is notified by Retailer that it is in violation of this representation and warranty, then, notwithstanding anything contained in this Agreement to the contrary, GSI shall have one year from the date of such notification to make such agreements as are necessary to make this representation true and correct. This shall not include a violation of this representation and warranty as of the Launch Date, which shall be deemed a breach of this provision with no cure period. Should any of the representations and warranties made by GSI in Section 10.3 a. above become materially false and not corrected within the time permitted, then Retailer's sole remedy shall be to terminate this Agreement and neither party shall have any further liability hereunder. 11. INDEMNIFICATION --------------- 11.1 Retailer, at its own cost and expense, shall defend, indemnify and hold harmless GSI and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys fees and court costs) arising as a consequence of GSI providing services pursuant to this Agreement a) from or related to a claim that GSI infringes a third party copyright, trademark or trade secret relating to Retailer's tradename or any other name set forth on Schedule 1 to this Agreement; or b) from Retailer's gross negligence, wilful or intentional misconduct. 11.2 GSI, at its own cost and expense, shall defend, indemnify and hold harmless Retailer and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys fees and court costs) arising a) from a claim made by any consumer that is related in any way to the Retailer's Web Site or GSI's services to Retailer provided pursuant to this Agreement, but excluding a claim for which GSI would have the right to indemnification pursuant to Paragraph 11.1 above, or b) from GSI's gross negligence, wilful or intentional misconduct and arising as a consequence of GSI providing services pursuant to this Agreement. 23 11.3 Retailer shall have sole control of any defense of any claim made pursuant to Section 11.1 above, but GSI shall cooperate with Retailer in providing such defense. 11.4 GSI shall have sole control of any defense of any claim made pursuant to Section 11.2 above, but Retailer shall cooperate with Retailer in providing such defense. 11.5 Any party seeking indemnification shall notify the other party as soon as possible after such party seeking indemnification becomes aware of the claim. 12. INSURANCE --------- 12.1 GSI shall maintain in full force and effect products liability insurance coverage for merchandise sold on Retailer's Web Site. Such policy shall name Retailer as an additional insured. 12.2 GSI shall deliver to Retailer certificates of insurance which stipulate that no less than ten days notice will be given to Retailer prior to the termination of the policy. 13. TERMINATION ----------- 13.1 Termination for Cause by Either Party. ------------------------------------- a. This Agreement may be terminated by either party in the event of any material breach of any of the terms and conditions of this Agreement by the other party which breach continues in effect after the breaching party has been provided with written notice of breach and ninety (90) days to cure such breach and fails to cure such breach. As used herein, "material breach" shall mean a failure by a party to this Agreement to perform any of its obligations the effect of which would substantially impair the value of this Agreement to the other party. By way of example only and not by way of limitation, GSI's failure to operate the Retailer's Web Site according to commercially reasonable standards as they are established today and as they may continue to develop during the Term of this Agreement, failure to pay the Retailer its Revenue Share (or any other amount due to Retailer hereunder) or failure to provide customer service equivalent to that provided by other reputable on line retailers, would be a material breach of this Agreement by GSI. Retailer's failure to comply with its obligations pursuant to Section 5 above, or failure to provide GSI with the Retailer Content 24 necessary to construct and/or maintain the Retailer's Web Site, would be a material breach of the Retailer's obligations under this Agreement. b. In addition to the right to terminate this Agreement as a result of a material breach of this Agreement, either party may terminate this Agreement in the event that the sale of On Line Merchandise on the Retailer's Web Site does not equal or exceed the following minimum requirements ("Inadequate Sales"): YEAR WEB SITE SALES ---- -------------- 2001 $[*] 2002 $[*] 2003 $[*] 2004 $[*] 2005 $[*] 2006 $[*] 2007 $[*] 2008 $[*] 2009 $[*] In the event that a party desires to terminate this Agreement as a result of Inadequate Sales it shall do so by notifying the other party within thirty days of receiving the audited report of sales on the Retailer's Web Site from GSI's independent auditor by sending written notice to the other party of its intention to do so. In such event the termination shall be effective sixty days after receipt of such notice by the party receiving it. Notwithstanding anything contained herein to the contrary, should the Retailer elect to terminate this Agreement as a result of Inadequate Sales, GSI shall have the option to void the termination notice by paying to the Retailer [*] dollars within thirty days of receipt of the Retailer's termination notice. In such event, the Retailer's termination notice shall be null and void and this Agreement shall remain in full force and effect. RETAILER ACKNOWLEDGES THAT RETAILER'S RIGHT TO TERMINATE THIS AGREEMENT AS A RESULT OF INADEQUATE SALES IS UNIQUE TO THE RETAILER AND DISCLOSURE OF SUCH WOULD CAUSE GSI IRREPARABLE HARM. ACCORDINGLY RETAILER REAFFIRMS ITS OBLIGATION SET FORTH IN ARTICLE SEVEN ABOVE TO KEEP THIS PROVISION AND THE OTHER TERMS OF THIS AGREEMENT CONFIDENTIAL, EXCEPT AS DISCLOSURE MAY BE PERMITTED PURSUANT TO ARTICLE SEVEN ABOVE. 25 13.2 Termination for Cause Only by GSI. GSI may terminate this Agreement --------------------------------- by giving five days prior written notice to Retailer of its election to terminate upon the occurrence of any of the following events: a. any representation or warranty contained herein becomes materially false or misleading; or b. closure by Retailer of more than one third of its Land Based Stores; or c. the filing for protection by the Retailer under any federal or state bankruptcy law. 13.3 Termination Without Cause by Either Party. In the absence of a ----------------------------------------- material breach, this Agreement may only be terminated by the expiration of the Term, as may be extended pursuant to Section 2.3 above. 14. LIMITATIONS UPON LIABILITY -------------------------- UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE TO RETAILER FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS' USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS' RELIANCE ON OR USE OF INFORMATION, SERVICES OR MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE TO RETAILER UNDER THIS AGREEMENT FOR AN AMOUNT THAT EXCEEDS, IN THE AGGREGATE THE AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. IN ADDITION, RETAILER SHALL BE ENTITLED TO SEEK EQUITABLE RELIEF FROM THE COURT. THE REMEDIES SET FORTH IN THIS ARTICLE 14 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN TWELVE (12) MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 15. PROPERTY RIGHTS AND OWNERSHIP ----------------------------- The Retailer's Web Site shall consist of, and shall operate in conjunction with, multiple elements, all of which are subject to certain intellectual property rights. The parties' 26 respective rights with respect to such elements shall be as set forth below. For purposes of this Agreement, the term "Ownership" shall refer to ownership of all right, title and interest in and to the respective elements, including, but not limited to, all patent, copyright, trade secret, trademark and any other similar intellectual property rights therein, as applicable. 15.1 Retailer's URL shall be owned solely by the Retailer; 15.2 Retailer's Web Site shall be owned solely by GSI; 15.3 Software developed for the Retailer's Web Site, shall be owned solely by GSI, subject to any authorizations to use and approvals obtained by the Retailer and granted to GSI. With respect to intellectual property owned by each of them, Retailer and GSI shall both have rights associated with the ownership of intellectual property, including the right to copyright web sites and domains. 16. GSI'S TWENTY DAY PERIOD TO EXECUTE ---------------------------------- Retailer shall execute this Agreement first and deliver such executed Agreement to GSI which shall thereafter have twenty days from receipt to countersign the Agreement. During such twenty day period, Retailer shall have no right to withdraw the agreements which it executed and delivered to GSI. 17. DISCONTINUANCE OR REGULATION OF THE INTERNET. --------------------------------------------- Retailer acknowledges and agrees that the Internet (including without limitation the Web) is a network of private and public networks, that GSI has no control over the Internet, and that GSI is not liable for the discontinuance of operation of any portion of the Internet or possible regulation of the Internet which might restrict or prohibit the operation of the Web site. 18. FORCE MAJEURE ------------- In the event that either party is unable to perform any of its obligations under this Agreement or to enjoy any of its benefits because of any event beyond the control of the affected party including, but not limited to, natural disaster, acts of God, actions or decrees of governmental bodies or failure of communications lines or networks (a "Force Majeure Event"), the party who has been so affected shall promptly give written notice to the other party and 27 shall use its best efforts to resume performance. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the duration of such Force Majeure Event. 19. WAIVER ------ No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified. 20. PRESS RELEASES -------------- Notwithstanding anything in this Agreement to the contrary, GSI shall not make any announcement, advertisement, statement or press release (collectively "Announcement") concerning the existence of this Agreement, that Retailer and GSI are developing a Web Site or the fact that Retailer and GSI are E-Commerce partners, prior to the Launch Date. If GSI desires to disclose the existence of this Agreement to any third party including but not limited to an investor, potential investor, analyst, professional advisor, business affiliate, business associate, lender, or employee that individual or entity must first enter into a Confidentiality Agreement with GSI, in a form acceptable to Retailer, or substantially similar to that attached hereto as Exhibit "B" agreeing not to make any disclosure as set forth above. If this particular restriction is violated by an individual or entity other than a member of the senior management of GSI, Retailer agrees not to take action against GSI and enforce its rights directly against the individual or entity and GSI will cooperate with Retailer in enforcing those rights. Notwithstanding anything contained herein to the contrary, GSI may disclose in an Announcement the fact that an E-Commerce partner is a "non-disclosed retailer with sales in excess of $200,000,000." If GSI or a member of its senior management breaches this particular restriction, GSI shall be required to pay Retailer [*] as liquidated damages, and Retailer may terminate this Agreement. After the Launch Date, all voluntary public announcements concerning the transactions contemplated by this Agreement shall be mutually acceptable to both GSI and Retailer. Unless required by law, neither GSI on the one hand, and Retailer on the other hand, shall make any public announcement or issue 28 any press release concerning the transactions contemplated by this Agreement without the prior written consent of GSI or Retailer, respectively. With respect to any announcement that any of the parties is required by law to issue, such party shall, to the extent possible under the circumstances, review the necessity for and the contents of the announcement with the other party before issuing the announcement; provided however, if either party cannot obtain the consent of the other party in a timely manner, the party required to comply with law may issue the press release or public announcement without obtaining the consent of the other party. 21. GOVERNING LAW ------------- This Agreement, the rights and obligations of the parties hereto, and any claims or disputes thereto, shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania (excluding the choice of law rules thereof). 22. ASSIGNMENT ---------- Retailer shall have no right to assign this Agreement without the prior written consent of GSI; provided, that Retailer shall have the right to assign this Agreement to any person or entity that acquires or succeeds to all or substantially all of such party's business or assets upon written notice to GSI. GSI shall not assign this Agreement to any traditional land based sporting goods retailer or any manufacturer of sporting goods without the Retailer's consent. 23. COUNTERPARTS ------------ This Agreement may be signed in several counterparts, each of which shall be deemed an original, and all of which when taken together, shall be deemed a complete instrument. 24. ENTIRE AGREEMENT ---------------- This Agreement, including the Web Development Agreement, represents the entire agreement of the parties with respect to the subject matter hereof and may not be modified, except in writing, executed by all of the parties hereto. This Agreement supersedes all prior writings of the parties with respect to this subject matter. 25. JURISDICTION ------------ 29 The parties agree that the exclusive jurisdiction and venue of any dispute that arises hereunder shall be in the Court of Common Pleas of Montgomery County, Pennsylvania or the United States District Court for the Eastern District of Pennsylvania. 26. INDEPENDENT CONTRACTORS ----------------------- The relationship of the parties herein shall hereunder be that of independent contractors and nothing herein shall be construed to create a joint venture or partnership. 27. SIGNING ------- The parties executing this Agreement represents and warrants that they have full corporate authority to do so. 28. BINDING EFFECT -------------- This Agreement shall be binding upon the parties hereto, their successors and permitted assigns. 29. HEADINGS -------- Section headings contained in this Agreement are inserted for convenience or reference only and shall not be deemed to be a part of this Agreement for any other purpose. 30. DISCLAIMER OF WARRANTIES ------------------------ EXCEPT AS TO THE EXPRESS WARRANTIES CONTAINED IN THIS AGREEMENT, GSI MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, IN FACT OR IN LAW WITH RESPECT TO THE CREATION AND MAINTENANCE OF THE PRODUCT AND SERVICES PROVIDED FOR HEREUNDER, AND DISCLAIMS ALL OTHER WARRANTIES. RETAILER ACKNOWLEDGES AND AGREES THAT GSI HAS NOT MADE, NOR DOES HEREBY MAKE, ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED. 31. NOTICES ------- Any notices or writings to be sent hereunder shall be in writing and shall be by personal delivery, facsimile transmission or by certified or registered mail, return receipt requested, and shall be deemed given upon the earlier of actual receipt, five (5) days after deposit in the mail, or receipt by sender of confirmation of facsimile transmission. Notices shall be sent to the following addresses (or such other address as either party may specify in writing): IF TO GSI: 555 South Henderson Road 30 King of Prussia, PA 19406 Attention: President Copy to: David S. Mandel, Esq. Astor Weiss Kaplan & Rosenblum, LLP The Bellevue Broad & Walnut Streets 6th Floor Philadelphia, Penna., 19102 IF TO RETAILER: 5000 Dixie Highway Waterford, Michigan, 48329 Attn: Sr. Vice President, Marketing Copy to: 5000 Dixie Highway Waterford, Michigan, 48329 Attn: Legal Department (SIGNATURES CONTAINED ON THE FOLLOWING PAGE) 31 IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to enter into this Agreement with intent to be legally bound hereby, the date and year first above written. GLOBAL SPORTS INTERACTIVE, INC.: DUNHAM'S ATHLEISURE CORPORATION: BY: /s/ Michael Rubin BY: /s/ Jeffrey G. Lynn -------------------------- -------------------------- Title: President Title: President & CEO ----------------------- ----------------------- Date: 3/28/99 Date: 3/23/99 ------------------------ ----------------------- 32 EXHIBIT A WEB SITE DEVELOPMENT AGREEMENT ------------------------------ THIS Web site Development Agreement ("Agreement") dated the ____ day of ______________, 1999 (the "Services Start Date") by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and Dunham's Athleisure Corporation (hereinafter referred to as "Retailer") with an address of 5000 Dixie Highway, Waterford, Michigan, 48329. W I T N E S S E T H: WHEREAS, GSI and Retailer have entered into a E - Commerce Agreement pursuant to which GSI shall provided certain E - Commerce services to Retailer, including the development and maintenance of a web site; and WHEREAS, the parties have elected to enter into this Agreement in order to set forth the terms and conditions pursuant to which GSI shall develop a web site for Retailer. NOW, THEREFORE, in consideration of the mutual promises and terms herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged; and intending to be legally bound hereby, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Domain Name" means the domain name specified for the Web site by Retailer from time to time. The initial Domain Name is specified in Attachment B. 1.2 "E-Commerce Agreement" means the E-Commerce Agreement by and between Retailer to which this Agreement is attached as Exhibit A. 1.3 "Features Set" means the requirements set forth in Attachment B, as amended or supplemented in accordance with this Agreement. 1.4 "Intellectual Property Rights" means any and all now known or hereafter known tangible and intangible (a) rights associated with works of authorship throughout the universe, 33 including but not limited to copyrighs, moral rights, and mask-works, (b) trademark and trade name rights and similar rights, (c) trade secret rights, (d) patents, designs, algorithms and other industrial property rights, (e) all other intellectual and industrial property rights (of every kind and nature throughout the universe and however designated) (including logos, "rental" rights and rights to remuneration), whether arising by operation of law, contract, license, or otherwise, and (f) all registrations, initial applications, renewals, extensions, continuations, divisions or reissues hereof now or hereafter in force (including any rights in any of the foregoing). 1.5 "Milestone Delivery Schedule" means the schedule for development of the Web site set forth in Attachment B. 1.6 "GSI Content" means all text, pictures, sound, graphics, video and other data and assets supplied by Retailer to GSI, as such materials may be modified from time to time. 1.7 "GSI Products" means, collectively, the GSI Tools, the GSI Content and the GSI Work Product. 1.8 "GSI Tools" means any tools, both in object code and source code form, which GSI has already developed or which GSI independently develops or licenses from a third party, excluding any tools which GSI creates pursuant to this Agreement. By way of example, GSI Tools may include, without limitation, toolbars for maneuvering between pages, search engines, Java applets, and ActiveX controls. 1.9 "Production Schedule" shall mean the schedule agreed upon by the parties for the production of the Retailer's Web site, including the delivery of the Retailer Content and GSI Content by Retailer to GSI. 1.10 "Retailer Content" means the Domain Name and all text, pictures, sound, graphics, video and other data and assets supplied by Retailer to GSI, as such materials may be modified from time to time. 1.11 "Services" means the services provided by GSI hereunder to develop, host and maintain the Web site, in accordance with this Agreement. 1.12 "Web site" means, collectively, the E - Commerce Shopping Experience and the Retailer Content made available on web pages under the Domain Name. 1.13 "GSI Work Product" means all HTML files, Java files, graphics files, animation files, data files, technology, scripts and programs, both in object code and source code form, all 34 documentation and any other deliverable used by GSI to create the Web site. 2. WEB SITE DEVELOPMENT SERVICES 2.1 Delivery of Initial Retailer Content. As soon as reasonably possible, GSI and Retailer shall agree upon a Production Schedule for the delivery by Retailer to GSI of the Retailer Content that Retailer intends for GSI to incorporate into the Web site. The parties acknowledge that Retailer will be able to deliver certain "static" information, such as store locations, promptly to GSI, and other Retailer Content, such as certain merchandise to be sold on the Retailer's Web site, at a later date closer to the Launch Date. The Retailer Content shall be in the format(s) designated by GSI as set forth on Attachment C hereto. Upon Retailer's request, GSI shall assist Retailer in the conversion of the Retailer Content into an acceptable form for use by the Web site. 2.2 Web site Development Services. At no cost to Retailer, GSI shall provide design, programming and other consulting Services as specified in Attachment B to create the Web site. GSI will provide the Web site to Retailer in accordance with the Milestone Delivery Schedule. 2.3 Project Liaisons. Each party's primary contact for development efforts shall be the project liaisons specified in Attachment B or the person otherwise designated in writing by Retailer or GSI, as the case may be. 2.4 Acceptance. GSI shall make available final versions of the Web site for Retailer's review and acceptance. Retailer shall have ten (10) days to review and evaluate the Web site (the "Acceptance Period") to assess whether it substantially meets the Features Set. During the Acceptance Period, Retailer shall identify in writing to GSI all aspects of the Web site that do not substantially conform to the Features Set. Upon receipt of Retailer's list of non-conformities, GSI shall correct promptly all such non-conformities so that the Web site does substantially conform to the Features Set and GSI shall extend the Acceptance Period for a second ten (10) day Acceptance Period during which Retailer shall confirm that all non-conformities that were previously identified have been corrected. Notwithstanding the foregoing, the Web site shall be deemed accepted upon the earlier of: (i) its use in commerce, provided however, GSI shall not use the Retailer's Web site in commerce without the Retailer's consent, which shall not be unreasonably withheld or delayed; (ii) Retailer's failure to articulate any non-conformities during an Acceptance Period; or (iii) Retailer's acceptance of the Web site; or (iv) GSI's demonstration that all non- conformities have been corrected. 35 3. WEB HOSTING AND MAINTENANCE SERVICES Following Retailer's acceptance of the Web site pursuant to Section 2.4, GSI shall, at no cost to Retailer, provide the following web hosting and maintenance Services: 3.1 Hosting Services. GSI shall load the Web site onto server(s) that are connected to the Internet and readily accessible via the Web through use of the Domain Names. GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner. 3.2 Retailer Content. GSI shall upload all Retailer Content, including updates, to the Web site within seven days of delivery to GSI. Upon GSI's prior written consent, Retailer may electronically transmit or upload Retailer Content directly to the Web site. 3.3 Maintenance Services. GSI shall maintain the Web site so that it functions in a reasonably error free manner. Upon notification of an error in the Web site or of a non-conformity between the Web site and the Features Set, whether from Retailer or from any user of the Web site, GSI shall promptly commence an investigation into the reported error, and GSI shall, upon reproducing such error, use reasonable commercial efforts to correct such error in a timely fashion. During such Maintenance Services, GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner, provided, however, GSI may, during low usage periods, -------- ------- temporarily block access to the Web site to perform Web site maintenance during periodic maintenance windows. 4. ADDITIONAL SERVICES 4.1 Search Engine Registration. When GSI makes the Web site available to Retailer, GSI shall register the Web Site and Domain Name with all applicable search engines, at GSI's discretion. 4.2 Domain Name Assistance. If requested by Retailer, GSI shall cooperate with Retailer in registering the Domain Name with InterNIC. Retailer shall own all right, title and interest in and to the Domain Name and all Intellectual Property Rights related thereto. Unless otherwise specified by Retailer, GSI shall, at Retailer's expense, assist Retailer in registration of the Domain Name. 36 5. CONSIDERATION In consideration for Retailer entering into the E Commerce Agreement, at no cost to Retailer, GSI shall perform the Services set forth in this Agreement. 6. TERM AND TERMINATION 6.1 Term. The term of this Agreement shall be conterminous with the term of the E- Commerce Agreement. In absence of a material breach, this Agreement may only be terminated by the expiration of the term. 6.2 Termination. Termination of this Agreement shall be governed by the terms of Article 13 of the E - Commerce Agreement. 7. WARRANTIES AND DISCLAIMERS. 7.1 Cross Warranties. Retailer warrants as to the Retailer Content, and GSI warrants as to the GSI Products, that any materials and updates or enhancements there to shall not: (a) infringe on the Intellectual Property Rights of any third party or any rights of publicity or privacy; (b) violate any law, statute, ordinance or regulation (including without limitation the laws and regulations governing export control, unfair competition, antidiscrimination or false advertising); (c) be defamatory, trade libelous, unlawfully threatening or unlawfully harassing; (d) be obscene, pornographic or indecent. 7.2 Representations and Warranties of Each Party. Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 7.3 Year 2000. GSI warrants that the Web site shall not suffer any material adverse effect as a result of a failure in any GSI Work Product or GSI Tools to be Y2K Compliant. A product or service which is "Y2K Compliant" is one that provides accurate results using data having date ranges spanning from January 1, 1980 37 through December 31, 2019 (the "Y2K Period"). By way of example and not of limitation, "Y2K Compliant" means, with respect to a product or service, that it can currently and shall, during the Y2K Period, continue to (a) manage and manipulate data involving all dates within the Y2K Period (including the fact that the year 2000 is a leap year) without functional or data abnormality related to such dates; (b) manage and manipulate data involving all dates within the Y2K Period without inaccurate results related to such dates; (c) have user interfaces and data fields formatted to distinguish between dates within the Y2K Period; and (d) accurately identify and either reject or correct invalid date data during the Y2K Period. Provided a party otherwise complies with this Section 7.4, it will not be liable to the other party for any failure to perform obligations under this Agreement to the extent such failure arises from a failure to be Y2K Compliant that (1) affects the non-performing party's customers or suppliers or (2) is beyond its reasonable control (e.g., a failure --- to be Y2K Compliant affecting a governmental entity). 7.4 Disclaimer. THE WARRANTIES MADE IN THIS SECTION 7 ARE MADE IN LIEU OF ALL OTHER EXPRESS WARRANTIES, WHETHER ORAL OR WRITTEN AND EXCEPT AS SET FORTH IN THIS SECTION 7, GSI MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 8. OWNERSHIP 8.1 Ownership of GSI Products. Retailer hereby acknowledges and agrees that as between Retailer and GSI, GSI owns all right, title and interest in and to the GSI Products and all applicable Intellectual Property Rights thereto. This Agreement confers no ownership interest in the GSI Products to Retailer. 8.2 Ownership of Retailer Content. GSI hereby acknowledges and agrees that as between GSI and Retailer, Retailer owns all right, title and interest in and to the Retailer Content and all applicable Intellectual Property Rights thereto. Except for a limited non-exclusive license during the term to use the Retailer Content solely to perform its obligations hereunder, this Agreement confers no ownership interest in the Retailer Content to GSI. 9. LIMITATION UPON LIABILITY. UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE TO RETAILER FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS' USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS' RELIANCE ON OR USE OF INFORMATION, SERVICES OR 38 MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE UNDER THIS AGREEMENT TO RETAILER FOR AN AMOUNT THAT EXCEEDS, IN THE AGGREGATE THE AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. THE REMEDIES SET FORTH IN THIS SECTION 9 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN TWELVE (12) MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 10. INDEMNITY. 10.1 Retailer Indemnity. Subject to Section 10.3, Retailer shall defend, indemnify and hold GSI harmless against any third party claim, action, suit or proceeding: (i) Retailer's gross negligence, willful or intentional misconduct; or (ii) any breach by Retailer of the warranties set forth in Sections 7.1 or 7.2. 10.2 GSI Indemnity. Subject to Section 10.3, GSI shall defend, indemnify and hold Retailer harmless against any third party claim, action, suit or proceeding: (i) GSI's gross negligence, willful or intentional misconduct; or (ii) any breach by GSI of the warranties set forth in Sections 7.1 or 7.2. 10.3 Mechanic of Indemnities. The indemnifying party's obligations are conditioned upon the indemnified party: (a) giving the indemnifying party prompt written notice of any claim, action, suit or proceeding for which the indemnified party is seeking indemnity; (b) granting control of the defense and settlement to the indemnifying party; and (c) reasonably cooperating with the indemnifying party at the indemnifying party's expense 11. MISCELLANEOUS. 11.1 Incorporation of Certain Provisions of the E-Commerce Agreement. Sections 7, 8, 12, and Sections 17 through 29, inclusive, of the E-Commerce Agreement are hereby incorporated in their entirety into this Agreement. 11.2 Interpretation of Agreements. With respect to the subject matter hereof, the E-Commerce Agreement shall control any conflict between the terms of this Agreement and the E-Commerce Agreement. 39 11.3 Definitions. Any terms not specifically defined in this Agreement shall be construed in accordance with the definitions given such terms in the E- Commerce Agreement, or if such terms are not defined in the E-Commerce Agreement, then such terms shall be construed in accordance with their every day, common meaning. IN WITNESS WHEREOF, each of the parties have caused their duly authorized representatives to enter into this Agreement to be effected on the Services Start Date. GLOBAL SPORTS INTERACTIVE, INC.: DUNHAM'S ATHLEISURE CORPORATION: By: /s/ Michael Rubin By: /s/ Jeffrey G. Lynn ---------------------------- -------------------------- Title: President Title: President & CEO ------------------------- ---------------------- Date: 3/25/99 Date: 3/23/99 -------------------------- ------------------------ Name: Michael Rubin Name: Jeff Lynn -------------------------- ------------------------ (Please type or print) (Please type or print) 40 ATTACHMENT A RETAILER'S ASSET REQUIREMENTS FOR GLOBAL SPORTS INTERACTIVE'S PARTNERS ---------------------------------------- Product Assets Elements: Product Assets should include names and prices. No product photography or description are required. Store Locations Store location information should include address, phone number and fax numbers. Corporate Assets Corporate Assets may include the following: . Press Releases . Frequently Asked Questions . Contact Information . Jobs Information . Community Programs Information . Annual Reports . Corporate Identity materials including logo All above information may be submitted at the retailers discretion, excluding the corporate identity materials and logos, which are mandatory. 41 ATTACHMENT B (TO BE COMPLETED) Domain Name: Format of Retailer Content: Project Liaisons: For GSE.C: For Retailer: FEATURES SET - ------------ 1. PRODUCT SEARCH 2. BROWSE CATEGORIES 3. RECOMMENDATION TOOLS 4. ADVANCE PRODUCT PRESENTATION 5. SHOPPING CART 6. GIFT GIVING FUNCTIONALITY 7. REMOTE PUBLISHING TOOLS FOR HUMAN RESOURCES AND PRESS ROOM 8. SALES TAX CONFIGURATION 9. PRODUCT REVIEWS 10. 24/7 CUSTOMER SUPPORT 11. AFFILIATE PROGRAM FUNCTIONALITY 12. ON LINE GIFT CERTIFICATES 13. LAND BASED STORES GIFT CERTIFICATES 14. STORE LOCATOR 15. FINANCIAL INFORMATION 16. FREQUENTLY ASKED QUESTIONS 17. COMMUNITY PROGRAMS 18. COMPANY PROFILE 19. ON LINE ORDER STATUS MILESTONE DELIVERY SCHEDULE: - --------------------------- TASK ESTIMATED COMPLETION DATE - ---- ------------------------- DISCOVERY AND PLANNING MARCH 15, 1999 COMMENCE ENGINE ENGINEERING JULY 31, 1999 ESTABLISH FULFILLMENT CAPABILITIES APRIL 30, 1999 RETAILER WEB SITE DEVELOPMENT JULY 31, 1999 QUALITY CONTROL REVIEW AND REVISIONS AUGUST 21, 1999 ALPHA TESTING SEPTEMBER 1, 1999 BETA (SOFT LAUNCH) SEPTEMBER 30, 1999 WEB SITE LAUNCH TO GENERAL PUBLIC OCTOBER 1 - DECEMBER 1,1999 MEDIA AND PROMOTIONS OCTOBER 1 - DECEMBER 1,1999 42 ATTACHMENT C ASSET SUBMISSION GUIDELINES This section details how to submit assets. Source Assets and Final Assets - -------------------------------------------------------------------------------- We require source files for all assets. This means if an image is originally constructed as a layered RGB Photoshop file at 100x500 pixels, we need that file, even if the final file is a flattened 4-bit GIF at 20x100. We allow the submission of final assets in some cases, but only by prior arrangement and only in addition to an up-to-date source file. All submitted assets are subject to review and verification by production staff. Media and Format - -------------------------------------------------------------------------------- We routinely receive assets in the following media and formats. Digital Media - -------------------------------------------------------------------------------- Media: SyQuest 44mb, 88mb, 200mb, CD-ROM (including PhotoCD), Zip, Jaz, 3.5" floppy. Format: Win16, Win-32, or Macintosh File Formats: Text: Raw, MS Word 95, RTF, HTML Bitmap Graphics: Photoshop, TIFF, PCD (PhotoCD), EPS, PICT (JPEG and GIF for final files only and only along with source files) PostScript Graphics: EPS, Illustrator (7.0 preferred) Video: QuickTime Audio: WAV, AIFF, MIDI Non-Digital Media - -------------------------------------------------------------------------------- 43 Contact us to discuss needs and capabilities before submitting any non-digital assets. Asset Submission - ----------------------------------------------------------------- We prefer to receive assets via FTP (file transfer protocol) although we gladly accept assets via standard package delivery services (i.e., FedEx, USPS, UPS, etc.). Submission via FTP FTP Area: ftp.globalsportsinteractive.com Assets should be left in "Incoming" which is a level below the initial directory. Once assets have been transferred, e-mail confirmation is required. Submission via Package Delivery If you wish to submit assets via standard package delivery services, please address the package to this address: Address TBD If you are submitting hard assets like brochures, photographs, etc. please be sure to ship them in a reinforced container to prevent damage to the assets while in transit. If you are submitting digital media like SyQuests, Zip disks, Jaz disks, etc., be sure to ship them in a well-padded, reinforced container. 44 SCHEDULE 1 TO E - COMMERCE AGREEMENT ------------------------------------ RETAILER'S TRADEMARKS, TRADENAMES AND LOGOS -------------------------------------------- 45 DUNHAM'S ATHLEISURE CORPORATION . Dunham's . Dunham's Sports . Dunham's Sporting Goods . Since 1917 Dunham's Sports Outfitters . DSO Sport . Mega Sports . Get in the Game 46 EXHIBIT "B" ----------- CONFIDENTIALITY AGREEMENT ------------------------- [DATE] [Company] [Company Address] In connection with the disclosure to you of certain confidential information, this document sets forth the confidentiality agreement (the "Agreement") by and between Global Sports Interactive, Inc. ("GSI") and [Company Name](the "Recipient"). In consideration of the release of certain valuable and confidential information relating to GSI's E-Commerce arrangements ("Material"), Recipient hereby agrees to keep such Material strictly confidential and to (1) use the Material only for the purpose of ____________________________________________; (2) not to reproduce the Material in whole or in part without the prior written consent of GSI; and (3) return the Material and any analysis prepared using the Material to GSI upon request. In addition, Recipient agrees that they shall not disclose to, nor allow access to the Material or the names of GSI's E-Commerce partner(s) to any other party or make any announcement, statement or press release with regard to the name(s) of GSI's E-Commerce partner(s) prior to the Launch Date of the E-Commerce partners. Recipient understands that it has represented to one of its E-Commerce Partners that it would not release any Materials to any third party without that third party executing a confidentiality agreement, and that should the Material become public, then GSI could be liable for [*]. Accordingly, if Recipient breaches this agreement, Recipient shall pay GSI [*] as liquidated damages and the E-Commerce partner whose confidentiality was breached may collect the same amount directly from the Recipient in the place of and on GSI's behalf. Recipient agrees to take all measures, including, but not limited to, court proceedings, at it's own expense, to restrain any such party; including employees or former employees, from unauthorized use or disclosure of the Material. The Agreement shall be governed by and construed in accordance with the law of the State of Pennsylvania. (SIGNATURES CONTAINED ON THE FOLLOWING PAGE) Agreed to on this ____ day of [DATE], 1999. 47 GLOBAL SPORTS INTERACTIVE, INC. RECIPIENT: BY:___________________________ BY:_________________________ Its:__________________________ Its:________________________ Date:_________________________ Date:_______________________ EX-10.4 5 E-COMMERCE MANAGEMENT AGREEMENT EXHIBIT 10.4 Confidential Treatment has been requested with respect to portions of the agreement indicated with an asterisk [*]. A complete copy of this agreement, including the redacted terms, has been separately filed with the Securities and Exchange Commission. E COMMERCE MANAGEMENT AGREEMENT ------------------------------- THIS E - Commerce Agreement dated the ___ day of ______________, 1999 by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and Sport Chalet, Inc., a Delaware corporation (hereinafter referred to as "Retailer") with an address of 920 Foothill Boulevard, La Canada, California, 91011. W I T N E S S E T H: WHEREAS, GSI is in the business of creating and operating all aspects of an E-Commerce Shopping Experience, including servicing and fulfilling the on-line retail sales of selected merchants; and WHEREAS, Retailer desires to enter into an exclusive agreement with GSI pursuant to which GSI will act as an Outsourcing Company providing the Retailer's on-line customers the complete E-Commerce Shopping Experience, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: 1. DEFINITIONS. As used herein, the following terms shall have the following ----------- meaning: 1.1 "Advertising Co-op and Discretionary Funds" shall mean amounts earned by or allocated to the Retailer by its vendors, the purpose of which is to advertise that vendor's brand or to use at the Retailer's discretion. 1.2 "Categories" shall mean the various types of product groups (e.g. athletic footwear, camping, in line skates, etc.) offered for sale by the Retailer in its Land Based stores. 1.3 "Closeout Merchandise" shall mean end of season or excess merchandise that is priced at a greater than normal discount. 1.4 "Complete URL Integration" shall mean the display of Retailer's URL in all of Retailer's marketing and communications. 1.5 "Confidential Information" shall mean as that term is defined in paragraph 7.1 of this Agreement. 1.6 "Cross Promotion" shall mean the use of the Retailer's URL, name and logo on other than the Retailer's Web Site for the purpose of promoting the Retailer's Web Site. 1.7 "Customary Pricing Structure" shall mean the policy generally employed by the Retailer in determining the prices of merchandise in its Land Based Stores. 1.8 "Customer Data" shall mean as that term is defined in paragraph 4.1 of this Agreement. 1.9 "Data Bases" shall mean as that term is defined in paragraph 4.2 of this Agreement. 1.10 "Defective Allowance" shall mean a discount granted by a manufacturer to a retailer as a result of defective merchandise received by the retailer and pursuant to which, the retailer also retains the merchandise. 1.11 "Disclosing Party" shall mean the party disclosing Confidential Information. 1.12 "Domain Name" shall mean as that term is defined in paragraph 1.1 of the Web Site Development Agreement (as hereinafter defined). 1.13 "E-Commerce" shall mean the Retailer's specific business conducted through the Internet. 1.14 "E-Commerce Orders" shall mean the orders for merchandise placed by customers of the Retailer's Web Site. 1.15 "E-Commerce Outsourcing Manager" shall mean GSI. 1.16 "E-Commerce Shopping Experience" shall mean the shopping for and purchasing of merchandise through the Internet. 1.17 "Flight Date" shall mean the date on which Retailer's advertising is scheduled to run for the first time. 1.18 "Force Majeure Event" shall mean as that term is defined in Article 18 of this Agreement. 1.19 "GSI Content" shall mean as defined in paragraph 1.6 of the Web Site Development Agreement. 1.20 "In Line Merchandise" shall mean current merchandise available to be carried by the Retailer in its Land Based Stores from Retailer's current or future vendors. 1.21 "Internet" shall mean the collection of interconnected networks that all use the TCP/IP protocols. 1.22 "Land Based Stores" shall mean the Retailer's stores located in shopping districts, strip shopping centers and shopping malls. 1.23 "Land Based Stores Gift Certificates" shall mean gift certificates offered for sale on the Retailer's Web Site for merchandise sold only in Retailer's Land Based Stores. 1.24 "Launch Date" shall mean the date on which GSI commences operation of the Retailer's Web Site to the public. 1.25 "Markdowns" shall mean merchandise in Retailer's inventory offered for sale at less than the price it was originally offered for. 1.26 "Milestone Delivery Schedule" shall mean as defined in paragraph 1.5 of the Web Site Development Agreement. 1.27 "On Line Customer" shall mean Retailer's customer who browses for or purchases On Line Merchandise on the Retailer's Web Site. 1.28 "On Line Customer Loyalty Programs" shall mean programs established to encourage repeat business from On Line Customers. 1.29 "On Line Merchandise" shall mean merchandise to be sold on the Retailer's Web Site. 1.30 "Outsourcing Company" shall mean a company which provides E-Commerce Services for traditional Retailers. 1.31 "Price Matching" shall mean a Retailer's policy pursuant to which it addresses another retailer's lower price on a particular item of merchandise. 1.32 "Production Schedule" shall mean as defined in paragraph 1.9 of the Web Site Development Agreement. 1.33 "Project Manager" shall mean an employee of Retailers who is assigned exclusively to work with GSI in supplying GSI with Retailer Content. 1.34 "Receiving Party" shall mean the party receiving Confidential Information. 1.35 "Retailer Content" shall mean as defined in paragraph 1.10 of the Web Site Development Agreement. 1.36 "Retailer's Net Cost" shall mean the amount paid by the Retailer for merchandise from its vendors after deduction of cash or anticipation discounts, marketing allowance, Defective Allowance, volume allowance and any other discount offered by vendors, but excluding any marketing funds granted to Retailer by a manufacturer as an overall marketing allowance and not based upon the number of units or dollars purchased. 1.37 "Retailer's Warehouse" shall mean the place at which Retailer receives delivery of merchandise from its vendors. 1.38 "Special Makeups" shall mean merchandise manufactured for the Retailer exclusively. 1.39 "Term" shall be as defined in Section 2.2 of this Agreement. 1.40 "URL" shall mean the address of the Web Site on the Internet. 1.41 "Web" shall mean the World Wide Web. 1.42 "Web Site" shall mean as defined in paragraph 1.12 of the Web Site Development Agreement. 1.43 "Web Site Development Agreement" shall mean the agreement by and between GSI and Retailer attached to this Agreement as Exhibit "A". 1.44 Product Information" shall mean as defined in paragraph 1.14 of the Web Site Development Agreement. 2. AGREEMENT AND TERM ------------------ 2.1 Agreement. During the Term GSI shall provide the Retailer with those --------- Web Site services as hereinafter specified. 2.2 Term. The Term of this Agreement shall commence upon the execution of ---- this Agreement and shall expire five (5) years after the Launch Date ("Expiration Date"). GSI shall use reasonable efforts to advise Retailer ten days prior to the expected Launch Date. Notwithstanding any other dates and/or schedules in the attached Web Site Development Agreement, the Launch Date shall occur between the period of October 1, 1999 and December 1, 1999 ("Commencement Period"). GSI's obligation to commence operation of the Web Site during the Commencement Period shall be contingent on Retailer complying with the deadlines set forth on the Milestone Delivery Schedule set forth on Attachment B to the Web Site Development Agreement and on the Production Schedule to be agreed upon by the parties. Retailer acknowledges the urgency of complying with the deadlines set forth in the Milestone Delivery Schedule and the Production Schedule and shall give GSI its full cooperation to ensure that such deadlines are satisfied. Notwithstanding anything contained herein to the contrary, in the event that the Retailer does not comply with such deadlines and GSI has given Retailer written notice of its failure to comply, then, for each day of such non compliance, the Commencement Period shall be extended by one day. 2.3 Extensions of Term. ------------------ a. This Agreement shall automatically renew itself for an additional five years ("First Option Period") unless terminated by GSI or Retailer with written notice to the other party no later than ninety (90) days prior to the expiration of the then current Term, as such Term may have been extended. b. After the expiration of the First Option Period, this Agreement shall automatically renew itself from year to year unless terminated by GSI or Retailer with written notice to the other party no later than ninety (90) days prior to the expiration of the then current Term, as such Term may have been extended. 3. OBLIGATIONS AND RIGHTS OF THE PARTIES ------------------------------------- 3.1 Creation of Retailer's Web Site. ------------------------------- a. GSI, at its own expense, shall create, maintain and operate a Web Site for the Retailer on the Web in accordance with the specifications attached to the Web Site Development Agreement. In connection therewith, simultaneous herewith, Retailer and GSI shall execute the Web Site Development Agreement. b. The Web Site shall contain the Retailer's E-Commerce Shopping Experience, the URL of which shall be www.Sportchalet.com. In addition, the Web Site shall contain any or all of the following information, as the Retailer shall elect: corporate information (e.g. historic background, mission statement, names of officers and directors), store locator, public financial information (e.g. SEC filings, annual reports), press releases, community programs, employment opportunities for in store or corporate positions, frequently asked questions and a "contact us" section. c. Following the initial completion of the Web Site, the Retailer shall have the right to update the content thereof as follows: 1) Employment Opportunities - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to update the employment opportunity portion of the Web Site as frequently as it desires. 2) Public Financial Information - a) Stock Prices - Will be updated daily by a link to another web site offering such information. b) SEC Filings and Annual Reports - SEC filings will be provided by a link so long as the government makes such filings available at no cost. Both SEC filings and annual reports will be provided only if available in portable document format; in the alternative, GSI will provide the consumer with a form in order to request such information from the Retailer's investor relations department. 3) Store Locators - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 4) Frequently Asked Questions - Will be updated by GSI monthly and Retailer provides GSI with such information. 5) Corporate Information - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 6) Community Programs - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 7) Press Releases - GSI will provide the Retailer with the technology necessary so that the Retailer will be able to post press releases on its Web site as it desires. Retailer shall defend and hold harmless GSI, its employees, officers and directors, agents and representatives from any liability arising from the posting of press releases on the Retailer's Web Site. 8) "Contact Us" Section - Will be updated by GSI as such information changes and Retailer provides GSI with such information. 9) Automatic Links to Retailer's Secondary Web Site -Such links shall be established in accordance with the parameters set forth in paragraph 8 below. d. GSI's use of Retailer's URL, Retailer's Content and any other Retailer information or material, whether confidential or not, shall be granted and continue only for the Term of this Agreement and shall not be used beyond the end of such Term, and shall be subject to the confidentiality provisions of paragraph 7 of this agreement, and shall be subject to Retailer's approval and quality control rights contained in this agreement and Website Development Agreement. 3.2 Creation and Maintenance of the Retailer's Web Site. ---------------------------------------------------- GSI shall create and maintain a Web Site at all times during the term for the Retailer. Commencing with the execution of this Agreement and continuing through the Term, as may be extended, the Retailer, shall cooperate with GSI so as to enable GSI to create and maintain for the Retailer's consumers, the Retailer's Web Site. In connection therewith, the Retailer shall supply GSI with the Product Information as that term is defined in the Web Site Development Agreement) required pursuant to the terms of the Web Site Development Agreement. This shall include, but not be limited to printed marketing information, data, text, audio files, video files, graphics, copy and other assets necessary to create and maintain the Retailer's Web Site as more fully set forth on Attachment A to the Web Site Development Agreement. Notwithstanding anything contained herein to the contrary, and except as it relates to Special Make - Ups, it shall be GSI's responsibility to produce and maintain all camera ready product information including high resolution images and appropriate product description text and data for use on the Retailer's Web Site and Retailer shall have no responsibility therefor. With respect to Special Make -Ups, Retailer shall be responsible to provide GSI with sample product only in a sufficient amount of time to allow GSI to produce camera ready product information. 3.3 Sale of Merchandise on the Retailer's Web Site. ----------------------------------------------- a. GSI, on behalf of the Retailer shall offer for sale on the Retailer's Web Site all Categories of merchandise offered for sale by the Retailer in its Land Based Stores. Notwithstanding anything contained herein to the contrary, in no event shall GSI offer firearms and related accessories for sale on the Retailer's Web Site. In addition, if, as a result of a legitimate stated business purpose, should Retailer disapprove of any item listed for sale on the Retailer's Web Site, and which is not offered for sale in the Retailer's Land Based Stores, upon five days prior notice from Retailer, GSI shall remove such item from the Retailer's Web Site. To protect Retailer's image with its current customers of selling top quality high specialty sporting goods equipment and apparel, all such items shall be of a quality equal to or greater than that carried in Retailer's Land Based Stores. GSI shall promptly e-mail Retailer the same product information that will appear on the Retailer's web site. b. Within the Categories, GSI, on behalf of the Retailer shall have the right to offer for sale: 1) current in line merchandise ordered by the Retailer from its vendors; and 2) current in line merchandise not carried by the Retailer in its Land Based Stores, but available in those Categories carried by the Retailer; provided however, no products will be offered for sale on Retailer's Web Site which a) the Retailer would not be authorized by the manufacturer to sell in its Land Based Stores; and b) would not be in accordance with the same type, quality and price of merchandise carried by the Retailer in its Land Based Stores; and 3) Special Make-Ups (manufactured for the Retailer exclusively and not carried on any other retailer's web site; and 4) Closeout Merchandise (but only if the Retailer sells Closeout Merchandise in its Land Based Stores; otherwise GSI shall not offer for sale Closeout Merchandise on the Retailer's Web Site); and 5) Markdowns of Retailer's inventory; and 6) Gift Certificates for On Line Merchandise ("On Line Gift Certificates") [Items 1) through 6) are hereinafter referred to as "On Line Merchandise"] c. Retailer agrees to the addition of logical line extensions to existing product bases specifically within the existing Retailer vendor structure; provided that the individual item within such line extension is approved by Retailer in advance of use on the website. For example, if Retailer sells 15 of the 40 tents manufactured by a particular vendor in its land-based stores, and GSI desires to add the remaining 25 inline tents to its on-line mix, such approval will not be withheld by Retailer. However, should the vendor offer GSI closeouts, seconds, blemishes, or customer returns to GSI to sell on-line, Retailer would not automatically grant permission, as this is not in keeping with Retailer's stated goal of selling top of the line, first run, high quality merchandise. In addition, product manufactured by the same vendor under a private label program for another retailer, such as Coleman manufactured tents sold as a private label under the Ozark Trails brand in Wal-Mart stores, would not be permitted in the on-line store. d. In addition, GSI, on behalf of the Retailer, shall offer for sale on the Retailer's Web Site, Land Based Stores Gift Certificates for merchandise available in the Retailer's Land Based Stores. Notwithstanding anything contained herein to the contrary, Retailer may elect not to offer Land Based Stores Gift Certificates for sale on its Web Site by notifying GSI of its decision not to do so no later than August 1, 1999. e. In addition, GSI, if requested by Retailer, will advertise on the Retailer's Web Site merchandise that is for sale only in the Retailer's Land Based Stores provided, 1) No later than February 1, 2000 the item has a minimum retail selling price of $20.00; and 2) Retailer furnishes GSI with a description and sample of the item to be advertised. f. In those instance where a written dealer agreement prohibits Retailer from selling a particular vendor's merchandise except in the Retailer's Land Based Stores, Retailer shall use its reasonable efforts to obtain all consents required to permit the sale of such merchandise on the Retailer's Web Site, but until the required consent is obtained, GSI will comply and not offer the restricted merchandise for sale on the Web Site. 3.4 Prices of On-Line Merchandise. GSI, on behalf of the Retailer, shall ----------------------------- offer the On-Line Merchandise for sale on the Retailer's Web Site on the following basis: a. If the On-Line Merchandise is the same as offered for sale in the Retailer's Land Based Stores, then it shall be offered for sale on-line [*]. In order to facilitate this pricing, Retailer shall [*]. GSI agrees to [*]. Retailer acknowledges that this is essential in order to [*]; and b. If the On-line Merchandise is not offered for sale in the Retailer's Land Based Stores, then, [*] will use reasonable efforts to [*]; provided however, upon five days prior notice to [*]. c. If the Retailer offers the same merchandise at different prices in its Land Based Stores, then [*], but in no event at [*]. d. GSI, on behalf of Retailer, shall add and collect all applicable taxes and GSI, at its discretion and for its own account, may add reasonable handling and delivery charges which are consistent with industry practice. e. In order to ensure that GSI may [*] Retailer shall furnish GSI with copies of all [*] at least [*] prior to its [*]. f. The parties shall cooperate with each other so that the entire pricing process between GSI and Retailer may be accomplished electronically. g. The parties agree that from time to time, the Retailer may carry an item of merchandise at [*]. In those instances, [*] shall have the right to [*]; provided however, GSI [*]. In such event, [*] shall have the right to request [*]. 3.5 GSI's Supply of On Line Merchandise. ----------------------------------- a. Invoicing and Shipping of On Line Merchandise. At such time as ---------------------------------------------- directed by GSI, the Retailer shall notify all of its vendors that 1) GSI is the Retailer's E - Commerce Outsourcing Manager; 2) the vendors, for the benefit of the Retailer, should sell their merchandise to GSI at the same prices, with the same Advertising Co-op and Discretionary Funds and on the same terms and conditions as they sell their merchandise to Retailer; and 3) such merchandise should be shipped and invoiced directly to GSI. The form of such notification shall be prepared by GSI and approved by Retailer, such approval not to be unreasonably withheld or delayed. In the event that a vendor deems it more efficient to invoice Retailer for such merchandise, then the Retailer shall place the order for GSI, invoice GSI at its net cost, and GSI shall pay Retailer within thirty days of shipment to GSI. In such instances, GSI shall also pay the Retailer its pro rata share (based upon that portion of the shipment purchased by the Retailer for GSI as it relates to the entire shipment received by the Retailer from that vendor) of the actual freight costs from the manufacturer to the Retailer's point of receipt and the actual freight costs from the Retailer's point of receipt to GSI's fulfillment facility. b. In Line Merchandise. The Retailer shall advise GSI, no later ------------------- than ten days after placing a purchase order with a vendor, of the Category, item ordered, net cost, Retailer's retail price and expected day of delivery to the Retailer's Warehouse. c. Special Make-Ups. No later than ten days after ordering Special ----------------- Make-Ups, Retailer shall advise GSI and furnish GSI with a sample of the Special Make-Ups and advise GSI of the net cost, color selection and size range. GSI shall have the right to purchase up to [*] per cent of the Special Make-Up, proportionately as to size and color, as ordered by the Retailer. GSI shall have five business days to advise Retailer whether it desires to order any of the Special Make-Ups and, if so, the quantity thereof. Special Make-Ups shall be exclusive to Retailer's Web Site and shall not be made available for sale on the web site of any other retailer for whom GSI operates a web site. Retailer shall supply GSI with a sample of the Special Make-Ups ordered by GSI for sale on the Retailer's Web Site within ten days of obtaining such sample. Notwithstanding anything contained herein to the contrary, GSI recognizes that there may be instances where there will be an insufficient amount of a particular item of Special Make-Ups to warrant selling such merchandise on line. In such instances the Retailer shall not be required to offer such Special Make-Ups for sale on line; provided however, the Retailer acknowledges that with respect to Special Make-Ups ordered by Retailer for chainwide distribution, GSI does not anticipate that this will occur on a regular basis and this should be the exception rather than the usual occurrence. Further, GSI acknowledges that the Retailer may not be able to offer for sale on line certain Special Make-Ups which are not available in all of the Retailer's stores. d. Closeout Merchandise. Retailer shall advise GSI no later than --------------------- five business days after issuing a purchase order for Closeout Merchandise from a vendor. At that time, Retailer shall advise GSI of the cost, sizes and colors available and GSI shall have five business days after receipt of such information to advise Retailer that it will purchase, at Retailer's net cost, up to [*] per cent of the Closeout Merchandise to be received by Retailer, proportionately as to size and color, as ordered by Retailer. Inasmuch as Retailer operates one Warehouse Outlet Store specializing in one of a kind buys, including individual sales representatives' merchandise, any items ordered for this Warehouse Outlet or any future Warehouse outlet location are excluded from as this provision. Notwithstanding anything contained herein to the contrary, GSI recognizes that there may be instances where there will be an insufficient amount of a particular item of Closeout Merchandise to warrant selling such merchandise on line. In such instances the Retailer shall not be required to offer such items of Closeout Merchandise for sale on line; provided however, the Retailer acknowledges that GSI does not anticipate that this will occur on a regular basis and this should be the exception rather than the usual occurrence. Any Closeout Merchandise purchased by GSI from Retailer shall be offered for sale by Retailer only on the Retailer's Web Site. e. Markdowns. In the event that the Retailer has available ---------- Markdowns which it would like to offer for sale on its Web Site solely at its discretion, it shall notify GSI and ship the Markdowns to GSI's fulfillment center. The Markdowns shall be shipped to GSI on consignment only. Retailer shall set the selling prices on the Markdowns; provided however, that GSI on behalf of the Retailer shall have no obligation to offer any Markdowns for sale on the Retailer's Web Site which GSI deems, in its sole discretion, would be inappropriate. Retailer shall retain [*] of the selling price received from the sale of any Markdowns when sold (excluding applicable taxes and shipping and handling charges; the remainder of [*] plus shipping and handling charges shall be retained by GSI as its management fee in connection with the sale of the Markdowns. Any applicable tax collected by GSI on behalf of Retailer shall be deposited into a separate account as more fully discussed in paragraph 3.9 below, and remitted by GSI to the appropriate taxing authority. GSI shall account to Retailer for the sale of any Markdowns at the same time that it accounts to the Retailer for sale of other On Line Merchandise on the Retailer's Web Site. The amount of proceeds from the sale of Markdowns shall not be considered the sale of On Line Merchandise for the purpose of determining the amount to be remitted to Retailer pursuant to paragraph 3.8 below. f. With the exception of Markdowns and Land Based Gift Certificates, which shall be governed by the provisions of paragraphs 3.5 e. and 3.6 hereof respectively, and as part of the performance of its obligations under this Agreement, GSI shall sell to the Retailer, and the Retailer shall purchase from GSI all merchandise to be sold by the Retailer on the Retailer's Web Site at a price equal to [*] per cent of the selling price (excluding applicable taxes, shipping and handling) at which such On Line Merchandise is sold to the Retailer's On Line Customer. g. Attached hereto as Schedule "2" is a schedule which summarizes the various levels of management fees to be paid to GSI by the Retailer depending upon the type of On Line Merchandise sold on the Retailer's Web Site. h. The parties shall cooperate with each other so that to the maximum extent commercially reasonable the entire process set forth in paragraphs 3.5 a, b, c, d and e between GSI and Retailer may be accomplished electronically. 3.6 Gift Certificates ----------------- a. Land Based Stores Gift Certificates. Subject to Retailer's ------------------------------------ rights set forth in 3.3 c. above, GSI, on behalf of the Retailer, shall offer for sale on the Retailer's Web Site gift certificates for merchandise in Retailer's Land Based Store. In order that Retailer may fulfill customer orders for Land Based Stores Gift Certificate, Retailer shall furnish GSI such gift certificates on an "as requested" basis. The Retailer shall retain [*] per cent of the proceeds received by the Retailer form the sale of Land Based Stores Gift Certificates (excluding applicable taxes) and the balance shall be paid to GSI as its management fee with respect to the sale of such gift certificates and to cover all costs, including credit card fees. GSI shall account to Retailer for all sales of such certificates at the same time as it accounts to Retailer for the sale of other On Line Merchandise. The amount of proceeds from the sale of Land Based Stores Gift Certificates shall not be considered the sale of On Line Merchandise for the purpose of determining the amount to be remitted to Retailer pursuant to paragraph 3.8 below. b. Online Gift Certificates. GSI on behalf of the Retailer shall ------------------------ offer for sale on the Retailer's Web Site gift certificates for On Line Merchandise. GSI shall supply the On Line Gift Certificates which shall not be redeemable for merchandise purchased in the Retailer's Land Based Stores. From each On Line Gift Certificate purchased, the Retailer shall retain as its operating income from the sale of the On Line Gift Certificate, [*] per cent of the proceeds received by the Retailer from such sale (excluding applicable taxes) and the balance shall be paid to GSI as its management fee with respect to the sale of such gift certificates and to cover all costs, including credit card fees and the cost of the merchandise redeemed with the gift certificate. GSI shall account to Retailer for all sales of such certificates at the same time as it accounts to Retailer for the sale of other On Line Merchandise. The amount of proceeds from the sale of On Line Gift Certificates shall not be considered the sale of On Line Merchandise for the purpose of determining the amount to be paid to GSI pursuant to paragraph 3.8 below. The proceeds shall be accounted for pursuant to paragraph 3.9 below; provided however, should the On Line Gift Certificate be redeemed for Markdowns, then at such time as the On Line Gift Certificate is redeemed, GSI shall pay to the Retailer an additional amount equal to [*] of the On Line Gift Certificate redeemed and the Retailer shall supply the Markdown item requested by the customer. 3.7 Processing of Customer Orders. GSI shall be solely responsible for ----------------------------- processing all on line merchandise sales business for the Retailer. GSI will promptly process E -Commerce Orders received from the Retailer's Web Site. GSI shall take the customer's credit card number at such time as the merchandise is ordered. GSI, on behalf of the Retailer's account discussed in paragraph 3.9 below, shall charge the customer's credit card with the amount of the order (including taxes, shipping and handling) at the time the merchandise is shipped. The order will appear on the customer's credit card under the name of "www.sportchalet.com" and proceeds from the sale shall be deposited into Retailer's designated bank account at the bank designated by GSI for full credit to Retailer. GSI will make all arrangements for delivery of merchandise purchased on the Retailer's Web Site. a. Retailer and GSI shall jointly agree to the formula to be used for computing shipping and handling charges for customer orders submitted to GSI as the outsource operator of www.sportschalet.com. Such approval will not be unreasonably withheld or delayed. b. As of February 1, 2000 GSI will track and report to Retailer the elapsed time between customer orders and submission for picking ("Front -Office Processing Time") for each customer order. GSI will provide Retailer with reports of average and longest Front- Office Processing Time monthly by the 15/th/ of the month following. c. Retailer and GSI shall agree to the back order policies that GSI will administer for customer orders submitted to GSI as the outsource operator of www.sportchalet.com. Such approval will not -------------------- be unreasonably withheld or delayed. d. GSI will provide a facility for the acceptance of Visa/MasterCard/American Express and all other credit card accepted by the other clients of GSI, but excluding proprietary cards of each such retailer. 1) GSI will perform authorization, settlement, and post- settlement operations independently of Retailer; 2) GSI will at all times operate in conformance with the Operating Rules and Regulations of each national credit card; 3) GSI will implement procedures as required by each national credit card for merchants engaged in non-face- to-face transactions; 4) GSI will at its own cost install and staff an inbound toll-free number to respond to inquiries and customer service issues from credit card customers. The customer service facility shall be staffed no fewer hours per week than the total number of hours that Retailer stores are open; 5) GSI will submit appropriate data with each credit card settlement file to enable display on the customer's credit card statement of the merchant name "Sportchalet.com" and the toll free number described in subsection 4) above. e. Order Fill Performance Standards 1) Service level standards-GSI will guarantee that more than [*] of items ordered will be shipped to customers within the Visa/MasterCard time limit or credit authorizations; 2) GSI will provide service level reports monthly to Retailer by the 15/th/ of each month following, and 3) Any two months in a 12-month period where GSI fails to meet the standard shall be considered a breach of this Agreement by GSI. f. Customer Service Standards 1) GSI will submit to Retailer for review and approval the policies that GSI will implement with respect to customer returns and refunds. GSI will not make any substantive changes to these policies and procedures without prior consent from Retailer. Approval will not be unreasonably withheld or delayed. 2) GSI will provide a systematic capability to track and monitor customer service activity to include such information as original order number, order date, reason for the customer contact, and resolution. a) For phone calls, time to answer and call duration; b) For e-mail, elapsed time from customer send time/date to GSI response time/date. 3) GSI will provide Retailer with summary reporting of customer service activity each month by the fifteenth day of the following month. 3.8 GSI's Management Fee For and in consideration of the services to be -------------------- rendered by GSI to Retailer hereunder, GSI shall be paid a management fee ("Management Fee") equal to [*] per cent of the sales price of all On Line Merchandise for all On Line Merchandise sold, excluding however, the sale of Markdowns, Land Based Gift Certificates and On Line Gift Certificates, the management fee for which shall be governed by paragraphs 3.5 e. and 3.6 a. and 3.6 b., respectively. GSI's Management Fee, including any management fee to GSI as a result of the sale of Markdowns, Land Based Gift Certificates or On Line Gift Certificates, shall be paid pursuant to the provisions of paragraph 3.9 below. 3.9 Payment and Accounting from the Sale of On - Line Merchandise. -------------------------------------------------------------- a. The proceeds from the sale of On Line Merchandise on the Retailer's Web Site shall be deposited into a bank account ("Web Account") in the Retailer's name at GSI's designated bank ("Bank"). The Web Account shall be owned by the Retailer; provided however, the only signatures on such account shall be employees of GSI and GSI's designated employees shall have an irrevocable power of attorney, and such power will be exercised solely in conformity with this agreement and for the benefit of GSI and Retailer pursuant to this Agreement's terms governing the Web Account and the Tax Account, as hereinafter discussed, unless this Agreement is terminated in accordance with the terms of this Agreement. No other funds shall be deposited into the Web Account except for credit and debit card proceeds from the sale of On Line Merchandise on Retailer's Web Site and no other sums shall be deposited into the Tax Account except applicable taxes collected from the sale of merchandise on the Retailer's Web Site. From each transaction, GSI shall be paid daily the sum of a) the cost of the On Line Merchandise sold to Retailer's On Line Customers, b) GSI's Management Fee and c) GSI's shipping and handling charge to the On Line Customer (collectively, "GSI's Entitlement"), if any. Retailer shall give the Bank instructions that will stand for the term of this Agreement, as such term may be extended, to a) debit the Web Account daily for the amount owed to GSI, as so directed by GSI, and to credit GSI's designated account for such amount; and b) to debit the Retailer's Web Account and to credit the Retailer's especially established tax account ("Tax Account") daily with the amount of any applicable tax collected. Any interest earned on the Web Account and Tax Account shall belong solely to GSI, and any interest earned on the Tax Account shall belong solely to GSI and any charges imposed by the bank as a result of such accounts, shall be paid by GSI. Prior to termination of this Agreement, as permitted herein, Retailer shall have no right to unilaterally offset from GSI's Entitlement any amount which Retailer may believe is owing to Retailer from GSI and Retailer shall obtain from its secured lenders a waiver to claim a security interest in either the Web Account or the Tax Account. In addition, Retailer shall give the Bank instructions that will stand for the term of this Agreement, as such term may be extended, to wire to the Retailer the amount determined ("Retailer's Operating Income") by GSI to be remaining from the sale of On Line Merchandise from the Retailer's Web Site after the deduction of GSI's Entitlement on the fifteenth day following the end of each month. The amount of the Retailer's Operating Income each month shall be certified by GSI's chief financial officer and a copy of the accounting shall be furnished to the Retailer at the same time that the Retailer's monthly Retailer Proceeds are wired to the Retailer. By way of example only, if Retailer sells a pair of athletic shoes on its Web Site for one hundred ($100.00) dollars, plus a five ($5.00) dollar shipping and handling charge, the total deposit to the Bank account is one hundred and five ($105.00) dollars. Retailer's Operating Income shall equal [*] after payment of the Retailer's cost of On Line Merchandise, GSI's management fee and the shipping and handling charge. GSI's Entitlement shall be [*]([*] of $100.00, [*] of $100.00 and [*]. The Retailer's Operating and GSI's Entitlement shall also take into account the amounts owing pursuant to paragraph 3.5 e. and 3.6 above and 3.11 below. GSI shall be responsible to collect any applicable sales taxes resulting from the sale of On Line Merchandise, if any. GSI shall complete all required sales tax forms and submit them on the Retailer's behalf. GSI shall indemnify, save and hold harmless Retailer from any taxes, interest and penalties which may arise as a result of GSI's failure to pay or timely pay any sales tax resulting from the sale of On Line Merchandise. GSI shall be in charge of any audit conducted by any taxing authority as it relates to the sale of On Line Merchandise. b. Within ninety (90) days of the end of each calendar year, GSI shall provide the Retailer with a statement certified by its independent auditors and setting forth the total On Line Sales, the Retailer's Operating Income and GSI's Entitlement therefrom. For a period of two years after the Retailer receives such certified statement from GSI, Retailer, on one occasion, shall have the right to audit the books and records of GSI with respect to the Retailer's Operating Income and GSI's Entitlement paid during the calendar year to which the certified statement relates. Such audit shall be conducted at GSI's principal office located in the continental United States on two weeks prior notice to GSI. In the event that the audit reveals that the Retailer's Operating Income were understated, GSI shall within thirty days of completion of the audit, pay to the Retailer the remaining balance of the Retailer's Operating Income for the period audited plus interest at the prime rate of interest as provided for in The Wall Street Journal on the date of the audit's certification. In addition, in the event that the audit reveals that the Retailer's Operating Income is understated by more than [*] per cent for the calendar year in question, GSI shall pay the additional amount owing and pay for the reasonable audit costs. In the event GSI's annual accounting is off more than [*]in two successive years, or more than [*] in one year, Retailer shall have the option to terminate this Agreement by giving to GSI written notice of its election to do so no later than thirty days after receipt of the Audited results. In addition, GSI will provide Retailer a statement certified by independent auditors setting forth the total On Line Sales, Retailer's Operating Income, and GSI's Entitlement therefrom within forty-five (45) days of the conclusion of retailers fiscal year ending 3/31/xx each fiscal year for the prior 12 months. c. GSI takes full responsibility for all credit card chargebacks for all occurrences resulting from an on-line purchase, and will accordingly operate with merchant ID numbers different from those used by Retailer for its land-based business. d. GSI warrants to Retailer that, [*], no other Full Line Sporting Goods Retailer (as hereinafter defined) which has or will enter into an E - Commerce Management Agreement with GSI [*]. As used herein, a "Full Line Sporting Goods Retailer" shall refer to a sporting goods retailer which carries in its Land Based Stores merchandise in a variety of Categories such as (by way of example only) baseball, basketball, golf, bowling, football, hockey, aerobics and fishing). In the event that GSI [*]. 3.10 Service of On Line Customers. GSI shall be responsible for providing ---------------------------- all customer service relating to sales from the Retailer's Web Site, including one click ordering, which shall be provided in a manner consistent with that provided by other reputable on line retailers representative of the then current state of the art E-Commerce standards. 3.11 Return of On Line Merchandise. Retailer's return policy for On Line ------------------------------ Merchandise shall be consistent with the Retailer's return policy for its Land Based Stores. With each shipment of merchandise, GSI shall specifically instruct all customers that all merchandise purchased on line may not be returned to the Retailer's Land Based Stores and may only be returned in accordance with the instructions enclosed; provided however, in the rare instance a customer desires to return On Line Merchandise to one of the Retailer's Land Based Stores, the Retailer, in order to maximize customer relations, shall accept such merchandise for return in accordance with the Retailer's return policy, and return the merchandise to GSI's fulfillment center. GSI shall pay the Retailer for the full amount credited to the customer by Retailer's land-based stores with respect to such merchandise, as well as an amount equal to the Retailer's freight cost for returning the merchandise to GSI's fulfillment center. Should GSI receive the return of On Line Merchandise, GSI shall reimburse the Retailer the amount of the GSI Entitlement paid to GSI with respect to that transaction, as well as applicable tax refunded to the On Line Customer. 3.12 On Line Customer Loyalty Programs. GSI shall have the right to --------------------------------- establish On Line Customer Loyalty Programs in order to encourage continued on line purchases. The On Line Customer Loyalty Programs established by GSI for Retailer shall be consistent with that program established by Retailer for use in its Land Based Stores. In addition, the Customer Loyalty Programs established by GSI shall be used only in connection with on line purchases and Retailer's customer loyalty programs shall be used only in connection with purchases at the Retailer's Land Based Stores. Notwithstanding anything contained herein to the contrary, GSI shall not establish any On Line Customer Loyalty Programs without first obtaining the approval of Retailer, which approval shall not be unreasonably withheld. Retailer shall respond to a request for such approval from GSI within fourteen days of receiving the request. In the event Retailer fails to timely respond, GSI shall furnish Retailer with a notice marked "second request". If Retailer does not respond within two business days, GSI's request shall be deemed granted. GSI will be solely and completely responsible for all costs occurring as a result of creating and operating an on line customer loyalty program. 3.13 Cross Promotion. GSI shall have the right to use Retailer's URL, name --------------- and logo to cross promote Retailer's Web Site with other businesses in order to promote Retailer's Web Site; provided however, GSI shall not promote Retailer's Web Site on any other sporting good retailer's web site, or on any other web site which would generally be considered immoral, pornographic, political or offensive. Notwithstanding anything contained herein to the contrary, GSI shall not establish any Cross Promotions without first obtaining the approval of Retailer, which shall not be unreasonably withheld. Withholding such consent in order to protect or preserve Retailer's reputation and/or intellectual property rights shall not be deemed unreasonable. Retailer shall respond to a request for such approval from GSI within seven days of receiving the request. In the event Retailer fails to timely respond, GSI shall furnish Retailer with a notice marked "second request". If Retailer does not respond within two business days, GSI's request shall be deemed granted. 3.14 Price Matching. In the event that the Retailer, at its Land Based -------------- Stores offers a "Price Matching" policy, GSI's management shall have the right to use and adopt such policy for the Retailer's Web Site; provided however, GSI shall not under any circumstance, advertise or market the availability of this policy, and may offer it to customers only in GSI's sole discretion. 3.15 Project Manager. Promptly after the execution of this Agreement, but --------------- in no event later than sixty days after such execution, Retailer, at its expense, shall hire or reassign one of its existing employees, to act as Project Manager to work exclusively with GSI in creating and maintaining the Retailer's Web Site. Commencing with the Project Manager's hiring and continuing through the Term, as may be extended, the Project Manager shall be the Retailer's liaison with GSI and shall be responsible for supplying GSI with the Retailer Content and such other information as may reasonably be required of the Retailer in order to create and maintain the Retailer's Web Site in the most efficient manner. 4. ON-LINE DATA AND DATABASES -------------------------- 4.1 Ownership of Data. Any and all data ("Customer Data") related to ----------------- Retailer's customers (including customer names and other identifying information such as addresses, phone numbers and e-mail addresses, credit card numbers, and descriptions of the items and quantities of items purchased) that is collected by GSI shall be owned [*]. 4.2 Ownership of Databases. All data structures, data schema, database ---------------------- dictionaries, attributes, validation tests for each element, table sizes and formats, access requirements, data dependencies and other elements involving the storage of Data on the Web Site and all refinements, updates, releases, improvements and enhancements thereto, all intellectual property rights embedded therein and all applications created specifically for use of the data and Retailer Content (collectively, the "Databases") shall, as between GSI and Retailer, be the sole and exclusive property of GSI. 4.3 Delivery of Customer Data to Retailer. From time to time, but no more ------------------------------------- than four (4) times per calendar year, GSI shall provide to Retailer any or all of the following information collected from the Customer Data: a. customer's names; b. customer's addresses; c. customer's phone number; d. customer's e-mail address; e. items purchased; f. amount spent; g. information as to how customer reached Web Site; h. refers; i. unique visitors to site; j. page views per site; k. top ten most viewed pages; l. bottom ten least viewed pages; m. time of day traffic patterns; n. sales by product and brand; customer comments and complaints (shall be furnished on a monthly basis); additional information at GSI's discretion. GSI shall provide the Customer Data to Retailer in a mutually agreeable, commercially standard format, either via diskette, CD-ROM, electronically, or via another mutually agreeable method. GSI shall use commercially reasonable efforts to ensure that the Customer Data provided to Retailer accurately and completely reflects the Customer Data in the Web Site, but GSI shall have no obligation to check the accuracy, validity or integrity of the Customer Data and except as set forth in this Section 4.3, the Customer Data is provided "AS-IS". 4.4 Restrictions on Use of Customer Data. Each party shall treat the ------------------------------------ Customer Data as Confidential Information of the other party in accordance with the provisions of Article 7. Neither party may sell, lend, or license the Customer Data to third parties without the prior written consent of the other party, which consent may be withheld at the sole discretion of the other party; provided however, Retailer grants to GSI the right to combine all Retailers' Customer Data to form trends and overall research as to the on line shopping habits of consumers. In addition, Retailer may use the Customer Data relating to Retailer in connection with the operation of its Land Based Stores only. As set forth above, Retailer may not sell, lend or license the Customer Data to any third party without GSI's consent, which consent may be withheld by GSI in its sole discretion. The parties acknowledge that the Customer Data referred to herein refers only to Customer Data gathered from On Line Customers and shall not be applicable to customer data gathered by the Retailer from its customers at its Land Based Stores. Retailer, as co-owner of the online customer database, will be provided with the results of such data aggregation and analysis, in the form of comparative profiles. GSI will provide the Retailer online customer profile as well as the aggregated online customer profile. In addition, Retailer will be allowed to promote to its own database of land based customers. 5. ADVERTISING AND MARKETING ------------------------- The Retailer shall, commencing no later than October 1, 1999, and continuing during the Term, and any extensions thereof, at no cost to GSI provide for Complete URL Integration in its advertising and marketing by: 5.1 prominently including as part of all of its print media (including but not limited to newspapers, periodicals, circulars, billboards, print materials, letterhead, business cards, shopping bags, cash register receipts and arena advertising) its URL, www.Sportschalet.com.; provided however, Retailer shall not be required to include the URL on print materials such as letterhead, business cards, shopping bags and cash register receipts until it exhausts its present supply of each such item at which time it will promptly replace that item with items containing the Retailer's URL; and 5.2 prominently including, at the end of its television advertising, its URL; and 5.3 mentioning its URL at the end of all radio advertisements; provided however, Retailer may request GSI's consent not to use the URL in up to [*] per cent of its annual radio advertisements, which consent GSI shall not unreasonably withhold. Notwithstanding anything contained herein to the contrary, Retailer shall be permitted to exhaust its existing supply of each item of printed materials before instituting the Complete URL Integration with respect to that item. 6. ADVERTISING CO-OP AND DISCRETIONARY FUNDS ----------------------------------------- 6.1 During the Term and any extensions thereof, GSI shall use all Advertising Co-op and Discretionary Funds received by GSI directly from vendors as a result of the purchase of merchandise for the Retailer's Web Site exclusively, to promote the Retailer's Web Site, as GSI shall elect. All such proposed advertisements shall be submitted to the Retailer for the Retailer's approval as to content and design along with placement information. The Retailer shall have seven days from receipt to either approve or disapprove. In the event that the Retailer disapproves, it shall advise GSI specifically as to why and GSI shall attempt to address the Retailer's concerns and resubmit the proposal to Retailer for its approval, which shall again have forty eight hours from receipt to approve or disapprove. This procedure shall continue until the advertisement has been approved or replaced. In all instances where approval is requested of the Retailer, in the event the Retailer does not respond within the aforementioned forty-eight hours, Retailer shall be deemed to have granted approval. 6.2 Any Advertising Co-op and Discretionary Funds received by the Retailer through the Retailer's purchase of product for GSI, ultimately for the Retailer's Web Site, may be retained by the Retailer; provided however, Retailer acknowledges that it is preferential for Retailer's vendors to sell to GSI directly and both Retailer and GSI shall request Retailer's vendors to do so. 6.3 Retailer shall retain from vendors any non item driven marketing funds; however, Retailer shall use its reasonable efforts to obtain from vendors incremental marketing funds based upon an increase in the sale of the vendor's merchandise on the Retailer's Web Site. Any such incremental marketing funds shall belong to GSI and shall be used in accordance with paragraph 6.1 above. 7. CONFIDENTIALITY --------------- 7.1 Confidential Information. Each party acknowledges that, in connection ------------------------ with the performance of this Agreement, it may receive Confidential Information of the other party. For the purpose of this Agreement, "Confidential Information" shall mean information or materials that is clearly marked "confidential" or the Receiving Party knows has reason to know is the confidential or proprietary information of the Disclosing Party, either because a) such information is marked or otherwise identified by the Disclosing Party as confidential or proprietary, or b) such information has commercial value and is not generally known in the Disclosing Party's trade or industry. Confidential Information shall include, without limitation: (a) concepts and ideas relating to the development and distribution of content in any medium; (b) trade secrets, drawings, inventions, know- how, software programs, and software source documents; (c) information regarding plans for research, development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublished financial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; and (d) existence of any business discussions, negotiations or agreements between the parties. 7.2 Confidentiality. The Receiving Party hereby agrees: (i) to hold and --------------- maintain in strict confidence all Confidential Information of the Disclosing Party and not to disclose it to any third party; and (ii) not to use any Confidential Information of the Disclosing Party except as permitted by this Agreement or as may be necessary for the Receiving Party to perform its obligations under this Agreement. The Receiving Party will use at least the same degree of care to protect the Disclosing Party's Confidential Information as it uses to protect its own Confidential Information of like importance, and in no event shall such degree of care be less than reasonable care. The obligations and restrictions imposed by this Article 7 shall not expire. 7.3 Exceptions. Notwithstanding the foregoing, the parties agree that ---------- Confidential Information will not include any information that: (i) was in the public domain at the time it was communicated to the Receiving Party by the Disclosing Party; (ii) entered the public domain subsequent to the time it was communicated to the Recipient by the Disclosing Party through no fault of the Receiving Party; (iii) was in the Receiving Party's possession free of any obligation of confidence at the time it was communicated to the Receiving Party by the Disclosing Party; (iv) was rightfully communicated to the Receiving Party by a third party, free of any obligation of confidence, subsequent to the time it was communicated to the Receiving Party by the Disclosing Party; (v) was developed by employees or agents of the Receiving Party independently of and without reference to any information communicated to the Receiving Party by the Disclosing Party; or (vi) was communicated by the Disclosing Party to an unaffiliated third party free of any obligation of confidence. In addition, the Receiving Party may disclose the Disclosing Party's Confidential Information in response to a valid order by a court or other governmental body, as otherwise required by law, or as necessary to establish the rights of either party under this Agreement; provided however, in the event that the Receiving Party receives a demand to disclose such Confidential Information in connection with a legal action or proceeding, the Receiving Party, if possible, shall first notify the Disclosing Party of the demand in order to provide the Disclosing Party an opportunity to seek a protective order. 7.4 Confidentiality of this Agreement. Retailer acknowledges that the --------------------------------- terms and conditions of this Agreement constitute Confidential Information which shall be governed by the terms of this Article 7. 7.5 Confidentiality of Customer Data and Retailer's Policies. -------------------------------------------------------- GSI acknowledges that it will be receiving from Retailer, and generating from the performance of its obligations under this Agreement, Confidential Information critical to the Retailer's business and concerning Retailer's customers and various information concerning the operation of Retailer's business including but not limited to net purchasing prices, advertising co-op and discretionary fund amounts, specific marketing plans, specific on line sales and delivery dates of merchandise. GSI recognizes its obligation to keep such information confidential. Therefore, all GSI employees who may have access to any such Confidential Information will be required to execute confidentiality agreements with GSI with respect to which Retailer will be a third party beneficiary and GSI shall use its best efforts to enforce the terms thereof. Such confidentiality agreements will specifically provide that the employee shall not discuss with any other retailers who may or may not be customers of GSI, any information concerning the Retailer or its customers. Further, GSI acknowledges it is associated with other subsidiaries of GSI's parent corporation, Global Sports, Inc. GSI therefore represents and warrants to Retailer that it will establish a "Need to Know" policy with respect to such Confidential Information and only disseminate such Confidential Information to those employees and members of GSI's management who have a specific need to know such Confidential Information. In those instances, prior to the dissemination of such Confidential Information to those individuals, they will be required to execute confidentiality agreements with GSI with respect to which Retailer will be a third party beneficiary specifically prohibiting such disclosure of such Confidential Information to anyone, except as otherwise permitted by the terms of this Agreement. 8. EXCLUSIVE WEB AGREEMENT ----------------------- During the Term and any extensions thereof, the Retailer, any subsidiary of the Retailer, shall not sell any sporting goods merchandise on the Internet (including the Web), nor use itself or allow a third party to use its URL, name or logo on the Web for the purpose of facilitating the sale of merchandise on the Web other than through GSI. Notwithstanding anything contained herein to the contrary, should GSI be unable to satisfy the Retailer's web site requirements with respect to specialized matters such as corporate information, or special services the Retailer shall have the right to establish a second web site incorporating the name "Sport Chalet" which GSI shall provide a link from the Retailer's Web Site; provided however, under no circumstances shall Retailer sell any merchandise on such second web site. 8.1 GSI will include in the website development agreement at no charge to Retailer, links that will enable Retailer's customers to link to a product expert, which expert shall be selected and engaged solely by Retailer; provided however, that should any such product expert a) be engaged in e-commerce; b) be linked to another site which is engaged in e-commerce; or c) recommend that a consumer patronize another retailer's Land Based Stores, then GSI, shall have the absolute right, which right shall not be subject to dispute by Retailer, not to link the Retailer's website to the web site of such product expert. Links will be provided by GSI to such product experts or vendors for informational purposes and not for the purpose of conducting any e-commerce business. 8.2 Inasmuch Retailer's land based business includes services and guarantees not specifically related to the actual selling of traditional, off the shelf retail merchandise, such as equipment rental, SCUBA Boat Charters, individually customized team sales equipment and apparel, and other services, Retailer reserves the right to create its own web page(s) to allow customers to reserve such equipment and/or charters, order customized team products, and take advantage of other land-based services. These pages will be consistent with the look and feel of the GSI-created www.sportchalet.com web -------------------- site, and furthermore these pages would in no way offer for sale similar or competing product available on the GSI web site; provided however, that should any such product expert a) be engaged in e- commerce; b) be linked to another site which is engaged in e-commerce; or c) recommend that a consumer patronize another retailer's Land Based Stores, then GSI, shall have the absolute right, which right shall not be subject to dispute by Retailer, not to link the Retailer's website to such other web site Links will be provided by GSI to such product experts or vendors for informational purposes and not for the purpose of conducting any e-commerce business. Retailer will bear the cost of developing and maintaining these sites. Retailer will not be obligated to let GSI operate these particular web pages as/when GSI is capable of doing so. At Retailer's request, GSI will provide a link to these additional pages. In addition, GSI will support and implement Retailer's ongoing program of providing links from its web site to those web sites of Retailer's vendors, as well as links to sports related publications such as newspaper and magazine web sites, along with weather forecasting web sites so as to add value to a customer's on-line shopping experience by providing more detailed product information, descriptions and information. These vendor sites will not be E-Commerce enabled nor provide links to competitive E-Commerce sites; provided however, that should any such product expert a) be engaged in e-commerce; b) be linked to another site which is engaged in e-commerce; or c) recommend that a consumer patronize another retailer's Land Based Stores, then GSI, shall have the absolute right, which right shall not be subject to dispute by Retailer, not to link the Retailer's website to such other web site Links will be provided by GSI to such product experts or vendors for informational purposes and not for the purpose of conducting any e-commerce business. 9. URL, NAME AND LOGO USAGE ------------------------ 9.1 During the Term, the Retailer hereby grants to GSI the right to use, copy, and display the Retailer's name, logo and URL and such other names and logos as the Retailer owns and as may be listed on Schedule "1" attached hereto and made a part hereof, on the Retailer's Web Site, on invoices and packing slips, in connection with credit card charges, a toll free Web site customer service telephone line, and generally in connection with the operation of GSI's on-line business; provided however, GSI shall have no right to modify Retailer's name, logo or URL without Retailer's consent. Such Schedule shall be modified from time to time during the Term to add any new names and logos which the Retailer may register with the United States Patent and Trademark Office. 9.2 GSI has the right to use a toll-free number for web site customer service and credit card calls. This number may be used on the web site, invoices, packing lists, and credit card statements. 10. REPRESENTATIONS AND WARRANTIES. ------------------------------- 10.1 Retailer represents and warrants that at all times during the Term hereof or any extensions thereof: a. it has or will have the full right to grant to GSI the right to use its URL, names and logos as discussed in Article 9 above, including its Domain Name; and b. Retailer is authorized to advertise and market on its Web Site the brands of merchandise to be sold thereon; and c. Prior to the Launch Date, if not already completed, Retailer shall register and maintain the Domain Name "sportchalet.com" with Network Solutions or any similar successor entity. Retailer shall list itself as the owner for the Domain Name "sportchalet.com" and Retailer shall list GSI as the administrative and technical contact and billing contact for the Domain Name "sportchalet.com"; d. neither the Retailer nor its secured lenders shall at any time have any interest in the Web Account or Tax Account. 10.2 Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 10.3 GSI represents and warrants that during the term of the contract, it is financially responsible for all costs of operating the Retailer's web site, except as specified in Section 8.2. 11. INDEMNIFICATION --------------- 11.1 Retailer, at its own cost and expense, shall defend, indemnify and hold harmless GSI and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys fees and court costs) arising as a consequence of GSI providing services pursuant to this Agreement a) from or related to a claim that GSI infringes a third party copyright, trademark or trade secret due to use of Retailer's tradename or any other name set forth on Schedule 1 to this Agreement; with the exception of modifications made to Retailer's marks, names or logos made by GSI without Retailer's consent or b) from Retailer's gross negligence, willful or intentional misconduct. 11.2 GSI, at its own cost and expense, shall defend, indemnify and hold harmless Retailer and any of its officers, directors, employees or agents from and against all damages, expenses, fines, penalties, exactments, liabilities and other costs (including reasonable attorneys fees and court costs arising a) from a claim made by any consumer that is related in any way to the Retailer's Web Site or GSI's services to Retailer provided pursuant to this Agreement, but excluding a claim for which GSI would have the right to indemnification pursuant to Paragraph 11.1 above, or b) from GSI's gross negligence, willful or intentional misconduct, or c) arising as a consequence of GSI providing or failing to provide services pursuant to this Agreement. 11.3 Retailer shall have sole control of any defense of any claim made pursuant to Section 11.1 above, but GSI shall cooperate with Retailer in providing such defense. 11.4 GSI shall have sole control of any defense of any claim made pursuant to Section 11.2 above, but Retailer shall cooperate with GSI in providing such defense. 11.5 Any party seeking indemnification shall notify the other party as soon as possible after such party seeking indemnification becomes aware of the claim. 11.6 GSI will process all credit card orders through its own processor under it's own merchant ID number - chargebacks shall be the sole responsibility of GSI. 11.7 Retailer maintains a risk management program with respect to its land based businesses which includes, without limitation, the use of written waivers and releases from customers of certain products and the obtaining of written indemnification agreements from vendors of certain products. Accordingly, the parties agree: a. Retailer shall provide GSI from time to time with a list of those products for which it requires a waiver or release from the customer and the form of waiver and release it currently uses; b. GSI shall design the web site such that a customer is required to give valid and binding legal assent to a waiver and release substantially equivalent to that used by Retailer in its land based business before he or she may purchase these products; c. GSI shall obtain from vendors of merchandise it purchases for sale on Retailer's web site indemnities of the nature and type then being furnished by such vendors to Retailer with respect to its land based business; provided, however, that such indemnities so obtained by GSI shall, by their terms, protect both GSI and Retailer; d. GSI shall comply with any requirements of the vendor indemnities mentioned above to the end that such indemnities are enforceable in accordance with their terms. 12. INSURANCE --------- 12.1 GSI, at its expense, shall maintain in full force and effect products liability insurance coverage for merchandise sold on Retailer's Web Site. The amount of product liability insurance will be equal to the amount Retailer requires of its vendors, with at least a minimum of [*], and shall be updated as required. Such policy shall insure Retailer and name GSI as an additional insured. 12.2 GSI shall deliver to Retailer certificates of insurance which stipulate that no less than ten days notice will be given to Retailer prior to the termination of the policy. 13. TERMINATION ----------- 13.1 Termination for Cause by Either Party. This Agreement may be ------------------------------------- terminated by either party in the event of any material breach of any of the terms and conditions of this Agreement by the other party which breach continues in effect after the breaching party has been provided with written notice of breach and ninety (90) days to cure such breach and fails to cure such breach. As used herein, "material breach" shall mean a failure by a party to this Agreement to perform any of its obligations the effect of which would substantially impair the value of this Agreement to the other party. By way of example only and not by way of limitation, GSI's failure to operate the Retailer's Web Site according to commercially reasonable standards as they are established today and as they may continue to develop during the Term of this Agreement or failure to provide customer service equivalent to that provided by other reputable on line retailers, would be a material breach of this Agreement by GSI. Retailer's failure to comply with its obligations pursuant to Section 5 above, or failure to provide GSI with the Retailer Content necessary to construct and/or maintain the Retailer's Web Site, would be a material breach of the Retailer's obligations under this Agreement. 13.2 Measures of Performance. In addition, the web site will need to have a ----------------------- large assortment of merchandise as depicted in Retailer Land Based Stores. The Retailer recognizes time will be required to build an assortment on-line which accurately represents the land-based stores. The percentage of on-line vs. land based SKU assortments will be as follows: Oct. 1, 1999 - the lesser of [*] or [*] of the Retailer's active land- based SKUs. Oct. 1, 2000 - the lesser of [*] or [*] of the Retailer's active land- based SKUs. Oct. 1, 2001 - the lesser of [*] or [*] of the Retailer's active land- based SKUs. The above thresholds have been agreed upon based upon the Retailer having [*] active land based SKUs.Both parties acknowledge that if vendors restrict or prohibit the sale of their merchandise on line, thereby significantly reducing the number of SKUs available for sale on line, then the parties will renegotiate the thresholds set forth above, acting in good faith. GSI will be required to report SKU levels monthly by the 15/th/ of the month following, and during any month in a twelve-month period where GSI fails to meet the standard, this failure will be considered to be a breach (without requirement of notice by Retailer). GSI's SKU count of offered SKU's may include items that are listed on the web site with the notation, "available in retail stores only. 13.3 Termination for Cause Only by GSI. GSI may terminate this --------------------------------- Agreement by giving sixty days prior written notice to Retailer of its election to terminate upon the occurrence of any of the following events: a. any representation or warranty contained herein becomes materially false or misleading; or b. a material change in the Retailer's business or business policies as determined by GSI in its sole reasonable judgment. 13.4 Termination for Cause by Retailer. Retailer may terminate --------------------------------- this agreement by giving 60 days prior notice to GSI upon the occurrence of: a. a default under 13.2 above; or b. if during the first three years of the Term of this Agreement, there is a change in control of the ownership of GSI, including a spin off as a public company so that Michael G. Rubin ceases to function as the chairman of the board or chief executive officer of both GSI and its parent corporation, Global Sports, Inc.; or c. there is a material adverse change in GSI's financial condition directly causing an uncured material breach and/or filing pursuant to Chapter 7 or 11 of the Bankruptcy Code. 13.5 Termination Without Cause by Either Party. In the absence of a ----------------------------------------- material breach, this Agreement may only be terminated by the expiration of the Term, as may be extended pursuant to Section 2.3 above. 14. LIMITATIONS UPON LIABILITY -------------------------- UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS' USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS' RELIANCE ON OR USE OF INFORMATION, SERVICES OR MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE UNDER THIS AGREEMENT FOR AN AMOUNT THAT EXCEEDS, IN THE AGGREGATE THE AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. IN ADDITION, RETAILER SHALL BE ENTITLED TO SEEK EQUITABLE RELIEF FROM THE COURT. THE REMEDIES SET FORTH IN THIS ARTICLE 14 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN TWELVE (12) MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 15. PROPERTY RIGHTS AND OWNERSHIP ----------------------------- The Retailer's Web Site shall consist of, and shall operate in conjunction with, multiple elements, all of which are subject to certain intellectual property rights. The parties' respective rights with respect to such elements shall be as set forth below. For purposes of this Agreement, the term "Ownership" shall refer to ownership of all right, title and interest in and to the respective elements, including, but not limited to, all patent, copyright, trade secret, trademark and any other similar intellectual property rights therein, as applicable. 15.1 Retailer's URL shall be owned solely by the Retailer; 15.2 Retailer's Web Site shall be owned solely by GSI; 15.3 Software developed for the Retailer's Web Site, shall be owned solely by GSI subject to any authorizations to use and approvals obtained by the Retailer and granted to GSI. 15.4 Upon Retailer's request, GSI will provide Retailer with digital images and copy for each and every item offered on the Retailer web site at no charge. 15.5 Retailer's Content shall be owned exclusively by Retailer. 15.6 Customer Data shall be owned jointly by Retailer and GSI. With respect to intellectual property owned by each of them, Retailer and GSI shall both have rights associated with the ownership of intellectual property, including the right to copyright web sites and domains. 16. GSI'S TWENTY DAY PERIOD TO EXECUTE ---------------------------------- Retailer shall execute this Agreement first and deliver such executed Agreement to GSI which shall thereafter have twenty days from receipt to countersign the Agreement. During such twenty-day period, Retailer shall have no right to withdraw the agreements which it executed and delivered to GSI. 17. DISCONTINUANCE OR REGULATION OF THE INTERNET. --------------------------------------------- Retailer acknowledges and agrees that the Internet (including without limitation the Web) is a network of private and public networks, that GSI has no control over the Internet, and that GSI is not liable for the discontinuance of operation of any portion of the Internet or possible regulation of the Internet which might restrict or prohibit the operation of the Web site. 18. FORCE MAJEURE ------------- In the event that either party is unable to perform any of its obligations under this Agreement or to enjoy any of its benefits because of any event beyond the control of the affected party including, but not limited to, natural disaster, acts of God, actions or decrees of governmental bodies or failure of communications lines or networks (a "Force Majeure Event"), the party who has been so affected shall promptly give written notice to the other party and shall use its best efforts to resume performance. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the duration of such Force Majeure Event. 19. WAIVER ------ No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified. 20. PRESS RELEASES -------------- All voluntary public announcements concerning the transactions contemplated by this Agreement shall be mutually acceptable to both GSI and Retailer. Unless required by law, neither GSI on the one hand, and Retailer on the other hand, shall make any public announcement or issue any press release concerning the transactions contemplated by this Agreement without the prior written consent of GSI or Retailer, respectively. With respect to any announcement that any of the parties is required by law to issue, such party shall, to the extent possible under the circumstances, review the necessity for and the contents of the announcement with the other party before issuing the announcement; provided however, if either party cannot obtain the consent of the other party in a timely manner, the party required to comply with law may issue the press release or public announcement without obtaining the consent of the other party. 21. GOVERNING LAW ------------- In the event that either party commences any proceeding pursuant to this Agreement, the rights and obligations of the parties hereto, and any claims or disputes thereto, shall be governed by and construed in accordance with the laws of the State of Delaware (excluding the choice of law rules thereof). 22. ASSIGNMENT ---------- Retailer shall have no right to assign this Agreement without the prior written consent of GSI; provided, that Retailer shall have the right to assign this Agreement to any person or entity that acquires or succeeds to all or substantially all of such party's business or assets upon written notice to GSI. In addition, should GSI assign this Agreement to a third party and not as part of the sale of all or substantially all its e-commerce business, then Retailer shall have the right to approve the assignee to ensure that the assignee is experienced in the operation of a web site. 23. COUNTERPARTS ------------ This Agreement may be signed in several counterparts, each of which shall be deemed an original, and all of which when taken together, shall be deemed a complete instrument. 24. ENTIRE AGREEMENT ---------------- This Agreement, including the Web Development Agreement, represents the entire agreement of the parties with respect to the subject matter hereof and may not be modified, except in writing, executed by all of the parties hereto. This Agreement supersedes all prior writings of the parties with respect to this subject matter. 25. JURISDICTION ------------ Should either party commence any proceeding pursuant to this Agreement, the exclusive jurisdiction and venue of any such dispute shall be in the United States District Court for the Disrict of Delaware 26. INDEPENDENT CONTRACTORS ----------------------- The relationship of the parties herein shall hereunder be that of independent contractors and nothing herein shall be construed to create a joint venture or partnership. 27. SIGNING ------- The parties executing this Agreement represents and warrants that they have full corporate authority to do so. 28. BINDING EFFECT -------------- This Agreement shall be binding upon the parties hereto, their successors and permitted assigns. 29. HEADINGS -------- Section headings contained in this Agreement are inserted for convenience or reference only and shall not be deemed to be a part of this Agreement for any other purpose. 30. DISCLAIMER OF WARRANTIES ------------------------ EXCEPT AS TO THE EXPRESS WARRANTIES CONTAINED IN THIS AGREEMENT, GSI MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, IN FACT OR IN LAW WITH RESPECT TO THE CREATION AND MAINTENANCE OF THE PRODUCT AND SERVICES PROVIDED FOR HEREUNDER, AND DISCLAIMS ALL OTHER WARRANTIES. RETAILER ACKNOWLEDGES AND AGREES THAT GSI HAS NOT MADE, NOR DOES HEREBY MAKE, ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED. 31. NOTICES ------- Any notices or writings to be sent hereunder shall be in writing and shall be by personal delivery, facsimile transmission if accompanied by e-mail and/or telephone transmission or by certified or registered mail, return receipt requested, and shall be deemed given upon the earlier of actual receipt, five (5) days after deposit in the mail, or receipt by sender of confirmation of facsimile transmission. Notices shall be sent to the following addresses (or such other address as either party may specify in writing): IF TO GSI: 555 South Henderson Road King of Prussia, PA 19406 Attention: President Copy to: David S. Mandel, Esq. Astor Weiss Kaplan & Rosenblum, LLP The Bellevue Broad & Walnut Streets 6th Floor Philadelphia, Penna., 19102 PH. 215-893-4959 FAX 215-790-0509 IF TO RETAILER: 920 Foothill Boulevard La Canada, CA., 91011 Attention: President/Chief Operating Officer Copy to: James G. Jones, Esq. Knapp, Marsh, Jones and Doran 515 South Figueroa Street Los Angeles, CA 90071 PH. (213) 627-8471 FAX (213) 627-7897 32. GRANT OF WARRANT TO RETAILER ---------------------------- Upon execution of this Agreement by Retailer, and acceptance thereof by GSI, prior to the announcement of GSI's e-commerce initiative, GSI will deliver to Retailer a warrant to purchase shares of Global Sports, Inc., the parent corporation of GSI, in accordance with the terms set forth in the Warrant Term Sheet attached hereto as Exhibit "B". IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to enter into this Agreement with intent to be legally bound hereby, the date and year first above written. GLOBAL SPORTS INTERACTIVE, INC.: SPORT CHALET, INC.: BY: /s/ Michael Rubin BY: /s/ Craig Levra ---------------------------- ---------------------------- Title: President Title: President/C.O.O. ------------------------ ------------------------- Date: 4/1/99 Date: 3/31/99 ------------------------- --------------------------- EXHIBIT A WEB SITE DEVELOPMENT AGREEMENT ------------------------------ THIS Web site Development Agreement ("Agreement") dated the ____ day of ______________, 1999 (the "Services Start Date") by and between Global Sports Interactive, Inc., a Pennsylvania corporation (hereinafter referred to as "GSI") with an address of 555 South Henderson Road, King of Prussia, PA 19406 and Sport Chalet, Inc., a Delaware corporation (hereinafter referred to as "Retailer") with an address of 920 Foothill Boulevard, La Canada, California, 91011. W I T N E S S E T H: WHEREAS, GSI and Retailer have entered into a E - Commerce Agreement pursuant to which GSI shall provided certain E - Commerce services to Retailer, including the development and maintenance of a web site; and WHEREAS, the parties have elected to enter into this Agreement in order to set forth the terms and conditions pursuant to which GSI shall develop a web site for Retailer. NOW, THEREFORE, in consideration of the mutual promises and terms herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged; and intending to be legally bound hereby, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Domain Name" means the domain name specified for the Web site by Retailer from time to time, each of which is owned by the retailer. The initial Domain Name is specified in Attachment B. 1.2 "E-Commerce Agreement" means the E-Commerce Agreement by and between Retailer to which this Agreement is attached as Exhibit A. 1.3 "Features Set" means the requirements set forth in Attachment B, as amended or supplemented in accordance with this Agreement. 1.4 "Intellectual Property Rights" means any and all now known or hereafter known tangible and intangible (a) rights associated with works of authorship throughout the universe, including but not limited to copyrights, moral rights, and, (b) trademark and trade name rights and similar rights, (c) trade secret rights, (d) patents, designs, algorithms and other industrial property rights, (e) all other intellectual and industrial property rights (of every kind and nature throughout the universe and however designated) (including logos, "rental" rights and rights to remuneration), whether arising by operation of law, contract, license, or otherwise, and (f) all registrations, initial applications, renewals, extensions, continuations, divisions or reissues hereof now or hereafter in force (including any rights in any of the foregoing). 1.5 "Milestone Delivery Schedule" means the schedule for development of the Web site set forth in Attachment B. 1.6 "GSI Content" means product information, text, pictures, sound, graphics, video and other data and assets supplied by GSI, as such materials may be modified from time to time. 1.7 "GSI Products" means, collectively, the GSI Tools, the GSI Content and the GSI Work Product. 1.8 "GSI Tools" means any tools, both in object code and source code form, which GSI has already developed or which GSI independently develops or licenses from a third party, excluding any tools which GSI creates pursuant to this Agreement. By way of example, GSI Tools may include, without limitation, toolbars for maneuvering between pages, search engines, Java applets, and ActiveX controls. 1.9 "Production Schedule" shall mean the schedule agreed upon by the parties for the production of the Retailer's Web site, including the delivery of the Retailer Content and GSI Content by Retailer to GSI. 1.10 "Retailer Content" means the Domain Name, and the contents of the Retailer's web site pages that describe or are unique to Retailer and does not include product information that is GSI's responsibility. Such retailer content includes, without limitation, Retailer's trademark, copyrights, trade secrets, and confidential information. 1.11 "Services" means the services provided by GSI hereunder to develop, host and maintain the Web site, in accordance with this Agreement. 1.12 "Web site" means, collectively, the E - Commerce Shopping Experience and the Retailer Content made available on web pages under the Domain Name. 1.13 "GSI Work Product" means all HTML files, Java files, graphics files, animation files, data files, technology, scripts and programs, both in object code and source code form, all documentation and any other deliverable used by GSI to create the Web site. 1.14 "Product Information" shall mean the camera ready image, and descriptive text associated with each and every item of merchandise offered for sale on the web site, plus any sound graphics, or video that may also be supplied by GSI for some or all of these same items of merchandise. 2. WEB SITE DEVELOPMENT SERVICES 2.1 Delivery of Initial Retailer Content. As soon as reasonably possible, GSI and Retailer shall agree upon a Production Schedule for the delivery by Retailer to GSI of the Retailer Content that Retailer intends for GSI to incorporate into the Web site. The parties acknowledge that Retailer will be able to deliver certain "static" information, such as store locations, promptly to GSI, and other product information, such as certain merchandise to be sold on the Retailer's Web site, at a later date closer to the Launch Date. The Retailer Content shall be in the format(s) designated by GSI as set forth on Attachment C hereto. Upon Retailer's request, GSI shall assist Retailer in the conversion of the Retailer Content into an acceptable form for use by the Web site. 2.2 Web site Development Services. At no cost to Retailer, GSI shall provide design, programming and other consulting Services as specified in Attachment B to create the Web site. GSI will provide the Web site to Retailer in accordance with the Milestone Delivery Schedule. 2.3 Project Liaisons. Each party's primary contact for development efforts shall be the project liaisons specified in Attachment B or the person otherwise designated in writing by Retailer or GSI, as the case may be. 2.4 Acceptance. GSI shall make available final versions of the Web site for Retailer's review and acceptance. Retailer shall have fifteen (15) days to review and evaluate the Web site (the "Acceptance Period") to assess whether it substantially meets the Features Set. During the Acceptance Period, Retailer shall identify in writing to GSI all aspects of the Web site that do not substantially conform to the Features Set. Upon receipt of Retailer's list of non-conformities, GSI shall correct promptly all such non-conformities so that the Web site does substantially conform to the Features Set and GSI shall extend the Acceptance Period for a second ten (10) day Acceptance Period during which Retailer shall confirm that all non-conformities that were previously identified have been corrected. Notwithstanding the foregoing, the Web site shall be deemed accepted upon the earlier of: (i) its use in commerce, provided however, GSI shall not use the Retailer's Web site in commerce without the Retailer's consent, which shall not be unreasonably withheld or delayed; (ii) Retailer's failure to articulate any non-conformities during an Acceptance Period; or (iii) Retailers acceptance of the Web site; or (iv) GSI's demonstration that all non- conformities have been corrected to Retailer's reasonable satisfaction. 2.5 The entire web site design, as viewed on-line by customers, including typeset, coloration, backgrounds, and overall look are subject to Retailer's approval, which shall not be unreasonably withheld. 3. WEB HOSTING AND MAINTENANCE SERVICES Following Retailer's acceptance of the Web site pursuant to Section 2.4, GSI shall, at no cost to Retailer, provide the following web hosting and maintenance Services: 3.1 Hosting Services. GSI shall load the Web site onto server(s) that are connected to the Internet and readily accessible via the Web through use of the Domain Names. GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner. 3.2 Retailer Content. GSI shall upload all Retailer Content, including updates, and product information to the Web site within seven days of delivery to GSI. Upon GSIs prior written consent, Retailer may electronically transmit or upload Retailer Content directly to the Web site. 3.3 Maintenance Services. GSI shall maintain the Web site so that it functions in a reasonably error free manner. Upon notification of an error in the Web site or of a non-conformity between the Web site and the Features Set, whether from Retailer or from any user of the Web site, GSI shall promptly commence an investigation into the reported error, and GSI shall, upon reproducing such error, use reasonable commercial efforts to correct such error in a timely fashion. During such Maintenance Services, GSI shall ensure that the Web site is functional and ready to process transactions in a reasonably efficient manner, provided, however, GSI may, during low usage periods, -------- ------- temporarily block access to the Web site to perform Web site maintenance during periodic maintenance windows. GSI shall use its best efforts to notify Retailer not less than forty-eight hours in advance of any planned maintenance of the Retailer's Web site which will cause GSI to close down the Web site. In the event that GSI is forced to close the Retailer's Web site as a result of an emergency, GSI shall use its best efforts to advise Retailer of the emergency within twenty-four hours after it occurs. 4. ADDITIONAL SERVICES 4.1 Search Engine Registration. When GSI makes the Web site available to Retailer, GSI shall register the Web Site and Domain Name with all applicable search engines, but at least the top five search engines as rated by frequency of use at GSI's discretion. 4.2 Domain Name Assistance. If requested by Retailer, GSI shall cooperate with Retailer in registering the Domain Name with InterNIC. Retailer shall own all right, title and interest in and to the Domain Name and all Intellectual Property Rights related thereto. Unless otherwise specified by Retailer, GSI shall, at Retailer's expense, assist Retailer in registration of the Domain Name. 5. CONSIDERATION In consideration for Retailer entering into the E Commerce Agreement, at no cost to Retailer, GSI shall perform the Services set forth in this Agreement. 6. TERM AND TERMINATION 6.1 Term. The term of this Agreement shall be conterminous with the term of the E- Commerce Agreement and controlled by the provision of Section 2 thereof. In absence of a material breach, this Agreement may only be terminated by the expiration of the term. 6.2 Termination. Termination of this Agreement shall be governed by the terms of Article 13 of the E - Commerce Agreement. 7. WARRANTIES AND DISCLAIMERS. 7.1 Cross Warranties. Retailer warrants as to the Retailer Content, and GSI warrants as to the GSI Products, that any materials and updates or enhancements there to shall not: (a) infringe on the Intellectual Property Rights of any third party or any rights of publicity or privacy; (b) violate any law, statute, ordinance or regulation (including without limitation the laws and regulations governing export control, unfair competition, antidiscrimination or false advertising); (c) be defamatory, trade libelous, unlawfully threatening or unlawfully harassing; (d) be obscene, pornographic, political, or indecent. 7.2 Representations and Warranties of Each Party. Each party represents and warrants to the other party that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or of any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each party in accordance with its terms. 7.3 Year 2000. GSI warrants that the Web site shall not suffer any material adverse effect as a result of a failure in any GSI Work Product or GSI Tools to be Y2K Compliant. A product or service which is "Y2K Compliant" is one that provides accurate results using data having date ranges spanning from January 1, 1980 through December 31, 2019 (the "Y2K Period"). By way of example and not of limitation, "Y2K Compliant" means, with respect to a product or service, that it can currently and shall, during the Y2K Period, continue to (a) manage and manipulate data involving all dates within the Y2K Period (including the fact that the year 2000 is a leap year) without functional or data abnormality related to such dates; (b) manage and manipulate data involving all dates within the Y2K Period without inaccurate results related to such dates; (c) have user interfaces and data fields formatted to distinguish between dates within the Y2K Period; and (d) accurately identify and either reject or correct invalid date data during the Y2K Period. Provided a party otherwise complies with this Section 7.4, it will not be liable to the other party for any failure to perform obligations under this Agreement to the extent such failure arises from a failure to be Y2K Compliant that (1) affects the non-performing party's customers or suppliers or (2) is beyond its reasonable control (e.g., a failure to be Y2K --- Compliant affecting a governmental entity). 7.4 Disclaimer. THE WARRANTIES MADE IN THIS SECTION 7 ARE MADE IN LIEU OF ALL OTHER EXPRESS WARRANTIES, WHETHER ORAL OR WRITTEN AND EXCEPT AS SET FORTH IN THIS SECTION 7, GSI AND RETAILER MAKE NO OTHER REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 7.5 GSI warrants that the web site developed by GSI for Retailer will be fit for E-Commerce as defined in the E-Commerce Management Agreement and will be equivalent to the then current, state of the art standards of web sites selling on-line merchandise. 8. OWNERSHIP 8.1 Ownership of GSI Products. Retailer hereby acknowledges and agrees that as between Retailer and GSI, GSI owns all right, title and interest in and to the GSI Products and all applicable Intellectual Property Rights thereto. This Agreement confers no ownership interest in the GSI Products to Retailer. 8.2 Ownership of Retailer Content. GSI hereby acknowledges and agrees that as between GSI and Retailer, Retailer owns all right, title and interest in and to the Retailer Content and all Product Information as defined in paragraph 1.44 and all applicable Intellectual Property Rights thereto. Except for a limited non-exclusive license during the term to use the Retailer Content and product information solely to perform its obligations hereunder, this Agreement confers no ownership interest in the Retailer Content to GSI. This includes all content on each product page, and copy including, but not limited to, pictures, descriptions, features, benefits, about each and every item offered for sale on- line, to the extent Retailer provides such content and such content is not generally available elsewhere. 9. LIMITATION UPON LIABILITY. UNDER NO CIRCUMSTANCES SHALL GSI BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (REGARDLESS OF WHETHER SUCH DAMAGES ARISE OUT OF CONTRACTUAL, NEGLIGENCE OR OTHER LEGAL THEORIES) ARISING FROM OR RELATED TO RETAILER'S OR RETAILER'S CUSTOMERS USE OF OR INABILITY TO ACCESS ANY PART OF THE INTERNET OR RETAILER'S OR RETAILER'S CUSTOMERS RELIANCE ON OR USE OF INFORMATION, SERVICES OR MERCHANDISE PROVIDED ON OR THROUGH THE WEB SITE OR THE SERVICES, OR THAT RESULT FROM MISTAKES, OMISSIONS, INTERRUPTIONS, LOSS, THEFT, OR DELETION OF FILES, ERRORS, DEFECTS, DELAYS IN OPERATION, OR TRANSMISSION, OR ANY FAILURE OF PERFORMANCE. IN NO EVENT SHALL GSI BE LIABLE UNDER THIS AGREEMENT FOR AN AMOUNT THAT EXCEEDS, IN THE AGGREGATE THE AMOUNTS PAID TO RETAILER DURING THE TWELVE (12) MONTHS PRECEDING THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. SHOULD A MATERIAL FAILURE OCCUR, THE RETAILER HAS AT ITS SOLE DISCRETION, THE OPTION TO MODIFY THE TERM OF THE E-COMMERCE MANAGEMENT AGREEMENT TO A NEW TERM ACCEPTABLE TO RETAILER. THE REMEDIES SET FORTH IN THIS SECTION 9 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO RETAILER UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE IN ANY RESPECT FOR CLAIMS BROUGHT MORE THAN [*] MONTHS AFTER THE LAST ACT OR OMISSION GIVING RISE TO SUCH LIABILITY. 10. INDEMNITY. 10.1 Retailer Indemnity. Subject to Section 10.3, Retailer shall defend, indemnify and hold GSI harmless against any third party claim, action, suit or proceeding connected with or arising out of (i) Retailer's gross negligence, willful or intentional misconduct; or (ii) any breach by Retailer of the warranties set forth in Sections 7.1 or 7.2. 10.2 GSI Indemnity. Subject to Section 10.3, GSI shall defend, indemnify and hold Retailer harmless against any third party claim, action, suit or proceeding connected with or arising out of: (i) GSI's gross negligence, willful or intentional misconduct; or (ii) any breach by GSI of the warranties set forth in Sections 7.1 or 7.2. 10.3 Mechanic of Indemnities. The indemnifying party's obligations are conditioned upon the indemnified party: (a) giving the indemnifying party prompt written notice of any claim, action, suit or proceeding for which the indemnified party is seeking indemnity; (b) granting control of the defense and settlement to the indemnifying party; and (c) reasonably cooperating with the indemnifying party at the indemnifying party's expense. 11. MISCELLANEOUS. 11.1 Incorporation of Certain Provisions of the E-Commerce Agreement. Sections 7, 8, 12, and Sections 17 through 29, inclusive, of the E-Commerce Agreement are hereby incorporated in their entirety into this Agreement. 11.2 Interpretation of Agreements. With respect to the subject matter hereof, the E-Commerce Agreement shall control any conflict between the terms of this Agreement and the E-Commerce Agreement. 11.3 Definitions. Any terms not specifically defined in this Agreement shall be construed in accordance with the definitions given such terms in the E- Commerce Agreement, or if such terms are not defined in the E-Commerce Agreement, then such terms shall be construed in accordance with their every day, common meaning. 12. MEASURE OF PERFORMANCE. GSI shall be responsible to comply with the provisions of Paragraph 13.2 of the E-Commerce Management Agreement, the terms of which are incorporated by reference. GSI's failure to do so shall be a default of both the E-Commerce Management Agreement and this agreement agreement permitting the Retailer to exercis its remedies set forth in paragraph 13.4 of the E-Commerce Management Agreement. IN WITNESS WHEREOF, each of the parties have caused their duly authorized representatives to enter into this Agreement to be effected on the Services Start Date. GLOBAL SPORTS INTERACTIVE, INC.: SPORT CHALET, INC.: By: /s/ Michael Rubin By: /s/ Craig Levra --------------------------- ------------------------- Title: President Title: President/C.O.O. ------------------------- ----------------------- Date: 4/1/99 Date: 3/31/99 -------------------------- ----------------------- Name: Michael Rubin Name: Craig Levra ------------------------- ------------------------ (Please type or print) (Please type or print) ATTACHMENT A RETAILER'S ASSET REQUIREMENTS Product Assets Elements: Product Assets should include names, UPCs and prices. No product photography or description are required. Store Locations Store location information should include address, phone number and fax numbers store manager's name, store hours (which vary by mall). Corporate Assets Corporate Assets may include the following: Press Releases Frequently Asked Questions Contact Information Jobs Information Community Programs Information Annual Reports Corporate Identity materials including logo All above information may be submitted at the retailer's discretion, excluding the corporate identity materials and logos, which are mandatory. * Please define corporate identity materials. Attachment B (TO BE COMPLETED) Domain Name: Format of Retailer Content: Project Liaisons: For GSE.C: For Retailer: T.B.A. FEATURES SET - ------------ 1. PRODUCT SEARCH 2. BROWSE CATEGORIES 3. RECOMMENDATION TOOLS 4. ADVANCE PRODUCT PRESENTATION 5. SHOPPING CART 6. GIFT GIVING FUNCTIONALITY 7. REMOTE PUBLISHING TOOLS FOR HUMAN RESOURCES AND PRESS ROOM 8. SALES TAX CONFIGURATION 9. PRODUCT REVIEWS 10. 24/7 CUSTOMER SUPPORT 11. AFFILIATE PROGRAM FUNCTIONALITY 12. ON LINE GIFT CERTIFICATES 13. LAND BASED STORES GIFT CERTIFICATES 14. STORE LOCATOR 15. FINANCIAL INFORMATION 16. FREQUENTLY ASKED QUESTIONS 17. COMMUNITY PROGRAMS 18. COMPANY PROFILE 19. ON LINE ORDER STATUS MILESTONE DELIVERY SCHEDULE: - --------------------------- TASK ESTIMATED COMPLETION DATE - ---- ------------------------- DISCOVERY AND PLANNING MARCH 15, 1999 COMMENCE ENGINE ENGINEERING JULY 31, 1999 ESTABLISH FULFILLMENT CAPABILITIES APRIL 30, 1999 RETAILER WEB SITE DEVELOPMENT JULY 31, 1999 QUALITY CONTROL REVIEW AND REVISIONS AUGUST 21, 1999 ALPHA TESTING SEPTEMBER 1, 1999 BETA (SOFT LAUNCH) SEPTEMBER 30, 1999 WEB SITE LAUNCH TO GENERAL PUBLIC OCTOBER 1 - DECEMBER 1,1999 MEDIA AND PROMOTIONS OCTOBER 1 - DECEMBER 1,1999 ATTACHMENT C ASSET SUBMISSION GUIDELINES This section details how to submit assets. Source Assets and Final Assets - ------------------------------------------------------------------ We require source files for all assets. This means if an image is originally constructed as a layered RGB Photoshop file at 100x500 pixels, we need that file, even if the final file is a flattened 4-bit GIF at 20x100. We allow the submission of final assets in some cases, but only by prior arrangement and only in addition to an up-to-date source file. All submitted assets are subject to review and verification by production staff. Media and Format - ------------------------------------------------------------------ We routinely receive assets in the following media and formats. Digital Media - ------------------------------------------------------------------ Media: SyQuest 44mb, 88mb, 200mb, CD-ROM (including PhotoCD), Zip, Jaz, 3.5" floppy. Format: Win16, Win-32, or Macintosh File Formats: Text: Raw, MS Word 95, RTF, HTML Bitmap Graphics: Photoshop, TIFF, PCD (PhotoCD), EPS, PICT (JPEG and GIF for final files only and only along with source files) PostScript Graphics: EPS, Illustrator (7.0 preferred) Video: QuickTime Audio: WAV, AIFF, MIDI Non-Digital Media - ------------------------------------------------------------------- Contact us to discuss needs and capabilities before submitting any non-digital assets. Asset Submission - ------------------------------------------------------------------ We prefer to receive assets via FTP (file transfer protocol) although we gladly accept assets via standard package delivery services (i.e., FedEx, USPS, UPS, etc.). Submission via FTP FTP Area: ftp.globalsportsinteractive.com Assets should be left in "Incoming" which is a level below the initial directory. Once assets have been transferred, e-mail confirmation is required. Submission via Package Delivery If you wish to submit assets via standard package delivery services, please address the package to this address: Address TBD If you are submitting hard assets like brochures, photographs, etc. please be sure to ship them in a reinforced container to prevent damage to the assets while in transit. If you are submitting digital media like SyQuests, Zip disks, Jaz disks, etc., be sure to ship them in a well-padded, reinforced container. SCHEDULE 1 TO E - COMMERCE AGREEMENT ------------------------------------ RETAILER'S TRADEMARKS, TRADENAMES AND LOGOS TO ----------------------------------------------- SPORT CHALET ------------ . Pacific Extreme . Sportland . Sport Chalet . Sport Chalet Divers . III (Romam Numeral Three) Sets . Classic Cottonworks . Classic Bodyworks SCHEDULE 2 TO E-COMMERCE MANAGEMENT AGREEMENT --------------------------------------------- TYPE OF ON RETAILER'S MANAGEMENT COST OF LINE GOODS OPERATING FEE MERCHANDISE - ---------- INCOME --- TO RETAILER ------ ----------- IN LINE [*]% [*]% [*]% SPECIAL MAKE-UPS [*]% [*]% [*]% CLOSEOUTS [*]% [*]% [*]% MARKDOWNS [*]%* [*]% N/A LAND BASED GIFT CERTIFICATES [*]%** [*]% N/A ON LINE GIFT CERTIFICATES*** [*]%**** [*]% [*]% * Retailer supplies markdown inventory ** Retailer supplies gift certificates *** Excluding those redeemed for Markdowns, which shall be treated as a sale of Markdowns as indicated above, **** GSI supplies gift certificate, and Retailer purchases inventory from GSI at such time as the certificate is purchased EXHIBIT "B" ----------- WARRANT TERM SHEET 1. Grant of Warrants As part of its E-Commerce Initiative, Global Sports, Inc. ("Global") intends to provide all sporting goods and/or athletic footwear and apparel retailers who execute a contract with Global to become part of Global's E-Commerce Initiative (the "Retailers") prior to the public announcement of such initiative the opportunity to receive warrants to purchase shares of Global common stock based on the terms and conditions outlined in this Term Sheet. 2. Amount of Warrants Warrants will be granted for a total exercise amount of [*]. Each Retailer will receive a warrant to purchase its pro rata share of the total exercise amount based on the proportion that such Retailer's net sales (including sales by such Retailer's franchisees, if any) for its most recent fiscal year bears to the total net sales of all Retailers participating in the E-Commerce Initiative (including sales by all such Retailers' franchisees, if any). 3. Security Warrant to purchase Global common stock. The period during which the warrant may be exercised will be one year from the date of public announcement of Global's E-Commerce Initiative. The warrant and the shares of common stock issuable upon exercise of the warrant will be offered and sold to the Retailers pursuant to an exemption from the Securities Act of 1933, as amended. As a result, such shares will be restricted securities within the meaning of that Act, and the resale of such shares will be subject to certain restrictions, including a one year holding period. 4. Warrant Exercise Price The warrant exercise price will be equal to the average of the closing bid and asked prices for a share of Common Stock for the 20 trading days ending on the trading day immediately preceding the public announcement of Global's E-Commerce Initiative. 5. Issuance of Warrant Global will issue the warrants to participating Retailers effective as of the public announcement of Global's E-Commerce Initiative which is expected to occur by March 31, 1999. 6. Confidentiality This Term Sheet is not to be disclosed to any party other than the employees or advisors of the Retailers receiving this Term Sheet who need to know the terms set forth herein for the purpose of evaluating such Retailer's participation in Global's E-Commerce Initiative. 7. Other This Term Sheet is only intended to serve as a general outline of the major terms of Global's proposed grant of warrants in accordance with the terms and conditions set forth herein. This Term Sheet does not constitute an offer or sale of the shares by Global. This Term Sheet does not constitute a commitment or binding agreement to grant such securities. such commitment or binding agreement can only be created by definitive agreements which will need to be negotiated and executed. EX-10.8 6 E-COMMERCE SERVICE AGREEMENT DATED MAY 14, 1999 Confidential Treatment has been requested with respect to portions of the agreement indicated with an asterisk [*]. A complete copy of this agreement, including the redacted terms, has been separately filed with the Securities and Exchange Commission. E-COMMERCE SERVICES AGREEMENT ----------------------------- THIS E-Commerce Services Agreement dated the 14th day of May, 1999 (the "Effective Date"), is by and between GLOBAL SPORTS INTERACTIVE, INC., a Pennsylvania corporation ("GSI"), and THESPORTSAUTHORITY.COM, INC., a Delaware corporation ("TSA.com"). WHEREAS, TSA.com has entered into an E-Commerce Agreement, a copy of which is attached hereto (the "E-Commerce Agreement"), with The Sports Authority, Inc., a Delaware corporation ("Retailer"), pursuant to which TSA.com has agreed to create and manage the e-commerce business of Retailer; and WHEREAS, GSI is in the business of creating, developing, operating, maintaining, advertising and promoting all aspects of e-commerce business; and WHEREAS, TSA.com desires to enter into an agreement with GSI pursuant to which GSI shall provide certain services to TSA.com, all upon the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I DEFINITIONS Terms used in this Agreement shall have the same meanings as set forth in Article I and elsewhere within the E-Commerce Agreement. ARTICLE II GSI SERVICES 2.1 Services. GSI agrees to perform all of the services and obligations on -------- behalf of TSA.com which TSA.com has agreed to perform for Retailer pursuant to Articles II - IX and Article 10.2 of the E-Commerce Agreement (the "Services"). 2.2 Payment and Accounting to GSI from TSA.com. For the services rendered ------------------------------------------ hereunder, TSA.com shall pay to GSI an amount equal to all of GSI's commercially reasonable actual direct costs (without markup) ("GSI's Direct Costs") of creating and operating the TSA Site and TSA.com's pro rata share of GSI's commercially reasonable actual indirect costs (without markup)("GSI's Indirect Costs"). The sum of GSI's Direct Costs and GSI's Indirect Costs shall be referred to as "GSI's Entitlement." GSI's Direct Costs shall include but not be limited to fulfillment costs (as discussed in Articles V and VI of the E- Commerce Agreement), credit card costs, direct employee costs including salary and benefits, front end development costs of the TSA Site and advertising and marketing costs. Indirect Costs shall be determined in accordance with GAAP and shall include, without limitation, GSI employee salary allocation, including benefits, overhead allocation of GSI including rent, taxes (other than income taxes) and utilities, GSI management personnel allocation, capital expenditures, including hardware and software costs, common engine allocation and hosting allocation. GSI shall not allocate or charge to TSA.com any sums as either GSI's Direct Costs or GSI's Indirect Costs if the underlying Services, costs or expenses were not directly or indirectly provided in relation to, or incurred for, the TSA Site or performed or paid by GSI on behalf of TSA.com or Retailer as otherwise provided in the E-Commerce Agreement. 2.3 TSA.com's Payments. GSI's Entitlement shall be calculated and charged by ------------------ GSI to TSA.com on a monthly basis. TSA.com agrees to pay GSI all charges within thirty (30) days after the receipt of any GSI Entitlement charges or invoice from GSI. ARTICLE III CUSTOMER DATA, FINANCIAL DATA AND DATABASES 3.1 Ownership and Use of Customer Data. TSA shall own all right, title and ---------------------------------- interest in and to the Customer Data, while TSA.com shall have an irrevocable right and license under the E-Commerce Agreement to use the Customer Data in its business operations. GSI shall adhere to all United States privacy and data protection laws applicable to its gathering, processing, storing and transmitting of Customer Data. GSI shall use its best efforts to adhere to all such privacy and data protection laws of all other nations and shall indemnify TSA for any loss, damage or expense caused by its failure to do so; provided, however, that the parties agree that such failure to do so shall not be deemed a breach of this Agreement. 3.2 Confidentiality of the Customer Data. Under the E-Commerce Agreement, both ------------------------------------ Retailer and TSA.com have agreed that each Party shall treat the Customer Data as Confidential Information of the other Party, that TSA.com may use Customer Data in the operation of the TSA Site and the E-Commerce Business, and that Retailer may use the Customer Data in the operation of Retailer's land based stores, but that neither Retailer nor TSA.com shall furnish, rent, sell or otherwise disclose Customer Data to any person or entity whatsoever without the prior written consent of the other Party. Further, under the E-Commerce Agreement, both Retailer and TSA.com have agreed not to furnish, rent, sell or otherwise disclose to any person or entity whatsoever any Financial Data, without the other Party's prior written consent and subject to such terms and conditions as the Parties may mutually determine. Notwithstanding the foregoing, Retailer and TSA.com have agreed that TSA.com may permit GSI, at no charge to GSI, to use Financial Data (but not Customer Data) to form trends and overall research as to the on-line shopping habits of consumers. GSI agrees to treat the Customer Data as Confidential Information and shall not furnish, rent, sell or otherwise disclose Customer Data to any person or entity whatsoever without the prior written consent of Retailer. 3.3 Ownership and Use of Financial Data. TSA.com, Retailer and GSI shall ----------------------------------- jointly and severally own all right, title and interest in and to the Financial Data, except that all use of the Financial Data by any of them shall always be subject to the restrictions set forth in the E-Commerce Agreement. 2 3.4 Ownership of Databases. GSI shall own all right, title and interest in and ---------------------- to the Databases, while Retailer and TSA.com may use the Databases subject to other restrictions set forth in the E-Commerce Agreement. ARTICLE IV CONFIDENTIALITY 4.1 Confidential Information. Each Party acknowledges that, in connection with ------------------------ the performance of this Agreement, it may receive Confidential Information of the other Party and that GSI may receive Confidential Information of Retailer (which shall be deemed a "Disclosing Party for purposes of this Agreement). For the purpose of this Agreement, "Confidential Information" shall mean information or materials that is marked "confidential" or which the Receiving Party knows has reason to know is the confidential or proprietary information of the Disclosing Party, either because a) such information is marked or otherwise identified by the Disclosing Party as confidential or proprietary, or b) such information has commercial value and is not generally known in the Disclosing Party's trade or industry. Confidential Information shall include, without limitation: (a) concepts and ideas relating to the development and distribution of content in any medium; (b) trade secrets, drawings, inventions, know-how, software programs, and software source documents; (c) information regarding plans for research, development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublished financial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; (d) existence of any business discussions, negotiations or agreements between the parties; (e) the terms and conditions of this Agreement; (f) all information with respect to Retailer's vendors, Retailer's price and cost structures, TSA.com's vendors, TSA.com's merchandise price and cost structures, the cost of merchandise sold by TSA.com, the existence or amount of any cooperative advertising subsidy or rebate; and (g) all prices of merchandise to be sold on the TSA Site prior to publication of such prices on the TSA Site; provided, however, that Retailer shall be provided with the information referred to in clauses (f) and (g). 4.2 Confidentiality. The Receiving Party hereby agrees: (i) to hold and --------------- maintain in strict confidence all Confidential Information of the Disclosing Party and, except as otherwise permitted herein, not to disclose it to any third party; and (ii) not to use any Confidential Information of the Disclosing Party except as permitted by this Agreement or as may be necessary for the Receiving Party to perform its obligations under this Agreement. The Receiving Party shall use at least the same degree of care to protect the Disclosing Party's Confidential Information as it uses to protect its own Confidential Information of like importance, and in no event shall such degree of care be less than reasonable care. The obligations and restrictions imposed by this Article IV shall terminate five (5) years after the expiration or termination of this Agreement. 4.3 Exceptions. Notwithstanding the foregoing, the parties agree that ---------- Confidential Information shall not include any information that: (i) was in the public domain at the time it was communicated to the Receiving Party by the Disclosing Party; (ii) entered the public domain subsequent to the time it was communicated to the Recipient by the Disclosing Party through no 3 fault of the Receiving Party; (iii) was in the Receiving Party's possession free of any obligation of confidence at the time it was communicated to the Receiving Party by the Disclosing Party; (iv) was rightfully communicated to the Receiving Party by a third party, free of any obligation of confidence, subsequent to the time it was communicated to the Receiving Party by the Disclosing Party; (v) was developed by employees or agents of the Receiving Party independently of and without reference to any information communicated to the Receiving Party by the Disclosing Party; or (vi) was communicated by the Disclosing Party to an unaffiliated third party free of any obligation of confidence. In addition, the Receiving Party may disclose the Disclosing Party's Confidential Information in response to a valid order by a court or other governmental body, as otherwise required by law, or as necessary to establish the rights of either party under this Agreement; provided, however, in the event that the Receiving Party receives a demand to disclose such Confidential Information in connection with a legal action or proceeding, the Receiving Party, if possible, shall first notify the Disclosing Party of the demand in order to provide the Disclosing Party an opportunity to seek a protective order. TSA.com may also disclose certain of Retailer's Confidential Information to GSI in connection with the performance by GSI of its duties, but only to the extent expressly permitted herein. 4.4 Confidentiality of this Agreement. The Parties acknowledge that the terms --------------------------------- and conditions of this Agreement constitute Confidential Information which shall be governed by the terms of this Article 4. ARTICLE V APPROVALS 5.1 Approval Process. Except as otherwise expressly set forth in the E- ---------------- Commerce Agreement and herein, and except with respect to any use of "Licensed Property" (as defined in the License Agreement) which requires approval under the License Agreement, when a given provision calls for prior review and approval by one Party of a submission by the other Party, the Party receiving the submission shall review it in a timely manner and use its best efforts to communicate in writing its approval or disapproval as soon as practicable after receiving the same. Failure to communicate approval within five (5) Business Days of receipt of the submission shall be deemed a disapproval. The submitting Party may re-start the approval process by making a second submission marked "Second Request." The Party receiving the second submission shall again review it in a timely manner and use its best efforts to communicate in writing its approval or disapproval as soon as practicable after receiving the same. Failure to communicate approval within five (5) Business Days of receipt of the submission shall be deemed an approval. In no event, shall the Party seeking approval produce, distribute, or otherwise follow through on or implement the subject of the submission until approval is granted in writing by the Party charged with the right of approval, or until the applicable period has expired after a Second Request and the Party receiving the second submission has failed to reply. ARTICLE VI REPRESENTATIONS AND WARRANTIES 4 6.1 Both Parties. Each Party represents and warrants to the other Party that: ------------ (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (ii) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder; and (iii) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each Party in accordance with its terms. 6.2 Year 2000. GSI warrants to TSA.com and Retailer that the TSA Site shall --------- not suffer any material adverse effect as a result of a failure in any TSA.com Work Product or TSA.com Tools to be Y2K Compliant. A product or service which is "Y2K Compliant" is one that provides accurate results using data having date ranges spanning from January 1, 1980 through December 31, 2019 ("Y2K Period"). By way of example and not of limitation, "Y2K Compliant" means, with respect to a product or service, that it can currently and shall, during the Y2K Period, continue to (a) manage and manipulate data involving all dates within the Y2K Period (including the fact that the year 2000 is a leap year) without functional or data abnormality related to such dates; (b) manage and manipulate data involving all dates within the Y2K Period without inaccurate results related to such dates; (c) have user interfaces and data fields formatted to distinguish between dates within the Y2K Period; and (d) accurately identify and either reject or correct invalid date data during the Y2K Period. Provided TSA.com otherwise complies with this Article 14.2, it shall not be liable to Retailer for any failure to perform obligations under this Agreement to the extent such failure arises from a failure to be Y2K Compliant that: (i) affects the non- performing party's customers or suppliers; or (ii) is beyond its reasonable control. ARTICLE VII INDEMNIFICATION 7.1 GSI, at its own cost and expense, shall defend, indemnify and hold harmless TSA.com and Retailer and any of their officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys' fees and court costs) arising: (a) from a claim made by any party (other than TSA.com or Retailer) that is related in any way to services furnished by GSI with respect to the TSA Site or GSI's services to TSA.com or Retailer provided pursuant to this Agreement; or (b) from GSI's gross negligence, willful or intentional misconduct. TSA.com or Retailer shall notify GSI as soon as possible after TSA.com becomes aware of a claim. GSI shall have the sole right to defend any claim pursuant to this Article VII. TSA.com and Retailer shall cooperate with such defense and, at its option, may also defend such claim to the extent that its interests in any way vary from that of GSI. ARTICLE VIII INSURANCE 5 8.1 GSI shall, during the Term of this Agreement, maintain the following insurance coverages as indicated or as required by law, whichever shall be greater, with insurers in good standing and authorized to do business under the laws of the State(s) where performance shall occur: (a) Comprehensive General Liability, naming Retailer and TSA.com as an additional insured, including without limitation Contractual Liability and Products Liability, with broad form property damage and bodily injury (including Personal Injury) coverage. The minimum limits for each shall be [*] per occurrence and [*] annual aggregate; (b) Workers' Compensation and Employers' Liability with minimum limits of [*]per accident, [*] disease (each employee) and [*] disease (policy limit). Upon TSA.com's or Retailer's request, GSI shall tender to TSA.com and/or Retailer certificates of insurance evidencing the coverages required to be maintained by GSI hereunder. The certificates must provide that no change or cancellation of insurance shall be made without thirty (30) days prior written notice to Retailer. ARTICLE IX TERM AND TERMINATION 9.1 This Agreement shall commence on the Effective Date and automatically terminate upon termination of the E-Commerce Agreement, or terminate pursuant to Article 9.1(a) or (b) below: (a) By either party if the other party shall materially default in the performance of any of the covenants, terms and conditions of this Agreement and shall fail to cure such default within 60 days after receipt of notice in writing from the terminating party of such default, giving reasonable particulars of such default and of the intention of the party serving the notice to terminate this Agreement unless such default is cured; provided, however, that if such default cannot reasonably be cured within 60 days, no termination shall occur so long as the party against which default has been declared continues to use its best efforts to cure such default. (b) By either party if the other party shall be judicially declared bankrupt or insolvent, make an assignment for the benefit of, or enter into a compromise with, its creditors; initiate bankruptcy or insolvency proceedings of any kind or proceedings for the appointment of a receiver, manager, judicial manager, or similar official with respect to it or any of its assets or become a party to dissolution proceedings; provided, however, that no termination shall occur if any such action is stayed, dismissed or reversed within 60 days of the initiation of such action and the other party provides satisfactory evidence of the same within such period. ARTICLE X NO IMPLIED WARRANTIES; LIMITATIONS UPON LIABILITY 10.1 Neither Party shall be liable to the other party for incidental, consequential, punitive or exemplary damages arising in connection with this agreement or the performance, omission of performance or termination hereof, even if the said Party has been advised of the possibility of 6 such damages and without regard to the nature of the claim or the underlying theory or cause of action (whether in contract, tort or otherwise). Neither Party makes any representation or warranty to the other except as specifically set forth herein. ARTICLE XI PROPERTY RIGHTS AND OWNERSHIP 11.1 General. The TSA Site shall consist of, and shall operate in conjunction ------- with, multiple elements, all of which are subject to certain Intellectual Property Rights. The Parties' respective rights with respect to such elements shall be as set forth below. For purposes of this Agreement, the term "ownership" shall refer to ownership of all right, title and interest in and to the respective elements, including, but not limited to, all patent, copyright, trade secret, trademark and any other similar Intellectual Property Rights therein, as applicable. 11.2 Retailer's URL shall be owned solely by Retailer (or its licensor). 11.3 The TSA Site shall be owned solely by TSA.com. Except with respect to each whole page of the TSA Site (which TSA.com shall own). TSA.com disclaims all right, title and interest, and Retailer shall own all right, title and interest, in and to all TSA Content and all works derivative of the TSA Content which are incorporated into the TSA Site, whether such works are copyright or trademark subject matter or otherwise, and even if such works are not created by Retailer. 11.4 Software. Software developed by GSI for the TSA Site, shall be owned -------- solely by GSI, subject to any authorizations to use and approvals obtained and granted to TSA.com and Retailer. 11.5 Ownership of TSA.com Products. As between Retailer and TSA.com, TSA.com ----------------------------- owns the TSA.com Products. 11.6 Ownership of TSA Content. As between TSA.com, GSI and Retailer, Retailer ------------------------ owns the TSA Content. Except for a limited non-exclusive license to use the TSA Content (during the Term and subject to the terms of the License Agreement) solely to perform TSA.com's obligations under the E-Commerce Agreement, this Agreement confers no ownership or other beneficial interest in TSA Content to TSA.com or to GSI. ARTICLE XII MISCELLANEOUS 12.1 Discontinuance Or Regulation Of The Internet. TSA.com acknowledges and -------------------------------------------- agrees that the Internet (including without limitation the Web) is a network of private and public networks, that GSI has no control over the Internet, and that GSI is not liable for the discontinuance of operation of any portion of the Internet or possible regulation of the Internet which might restrict or prohibit the operation of the TSA Site. 7 12.2 Force Majeure. In the event that either party is unable to perform any of ------------- its obligations under this Agreement or to enjoy any of its benefits because of any event beyond the control of the affected party including, but not limited to, natural disaster, acts of God, actions or decrees of governmental bodies or failure of communications lines or networks (a "Force Majeure Event"), the party who has been so affected shall promptly give written notice to the other party and shall use its best efforts to resume performance. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the duration of such Force Majeure Event. 12.3 Waiver. No delay or failure on the part of any party hereto in exercising ------ any right, power or privilege under this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified. 12.4. Choice of Law. This Agreement shall be construed, interpreted and ------------- enforced under and in accordance with the internal laws of the State of Delaware 12.5 Binding Effect; Assignment; GSI's Use of Outsourcing Partners. This ------------------------------------------------------------- Agreement shall be binding upon the Parties hereto, their successors and permitted assigns and approved Outsourcing Partners. Subject to the following provisions, neither Party may assign its rights and/or duties under this Agreement without the prior written consent of the other Party, except as provided below. (a) GSI may employ Outsourcing Partners to perform certain Services hereunder, provided, however, that for any Outsourcing Partner proposed by GSI to perform web site development or fulfillment services, and for any Outsourcing Partner proposed by GSI under an agreement which will pay such Outsourcing Partner over [*] in any year, GSI shall notify Retailer and obtain its prior written consent with respect to the material terms of engagement of any such Outsourcing Partner, which consent shall not be unreasonably withheld. (b) All Outsourcing Partners must be fully informed by GSI and bound in writing and agree (i) to all of the applicable restrictions upon GSI hereunder, and (i) to perform all of the applicable obligations of GSI with respect to TSA.com hereunder and with respect to Retailer under the E-Commerce Agreement. TSA.com and Retailer shall each be deemed a third party beneficiary of all such agreements between GSI and its Outsourcing Partners, and shall be entitled to enforce such agreements as against any Outsourcing Partner in its own name and on its own behalf. Notwithstanding the foregoing, as between Retailer and TSA.com on the one hand, and GSI on the other hand, GSI shall be responsible for all acts or omissions of any Outsourcing Partner. (c) Retailer acknowledges that it has approved ClientLogic and Organic On Line, Inc. as Outsourcing Partners. 8 12.6 Counterparts. This Agreement may be signed in several counterparts, each ------------ of which shall be deemed an original, and all of which when taken together, shall be deemed a complete instrument. 12.7 Entire Agreement. This Agreement represents the entire agreement of the ---------------- Parties with respect to the subject matter hereof and may not be modified, except in writing, executed by both of the Parties hereto. This Agreement supersedes all prior writings of the Parties with respect to this subject matter. 12.8 No Partnership. The relationship of the Parties herein shall be that of -------------- independent contractors and nothing herein shall be construed to create a joint venture or partnership. 12.9 Headings. Section headings contained in this Agreement are inserted for -------- convenience or reference only and shall not be deemed to be a part of this Agreement for any other purpose. 12.10 Notices. Any notices or writings to be sent hereunder shall be in ------- writing and shall be by personal delivery or facsimile transmission and shall be deemed given upon the earlier of actual receipt or receipt by sender of confirmation of facsimile transmission. Notices shall be sent to the following addresses (or such other address as either party may specify in writing): if to TSA.com: TheSportsAuthority.com, Inc. 555 South Henderson Road King of Prussia, Pennsylvania 19406 Attention: President Fax No.: (610) 768-0981 copy to: David S. Mandel, Esq. Astor Weiss Kaplan & Rosenblum, LLP The Bellevue Broad & Walnut Streets 6th Floor Philadelphia, Pennsylvania 19102 Fax No.: (215) 790-0509 copy to: The Sports Authority, Inc. 3383 North State Road 7 Fort Lauderdale, Florida 33319 Attention: General Counsel Fax No.: (954) 730-4288 if to GSI: Global Sports Interactive, Inc. 555 South Henderson Road King of Prussia, Pennsylvania 19406 Attention: President Fax No.: (610) 768-0981 9 IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to enter into this Agreement with intent to be legally bound hereby, the date and year first above written. GLOBAL SPORTS INTERACTIVE, INC. THESPORTSAUTHORITY.COM, INC. By: /s/ Michael Rubin By: /s/ Michael Rubin ------------------------------- ------------------------------------ Print Name:________________________ Print Name:_____________________________ Title:_____________________________ Title:__________________________________ Date:______________________________ Date:___________________________________ 10 EX-10.9 7 E-COMMERCE AGREEMENT DATED MAY 14, 1999 EXHIBIT 10.9 Confidential Treatment has been requested with respect to portions of the agreement indicated with an asterisk [*]. A complete copy of this agreement, including the redacted terms, has been separately filed with the Securities and Exchange Commission. E-COMMERCE AGREEMENT -------------------- THIS E-Commerce Agreement dated the 14th day of May, 1999 (the "Effective Date") is by and between THESPORTSAUTHORITY.COM, INC., a Delaware corporation ("TSA.com"), and THE SPORTS AUTHORITY, INC., a Delaware corporation ("Retailer"). WHEREAS, Retailer is a full line sporting goods retailer and operates TSA Stores (as defined below) in the U.S. and Canada under the trade name, trademark and service mark THE SPORTS AUTHORITY; WHEREAS, Retailer has entered into a certain E-Commerce Venture Agreement with Global Sports Interactive, Inc. for the purpose of cooperatively forming and operating the company which is TSA.com; WHEREAS, TSA.com is in the business of creating, developing, operating, maintaining, advertising and promoting all aspects of the E-Commerce Business; and WHEREAS, Retailer desires to enter into an agreement with TSA.com pursuant to which TSA.com shall provide certain services to Retailer, all upon the terms and conditions hereinafter set forth; WHEREAS, Retailer and its subsidiary THE SPORTS AUTHORITY MICHIGAN, INC. (as "Licensor") have entered into a certain License Agreement with TSA.com under which TSA.com as Licensee has been granted certain rights to use the Marks, Names, TSA Buying Power and TSA Content (all as defined in the License Agreement) in connection with creating, developing, operating, maintaining, advertising and promoting the TSA Site; and NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I DEFINITIONS As used herein, the following terms shall have the following meaning: 1.1 "Advertising Co-op and Discretionary Funds" shall mean amounts earned by or allocated to Retailer by its vendors, the purpose of which is to advertise or market a given vendor's brand or goods, or for advertising, marketing, promotional or other use at Retailer's discretion. 1.2 "Advertising and Marketing Partners of TSA.com" shall mean operators or proprietors of search engines, portals, community sites, content sites, on- line retailers, shopping, regional and industry directories, push sites, and other Internet sites capable of attracting Customers for the TSA Site, or desirous of attracting Customers from the TSA Site to their sites, with whom TSA.com contracts for exchanges of advertising and promotional services and any form of compensation. For purposes of this Agreement, TSA.com shall not contract with TSA Competitors and the same shall be excluded from the definition of Advertising and Marketing Partners of TSA.com. 1.3 "Business Day(s)" shall mean any day which is not a Saturday, Sunday or official federal holiday in the U.S. 1.4 "Closeout Merchandise" shall mean end of season, out of style, broken stock or excess merchandise that is currently carried by Retailer in a substantial number of its TSA Stores, or merchandise which is available for purchase from a given vendor on a closeout basis for sale in a substantial number of Retailer's TSA Stores, and priced by Retailer at a greater than normal discount for the purpose of reducing inventory or turning inventory quickly, without replenishment. 1.5 "Confidential Information" shall mean as that term is defined in Article XI of this Agreement. 1.6 "Cross Promotion" shall mean the use by Advertising and Marketing Partners of TSA.com of certain of Retailer's Names and Marks (as defined in and subject to the License Agreement) on other than the TSA Site for the purpose of promoting the TSA Site and the goods and services offered on the TSA Site. 1.7 "Customer" shall mean a consumer who purchases or otherwise receives any merchandise or services furnished by TSA.com from the TSA Site as permitted hereunder. 1.8 "Customer Data" shall mean any and all data relating to Customers or potential Customers of the TSA Site, including without limitation, data relating to persons referred by or through the Advertising and Marketing Partners of TSA.com to the TSA Site. Such data may include, without limitation, names and other identifying information such as addresses, phone numbers and e-mail addresses, credit card numbers and related data, preferences, gift and shipping information, purchase, payment and connection histories, correspondence, inquiries, and descriptions of the items and quantities of items purchased by any such persons. 1.9 "Databases" shall mean all data structures, data schema, database dictionaries, attributes, validation tests for each element, table sizes and formats, access requirements, data dependencies and other elements involving the management or storage of data on the TSA Site, and all refinements, updates, releases, improvements and enhancements thereto, all Intellectual Property Rights embedded therein (except those belonging to Retailer or TSA.com) and all applications created specifically for management and use of the Customer Data, Financial Data and TSA Content, but excluding the Customer Data, 2 Financial Data and TSA Content per se. GSI shall own all right, title and interest in and to the Databases, while Retailer and TSA.com may use the Databases subject to other restrictions set forth herein. 1.10 "Defective Allowance" shall mean a discount or rebate granted by a vendor to a retailer as a result of defective merchandise received by the retailer and pursuant to which, the retailer also retains or destroys the merchandise. 1.11 "Disclosing Party" shall mean the party disclosing Confidential Information as permitted under this Agreement. 1.12 "E-Commerce Business" shall mean the business of creating, developing, operating, advertising and promoting the TSA Site as further described herein. 1.13 "E-Commerce Orders" shall mean any orders for On-Line Merchandise or services placed by Customers from the TSA Site. 1.14 "E-Commerce Shopping Experience" shall mean the unique and highly interactive experience of shopping for and purchasing merchandise from the TSA Site, including, without limitation, the experience of a functional (little or no fluff), streamlined, easy to navigate, on-line sporting goods store with the Features Set described herein and in Attachment A. As much ------------ as practicable, the TSA Site shall draw from the "look and feel" of Retailer's TSA Stores and reinforce Retailer's mission of offering high quality, high performance, innovative products, in fashion and on trend as to style, color, materials and makeup, supporting beginner, intermediate and enthusiast participants through superior value and service. The E- Commerce Shopping Experience is intended to help make the TSA Site the e- commerce shopping site for sporting goods, athletic apparel and athletic footwear. 1.15 "Features Set" shall mean the features, characteristics and requirements for the TSA Site as set forth throughout this Agreement and in Attachment ---------- A, as the latter may be amended or supplemented in accordance with this -- Agreement. 1.16 "Financial Data" shall mean all data relating to the financial performance or operations of the TSA Site, including the financial information generated pursuant to Article 8.1 below, and any aggregates of data which are Customer Data, except that any names and other information identifying Customers in any manner shall not be considered and be excluded from Financial Data. 1.17 "Fiscal Year" shall mean TSA.com's fiscal year. TSA.com shall give at least ninety (90) days advance notice to Retailer of any change in designation of TSA.com's Fiscal Year. 1.18 "In Line Merchandise" shall mean current merchandise carried by Retailer in a substantial number of its TSA Stores (excluding test merchandise, Markdowns, Closeouts and Special Makeups), or merchandise which Retailer intends in the near future to carry in a substantial number of its TSA Stores, or which is offered by the same vendors and is 3 closely related to foregoing merchandise and available to Retailer but not currently carried in its TSA Stores. 1.19 "Intellectual Property Rights" shall mean any and all now known or hereafter known tangible and intangible (a) rights associated with works of authorship throughout the universe, including but not limited to copyrights, moral rights, and mask-works, (b) trademark and trade name rights and similar rights, (c) trade secret rights, (d) patents, designs, algorithms and other industrial property rights, (e) all other intellectual and industrial property rights (of every kind and nature throughout the universe and however designated) (including logos, "rental" rights and rights to remuneration), whether arising by operation of law, contract, license, or otherwise, and (f) all registrations, initial applications, renewals, extensions, continuations, divisions or reissues hereof now or hereafter in force (including any rights in any of the foregoing). 1.20 "Internet" shall mean a global network of interconnected computer networks, each using the Transmission Control Protocol/Internet Protocol and/or such other standard network interconnection protocols as may be adopted from time to time, which is used to transmit content that is directly or indirectly delivered to a computer or other digital electronic device for display to an end-user, whether such content is delivered through on-line browsers, off-line browsers, or through "push" technology, electronic mail, broadband distribution, satellite, wireless or other successor technologies or means. Internet shall also mean on-line services such as AOL, CompuServe and Prodigy. 1.21 "Launch Date" shall mean the date on which TSA.com commences normal operation of the TSA Site with the Core Functionality as further described in Attachment A. ------------ 1.22 "Markdowns" shall mean merchandise currently in Retailer's inventory in a substantial number of its TSA Stores which is systematically offered for sale at prices less than the original retail prices at which Retailer offered such merchandise, in response to low demand, seasonality, obsolescence or other market conditions. 1.23 "Milestone Delivery Schedule" shall mean the major dates and deliverables in creating, developing and launching the TSA Site, which may be incorporated into the Production Schedule, as further described in Attachment A. ------------ 1.24 "On Line Customer Loyalty Programs" shall mean programs established by TSA.com with Retailer's prior review and approval to encourage repeat business at the TSA Site from Customers. 1.25 "On Line Gift Certificates" shall mean gift certificates bearing the mark THESPORTSAUTHORITY.COM, distributed electronically under the auspices of TSA.com (subject to Retailer's approval and the terms of the License Agreement), offered by TSA.com and redeemable only through or on the TSA Site, but not at Retailer's TSA Stores. 4 1.26 "On Line Merchandise" shall mean the merchandise offered and sold by TSA.com on the TSA Site as further defined in Article 4.3. 1.27 "Outsourcing Partner(s)" shall mean any person or entity which, subject to Article 20.11 and other applicable terms of this Agreement, TSA.com engages to perform any of the obligations, duties or services which TSA.com has undertaken or promised to perform under this Agreement. 1.28 "Own Brand Merchandise" shall mean any and all goods bearing, or sold under or in connection with packaging or labels bearing the mark THE SPORTS AUTHORITY or the mark THE SPORTS AUTHORITY & Design, as either offered and sold by Retailer in its TSA Stores, or offered and sold by TSA.com from the TSA Site. All such sales by TSA.com are subject to the terms of the License Agreement. 1.29 "Party" shall mean Retailer or TSA.com; "Parties" shall mean both of them. 1.30 "Production Schedule" shall mean the schedule to be agreed upon by the Parties for the creation, development, and production (both before and after the Launch Date) of the TSA Site, including the delivery of TSA Content and TSA.com Products. 1.31 "Receiving Party" shall mean the party receiving Confidential Information as permitted under this Agreement. 1.32 "Retailer's Warehouse" shall mean the place or places at which Retailer receives bulk delivery of any merchandise from its vendors. 1.33 "Special Makeups" shall mean merchandise currently carried by Retailer in a substantial number of its TSA Stores (excluding test merchandise, Markdowns and In-Line Merchandise), or merchandise which Retailer plans to carry in a substantial number of its TSA Stores, which is manufactured and sold to Retailer on a temporarily exclusive basis, and not otherwise available in the market or for purchase by other retailers during the period of exclusivity. 1.34 "Term" shall mean the period commencing with the Effective Date and continuing until this Agreement is terminated as provided in Article XVII below. 1.35 "TSA Competitor" shall mean: (a) any person, firm or corporation or other entity (other than TSA and its retailing subsidiaries) which either directly or indirectly derives twenty percent (20%) or more of its revenues from the sales or distribution of sporting goods, athletic apparel, athletic footwear or related goods and services, whether operating from stores located in the U.S., Canada or Japan or any other nation in which the predominant language is English, whether by mail order, home shopping through audio or video programming, over the Internet or otherwise; and (b) any retailing entity which would clearly be regarded as a competitor of TSA by the U.S. Department of Justice under federal antitrust and competition laws and regulations. 5 1.36 "TSA.com Products" shall mean, collectively, the TSA.com Tools and the TSA.com Work Product. 1.37 "TSA.com Tools" shall mean any tools, both in object code and source code form, which TSA.com has already developed or which TSA.com independently develops or licenses from a third party, excluding any tools which TSA.com creates pursuant to this Agreement. By way of example, TSA.com Tools may include, without limitation, search engines, Java servlets and ActiveX controls. 1.38 "TSA.com Work Product" shall mean all HTML files and Java files (or derivatives of either), graphics files, animation files, data files, technology, scripts and programs, both in object code and source code form, all documentation and any other items used by TSA.com to create the TSA Site. 1.39 "TSA Content" shall mean the following content or information, as furnished by Retailer to TSA.com subject to the terms of this Agreement and the License Agreement: (a) text, graphics, photographs, video, audio and/or other data or information relating to any subject furnished by Retailer to TSA.com and intended solely for use in connection with the TSA Site; (b) Retailer selected print advertisements for the TSA Stores or the goods and services offered by Retailer in the TSA Stores, including run of press and insert advertisements which appear in newspapers and magazines, as well as printed in store signage, point of sale and display signage and information promoting events and the goods and services offered in the TSA Stores; and (c) such information concerning the goods and services offered by Retailer in the TSA Stores in the U.S. as Retailer possesses and has the right to transfer and license to TSA.com, and which Retailer deems necessary to successful operation of the TSA Site, including, without limitation, information which is related to the sourcing, manufacturing, development, design, fabrication, construction, test procedures, performance features, quality control standards, merchandise specifications, reliability standards, distribution, product costs, other costs, allowances, rebates, sizes, colors, decoration, display, pricing, margins, vendor economic information, and similar information and know-how necessary to the procurement, merchandising, inventory management and sales of such goods and services in the TSA Stores. 1.40 "TSA Gift Certificates" shall mean gift certificates bearing the marks THE SPORTS AUTHORITY and THE SPORTS AUTHORITY & Design, printed and distributed under the auspices of Retailer, offered by Retailer for redemption at its TSA Stores, or if by TSA.com on the TSA Site, redeemable only at Retailer's TSA Stores. 6 1.41 "TSA Site" shall mean that certain Internet site currently accessible through the URL "http://www.thesportsauthority.com," and any backup or mirror Internet site; it being understood that the TSA Site shall be primarily targeted by TSA.com at Customers, and not at persons, entities or activities otherwise described in Article 2.6 of the License Agreement. Further, the TSA Site shall not be used by TSA.com to furnish, sell, advertise or promote the goods or services of any TSA Competitor. The TSA Site shall include, without limitation, the E-Commerce Shopping Experience, the Features Set and other aspects, features and characteristics as set forth in this Agreement and its Attachments. 1.42 "TSA Stores" shall mean any sporting goods retail store established and/or operated by Retailer or Retailer's wholly-owned retailing subsidiaries and devoted to the sale of a broad assortment of sporting goods, athletic footwear, athletic apparel and related goods, and to provision of related services. 1.43 "URL" shall mean the uniform resource locator of the TSA Site on the Internet. 1.44 "URL Integration" shall mean the display of Retailer's URL in Retailer's prepared advertising, marketing, public relations and investor relations communications as further described in Article 7.5. 1.45 "Web" or "web" shall mean the World Wide Web, a network protocol for accessing and viewing text, graphics, sound and other media and engaging in e-commerce via the Internet. ARTICLE II DEVELOPMENT OF THE TSA SITE 2.1 Services. TSA.com, at its own expense and at no cost to Retailer, shall -------- provide all creative, design, programming and other consulting services, including all applicable TSA.com Products, necessary to the successful realization of the TSA Site, including without limitation, services in the Core Functionality as specified in Attachment A and incorporation of at least the ------------ core aspects (as agreed by the Parties) of the Features Set, in accordance with the Milestone Delivery Schedule and the Production Schedule, and as is necessary in order to deliver the TSA Site in condition acceptable to Retailer on or before the Launch Date. After initial acceptance by Retailer and full scale launch of the TSA Site, TSA.com's development and maintenance services shall continue throughout the Term of this Agreement. 2.2 TSA Content. (a) Initial TSA Content. As soon as reasonably possible ----------- ------------------- after the Effective Date, TSA.com and Retailer shall agree upon a Production Schedule for the delivery by Retailer to TSA.com of that TSA Content which Retailer intends for TSA.com to incorporate into the TSA Site. The Parties acknowledge that Retailer shall be able to deliver certain "static" information, such as TSA Store locations, promptly to TSA.com, and that other TSA Content, such as TSA Content concerning the merchandise to be sold on the TSA Site, may be delivered at a later date, closer to the Launch Date. TSA Content shall be in the format(s) designated by TSA.com as set forth in Attachment B hereto or in ------------ such other formats as the Parties may 7 mutually agree. Upon Retailer's request, TSA.com shall assist Retailer in the conversion of TSA Content into an acceptable form for use by TSA.com for the TSA Site. (b) Subsequent TSA Content. Retailer shall supply TSA.com with updated TSA ---------------------- Content as it becomes available to Retailer and necessary to updating the TSA Site. Notwithstanding anything contained herein to the contrary, and except as it relates to Special Make-Ups, it shall be TSA.com's responsibility to produce and maintain all camera ready product information for use on the TSA Site and Retailer shall have no responsibility therefor. With respect to Special Make- Ups, Retailer shall furnish sample products to TSA.com with sufficient lead time to allow TSA.com to produce camera ready product information as and when needed. 2.3 Project Liaisons. Each party's primary contacts for development efforts ---------------- shall be the project liaisons specified in Attachment A or the persons otherwise ------------ designated in writing by Retailer or TSA.com from time to time, as the case may be. 2.4 Acceptance. TSA.com shall make available to Retailer Alpha and Beta ---------- versions of the TSA Site for Retailer's review and, with respect to the Beta version, annotation and approval, and Retailer shall provide the latter, all according to the Milestone Delivery Schedule, if not earlier. Retailer shall review and comment upon the Alpha version within two Business Days after delivery of the Alpha version. TSA.com shall make any necessary changes and furnish the Beta version of the TSA Site for Retailer's review and acceptance on or before September 21, 1999. Retailer shall have seven (7) Business Days after delivery of the Beta version to review and evaluate the TSA Site (the "Acceptance Period") in order to assess whether it successfully incorporates the Features Set, captures the desired E-Commerce Shopping Experience and otherwise complies with the terms of this Agreement and of the License Agreement. During the Acceptance Period, Retailer shall identify in writing to TSA.com all aspects of the TSA Site that do not substantially conform as described above. Upon receipt of Retailer's list of non-conformities, TSA.com shall correct promptly all such non-conformities so that the TSA Site does conform in all material respects, and substantially conforms in all lesser respects, after which Retailer and TSA.com shall extend the Acceptance Period for a second seven (7) Business Day Acceptance Period during which Retailer shall confirm that all non- conformities that were previously identified have been corrected. Notwithstanding the foregoing, the TSA Site shall be deemed accepted upon the earlier of: (i) its use in commerce with all Core Functionality, provided, however, TSA.com shall not use the TSA Site in commerce without Retailer's prior approval and consent; (ii) Retailer's failure to give notice of any non- conformities during an Acceptance Period; or (iii) Retailer's acceptance of the TSA Site. The acceptance procedures set forth in this Article 2.4 shall also apply to any material modifications made to the TSA Site during the Term of this Agreement. As used herein, "material modifications" shall mean alterations which significantly change the overall design, "look and feel" or functionality of the TSA Site, or which extend or reduce the Features Set. 2.5 Additional Features of the TSA Site; Updates. TSA.com, at its own expense -------------------------------------------- and at no cost to Retailer shall provide such content and features on the TSA Site as Retailer elects, which contain or make accessible as part of the TSA Site such information as: corporate information 8 (e.g., historic background, mission statement, names of officers and directors), store locator, public financial information (e.g., SEC filings, annual reports, etc.), press releases, community programs, employment opportunities for in store or corporate positions, frequently asked questions, a "contact us" section, customer reviews, product reviews and any other information which serves to enhance the TSA Site and help the TSA Site and Retailer attract and retain Customers. Without limiting the foregoing, following the initial completion, acceptance and launch of the TSA Site, TSA.com, at its own expense and at no cost to Retailer, shall update non-shopping aspects of the TSA Site, as requested from time to time by Retailer, as follows: (a) Employment Opportunities - TSA.com shall furnish technology to allow Retailer to update as frequently as Retailer desires. (b) Public Financial Information - i) Stock Prices - to be updated daily or more frequently by a link to another web site offering such information. ii) SEC Filings and Annual Reports - SEC filings shall be provided by a link so long as the government (or Retailer) makes such filings available at no cost. Both SEC filings and annual reports shall be provided only if available in portable document format; in the alternative, TSA.com shall provide the consumer with a form and format in order facilitate efficient delivery of such information from Retailer's investor relations or legal departments. (c) Store Locators - to be updated as such information changes and is received from Retailer. (d) Frequently Asked Questions - to be updated by TSA.com monthly, from TSA.com's experience in hosting, managing and operating the TSA Site, and from any information which Retailer provides. (e) Corporate Information - to be updated as such information changes and is received from Retailer. (f) Retailer's Community Programs - to be updated as such information changes and is received from Retailer. (g) Press Releases - TSA.com shall furnish technology to allow Retailer to update and post on the TSA Site directly. Retailer shall be able to post press releases on the TSA Site as it desires. (h) "Contact Us" Section - to be updated as such information changes and is received from Retailer. 9 ARTICLE III HOSTING AND MAINTENANCE OF THE TSA SITE 3.1 Data Center and Services. TSA.com, at its own expense and at no cost to ------------------------ Retailer, shall furnish a data center and all "back-end" operations for the purpose of hosting and maintaining the TSA Site, either directly, or through an Outsourcing Partner (the "Data Center"). The Data Center shall be configured to meet or exceed the standards and specifications set forth in Attachment C. The ------------ Data Center shall host the TSA Site and data servers in a secure environment. The Data Center shall provide a commercially reasonable communications link to the public Internet that is monitored at all times with wide area network management tools. The Data Center shall include all necessary resources, including backup and mirror systems, to make the Data Center highly reliable and allow the TSA Site to be operational on a 24 hours/7 days a week basis but for scheduled down time for maintenance and backup purposes. The Data Center shall be supported and managed by TSA.com and TSA.com's operations and systems administration staff shall maintain all servers and provide all technical and support resources required to resolve any technical issues or failures of equipment. TSA.com shall operate the Data Center and all servers, all in accordance with Attachment C. ------------ Retailer may request changes in the hosting operation or services provided under this Agreement in order to meet the changing needs of Retailer and of the TSA Site. Such requests shall be made in writing. Retailer and TSA.com shall evaluate the needs and proposed changes to determine the best course of action and amend Attachment C, if necessary and agreed to by the Parties. ------------ 3.2 TSA.com shall make the Data Center ready for acceptance testing on or before October 14, 1999. Retailer or its representatives may conduct acceptance tests during the following two-week period to verify that the Data Center meets the agreed upon acceptance criteria. If at the end of such two-week period, the Data Center has failed to meet such criteria, the Parties shall work together to determine the reasons for such failure. The Party whose action or inaction is determined to be the cause of such failure, shall, with the cooperation and assistance of the other Party, work to promptly remedy such failure. If the Data Center has not passed the acceptance criteria within thirty (30) days after the end of such two-week period, and if the cause has been attributed to TSA.com or its Outsourcing Partner, Retailer shall have the right, upon written notice to TSA.com, to terminate this Agreement at the end of such thirty day period. Once Retailer has accepted the Data Center in accordance with the agreed upon acceptance criteria, TSA.com shall immediately staff its operations team and begin operating the Data Center. 3.3 Performance Monitoring. TSA.com and Retailer shall work together during ---------------------- the implementation of the Data Center to mutually agree upon the reports that TSA.com shall prepare and deliver as part of normal operations to document performance once the Data Center has been accepted and gone into operation. TSA.com shall permit Retailer to track performance and derive statistics via remote access to the Data Center. 3.4 Hosting Services. TSA.com shall load the TSA Site onto server(s) that are ---------------- connected to the Internet and readily accessible via the Web through use of the URL. TSA.com shall ensure 10 that the TSA Site is functional and ready to process transactions in an efficient manner, and that it is compatible with all major software platforms, including the major web browsers and helping applications and plug-ins. TSA.com shall upload all TSA Content, including updates, to the TSA Site within three (3) Business Days of delivery to TSA.com. With TSA.com's prior written consent and cooperation, Retailer may electronically transmit or upload TSA Content directly to the Web Site. 3.5 Maintenance Services. TSA.com shall maintain the TSA Site so that it -------------------- functions in a reasonably error free manner and according to the standards and specifications set forth in Attachment C. Upon notification of an error in the ------------ TSA Site or of a non-conformity between the TSA Site and the Features Set or Attachment C, whether from Retailer or from any Customer or user of the TSA - ------------ Site, TSA.com shall promptly commence an investigation into the reported error, and TSA.com shall, upon reproducing such error, use reasonable commercial efforts to correct such error in a timely fashion. While providing any maintenance services, TSA.com shall ensure that the TSA Site is functional and ready to process transactions in a reasonably efficient manner, provided, however, that TSA.com may, during low usage periods and as mutually determined by the Parties, temporarily take down or block access to the TSA Site to perform maintenance. 3.6 Search Engine Registration. On or before the Launch Date, and from time to -------------------------- time as requested by Retailer during the Term of this Agreement, TSA.com shall write professional meta tags and register the TSA Site and Retailer's URL with the as many of the leading search engines and directories, as well as many of the leading shopping, industry and regional directories, as practicable. The Parties acknowledge that submission of registration materials does not guarantee that registration will actually take place. ARTICLE IV MERCHANDISING THE TSA SITE 4.1 In General. The Parties acknowledge that Retailer's core competencies lie, ---------- in part, in the selection, sourcing, purchasing, distribution, presentation, advertising and sale of merchandise, including without limitation, the establishment and maintenance of favorable relationships with merchandise vendors, all in relation to operating land-based sporting goods stores. Similarly, TSA.com's (or GSI's) core competencies lie, in part, in the creation, development and operation of e-commerce businesses, including, without limitation, making it possible for land-based retailers to successfully migrate to and operate e-commerce businesses which may differ, especially as to merchandising, from their land-based stores. The Parties anticipate that the majority of merchandise to be offered and sold on the TSA Site shall be merchandise which Retailer originally selects and orders for its TSA Stores. Under this Agreement, TSA.com shall be kept informed of Retailer's selection and ordering processes and shall be entitled, subject to the restrictions set forth herein, to select from the full range of merchandise offered in Retailer's TSA Stores the merchandise to be offered on the TSA Site. TSA.com's selection may be supplemented in part, as provided herein, with merchandise not otherwise offered or sold in Retailer's TSA Stores. 11 4.2 Restrictions. In no event shall TSA.com offer or sell on the TSA Site, and ------------ Retailer shall not be required to assist TSA.com in obtaining: (a) firearms, ammunition, explosives and explosive materials, weapons, and any related items, equipment and accessories which may be subject to licensing, permitting and or other governmental restrictions on sales, distribution and/or exports of the same; (b) counterfeit merchandise or merchandise which infringes the valid Intellectual Property Rights of others within an applicable jurisdiction; (c) any merchandise for which merchants are charged with in-person verification of identity or age or other qualifications to own or purchase the subject merchandise; (d) any merchandise which is subject to any export prohibition from the U.S., or which is barred or otherwise prohibited from use in any export destination country outside the U.S., unless such merchandise is offered, sold and delivered to Customers only within the U.S.; (e) any merchandise, which if offered or sold on the TSA Site, would violate the terms of any agreement between the subject vendor and Retailer, including, without limitation, any term restricting distribution to the territories served by Retailer's TSA Stores, or which would otherwise materially damage the relationship between the subject vendor and Retailer; and (f) any merchandise which Retailer requests in writing be removed from the TSA Site, if for legitimate business purposes set forth in Retailer's notice to TSA.com; provided that Retailer purchases such merchandise from TSA.com at TSA.com's cost if such merchandise cannot be returned to the vendor. The above restrictions shall apply at all times to the TSA Site. Retailer and TSA.com agree to communicate in good faith, as needed, concerning the construction, application and enforcement of the above restrictions. 4.3 Available Merchandise. Subject to the above restrictions, TSA.com shall --------------------- have the right to offer and sell on the TSA Site, and Retailer shall assist TSA.com in obtaining: (a) In Line Merchandise; (b) Special Make-Ups; (c) Closeout Merchandise, but only such Closeout Merchandise as Retailer currently carries, or places orders for sale in its TSA Stores; (d) Markdowns; 12 (e) On Line Gift Certificates; and (f) TSA Gift Certificates. Merchandise in categories 4.3(a) through (f) above shall be referred to as "On- Line Merchandise." 4.4 Vendor Relations; Orders by TSA.com. (a) At such time and by means of a ----------------------------------- form of written or electronic notice which is mutually agreed upon by the Parties, Retailer shall notify all of its vendors: (i) of the formation of TSA.com as a venture of Retailer and GSI; (ii) that the TSA Site is operated by TSA.com; (iii) that TSA.com shall be coordinating its purchases with Retailer and purchasing additional quantities of merchandise as ordered by Retailer; (iv) that each vendor, for the benefit of Retailer, should sell its merchandise to TSA.com at the same prices, with the same Advertising Co-op and Discretionary Funds and on the same terms and conditions as it sells the same merchandise to Retailer; and (v) that such merchandise should be shipped and invoiced directly to TSA.com. If a given vendor refuses to directly ship to and invoice TSA.com, TSA.com shall notify Retailer. If the vendor cannot be persuaded to deal directly with TSA.com, then subject to Retailer's consent, which it may withhold as it sees fit, Retailer may place the order for TSA.com and such vendor may ship to and invoice Retailer for such merchandise. Retailer shall then invoice TSA.com at Retailer's net cost, and TSA.com shall pay Retailer the purchase price and all freight and handling charges within thirty days of any such shipment by Retailer to TSA.com. TSA.com shall pay Retailer its pro rata share (based upon that portion of the shipment purchased by Retailer for TSA.com as it relates to the entire shipment received by Retailer from that vendor) of the actual freight costs from the vendor's facility to Retailer's Warehouse, as well as any handling and freight costs incurred by Retailer in packing and shipping the subject merchandise from Retailer's Warehouse to TSA.com's fulfillment facility. Retailer shall include a detailed bill of lading or invoice with each such shipment. (b) In Line Merchandise. Retailer shall use its best efforts to advise ------------------- TSA.com within ten (10) Business Days after placing a purchase order with a vendor for any In Line Merchandise, identifying the vendor and the item (by category, class, UPC and/or Retailer's sku number), and setting forth Retailer's net cost, Retailer's proposed original retail price and expected date of receipt at Retailer's Warehouse. (c) Special Make-Ups; Own Brand Merchandise. Retailer shall use its best --------------------------------------- efforts to advise TSA.com within ten (10) Business Days after placing a purchase order with a vendor for any Special Make-Ups or Own Brand Merchandise, identifying the vendor and the item (by category, class, UPC and/or Retailer's sku number), and setting forth Retailer's net cost, Retailer's proposed original retail price and expected date of receipt at Retailer's Warehouse. Further, Retailer shall advise TSA.com and, if possible, furnish TSA.com with a sample of the Special Make-Ups or Own Brand Merchandise and advise TSA.com of the color selection and size range. TSA.com shall have the right to purchase up to five per cent of the Special Make-Up or Own Brand Merchandise, proportionately as to size and color, as ordered by Retailer. TSA.com shall have five (5) business days after receipt of notice from Retailer to place its order for Special Make- Ups or Own Brand Merchandise and, if so, the quantity thereof. 13 Notwithstanding anything contained herein to the contrary, TSA.com recognizes that there may be instances where there shall be an insufficient amount of a particular item of Special Make-Ups or Own Brand Merchandise to warrant selling such merchandise on-line. In such instances Retailer shall not be required to offer such Special Make-Ups or Own Brand Merchandise to TSA.com. Further, TSA.com acknowledges that Retailer may not be able to offer to TSA.com certain Special Make-Ups or Own Brand Merchandise which is not available in all of Retailer's TSA Stores. (d) Closeout Merchandise. Retailer shall use its best efforts to advise -------------------- TSA.com within ten (10) Business Days after issuing a purchase order for Closeout Merchandise from a vendor. Retailer may from time to time agree to sell Closeout Merchandise to TSA.com on such terms and in such amounts as may be determined by the Parties, provided, however, that Retailer shall use commercially reasonable efforts to make Closeout Merchandise available to TSA.com, subject to availability. (e) Markdowns. Retailer may from time to time agree to sell Markdowns to --------- TSA.com on such terms and conditions and in such amounts as may be determined by the Parties. (f) The Parties shall cooperate with each other so that, as between TSA.com and Retailer, as much of the processes set forth in Article 4.4(a)-(f) above as possible may be accomplished electronically. 4.5 Prices of On-Line Merchandise. Subject to the terms of this paragraph and ----------------------------- to any applicable laws, Retailer shall [*]. [*] shall adopt and be responsible for implementing such price determinations. Retailer shall use its best efforts to [*]; provided, however, that for any item which [*]. TSA.com may assist Retailer in [*]. Retailer acknowledges that TSA.com, unless it elects to do so, [*]. In such event, Retailer shall nevertheless have the right to [*] The Parties shall cooperate with each other so that the entire pricing process between TSA.com and Retailer may be accomplished electronically. 4.6 On-Line Gift Certificates; TSA Gift Certificates. Subject to Retailer's ------------------------------------------------ prior review and approval of the form and content of any proposed On-Line Gift Certificate and of TSA.com's redemption policy, and subject to the terms of the "License Guidelines and Restrictions" under the License Agreement, TSA.com may develop, publish and offer for sale On-Line Gift Certificates on the TSA Site. TSA.com shall clearly and conspicuously state in connection with any offer to purchase or sell such On-Line Gift Certificates, and state on the On-Line Gift Certificates themselves, that On-Line Gift Certificates are redeemable only on the TSA Site and not at TSA Stores. In addition, subject to the prior negotiation and agreement of the Parties as to all terms, TSA.com may offer TSA Gift Certificates for sale on the TSA Site, but only with the clear and conspicuous statement that such TSA Gift Certificates are redeemable only in TSA Stores. As between TSA.com and Retailer, TSA.com shall bear any escheat duties with respect to On-Line Gift Certificates. ARTICLE V ORDER PROCESSING AND CUSTOMER SERVICE 14 5.1 Processing of Customer Orders. Except as otherwise provided in Article ----------------------------- 6.3, TSA.com shall be solely responsible for processing all E-Commerce Business. TSA.com shall enter into merchant agreements in its own name and on its own account with at least the credit card providers VISA, Master Card and American Express. Further, TSA.com shall use commercially reasonable efforts to provide the functionality to accept Retailer's forthcoming private label credit card, on the same terms and conditions as accepted by Retailer at Retailer's TSA Stores. TSA.com shall provide secure systems for submitting and processing all credit card transactions, as well as systems for immediate confirmation of all E- Commerce Orders, and confirmation of shipments, out of stock or back orders via mail and/or email. TSA.com shall promptly process all E-Commerce Orders received from Customers via the TSA Site. TSA.com shall take the Customer's credit card number at such time as On-Line Merchandise or related services are ordered. TSA.com shall charge the Customer's credit card at the time the On- Line Merchandise is shipped or the related services are furnished. The transaction shall appear on the Customer's credit card under the merchant name "TheSportsAuthority.com" and proceeds shall be deposited into TSA.com's designated bank account for full credit to TSA.com. TSA.com shall make all arrangements for delivery of all On-Line Merchandise and related services purchased on the TSA Site. 5.2 Customer Relations. TSA.com shall be responsible for providing all ------------------ Customer service relating to the TSA Site, which shall be provided in a courteous and professional manner consistent with that provided by other reputable on-line retailers. TSA.com shall invite Customer feedback via a "Contact us" or "How are we doing?" feature. Beginning on and after the Launch Date, TSA.com shall maintain an email reply service and a toll-free telephone number and furnish adequate staff on a 24 hours a day/7 days a week basis to receive and handle telephone inquiries, requests and complaints from Customers. TSA.com shall periodically summarize and share Customers' on-line and telephone feedback with Retailer, and continuously use it to improve TSA.com's operations, as applicable. 5.3 On-Line Customer Loyalty Programs. Subject to Retailer's prior review and --------------------------------- approval, which shall no be unreasonably withheld, TSA.com shall have the right to establish On-Line Customer Loyalty Programs in order to encourage continued E-Commerce Orders. Customer Loyalty Programs established by TSA.com shall be used only in connection with E-Commerce Orders and Retailer's customer loyalty programs shall be used only in connection with purchases at Retailer's TSA Stores. 5.4 Return of On-Line Merchandise. TSA.com's return policy shall be consistent ----------------------------- with Retailer's return policy. With each shipment of merchandise, TSA.com shall specifically instruct all Customers that no On-Line Merchandise purchased from the TSA Site may be returned to Retailer's TSA Stores and may only be returned to TSA.com in accordance with the instructions enclosed; provided, however, that Retailer at its sole discretion, in order to maximize its own customer goodwill, may accept any such On-Line Merchandise for return in accordance with Retailer's return policy, and thereafter return the On-Line Merchandise (or destroy for credit, as agreed by the Parties) to TSA.com's fulfillment center. Once each quarter, or more often as Retailer sees fit, it shall prepare and send an itemized invoice describing all returns of On-Line Merchandise which it has accepted at TSA Stores during the period elapsed since the 15 last such invoice, setting forth the items returned, quantities, amounts refunded or values exchanged, and any packing, handling and freight charges incurred by Retailer in shipping such On-Line Merchandise to TSA.com. TSA.com shall pay each invoice in full within 30 days of receipt from Retailer. The Parties shall negotiate in good faith and mutually agree to an appropriate service charge which Retailer may add to all such invoices. ARTICLE VI FULFILLMENT 6.1 Fulfillment Duties of TSA.com. TSA.com shall use commercially reasonable ----------------------------- efforts commensurate with leading e-commerce retail fulfillment operations to provide fulfillment services for the TSA Site, according to the service standards set forth in Attachment C. These fulfillment services shall include, ------------ without limitation: (a) Order Receipt: accept all Customer orders (and order inquiries and ------------- cancellations) on-line from TSA Site, and via dedicated toll-free telephone number(s) on a 24 hours/day, seven days a week basis. Process credit cards, verify authorizations and track frauds. Compute and collect applicable taxes and shipping and handling charges. Track, verify and confirm all orders by phone, mail or email as appropriate. (b) Credit Card Authorization and Billing: Process credit card payments, ------------------------------------- verify authorizations and track frauds. Reauthorize initial denials. Bill credit cards at time of shipment. (c) Merchandise Receiving and Inspection: Receive, count and inspect ------------------------------------ merchandise at warehouse or distribution center. Issue and track backorders. (d) Inventory Control: Track all merchandise on order, in warehouse or ----------------- distribution center, and as sold to Customers. Manage shrinkage. (e) Pick, Pack and Ship: Pick merchandise to fill orders from warehouse or ------------------- distribution center. Pack and seal merchandise for safe shipment. Ship via Customer designated method within the time frames selected by or promised to Customers. (f) Shipping Verification and Manifesting: Select appropriate shipping ------------------------------------- carriers, apply appropriate shipping labels, and communicate with carriers and Customers to verify and track all shipments. (g) Returns Processing: Provide on-line and toll-free telephone support ------------------ for processing merchandise returns. Issue RA numbers, UPS call tags and the like. Verify, confirm and track returns. Issue credit card credits (or refunds or exchanges) to Customers promptly upon receipt of returned merchandise. Process returns of defective merchandise to recover from vendors. 16 (h) Customer Service: In addition to the services afforded to Customers ---------------- above and as described in Article V, invite, track and respond as appropriate to Customer feedback. Provide systematic capability to track and monitor customer service activity to include such information as original order number, order date, reason for Customer contact, and resolution. For phone calls, track time to answer and call duration. For e-mail, track elapsed time from Customer send time/date to TSA.com response time/date. (i) Reporting: Provide reports to Retailer, including, without limitation, --------- concerning daily, weekly and monthly performance in each of the above categories, demand by page in the TSA Site, demand by item in the TSA Site, cancellations and returns, defectives, and the like. 6.2 Retailer's Option to Assume Fulfillment Duties. The parties agree that, at ---------------------------------------------- the option of Retailer, at any time after the second anniversary of the Launch Date, and upon nine months' prior written notice given by Retailer to TSA.com and GSI, Retailer may assume all fulfillment duties with respect to the E- Commerce Business and the TSA Site, provided that Retailer is able to satisfy the following conditions: (a) Retailer demonstrates to TSA.com's reasonable satisfaction that it has the ability to provide the same or better fulfillment services as TSA.com's then current fulfillment Outsourcing Partner at the same or better cost; (b) Retailer demonstrates to GSI's reasonable satisfaction that any resulting modifications needed in GSI's engineering architecture shall seamlessly integrate Retailer's fulfillment systems with GSI's operations. Further, if modifications are needed to integrate with GSI's operations, Retailer shall bear the costs of making such modifications; and (c) If Retailer desires to outsource fulfillment after satisfying the foregoing conditions, it may only do so: (i) if Retailer also outsources all of its other e-commerce, mail order and catalog fulfillment services; and (ii) the costs charged by Retailer to TSA.com for the outsourced fulfillment services for the TSA Site does not include any markup by Retailer. ARTICLE VII ADVERTISING AND MARKETING THE TSA SITE 7.1 Prior Approval of Agreements. TSA.com agrees to obtain the written ---------------------------- approval of Retailer prior to entering into any agreement or arrangement with Advertising and Marketing Partners of TSA.com, including, without limitation, all agreements for on-line or off-line links, cross promotion, exclusive arrangements, affiliate arrangements, and all other advertising exchange, traffic accumulation, aggregation and distribution methods or arrangements. 7.2 Use Of Advertising Co-op And Discretionary Funds. (a) TSA.com shall use ------------------------------------------------ all Advertising Co-op and Discretionary Funds received by TSA.com directly from vendors as a 17 result of the purchase of On-Line Merchandise for the TSA Site, exclusively to promote the TSA Site, in the manner and according to strategies as the Parties shall mutually determine. All proposed advertisements shall be submitted to Retailer for Retailer's prior review and approval. (b) Any Advertising Co-op and Discretionary Funds received by Retailer due to a given vendor's refusal to deal directly with TSA.com, and arising from Retailer's purchase of any On-Line Merchandise for TSA.com, shall be passed through to TSA.com by Retailer. In any event, Retailer and TSA.com each prefer that vendors deal directly with TSA.com, and each shall request Retailer's vendors to do so. 7.3 TSA.com's Additional Advertising Commitment. TSA.com shall spend, prior to ------------------------------------------- December 31, 2007, not less than [*] in excess of the amount of Advertising Co- op and Discretionary Funds spent by TSA.com for advertising of TSA's Site, of which at least [*] shall be spent by December 31, 2001 and the balance remaining will be spent at the rate of at least [*] per Fiscal Year until all [*] is spent. In the event of a breach of this Article 7.3, TSA.com shall have the right to cure such breach within 30 days of receipt of written notice of breach from Retailer. 7.4 Cross Promotion. Subject to Retailer's prior review and approval, and --------------- subject to the terms of the License Agreement, TSA.com shall have the right to use Retailer's URL, the name and mark "TheSportsAuthority.com" and certain other Marks (as defined in the License Agreement) to cross promote the TSA Site with Advertising and Marketing Partners of TSA.com. 7.5 URL Integration by Retailer. Retailer, commencing no later than October 1, --------------------------- 1999 and on a rolling basis as it orders or prepares new printed materials or advertisements or other communications pieces, and continuing during throughout the Term, at no cost to TSA.com, shall use its best efforts to provide for URL Integration in its prepared advertising, marketing and public and investor relations communications pieces, as follows: (a) by including its URL within substantially all of its print media advertising (including, without limitation, in newspapers, periodicals, circulars, billboards, print materials, shopping bags, cash register receipts and print sponsorship advertising); (b) by including its URL in substantially all of Retailer's television advertising; and (c) by mentioning its URL during substantially all of Retailer's radio advertisements. Retailer shall not be required to use the URL in any formats or applications where it deems such use to be inappropriate, poor design, unreasonable or awkward (e.g., in a radio spot which is too short) or where such use is rejected or unacceptable under the terms of any applicable advertising, marketing or sponsorship agreement. Retailer may use the following disclaimer together with the URL if appropriate and necessary: "On Line Merchandise offerings may vary from products offered in The Sports Authority stores." 18 ARTICLE VIII ADMINISTRATIVE SERVICES 8.1. Administrative Services to be Provided by TSA.com. TSA.com shall provide ------------------------------------------------- the following services to support the TSA Site and the E-Commerce Business: (a) TSA.com shall, as required by law, or as requested by Retailer, GSI or both: (i) formulate operating plans and budgets and share these with GSI and Retailer, at least semi-annually; (ii) provide long range forecasting and statistical analyses and share these with GSI and Retailer; (iii) establish policies, provide technical support for and prepare and maintain financial books, coordinate financial audits, maintain statutory records and registers, and prepare and file financial reports, accounts and returns and income tax and other taxation returns required by the U.S. and other national, state and local governments; (iv) obtain and administer national, state, and local licenses and permits necessary to conduct the E-Commerce Business and to operate the TSA Site; (v) install and maintain various financial reporting systems, including general accounting, sales audit, inventory control, internal control, asset accounting and other like systems as are customary and usual for similar enterprises; (vi) assist with public affairs and corporate communications services involving the TSA Site and the E-Commerce Business; and (vii) assist with developing advertising and marketing strategies and plans, and buying and managing print, electronic, sponsorship and other advertising and signage programs. (b) Financial Statements. TSA.com shall provide Retailer with monthly -------------------- unaudited financial statements in such detail as Retailer may from time to time require and shall provide Retailer with real-time electronic access on a 24 hour/7 days a week basis to its books and records to the extent the same are maintained in an electronic media and accessible on-line. (c) Audits. During the term of this Agreement and for a period of two (2) ------ years thereafter, each Party shall keep and maintain accurate books and records relating to this Agreement. Upon request, Retailer or its agent(s) may inspect, audit and analyze copies of those records of TSA.com relating to this Agreement. Upon request, TSA.com or its agent(s) may inspect, audit and analyze copies of those records of Retailer relating to this Agreement. Any 19 such audit by a Party (the "Auditing Party") shall be conducted at the Auditing Party's own cost and expense, during normal business hours at the regular place of business of the other Party (the "Audited Party") upon at least ten (10) days prior written notice. Each Party may exercise its right to audit hereunder no more than once per year, unless a material discrepancy (i.e., a discrepancy in excess of [*] or [*]) was discovered in an audit. In such cases, the Auditing Party may audit every six (6) months until the results of the audit show that a material discrepancy no longer exists. All underpayments shall be promptly remitted to the Auditing Party. No payments rendered under this Agreement shall be subject to audit more than two (2) years from the date of its presentation. Neither Party shall exercise its audit rights unless it has a reasonable basis to believe the information provided by the other Party is inaccurate. ARTICLE IX RETAILER'S SERVICES 9.1 Project Manager; Merchandising Manager. Retailer shall make two of its -------------------------------------- employees available to serve as a full-time project manager and a full-time merchandising manager to work with TSA.com with respect to all aspects of Retailer's rights and obligations pursuant to the TSA Site, the E-Commerce Business and this Agreement. Such "Dedicated Employees" shall be hired, employed, managed and compensated by Retailer, and TSA.com shall reimburse Retailer for each such Dedicated Employee's services in the manner set forth below. 9.2 Charges. TSA.com shall reimburse Retailer for all commercially reasonable ------- compensation costs incurred by Retailer in connection with the Dedicated Employees, including, without limitation, TSA.com's allocable share of the wages, salary, bonus, 401(k), profit sharing and other standard compensation and employee benefits as paid or furnished by Retailer, and of any employment based sums that Retailer as an employer is required by law to contribute on behalf of such Dedicated Employees to local, state and federal agencies. Each Dedicated Employee shall keep track of all work time that he or she devotes to working for any party other than TSA.com and periodically report the same to Retailer. At least once each month Retailer shall prepare a written statement (a "Dedicated Employee Invoice") identifying each Dedicated Employee employed on TSA.com's behalf during the preceding month, itemizing the compensation furnished by Retailer for each Dedicated Employee, totaling the amounts by Dedicated Employee, and reducing such totals proportionately for the time each Dedicated Employee spent working for parties other than TSA.com during the subject month. 9.3 TSA.com's Payments. Dedicated Employee Invoices shall be calculated and ------------------ sent by Retailer to TSA.com on a monthly basis. Less frequent billing may be appropriate for periods in which minimal time has been spent or minimal costs have been incurred. TSA.com agrees to pay Retailer all charges within thirty (30) days after the receipt of any Dedicated Employee Invoice from Retailer. ARTICLE X CUSTOMER DATA, FINANCIAL DATA AND DATABASES 10.1 Ownership and Use of Customer Data. (a) TSA shall own all right, title and ---------------------------------- interest in and to the Customer Data, while TSA.com shall have an irrevocable right and license hereunder touse the Customer Date in its business operations. TSA.com shall adhere to all United States and Canadian privacy 20 and data protection laws applicable to its gathering, processing, storing and transmitting of Customer Data. TSA.com shall use its best efforts to adhere to all such privacy and data protection laws of all other nations and shall indemnify TSA for any loss, damage or expense caused by its failure to do so; provided, however, that the parties agree that such failure to do so shall not be deemed a breach of this Agreement. (b) Each Party shall treat the Customer Data as Confidential Information of the other Party in accordance with the provisions of Article 11.1. The Parties agree that TSA.com may use Customer Data in the operation of the TSA Site and the E-Commerce Business, and that Retailer may use the Customer Data in the operation of Retailer's land based stores, but neither Party shall furnish, rent, sell or otherwise disclose Customer Data to any person or entity whatsoever without the prior written consent of the other Party. Further, the Parties agree not to furnish, rent, sell or otherwise disclose to any person or entity whatsoever any Financial Data, without the other Party's prior written consent and subject to such terms and conditions as the Parties may mutually determine. Notwithstanding the foregoing, TSA.com may permit GSI, at no charge to GSI, to use Financial Data (but not Customer Data) to form trends and overall research as to the on-line shopping habits of consumers. 10.2 Delivery of Customer Data and Financial Data to Retailer. From time to -------------------------------------------------------- time, Retailer may request that TSA.com provide to Retailer any or all of the Customer Data or the Financial Data as Retailer shall specify, including, without limitation, the following information: (a) Customers' names; (b) Customers' addresses; (c) Customers' phone numbers; (d) Customers' e-mail addresses; (e) items purchased; (f) amount spent; (g) information as to how and from where Customers reached TSA Site; (h) "refers"; (i) unique visitors to site; (j) page views per site; (k) top ten most viewed pages; (l) bottom ten least viewed pages; (m) time of day traffic patterns; (n) sales by product and brand in the aggregate; (o) Customer comments and complaints (shall be furnished on a monthly basis or more often as requested); and (p) such additional information as requested by Retailer. Upon receipt of such request, TSA.com shall provide the Customer Data or Financial Data to Retailer in a commercially standard format, either via diskette, CD-ROM, electronically, or via another mutually agreeable method. TSA.com shall use commercially reasonable efforts to ensure that the Customer Data and Financial Data provided to Retailer accurately and completely reflects the Customer Data and Financial Data in the TSA Site, but until such data is audited and 21 TSA.com's books are closed for the applicable period, TSA.com shall have no obligation to check the accuracy, validity or integrity of the Customer Data or Financial Data. 10.3 Ownership and Use of Financial Data. TSA.com, Retailer and GSI shall ----------------------------------- jointly and severally own all right, title and interest in and to the Financial Data, except that all use of the Financial Data by any of them shall always be subject to the restrictions set forth herein. 10.4 Ownership of Databases. GSI shall own all right, title and interest in and ---------------------- to the Databases, while Retailer and TSA.com may use the Databases subject to other restrictions set forth herein. ARTICLE XI CONFIDENTIALITY 11.1 Confidential Information. Each Party acknowledges that, in connection with ------------------------ the performance of this Agreement, it may receive Confidential Information of the other Party. For the purpose of this Agreement, "Confidential Information" shall mean information or materials that is marked "confidential" or which the Receiving Party knows or has reason to know is the confidential or proprietary information of the Disclosing Party, either because (i) such information is marked or otherwise identified by the Disclosing Party as confidential or proprietary, or (ii) such information has commercial value and is not generally known in the Disclosing Party's trade or industry. Confidential Information shall include, without limitation: (a) concepts and ideas relating to the development and distribution of content in any medium; (b) trade secrets, drawings, inventions, know-how, software programs, and software source documents; (c) information regarding plans for research, development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublished financial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; (d) existence of any business discussions, negotiations or agreements between the parties; (e) the terms and conditions of this Agreement; (f) all information with respect to Retailer's vendors, Retailer's price and cost structures, TSA.com's vendors, TSA.com's merchandise price and cost structures, the cost of merchandise sold by TSA.com, the existence or amount of any cooperative advertising subsidy or rebate; and (g) all prices of merchandise to be sold on the TSA Site prior to publication of such prices on the TSA Site; provided, however, that Retailer shall be provided with the information referred to in clauses (f) and (g). 11.2 Confidentiality. The Receiving Party hereby agrees: (i) to hold and --------------- maintain in strict confidence all Confidential Information of the Disclosing Party and, except as otherwise permitted herein, not to disclose it to any third party; and (ii) not to use any Confidential Information of the Disclosing Party except as permitted by this Agreement or as may be necessary for the Receiving Party to perform its obligations under this Agreement. The Receiving Party shall use at least the same degree of care to protect the Disclosing Party's Confidential Information as it uses to protect its own Confidential Information of like importance, and in no event shall such degree of care be less than reasonable care. The obligations and restrictions imposed by this Article 11 shall terminate five (5) years after the expiration or termination of this Agreement. 22 11.3 Exceptions. Notwithstanding the foregoing, the parties agree that ---------- Confidential Information shall not include any information that: (a) was in the public domain at the time it was communicated to the Receiving Party by the Disclosing Party; (b) entered the public domain subsequent to the time it was communicated to the Recipient by the Disclosing Party through no fault of the Receiving Party; (c) was in the Receiving Party's possession free of any obligation of confidence at the time it was communicated to the Receiving Party by the Disclosing Party; (d) was rightfully communicated to the Receiving Party by a third party, free of any obligation of confidence, subsequent to the time it was communicated to the Receiving Party by the Disclosing Party; (e) was developed by employees or agents of the Receiving Party independently of and without reference to any information communicated to the Receiving Party by the Disclosing Party; or (f) was communicated by the Disclosing Party to an unaffiliated third party free of any obligation of confidence. In addition, the Receiving Party may disclose the Disclosing Party's Confidential Information in response to a valid order by a court or other governmental body, as otherwise required by law, or as necessary to establish the rights of either party under this Agreement; provided, however, in the event that the Receiving Party receives a demand to disclose such Confidential Information in connection with a legal action or proceeding, the Receiving Party, if possible, shall first notify the Disclosing Party of the demand in order to provide the Disclosing Party an opportunity to seek a protective order. TSA.com may also disclose certain of Retailer's Confidential Information to GSI in connection with the performance by GSI of its duties, but only to the extent expressly permitted in the E-Commerce Services Agreement by and among TSA.com, GSI and Retailer of even date herewith. 11.4 Confidentiality of this Agreement. The Parties acknowledge that the terms --------------------------------- and conditions of this Agreement constitute Confidential Information which shall be governed by the terms of this Article 11. ARTICLE XII APPROVALS 12.1 Approval Process. Except as otherwise expressly set forth herein, and ---------------- except with respect to any use of "Licensed Property" (as defined in the License Agreement) which requires approval under the License Agreement, when a given provision calls for prior review and approval by one Party of a submission by the other Party, the Party receiving the submission shall review it in a timely manner and use its best efforts to communicate in writing its approval or disapproval as soon as practicable after receiving the same. Failure to communicate approval within five (5) Business Days of receipt of the submission shall be deemed a disapproval. The submitting Party may re-start the approval process by making a second submission marked "Second Request." The Party receiving the second submission shall again review it in a timely manner and use its best efforts to communicate in writing its approval or disapproval as soon as practicable after receiving the same. Failure to communicate approval within five (5) Business Days of receipt of the submission shall be deemed an approval. In no event, shall the Party seeking approval produce, distribute, or otherwise follow through on or implement the subject of the submission until approval is granted in writing by the Party charged with the right of approval, or until the applicable period has expired after a Second Request and the Party receiving the second submission has failed to reply. 23 ARTICLE XIII EXCLUSIVITY 13.1 Retailer. During the term of this Agreement, except as otherwise permitted -------- under Article 2.6(a) of the License Agreement, Retailer agrees to not engage in the business of creating, developing, operating, advertising and promoting a business-to-consumer e-commerce business on the Internet which directly or indirectly generates in excess of 20% of its revenues from the sale of sporting goods, athletic footwear, athletic apparel and related goods and services ("Restricted Business"), except that if Retailer acquires another business selling sporting goods, athletic footwear and/or athletic apparel and related goods and services either through land based stores or through catalog sales which is engaged in e-commerce business, Retailer can continue to operate the e- commerce business of the acquired business until such time, if ever, that Retailer changes 50% or more of the acquired business's land based stores to stores operating under the name "The Sports Authority" or any variation thereof or changes the catalog name to "the Sports Authority" or any variation thereof. If Retailer desires to engage in any Restricted Business during the term of this Agreement, it shall only do so through TSA.com and such business shall be conducted on the terms and conditions set forth in this Agreement. 13.2 TSA.com. During the Term of this Agreement, TSA.com agrees to not engage ------- in the sale of goods over the Internet as a shareholder, partner or investor in any corporation, partnership, limited liability company or other entity or venture which directly or indirectly generates in excess of 20% of its revenues from the sale of sporting goods, athletic footwear, athletic apparel and related goods and services. ARTICLE XIV REPRESENTATIONS AND WARRANTIES 14.1 Both Parties. Each Party represents and warrants to the other Party that: ------------ (a) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and that it has the power and authority to enter into this Agreement and the transactions contemplated herein; (b) the consummation of the transactions described by this Agreement shall not conflict with or result in a breach of any of the terms, provisions or conditions of its Articles of Incorporation or Bylaws, or any statute or administrative regulation or any order, writ, injunction, judgment or decree of any court, regulatory or governmental authority or of any agreement or instrument to which it is a party or by which it is bound, or constitute a default thereunder; and (c) this Agreement has been duly authorized, executed and delivered by it and this Agreement is valid, enforceable and binding upon each Party in accordance with its terms. 14.2 Year 2000. TSA.com warrants that the TSA Site shall not suffer any --------- material adverse effect as a result of a failure in any TSA.com Work Product or TSA.com Tools to be Y2K Compliant. A product or service which is "Y2K Compliant" is one that provides accurate results using data having date ranges spanning from January 1, 1980 through December 31, 2019 ("Y2K Period"). By way of example and not of limitation, "Y2K Compliant" means, with respect to a product or service, that it can currently and shall, during the Y2K Period, continue to (a) manage and manipulate data involving all dates within the Y2K Period (including the fact that the year 24 2000 is a leap year) without functional or data abnormality related to such dates; (b) manage and manipulate data involving all dates within the Y2K Period without inaccurate results related to such dates; (c) have user interfaces and data fields formatted to distinguish between dates within the Y2K Period; and (d) accurately identify and either reject or correct invalid date data during the Y2K Period. Provided TSA.com otherwise complies with this Article 14.2, it shall not be liable to Retailer for any failure to perform obligations under this Agreement to the extent such failure arises from a failure to be Y2K Compliant that: (i) affects the non-performing party's customers or suppliers; or (ii) is beyond its reasonable control. ARTICLE XV INDEMNIFICATION 15.1 Retailer. Retailer, at its own cost and expense, shall defend, indemnify -------- and hold harmless TSA.com and any of its officers, directors, employees or agents from and against any and all actions, claims, proceedings or lawsuits arising from or related in any way to: (a) any claim that TSA.com's use of the Marks as permitted hereunder and under the License Agreement, including use of Retailer's URL and of the name and Mark "TheSportsAuthority.com" infringes the trademark, service mark, trade dress or trade name rights of any third party in the U.S., its territories and possessions, Puerto Rico, or Canada, provided, however, that Retailer shall not bear any duty, obligation or liability pursuant to this Article 15.1 to the extent that, and with respect to which, any use by TSA.com of any of the Marks is in a manner not authorized by this Agreement or the License Agreement; or (b) from Retailer's gross negligence or willful or intentional misconduct. 15.2 TSA.com. Subject to Article 15.1 above, TSA.com, at its own cost and ------- expense, shall defend, indemnify and hold harmless Retailer and any of its officers, directors, employees or agents from and against all damages, expenses, liabilities and other costs (including reasonable attorneys' fees and court costs) arising: (a) from a claim made by any party (other than Retailer) that is related in any way to the TSA Site, the E-Commerce Business, On-Line Merchandise sold or services furnished through the TSA Site, or TSA.com's services to Retailer provided pursuant to this Agreement; or (b) from TSA.com's gross negligence or willful or intentional misconduct. 15.3 Any Party seeking indemnification shall notify the other Party as soon as possible after such Party seeking indemnification becomes aware of the claim. Except with respect to infringement claims asserted under 15.1(a) which Retailer shall have the sole right to defend, the indemnifying Party shall have the right to defend any claim pursuant to this Article XV. The indemnified Party shall cooperate with such defense and, at its option, may also defend such claim to the extent that its interests in any way vary from that of the indemnifying Party. ARTICLE XVI INSURANCE 16.1 TSA.com shall, during the Term of this Agreement, maintain the following insurance coverages as indicated or as required by law, whichever shall be greater, with insurers in good standing and authorized to do business under the laws of the State(s) where performance shall occur: 25 (a) Comprehensive General Liability, naming Retailer as an additional insured, including without limitation Contractual Liability and Products Liability, with broad form property damage and bodily injury (including Personal Injury) coverage. The minimum limits for each shall be [*] per occurrence and [*] annual aggregate; and (b) Workers' Compensation and Employers' Liability with minimum limits of [*] per accident, [*] disease (each employee) and [*] disease (policy limit). Upon Retailer's request, TSA.com shall tender to Retailer certificates of insurance evidencing the coverages required to be maintained by TSA.com hereunder. The certificates must provide that no change or cancellation of insurance shall be made without thirty (30) days prior written notice to Retailer. ARTICLE XVII TERM AND TERMINATION 17.1 Term. This Agreement shall commence on the Effective Date and ---- automatically terminate upon termination of the E-Commerce Venture Agreement, or terminate pursuant to Article 17.2 below. 17.2. Termination. This Agreement may be terminated prior to termination of ----------- the E-Commerce Venture Agreement, as follows: (a) By either Party if the other Party shall materially breach in the performance of any of the covenants, terms and conditions of this Agreement and shall fail to cure such breach within 60 days after receipt of notice in writing from the terminating Party of such breach, giving reasonable particulars of such breach and of the intention of the Party serving the notice to terminate this Agreement unless such breach is cured; provided, however, that if such breach cannot reasonably be cured within 60 days, no termination shall occur so long as the Party against which breach has been declared continues to use its best efforts to cure such breach. (b) By either Party if the other Party shall be judicially declared bankrupt or insolvent, make an assignment for the benefit of, or enter into a compromise with, its creditors; initiate bankruptcy or insolvency proceedings of any kind or proceedings for the appointment of a receiver, manager, judicial manager or similar official with respect to it or any of its assets or become a party to dissolution proceedings; provided, however, that no termination shall occur if any such action is stayed, dismissed or reversed within 60 days of the initiation of such action and the other Party provides satisfactory evidence of the same within such period. ARTICLE XVIII NO IMPLIED WARRANTIES; LIMITATIONS UPON LIABILITY 18.1 Neither Party shall be liable to the other party for incidental, consequential, punitive or exemplary damages arising in connection with this agreement or the performance, omission of performance or termination hereof, even if the said Party has been advised of the possibility of 26 such damages and without regard to the nature of the claim or the underlying theory or cause of action (whether in contract, tort or otherwise). Neither Party makes any representation or warranty to the other except as specifically set forth herein. ARTICLE XIX PROPERTY RIGHTS AND OWNERSHIP 19.1 General. The TSA Site shall consist of, and shall operate in conjunction ------- with, multiple elements, all of which are subject to certain Intellectual Property Rights. The Parties' respective rights with respect to such elements shall be as set forth below. For purposes of this Agreement, the term "ownership" shall refer to ownership of all right, title and interest in and to the respective elements, including, but not limited to, all patent, copyright, trade secret, trademark and any other similar Intellectual Property Rights therein, as applicable. 19.2 Retailer's URL. Retailer's URL shall be owned solely by Retailer (or its -------------- licensor) and all use by TSA.com shall be governed by the License Agreement. 19.3 The TSA Site. The TSA Site shall be owned solely by TSA.com. Except with ------------ respect to each whole page of the TSA Site (which TSA.com shall own), TSA.com disclaims all right, title and interest, and Retailer shall own all right, title and interest, in and to all TSA Content and all works derivative of the TSA Content which are incorporated into the TSA Site, whether such works are copyright or trademark subject matter or otherwise, and even if such works are not created by Retailer. 19.4 Software. Software developed by GSI for the TSA Site shall be owned solely -------- by GSI, subject to any authorizations to use and approvals obtained and granted to TSA.com and Retailer. 19.5 TSA.com Products. As between Retailer and TSA.com, TSA.com owns the ---------------- TSA.com Products. 19.6 TSA Content. As between TSA.com and Retailer, Retailer owns the TSA ----------- Content. Except for a limited non-exclusive license to use the TSA Content (subject to the terms of the License Agreement) solely to perform its obligations hereunder, this Agreement confers no ownership or other beneficial interest in TSA Content to TSA.com. ARTICLE XX MISCELLANEOUS 20.1 Discontinuance Or Regulation Of The Internet. Retailer acknowledges and -------------------------------------------- agrees that the Internet (including without limitation the Web) is a network of private and public networks, that TSA.com has no control over the Internet, and that TSA.com is not liable for the discontinuance of operation of any portion of the Internet or possible regulation of the Internet which might restrict or prohibit the operation of the TSA Site. 27 20.2 Force Majeure. In the event that either party is unable to perform any of ------------- its obligations under this Agreement or to enjoy any of its benefits because of any event beyond the control of the affected party including, but not limited to, natural disaster, acts of God, actions or decrees of governmental bodies or failure of communications lines or networks (a "Force Majeure Event"), the party who has been so affected shall promptly give written notice to the other party and shall use its best efforts to resume performance. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the duration of such Force Majeure Event. 20.3 Waiver. No delay or failure on the part of any party hereto in exercising ------ any right, power or privilege under this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified. 20.4 Press Releases. All voluntary public announcements concerning the -------------- transactions contemplated by this Agreement shall be mutually acceptable to both TSA.com and Retailer. Unless required by law, neither TSA.com on the one hand, and/or Retailer on the other hand, shall make any public announcement or issue any press release concerning the transactions contemplated by this Agreement without the prior written consent of TSA.com or Retailer, respectively. With respect to any announcement that any of the Parties is required by law to issue, such Party shall, to the extent possible under the circumstances, review the necessity for and the contents of the announcement with the other Party before issuing the announcement; provided, however, if either Party cannot obtain the consent of the other Party in a timely manner, the Party required to comply with law may issue the press release or public announcement without obtaining the consent of the other Party. 20.5 Choice of Delaware Law. This Agreement shall be deemed to have been ---------------------- executed and delivered in the State of Delaware, and shall be construed, interpreted and enforced under and in accordance with the internal laws of the State of Delaware. 20.6 Binding Effect; Assignment; TSA.com's Use of Outsourcing Partners. (a) ----------------------------------------------------------------- This Agreement shall be binding upon the Parties hereto, their successors and permitted assigns and approved Outsourcing Partners. Neither Party may assign its rights and/or duties under this Agreement without the prior written consent of the other Party, except as provided below. (b) Upon written notice to TSA.com, Retailer shall have the right to assign this Agreement to any person or entity which acquires or succeeds to all or substantially all of Retailer's business or assets (c) Retailer acknowledges that TSA.com shall contract with GSI, Organic Online, Inc. and Client Logic Corporation as major Outsourcing Partners to perform certain services hereunder. TSA.com represents and warrants to Retailer that TSA.com shall fully comply with the terms of Article 20.6(e) below with respect to GSI, Organic Online, Inc. and Client Logic Corporation. 28 (d) TSA.com may employ Outsourcing Partners to perform certain other services hereunder, provided, however, that for any Outsourcing Partner proposed by TSA.com to perform web site development or fulfillment services, and for any Outsourcing Partner proposed by TSA.com under an agreement which will pay such Outsourcing Partner over $500,000 in any year,TSA.com shall notify Retailer and obtain its prior written consent with respect to the material terms of engagement of any such Outsourcing Partner, which consent shall not be unreasonably withheld. (e) All Outsourcing Partners must be fully informed by TSA.com and bound in writing and agree (i) to all of the applicable restrictions upon TSA.com hereunder, and (i) to perform all of the applicable obligations of TSA.com with respect to Retailer hereunder, including, without limitation, the obligations set forth in Articles VIII, X, XI, XII, XV, XVI and XX. Retailer shall be deemed a third party beneficiary of all such agreements between TSA.com and its Outsourcing Partners, and shall be entitled to enforce such agreements as against any Outsourcing Partner in its own name and on its own behalf. Notwithstanding the foregoing, as between Retailer and TSA.com, TSA.com shall be responsible for all acts or omissions of any Outsourcing Partner. 20.7 Counterparts. This Agreement may be signed in several counterparts, each ------------ of which shall be deemed an original, and all of which when taken together, shall be deemed a complete instrument. 20.8 Entire Agreement. This Agreement, as well as the License Agreement and ---------------- the E-Commerce Services Agreement, represent the entire agreement of the Parties with respect to the subject matter hereof and may not be modified, except in writing, and executed by all of the Parties hereto. This Agreement supersedes all prior writings of the Parties with respect to this subject matter. 20.9 No Partnership. The relationship of the Parties herein shall be that of -------------- independent contractors and nothing herein shall be construed to create a joint venture or partnership. 20.10 Headings. Section headings contained in this Agreement are inserted for -------- convenience or reference only and shall not be deemed to be a part of this Agreement for any other purpose. 20.11 Notices. Any notices or writings to be sent hereunder shall be in ------- writing and shall be by personal delivery or facsimile transmission and shall be deemed given upon the earlier of actual receipt or receipt by sender of confirmation of facsimile transmission. Notices shall be sent to the following addresses (or such other address as either party may specify in writing): if to TSA.com: TheSportsAuthority.com, Inc. 555 South Henderson Road King of Prussia, Pennsylvania 19406 Attention: President Fax No.: (610) 768-0981 29 copy to: David S. Mandel, Esq. Astor Weiss Kaplan & Rosenblum, LLP The Bellevue Broad & Walnut Streets 6th Floor Philadelphia, Pennsylvania 19102 Fax No.: (215) 790-0509 if to Retailer: The Sports Authority, Inc. 3383 North State Road No. 7 Fort Lauderdale, Florida 33319 Attention: Alex Stanton, Senior Vice President, Business Development Fax No.: (954) 677-6094 copy to: The Sports Authority, Inc. 3383 North State Road 7 Fort Lauderdale, Florida 33319 Attention: General Counsel Fax No.: (954) 730-4288 and to: The Sports Authority Michigan, Inc. 306 South Washington, Suite 224 Royal Oak, Michigan 48067 Attention: General Counsel Fax No: (248) 414-9993 30 IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to enter into this Agreement with intent to be legally bound hereby, the date and year first above written. THESPORTSAUTHORITY.COM, INC. THE SPORTS AUTHORITY, INC. By: /s/ Michael Rubin By: /s/ Martin E. Hanaka ---------------------------- ----------------------------- Title: ________________________ Title: _________________________ 31 ATTACHMENT A Domain Name: TheSportsAuthority.com Format of Retailer Content: See Attachment B Project Liaisons: For TSA.com - Michael Golden For Retailer - Alex Stanton Feature Set: TSA.com, at its own expense, shall create, maintain and operate the TSA Site for Retailer on the Web in accordance with state of the art computer software development industry professional standards and with at least the following functionality: 1. Standard Search 2. Browse Category/Sub-Category/Family/Sub-Family 3. Product Presentation 4. Related Products 5. Product Comparison 6. Shopping Cart 7. Online Checkout with Secure Ordering 8. Email Notification of Orders 9. Order Tracking 10. User Login/Registration 11. User Profile Management 12. Product Bundles/Promotions 13. 24/7 Real Time Customer Service 14. Reporting Tools for Site Performance, Sales and Traffic 15. Affiliate Program Management 16. Store Locator with Mapping 17. Gift Giving Functionality 18. Real-Time Order Processing (including tax and shipping costs configurators) 19. Corporate Information (including financial information and company profile) 20. Employment and Press Areas with remote publishing tools for administration by Retailer (Collectively, items 1-20 above describe the "Core Functionality" of the TSA Site) Milestone Delivery Schedule: - --------------------------- Task Estimated Completion Date Establish Fulfillment Capabilities April 30, 1999 Discovery And Planning June 1, 1999 Commence Engine Engineering July 31, 1999 Alpha Testing August 15, 1999 Retailer Web Site Development August 30, 1999 Quality Control Review And Revisions September 16, 1999 Beta (Soft Launch) September 21, 1999 Web Site Launch To General Public October 1 - December 1,1999 Media And Promotions October 1 - December 1,1999 ATTACHMENT B ASSET SUBMISSION GUIDELINES This section details how to submit assets. Source Assets and Final Assets - ------------------------------ We require source files for all assets. This means if an image is originally constructed as a layered RGB Photoshop file at 100x500 pixels, we need that file, even if the final file is a flattened 4-bit GIF at 20x100. We allow the submission of final assets in some cases, but only by prior arrangement and only in addition to an up-to-date source file. All submitted assets are subject to review and verification by production staff. Media and Format - ---------------- We routinely receive assets in the following media and formats: Digital Media: Media: SyQuest 44mb, 88mb, 200mb, CD-ROM (including PhotoCD), Zip, Jaz, 3.5" floppy. Format: Win16, Win-32, or Macintosh File Formats: Text: Raw, MS Word 95, RTF, HTML Bitmap Graphics: Photoshop, TIFF, PCD (PhotoCD), EPS, PICT (JPEG and GIF for final files only and only along with source files) PostScript Graphics: EPS, Illustrator (7.0 preferred) Video: QuickTime Audio: WAV, AIFF, MIDI Non-Digital Media: Contact us to discuss needs and capabilities before submitting any non-digital assets. Asset Submission - ---------------- We prefer to receive assets via FTP (file transfer protocol) although we gladly accept assets via standard package delivery services (i.e., FedEx, USPS, UPS, etc.). Submission via FTP FTP Area: ftp.globalsportsinteractive.com Assets should be left in "Incoming" which is a level below the initial directory. Once assets have been transferred, e-mail confirmation is required. Submission via Package Delivery If you wish to submit assets via standard package delivery services, please address the package to this address: Address TBD If you are submitting hard assets like brochures, photographs, etc. please be sure to ship them in a reinforced container to prevent damage to the assets while in transit. If you are submitting digital media like SyQuests, Zip disks, Jaz disks, etc., be sure to ship them in a well-padded, reinforced container. ATTACHMENT C TSA Site Performance Standards and Specifications A. Scheduled Maintenance Downtime In order to keep the TSA site running at optimal efficiency, scheduled downtime will be used for periodic system maintenance and upgrades. TSA.com has a scheduled maintenance window of 4AM to 6AM EST on Sunday mornings for the TSA Site. Tracking tickets will be issued to track any maintenance performed during this time. Tickets are also issued for unscheduled maintenance and downtime. B. Escalation Procedures If a technical problem occurs with the TSA Site, contact people in the following order: Frontier Global Center Network Operations Center 1 800 662 3551 TSA.com Web Operations Joe Romello (610)768 0900 Michael Balik (610) 768 0900 Organic Web Operations Daniel Lees (212) 277 4678 pager page-dlees@organic.com ---------------------- Dion Lee Chin (212) 277 4742 pager page-dleechin@organic.com ------------------------- Organic Project Engineer Clay Amerault (212) 277 4732 pager page-amerault@organic.com ------------------------- C. Server Monitoring 1. Web Servers Web servers will be monitored by continuous pinging to make sure the machine is alive. The http server will be continuously monitored to ensure it is serving web pages. The home page will be monitored to ensure the correct home page is being displayed with no errors. Disk space on the web servers will be monitored and someone notified if capacity exceeds a preset level. 2. Application Servers Application servers will be monitored by continuous pinging to make sure the machine is alive. Disk space on the application servers will be monitored and web operations notified if capacity exceeds a preset level. 3. Database Servers Database servers will be monitored by continuous pinging to make sure the machine is alive. Disk space on the database servers will be monitored and someone notified if capacity exceeds a preset level. Database table space and database extents allocated will be monitored and web operations notified if capacity exceeds a preset level. D. Replacement Parts Under the Sun Silver maintenance agreement, replacement parts shall be available within four (4) hours of reported failure. E. Backups Full backups of all machines will be performed every Monday morning beginning at 2AM EST. Incremental backups will be performed every morning except Monday beginning at 4AM EST. F. Hosting Environment Other than scheduled downtime as described above, TSA.com guarantees 99% uptime, with preset escalation points for outages starting from system degradation and system interruption and moving to Priority I, II or III. The mean response time for server response to access the TSA Site shall not exceed more than __ seconds during any one (1) hour period. Pages will return in 8 seconds or less over a T1 connection on a 28.8Kps modem. The bandwidth representing the TSA Site's connection to the Internet shall be no less than a ____ connection, and shall be operating at capacity no more than __ minutes in any 24 hour period. G. Security Since the TSA Site is an electronic commerce web site, security is a primary concern. TSA.com shall operate and maintain the TSA Site's servers at a locked and secured location and shall prevent unauthorized access to the same, and any databases or other sensitive material generated from or used in conjunction with the TSA Site. TSA.com shall promptly notify Retailer of any known security breaches or holes. A Solaris platform will be used to keep the web site system as secure as possible. Solaris allows easy removal of nonessential services. Solaris allows administrative access to the servers to be restricted by a secure shell or direct terminal connection. Solaris allows auditing of access to the system. Solaris allows software that performs a single use password system. Credit card and other sensitive data will be encrypted before being transmitted. In addition to securing the individual servers used in the system, a firewall will be used. H. Design Requirements Standard Viewable Area: 615x500 Monitor Resolution: 800x600 and greater Maximum Page Size: 50k, no page exceeding 80k Connection Speed: 28.8 Kbps and greater Graphic Formats: GIF89a, JPEG, plus a TBD enhanced image format Interactive Elements: HTML, JavaScript, CSS, Dynamo, dHTML I. Supported Browser Environments This list below shows which browser/platform/OS combinations, based on research conducted by GSI, will provide full functionality for the GSI Common Engine and the TSA Site. The list below should cover approximately 95% of all browsers. Users without Netscape 4 (or higher) or Internet Explorer 4 (or higher) will be directed to a page informing them how to download the necessary browser. Additionally, since JavaScript is required to view the site, users who have disabled JavaScript will be directed to a page telling them how to enable it. This list also serves as the list of browsers with which the site will be tested during the quality assurance phase of the project-preceding launch. Browser Version Platform OS Version Netscape Navigator 4.0.x Windows 95,98,NT 4.0 MS Internet Explorer 4.x Windows 95,98,NT 4.0 Netscape Navigator 4.0.x Macintosh MacOS 7.x.x and up MS Internet Explorer 4.x Macintosh MacOS 7.x.x and up J. Fulfillment, Customer Service 1. Telephone Service On a monthly basis, TSA.com shall provide the following service levels: . Abandoned calls not to exceed 2% of total calls. . Average speed of answer shall not exceed 20 seconds. . Calls delayed shall not exceed 20%. 2. Shipment Service Time TSA.com shall use its best efforts to make all shipments of merchandise to Customers according to the following schedule: . 100% by the end of the Business Day following date of receipt (orders received after 3PM count as next day). . Balance by the end of the second Business Day following the date of receipt. . Preferential orders and Federal Express (or other express courier service) orders will be shipped on the day received. 3. Customer Returns, Requests for Information TSA.com shall process all Customer returns within three (3) Business Days of receipt. TSA.com shall respond to requests for information Customers for UPS call tags (or the like) and Customer returns within three (3) Business Days of receipt. Similarly, TSA.com shall respond to requests from Customers regarding shipment confirmation or other matters within three (3) Business Days of receipt, except that serious problems shall be responded to within 24 hours. K. Reporting TSA.com shall provide monthly reports (or more frequent) to Retailer by the 15th of each month, which: . Track and monitor maintenance and downtime of the TSA Site; . Track and monitor the metrics set forth above in items C, E, F and J; . Track and monitor such information as original order number, order date, reason for Customer contact, and resolution; and . For e-mail, elapsed time from Customer send time/date to TSA.com response time/date. -----END PRIVACY-ENHANCED MESSAGE-----