<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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)
Formerly located at 555 South Henderson Road, King of Prussia, PA 19406
-----------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
Between February 1, 1999 and May 14, 1999, Global Sports, Inc. (the
"Registrant") entered into exclusive agreements to operate the e-commerce
businesses for the following sporting goods retailers: Michigan Sporting Goods
Distributors, Inc. ("MC Sports"), The Athlete's Foot Stores, Inc. ("TAF"),
Dunham's Athleisure Corporation ("Dunham's"), Sport Chalet, Inc. ("Sport
Chalet") and The Sports Authority, Inc. ("TSA").
ITEM 7. EXHIBITS
Exhibit No. Description
- ---------- ------------------
10.1+ E-Commerce Agreement dated February 1, 1999 by and between Global
Sports Interactive, Inc. ("GSI") and MC Sports
10.2+ E-Commerce Management Agreement dated March 10, 1999 by and between
GSI and TAF
10.3+ E-Commerce Agreement dated March 23, 1999 by and between GSI and
Dunham's
10.4+ E-Commerce Management Agreement by and between GSI and Sport Chalet
10.5+ E-Commerce Venture Agreement dated May 7, 1999 by and between GSI
and TSA
10.6+ Amendment No. 1 to the 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
10.10 Agreement dated May 14, 1999, by and between TSA and the Registrant
+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.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
GLOBAL SPORTS, INC.
DATE: December 28, 1999 BY: /s/ Michael G. Rubin
-------------------------
Michael G. Rubin
Chairman of the Board &
Chief Executive Officer
DATE: December 28, 1999 BY: /s/ Steven A. Wolf
--------------------------
Steven A. Wolf
Vice President &
Chief Financial Officer
3
<PAGE>
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 dated May 7, 1999 by and between GSI
and The Sports Authority, Inc. ("TSA")
10.6+ Amendment No. 1 to the 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
10.10 Agreement dated May 14, 1999, by and between TSA and the Registrant
+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.
4
<PAGE>
EXHIBIT 10.1
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.
<PAGE>
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
2
<PAGE>
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.
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
3
<PAGE>
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.
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
---------
4
<PAGE>
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 [*] 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.
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
5
<PAGE>
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 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
<PAGE>
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 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
7
<PAGE>
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 [*]
8
<PAGE>
9
<PAGE>
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 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 [*] per cent ([*]%) 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")
10
<PAGE>
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 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.
11
<PAGE>
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.
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
12
<PAGE>
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) [*]. 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 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
13
<PAGE>
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 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
14
<PAGE>
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 [*]
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;
15
<PAGE>
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;
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
16
<PAGE>
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: "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
17
<PAGE>
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 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.
18
<PAGE>
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.
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
19
<PAGE>
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
------------------------
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.
20
<PAGE>
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.
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
21
<PAGE>
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.
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
22
<PAGE>
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.
13.3 Termination Without Cause by Either Party. In the absence of a
-----------------------------------------
material breach, this Agreement may only be terminated by the
23
<PAGE>
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.
24
<PAGE>
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 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
25
<PAGE>
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
-------------
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.
26
<PAGE>
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 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
27
<PAGE>
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
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
28
<PAGE>
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
------------------------- -------------------------
29
<PAGE>
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,
30
<PAGE>
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 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.
31
<PAGE>
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 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
32
<PAGE>
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 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.
33
<PAGE>
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
34
<PAGE>
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 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) [*] DOLLARS([*]) OR B) THE
AMOUNTS PAID TO RETAILER DURING THE [*] MONTHS PRECEDING THE LAST ACT OR
35
<PAGE>
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 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
36
<PAGE>
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)
37
<PAGE>
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
38
<PAGE>
EXHIBIT 10.2
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.
<PAGE>
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.
-2-
<PAGE>
1.19 "GSI Content" shall mean as defined in paragraph 1.5 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 "Private Label" shall mean a tradename owned by the Retailer under
which name the Retailer manufactures merchandise for sale in its
retail stores.
-3-
<PAGE>
1.33 "Production Schedule" shall mean as defined in paragraph 1.9 of the
Web Site Development Agreement.
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.
-4-
<PAGE>
2.2 Term. The Term of this Agreement shall commence upon the execution of
----
this Agreement and shall expire [*] 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, 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 [*] 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 [*] 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.
-5-
<PAGE>
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
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-
<PAGE>
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) "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
-7-
<PAGE>
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, 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
-8-
<PAGE>
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. 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 [*]
-9-
<PAGE>
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
-10-
<PAGE>
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
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.
-11-
<PAGE>
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 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
-12-
<PAGE>
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.
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
-13-
<PAGE>
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
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
-14-
<PAGE>
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
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 [*]
-15-
<PAGE>
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 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.
-16-
<PAGE>
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
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
-17-
<PAGE>
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 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.
-18-
<PAGE>
4. ON-LINE DATA AND DATABASES
--------------------------
4.1 [*]
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.
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;
-19-
<PAGE>
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 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
-20-
<PAGE>
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 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
-21-
<PAGE>
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 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
-22-
<PAGE>
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 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
-23-
<PAGE>
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 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
------------------------
-24-
<PAGE>
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.
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.
-25-
<PAGE>
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 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.
-26-
<PAGE>
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 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
-27-
<PAGE>
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.
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
-28-
<PAGE>
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.
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
----------------------------------
-29-
<PAGE>
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.
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
-30-
<PAGE>
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.
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.
-31-
<PAGE>
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
-------
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
-------
-32-
<PAGE>
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
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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 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.
-41-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
-47-
<PAGE>
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.
-48-
<PAGE>
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.
-49-
<PAGE>
EXHIBIT 10.3
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.
<PAGE>
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.
2
<PAGE>
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 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.
3
<PAGE>
1.33 "Receiving Party" shall mean the party receiving Confidential
Information.
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 [*] years after the Launch Date
("Expiration Date"). GSI shall use reasonable efforts to advise
Retailer ten days
4
<PAGE>
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 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
<PAGE>
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
<PAGE>
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
<PAGE>
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 [*]
8
<PAGE>
9
<PAGE>
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 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
10
<PAGE>
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.
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
11
<PAGE>
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, 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.
12
<PAGE>
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 [*]% 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 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)[*]. 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.
13
<PAGE>
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.
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.
14
<PAGE>
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 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
15
<PAGE>
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 [*]
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;
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.
16
<PAGE>
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 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.
17
<PAGE>
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 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.
18
<PAGE>
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 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
19
<PAGE>
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.
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.
20
<PAGE>
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
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
21
<PAGE>
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".
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.
22
<PAGE>
10.3 GSI represents and warrants that at all times during the term hereof
or any extensions thereof:
a. [*].
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.
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
23
<PAGE>
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 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
24
<PAGE>
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 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
25
<PAGE>
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.
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,
26
<PAGE>
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' 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.
27
<PAGE>
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
--------------
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
28
<PAGE>
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 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.
29
<PAGE>
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
------------
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
------------------------
30
<PAGE>
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
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
34
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
45
<PAGE>
Agreed to on this ____ day of [DATE], 1999.
GLOBAL SPORTS INTERACTIVE, INC. RECIPIENT:
BY:___________________________ BY:_________________________
Its:__________________________ Its:________________________
Date:_________________________ Date:_______________________
46
<PAGE>
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
<PAGE>
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.
2
<PAGE>
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.
3
<PAGE>
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.
4
<PAGE>
2.2 Term. The Term of this Agreement shall commence upon the execution of
----
this Agreement and shall expire [*] 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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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 bythe Retailer from its
vendors; and
2) current in line merchandise not carried by the Retailer in
its Land Based Stores, but
8
<PAGE>
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.
9
<PAGE>
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 [*]; 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 [*]
10
<PAGE>
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
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.
15
<PAGE>
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 [*] per cent [*] 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.
16
<PAGE>
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 15th 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.
17
<PAGE>
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 15th 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
18
<PAGE>
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
19
<PAGE>
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
20
<PAGE>
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
21
<PAGE>
on-line purchase, and will accordingly operate with merchant ID
numbers different from those used by Retailer for its land-based
business.
d. [*]
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
22
<PAGE>
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
23
<PAGE>
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 [*]
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;
24
<PAGE>
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
25
<PAGE>
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
26
<PAGE>
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
27
<PAGE>
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.
--------------------------------------------------------
28
<PAGE>
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
29
<PAGE>
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
30
<PAGE>
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:
31
<PAGE>
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,
32
<PAGE>
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
33
<PAGE>
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
34
<PAGE>
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
35
<PAGE>
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
36
<PAGE>
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.
37
<PAGE>
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
38
<PAGE>
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
39
<PAGE>
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
40
<PAGE>
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
41
<PAGE>
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.
-------------------------- -----------------------
42
<PAGE>
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)
43
<PAGE>
(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.
44
<PAGE>
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
45
<PAGE>
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.
46
<PAGE>
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
47
<PAGE>
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.
48
<PAGE>
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.
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
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 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
49
<PAGE>
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 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)
50
<PAGE>
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.
51
<PAGE>
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
52
<PAGE>
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
- --------------------------------------------------------------------------------
53
<PAGE>
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.
54
<PAGE>
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
55
<PAGE>
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.
56
<PAGE>
EXHIBIT 10.5
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 VENTURE AGREEMENT
BETWEEN
THE SPORTS AUTHORITY, INC.
AND
GLOBAL SPORTS INTERACTIVE, INC.
MAY 7, 1999
<PAGE>
E-COMMERCE VENTURE AGREEMENT
This Agreement is made and entered into on the 7th day of May, 1999, by and
between GLOBAL SPORTS INTERACTIVE, INC., a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania and having its principal
place of business at King of Prussia, Pennsylvania ("GSI"), and THE SPORTS
AUTHORITY, INC., a corporation organized and existing under the laws of the
State of Delaware and having its principal place of business at Fort Lauderdale,
Florida ("TSA").
SECTION I
PURPOSE AND STRUCTURE OF THE E-COMMERCE VENTURE
1.1. Purpose. The purpose of the e-commerce venture is to manage and
-------
operate the E-Commerce Business.
1.2. Structure. The e-commerce venture shall be carried out through
---------
TheSportsAuthority.com, Inc., a corporation to be organized by the parties under
the laws of the State of Delaware ("TSA.com") and located in King of Prussia,
Pennsylvania unless the parties otherwise agree. The parties agree to cause
TSA.com to sell and issue shares only as provided in Section 3.3 hereof.
SECTION II
TERMS AND DEFINITIONS
For purposes of this Agreement, the following terms have the meaning
expressed after each term:
2.1. "Advertising Co-op and Discretionary Funds" - Amounts earned by or
allocated to TSA.com by vendors, the purpose of which is to advertise that
vendor's brand or to use at TSA.com's discretion.
2.2. "Affiliate(s)" - An entity directly or indirectly controlling
(through one or more intermediaries), controlled by or under common control with
a given "Party" (as defined below), where control means the ownership or
control, directly or indirectly, of 50% or more of all of the voting power of
the shares (or other securities or rights) entitled to vote for the election of
directors or other governing authority, provided that such entity shall be
considered an Affiliate only for the time during which such control exists.
<PAGE>
2.3. "Board of Directors" - The Board of Directors of TSA.com or of any
Subsidiary, as the case may be.
2.4. "Business Day(s)" - Any day which is not a Saturday, Sunday or
official federal holiday in the United States.
2.5. "Directors" - The members of the Board of Directors of TSA.com.
2.6. "E-Commerce Agreement" - The agreement between TSA.com and TSA,
substantially in the form attached hereto as Exhibit "A."
----------
2.7. "E-Commerce Business" - The business of creating, developing,
operating, managing, advertising and promoting the TSA Site (as defined below).
2.8. "E-Commerce Services Agreement" - The agreement between TSA.com and
GSI, substantially in the form attached hereto as Exhibit "B."
----------
2.9. "Fiscal Year" - TSA.com's fiscal year as further defined in Section
7.1.
2.10. "GAAP" - Generally accepted accounting principles, consistently
applied.
2.11. "Gross Sales" shall mean all revenues received for merchandise and
services furnished at, by or through the TSA Site by TSA.com, its Affiliate,
Subsidiary or Related companies or permitted sublicensees (if any), whether
received by TSA.com, its Affiliate, Subsidiary or Related companies or permitted
sublicensees, whether for cash, credit, or other quid pro quo (as measured at
fair market value), except that the following shall be excluded in calculating
Gross Sales: (i) sales of General Merchandise or Own Brand Merchandise
subsequently returned for refund or credit; (ii) value added taxes, consumption
taxes, sales taxes, uses taxes and any other applicable taxes imposed by
governments, excluding withholding taxes collected and paid by TSA.com, if any;
and (iii) TSA.com's related actual costs of shipping and handling. Gross Sales
shall be calculated net of any allowances given with respect to defective
General Merchandise or Own Brand Merchandise, provided that such allowances
shall not exceed [*] percent ([*]%) of the value (at TSA.com's lowest cost) of
General Merchandise or Own Brand Merchandise (as the case may be) received in
any given Fiscal Year from the subject vendor or vendors to TSA.com.
2.12. "Internet" - 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.
2
<PAGE>
2.13. "Investment Banker" - A major investment banking firm having
substantial experience in the valuation of e-commerce enterprises similar in
size and structure to TSA.com.
2.14. "License Agreement" - The agreement among TSA, The Sports Authority
Michigan, Inc. and TSA.com, substantially in the form attached hereto as Exhibit
-------
"C."
- --
2.15. "Operative Documents" - This Joint Venture Agreement, the E-Commerce
Agreement, the E-Commerce Services Agreement and the License Agreement.
2.16. "Party(ies)" - "Party" shall mean TSA and/or GSI; "Parties" shall
mean both of them.
2.17. "Related" - Related company or companies shall mean any legal entity
which holds directly or indirectly more than 50% of the issued share capital or
capital stock of GSI or TSA, or of which GSI or TSA holds directly or indirectly
more than 50% of the issued share capital or capital stock, in any event not to
include TSA.com. An entity shall be deemed to hold shares indirectly if the
shares are held by another entity that is majority controlled, either directly
or through other majority controlled entities, by such first mentioned entity.
2.18. "Shareholder(s)" - The shareholder(s) of TSA.com.
2.19. "Subsidiary" - Any company owned or controlled by GSI or by TSA.
2.20. "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.
2.21. "TSA Site" shall mean that certain Internet site currently
accessible through the URL "http://www.thesportsauthority.com," and any backup
or mirror Internet site operated by TSA.com; 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. TSA.com agrees that the TSA Site shall not be used by TSA.com to
furnish, sell, advertise or promote the goods or services of any TSA Competitor.
2.22. "TSA Stores" shall mean any sporting goods retail store established
and/or operated by Retailer or Retailer's retailing subsidiaries devoted to the
sale of a broad assortment of sporting goods and equipment, footwear and apparel
and related goods and to provision of the related services.
3
<PAGE>
SECTION III
FORMATION AND CAPITALIZATION OF THE JOINT VENTURE
3.1. Independent Entities. It is the intention of GSI and TSA that
TSA.com and any Subsidiary of TSA.com shall (i) be autonomous and independent
business organizations; (ii) have their own personnel, except as otherwise
contemplated herein or by the E-Commerce Services Agreement, and (iii) not
require any loans or guarantees from TSA.
3.2. Organization of TSA.com. As soon as possible after the execution of
-----------------------
this Agreement, GSI shall cause TSA.com to be duly organized under the laws of
the State of Delaware. The initial registered office of TSA.com shall be
located at such location as may be determined mutually by the Parties. The text
of the Certificate of Incorporation and the Bylaws of TSA.com shall be subject
to the prior approval of both of the Parties.
3.3. Initial Capital Contributions. The Certificate of Incorporation of
-----------------------------
TSA.com shall authorize the issuance of up to 16,000 shares of common stock,
$.01 par value per share, and no other class of equity securities. Upon
organization of TSA.com, the Parties agree to cause TSA.com to issue and sell to
(i) GSI 8,001 shares of TSA.com common stock for the aggregate cash purchase
price of $[*] and (ii) TSA 1,999 shares of TSA.com common stock for the
aggregate cash purchase price of $[*].
3.4. Additional Funding.
------------------
(a) GSI shall loan TSA.com all additional funding hereafter
required by TSA.com. Such loans shall bear interest at [*]% (the "GSI Rate"). In
the alternative, GSI may support borrowing directly by TSA.com by providing
(without additional compensation other than reimbursement of any letter of
credit fees) letters of credit or guarantees to enhance TSA.com's
creditworthiness to permit TSA.com to borrow at the GSI Rate. All additional
funding as used herein shall include but not be limited to all amounts for
corporate overhead, purchase or lease of property, inventory and working capital
needs in connection therewith, and any shortfall that may be required pursuant
to Section 6.3 of the E-Commerce Agreement. In the event of a breach of this
Section 3.4(a), GSI shall have the right to cure such breach within 30 days of
receipt of written notice of breach from TSA.
(b) GSI agrees to fund TSA.com in the manner provided in Section
3.4(a) in an amount not less than $[*] during the period from the date hereof
through November 1, 1999. In the event of a breach of this Section 3.4(b), GSI
shall have the right to cure such breach within 30 days of receipt of written
notice of breach from TSA.
(c) GSI agrees to cause TSA.com to 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
4
<PAGE>
the event of a breach of this Section 3.4(c), GSI shall have the right to cure
such breach within 30 days of receipt of written notice of breach from TSA.
(d) A breach of Sections 3.4(c) may be cured by delivering to TSA
the required amounts not spent on condition that TSA spend such amounts for
advertising of TSA's Site in such manner as TSA shall determine.
(e) The Parties shall not permit TSA.com to incur any indebtedness
for borrowed money except in accordance with Section 3.4(a).
3.5 TSA Option. The parties agree to cause TSA to have the right and
----------
option, on and after May 9, 2002 (or immediately prior to an initial public
offering of shares of TSA.com common stock, if such offering occurs prior to May
9, 2002), to purchase from TSA.com shares of TSA.com common stock in the number
which after purchase would cause TSA to own up to 49.9% of the outstanding
shares of TSA.com common stock. Such "49.9%" is based on 16,000 authorized
shares of common stock, and the parties agree that so long as there are 16,000
shares authorized TSA's ownership pursuant to Sections 3.3, 3.5 and 3.6 hereof
shall never exceed 7.999 shares unless the parties otherwise mutually agree.
The purchase price shall be payable to TSA.com in cash at closing and shall be
equal to the lesser of (i) the aggregate amount equal to the percentage of
TSA.com shares to be purchased (giving effect to such purchase) multiplied times
an amount equal to [*], or (ii) $[*]. In the event that such stockholders
equity shall be positive, then such aggregate purchase price shall be $[*]. The
option set forth in this Section 3.5 shall expire upon an initial public
offering of TSA.com common stock.
3.6 Earn In.
-------
(a) The Parties agree that provided that TSA.com's Gross Sales in
the first full fiscal year exceed $[*], TSA.com shall issue and deliver to TSA
upon TSA's demand therefor, [*] shares of TSA.com common stock.
(b) The Parties further agree that TSA.com shall issue and deliver
shares of TSA.com common stock to TSA in the following amounts promptly upon the
achievement of either the Land Based Goal or the E-Commerce Goal for the year
indicated.
5
<PAGE>
<TABLE>
<CAPTION>
Land Based E-Commerce Number of
Year Goal Goal Shares
--------------------------------------------------------------------
<S> <C> <C> <C>
2000 $[*] N/A [*]
2001 $[*] $[*] [*]
2002 $[*] $[*] [*]
2003 $[*] $[*] [*]
</TABLE>
"Land Based Goal" shall mean gross revenues of TSA for TSA's fiscal year.
"E-Commerce Goal" shall mean TSA.com's operating income (excluding
extraordinary items) for the Fiscal Year as determined in accordance with GAAP.
In the event the goals set forth in Sections 3.6(a) or 3.6(b) for a prior
year or years are not achieved, but a goal for a subsequent year is achieved,
then TSA shall receive all shares specified above in Sections 3.6(a) or 3.6(b)
for the prior year or years.
The provisions of this Section 3.6 shall terminate upon TSA's exercise of
the option set forth in Section 3.5 hereof.
3.7 Warrant. In consideration of TSA entering into this Agreement, GSI
-------
shall cause Global Sports, Inc., a Delaware corporation ("Global"), to issue and
deliver to TSA a Warrant to purchase shares of Global common stock in the amount
and with the terms and conditions set forth on Exhibit "D" hereto.
----------
SECTION IV
MANAGEMENT AND OPERATIONS OF TSA.COM;
VOTING PROCEDURES
4.1. Management of TSA.com.
---------------------
(a) Board of Directors. The Board of Directors shall consist of
------------------
five persons. The Parties agree to elect to the Board of Directors three persons
designated by GSI from time to time and two persons designated by TSA from time
to time. Each Party may remove the persons appointed by such Party as a Director
at any time. The Parties agree that a quorum for a Board of Directors meeting
shall exist only if at least three directors are present and if at least one of
the directors present is a designee of TSA. The initial directors designated by
each Party shall be as set forth on Exhibit "E."
----------
6
<PAGE>
(b) Meetings. The Parties agree that the Bylaws of TSA.com shall
--------
provide that (i) meetings of the Board of Directors can be called upon five
Business Days' written notice by the Chairman of the Board, the President or any
two Directors and (ii) meetings of shareholders can be called by any shareholder
upon 10 days' written notice.
4.2. Management of Subsidiaries. The Board of Directors of any
--------------------------
Subsidiary of TSA.com shall consist at all times of the same persons as are the
members of the Board of Directors of TSA.com.
4.3. Transactions with GSI or TSA. The Parties agree that TSA.com and
----------------------------
any Subsidiaries of TSA.com shall be operated as independent businesses and that
any transaction between or among TSA.com or any Subsidiary of TSA.com, on the
one hand, and GSI or TSA or any of their Related companies, on the other hand,
shall be on an arms-length basis (except as otherwise provided in the Operative
Documents). Any sales or purchases of materials, products or services to or from
TSA.com or any Subsidiary by GSI or TSA or any of their Related companies shall
be competitive with alternative sources of equivalent materials, products or
services in terms of price, design, performance, quality, technology and
delivery (except as otherwise provided in the Operative Documents).
4.4. Insurance. The Parties shall cause TSA.com to maintain at all times
---------
during the term of this Agreement an amount of coverage, consistent with good
business practices in the United States and sufficient at all times to the
obligations of the Parties under the Operative Documents, including, without
limitation, comprehensive general liability insurance, including products and
completed operations and contractual liability coverage, naming TSA and GSI and
their respective Subsidiary and Related companies as additional insureds. Each
policy of insurance purchased by TSA.com pursuant to the preceding sentence
shall (i) be placed with a reputable insurance company acceptable to the Board
of Directors, (ii) either have a self-insurance retention or a deductible in
amounts consistent with good business practices, as such amount may be
determined by the Board of Directors, and (iii) contain other terms acceptable
to the Board of Directors.
4.5. Actions by Shareholders/Voting Procedure. Any action of TSA.com or
----------------------------------------
any Subsidiary with respect to any decision or process requiring the approval of
the Shareholders shall require the unanimous vote of the shareholders.
4.6. Actions by Board of Directors. Any action of TSA.com or any
-----------------------------
Subsidiary with respect to any decision or process requiring the approval of the
Directors shall require the affirmative vote of a majority of the Directors
present at a Board meeting except the following actions, which shall require the
affirmative vote of at least four Directors:
(i) Any amendment to the Bylaws.
(ii) The sale or issuance of any shares of common stock,
securities convertible in shares of common stock or options or rights to acquire
any shares of common stock, other than as provided in Section 3 of this
Agreement.
7
<PAGE>
(iii) The declaration of any dividend or distribution to
shareholders.
SECTION V
DIVIDEND POLICY
The Parties agree not to permit TSA.com to declare and pay any dividends
until such time as the indebtedness payable to GSI referred to in Section 3.4
hereof shall have been paid in full, unless the Parties shall otherwise agree in
writing.
SECTION VI
E-COMMERCE, E-COMMERCE SERVICES AND LICENSE AGREEMENTS
The Parties agree to enter into the E-Commerce Agreement, the E-Commerce
Services Agreement and the License Agreement substantially in the form attached
hereto. The parties agree that none of such agreements, in the form executed by
the parties thereto, may be amended without the prior written consent of both of
the Parties. The Parties agree that TSA.com shall not enter into any agreement
with either of the Parties or any of their Affiliates without the prior written
consent of both of the Parties.
SECTION VII
ACCOUNTING MATTERS, BOOKS AND RECORDS
7.1. Fiscal Year. The fiscal year of each of TSA.com and any Subsidiary
-----------
of TSA.com shall end on December 31 of each year.
7.2. Right of Inspection. The accounting books, records and accounts of
-------------------
TSA.com and each Subsidiary shall at all times be open to inspection by duly
authorized representatives of GSI and/or TSA during regular business hours.
7.3. Books and Records. The accounting books, records and accounts of
-----------------
TSA.com and Subsidiary shall be kept in accordance with GAAP at the principal
place of business of TSA.com and shall be audited by TSA.com's external auditor
at the expense of TSA.com or the appropriate Subsidiary of TSA.com, as
applicable. The Parties agree to mutually nominate and approve Deloitte Touche
as the initial external auditor and to nominate and approve any replacement
external auditor thereafter.
8
<PAGE>
SECTION VIII
RESTRICTION ON TRANSFER
8.1. General Restriction. Except with the prior written consent of the
-------------------
other Party, neither Party shall, directly or indirectly, sell, assign, give or
otherwise dispose of, any shares of common stock of TSA.com owned by it in any
manner except (i) as provided in Section 8.3 hereof or (ii) as provided in
Section 8.6 hereof. Neither Party shall pledge or otherwise grant a security
interest in the shares of TSA.com common stock owned by it without the prior
written consent of the other Party.
8.2. Interest Covered by Agreement. Section 8.1 hereof shall be
-----------------------------
applicable to any shares of TSA.com common stock owned by a Party, whether now
owned or hereafter acquired by whatever means, including, but not limited to,
interests acquired by purchase, share dividend or received through any
recapitalization or reorganization of TSA.com.
8.3. Transfers to Wholly Owned Subsidiaries. Notwithstanding anything in
--------------------------------------
this Agreement to the contrary, (a) TSA may, from time to time, transfer all
(but not less than all) of its TSA.com common stock to any Subsidiary of TSA,
and (b) GSI may, from time to time, transfer all (but not less than all) of its
TSA.com common stock to any Subsidiary of GSI (each of the foregoing transfers
in this paragraph is hereinafter referred to as a "Permitted Transfer" and each
Subsidiary referred to as a "Transferee"); provided, however, that (i) the
Transferee shall continue to be a Subsidiary of TSA or GSI, as the case may be,
(ii) the Transferee shall enter into a joinder agreement to be bound by all of
the terms and conditions of this Agreement in the same manner as is applicable
to its transferor hereunder, (iii) GSI or TSA, as the case may be, shall
continue to be bound by all of the terms and conditions of this Agreement, (iv)
the Party effecting a Permitted Transfer shall provide notice of such Transfer
to the other Party within 10 Business Days following such Permitted Transfer,
together with the written joinder from the Transferee and (v) if any Transferee
subsequently ceases to be a Subsidiary of TSA or GSI, as the case may be, TSA or
GSI, as the case may be, shall cause such common stock to be transferred back to
TSA or GSI or to any other Subsidiary of TSA or GSI prior to the Transferee
ceasing to be a Subsidiary of TSA or GSI.
8.4. Impermissible Transfers Void. Any attempted sale, transfer or
----------------------------
disposition of TSA.com common stock made in violation of this Agreement shall be
null and void. The transferee of such interest shall not be entitled to be
registered as a shareholder of TSA.com and shall not be entitled to vote such
interest or receive dividends thereon.
8.5. Legend on Shares. The following legend shall be placed on all
----------------
certificates representing TSA.com common stock:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM
SUCH REGISTRATION, PROVIDED THAT THE SELLER DELIVERS TO
THE COMPANY
9
<PAGE>
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
THESE SECURITIES ARE SUBJECT TO CERTAIN RIGHTS AND OPTIONS
RESTRICTING TRANSFERABILITY PURSUANT TO A CERTAIN JOINT
VENTURE AGREEMENT DATED MAY 9, 1999, A COPY OF WHICH IS
AVAILABLE FROM THE SECRETARY OF THE COMPANY.
8.6. Provisions Relating to Transfers to Persons or Entities other than
------------------------------------------------------------------
to Wholly Owned Subsidiaries.
- ----------------------------
(a) General. After May 9, 2004, a Party may sell all, but not less
-------
than all, of its TSA.com common stock only in accordance with this Section 8.6.
(b) Negotiations; Notice of Proposed Sale. A Party (the
-------------------------------------
"Transferring Party") who desires to sell all of its TSA.com common stock, other
than a Permitted Transfer, shall first give written notice to the other Party
the "Other Party") of its intentions, and negotiate in good faith with the Other
Party with respect to a sale of its TSA.com common stock. If a written
definitive agreement with respect to a sale is not reached within 60 days after
the date on which notice is given by the Transferring Party, the Transferring
Party may negotiate with third parties with respect to the sale of all but not
less than all of its TSA.com common stock, subject to the right of first refusal
of the Other Party set forth below. If the Transferring Party receives a bona
fide written offer from a third party to purchase its TSA.com common stock, the
Transferring Party shall serve notice (the "Transfer Notice") on the Other
Party. The Transfer Notice shall state that the Transferring Party has received
a bona fide written offer to purchase all of its TSA.com common stock from a
financially responsible third party, the consideration proposed to be paid for
the TSA.com common stock, any additional material terms or conditions of such
offer and the name and address of the prospective purchaser (the "Third Party").
(c) Option to Purchase.
------------------
(1) Upon receipt of the Transfer Notice, the Other Party shall
have the option to purchase all, but not less than all, of the TSA.com common
stock owned by the Transferring Party. The Other Party may purchase such common
stock for the same consideration described in the Transfer Notice (or, to the
extent the consideration consists of securities, for the equivalent cash market
value of such securities) and in accordance with any other material terms or
conditions described in the Transfer Notice.
(2) If the Other Party elects to exercise its option to
purchase the TSA.com common stock, it shall do so by notifying the Transferring
Party of such election within 30 days after receipt of the Transfer Notice from
such Party. After such 30-day period, the Other Party's option shall expire.
10
<PAGE>
(3) In the event of any purchase and sale of TSA.com common
stock pursuant to this paragraph (c), the closing of such purchase and sale
shall be held within 90 days after the date on which notice of exercise of an
option is given by the Other Party to the Transferring Party.
(d) Lapse of Options. If the option specified in Section 8.6(c)
----------------
hereof shall expire without exercise thereof, the Transferring Party shall be
entitled to make the proposed sale of its TSA.com common stock to the Third
Party for the consideration and in accordance with any other material terms or
conditions described in the Transfer Notice, provided that the Third Party
agrees, in form and substance reasonably satisfactory to the Other Party, to be
bound by the provisions of this Agreement to the same extent as if such Third
Party were originally a party hereto. If the sale of the Transferring Party's
TSA.com common stock is not completed within 90 days of the date of the
expiration of the option set forth in Section 8.6(c) above, then such TSA.com
common stock shall again become subject to the options of this Section 8.6.
(e) Delivery of Certificates. At the closing of any sale of
------------------------
TSA.com common stock pursuant to this Agreement, the Transferring Party shall
deliver to the Transferee the certificate(s) for such TSA.com common stock. The
shares being transferred shall be transferred free and clear of any lien or
encumbrance, except for the provisions of this Section 8.6.
8.7 Public Offerings. Upon the closing of an underwritten public
----------------
offering by TSA.com of its common stock registered under the Securities Act of
1933, this Section 8 shall automatically terminate and be of no further force
and effect.
SECTION IX
TERM AND TERMINATION
9.1. Term. This Agreement shall terminate upon 90 days' prior notice
----
given by one Party to the other Party on and after December 31, 2014. Such 90
day period shall be extended until the occurrence of a purchase by one of the
Parties pursuant to Section 9.3, if such purchase shall not have been completed
within such 90 day period, or the expiration of the right of each Party to elect
to make a purchase pursuant to Section 9.3.
9.2. Termination. This Agreement may be terminated prior to December 31,
-----------
2014 in accordance with Section 9.4, as follows:
(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
11
<PAGE>
been declared continues to use its best efforts to cure such default and in fact
cures such default within 90 days of receipt of such notice.
(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 and in fact cures such default within 90 days of
receipt of such notice.
(c) TSA shall have the right to terminate this Agreement in the
event that total revenues from all sources from the TSA Site by TSA.com for the
Fiscal Year ended December 31, 2003 shall be less than $[*]. In order to
exercise such right to terminate this Agreement, TSA shall give GSI written
notice of termination during the period commencing January 1, 2004 and ending 30
days after final TSA.com financial statements for the year ended December 31,
2003 are delivered to TSA. The Parties agree to cause such financial statements
to be prepared and delivered to TSA prior to March 15, 2004.
(d) TSA shall have the right to terminate this Agreement in the
event that TSA.com shall not achieve positive operating income for the Fiscal
Year ended December 31, 2005, excluding extraordinary items of income or
expense, as determined in accordance with GAAP. In order to exercise such option
to terminate this Agreement, TSA shall give GSI written notice of termination
during the period commencing January 1, 2006 and ending 30 days after final
TSA.com financial statements for the Fiscal Year ended December 31, 2005 are
delivered to TSA. The Parties agree to cause such financial statements to be
prepared and delivered to TSA prior to March 15, 2006.
(e) TSA shall have the option to terminate this Agreement in the
event that (i) either TSA.com's operating income, excluding extraordinary items
of income or expense, for the Fiscal Year ended December 31, 2009 shall be less
than [*]% of TSA.com's Gross Sales for the Fiscal Year ended December 31, 2009,
or (ii) TSA.com's Gross Sales for the Fiscal Year ended December 31, 2009, as
determined in accordance with GAAP, shall be less than $[*]. In order to
exercise such option to terminate this Agreement, TSA shall give GSI written
notice of termination during the period commencing January 1, 2010 and ending 30
days after final TSA.com financial statements for the Fiscal Year ended December
31, 2009 are delivered to TSA. The Parties agree to cause such financial
statements to be prepared and delivered to TSA prior to February 15, 2010.
(f) TSA shall have the option to terminate this Agreement in the
event that the Launch Date (as defined in the E-Commerce Agreement) has not
occurred on before November 1, 1999, provided that TSA.com shall have until
December 1, 1999 to cure such default. In order to exercise such right, TSA
shall give GSI written notice of termination prior to January 31, 2000.
12
<PAGE>
(g) TSA shall have the right to terminate this Agreement in the
event that Michael G. Rubin is not a full-time active employee of one of Global,
GSI or TSA.com for any reason prior to January 1, 2001. In order to exercise
such option to terminate this Agreement, TSA shall give GSI written notice of
termination within 60 days of the date on which Michael G. Rubin is not such an
employee.
(h) TSA shall have the right to terminate this Agreement in the
event that the shareholders equity of Global, as determined in accordance with
GAAP, as of December 31, 1999, is less than $[*]. In order to exercise such
option to terminate this Agreement, TSA shall give GSI written notice of
termination within 60 days of the date Global first publishes financial
statements as of December 31, 1999.
(i) TSA shall have the right to terminate this Agreement in the
event that GSI breaches any of the provisions of Sections 3.4(b), (c) or (d)
hereof, or Section 5.1 of the E-Commerce Services Agreement.
(j) TSA shall have the right to terminate this Agreement in the
event TSA gives notice of termination of the License Agreement or the E-Commerce
Agreement or if TSA.com gives notice of termination of the E-Commerce Services
Agreement provided that termination of this Agreement shall not be effective
unless and until such other agreement is terminated pursuant to its terms.
(h) GSI shall have the right to terminate this Agreement if the
event TSA.com gives notice of termination of the License Agreement or the E-
Commerce Agreement provided that termination of this Agreement shall not be
effective unless and until such other agreement is terminated pursuant to its
terms.
9.3. Effect of Termination after 2014. Upon termination of this
--------------------------------
Agreement by written notice given after December 31, 2014 by either Party in
accordance with Section 9.1 hereof, hereof, either Party shall have the right to
cause a Valuation by giving written notice to the other within 30 days after the
date on which notice of termination is given. If neither Party elects to cause a
Valuation, then the option contained in this Section 9.3 shall terminate. If
either Party elects to cause a Valuation, TSA shall have the right (but not the
obligation) to purchase all (but not less than all) of the TSA.com common stock
then owned or held by GSI or any of its Subsidiaries by giving written notice to
GSI within 20 days after the date of determination of Fair Market Value. In the
event that TSA shall fail to exercise such right, GSI shall have the right (but
not the obligation) to purchase all (but not less than all) of the TSA.com
common stock then owned or held by TSA or any of its Subsidiaries by giving
written notice to TSA within 40 days after the date of determination of Fair
Market Value. The price that the purchaser (the "Purchaser") shall pay for the
TSA.com common stock owned by the other Party or any of its Subsidiaries (the
"Seller"), in the event that the Purchaser elects to exercise the right to
purchase the TSA.com common stock of the Seller under this Section 9.3, shall be
the Fair Market Value of the TSA.com common stock owned by the Seller as of the
date notice of termination is given, determined in accordance with the
Valuation. The purchase price of the TSA.com common stock purchased under this
Section 9.3 must be paid in immediately available
13
<PAGE>
funds through a transfer of funds to a banking account to be designated at that
time by the Seller to the Purchaser. The closing of any purchase and sale of
TSA.com common stock under this Section 9.3 shall be completed within 20 days
after the Purchaser gives the Seller notice of its election to purchase
hereunder. As a condition of closing, the Seller shall deliver to the Purchaser
or its nominees the certificate for the TSA.com common stock. The TSA.com common
stock so delivered shall be duly endorsed and free and clear of any lien or
encumbrance of any nature whatsoever.
9.4. Effect of Termination Under Section 9.2.
---------------------------------------
(a) Upon termination in accordance with Section 9.2 hereof, the
Party exercising the right of termination (the "Terminating Party") shall have
the right to cause a Valuation by giving written notice to the other Party
contemporaneously with the notice of termination, in which event the date of
termination shall not occur until the occurrence of a purchase by the
Terminating Party pursuant to this Section 9.4 or the expiration of the
Terminating Party's right to make a purchase hereunder. If the Terminating Party
does not cause a Valuation, then the option contained in this Section 9.4 shall
terminate. If the Terminating Party elects to cause a Valuation and in addition
to any other remedy as may be provided for in this Agreement or by law, the
Terminating Party shall have the right but not the obligation to purchase all
(but not less than all) of the TSA.com common stock then owned by the other
party or any of its Subsidiaries by giving written notice to the other Party
within 20 days of the date of determination of Fair Market Value. The price that
the Terminating Party shall pay for the TSA.com common stock owned by the other
Party or any of its Subsidiaries shall be 50% of the Fair Market Value of the
TSA.com common stock owned by the other Party as of the date notice of
termination is given, determined in accordance with the Valuation. The purchase
price of the TSA.com common stock purchased must be paid in immediately
available funds through a transfer of funds to a banking account to be
designated at that time by the seller to the purchaser. The closing of any
purchase of TSA.com common stock by the Terminating Party shall be completed
within 20 days after the Terminating Party gives the other Party notice of its
election to purchase hereunder. As a condition of closing, the seller shall
deliver to the purchaser or its nominees the certificate for the TSA.com common
stock. The TSA.com common stock so delivered shall be duly endorsed and free and
clear of any lien or encumbrance of any nature whatsoever.
(b) In the event that the Terminating Party elects to cause a
Valuation pursuant to Section 9.4(a) and TSA.com common stock is not so
purchased by the Terminating Party pursuant to Section 9.4(a), the other Party
shall have the right (but not the obligation) to require the Terminating Party
to purchase all (but not less than all) of the TSA.com common stock then owned
or held by the other Party or any of its Subsidiaries by giving written notice
to the Terminating Party within 40 days after the date of Valuation. The
purchase price for the TSA.com common stock under this Section 9.4(b), shall be
50% of the Fair Market Value of the TSA.com common stock owned by the other
Party as of the date notice of termination is given, determined in accordance
with the Valuation. The purchase price must be paid in immediately available
funds through a transfer of funds to a banking account to be designated at that
time by the seller to the purchaser. The closing of any purchase of TSA.com
common stock under this Section 9.4(b) shall be completed within 20 days after
the other Party gives the Terminating Party notice of its election to require
the Terminating
14
<PAGE>
Party to purchase hereunder. As a condition of closing, the seller shall deliver
to the purchaser or its nominee the certificate for the TSA.com common stock.
The TSA.com common stock so delivered shall be duly endorsed and free and clear
of any lien or encumbrance of any nature whatsoever.
9.5. Definitions. For the purposes of this Section 9, the following
-----------
terms shall have the meanings ascribed to them below.
"Fair Market Value" of the TSA.com common stock held by the Seller means
(A) the value of the TSA.com common stock, considering TSA.com as a going
concern being sold as an entirety, taking into account net worth, past, present
and prospective earnings and cash flow, market conditions and prices paid in
previous acquisitions of similar businesses and specific valuations given to
Internet-related business, multiplied by (B) the percentage of the TSA.com
common stock held by the Seller.
"Valuation" means the following procedure to determine Fair Market Value:
GSI and TSA shall each select an Investment Banker, each at its own expense,
within a 20-day calendar period following the date on which a Party notified the
other Party of its intent to exercise the right to cause a Valuation under
Section 9.3 or 9.4. The Fair Market Value shall be the average obtained by
dividing the sum of the Fair Market Value determined by the two Investment
Bankers by two, provided the higher of the two determinations is not greater
than 10% of the lesser of the two. In the event that such difference is greater
than 10%, the two Investment Bankers shall choose a third Investment Banker.
The third Investment Banker shall then select which of the Fair Market Values
previously determined by the first two Investment Bankers it believes is more
accurate. The selection of the third Investment Banker shall be the Fair Market
Value and shall be conclusive and binding on both parties. Each Investment
Banker shall make its determination as to the Fair Market Value within a period
of 30 days from the date of its selection.
The Parties shall cause TSA.com to disclose and make available to the
Investment Bankers selected pursuant to this Section 9.5 all of the information
regarding the operations and financial condition of TSA.com and its Subsidiaries
as may be requested by such Investment Bankers in order to conduct and conclude
their Valuations as set forth herein.
9.6. Dissolution. In the event that the TSA.com common stock is not
-----------
purchased in accordance with either Section 9.3 or 9.4, the Parties agree to
promptly dissolve TSA.com and distribute its net assets in accordance with
Delaware law.
9.7. Survival. The termination of this Agreement for any reason shall
--------
not release either Party from its liability to pay any sums of money accrued,
due and payable to the other Party or to discharge its then-accrued and unfilled
obligations. Sections 9 and 10 shall survive any termination of this Agreement.
15
<PAGE>
SECTION X
CONFIDENTIALITY PROVISIONS
10.1. General Confidentiality Provisions/Public Disclosure. Except as may
----------------------------------------------------
be mutually agreed in writing between the Parties or as a Party may reasonably
determine to be required or appropriate to comply with stock exchanges or
securities laws, neither GSI nor TSA shall, nor shall either of them permit any
of its Related companies, during the term of this Agreement or any time
thereafter, to: (i) disclose to third parties the terms and conditions of this
Agreement or the other Operative Documents, except to those of its Related
companies, attorneys, accountants and other consultants who need to know the
information for the purposes of operating TSA.com and carrying out transactions
related thereto; or (ii) disclose to third parties (i.e. persons or entities
other than TSA or GSI), any confidential or proprietary information obtained
from the other Party or any Affiliate Company of the other Party.
SECTION XI
ADDITIONAL COVENANTS
11.1. Press Releases. All voluntary public announcements concerning the
--------------
transactions contemplated by this Agreement shall be mutually acceptable to both
GSI and TSA. Unless required by law, neither GSI on the one hand, and TSA 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 TSA, respectively.
11.2. Exclusive.
---------
(a) During the term of this Agreement (i) TSA and its Subsidiaries
agree not to engage in the E-Commerce Business except as permitted under Section
2.6(a) of the License Agreement and (ii) GSI agrees not to engage in and TSA.com
shall 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 generates in excess of 20% of its revenues from
the sale of sporting goods, athletic footwear and athletic apparel (other than
with [*] and any other such party which does
not engage in the sale of sporting goods, athletic footwear and athletic apparel
in the United States, Canada, Japan, any other nation in which the predominant
language is English or any other nation in which TSA, any of its Subsidiaries or
any corporation, LLC or other entity or venture in which TSA has more than a 19%
interest engages in the sale of sporting goods, athletic footwear and athletic
apparel or has announced its intention to commence doing so within six months
and in fact does so) (the foregoing shall not prevent GSI from entering into
additional e-commerce services or e-commerce license agreement with other
retailers of sporting goods, athletic footwear or athletic apparel, but GSI may
not launch any web site for such retailers or provide any other e-commerce
services prior to January 1, 2000).
(b) Until January 1, 2000, GSI agrees to devote all of its
e-commerce related activities to developing the TSA Site and the sites of other
retailers which have executed e-commerce
16
<PAGE>
services agreements with GSI prior to the date of this Agreement (except that
GSI may enter into additional e-commerce services or e-commerce license
agreement with other retailers of sporting goods, athletic footwear or athletic
apparel, but GSI may not launch any web site for such retailers or provide any
other e-commerce services prior to January 1, 2000).
11.3. Expenses. Except as otherwise provided herein, each Party shall
---------
bear its own expenses in connection with the transactions contemplated hereby.
11.4. Choice of Law. This Agreement shall be construed, interpreted and
-------------
enforced under and in accordance with the internal laws of the State of
Delaware.
11.5. WAIVER OF JURY TRIAL. EACH OF TSA AND GSI DO HEREBY KNOWINGLY,
--------------------
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE SUCH RIGHT ANY PARTY MAY HAVE
TO A JURY TRIAL IN EVERY JURISDICTION IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY OR ITS RESPECTIVE
AFFILIATES, SUCCESSORS OR ASSIGNS, IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, ANY OTHER OPERATIVE DOCUMENT OR ANY OTHER
DOCUMENTS EXECUTED AND DELIVERED BY ANY PARTY IN CONNECTION THEREWITH
(INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT,
AND ANY CLAIMS OR DEFENSES ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY
INDUCED OR OTHERWISE VOID OR VOIDABLE).
11.6. Notices.
-------
(a) Any notice or request with respect to this Agreement shall be
in writing and shall be delivered personally, by facsimile transmission, or by
overnight express courier, in each such case directed by each Party to the
other, with evidence of transmission, to its respective addresses as follows:
if to GSI: Global Sports Interactive, Inc.
555 South Henderson Road
King of Prussia, Pennsylvania 19406
Attention: President
Fax No.: 610-354-9088
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
17
<PAGE>
if to TSA: The Sports Authority, Inc.
3383 North State Road 7
Fort Lauderdale, Florida 33319
Attention: Alex Stanton,
Senior Vice President, Business Development
Fax No.: 954-677-6094
copies to: The Sports Authority, Inc.
3383 North State Road 7
Fort Lauderdale, Florida 33319
Attention: General Counsel
Fax No.: 954-730-4288
The Sports Authority Michigan, Inc.
306 S. Washington, Suite 224
Royal Oak, Michigan 48067
Attention: Senior Vice President and General Counsel
Fax No.: 248-414-9993
(b) Any notice or request shall be deemed to be given when actually
received. Either Party, by written notice to the other Party, may change the
address to which notices or requests shall be directed.
11.7. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon each of the Parties and their respective permitted successors and
assigns, but neither the rights nor the obligations of either Party hereunder
may be voluntarily assigned, in whole or in part, without the prior written
consent of the other Party.
11.8. Severability; Conflict with Organizational Documents. If any term
----------------------------------------------------
or provision of this Agreement is held to be unenforceable or in conflict with
any law or regulation of any kind, either by arbitration as provided herein or
by court of competent jurisdiction, then this Agreement, except for such part or
parts thereof, shall continue to be in full force and effect; provided, however,
that such remaining terms and provisions of this Agreement shall be construed to
reflect the original intent of the Parties and remain as a workable instrument
for the purposes of carrying out the original intentions of the Parties. In the
event of any conflict between the provisions of this Agreement and the
organizational documents of TSA.com, the provisions of this Agreement shall
prevail.
11.9. Entire Agreement. The Operative Documents constitute the complete
----------------
and final agreement between the Parties with respect to the subject matter
hereof and supersede all previous negotiations, agreements, commitments and
understandings, whether written or oral.
11.10. Amendment; Waiver. The provisions hereof may not be amended,
-----------------
waived, modified or superseded except by an instrument in writing signed by a
duly authorized officer or representative of each of the Parties.
18
<PAGE>
11.11. Headings. Descriptive headings in this Agreement are for
--------
convenience only and shall not control or affect the meaning or construction of
any of the provisions of this Agreement.
11.12. Counterparts. This Agreement may be executed in counterparts and
------------
both such counterparts taken together shall be deemed to constitute the same
instrument.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on the date first above written by its duly authorized officer or
officers.
GLOBAL SPORTS INTERACTIVE, INC.
By: /s/ Michael Rubin
------------------------------------
Name:
Title:
THE SPORTS AUTHORITY, INC.
By: /s/ Martin E. Hanaka
------------------------------------
Name:
Title:
19
<PAGE>
EXHIBIT "D"
-----------
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 ("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 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 May 10, 1999.
Exhibit D - Page 1
<PAGE>
6. Confidentiality This Term Sheet is not to be disclosed to any
party other than the employees or advisors of
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.
Exhibit D - Page 2
<PAGE>
EXHIBIT 10.6
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.
AMENDMENT NO. 1
TO
E-COMMERCE VENTURE AGREEMENT
----------------------------
This Amendment No 1 to E-Commerce Venture Agreement (the "Amendment") is
made and entered into on this 14th day of May, 1999, by and between GLOBAL
SPORTS INTERACTIVE, INC., a Pennsylvania corporation ("GSI"), and THE SPORTS
AUTHORITY, INC., a Delaware corporation ("TSA").
WHEREAS, the parties hereto are parties to that certain E-Commerce Venture
Agreement dated May 7, 1999 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto hereby agree as follows:
1. Amendments. Sections 2.11, 3.3, 9.2(e) and 11.2 of the Agreement and
----------
the definition of "Fair Market Value" contained in Section 9.5 of the Agreement
are amended in their entirety to read as follows:
2.11 "Net Sales" shall mean as defined by GAAP in the United
States.
* * *
3.3. Initial Capital Contributions. The Certificate of
-----------------------------
Incorporation of TSA.com shall authorize the issuance of up to
16,000 shares of common stock, $.01 par value per share, and no
other class of equity securities. The Parties agree to cause
TSA.com to issue and sell to (i) GSI 8,001 shares of TSA.com
common stock for the aggregate cash purchase price of $[*], (ii)
TSA 1,999 shares of TSA.com common stock for the aggregate cash
purchase price of $[*] and (iii) TSA 6,000 shares of TSA.com
common stock in consideration of the Names (as defined and
provided for in the License Agreement) provided that such 6,000
shares shall only be issued and delivered, on or after February
1, 2002, promptly after the first to occur of the following: (a)
TSA"s gross revenues for any TSA fiscal year, commencing with
fiscal year 2001 and fiscal years thereafter, shall exceed $[*]
or (b) TSA.com"s operating income
<PAGE>
(excluding extraordinary items) for any TSA.com Fiscal Year,
commencing with Fiscal Year 2001 and Fiscal Years thereafter,
shall exceed $[*].
* * *
9.2 (e):
(e) TSA shall have the option to terminate this
Agreement in the event that (i) either TSA.com"s operating
income, excluding extraordinary items of income or expense, for
the Fiscal Year ended December 31, 2009 shall be less than [*]%
of TSA.com"s Net Sales for the Fiscal Year ended December 31,
2009, or (ii) TSA.com"s Net Sales for the Fiscal Year ended
December 31, 2009 and determined in accordance with GAAP, shall
be less than $[*]. In order to exercise such option to terminate
this Agreement, TSA shall give GSI written notice of termination
during the period commencing January 1, 2010 and ending 30 days
after final TSA.com financial statements for the Fiscal year
ended December 31, 2009 are delivered to TSA. The Parties agree
to cause such financial statements to be prepared and delivered
to TSA prior to February 15, 2010.
* * *
11.2. Exclusive.
---------
(a) During the term of this Agreement (i) TSA and
its Subsidiaries agree not to engage in the E-Commerce Business
except as permitted under Section 2.6(a) of the License
Agreement, except that if TSA 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,
TSA can continue to operate the e-commerce business of the
acquired business until such time, if ever, that TSA 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, (ii) GSI agrees not to engage in and
TSA.com shall 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 generates in excess of 20% of its revenues from the sale of
sporting goods, athletic footwear and athletic apparel (other
than with TJX Companies, Inc., Ross Stores, Inc. and any other
such party which does not engage in the sale of sporting goods,
athletic footwear and athletic apparel in the United States,
Canada, Japan, any other nation in which the predominant language
is English or any other nation in which TSA, any of its
2
<PAGE>
Subsidiaries or any corporation, LLC or other entity or venture in which
TSA has more than a 19% interest engages in the sale of sporting goods,
athletic footwear and athletic apparel or has announced its intention to
commence doing so within six months and in fact does so) (the foregoing
shall not prevent GSI from taking the actions permitted in Section
11.2(b)).
(b) Until January 1, 2000, GSI agrees to devote its e-commerce
related activities to developing the TSA Site and the sites of other
retailers which have executed e-commerce services agreements with GSI prior
to the date of this Agreement, provided that (i) GSI may enter into
additional e-commerce services or e-commerce license agreements with other
retailers of sporting goods, athletic footwear or athletic apparel, (ii)
GSI may not commence providing any services to develop any web site for
such retailers until after the Launch Date (as defined in the E-Commerce
Agreement) and (iii) GSI may not launch any web site for such retailers
prior to January 1, 2000.
* * *
"Fair Market Value" of the TSA.com common stock held by the Seller
means (A) the value of the TSA.com common stock, considering TSA.com as a
going concern being sold as an entirety, taking into account net worth,
past, present and prospective earnings and cash flow, market conditions and
prices paid in previous acquisitions of similar businesses and specific
valuations given to Internet-related business and considering TSA.com as if
TSA.com owned the Customer Data, multiplied by (B) the percentage of the
TSA.com common stock held by the Seller.
2. Deletions. The penultimate sentence of Section 3.5 and all of Section
---------
3.6 of the Agreement are hereby deleted.
3. Continuing Effect. Except to the extent expressly amended pursuant to
-----------------
this Amendment, the parties agree that each of the provisions of the Amendment
remain in full force and effect.
4. Counterparts. This Amendment may be executed in counterparts and both
------------
such counterparts taken together shall be deemed to constitute the same
instrument.
3
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be executed
on the date first above written.
GLOBAL SPORTS INTERACTIVE, INC.
By: /s/ Michael Rubin
----------------------
Name:
Title:
THE SPORTS AUTHORITY, INC.
By: /s/ Martin E. Hanaka
----------------------
Name:
Title:
4
<PAGE>
EXHIBIT 10.7
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.
LICENSE AGREEMENT
-----------------
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as of the
14th day of May, 1999 (the "Effective Date") by and between THE SPORTS
AUTHORITY, INC., a Delaware corporation with its principal place of business at
3383 North State Road 7, Fort Lauderdale, Florida 33319, U.S.A. ("TSA"), and THE
SPORTS AUTHORITY MICHIGAN, INC. a Michigan corporation with its principal place
of business at 306 South Washington, Suite 224, Royal Oak, Michigan 48067
("TSAMI"; or collectively, "Licensor"), and THESPORTSAUTHORITY.COM, INC., a
Delaware corporation with its principal office at 555 South Henderson Road, King
of Prussia, Pennsylvania 19406 ("TSA.COM" or "Licensee").
WHEREAS, TSAMI, its parent company TSA and TSA's other retailing
subsidiaries The Sports Authority Florida, Inc., Authority International Inc.
and The Sports Authority Canada, Inc. comprise the largest full-line sporting
goods retailer in the U.S. and Canada, each operating full line sporting goods
stores under the name and mark THE SPORTS AUTHORITY;
WHEREAS, TSAMI is the owner of certain Marks, Names and TSA Content (as
each is defined below) in the U.S., Canada and Japan; TSA is the owner of
certain Marks, Names and TSA Content throughout the world other than in the
U.S., Canada and Japan; and both TSAMI and TSA are the owners of certain TSA
Buying Power (as defined below);
WHEREAS, TSA and Global Sports Interactive, Inc. ("GSI") have agreed under
a certain E-Commerce Venture Agreement dated May 7, 1999 (the "EVA") to form
TSA.COM to develop and operate the "TSA Site" (as defined below) on the
"Internet" (as defined below);
WHEREAS, TSA and TSA.COM have agreed under a certain E-Commerce Agreement
dated May 14, 1999 (the "ECA") that TSA.COM shall create, develop, operate,
maintain, advertise and promote the TSA Site;
<PAGE>
WHEREAS, GSI and TSA.COM have agreed under a certain E-Commerce Services
Agreement dated May 14, 1999 (the "ESA") that GSI shall perform many of the
services described in the ECA; and
WHEREAS, TSA.COM desires to license from TSA and TSAMI certain of the
Marks, Names, TSA Buying Power and TSA Content owned or controlled by TSA and
TSAMI for use in creating, developing, operating, maintaining, advertising and
promoting the TSA Site;
NOW, THEREFORE, in consideration of the mutual promises, undertakings and
covenants herein, and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereby respectively
grant, covenant and agree as follows:
ARTICLE I
DEFINITIONS
1.1 "Advertising and Marketing Partners of Licensee" 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 Licensee
contracts for exchanges of advertising and promotional services and any form of
compensation. For purposes of this Agreement, Licensee shall not contract with
TSA Competitors (as defined below) and the same shall be excluded from the
definition of Advertising and Marketing Partners of Licensee.
1.2 "Affiliate(s)" shall mean an entity directly or indirectly controlling
(through one or more intermediaries), controlled by or under common control with
a given "Party" (as defined below), where control means the ownership or
control, directly or indirectly, of fifty percent (50%) or more of all of the
voting power of the shares (or other securities or rights) entitled to vote for
the election of directors or other governing authority; provided that such
entity shall be considered an Affiliate only for the time during which such
control exists.
1.3 "Business Day(s)" shall mean any day which is not a Saturday, Sunday or
official federal holiday in the U.S.
2
<PAGE>
1.4 "Customer" shall mean a consumer who purchases or otherwise receives
Services, Materials, General Merchandise or Own Brand Merchandise furnished by
Licensee from the TSA Site as permitted hereunder.
1.5 "Fiscal Year" shall mean Licensee's fiscal year. Licensee shall give at
least ninety (90) days advance notice to Licensor of any change in designation
of Licensee's Fiscal Year.
1.6 "General Merchandise" shall mean any goods offered, sold or furnished by
Licensee from the TSA Site as permitted hereunder, other than Own Brand
Merchandise.
1.7 "Net Sales" shall mean as defined by GAAP in the United States.
1.8 "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.
1.9 "Licensed Property" shall mean the Marks, Names, TSA Buying Power and TSA
Content which Licensor has agreed to license to Licensee under Articles 2.1-2.4.
1.10 "License Guidelines And Restrictions" shall mean the clearance, form,
format and use restrictions and procedures set forth in Exhibit A, attached,
---------
which Licensee shall adhere to at all times in its use of the Licensed Property
on or in connection with the TSA Site and on or in connection with any site of
the Advertising and Marketing Partners of Licensee linked with or to the TSA
Site.
1.11 "Marks" shall mean:
(a) the mark THE SPORTS AUTHORITY in English in block letters and any
equivalent in foreign language characters, and certain THE SPORTS AUTHORITY
logotypes, and such other trademarks and service marks, which are
proprietary to Licensor, as shall be identified in writing by Licensor from
time to time, together with
3
<PAGE>
associated trademark and service mark applications and registrations
therefor, all as more specifically described in Exhibit B attached hereto
---------
and incorporated herein, as Exhibit B may be modified from time to time in
---------
writing by Licensor as further set forth in Article 2.1(b);
(b) all related emblems, logos and symbols, and all combinations, forms
and derivations thereof as are currently or hereafter used by Licensor in
connection with Own Brand Merchandise (as defined below); and
(c) the Trade Dress (as defined below) inherent in the design, layout and
presentation of TSA Stores or in the TSA Content in the U.S.A. and Canada,
including, without limitation, such Trade Dress as may be subject to
protection under applicable intellectual property or industrial property
laws and regulations of countries within the Territory.
1.12 "Materials" shall mean exterior and interior signs, flags, banners,
packaging, labels, print, electronic and broadcast advertising and promotional
media, indexes and pages on Internet sites (whether visible or not to the
general public), meta-tags, manuals, brochures, flyers, posters, sales
literature, business forms, gift certificates, credit cards, debit cards,
membership or consumer loyalty program cards and related materials, stationery,
employee uniforms, badges, merchandise bags and boxes, baskets, trolleys and
carts, sales receipts and charge slips, tickets and tags, and the like, bearing
any of the Marks and used on or in connection with furnishing the Services,
General Merchandise, or Own Brand Merchandise or with the TSA Site.
1.13 "Names" shall mean the following Internet domain names or URLs registered
in the name of either TSAMI or TSA, or both, together with any additions as may
be notified to Licensee from time to time in writing by Licensor, or any
deletions as agreed by the Parties:
. http://www.sportsauthority.com
. http://www.thesportsauthority.com
. http://www.sportsauthority.org
. http://www.thesportsauthority.org
. http://www.sports-authority.org
. http://www.sportsauthority.net
. http://www.thesportsauthority.net
. http://www.sports-authority.net
. http://www.skiauthority.com
4
<PAGE>
. http://www.theskiauthority.com
. http://www.skiauthority.org
. http://www.theskiauthority.org
. http://www.skiauthority.net
. http://www.theskiauthority.net
1.14 "Own Brand Merchandise" shall mean any and all goods bearing or otherwise
sold under or in connection with packaging or labels bearing the mark THE SPORTS
AUTHORITY, THESPORTSAUTHORITY.COM or the mark THE SPORTS AUTHORITY & Design, as
permitted hereunder and subject always to Licensor's prior written approval and
instructions.
1.15 "Party" shall mean the Licensor or Licensee; "Parties" shall mean both of
them.
1.16 "Related" company or companies shall mean any legal entity which holds
directly or indirectly more than fifty percent (50%) of the issued share capital
or capital stock of GSI or TSA, or of which GSI or TSA or their parent companies
hold directly or indirectly more than fifty (50%) of the issued share capital or
capital stock, in any event not to include Licensee. An entity shall be deemed
to hold shares indirectly if the shares are held by another entity that is
majority controlled, either directly or through other majority controlled
entities, by such first mentioned entity.
1.17 "Royalties" shall mean the following:
--------------------------------------------------
[*] PERCENT ([*]%) of any and all Net Sales during
any Fiscal Year (or portion thereof) during the
Term and any permitted extension.
--------------------------------------------------
The Royalties shall be paid by Licensee in consideration for use of the Marks,
TSA Content and TSA Buying Power hereunder, but not for use of the Names.
Licensor shall receive consideration for use of the Names as provided in Article
3.3 of the E-Commerce Venture Agreement. Upon request of any Party, the
Royalties may be reviewed from time to time to insure that they are commensurate
with the income derived by Licensee from use of the Licensed Property and to
ensure the Parties' compliance with applicable transfer pricing rules. The
Royalties may be amended only by mutual written agreement of the Parties.
5
<PAGE>
1.18 "Services" shall mean those services:
(a) offered by Licensee to Customers at or through the TSA Site,
including, without limitation, retail store services in the fields of
sporting goods, athletic footwear, athletic apparel and related goods
as furnished on the Internet at the URL
"http://www.thesportsauthority.com," as well as sporting goods
assembly, repair and maintenance, racquet stringing, layaway,
delivery, customer loyalty programs, and related services; and
(b) those advertising and promotional services offered by Licensee to
Advertising and Marketing Partners of Licensee, including, without
limitation, services intended to increase Customer traffic at the TSA
Site, and services intended to attract Customers from the TSA Site to
the sites of Advertising and Marketing Partners of Licensee.
1.19 "Subsidiary" shall mean any company owned or controlled by Licensee, or by
Licensor.
1.20 "Term" shall mean the period commencing with the Effective Date and
continuing approximately fifteen (15) years through December 31, 2014 unless
this Agreement is otherwise earlier terminated as provided in Article 5.8 below.
1.21 "Territory" shall mean throughout the universe excluding Japan.
1.22 "TSA Buying Power" shall mean Licensor's volume purchasing power and
ability to obtain other favorable terms in procuring goods and services from
Licensor's vendors, including without limitation, favorable pricing, delivery,
exclusivity, makeup, display, advertising and promotion, defective allowance and
merchandise return terms and other consideration.
1.23 "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
or any other nation in which TSA establishes TSA Stores during the Term of this
Agreement, whether by mail order, home shopping through audio or video
programming, over the Internet or
6
<PAGE>
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.
1.24 "TSA Content" shall mean:
(a) text, graphics, photographs, video, audio and/or other data or
information relating to any subject furnished by Licensor to Licensee
and intended solely for use in connection with the TSA Site;
(b) Licensor selected print advertisements for the TSA Stores or the
goods and services offered by Licensor 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
Licensor in the TSA Stores in the U.S. as Licensor possesses and has
the right to transfer and license to Licensee, and which Licensor
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,
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.
1.25 "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 Licensor, and redeemable at Licensor's TSA Stores.
1.26 "TSA Site" shall mean that certain Internet site currently accessible
through the URL "http://www.thesportsauthority.com," and any backup or mirror
Internet site operated by Licensee; it being understood that the TSA Site shall
be primarily targeted by Licensee at Customers, and not at persons, entities or
activities otherwise described in Article 2.6. Licensee agrees that the TSA
Site shall not be used by Licensee to furnish, sell, advertise or promote the
goods or services of any TSA Competitor.
7
<PAGE>
1.27 "TSA Stores" shall mean any sporting goods retail store established and/or
operated by TSA or its retailing Subsidiaries under the name and mark THE SPORTS
AUTHORITY and related marks, and devoted to the sale of a broad assortment of
sporting goods, athletic footwear, athletic apparel and related goods, and to
provision of the related services.
1.28 "Trade Dress" shall mean the total appearance or look and feel of:
(a) Own Brand Merchandise and its packaging and labels;
(b) TSA Stores as operated by Licensor in the U.S.; and
(c) print and television advertisements, billboards, and interior or
exterior signage as used by Licensor in the U.S. to promote or
identify the TSA Stores or Licensor's goods and services.
ARTICLE II
LICENSES
2.1 Grant of License to Use Marks. (a) Subject to the terms and conditions
-----------------------------
set forth in this Agreement, Licensor hereby grants to Licensee, for the Term
only, and Licensee accepts from Licensor, upon the terms and conditions
specified herein, the non-transferable, exclusive (as to third parties but not
as to Licensor) right and license in the Territory only, to use the Marks on and
in connection with the Services, Materials and Own Brand Merchandise furnished
in or in connection with the TSA Site if, and only if, such Services, Materials
and Own Brand Merchandise comply with the quality standards set forth herein and
those approved and issued by Licensor from time to time. Licensor may monitor
and control the nature and quality of the Services, Materials and Own Brand
Merchandise, and Licensor may appoint one or more representatives to monitor and
exercise such control on Licensor's behalf. Such monitoring shall in no way
lessen or limit Licensee's obligation to use the Marks only as set forth herein.
No other, further or different license is granted or implied and no assignment
of any right or interest is made or intended herein. In particular, no license
is granted to sublicense or otherwise permit any third party to use the Marks.
Licensee may only use the Marks on or in connection with Services, Materials and
Own Brand Merchandise subject to Articles II and III and all other terms and
conditions hereof. Except for use of "TheSportsAuthority.com, Inc." as its
registered corporate or business name (subject always to the applicable terms
and conditions of this
8
<PAGE>
Agreement), Licensee is prohibited from using the Marks or any name or mark
confusingly similar to the Marks, including any abbreviations of the Marks, as
part of Licensee's registered corporate or business name in any jurisdiction in
the Territory, or as part of any Internet domain name not otherwise registered
in Licensor's name.
(b) Changes to Exhibit B: Certain records in Exhibit B may be included for
-------------------- ---------
information purposes only and, as indicated in writing, shall be excluded from
the definition of Marks hereunder. Licensor and Licensee acknowledge that the
"core" Marks as set forth in Exhibit B are: AUTHORITY, THE SPORTS AUTHORITY,
---------
THESPORTSAUTHORITY.COM, SPORTSAUTHORITY.COM and THE SPORTS AUTHORITY & Design as
registered (or subject to pending applications to register) in the U.S. and
Canada. Licensor may make changes to Exhibit B from time to time as it sees fit
---------
to add Marks and to update information in records for existing Marks by
delivering an updated version of Exhibit B to Licensee. Licensor may only
---------
change Exhibit B to delete non-core Marks (or records for non-core Marks) by
---------
giving 30 days prior written notice (stating Licensor's reasons for the proposed
deletion(s) in reasonable detail) and an opportunity to object to Licensee. If,
at the end of 30 days, Licensee has failed to object in writing, the proposed
deletions may be made and Licensor shall deliver an updated Exhibit B to
---------
Licensee. If Licensee objects within the 30-day period, it shall do so by
delivering a written notice to Licensor which explains in reasonable detail the
basis for the objection. Licensor may accept the objection and forego the
deletion(s), but if not, Licensor and Licensee shall negotiate in good faith and
use their best efforts to achieve a mutually acceptable resolution.
Notwithstanding the foregoing, if Licensee has made a substantial and material
investment in a non-core Mark which Licensor proposes to delete, and the reason
for the proposed deletion is not a binding court order, judgment or other
injunction prohibiting Licensor's or Licensee's continued use of the subject
Mark, the Parties shall strive to preserve Licensee's continued right to use the
non-core Mark and to retain the non-core Mark as part of Exhibit B.
---------
2.2 Grant of License to Use Names. Subject to the terms and conditions set
-----------------------------
forth in this Agreement, Licensor hereby grants to Licensee, for the Term only,
and Licensee accepts from Licensor, upon the terms and conditions specified
herein, the non-transferable, exclusive (as to third parties but not as to
Licensor) right and license in the Territory only, to use the Names on and in
connection with the TSA Site if, and only if, such use complies with the License
Guidelines And Restrictions set forth in Exhibit A. In particular, Licensee
---------
shall use the Name "http://www.thesportsauthority.com" as its primary domain
name, and use the other Names, if at all, as pointers or immediate links to the
primary domain name. Licensor may monitor and control the nature and quality of
Licensee's use of the Names, and Licensor may appoint one or
9
<PAGE>
more representatives to monitor and exercise such control on Licensor's behalf.
Such monitoring shall in no way lessen or limit Licensee's obligation to use the
Names only as set forth herein. No other, further or different license is
granted or implied and no assignment of any right or interest is made or
intended herein. In particular, no license is granted to sublicense or otherwise
permit any third party to use the Names. Licensee may only use the Names on or
in connection with TSA Site subject to Articles II and III and all other terms
and conditions hereof.
2.3 Grant of License to Use TSA Buying Power. Subject to the terms and
----------------------------------------
conditions set forth in this Agreement, Licensor hereby grants to Licensee, for
the Term only, and Licensee accepts from Licensor, upon the terms and conditions
specified herein, the non-transferable, non-exclusive right and license in the
Territory only, to use the TSA Buying Power on and in connection with the TSA
Site if, and only if, such use complies with the restrictions set forth in this
Agreement. Licensor may monitor and control the nature and quality of Licensee's
use of the TSA Buying Power, and Licensor may appoint one or more
representatives to monitor and exercise such control on Licensor's behalf. Such
monitoring shall in no way lessen or limit Licensee's obligation to use the TSA
Buying Power only as set forth herein. No other, further or different license is
granted or implied and no assignment of any right or interest is made or
intended herein. In particular, no license is granted to sublicense or otherwise
permit any third party to use the TSA Buying Power. Licensee may only use the
TSA Buying Power on or in connection with TSA Site subject to Articles II and
III and all other terms and conditions hereof.
2.4 Grant of License to Use TSA Content. Subject to the terms and conditions
-----------------------------------
set forth in this Agreement, Licensor hereby grants to Licensee, for the Term
only, and Licensee accepts from Licensor, upon the terms and conditions
specified herein, the non-transferable, non-exclusive right and license in the
Territory only, to use the TSA Content solely in connection with the TSA Site
if, and only if, such use complies with the restrictions set forth in herein.
Licensor may monitor and control the nature and quality of Licensee's use of the
TSA Content, and Licensor may appoint one or more representatives to monitor and
exercise such control on Licensor's behalf. Such monitoring shall in no way
lessen or limit Licensee's obligation to use the TSA Content only as set forth
herein. No other, further or different license is granted or implied and no
assignment of any right or interest is made or intended herein. In particular,
no license is granted to sublicense or otherwise permit any third party to use
the TSA Content. Licensee may only use the TSA Content on or in connection with
TSA Site subject to Articles II and III and all other terms and conditions
hereof.
2.5 Marking, Samples, Inspection, Quality Control
---------------------------------------------
10
<PAGE>
(a) Marking Own Brand Merchandise and Materials. Licensee agrees to mark
-------------------------------------------
all Own Brand Merchandise and Materials in a manner complying with the License
Guidelines And Restrictions set forth in Exhibit A. Licensor reserves the right
---------
to change the provisions of Exhibit A as it sees fit in order to protect the
---------
Licensed Property, or Licensor's interests in the Licensed Property, and such
changes shall become binding upon Licensee upon receipt of written notice of
such changes. Licensee shall have a reasonable period, but no more than ninety
(90) days from first notice, to fully implement such changes. Without limiting
the foregoing, upon request from Licensor and with respect to TSA Content which
is created or owned by Licensor, Licensee shall place a notice of copyright on
each page of the TSA Site which displays TSA Content ("TSA Content Page") in
accordance with the License Guidelines and Restrictions. No TSA Content Page,
upon which a notice of copyright is placed pursuant to the preceding sentence,
shall contain any other copyright notice whatsoever except as mutually agreed to
and determined by the Parties. Licensee shall cooperate fully with Licensor in
connection with Licensor's obtaining appropriate copyright protection in the
name of Licensor for any TSA Content Page. Licensee acknowledges and agrees that
all copyrights and rights of copyright furnished by Licensor as TSA Content,
including any derivative works, shall be and remain the sole and complete
property of Licensor; that all such copyrights and rights of copyright in the
name of and/or owned by any copyright proprietor other than Licensor or Licensee
shall be and remain the sole and complete property of such copyright proprietor;
that Licensee shall not at any time acquire or claim any right, title or
interest of any nature whatsoever in any such copyright by virtue of this
Agreement or of Licensee's uses thereof in connection with TSA Content, the
Marks, Own Brand Merchandise, TSA Buying Power or any intellectual or industrial
property rights therein; and that any right, title or interest in or relating to
any such copyright which comes into existence as a result of, or during the term
of, the exercise by Licensee of any right granted to it hereunder shall
immediately vest in Licensor.
(b) Submission of Samples of Own Brand Merchandise and Materials; Approval
----------------------------------------------------------------------
Process. At any time upon request of Licensor, prior to introducing any Own
- -------
Brand Merchandise for sale and prior to producing and publishing or distributing
any Materials for the first time, Licensee shall furnish at Licensee's expense
samples of such Own Brand Merchandise and Materials, including the trademark,
copyright and disclaimer notices thereon and any other labels, tags or markings.
Further, Licensor shall have the right to inspect the TSA Site, including all
underlying code and data structures (solely for purposes of protecting its
interests in the Licensed Property and to ensure Licensee's compliance with the
terms hereof), and to inspect samples of General Merchandise or Own Brand
Merchandise, in order to assure compliance with
11
<PAGE>
the quality standards established by Licensor. If so notified in writing by
Licensor, Licensee shall not offer or furnish any Services, Materials, General
Merchandise or Own Brand Merchandise whose nature or quality does not comply
with the quality standards established by Licensor in accordance with this
Agreement. Further, if Licensee proposes to alter the Marks in any way or to
deviate in any way from the forms in which the Marks have been furnished to
Licensee by TSAMI, Licensee shall first submit a sample of the proposed altered
Mark to Licensor for Licensor's prior review and written approval.
Licensor's changes (if any) to the quality standards established by Licensor in
accordance with this Agreement shall be reasonably necessary or reasonably
calculated to protect the Licensed Property or Licensor's interests in the
Licensed Property.
Licensor shall review in a timely manner all such samples and requests 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
fifteen (15) Business Days of receipt of the same shall be deemed a disapproval.
In no event, however, shall Licensee distribute or offer for sale the subject
General Merchandise, Own Brand Merchandise or Materials or use any altered Marks
until approval of the applicable sample is granted in writing by Licensor. If
Licensee intends to proceed, Licensee specifically agrees to amend to the
satisfaction of Licensor any sample of General Merchandise or Own Brand
Merchandise (including packaging and labels), Materials or any proposed
alterations of the Marks as may be directed by Licensor. A further sample shall
be provided to Licensor for its prior review and written approval if any
subsequent changes are made in approved General Merchandise, Own Brand
Merchandise or Materials or in the Marks. To the extent practicable, Licensor
and Licensee shall cooperate in good faith in developing standard manuals or
procedures setting forth approved formats for packaging and labels for Own Brand
Merchandise, and approved formats for Materials. Once established, Licensee
shall fully comply with such manuals or procedures and submit for Licensor's
review and approval any material deviation from such manual or procedures in the
manner provided herein.
(c) Approval Process for Changes in Quality. In the event Licensee wishes
---------------------------------------
to materially reduce the quality of an existing Service or item of Own Brand
Merchandise, and such reductions may have a materially adverse impact upon the
Licensed Property, or upon Licensor's interests in the Licensed Property,
Licensee shall advise Licensor in writing of the description of such Service or
item of Own Brand Merchandise and the proposed revised quality standard well in
advance of any such proposed change. Licensor's failure to advise Licensee in
writing of
12
<PAGE>
Licensor's approval of such proposed change within thirty (30) days of receipt
of notice from Licensee, shall be deemed a disapproval.
(d) Line Reviews. Licensee shall inform Licensor of, and Licensor shall
------------
have the right to attend at its expense, Licensee's periodic line reviews of any
General Merchandise or Own Brand Merchandise offered or to be offered by
Licensee. Further, to ensure compliance with Licensor's standards and
instructions relating to the Licensed Property, Licensor, at its expense,
directly or through representatives, may inspect and test General Merchandise
and Own Brand Merchandise from time to time. Licensee shall reasonably cooperate
and aid Licensor in making such inspections and tests.
(e) Delegation. Without limiting or waiving Licensor's rights in any
----------
manner, Licensor delegates in part to Licensee the continuing duty to exercise
quality control regarding the nature and quality of the Services, Materials,
General Merchandise and Own Brand Merchandise and the nature and quality of
Licensee's use of the Marks and Names. Licensor may recommend and Licensee shall
adopt and comply with any reasonable procedures, tests, surveys or the like to
fulfill this delegation. Licensor may request reports, documentation, evidence
or other proof of Licensee's performance under this provision and Licensee shall
promptly furnish the same to Licensor.
2.6 License Exclusions: Licensee agrees and acknowledges that:
------------------
(a) Reservation of Rights. Taken together, Articles 2.1-2.4 grant to
---------------------
Licensee the exclusive right to use the Marks, Names, TSA Content and TSA Buying
Power to conduct the "E-Commerce Business," which shall mean the business of
creating, developing, operating, maintaining, advertising and promoting the TSA
Site (as further described in the ECA). Notwithstanding the foregoing, Licensor
reserves to itself, its Affiliate, Subsidiary and Related companies, and their
respective agents, distributors, representatives, licensees, franchisees,
customers, successors and assigns (now or hereafter existing), all rights to use
(and the right to license or otherwise authorize others to use) the Marks,
Names, TSA Buying Power and TSA Content for any and all purposes not
inconsistent with Licensee's rights as provided in Articles 2.1-2.4 hereof,
including without limitation, the right to use and exploit the Marks, Names, TSA
Buying Power and TSA Content throughout the universe, including in the
Territory:
13
<PAGE>
(i) to manufacture, source, market, sell, furnish, advertise and promote
goods and services offered at or in connection with the TSA Stores,
including from kiosks or other externally networked devices located
within TSA Stores;
(ii) to manufacture, source, market, sell, furnish, advertise and promote
goods and services offered by means of mail order catalogs furnished
to consumers, vendors, employees and others by mail, or distributed
within TSA Stores;
(iii) to print, source, market, sell, furnish, advertise and promote TSA
Gift Certificates directly or indirectly, whether from TSA Stores,
by mail order, over the Internet, an intranet or extranet (except
from an Internet site owned or operated by Licensor directed at
consumers, as opposed to Licensor's employees or other businesses),
or otherwise;
(iv) to create, develop, operate and/or maintain, directly or indirectly
through any third party, any Internet site primarily devoted to
business-to-business transactions, or primarily devoted to the
provision of information and not otherwise directed at the purchase
of sporting goods, athletic apparel, athletic footwear or related
goods and services;
(v) to advertise and promote the TSA Stores and Licensor's goods and
services, and to display the Marks, on the Internet on sites other
than the TSA Site, provided that such advertisements, promotions or
displays shall attempt to direct all individual consumers (as
opposed to businesses or organizations) wishing to make purchases
from Licensor on the Internet to the TSA Site; and
(vi) to manufacture, source, market, sell, furnish, advertise and promote
goods and services offered by means of home shopping audio or video
programs or successor technologies (not on the Internet).
(b) Own Brand Merchandise. Nothing contained herein shall prevent or
---------------------
restrict Licensor or any Affiliate, Related or Subsidiary companies or third
parties licensed by Licensor from manufacturing, marketing, advertising or
selling Own Brand Merchandise, whether from stores, by mail order, over the
Internet, an intranet or extranet (except from an Internet site directed at
consumers, as opposed to Licensor's employees or other businesses), or
otherwise, it
14
<PAGE>
being understood that the license granted with respect to Own Brand Merchandise
is wholly non-exclusive.
(c) Prohibited Use of TSA Content. Nothing contained herein shall permit
-----------------------------
Licensee (or its Affiliate, Subsidiary or Related companies) to use or permit
others to use the TSA Content in any manner on or in connection with any site of
any TSA Competitor. Licensee shall segregate and take all necessary measures to
prevent the TSA Content from being commingled with the content of any TSA
Competitor, and to prevent the unauthorized disclosure of such TSA Content as
would be deemed "Confidential Information" as defined in Article IV. Further, in
possessing and using the TSA Content, Licensee shall be responsible for
compliance with all antitrust, competition and similar laws and regulations
applicable to the use or misuse of the TSA Content by Licensee, its Affiliate,
Subsidiary and Related companies, and any third party (including any TSA
Competitors) which may have gained access to the TSA Content through any of
them.
(d) Prohibited Use of HEAD and TYROLIA Marks. Nothing contained herein
----------------------------------------
shall authorize or permit Licensee (or its Affiliate, Related or Subsidiary
companies) to use the trademarks HEAD or TYROLIA, or to offer for sale on the
TSA Site any goods, packaging or labels bearing the marks HEAD or TYROLIA.
(e) Licensor's Other Authorized Users. Licensor has entered into license
---------------------------------
agreements, sponsorship agreements, settlement agreements and other agreements
regarding use of the Marks by others, as further described in Exhibit C,
---------
attached. Licensor intends to renew such agreements where applicable, and to
continue entering into similar agreements during the Term which are not
otherwise inconsistent with Licensee's rights hereunder.
(f) No Embarrassment. Licensee shall not offer or sell General
----------------
Merchandise, Own Brand Merchandise or render the Services, or advertise or
promote the TSA Site, in any way associated with, or thought to be associated
with any illegal, vulgar, obscene, immoral, unsavory or offensive activities,
nor cause material embarrassment to be suffered by Licensor by reason of acts or
omissions of Licensee which are illegal, immoral or scandalous.
(g) No Other Uses. Licensee shall not use any Marks, Names, TSA Buying
-------------
Power or TSA Content for any purpose other than the creation, development,
operation, maintenance, advertising and promotion of the TSA Site. All Marks,
Names, TSA Buying Power and TSA Content shall remain the sole and exclusive
property of Licensor, and neither Licensee nor any
15
<PAGE>
other person or entity shall acquire any rights in the Marks, Names, TSA Buying
Power or TSA Content except those rights specifically granted to Licensee under
this Agreement.
(h) No Exports to Japan. While the TSA Site may be accessible within Japan
-------------------
(such accessibility shall not, by itself, be considered a breach), except for
one time, individual quantity (not bulk or volume) purchases for personal use by
the subject Customer for delivery within the Territory but possible export to
Japan, Licensee shall not knowingly export or furnish General Merchandise, Own
Brand Merchandise or Services from the Territory into Japan or knowingly sell
General Merchandise, Own Brand Merchandise to any person or entity which it
knows or has reason to believe intends to export Own Brand Merchandise from the
Territory into Japan. Licensee acknowledges and agrees that the sale or
marketing of General Merchandise, Own Brand Merchandise or Services by it or by
persons authorized by it outside of the Territory shall materially damage
Licensor and its relationships with other licensees, and that, accordingly, any
such sales, if done knowingly, shall be deemed a material breach of this
Agreement.
(i) No Co-Branding. Licensee shall not "co-brand" the TSA Site or use the
--------------
Marks immediately adjacent to other trademarks on the TSA Site in a manner
which, in comparison, places less emphasis or imposes smaller dimensions upon
the Marks, without obtaining Licensor's prior approval in the manner described
in Article 2.5(b).
(j) Prohibition Of Gambling Activities. Licensee at no time shall
----------------------------------
publicize, advertise, distribute, transmit, promote or otherwise make
available information about gambling or lotteries in violation of any
federal, state, local or foreign law, regulation, order or act of
government or governmental instrumentality to which either Licensor or
Licensee is subject, nor shall Licensee engage in, aid or abet, any
such gambling or lottery activity in violation of any federal, state,
local or foreign law, regulation, order or act of government or
governmental instrumentality to which either Licensor or Licensee is
subject. Furthermore, Licensee shall not at any time permit or
authorize any links between the TSA Site and any Other Licensee Site
or any Third Party Site that publicizes, advertises, distributes,
transmits, promotes or otherwise makes available information about
gambling or lotteries in violation of any federal, state, local or
foreign law, regulation, order or act of government or governmental
instrumentality to which either Licensor or Licensee is subject.
ARTICLE III
16
<PAGE>
STANDARD OF PERFORMANCE
3.1 Commercially Reasonable Efforts. Licensee shall use commercially
-------------------------------
reasonable efforts appropriate to an experienced e-commerce retailer, on a
continuous basis during the Term:
(a) to advertise, promote, sell and furnish the TSA Site, Services,
General Merchandise and Own Brand Merchandise in the Territory;
(b) to exercise all reasonable care and skill in the performance of such
duties;
(c) to review and progressively improve its Net Sales in the Territory;
(d) to exploit the rights granted herein throughout the Territory
consistent with the high standards and prestige represented by the
Marks; and
(e) to observe, protect and enhance the distinctive THE SPORTS AUTHORITY
image as communicated by Licensor.
3.2 High Standards; TSA Mission Statement. Licensee acknowledges that Licensor
-------------------------------------
maintains high standards for Own Brand Merchandise and services sold by and
through the TSA Stores. Further, Licensee acknowledges that Licensor maintains
high standards for its Own Brand Merchandise and Licensor's services, as
expressed in Licensor's Mission Statement, attached hereto as Exhibit D and as
---------
may be amended from time to time by Licensor (the "TSA Mission Statement").
Licensee agrees to maintain the quality of the Own Brand Merchandise, Services
and Materials sold or distributed by it pursuant to this Agreement, and the
nature and quality of Licensee's use of the Licensed Property, in conformity
with the TSA Mission Statement and as expressed in standards communicated by
Licensor to Licensee from time to time. Further, Licensee warrants that all Own
Brand Merchandise, Services and Materials shall continue to meet or exceed such
standards. Further, Licensee shall use its best efforts to ensure that: (a) all
Own Brand Merchandise, Services and Materials comply with the requirements of
Articles II and III and all applicable laws, rules and regulations; and (b)
neither the Own Brand Merchandise nor the manufacturing thereof shall violate or
infringe any right of any third party or the human rights of any person employed
to manufacture the same.
ARTICLE IV
CONFIDENTIALITY AND NON-DISCLOSURE
17
<PAGE>
4.1 Confidential Information. For purposes of this Agreement, Confidential
------------------------
Information means: (i) business or technical information of either Party,
including but not limited to any information relating to either Party's product
plans, designs, product costs, other costs, product prices, product names,
allowances, rebates, finances, advertising plans, strategies or buys, marketing
plans or strategies, business opportunities, personnel, research, development or
know-how; (ii) any written information designated by either Party as
confidential or proprietary or, if orally disclosed, reduced to writing by the
disclosing Party within thirty (30) days of such disclosure; (iii) all materials
furnished by one Party in connection with any audit conducted hereunder; and
(iv) the terms and conditions of this Agreement.
4.2 Exclusions. Confidential Information shall not include: (i) information
----------
that is or becomes generally known or available by publication, commercial use
or otherwise through no fault or breach of this Agreement by the receiving
Party; (ii) information that is rightfully in the receiving Party's possession
prior to first receiving it from the disclosing Party; (iii) information that is
lawfully received by the receiving party from a third party, without restriction
on disclosure and without breach of a nondisclosure obligation; or (iv)
information that the receiving Party can prove with written evidence is
independently developed by the receiving Party, without use of or access to
Confidential Information of the disclosing Party.
4.3 Obligations. Each Party shall not use the other Party's Confidential
-----------
Information, except as expressly permitted under this Agreement and shall not
disclose such Confidential Information to any third party, except to its
employees and consultants with a need to know for such party's performance of
this Agreement (and only subject to binding use and disclosure restrictions at
least as protective as those set forth herein executed in writing by such
employees or consultants). However, each Party may disclose Confidential
Information of the other Party: (i) pursuant to an order or requirement, to
which it is subject, of a court, administrative agency or other governmental
body, provided that such Party gives reasonable notice to the other Party to
contest such order or requirement; (ii) on a confidential basis to legal and
financial advisors; provided, however, that prior to such disclosure, the Party
disclosing the Confidential Information shall use its best efforts to secure an
agreement from the third party receiving the Confidential Information to keep
such information confidential; and (iii) as required by any law, rule, or
regulation, to which it is subject.
18
<PAGE>
4.4 The Parties' respective confidentiality obligations as set forth in this
Article IV shall continue in full force and effect notwithstanding expiration or
termination of this Agreement for any reason.
ARTICLE V
GENERAL PROVISIONS
5.1 Payments. Beginning with the Effective Date, during the initial Term, and
--------
if applicable, after termination of the Agreement to the extent any amounts are
accrued and unpaid, Licensee shall pay the Royalties to Licensor in the manner
and at the times specified below.
19
<PAGE>
5.2 Reports; Royalties.
------------------
(a) Within forty-five (45) days after the end of each quarter of
Licensee's Fiscal Year, Licensee shall:
(i) Deliver to Licensor a report, certified by one of its corporate
officers, giving the following particulars concerning Net Sales during
the preceding quarter of Licensee's Fiscal Year, together with
documentary proof of payment of any applicable tax withheld and/or
paid by Licensee (including, without limitation, true copies of
receipts or certificates evidencing payment of such taxes):
(A) Net Sales of the TSA Site derived from sale of General
Merchandise, Own Brand Merchandise and Services to Customers;
(B) Net Sales of the TSA Site derived from advertising furnished by
Licensee to any Advertising and Marketing Partners of Licensee;
(C) Net Sales of the TSA Site derived from all other sources;
(D) Amount of Royalties due to Licensor with respect to the TSA Site
attributable to items (A), (B) and (C) above, and in the
aggregate; and
(E) Amount of tax of any kind properly withheld and/or paid to tax
authorities by Licensee.
(ii) Pay to Licensor the Royalties due for the quarter covered by such
report, in U.S. Dollars, in immediately available funds, by bank draft
or other means as reasonably directed by Licensor. Receipt or
acceptance of any report or payment shall not preclude Licensor from
questioning the correctness thereof at any time. In the event that any
inconsistency or mistake is discovered by either Licensor or Licensee
in such reports or payments, it shall be immediately rectified and,
within fifteen (15) Business Days, the appropriate report and payment
shall be made.
(b) Time is of the essence with respect to Licensee's duty to make all
payments when due and Licensee's obligations to make such payments are absolute,
unconditional and not subject to any right of reduction or set-off, except for
withholding taxes imposed on the
20
<PAGE>
Royalties which Licensee is required by law to withhold. Licensee shall withhold
and pay in a timely manner such taxes to the proper tax authority at the rate
required by statute but reduced to the fullest extent as permitted by tax
treaty, and Licensee shall provide Licensor with official receipts of all
withholding tax payments sufficient to enable Licensor to claim appropriate
federal income tax credits. Without limiting the foregoing, Licensee shall pay
to Licensor interest at the rate of the lesser of (i) one and one half percent
(1.5%) per month, compounded monthly, or (ii) the maximum rate allowed by
applicable law, on so much of the Royalty as remains outstanding from time to
time beyond the period for payment set forth above. Written notice by Licensor
to Licensee as to any amount of the outstanding Royalty (including interest)
shall be prima facie evidence that said amount is unpaid as of the date of such
notice.
(c) Licensee shall respond in writing to any written inquiry from Licensor
with respect to any report or payment within fifteen (15) Business Days of
receipt thereof.
(d) If, in the course of an audit or inspection by Licensor or its
representative(s), any discrepancy shall appear with respect to any amount due
and payable by Licensee and the amount paid, the amount owed (including interest
computed as set forth in Article 5.2(b) above) shall be paid within fifteen (15)
Business Days after Licensee's receipt of notice of any such discrepancy.
(e) Within ninety (90) days after the end of each Fiscal Year of Licensee,
Licensee shall furnish Licensor a certificate from an independent certified
public accountant as to the accuracy of Licensee's Royalty payments and reports
for each such Fiscal Year.
5.3 Books and Audits.
----------------
(a) Licensee shall keep full, true and accurate books of account in
conformance with generally accepted accounting principles ("GAAP") in effect in
the U.S. and containing all particulars which may be necessary for the purpose
of reviewing Net Sales and computing the Royalties due and payable to Licensor.
Said books of account shall be kept at Licensee's principal place of business
and maintained by Licensee for a period of at least two (2) years following the
end of each subject year during the Term and shall be available for inspection
by Licensor, upon reasonable notice and during normal business hours.
21
<PAGE>
(b) Licensee shall maintain accurate records of all sales from the TSA
Site, of its annual advertising and promotional expenditures, and of contracts
and orders placed by Customers, and shall make such records available to
Licensor upon request for use in enforcing, registering or protecting the
Licensed Property throughout the world.
(c) During the Term and for a period of three (3) years after expiration
or termination of this Agreement, Licensor or an independent certified public
accountant retained by Licensor, may audit all statements of account, records
and reports provided for in this Agreement, at least once per Fiscal Year of
Licensee, but no more than once unless an audit discloses a material
discrepancy. In such cases, Licensor may audit every six (6) months until the
results of the audit show that a material discrepancy no longer exists. Licensee
shall make available to Licensor or said certified public accountant for the
purposes of this paragraph any and all records reasonably necessary to the
verification of such reports. Any error(s) discovered by such audit shall be
corrected by Licensee within fifteen (15) Business Days after having been
notified of such error. The expenses of any and all such audits and inspections
shall be borne by Licensor. However, if the error(s) discovered represent an
underpayment by Licensee of more than [*] Dollars ($[*]) due in the Fiscal Year
in question, Licensee shall promptly reimburse Licensor for the reasonable costs
of such audit.
5.4 Representations, Warranties and Duties of Licensee. Licensee represents
--------------------------------------------------
and warrants to Licensor and agrees that:
(a) Licensee is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; and it has the
corporate power and is authorized under its Articles of Incorporation and its
Bylaws to carry on its business as now conducted and as contemplated under this
Agreement;
(b) Licensee has performed all corporate actions and received all
corporate authorizations necessary to execute and deliver this Agreement and to
perform its obligations hereunder;
(c) Licensee has and shall maintain the power and authority and all
material governmental licenses, authorizations, consents and approvals as
required in all jurisdictions within the Territory to own its assets, carry on
its business and to execute, deliver, and perform its obligations under this
Agreement;
22
<PAGE>
(d) Licensee is in compliance, and shall remain in compliance with all
requirements of any U.S. and Canadian, or to the best of its knowledge, any
other law (statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a governmental authority, in each case applicable to or
binding upon it or any of its property or to which the Services or any of its
business related to the TSA Site is subject, except where failure to be in
compliance could not reasonably be expected to have a material adverse change
in, or a material adverse affect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of Licensee;
(e) There are no (A) nongovernmental third parties or (B) governmental or
regulatory entities in the U.S. or Canada who are entitled to any notice of the
transactions contemplated hereunder or whose consent is required to be obtained
by Licensee for the consummation of the transactions contemplated hereunder;
(f) Licensee does not currently, and shall not during the term of this
Agreement, represent or promote any services or products that intentionally
divert business away from the TSA Site. Licensee shall continuously conduct its
business in a manner that reflects favorably on the Licensed Property;
(g) Licensee shall fully comply at its sole cost and expense with any and
all quality standards set forth herein and that Licensor may set forth from time
to time with respect to the Licensed Property and the Own Brand Merchandise and
Materials and Services bearing or embodying the Licensed Property;
(h) As between Licensor and Licensee, for purposes of this Agreement,
Licensee shall be completely responsible for the payment of all sums of money
which may be due at any time to its own employees, contractors, vendors, agents
and representatives, and for all other claims made by such parties against
Licensor. Licensor shall not for any reason be liable under this Agreement in
any way for Licensee's termination of employment or other relationships with
such parties or other legal entities, nor for any goods or services furnished to
Licensee by Licensor or any third party or by Licensee to Licensor or any third
party;
(i) As between Licensor and Licensee, for purposes of this Agreement,
Licensee shall be completely responsible for the computation, notification,
withholding, payment, filing and reporting of all applicable taxes of any kind
whatsoever which may be due at any time in connection with Licensee's
activities, assets or operations as permitted hereunder, including, without
limitation, all sales and use taxes, all value added taxes, and all withholding
taxes.
23
<PAGE>
(j) Except with respect to trademark and service mark applications and
registrations, domain name registrations, recording of this Agreement and
related registered user agreements, all of which are reserved exclusively to
Licensor, Licensee shall, at its own expense, secure any and all approvals,
licenses, registrations and/or permits required under the laws or regulations of
any governmental or similar entity having jurisdiction over Licensee or the TSA
Site, or over the shipment, export, import, sale or other distribution of goods
(including General Merchandise and Own Brand Merchandise) or provision of
Services within the Territory as these relate to operation of the TSA Site,
including, without limitation, compliance with all export and import control
regulations and applicable consumer product, content labeling, country of
origin, and health and safety laws and the like;
(k) Licensee shall, during the Term and for one (1) year following
expiration or termination of this Agreement, ensure the adequate provision of
after sales service and spare parts to Customers in the Territory, subject to
reasonable cooperation of Licensor to assist Licensee in obtaining access to
spare parts;
(l) As between Licensor and Licensee, in the Territory and in Japan, all
right, title, interest and ownership in and to the Licensed Property, and
present and future registrations thereof, as trademarks, service marks, trade
names, trade dress, copyrights or works or copyright (including derivative
works), industrial models, designs, and the like, are and shall remain in
Licensor and Licensee agrees to render all reasonable assistance in maintenance
of these rights. Further, Licensee agrees and acknowledges that all goodwill
associated with or created by use of the Licensed Property by Licensee has
inured and shall continue forever to inure to the benefit of Licensor. Upon
termination of this Agreement all rights in and to the Licensed Property,
including all right to the use thereof, and all goodwill associated with use of
the Licensed Property, shall thereupon revert back to Licensor and Licensor
shall thereafter enjoy those rights as if this Agreement had never been
executed. If, by operation of law or otherwise, any goodwill associated with
Licensee's use of the Licensed Property shall be deemed to accrue or have
accrued to Licensee, Licensee agrees to immediately and irrevocably assign
without condition such goodwill to Licensor. Licensor shall not be required to
compensate Licensee for reversion or assignment of the goodwill;
(m) Except with respect to authorized advertising and marketing programs
conducted by Licensee with the Advertising and Marketing Partners of Licensee
and any non-Internet advertising and marketing programs otherwise permitted
under this Agreement, Licensee shall
24
<PAGE>
not sell, distribute or otherwise make available or permit any use of the
Licensed Property on or in connection with Own Brand Merchandise, Materials or
Services, outside of the TSA Site, whether inside or outside the Territory, and
Licensee shall cooperate with Licensor in preventing all such sales and
distribution by others. Before permitting any vendor or supplier to sell off or
otherwise dispose of surplus, defective or returned Own Brand Merchandise to
parties other than Licensee, Licensee shall require the vendor or supplier to
remove all of the Licensed Property from such Own Brand Merchandise; and
(n) Licensee shall not attack or impair or put at issue Licensor's rights
in the Licensed Property, or any of Licensor's applications or registrations
therefor, nor assist anyone else in doing so. Except as licensed hereunder,
Licensee shall not use or apply to register the Licensed Property or any
identical or deceptively or confusingly similar service marks, trademarks,
corporate names, trade names, domain names, trade dress, copyrights, industrial
models or designs, or any derivations thereof, during the Term and forever
hereafter. Further, Licensee shall not use the Licensed Property in any manner
likely to jeopardize the exclusiveness or distinctiveness of the Licensed
Property or Licensor's proprietorship thereof, and Licensee shall not register
or attempt to register its rights in the Licensed Property as granted hereunder.
Without limiting the foregoing, during and after the expiration or termination
of this Agreement, Licensee, upon Licensor's written request, shall execute all
such documents as may be necessary to further confirm or perfect Licensor's
rights in the Licensed Property. If Licensee shall fail to execute any such
documents within thirty (30) days after Licensor's request, Licensee hereby
confirms that Licensor shall automatically be considered Licensee's attorney-in-
fact for the purpose of executing such documents.
5.5 Representations, Warranties and Duties of Licensor. TSA and TSAMI each
--------------------------------------------------
represents, warrants and agrees that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and it has the
corporate power and is authorized under its Certificate of Incorporation and its
Bylaws to carry on its business as now conducted;
(b) it has performed all corporate actions and received all corporate
authorizations necessary to execute and deliver this Agreement and to perform
its obligations hereunder;
25
<PAGE>
(c) it has and shall maintain the power and authority and all material
governmental licenses, authorizations, consents and approvals to be obtained
within the U.S to own its assets, carry on its business and to execute, deliver,
and perform its obligations under this Agreement;
(d) there are no (A) nongovernmental third parties and (B) governmental or
regulatory entities in the U.S. who are entitled to any notice of the
transaction, licenses and services contemplated hereunder or whose consent is
required to be obtained by Licensor for the consummation of the transaction
contemplated hereunder;
(e) to the best of its knowledge as of the Effective Date it and its
licensors are the sole and rightful owners of all right, title and interest in
and to the Marks and Names and it has the unrestricted right to market, license
and exploit the Marks and Names;
(f) as of the Effective Date, either TSA or TSAMI has obtained or applied
for trademark and service mark registrations for certain of the Marks throughout
much of the Territory, as further described in Exhibit B;
---------
(g) it shall not engage directly or indirectly in the "E-Commerce
Business" except as otherwise provided in Article 2.6 of this Agreement and as
otherwise provided in Article 13.1 of the E-Commerce Agreement;
(h) Other than as disclosed in Exhibit C, attached, as of the Effective
---------
Date, there are no material outstanding assignments, grants, licenses,
encumbrances, obligations or agreements of Licensor inconsistent with this
Agreement; and
(i) OTHER THAN THOSE SET FORTH ABOVE, LICENSOR MAKES NO WARRANTIES TO ANY
PERSON OR ENTITY WITH RESPECT TO ANY TSA CONTENT, TSA BUYING POWER, NAMES,
MARKS, GOODS, SERVICES, OR OTHER SUBJECT MATTER OF THIS AGREEMENT ALL OF WHICH
ARE PROVIDED "AS IS," AND LICENSOR HEREBY DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING, WITHOUT LIMITATION, ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE AND NONINFRINGEMENT.
26
<PAGE>
5.6 Protection of Rights.
--------------------
(a) In the ordinary course of business, Licensee or its counsel may review
periodically the use and/or registration by others of any trademark, service
mark, trade name, domain name, trade dress, industrial model or design or
copyright in the Territory which is a copy of, identical or confusingly or
deceptively similar to the Licensed Property or any aspect thereof. Licensee
agrees to inform Licensor promptly of any possible infringement, or of any
passing off or unfair competition affecting said Licensed Property which comes
to the attention of Licensee. Further, Licensee agrees to fully cooperate and
assist Licensor in the protection and defense of any of Licensor's rights in the
Licensed Property, in the filing and prosecution (at Licensor's expense) of any
trademark, trade dress, service mark, trade name, copyright, domain name,
industrial model or design application, registration, renewal and the like, in
the recording of this Agreement or any other relevant agreements, including,
without limitation, registered user agreements, and in the doing of any other
act with respect to the Licensed Property, including the prevention of the use
thereof by any unauthorized person, that in the sole discretion and judgment of
Licensor may be necessary or desirable.
(b) Licensor deems the Licensed Property to be extremely valuable.
Licensor shall have the sole right to determine whether or not any action shall
be taken on account of any infringement, passing off or unfair competition
activities or other enforcement of Licensor's rights in the Licensed Property.
If Licensor so desires it may prosecute any actions, claims, lawsuits or
proceedings in its own name or join Licensee as a party thereto, all at
Licensor's expense. Licensor shall be entitled to recover any and all sums of
money awarded and materials delivered up as a result of such actions, claims,
lawsuits or proceedings.
(c) Licensee shall not institute any lawsuit or take any action on account
of any actual or alleged infringement, passing off or unfair competition
relating to the Licensed Property, and Licensee shall not have any right or
claim against Licensor for Licensor's failure to enforce its rights in the
Licensed Property or failure to prosecute any actual or alleged infringement,
passing off or unfair competition by others in relation to the Licensed
Property. Notwithstanding the foregoing, if, after Licensor is advised and has a
reasonable opportunity to investigate and attempt to resolve an instance of
actual or alleged infringement, passing off or unfair competition, yet Licensor
determines not to institute any lawsuit or take any further action or because,
in Licensor's reasonable opinion, the same are unwarranted or of no avail,
Licensee may institute a lawsuit or take any action, solely in its own name, to
remedy the actual or alleged infringement, passing off or unfair competition. As
a prerequisite to instituting such a lawsuit
27
<PAGE>
and taking any such actions, Licensee shall deliver to Licensor a duly executed
guarantee from Global Sports, Inc. ("GSI") providing that GSI agrees to and
shall pay any and all costs, expenses and damages, including attorneys' fees,
expert fees and all court costs incurred by Licensee and by Licensor (including
Licensor's internal costs) in the matter. Licensee agrees to keep Licensor fully
informed regarding all such lawsuits and actions, and to obtain Licensor's prior
written approval of any proposed settlement which affects the Licensed Property
or Licensor's interest in the Licensed Property. Licensee shall apply any costs,
fees, damages or other sums recovered in any such action or lawsuit to reimburse
the amounts Licensee or GSI has expended in the action or lawsuit. Once Licensee
or GSI has been fully reimbursed, the balance shall be delivered as determined
by the court.
5.7 Indemnification.
---------------
(a) Licensee's Indemnification. Except as provided in Article 5.7(b)
--------------------------
below, Licensee agrees to defend, indemnify and hold harmless Licensor and its
Affiliate, Subsidiary and Related companies and each of their respective
directors, officers, employees, representatives and agents, at Licensee's
expense, from and against any and all actions, claims, proceedings or lawsuits
to the extent arising from or related in any way to Licensee's acts or
omissions. This indemnification shall include, without limitation, claims of
premises or product liability, claims of patent, copyright, trade name,
trademark, trade dress, service mark, right of personality or persona, or
industrial model or design infringement, negligence, defamation,
misrepresentation, false advertising, unfair competition, trade secret
misappropriation and failure to file, pay or report any applicable tax. Licensor
agrees to give Licensee timely notice of such actions, claims, proceedings or
lawsuits and Licensee has the right and obligation, at its sole expense, to
defend the same and shall be solely responsible for satisfying any monetary
judgments awarded or any settlements entered into as a result of such actions,
claims, proceedings or lawsuits. Licensor may at its sole election participate
in any such defense at its own expense. In any event, Licensee agrees to keep
Licensor fully informed regarding all actions, claims, proceedings or lawsuits
which affect or involve Licensor under this paragraph.
(b) Licensor's Indemnification. Licensor agrees to defend, indemnify and
--------------------------
hold harmless Licensee and its Affiliate, Subsidiary and Related companies and
each of their respective directors, officers, employees, representatives and
agents, at Licensor's expense, from and against any and all actions, claims,
proceedings or lawsuits to the extent arising from or related in any way to,
claims that Licensee's use of the Marks and/or Names hereunder infringes the
trademark, service mark, trade dress or trade name rights of third parties in
the U.S., its
28
<PAGE>
territories and possessions, Puerto Rico, or Canada, provided, however, that
Licensor shall not bear any duty, obligation or liability pursuant to this
Article 5.7(b) to the extent that and with respect to any use by Licensee of any
of the Marks and/or Names is in a manner not authorized by this Agreement.
Licensee agrees to give Licensor timely notice of such actions, claims,
proceedings or lawsuits and Licensor has the right and obligation, at its sole
expense, to defend the same and shall be solely responsible for satisfying any
monetary judgments awarded or any settlements entered into as a result of such
actions, claims, proceedings or lawsuits. Licensee may at its election
participate in any such defense at its own expense, provided, however, that
Licensee shall comply with any reasonable request of Licensor to cooperate in
the defense of any such actions, claims, proceedings or lawsuits. In any event,
Licensor agrees to keep Licensee fully informed of any material information
regarding all actions, claims, proceedings or lawsuits which affect or involve
Licensee under this paragraph.
5.8 Term and Termination.
--------------------
(a) Initial Term. This Agreement shall begin on the Effective Date and
------------
continue in full force and effect for approximately fifteen (15) years through
and including December 31, 2014. This Agreement shall terminate of the first to
occur of 90 days prior notice given by one Party to the other Party on or after
December 31, 2014, or termination pursuant to any of Articles 5.8(b)-(f) below.
(b) Without prejudice to any other rights either Party may have, a Party
may terminate this Agreement for cause premised upon any one or more of the
reasons set forth in (i) through (iv) below by giving notice to the other Party
in accordance with (c), (d) or (e) below, as the case may be:
(i) if Licensee shall fail to make any payments when due or to deliver any
reports as required hereunder or if Licensee or Licensor otherwise
materially breaches in any manner the terms of this Agreement;
(ii) if Licensee shall be generally unable to pay its obligations as they
become due, or if either Party shall make any assignment for the
benefit of creditors, or shall file, or have filed against it, any
petition for protection or relief from creditors or any petition in
bankruptcy, or be adjudicated bankrupt or insolvent, or if any
receiver is appointed for its business or property or a substantial
portion thereof, or if any trustee in bankruptcy or insolvency shall
be appointed for a Party, or if a Party
29
<PAGE>
shall be in default upon any material debt obligation and such
default shall be continuing beyond any applicable cure period;
(iii) if Licensee shall fail in any material respect to follow Licensor's
instructions regarding quality control and protection of the Licensed
Property as required under this Agreement; or
(iv) if Licensee has ceased to carry on and diligently pursue its day to
day business activities of operating and promoting the TSA Site
utilizing the Licensed Property.
(c) In the event of breach by a Party of any provision of this Agreement
as provided in (b)(i), (b)(iii) or (b)(iv) above, the non-breaching Party shall
give the breaching Party notice in writing to cure the breach within sixty (60)
days (the "Notice Period") or such longer period as may be agreed upon by the
Parties, and if the breach is not cured within such period, the non-breaching
Party shall be entitled to exercise any remedies it may have hereunder,
including, without limitation, its right to terminate this Agreement effective
upon expiration of the Notice Period, provided that if such breach is capable of
being cured but incapable, by reason of its nature, of being cured within the
Notice Period, the non-breaching Party may, in its discretion, delay taking
action so long as the breaching Party shall have begun in good faith to cure
such breach within the Notice Period and thereafter proceeds diligently to
complete the cure of the breach and such breach is cured within a reasonable
period thereafter.
(d) In the event of the occurrence of any event described in (b)(ii)
above, the complaining Party may terminate this Agreement effective upon
expiration of the Notice Period; provided, however, that the non- complaining
Party may avoid such termination if any adverse filing described in (b)(ii) is
stayed, dismissed or reversed within the Notice Period and Licensee provides
satisfactory evidence of same to Licensor within such period.
(e) This Agreement shall automatically terminate on the date that
Licensor ceases to have a direct or indirect ownership interest in Licensee or
on the date that any of the EVA, ESA or ECA agreements is terminated, whichever
is earlier.
(f) This Agreement may be terminated at any time by mutual written
agreement of the Parties.
30
<PAGE>
(g) Expiration or termination of this Agreement for any reason shall not
affect obligations which (i) have accrued as of the date of expiration or
termination, (ii) arise out of occurrences prior to the termination date, (iii)
become effective upon termination or (iv) by their terms continue after
termination.
(h) Upon termination of this Agreement, the Parties shall mutually
cooperate to effect an orderly termination of their relationship as Licensor and
Licensee, and Licensee shall within thirty (30) days:
(i) Return to Licensor all TSA Content and Materials, and cease using the
Licensed Property in any manner and for any purpose and take all
steps necessary to delete any and all references to any Licensed
Property from its business licenses, permits, business forms,
packaging, labels, advertisements, promotions and other Materials;
(ii) As directed by Licensor, return to Licensor, destroy or obliterate
all Own Brand Merchandise (including packaging and labels) and
Materials bearing the Licensed Property and furnish sworn affidavits
attesting thereto as requested by Licensor;
(iii) Cease holding itself out as a licensee of Licensor or as an entity
otherwise authorized or permitted to use the Licensed Property; and
(iv) Cooperate with Licensor in obtaining the cancellation of any
registration of this Agreement and amendment or cancellation of any
registered user agreements and corporate, domain name or business
name registrations. Licensee, upon Licensor's written request, shall
execute all such documents as may be necessary to fulfill this
provision. If Licensee shall fail to execute any such documents
within thirty (30) days after Licensor's request, Licensee hereby
confirms that Licensor shall automatically be considered Licensee's
attorney-in-fact for the purpose of executing such documents.
(i) Notwithstanding the foregoing, upon termination or expiration of this
Agreement for any reason other than pursuant to Article 5.8(b)(i) or (b)(iii),
Licensee shall have, for a period of 180 days thereafter, the right to sell off,
on a nonexclusive basis, all of the unsold Own Brand Merchandise in Licensee's
inventory which was on hand prior to such termination or expiration; provided,
however, that Licensee shall, prior to disposing of such unsold Own Brand
31
<PAGE>
Merchandise, furnish to Licensor an itemized and sworn statement setting forth
accurate descriptions and unit volumes of all such unsold Own Brand Merchandise.
Further, Licensee shall be entitled to phase out use of the Licensed Property
over the same 180 day period. Royalties shall accrue at the then current rate
and be paid by Licensee according to the quarterly schedule set forth in Article
5.2 and within thirty (30) days of the end of such 180 day period. All
dispositions of inventory and use of Licensed Property pursuant to this
paragraph shall strictly comply with all provisions of this Agreement. On the
181st day, Licensee:
(i) shall immediately transfer to Licensor, or destroy, at Licensor's
option, all remaining inventory of Own Brand Merchandise;
(ii) shall immediately transfer to Licensor all TSA Content; and
(iii) shall have completely and permanently ceased using the Licensed
Property.
(j) Should Licensee fail to cease using any Licensed Property upon
termination of this Agreement, or in any other manner fail to comply with
Articles 5.8(h) and (i) above, Licensee agrees and hereby specifically consents
to each and all of the following remedies and provisions, which shall be
cumulative and not mutually exclusive:
(i) Licensor may obtain a decree of any court of competent jurisdiction
ordering Licensee to immediately cease the use of the Licensed
Property and to otherwise comply with Articles 5.8(h) and (i) above,
to amend or cancel any registration of this Agreement and any
registered user agreements and to amend or cancel any corporate or
business name registrations and to change its business name
accordingly. Licensee's consent to this remedy is based upon express
recognition by Licensee that Licensor would otherwise suffer
irreparable harm and that monetary damages would therefore be an
inadequate remedy for Licensor;
(ii) Licensor shall have the right to collect actual direct damages
suffered by Licensor by reason of Licensee's failure to comply with
Articles 5.8(h) and (i) above;
(iii) Licensor may file an action asking the appropriate governmental
agency to impound any infringing Own Brand Merchandise and Materials
and to close or put on hold the TSA Site;
32
<PAGE>
(iv) Licensor shall be entitled to any other relief which may be deemed
proper, whether at law or equity;
(v) No assignee for the benefit of creditors, custodian, receiver,
trustee in bankruptcy, sheriff or any other officer of the court or
official charged with marshalling or taking over custody of
Licensee's assets or business shall have any right to continue this
Agreement or to exploit in any way or use the Licensed Property; and
(vi) Licensee's performance under this Agreement is personal in nature and
Licensor is excused from accepting the performance of an entity other
than Licensee. The Parties agree that this Agreement is a
nonassignable contract of Licensee under section 365(c) of the
Bankruptcy Code of the U.S.A., or any amendment or successor thereto
(the "Bankruptcy Code"). Further, in the event that Licensee is a
debtor under the Bankruptcy Code, or any equivalent in any foreign
jurisdiction, and this Agreement has not been terminated, the Parties
agree that the adequate protection of Licensor's interest in this
Agreement and in the Licensed Property requires that Licensee fully
comply with all of the terms and conditions of this Agreement,
including, without limitation, timely making all Royalty payments
when due and maintaining the quality of Own Brand Merchandise and
Services sold by Licensee pursuant to this Agreement, and the nature
and quality of Licensee's use of the Licensed Property as required
hereunder.
5.9 Choice of Law and Forum. This Agreement shall be governed and construed
-----------------------
under federal laws of the U.S.A. and laws of the State of Michigan and for any
controversy, the Parties expressly submit to the exclusive jurisdiction of the
state and federal courts of the State of Michigan, U.S.A., and hereby waive any
claim of inconvenient forum. Without limiting the foregoing, Licensee also
submits to the jurisdiction of any court in Licensee's home state with authority
to hear and decide proceedings in relation to Licensor's specific or provisional
enforcement of this Agreement.
5.10 Waiver of Jury Trial. Each Party hereby knowingly, voluntarily,
--------------------
intentionally and irrevocably waives such right as any Party may have to a jury
trial in every jurisdiction in any action, proceeding or counterclaim brought by
either of the Parties hereto and/or their respective Affiliate, Subsidiary and
Related companies in respect of any matter arising out of or in connection with
this Agreement (including, without limitation, any action to cancel or rescind
33
<PAGE>
this Agreement, and any claims or defenses asserting that this Agreement was
fraudulently induced or otherwise void or voidable).
5.11 Notices.
-------
(a) Any notice or request with respect to this Agreement shall be made
personally, by registered mail, by airborne express courier, or by confirmed
facsimile, and shall be directed by each Party to the other at its respective
address as follows:
If to Licensee, to:
TheSportsAuthority.com, Inc.
555 South Henderson Road
King of Prussia, Pennsylvania 19406
Tel: (610) 768-0900
Fax: (610) 768-0981
Attention: President
with a copy to:
Global Sports Interactive, Inc.
555 South Henderson Road
King of Prussia, Pennsylvania 19406
Tel: (610) 768-0900
Fax: (610) 768-0981
Attention: President
and if to Licensor, to:
The Sports Authority Michigan, Inc.
306 S. Washington, Suite 224
Royal Oak, Michigan 48067
Tel: (248) 414-9990
Fax: (248) 414-9993
Attention: Senior Vice President and General Counsel
and
The Sports Authority, Inc.
3383 North State Road 7
Ft. Lauderdale, Florida 33319
Tel: (954) 735-1701
Fax: (954) 730-4288
Attention: Chief Executive Officer and General Counsel
34
<PAGE>
(b) Any notice or request shall be deemed to be given when actually
received. Either Party, by written notice to the other Party, may change the
address to which notices or requests shall be directed.
5.12 No Implied Warranties; Limitation on Liability. 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 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.
5.13 Further Documents. Each Party shall, upon request, make, execute and
-----------------
deliver such documents as shall be reasonably necessary to take such action as
may be reasonably requested to fully implement and carry out the purposes of
this Agreement. This Agreement may be executed in counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
5.14 Binding Effect. All covenants, agreements, representations, warranties and
--------------
indemnifications in this Agreement by and on behalf of either of the Parties
shall bind and inure to the benefit of the successors and permitted assigns of
Licensor and Licensee (if any). Upon termination of this Agreement, all
obligations and covenants of Licensee under this Agreement shall survive and be
enforceable.
5.15 No Partnership, No Joint Venture. This Agreement shall not be construed as
--------------------------------
creating a joint venture, partnership or agency between Licensor and Licensee.
5.16 Sublicensing; Prohibition on Assignment by Licensee. The licenses granted
---------------------------------------------------
herein are personal to Licensee and neither this Agreement nor any rights or
duties hereunder may be sublicensed, assigned, mortgaged or pledged by Licensee
without the prior written consent of an authorized officer of Licensor, which
consent may be withheld at Licensor's sole discretion. For purposes of this
Article 5.16, an assignment shall include any attempt to sublicense, assign,
mortgage or pledge by Licensee without the prior written consent of an
authorized officer of Licensor, and shall be null and void ab initio.
Notwithstanding the foregoing, Licensor may freely assign this Agreement and/or
its rights and duties hereunder to any Affiliate, Related or
35
<PAGE>
Subsidiary company, provided Licensor gives timely notice of the same to
Licensee. Licensee's change in status from a privately held to a publicly held
company after an initial public offering shall not, in and of itself, be
considered a prohibited assignment, mortgage or pledge.
5.17 Waiver. Silence, acquiescence or inaction shall not be deemed a waiver of
------
any right. A waiver shall only be effective if it is in writing and signed by
the Party to be charged. Any such waiver shall not be construed as a continuing
waiver or as a waiver of any other breach of a same or similar nature.
5.18 Severability. In the event that any part or portion of this Agreement
------------
shall be deemed to be invalid or illegal, then such invalid or illegal portion
shall, so far as possible, not affect the validity or legality of the remainder
of this Agreement. Further, the Parties agree that they shall attempt to arrive
at a modification of any illegal or invalid part so as to render the same legal
and valid and within the keeping of the original tenor and spirit of the
Agreement.
5.19 Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the Parties with respect to use and licensing of the Licensed Property, and
supersedes all prior negotiations, understandings and agreements, if any,
between the Parties, whether oral or written. This Agreement replaces in its
entirety the License Agreement, and the latter is hereby terminated. Except as
otherwise provided with respect to Exhibits A-D, this Agreement may only be
-------- - -
amended or modified by written instrument signed by authorized officers of both
Parties. Because both Parties are sophisticated and knowledgeable business
enterprises with ready access to legal counsel, the principle of construing an
ambiguous provision or provisions against the drafter shall be disregarded when
construing this Agreement.
5.20 Titles and Headings. Titles and headings herein are for convenience only
-------------------
and are not part of this Agreement.
5.21 Tax on Agreement. Any stamp duty or other tax or duty imposed on this
----------------
Agreement or on any related registered user agreement shall be the sole
responsibility of and shall be paid by Licensee.
5.22 Confidential Agreement. The terms of this Agreement are confidential and
----------------------
shall not be disclosed except for the purpose of enforcement or registration or
recording or as may be required by law.
36
<PAGE>
5.23 Counterparts; Facsimiles. The Agreement may be executed in any number of
------------ -----------
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one and the same
instrument. Each Party shall receive a duplicate original of the counterpart
copy or copies executed by it. For purposes hereof, a facsimile copy of this
Agreement, including the signature pages and Exhibits hereto, shall be deemed an
--------
original. Notwithstanding the foregoing, the Parties shall each deliver
original, execution copies of this Agreement to one another as soon as
practicable following execution thereof.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the Effective Date.
THE SPORTS AUTHORITY, INC. THESPORTSAUTHORITY.COM, INC
By: /s/ Martin E. Hanaka By: /s/ Michael Rubin
------------------------------ ---------------------------------
Title: ____________________________ Title: _______________________________
THE SPORTS AUTHORITY MICHIGAN, INC.
By: /s/ Michael Lisi
------------------------------
Title: SVP, General Counsel & Secretary
--------------------------------
Acknowledged and Agreed to by: Acknowledged and Agreed to
with respect to Article 5.6(c) by:
GLOBAL SPORTS INTERACTIVE, INC. GLOBAL SPORTS, INC.
By: /s/ Michael Rubin By: /s/ Michael Rubin
------------------------------ ---------------------------------
Title: ___________________________ Title: _______________________________
37
<PAGE>
EXHIBIT 10.8
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
<PAGE>
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 [*]
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
2
<PAGE>
Financial Data by any of them shall always be subject to the restrictions set
forth in the E-Commerce Agreement.
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
3
<PAGE>
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. 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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,
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
(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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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;
<PAGE>
(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.
<PAGE>
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 [*]
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
<PAGE>
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
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
<PAGE>
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 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
<PAGE>
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.
(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
<PAGE>
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 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,
<PAGE>
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."
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
<PAGE>
(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 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 [*]
Dollars ($[*]) or [*] percent ([*]%)) 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
<PAGE>
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 [*]
(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;
<PAGE>
(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 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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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:
(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.
<PAGE>
(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 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.
<PAGE>
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.
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.
<PAGE>
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.
(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 $[*] 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.
<PAGE>
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
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
<PAGE>
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: ____________________________
<PAGE>
Exhibit 10.10
AGREEMENT
---------
THIS AGREEMENT is made and entered into on May 14, 1999, by and between THE
SPORTS AUTHORITY, INC., a Delaware corporation ("TSA"), and GLOBAL SPORTS, INC.,
a Delaware corporation ("Global").
WHEREAS, Global desires that TSA enter into a certain E-Commerce Venture
Agreement (the "Venture Agreement") of even date with Global Sports Interactive,
Inc., a Pennsylvania corporation and wholly owned subsidiary of Global ("GSI")
regarding the formation and operation of TheSportsAuthority.com, Inc., to be a
Delaware corporation ("TSA.com"); and
WHEREAS, GSI desires to enter into a certain E-Commerce Services Agreement,
referred to in the JV Agreement, to be between GSI and TSA.com (the "Services
Agreement"); and
WHEREAS, TSA is willing to enter into the Venture Agreement only if Global
Agrees to be bound by certain provisions of the Venture Agreement and the
Services Agreement as if it were a party thereto;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto do hereby agree as follows:
1. JV Agreement. For the benefit of TSA, Global hereby agrees to be bound
------------
by and subject to all of the provisions of Sections 3.4, 3.7, 10.1 and 11.2, the
last sentence of Section 2.21 and the last sentence of Section 6 of the Venture
Agreement as if it were GSI and a party thereto.
2. Services Agreement. For the benefit of TSA.com, Global hereby agrees
------------------
to be bound by and subject to all of the provisions of Articles III, IV and VII
of the Services Agreement as if it were GSI and a party thereto.
3. License Agreement. For the benefit of TSA, Global hereby agrees to be
-----------------
bound by and subject to the provisions of Article IV and Article 5.6(c) of the
License Agreement as if it were GSI and a party thereto.
4. Choice of Law. This Agreement shall be construed, interpreted and
-------------
enforced under and in accordance with the laws of the State of Delaware.
5. Counterparts. This Agreement may be executed in counterparts and both
------------
such counterparts taken together shall be deemed to constitute the same
instrument.
<PAGE>
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.
THE SPORTS AUTHORITY, INC.
By /s/ Martin E. Hanaka
----------------------
Name:
Title:
GLOBAL SPORTS, INC.
By /s/ Michael G. Rubin
-----------------------
Name:
Title:
