Exhibit 10.15
 
Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


 


Strategic
Alliance and Product Sales Agreement


                This
Strategic Alliance and Product Sales
Agreement, including the Exhibits and/or amendments (if any) attached
hereto (the “Agreement”) is entered into by and between Overstock.com, Inc., a Utah
Corporation located at 6322 South, 3000 East, Suite 100, Salt Lake City, UT
84121 (“Overstock”) and Safeway Inc.,
a Delaware Corporation with principal headquarters located at 5918 Stoneridge
Mall Road, Pleasanton, California 94588 (“Safeway”).
The Agreement shall be effective as of February 26, 2002 (the “Effective Date”).


Background


                WHEREAS, Overstock is an Internet retailer of
name-brand surplus and close-out merchandise and specializes in selling
first-quality merchandise at deep discounts across a broad range of categories;


                WHEREAS,  Safeway is one of the largest food and drug retailers
in North America and owns or operates stores throughout North America;


                WHEREAS, Overstock and Safeway desire to enter
into this Agreement according to the terms and conditions set forth herein;


                NOW THEREFORE, in consideration of the mutual promises set forth
herein, the Parties agree as follows:


1.     DEFINITIONS


1.1.          “Applicable Laws” means state,
federal and local laws, rules, regulations, codes, ordinances,
administrative rulings, judgments, decrees, injunctions, writs, orders, and
directives of any jurisdiction applicable to the Parties or the Agreement
together with any interpretations of any governmental entity or agency with
jurisdiction over the Agreement or the Parties.


1.2.          “Business Day” means a day other than a
Saturday, Sunday or holiday on which financial institutions are authorized or
obligated to close in New York, New York, U.S.A.


1.3.          “Confidential Information” is defined in
Section 8.1.


1.4.          “Content” means interviews, concepts, data,
images, programming, computer code, photographs, illustrations, graphics, audio
clips, video clips, text, or other materials generated in any form or media.

















 


1.5.          “Custom Content” shall mean Intellectual
Property (including Content) made, conceived, or developed by Overstock after
the Effective Date specifically on behalf of Safeway in creating the Web
Site.  Custom Content does not include any
Overstock Content, Overstock Intellectual Property created or otherwise owned
or in the possession of Overstock prior to the Effective Date of this
Agreement, as well as other Overstock Intellectual Property developed by or on
behalf of Overstock outside the scope of this Agreement, or Third Party
Content.


1.6.          “Customer Information” is defined in
Section 3.9.2.


1.7.          “Customer Service Standards” is defined in
Section 3.8.3.


1.8.          “Domain Name” shall mean the domain name
specified for the Web Site in accordance with Section 3.3.


1.9.          “Intellectual Property” means all
inventions (whether or not prosecutable under patent laws), works of
authorship, information fixed in any tangible medium of expression (whether or
not protectable under copyright laws), moral rights, mask works, trademarks,
trade names, trade dress, trade secrets, publicity rights, know-how, ideas
(whether or not protectable under trade secret laws), and all other subject
matter protectable under patent, copyright, moral right, mask work, trademark,
trade secret, or other laws, including without limitation all new or useful
art, combinations, discoveries, formulae, manufacturing techniques, technical
developments, artwork, software, programming, applets, scripts, designs,
service marks, logos, tags lines, and other corporate branding/identity.


1.10.        “Look and Feel” means the graphics, design,
organization, presentation, layout, user interface, navigation and stylistic
convention (including the digital implementations thereof) of a particular
piece of media.


1.11.        “Overstock Content” shall mean: (i)
Intellectual Property (including Content and the Overstock Site) made,
conceived, or developed by Overstock prior to the Effective Date and contained
in, comprising, or otherwise necessary to produce, display and/or maintain the
Web Site; and (ii) Intellectual Property made, conceived or developed by or on
behalf of Overstock independent of this Agreement. Overstock Content does not
include Safeway Content, Third Party Content, or Custom Content.


1.12.        “Overstock Site” means the Web sites or
collection of Internet pages residing on Servers owned or controlled by
Overstock or its affiliated, subsidiary or related companies and currently
accessible by the public via the Internet at the URL http://www.overstock.com.


1.13.        “Party” means either Safeway or Overstock; “Parties”
means Safeway and Overstock.


1.14.        “Privacy Policy” means the privacy policy
set forth in Exhibit A.


1.15.        “Product” means
those products ordered by Safeway under this Agreement for in-store sales and
those products offered for sale on the Web Site.


2

















 


1.16.        “Product
List” means a list of those Products (including available quantities
and Purchase Price) that are available for purchase by Safeway from Overstock’s
vendors, suppliers and other providers.


1.17.        “Project
Manager” is defined in Section 10.1


1.18.        “Purchase Price” is defined in Section
2.2.3.


1.19.        “Safeway Content” shall mean Intellectual
Property (including Content) made, conceived, or developed by Safeway and contained
in, comprising, or otherwise necessary to display and/or maintain the Web Site.
Safeway Content does not include Overstock Content or Third Party Content.


1.20.        “Safeway Site” means the Web sites or
collection of Internet pages residing on Servers owned or controlled by Safeway
or its affiliated, subsidiary or related companies and currently accessible by
the public via the Internet at the URL http://www.safeway.com
or other URLs owned or controlled by any Safeway Store.


1.21.        “Safeway Stores” means Safeway, Safeway
Food and Drugs, Carr’s, Dominick’s, Eagle, Genuardi’s, Pak’n Save Foods,
Pavilions, Randalls, Simon David, Tom Thumb, Vons, and other stores owned
and/or operated by Safeway or any of its Affiliates on or after the Effective
Date.


1.22.        “Server” means computers or other data
processing devices that host, store, or deliver content over the Internet or
such other communications network or networks as are capable of interactive
communications with the Web Site, Safeway Site and Overstock Site, utilizing
such communications protocols and technology as exist now or may in the future
become available.


1.23.        “Term” is defined in Section 9.1.


1.24.        “Third Party Content” means Intellectual
Property (including Content) licensed, made, conceived, or developed by a third
party used by Overstock and contained in, comprising, or otherwise necessary to
display and/or maintain the Web Site.


1.25.        “Web Site” means the co-branded Web site or
collection of Internet pages developed by Overstock and Safeway in connection
with this Agreement and residing within the Overstock Site and currently
accessible by the public via the Internet at the URL http://www.safewayexclusives.com.


1.26.        “Web Site Service Standards” is defined in
Section 3.1.


2.     SALES AND
PURCHASES OF PRODUCTS FOR IN-STORE SALES.


2.1.          Joint
Commitments.


2.1.1.       Each Party recognizes that the other
Party generally purchases products 


 


3

















 


from a wide variety of respective vendors,
liquidators, and suppliers. Periodically during the term of this Agreement, the
Parties  may provide one another with
non-confidential, general information regarding the identity and status of  relevant suppliers and vendors for purposes
of complying with the exclusivity obligations set forth herein.


2.1.2.       During the Term and subject to this
Section 2.1, Safeway agrees to use reasonable good faith efforts to abstain
from purchasing any Products or other substantially similar products as are
contemplated hereunder from any of Overstock’s respective vendors or suppliers
with whom Safeway does not have a pre-existing relationship as of the Effective
Date. Subject to Safeway’s obligations under this Section 2.1, Safeway shall
not be prohibited or restricted from purchasing any goods from any liquidator
or similar person or entity.


2.1.3.       In addition, during the Term and subject
to the conditions contained in this Agreement, Safeway shall purchase from
Overstock no less than [*] of all products made available by Safeway in
connection with Safeway’s “Safeway Exclusives” program. If Safeway fails, for a
period of thirty (30) consecutive days during the Term, to sell Products [*],
Overstock shall have the right, for a period of thirty (30) days thereafter, to
terminate this Agreement upon not less than thirty (30) days written notice to
Safeway .  Notwithstanding anything to
the contrary contained herein, Safeway’s obligation under this Section 2.1
shall be conditioned on Overstock’s ability to timely deliver to Safeway
Products at competitive prices which are of equal or greater quality, quantity
and timeliness as those which Safeway could purchase from third parties. In the
event Overstock fails to meet its obligations under this Agreement, the Parties
shall negotiate in good faith to appropriately adjust downward Safeway’s
obligations under this Section 2.1.2.


2.1.4.       Notwithstanding anything to the contrary
contained herein but without affecting Safeway’s purchase obligations in
Section 2.1.3, Overstock acknowledges that Safeway currently maintains, and
shall be allowed to maintain unaffected by this Agreement, an existing
contractual relationship with [*] for online sales of related products.


2.1.5.       Overstock agrees that, during the Term,
it shall not sell goods which are the same or similar to the Products to any
store that has more than four hundred (400) retail stores in the following
categories: (a) drug; (b) mass merchandising; (c) grocery; or
(d) club or warehouse stores. In addition to the foregoing, Overstock agrees
that, during the Term, it shall not, directly or through an affiliate, enter
into any business relationship of any type (including without limitation,
on-line sales, in-store sales, or consulting) with any entity selling groceries
or drugs that has more than four hundred (400) retail stores.


2.1.6.       Non-Solicitation.  Each of the Parties agrees that during the
term of this Agreement and for a [*] period thereafter, it shall not, except
with the prior written consent of the other, solicit the employment or
engagement of any employee of the other Party; provided that nothing shall
prohibit either Party from employing an employee of the other who initiated
discussions regarding employment, or who responded to a generally publicized
advertisement for employment. In the event of a breach of this Section 2.16,
the breaching Party shall pay to the non-breaching Party, as liquidated damages
and not as a penalty, an amount equal to [*]. Payments to be made under this
Section 2.1.6 shall be made within fifteen (15) days of the non-breaching
Party’s demand.


2.2.          Product
Offering; Prices and Payment.


2.2.1.       To the extent possible, Overstock shall
periodically provide Safeway with 


 


4

















 


written Product Lists and shall provide the Safeway
Project Manager with frequent updates (as such become available) to the Product
List to reflect changes in the Product mix, quantity, Purchase Price and other
information.


2.2.2.       In order to assist Safeway  in determining whether to purchase Product
and to the extent possible, Overstock shall, within ten (10) Business Days
after a request from the Safeway Project Manager, use reasonable efforts to
deliver a representative sample (contained in representative packaging) of the
requested Product to the Safeway Project Manager, [*].


2.2.3.       Safeway’s initial purchase price for each
Product shall be equal to Overstock’s actual, documented cost for the Product plus
[*] (“Purchase Price”), subject to
adjustment as provided herein. If Safeway specifically requests special sorting
or repackaging services from Overstock, Safeway shall reimburse Overstock at a
mutually agreed upon fee.


2.2.4.       Overstock shall invoice Safeway for all
Product in a form and manner mutually agreed by the Parties.  Safeway shall pay all amounts (unless
Safeway disputes such invoice amounts in good faith) within the later of ten
(10) Business Days after receipt of Overstock’s invoice or Safeway’s first
receipt of Product at the Delivery Point. 
Safeway may contest, in good faith, all or any portion of an invoice by
providing Overstock with written notice of such contest (the “Contest Notice”).  The Contest Notice will include the reason
for such contest and the amount that the Safeway believes is properly due.  Overstock shall investigate the matter and
provide a written response to Safeway. 
If the Parties disagree, the dispute shall be submitted to the dispute
resolution procedure set forth in Section 10.10 and 10.11 below. Safeway’s
payment obligations and Overstock’s Product delivery obligations hereunder
shall be suspended while any good-faith payment dispute is outstanding.


2.3.          Orders.


2.3.1.       Safeway’s purchase orders (“Purchase
Order(s)”) for Products shall be submitted to Overstock in writing or via email
within ten (10) business days from the anticipated arrival date of Products.
Overstock shall provide Safeway with reasonable notice if Overstock has reason
to believe that its suppliers or vendors will not have a certain Product
available for shipment to Safeway. In addition, Overstock shall provide Safeway
with as much notice as possible if it anticipates or has reason to believe that
Overstock’s supply of a Product will not be sufficient to meet Safeway’s
requirements. The Parties understand that because Overstock’s inventory of
Products is dependent on the availability of Products from Overstock’s
respective vendors, suppliers, and/or other providers, Overstock cannot make
any specific representations regarding or otherwise guaranteeing the
availability of the types or quantities of Products which may or may not be
available for purchase by Safeway. Notwithstanding the foregoing, however, the
Parties agree that at such time as Overstock accepts Safeway’s Purchase Order
in accordance with Section 2.3.4 below, Overstock shall be obligated to timely
and accurately fill such Purchase Order.


2.3.2.       All purchases and sales between Overstock
and Safeway will be initiated by Safeway’s issuance of written Purchase Orders
or Purchase Orders auto-faxed directly to Overstock from Safeway. Each Purchase
Order shall include: (i) identification of 
Products ordered; (ii) quantity to be purchased; (iii) Purchase Price of
Products ordered; (iv)  requested 


 


5

















 


delivery dates; (v) shipping instructions; and (vi)
purchase order number(s).  Nothing
contained in any purchase order will modify any material terms or conditions of
this Agreement, and in the event of any conflict between this Agreement and any
purchase order, this Agreement shall govern.


2.3.3.       During the Term, Overstock shall provide
Safeway with [*] on all Product orders. To that end, Overstock shall use
commercially reasonable efforts to timely and accurately fulfill all Safeway
orders in accordance with Safeway’s [*], regardless of any allocation methodologies
that may otherwise apply to any Product.


2.3.4.       Overstock shall notify Safeway of the
acceptance or rejection of a Purchase Order within two (2) Business Days of
receipt; provided that, in the event that 
Overstock does not respond to any Purchase Order within such two (2)
Business Day period, Overstock shall be deemed to have accepted the order as
written.


2.3.5.       Safeway may redirect delivery of Products
prior to shipment at no additional charge other than any additional freight
charges actually incurred by Overstock . Furthermore, Safeway may, [*], cancel
or reschedule delivery of Products if Overstock has not yet placed a binding
order for such Products on Safeway’s behalf or Overstock is not legally bound
to purchase such Products.  If Overstock
has placed a binding order for such Products on Safeway’s behalf or Overstock
is legally bound to purchase such Products and Safeway cancels an order,
Safeway shall reimburse Overstock an amount equal to [*].  Overstock shall use best commercially
reasonable efforts to return or resell such Products on behalf of Safeway at
the highest price possible.


2.3.6.       Overstock (at Safeway’s expense) shall
provide information which is required for Safeway to obtain any export or
import licenses required for Safeway to ship or receive Products, including,
but not limited to, certificates of origin, (NAFTA, etc.), manufacturer’s
affidavits, Buy America qualification, and U.S. Federal Communications
Commissions identifier, if applicable.


2.4.          Packaging
and Shipping.


2.4.1.       Unless otherwise specified by Safeway,
Overstock and/or its respective vendors, suppliers or other providers will
mark, package and deliver all goods in a manner which is in accordance with
industry standard practices.  Overstock
shall use commercially reasonable efforts to accommodate any special packaging
requests made by Safeway, and Safeway shall bear any additional expenses
relating thereto.


2.4.2.       Shipment will be F.O.B. Safeway’s
distribution center (“Delivery Point”),
at which time risk of loss and title pass to Safeway.  All freight charges from either Overstock or the
third party supplier to the Delivery Point, will be borne by Safeway.  Unless provided in this Agreement, [*].


2.4.3.       Upon reaching agreement on the prices
associated with Product rush orders, Overstock shall use its reasonable efforts
to meet Safeway’s requirements for reasonable rush orders for Products
requiring immediate delivery.  The
Parties will negotiate in good faith the prices for such rush orders, taking
into consideration Overstock’s available inventory and 


 


6

















 


additional shipping and personnel expense necessary.


2.4.4.       If Overstock fails to timely and
accurately fill any Safeway Purchase Order that has been accepted by Overstock,
Safeway may, in its sole discretion, either (i) accept the deficient order and
Overstock shall credit Safeway promptly for such deficiency, or (ii) terminate
the order and return any materially deficient order Products at Overstock’s
expense.


2.5.          Inspection
and Acceptance.


2.5.1.       Safeway will inspect all Products for
obvious physical damage within five (5) days of receipt thereof. Safeway may
reject any Product that appears defective by notifying Overstock in writing or
by facsimile of its rejection within such five (5) day inspection period and
requesting a Returned Material Authorization (“RMA”)
number.  Overstock will provide the RMA
number in writing or by facsimile to Safeway within five (5) days of receipt of
the request. If Safeway observes Product discrepancies that are the result of
shipping or Product carrier and/or transport circumstances, Safeway shall make
note of such Product shipping discrepancies on the applicable bill of
lading.  Within ten (10) days of receipt
of the RMA number, Safeway will return to Overstock the rejected Product with
the RMA number displayed on the rejected Product. Products not rejected by
Safeway within two (2) Business Days of Safeway’s inspection thereof shall be
deemed accepted by Safeway.


2.5.2.       Unless it is determined that Safeway, its
agents or affiliates are responsible for the defect or discrepancy apparent in
a returned Product, Overstock shall reimburse Safeway for the cost of the
defective returned item together with return shipping and related charges from
Safeway’s Standard Product Recovery Center (PRC) to Overstock or its designee
within ten (10) Business Days after receiving the rejected Product from
Safeway.


2.6.          Inventory
Balancing.


2.6.1.       Safeway may return to Overstock and have
liquidated any or all unsold Product (“Unsold Product”) at Safeway’s sole
discretion in accordance with this Section 2.6; provided that such request is
made within sixty (60) days of Safeway’s original receipt of such Unsold
Products.


2.6.2.       In the event Safeway desires to return or
have liquidated any Unsold Product, Safeway shall notify Overstock, and
Overstock shall use its best commercially reasonable efforts to promptly
identify, through use of its in-house business to business reseller personnel
or otherwise, willing, ready and able buyers for the Unsold Products. Overstock
shall use best commercially reasonable efforts to liquidate Unsold Products on
behalf of Safeway at the highest price possible.


2.6.3.       At such time as Overstock identifies a
buyer or buyers of all or part of the Unsold Product, Overstock shall provide
Safeway with written or email notice of the price to be paid for, and quantity
to be purchased of, the Unsold Product by such buyer(s).  Safeway shall then have the right to either
(i) sell the Unsold Product directly to the buyer(s), (ii) return the Unsold
Product to Overstock for processing prior to the sale thereof to the buyer(s)
(in which case Overstock shall provide Safeway with a written “not-to-exceed”
estimate of its handling costs, which shall not include the cost of  return shipping back to Overstock, which
shall be 


 


7

















 


borne by Overstock (but only to the extent that and
insofar as such Overstock borne Unsold Product costs do not prevent Overstock from
receiving at least  [*] for Products
provided Safeway hereunder, as set forth in Section 2.7 below), or (iii) keep
the Unsold Product.  If Safeway chooses
option (ii) above, Safeway shall use best commercially reasonable efforts to
itemize, sort, and organize all Unsold Products returned for processing to
Overstock.


2.6.4.       Safeway shall include an Unsold Product
Inventory Report (containing a description of Unsold Products and quantities)
with all Unsold Product shipments returned back to Overstock. Such Unsold
Product Inventory Reports shall correspond to and adequately reflect Safeway’s
pre-return Product itemization, sorting and organization obligations hereunder.
Upon Overstock’s receipt of Unsold Product, Overstock will, within five (5)
days, reconcile Unsold Products actually received with Unsold Products
documented on Safeway’s Unsold Product Inventory Report accompanying such
return shipment. The Parties agree that Safeway shall have no financial
responsibility to Overstock for Unsold Products that are returned to Overstock
on account of “shrinkage”, stolen, or missing Unsold Product, unless such
damage or loss was caused by Safeway or its agents.


2.6.5.       Upon liquidation of Unsold Product as set
forth herein, Safeway shall be entitled to receive (either directly from the
buyer(s) or from Overstock) the aggregate amount realized from the sale of the
Unsold Products. Overstock shall share in any decreased return on Unsold
Product, but  only to the extent provided
in Section 2.7 below.


2.6.6.       The Parties agree that Overstock shall
have no financial responsibility to Safeway for Unsold Products that are
returned to Overstock in damaged or non-resalable form, or on account of
“shrinkage”, stolen, or missing Product, unless such damage or loss was caused by
Overstock or its agents.


2.7.          Reconciliation. The Parties shall, on a
calendar quarterly basis, determine the aggregate Purchase Price paid by
Safeway for Unsold Products and the amount actually received by Safeway for the
sale of Unsold Products under Section 2.6 above (“Realized Amount”). In the
event the Realized Amount is less than the aggregate Purchase Price for the
applicable Unsold Products, subject to the next sentence, Overstock shall remit
back to Safeway (or credit to Safeway, at Safeway’s discretion), the difference
between the  Realized Amount and the
aggregate Purchase Price for the applicable Unsold Products.  Notwithstanding the foregoing, the Parties
expressly agree that in no event shall Overstock be obligated to remit to
Safeway any amount which would, in the aggregate for such calendar quarter,
cause Overstock to realize proceeds of less than Overstock’s actual, documented
cost for such Products plus [*]. See Exhibit B attached
hereto as an illustration of the foregoing.


2.8.          Sell-Off.  Upon expiration or termination of this
Agreement, Safeway shall have the right, in its sole discretion, to sell-off
all Products in its inventory.


3.     WEB SITE
OPERATIONS AND SALES.


3.1.          Hosting and Maintenance of the Web Site.
Overstock will be solely responsible for hosting, maintaining, securing, and
operating the Web Site in accordance with the standards set forth herein,
including the technical requirements and service standards set forth in Exhibit
C 


 


8

















 


(the “Web Site
Service Standards”).


3.2.          Future Developments.  Overstock will use commercially reasonable
efforts to provide mutually agreed upon modifications or enhancements to the
Website that are requested by Safeway. 
Any Safeway-initiated modifications, additions, improvements and/or
enhancements shall be performed at a mutually agreeable rate, which in no event
shall exceed Overstock’s then current consulting and development rates.


3.3.          Domain Name.


3.3.1.       Overstock shall obtain and maintain during
the Term, on Safeway’s behalf, at Safeway’s expense for registration fees and
similar out-of-pocket expenses, and in Safeway’s name, an Internet Protocol
address and corresponding domain name(s) as instructed by Safeway from time to
time (singularly
or collectively, “Domain Name”), and do all other acts necessary to establish
and maintain the Internet Protocol address and Domain Name of the Web Site. The
initial Domain Name shall be www.safewayexclusives.com.


3.3.2.       Safeway (at its own expense for registration
fees and similar out-of-pocket expenses) may add to or change the Domain Name
at any time by providing Overstock with written notice and Overstock shall make
any additions or changes necessary (including without limitation, additional
filings with registration entities or additional or modified links to or from
the Web Site) within thirty (30) days after receiving such notice.  All right, title and interest in the Domain
Name shall vest immediately and exclusively in Safeway. Overstock shall list
the Administrative Contact and Billing Contact as follows:


 


Administrative Contact,
Technical Contact:


        sande,
bob  (BSW504)  bob.sande@SAFEWAY.COM


       
Safeway, Inc.


        2800
Ygnacio Valley Rd


        Walnut
Creek, Ca  94596


       
925-944-4560


 


Billing Contact:


        Harry,
Little  (LHK551)  harry.little@SAFEWAY.COM


        Safeway
IT


        2800
Ygnacio Valley Rd.


        Walnut
Creek, CA  94598


       
925-944-4570


3.4.          Hidden
Text.  Without prior written
permission from Safeway, Overstock shall not include any hidden, microscopic,
or invisible text, commands, code, programming, meta tags, or other similar
material in the Web Site.


3.5.          Branding;
Advertisements.


3.5.1.       The Parties shall mutually agree upon any
third party advertisement, trademark, service mark, trade name, copyright or
other Content on the Web Site. If Safeway 


 


9

















 


consents to any third party advertisement on the Web
Site, [*] of any and all revenues invoiced to such third parties. Without
limiting the foregoing, neither Party shall enter into any agreement with any
third party that imposes any obligations upon the other Party, without the
other’s prior written consent.


3.5.2.       The page header of the Web Site shall be
reserved for the exclusive use of Safeway branding and logos. During Term, and subject to Safeway’s consent as
to placement, size and frequency, Overstock may place on the Web Site text
and/or graphics stating “Powered by Overstock” or a similar attribution reasonably
acceptable to Safeway.


3.6.          Navigation.


3.6.1.       The Web Site will be accessible to users
via the Internet with the aid of any standard Web browser. Overstock shall
create and maintain during the Term: (i) a hyperlink from the Safeway Site, and
any other Safeway Stores web site(s) requested by Safeway, to the Web Site, and
(ii) corresponding hyperlinks from the Web Site back to the Safeway Site.  The type and placement of the hyperlinks
shall be as agreed to by the Parties.


3.6.2.       Overstock shall provide an interstitial
page for users that click the hyperlink from the Safeway Site to the Web Site
informing such users that it is leaving the Safeway Site.  Except as provided in this Section,
Overstock shall not, in conjunction with the Web Site, use any interstitials,
pop-up windows, other intermediate steps or any other technology or content
which acts as a barrier to the transition of a user from the Safeway Site to
the Web Site or any transition between pages within the Web Site, nor shall
Overstock otherwise frame the pages within the Web Site or use any other
technology which interferes with or affects the page layout of such pages.


3.6.3.       Overstock agrees not to override browser
back button functionality for any purpose, including, without limitation, to
prevent users who link to the Web Site from the Safeway Site from returning to
the Safeway Site.


3.7.          Infrastructure
Requirements.


3.7.1.       During the Term, Overstock shall, [*],
provide all necessary servers, communication lines, connectivity and related hardware,
software, equipment, physical facilities, and technology to host and operate
the Web Site. In the event Safeway requests that Overstock utilizes any custom
hardware, software or equipment solely for Safeway, the Parties shall negotiate
in good faith regarding an equitable cost sharing arrangement therefore.


3.7.2.       Overstock shall configure and operate the
Web Site upon a  secure computer
hardware server with a direct Internet connection of at least T-1 bandwidth.
Overstock shall locate the Web Site at Overstock’s premises or at a locked and
secured location at a third party’s premises, provided no third party will have
access to the Web Site, Customer Information or any Confidential Information of
Safeway.


3.8.          Sale of
Products On the Web Site.


10

















 


3.8.1.       The Web Site shall promote and sell only
those Products mutually agreed by the Parties. In no event shall Overstock
knowingly include on the Web Site any Content or offer any Products which (i)
infringe upon the copyright, literary, privacy, publicity, trademark, service
mark or any other personal or property right of any person; (ii) constitute
libel or defamation of any person or entity; (iii) constitute unfair
competition or false advertising, (iv) contain content that is obscene, child
pornographic or harmful to minors; or (iv) violate any Applicable Laws. The
Parties further acknowledge and agree that nothing contained in this Agreement
shall obligate Safeway to include Products on the Web Site that would violate
the terms of any agreement binding on Safeway as of the Effective Date.


3.8.2.       In the event that a Web Site user desires
to purchase a Product on or through the Web Site and such Product is no longer
available to Overstock, Overstock agrees to use commercially reasonable efforts
to provide such customer (at the customer’s sole discretion) with a reasonable
alternative to the unavailable Product.


3.8.3.           Overstock shall provide customer
service and support in accordance with the standards specified in Exhibit D
(the “Customer Service Standards”).  Without limiting the foregoing, Overstock
(or, if applicable, the respective Product manufacturer) agrees to provide all
customer service and support for the Products sold to customers from the Web Site
with highest industry standard responsiveness and satisfaction.


3.8.4.           Order Processing.  Overstock
will be solely responsible for order processing, order fulfillment, payment
processing, shipment, cancellations, complaints, returns and other forms of customer
service. All such obligations shall be performed in accordance with the
Customer Service Standards, or if not addressed thereon, in accordance with
highest industry standards.


3.9.          Privacy
Policy; Customer Information.


3.9.1.       Overstock represents, covenants, and
agrees that it shall comply with all 
terms and conditions of the Privacy Policy, as may be amended from time
to time upon the mutual agreement of the Parties. In the event the Parties are
unable to agree upon any such modification, but Overstock implements such
modification without the approval of Safeway, Safeway shall have the right, but
not the obligation, to terminate this Agreement without penalty or cost upon
not less than ten (10) days prior written notice to Overstock.


3.9.2.       Without limiting any other warranty or
obligation of Overstock under this Agreement, during the Term and thereafter in
perpetuity, Overstock will not gather, store, use, disclose, distribute, sell,
share, rent or otherwise transfer any personally identifiable information
obtained from users of the Web Site, including name, address, phone numbers,
credit card numbers, or Products requested (the “Customer Information”) in any manner, except as expressly provided in this
Agreement or as Overstock may be expressly directed in advance in writing by
Safeway.


3.9.3.       Overstock represents, covenants, and
agrees that it will use Customer Information only in compliance with: (i) this
Agreement; (ii) the Privacy Policy; and (iii) all Applicable Laws (including
applicable laws, policies and regulations related to spamming, privacy, and
consumer protection). Overstock further agrees that Overstock will use all 


 


11

















 


commercially reasonable and appropriate security, such
as, for example, encryption and passwords, to protect Customer Information from
unauthorized disclosure (internally or externally) and that the use of such
security does not give rise to any privacy rights in the communication as
between Overstock and Safeway.


3.10.        Changes.


3.10.1.     Overstock shall not make any change to the
Look and Feel of the Web Site or Content contained thereon without Safeway’s
prior written consent.  The Parties do
acknowledge, however, that Overstock may, without Safeway’s consent, but with
notice to Safeway, make modifications to the Web Site other than to Look and
Feel if such modifications are being made throughout the Overstock Site.


3.10.2.     Overstock will use commercially reasonable
efforts to provide mutually agreed upon modifications or enhancements to the
Web Site during the Term that are requested by Safeway. Any Safeway-initiated
modifications, additions, improvements and/or enhancements shall be performed
at a mutually agreeable rate, which in no event shall exceed Overstock’s then current
consulting and development rates.


3.11.        Terms and
Conditions.  The Web Site
shall include Terms and Conditions for use, mutually agreed to by the Parties,
created in such a way as to cause each user to view (i.e., at a minimum, to be
forced to scroll through or past) and acknowledge (e.g., by an acknowledgement
button following the text) the same.


3.12.        Revenue
Sharing for Web Site Sales.


3.12.1.     Within fifteen (15) days of the end of each
calendar month during the term, Overstock shall pay to Safeway an amount equal
to the greater of (i) [*] of gross sales, or (ii) [*] of net profits for the
month just ended. For purposes of this Section, “gross sales” means the gross price invoiced for all Products sold less
only coupon discounts and promotional deductions agreed to by Safeway; “net profits” means the gross price
invoiced for all Products sold less the actual cost of the Product(s)
as documented by Overstock, taxes, out-bound shipping charges, and reasonable
reserve for returns.  At the end of each
calendar quarter during the Term, Overstock shall reconcile the return reserve
used in the calculation of net profits with actual returns received during such
period. Following such reconciliation, the applicable Party shall pay the other
Party the amount necessary to correct any overpayment or underpayment (as
applicable) resulting from the variance between the return reserve and actual
reserves.  If any reconciliation shows
an overstatement in the return reserve of more than [*], Overstock shall pay
Safeway the correction amount described in the previous sentence [*]; provided
that [*] shall not be Safeway’s exclusive remedy for an overstated return
reserve and payment of such amount shall not limit or otherwise affect any
other rights or remedies that Safeway may have under this Agreement or
Applicable Law.


3.12.2.     Overstock shall provide the following
reports to Safeway in the form and manner reasonably  requested by Safeway:  (a)
daily usage reports describing the number of page impressions, number of users
and such other information as reasonably requested by Safeway from time to
time;  (b) detailed weekly logging of
content access, and product movement, and (c) 


 


12

















 


a detailed accounting of all revenues, costs and
expenses involved in the calculation of the amount payable under Section  3.12.1 (showing both the “gross sales” and
“net profit” calculations).  Without
limiting the foregoing, upon Safeway’s request, Overstock shall promptly
provide Safeway with invoices and other documentation supporting the report
described in clause (c).


3.13.        Joint
Promotional Activities for the Web Site.   Subject to Section 4.5 below, the Parties
will cooperate to promote the Web Site in ways to be mutually agreed upon.


4.     OWNERSHIP OF
INTELLECTUAL PROPERTY


4.1.          Ownership By
Safeway.


4.1.1.       Safeway Content. 
Safeway is the sole and exclusive owner of the Safeway
Content and all Intellectual Property relating thereto.  Subject to the terms and conditions
contained herein, Safeway grants to Overstock, during the Term, a limited,
non-exclusive, non-transferable, non-sublicensable, royalty free  license to access, operate, display and use
the Safeway Content solely on the Web Site. Overstock acknowledges and agrees
that it (i) may only use the Safeway Content in the form provided by Safeway,
(ii) may use the Safeway Content solely in connection with this Agreement,
and  (iii) shall not alter, edit, or
make any change to the Safeway Content without Safeway’s prior written
approval.  Safeway shall deliver the
Safeway Content to Overstock in an electronic file format (e.g., .pdf, .txt,
..gif, .jpg) or as otherwise agreed to by the Parties. Upon expiration or
termination of this Agreement, the licenses granted in this Section 4.1 shall immediately
revert to Safeway, and Overstock shall, at Safeway’s instructions, immediately
either deliver to Safeway or destroy and erase all original and copies,
summaries, abstractions and other iterations (regardless of form) of the
Safeway Content.


4.1.2.       Custom Content. Overstock acknowledges and
agrees that its creation and authorship of Custom Content constitutes a “work
made for hire,” as that term is defined in Title 17 of the United States Code
(the “Copyright Act”),  and that Safeway
is, and shall be deemed to be, the sole author and owner of the Custom Content
including Intellectual Property therein. 
With respect to all Custom Content that is not covered by the definition
of a “work made for hire” under the Copyright Act, such that Overstock would be
regarded as the copyright author and owner, Overstock hereby assigns and agrees
to assign to Safeway (at Safeway’s expense for registration fees and similar
out-of-pocket expenses), and Safeway accepts and agrees to accept, Overstock’s
entire right, title, and interest in and to such works, including all
copyrights therein, for all media now known or later developed.  Overstock further agrees to execute, or
cause to be executed by its employees, agents, or subcontractors, whatever
assignments of copyright and ancillary and confirmatory documents that may be
required or appropriate so that title to any Custom Content and to the
copyright therein shall be clearly and exclusively held by Safeway or any
nominee thereof.


4.1.3.       Domain Name.   Safeway
shall own all right, title and interest in and to the Domain Name and all
Intellectual Property related thereto.


4.2.          Overstock
Content. Overstock is
the sole and exclusive owner of the Overstock 


 


13

















 


Content and all Intellectual Property relating
thereto.  Subject to the terms and
conditions contained herein, Overstock grants to Safeway, during the Term, a
limited, non-exclusive, non-transferable, non-sublicensable license to access,
reproduce, display and use the Overstock Content for use in the promotions set
forth herein. Safeway acknowledges and agrees that it (i) may only use the
Overstock Content in the form provided by Overstock, (ii) may use the Overstock
Content solely in connection with this Agreement, and  (iii) shall not alter, edit, or make any change to the Overstock
Content without Overstock’s prior written approval. Overstock shall deliver the
Overstock Content to Overstock in an electronic file format (e.g., .pdf, .txt,
..gif, .jpg) or as otherwise agreed to by the Parties. Upon expiration or
termination of this Agreement and subject to Safeway’s right to sell-off
inventory of Products, the licenses granted in this Section 4.2 shall revert to
Overstock, and Safeway shall, at Overstock’s instructions, immediately either
deliver to Overstock or destroy and erase all original and copies, summaries,
abstractions and other iterations (regardless of form) of the Overstock
Content.


4.3.          Third Party
Content.  Overstock shall
obtain and maintain throughout the Term, at Overstock’s sole cost and
expense,  a world-wide license to use
the Third Party Content incorporated into the Web Site . Such license must
include the electronic distribution and public display and performance of the
Third Party Content and the right to modify, amend, create derivative works,
rent, sell, assign, lease, sublicense, or otherwise alter or transfer the Third
Party Content. If Safeway specifically requests the inclusion of certain Third
Party Content, Safeway shall assist Overstock in securing the aforementioned
rights to such Third Party Content.


4.4.          Copyright
Notice.


4.4.1.       Overstock shall cause the following
copyright notice (or any other notices as instructed by Safeway) to be
displayed on each page of the Web Site on which Safeway Content is viewed: “©
____________ Inc.  All Rights Reserved.”


4.4.2.       Safeway shall cause the following
copyright notice (or any other notices as instructed by Safeway) to be
displayed on each item on which Overstock Content is displayed: “© ____________
Inc.  All Rights Reserved.”


4.5.          Use of Name, Trademark
and Logos.


4.5.1.       Each
Party understands that listing the other as a customer, client, or otherwise,
has value, and therefore agrees that each Party will submit to the other
Party for such Party’s prior written approval all marketing, advertising, press
releases, and all other promotional materials (including sales literature, press releases, trade shows,
posters, reference lists, or similar public announcements) referencing
the other Party and/or the other Party’s trade names, trademarks, service
marks, copyright or other Intellectual Property right, prior to the use or
distribution of such materials. Neither Party shall use or distribute any such
material unless and until it receives the other Party’s written approval to do
so. Approval shall not be unreasonably withheld or delayed.  Once approved, such materials may be reused
until such approval is reasonably withdrawn with reasonable prior notice.


4.5.2.       In using the other Party’s trade names,
trademarks, service marks, copyright or other Intellectual Property right
hereunder, each Party acknowledges and agrees 


 


14

















 


that; (i) the other Party’s trade names, trademarks,
service marks, copyright or other Intellectual Property right shall remain the
sole property of the other Party; (ii) nothing in this Agreement shall confer
in the Party any right of ownership in the other Party’s trade names,
trademarks, service marks, copyright or other Intellectual Property; and (iii)
the Party shall not now or in the future contest the validity of the other
Party’s trade names, trademarks, service marks, copyright or other Intellectual
Property right.


4.5.3.       The Parties acknowledge and agree that,
in light of certain conflicts concerning the use of the Safeway name in
Indiana, Safeway may condition its consent under Section 4.5.1 to use outside
of Indiana and may impose special conditions on such use within Indiana.


5.     AUDIT RIGHTS.


5.1.          For
the purpose of confirming the accuracy of payments either made or outstanding
under this Agreement, Safeway will have the right to, or to direct an
independent “Big Five” auditor to, audit all books, records and documents of
Overstock that relate to this Agreement or payments made or otherwise
outstanding hereunder. Safeway shall give Overstock five (5) Business Days
prior written notice of such audit, and shall conduct such audit during regular
business hours in a manner that does not unreasonably interfere with
Overstock’s business.


5.2.          Overstock
shall, during the Term and for five (5) years thereafter, keep and maintain all
books and records as are necessary to substantiate, without limitation, Product
costs, gross sales calculations, net sales calculations, Product shipments,
Product sales, accounts receivable and invoiced amounts.


5.3.          All
audits shall be at the expense of Safeway unless the audit reveals
non-compliance by Overstock with the terms of this Agreement, in which case the
audit shall be at the expense of Overstock.


6.     REPRESENTATIONS
AND WARRANTIES; LIMITATION OF LIABILITIES


6.1.          General
Representations and Warranties.
Each Party represents and warrants for the benefit of the other that: (a) it
has full and requisite corporate power and authority to enter into and perform
under and grant the rights specified in this Agreement; and (b) in performance
of its obligations under this Agreement it will comply with all Applicable Laws
now or hereafter enacted that are applicable to performance under this
Agreement,  including the Health
Insurance Portability and Accountability Act of 1996 and other Applicable Laws
relating to the handling of personally identifiable data, and all Applicable
Laws which regulate any material because it is radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment, including but
not limited to the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Resource Conservation Recovery Act, the Federal
Water Pollution Control Act, the Clean Air Act, the Montreal Protocol, the
Toxic Substances Control Act and similar laws, rules, statutes, treaties or
orders and international understandings.


6.2.          Overstock
Representations, Warranties and Covenants.


6.2.1.               Service.  Overstock represents, warrants and agrees that all
services to 


 


15

















 


be provided under this Agreement shall be performed in
a professional, competent, and timely manner by appropriately qualified
personnel in accordance with this Agreement.


6.2.2.               Third Party Compensation.  Overstock represents and warrants that it has not received any
compensation from a third party to include any programs, data, hyperlinks,
advertisements, or other Content in the Web Site.


6.2.3.               Authority to License.  Overstock represents and warrants
that it has full power and authority to grant the rights granted by this
Agreement to Safeway (including without limitation, the right to use the Third
Party Content), that no consent of any other person or entity is required by
Overstock to grant such rights.


6.2.4.               Non-Infringement.  Overstock represents  and
warrants that to the best of Overstock’s knowledge neither the performance of
this Agreement by Overstock, nor the license to, and use by, Safeway and the
Web Site users of the Overstock Content, Third Party Content, Custom Content or
Web Site will in any way violate any agreement, nor constitute an infringement
or other violation of any copyright, trade secret, trademark, service mark,
patent, design, proprietary information, or other Intellectual Property of any
third party.


6.2.5.               Quiet Enjoyment.  Overstock represents  and
warrants that Safeway and the users of the Web Site shall be entitled to use
the Overstock Content, Third Party Content, Custom Content and Web Site without
unscheduled disturbance in accordance with this Agreement, subject only to
Safeway’s obligation to make the required payments under this Agreement.


6.2.6.               Title. 
Overstock warrants that to the best of its knowledge, Safeway
and its customers shall acquire good and clear title to the Products, free and
clear of all liens, claims, and encumbrances.


6.2.7.               Product
Warranty. Overstock shall provide and (where possible) assign
Product warranties or other warranties it receives from third parties in performance
of this  program to Safeway. However,
subject to the foregoing, Overstock (including its vendors and suppliers) is
neither providing nor representing or warranting that Products under this
Agreement come with any product warranty above or in addition to any
manufacturer or vendor-provided product warranty for any particular Product. To
the extent possible, Products will be provided under this Agreement with the
remainder of the manufacturer’s stated Product warranty (if any) in place.


6.3.          Safeway
Warranties. Safeway
warrants to Overstock that  all Content
provided to Overstock by  Safeway is
either owned or properly licensed by Safeway or is in the public domain and the
use thereof by Overstock will not infringe any Intellectual Property rights of
any third party.


6.4.          Limited
Warranty. UNLESS
EXPRESSLY PROVIDED, NEITHER PARTY MAKES ANY WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.


 


16

















 


6.5.          Limitation
of Liabilities.  EXCLUDING
(I) LIABILITY CAUSED BY THE GROSS NEGLIGENCE, FRAUD OR WILLFUL MISCONDUCT
OF A PARTY, OR (II) EACH PARTY'S CONFIDENTIALITY OBLIGATIONS UNDER THIS
AGREEMENT, BOTH PARTIES’ LIABILITY FOR DAMAGES UNDER THIS AGREEMENT SHALL BE
LIMITED TO MONETARY DAMAGES, AND THE AGGREGATE AMOUNT THEREOF FOR ALL CLAIMS
SHALL IN NO EVENT EXCEED AN AMOUNT EQUAL TO THE AMOUNTS PAID BY SAFEWAY
HEREUNDER DURING THE PREVIOUS TWELVE (12) MONTHS PERIOD. NOTWITHSTANDING THE
FOREGOING, UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER
UNDER ANY LEGAL OR EQUITABLE THEORY, FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS,
IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT. NOTWITHSTANDING THE
FOREGOING, THE LIABILITY LIMITATION CONTAINED IN THIS SECTION SHALL NOT APPLY
TO (I) LIABILITY CAUSED BY THE GROSS NEGLIGENCE, FRAUD OR WILLFUL
MISCONDUCT OF A PARTY, OR (II) EACH PARTY'S CONFIDENTIALITY OBLIGATIONS
UNDER THIS AGREEMENT.


7.     INDEMNIFICATION


7.1.          Overstock
Indemnity.


7.1.1.       Overstock shall indemnify, and hold
harmless Safeway, its users, directors, officers, agents, employees, members,
subsidiaries, joint venture partners, and predecessors and successors in
interest from and against any third party claim, action, proceeding, liability,
loss, damage, cost, or expense, including, without limitation, attorneys’ fees,
arising out of, relating to or in any way connected with: (1) any claim that
the Overstock Content, Third Party Content, Custom Content, and/or Web Site
(collectively, the “Web Content”)
infringes upon or otherwise violates any copyright, trade secret, trademark,
service mark, patent, design, proprietary information, or other Intellectual
Property rights of any third party (unless such infringement was caused by
Safeway), (2) any uncured material breach of its representations or warranties
contained herein, and/or (3) any negligent action or inaction of Overstock or
its employees, contractor or agents. 
Overstock shall pay all amounts that a court or arbitrator finally
awards or that Overstock agrees to in settlement of such claim(s) as well as
any and all expenses or charges arising from such claim(s) as they are incurred
by Safeway or any other party indemnified under this Section.


7.1.2.       If the operation or use of Web Content
becomes, or in Safeway’s opinion is likely to become, the subject of a claim,
Safeway shall permit Overstock, at Overstock’s option and expense for all
associated costs, either to (i) procure the right for Safeway to continue to
use the Web Content or (ii) modify the Web Content in such a manner for it to
become non-infringing, provided such modification does not cause the Web
Content to fail to comply with any of the requirements of this Agreement,
including all functionality, technical specifications, performance warranties,
and Web Site Specifications.


7.1.3.       Overstock shall have no indemnity
obligation under this Section 7.1 for claims arising out of any Safeway Content
incorporated into the Web Site.


7.2.          Safeway
Indemnification Obligations.


7.2.1.       Safeway shall defend, indemnify, and hold
harmless Overstock, its users, directors, officers, agents, employees, members,
subsidiaries, joint venture partners, and predecessors and successors in
interest from and against any third party claim, action, proceeding, liability,
loss, damage, cost, or expense, including, without limitation, attorneys’ fees 


 


17

















 


as provided herein, arising out of or relating to: (1)
any claim that the Safeway Content infringes upon or otherwise violates any
copyright, trade secret, trademark, service mark, patent, design, proprietary
information, or other Intellectual Property rights of any third party(unless
such infringement was caused by Overstock), (2) any uncured material breach of
its representations or warranties contained herein, and/or (3) any negligent
action or inaction of Safeway or its employees, contractor or agents.  Safeway shall pay all amounts that a court
or arbitrator finally awards or that Safeway agrees to in settlement of such
claim(s) as well as any and all expenses or charges arising from such claim(s)
as they are incurred by Overstock or any other party indemnified under this
Section.


7.2.2.       If the operation or use of Safeway
Content becomes, or in Overstock’s opinion is likely to become, the subject of
a claim, Overstock shall permit Safeway, at Safeway’s option and expense for
all associated costs, either to (i) procure the right for Overstock to continue
to use the Safeway Content or (ii) modify the Safeway Content in such a manner
for it to become non-infringing, provided such modification does not cause the
Safeway Content to fail to comply with any of the requirements of this
Agreement, including all functionality, technical specifications, performance
warranties, and Web Site Specifications.


7.2.3.       Safeway shall have no indemnity
obligation under this Section 7.2 for claims arising out of any Overstock
Content, Custom Content or Third Party Content incorporated into the Web Site
to the extent that such Overstock Content, Custom Content, or Third Party
Content (as opposed to Safeway Content incorporated therein) form the basis for
such claims.


7.3           Indemnification
Procedure. As an indemnitee under this Agreement, an indemnitee shall (i)
promptly notify the indemnitor in writing of any such claim for which indemnity
may be had, (ii) allow the indemnitor to have sole control of the defense and
all related settlement negotiations so long as such defense and/or settlement
proceedings do not impair the rights of indemnitee (however, indemnitee
reserves the right to retain independent counsel of its choosing and at its own
expense);); and (iii) provide indemnitor with reasonably available information,
authority and assistance (at the indemnitor’s expense) necessary to perform
indemnitor’s obligations under this Section.


8.     CONFIDENTIALITY


8.1.          The
term “Confidential Information” shall mean (i) the terms of this Agreement (and
not its existence), (ii) CustomerInformation, (ii) any information disclosed by
one Party to the other pursuant to this Agreement which is in written, graphic,
machine readable or other tangible form and is marked “Confidential”,
“Proprietary” or in some other manner to indicate its confidential, and (iv)
oral information disclosed by one Party to the other pursuant to this
Agreement, provided that such information is designated as confidential at the
time of disclosure and reduced to a written summary by the disclosing Party,
within thirty (30) days after its oral disclosure, which is marked in a
manner to indicate its confidential nature and delivered to the receiving
Party. Notwithstanding the above, neither Party shall have liability to the
other with regard to any Confidential Information of the other which: (i) was
generally known and available at the time it was disclosed or becomes generally
known and available through no fault of the receiver; (ii) was known to the
receiver, without restriction, at the time of disclosure as shown by 


 


18

















 


the files of the receiver in existence at the time of
disclosure; (iii) is disclosed with the prior written approval of the
disclosure; (iv) was independently developed by the receiver without any use of
the Confidential Information; or (v) becomes known to the receiver, without
restriction, from a source other than the disclosure without breach of this
Agreement by the receiver and otherwise not in violation of the disclosure’s
rights.  In addition, each Party shall
be entitled to disclose the other Party’s Confidential Information to the
extent such disclosure is requested by the order or requirement of a court, administrative
agency, or other governmental body, including the Securities and Exchange
Commission; provided, that the Party required to make the disclosure shall
provide prompt, advance notice thereof to enable the other Party to seek a
protective order or otherwise prevent such disclosure, confidential treatment
of certain information, or otherwise prevent such disclosure.


8.2.          Each
Party shall (i) treat as confidential all Confidential Information of the other
Party, (ii) not use such Confidential Information except as expressly set forth
herein or otherwise authorized in writing, (iii) implement reasonable
procedures to prohibit the disclosure, unauthorized duplication, misuse or
removal of the other Party’s Confidential Information, and (iv)  not disclose any of the other Party’s
Confidential Information to any third party except as may be necessary and
required under this Agreement, and subject to confidentiality obligations at
least as protective as those set forth herein. 
Without limiting the foregoing, each of the Parties shall use at least
the same procedures and degree of care which it uses to prevent the disclosure
of its own confidential information of like importance to prevent the
disclosure of Confidential Information disclosed to it by the other Party under
this Agreement, but in no event less than reasonable care. The receiving Party
shall notify the disclosing Party, in writing, of any disclosure, loss or use
of Confidential Information in violation of this Agreement promptly after the
receiving Party receives notice of such violation.


8.3.          If
either Party breaches any of its obligations with respect to confidentiality,
or if such a breach is likely to occur, the other Party shall be entitled to
equitable relief, including specific performance or an injunction, in addition
to any other rights or remedies, including money damages, provided by law.


8.4.          With
respect to Confidential Information in the receiving Party’s possession as of
such expiration or termination, the receiving Party shall within ten (10)
Business Days after the expiration or termination of this Agreement, return or
destroy all such Confidential Information in its actual or constructive
possession (including all original, copies, summaries, abstractions and other
iterations, regardless of form) to the disclosing Party in any manner that the
disclosing Party may reasonably direct.


9.     TERM AND
TERMINATION


9.1.          Term.  Unless terminated earlier as provided herein, this Agreement
shall have a term of two (2) years commencing on the Effective Date (the “Initial Term”), unless terminated sooner
by written notice given by a Party pursuant to this Agreement.  No later than [*] prior to the expiration of
the Initial Term, or any subsequent Term, Safeway may give notice to Overstock,
extending the term for [*].  For
purposes of the exclusivity provisions of this Agreement, “Term” shall refer to the Initial Term and
any renewal or subsequent term(s).


 


19

















 


9.2.          Termination
for Cause.  This Agreement
may be terminated by a Party for cause immediately by written notice upon the
occurrence of any of the following events: (i) if the other ceases to do
business, or otherwise terminates its business operations; (ii) if the other
breaches any provision of this Agreement and fails to cure such breach within
thirty (30) days (immediately in the case of a breach of Section 11) of written
notice describing the breach; (iii) if the other Party becomes insolvent or
seeks protection under any bankruptcy, receivership, trust deed, creditors
arrangement, composition or comparable proceeding, or if any such proceeding is
instituted against the other (and not dismissed within ninety (90) days); (iv)
in accordance with the Customer Service Standards and the Web Site Service
Standards; and/or (v) following a force majeure event in accordance with
Section 10.2.


9.3.          Survival. Sections 2.6, 2.7, 2.8,
3.3, 3.10, 3.13, 3.14, 4-8 (inclusive), 9.3, and 10 shall survive the
expiration or termination of this Agreement.


10.  GENERAL


10.1.        Project
Managers. Each Party will appoint a project manager (“Project Manager”)
as a primary point of contact for this Agreement, and will provide written
notification to the other Party of the names of the Project Managers within
five (5) Business Days of the Effective Date. The Project Managers shall be
responsible for: (i) managing the day-to-day activities under this Agreement,
(ii) serving as liaisons between the Parties, (iii) assigning and scheduling
the appropriate personnel to perform all of the required services under this Agreement,
and (iv) authorizing and executing any and all change order(s) in connection
with the development of the Web Site. 
In the event that either Party appoints a new Project Manager, such
Party will promptly notify the other. 
Should either Party be dissatisfied with the performance, competence,
responsiveness, capabilities, cooperativeness, or fitness for a particular task
of any person assigned by the other Party to perform services under this
Agreement, including the Project Manager, such Party may request the
replacement of that person.  Each Party
shall endeavor to address the concerns of the other Party and, if appropriate,
to replace the person(s) requested to be replaced.


10.2.        Force
Majeure.  Neither Party shall be considered in default
of performance of its obligations under this Agreement to the extent that
performance of such obligations is delayed by acts of terrorism, civil
disturbance, or acts of God; provided, however, that if performance is delayed
by a force majeure even for a period of more than twenty (20) days, either
Party, in its sole discretion, may terminate this Agreement.


10.3.        Assignment.  This Agreement shall be binding on the Parties hereto and their
successors and assigns.  Neither Party
may assign, license, or otherwise transfer its rights or obligations under this
Agreement without the prior written consent of the other Party, which consent
shall not be unreasonably withheld; provided, however, that either Party may
assign or transfer, in whole or part, this Agreement or any of its rights or
obligations arising hereunder in connection with a sale, merger, acquisition or
other disposition involving all or substantially all of its assets or
liabilities if such assignee agrees in writing to be bound by all terms and
conditions contained herein; provided,
further, that Overstock (or its acquiror) shall remain liable of all
of its obligations under this Agreement regardless of any assignment.


10.4.        Independent
Contractors.  Each Party shall perform its obligations
hereunder as 


 


20

















 


an independent contractor of the other and shall be
solely responsible for its own financial obligations.  Nothing contained herein shall be construed to imply a joint
venture or principal and agent relation­ship between the Parties, and neither
Party shall have any right, power or authority to create any obligation,
express or implied, on behalf of the other in connection with the performance
hereunder.


10.5.        Modification.  No alteration, amendment, waiver, cancellation or any other
change in any term or condition of this Agreement shall be valid or binding on
either Party unless the same shall have been mutually assented to in writing by
both Parties.


10.6.        Waiver.  The failure of either Party to enforce at any time any of the
provisions of this Agreement, or the failure to require at any time performance
by the other Party of any of the provisions of this Agreement, shall in no way
be construed to be a present or future waiver of such provisions, nor in any
way affect the right of either Party to enforce each and every such provision
thereafter.  The express waiver by
either Party of any provision, condition or requirement of this Agreement shall
not constitute a waiver of any future obligation to comply with such provision,
condition or requirement.


10.7.        Notices. All notices, requests, or
other communications (excluding invoices) hereunder shall be in writing and
either transmitted via certified or registered mail, overnight courier,
facsimile (with a machine-provided receipt), hand delivery or certified or
registered mail, postage prepaid and return receipt requested to the Parties at
the following addresses or such other addresses as may be specified by written
notice. Notices will be deemed to have been given (i) on the next Business Day
if sent by overnight courier, prepaid, or by facsimile, or hand delivery, or
(ii) three (3) Business Days if sent by U.S. mail, postage prepaid.


10.8.        No Third
Party Beneficiaries.  Unless otherwise expressly provided, no provisions
of this Agreement are intended or shall be construed to confer upon or give to
any person or entity other than Safeway or Overstock any rights, remedies or
other benefits under or by reason of this Agreement.


10.9.        Severability.  This Agreement represents the negotiated agreement of the
Parties, with the advice and assistance of counsel, and shall not be construed
against either Party as the drafter thereof. In the event that any provision of
this Agreement conflicts with governing law or if any provision is held to be
null, void or otherwise ineffective or invalid by a court of competent
jurisdiction, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
Applicable Laws, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and will
be construed in such a manner as to carry out the full intention of the Parties
and the Parties will negotiate in good faith to replace any material provisions
that have been determined to be invalid.


10.10.      Informal
Dispute Resolution.  All disputes, controversies or claims
(collectively, “Disputes”) arising out of or
relating to this Agreement (excluding indemnity claims) shall initially be
submitted to the Project Managers for good faith negotiations.  If the Project Managers are unable to
resolve the Dispute within ten (10) Business Days after submission of the
dispute to them, either Party may escalate the Dispute to the vice presidents
(or other executive with a similar 


 


21

















 


level of authority) responsible for such Party’s
performance of the Agreement for attempted resolution through good faith
negotiations.  If such executives are
unable to resolve the Dispute within ten (10) Business Days after submission of
the Dispute to them, then the Parties may proceed to litigation or, if mutually
agreed, arbitration.


10.11.      Arbitration.  Any Dispute (other than a Dispute
under Section 8 of this Agreement) that the Parties are unable to resolve
through the procedures set forth in Section 10.10 of this Agreement shall be
submitted to arbitration in accordance with the following procedures:


10.11.1.   Either Party may demand arbitration by giving
the other Party notice to such effect, which notice shall describe, in
reasonable detail, the facts and legal grounds forming the basis for the filing
Party’s request for relief and shall include a statement of the total amount of
damages claimed, if any, and any other remedy sought by that Party.  If Safeway requests arbitration as a result
of a perceived non-compliance by Overstock of the terms of this Agreement, the
arbitration shall be held before one neutral arbitrator in Salt Lake City, Utah
.. If Overstock requests arbitration as a result of a perceived non-compliance
by Safeway of the terms of this Agreement, the arbitration shall be held before
one neutral arbitrator in the San Francisco Bay Area, California.


10.11.2.   Within 5 Business Days after the other
Party’s receipt of such demand, the Parties shall mutually determine who the
arbitrator will be.  If the Parties are
unable to agree on the arbitrator within that time period, the arbitrator shall
be selected by the AAA.  In any event,
the arbitrator shall have a background in, and knowledge of, the retail sales
business and the information technology and e-commerce industries and shall be
an appropriate person based on the nature of the Dispute.  If a person with experience in both such
industries is not available, the arbitrator shall be chosen from the large and
complex case panel or, if an appropriate person is not available from such
panel, the retired federal judges pool.


10.11.3.   The arbitration shall be governed by the Commercial
Arbitration Rules of the AAA, except as expressly provided in this Section
10.  However, the arbitration shall be
administered by any organization mutually agreed to in writing by the Parties.  If the Parties are unable to agree on the
organization to administer the arbitration, it shall be administered by the AAA
under its procedures for large and complex cases.  Pending the arbitrator’s determination of the merits of the
Dispute, either Party may apply to any court of competent jurisdiction to seek
injunctive or other extraordinary relief.


10.11.4.   Discovery shall be limited to the request for
and production of documents and interrogatories.  Interrogatories shall be allowed only as follows:  a Party may request the other Party to
identify by name, last known address and telephone number (i) of all persons
having knowledge of facts relevant to the Dispute and a brief description of
that person’s knowledge, (ii) any experts who may be called as an expert
witness, the subject matter about which the expert is expected to testify, the
mental impressions and opinions held by the expert and the facts known by the
expert (regardless of when the factual information was acquired) which relate
to or form the basis for the mental impressions and opinions held by the expert
and (iii) any experts who have been used for consultation, but who are not
expected to be called as an 


 


22

















 


expert witness, if such consulting expert’s opinions
or impressions have been reviewed by an expert witness.  All discovery shall be guided by the Federal
Rules of Civil Procedure.  All issues
concerning discovery upon which the Parties cannot agree shall be submitted to
the arbitrator for determination.


10.11.5.   In rendering an award, the arbitrator shall
determine the rights and obligations of the Parties according to the
substantive and procedural laws of the State of Delaware, without reference to
conflict of law principles.


10.11.6.   Each of Safeway and Overstock agree that it
shall use commercially reasonable efforts to join (and will allow the other
Party to join) any third party that the Parties have agreed is indispensable to
the arbitration.  If any such third
party does not agree to be joined, the arbitration shall proceed nonetheless.


10.11.7.   The decision of, and award rendered by, the
arbitrator shall be determined no more than thirty (30) days after the
selection of the arbitrator and shall be final and binding on the Parties and
shall not be subject to appeal. 
Judgment on the award may be entered in and enforced by any court of
competent jurisdiction.  Each Party
shall bear its own costs and expenses (including filing fees) with respect to
the arbitration, including one-half of the fees and expenses of the arbitrator.


10.11.8.   The provisions of this Section 10 will not be
construed to prevent a Party from (i) seeking a temporary restraining order or
injunctive or other equitable relief or specific performance with respect to a
breach (or attempted breach) of this Agreement by the other Party, or (ii)
instituting litigation or other formal proceedings to the extent necessary (A)
to enforce the award of the arbitrator or (B) to avoid the expiration of any
applicable limitations period.  Except
for such matters, the Parties agree that the provisions of this Section 10 are
a complete defense to any suit, action or other proceeding instituted in any
court or before any administrative tribunal with respect to any Dispute.


10.12.      Governing
Law.  This Agreement shall be governed by the laws
of the State of Delaware, without reference to conflict of laws principles. If
Safeway commences suit hereunder, the Parties irrevocably submit to the
jurisdiction of courts in Salt Lake City, Utah. If Overstock commences suit
hereunder, the Parties irrevocably submit to the jurisdiction of courts in the
San Francisco Bay Area, California.


10.13.      Interpretation.


10.13.1.   This Agreement hereto, represent and
constitute the entire agreement between the Parties and supersedes all prior
agreements and understandings, whether written or oral, relating to the subject
matter contained herein.


10.13.2.   When used in this Agreement, the terms
“including” or “include” will not limit the generality of any provision of this
Agreement but rather will be interpreted as if followed by the words “without
limitation” or “but not limited to.”


10.13.3.   This Agreement and any amendment hereto or
any other document 


 


23

















 


delivered pursuant hereto may be executed by telecopy,
in one or more counterparts, and by different Parties in separate
counterparts.  All of such counterparts
will constitute one and the same agreement (or other document) and will become
effective (unless otherwise provided therein) when one or more counterparts
have been signed by each Party and delivered to the other Party.  Any execution by telecopy will be followed
promptly by the delivery of signed original counterparts to the Party or
Parties receiving the telecopy.


10.13.4.   Headings are inserted for convenience only
and will not affect the construction of the Agreement.


                                IN WITNESS
WHEREOF, the Parties hereto have executed this
Agreement by persons duly authorized as of the date and year first above
written.


The
Parties have signed below to indicate their acceptance of the terms of this
Agreement.


 


 


	
  SAFEWAY
  INC.

  	
   

  	
  OVERSTOCK.COM,
  INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Daniel Dmochowski 

  	
   

  	
  By:

  	
  /s/ Jason Lindsey

  
	
   

  	
   

  	
   

  	
   

  
	
  Name: Daniel Dmochowski
  

  	
   

  	
  Name: 

  	
  Jason Lindsey

  
	
   

  	
   

  	
   

  	
   

  
	
  Title: Vice President,
  Marketing Services 

  	
   

  	
  Title: 

  	
  CFO

  
	
   

  	
   

  	
   

  	
   

  



 


 


24

















 


EXHIBIT A


PRIVACY
POLICY


We use the information we collect when you log on and
visit different sections of our site to help make our site, products and
services more useful to you.  We also
use this information to offer savings awards and other promotions to you.  We may use this information to give you
personally-tailored coupons, offers or other information which may be provided
to us by 

other companies. We may create compilations of information that is not
personally-identifying and provide this data to other companies to help them
understand the demographics of our customers.


We do not sell or lease personally-identifying
information to any other company, person or agency. “Personally-identifying information”
means your name, address, social security number, bank account, credit card
number, telephone number or other information by which you can be personally
identified. We do not disclose personally identifying information to other
non-affiliated companies or persons for commercial purposes. We may disclose
personally-identifying information in response to a subpoena, court order or a
specific request by a law enforcement agency, or as required by law.


Please remember that you may be asked for information
by entities other than us when clicking on an advertisement or hypertext
language linking this site to other sites. We do not exercise control over any
information you give to any other entity, even if that information was provided
after linking to the entity requesting the information from our website.


By using this site, you are agreeing to the conditions
of this Privacy Policy.  IF YOU DO NOT
AGREE WITH THIS PRIVACY POLICY, DO NOT USE THIS SITE. We reserve the right at
our discretion to change, modify, add, or remove portions of this Policy at any
time. Any changes will be posted on the site. Please check this page
periodically for changes.


 


 


25

















 


EXHIBIT B


 


RECONCILIATION ILLUSTRATION


 


 


(See attached)


 


26

















 


 


[*]


 


27

















 


EXHIBIT C


WEB SITE SERVICE STANDARDS


Overstock shall comply with the technical requirements
set forth in this Exhibit with respect to the Web Site.


 


1.     Servers; Capacity. 
Overstock shall have a back-up server available and ready to operate in
the event the main server ceases to function in accordance with this
Agreement.  Overstock shall maintain
sufficient Server capacity and Internet connectivity throughout the term of
this Agreement to accommodate growth in user numbers and overall traffic levels
to the Web Site. Overstock shall host and operate the Web Site such that users
experience access times and times to retrieve full Web pages that are no slower
than the access times and times to retrieve full Web pages by users visiting
comparable Web pages hosted by Overstock for the Overstock Web Site.  Without limiting the foregoing, Overstock
shall use reasonable commercial efforts to manage the Web Site so that usage
does not exceed seventy percent (70%) of capacity.  In the event Overstock anticipates that such usage will exceed
seventy percent (70%) of capacity within the next thirty (30) days, Overstock shall
notify Safeway of this anticipated event within five (5) days. If usage does at
any time exceed [*] of capacity, Overstock shall notify Safeway within one (1)
day of such event.


2.     Site
Availability.  Except as otherwise
agreed in writing between the Parties, the Web Site shall be available, via the
Internet, and according to the terms of this Agreement, twenty-four (24) hours
a day, seven (7) days a week, without interruption, with the sole exception of
scheduled maintenance periods (“Scheduled
Maintenance”), which
shall not exceed two (2) hours per week. 
Overstock shall use commercially reasonable efforts to conduct any
Scheduled Maintenance on equipment during hours when the number of visitors to
the Web Site is relatively low compared to the overall visitor access
rates.  Overstock shall provide Safeway
with at least twenty four (24) hours advance notice prior to conducting
Scheduled Maintenance.  In the event
that Site Availability for any month drops below [*] during the Primary
Business Hours (as defined below) (“Site
Availability Failure”),
Safeway shall have the remedies set forth in Section 10 of this Exhibit.  For the purposes of this Section, Site
Availability will be calculated based on the following formula:


                        X = 100 [1 — (Y /Z)] where


X =          Site Availability


Y =          Total number of minutes that the
Server is down in the applicable month.


Z =          Total
number of minutes during Primary Business Hours in applicable month


3.     Problem
Response.  Except during the
Scheduled Maintenance period, if the Server or the Web Site becomes unavailable
to users via the Internet, Overstock shall have qualified personnel respond
immediately and render continuous commercially reasonable efforts until the
problem has been remedied; provided that, in the event a problem arises outside
of Primary Business Hours, Overstock’s obligation under this Section shall be
suspended until the commencement of Primary Business Hours.


4.     Cooperation
and Access.  Overstock shall
cooperate fully with Safeway in providing Safeway with physical access to the
Server on which the Web Site is stored during normal business hours as
reasonably requested by Safeway given a minimum of (3) Business Days notice and
in removing access by the general 


 


28

















 


public to the Web Site from Overstock’s computers upon
the written request of Safeway.


5.     Back-Up.  Overstock shall maintain daily onsite and
weekly offsite back-up copies of Customer Information and all other information
necessary or desirable to calculate revenues and pricing hereunder.  Overstock shall provide a copy of all such
back-up materials in a form and manner acceptable to Safeway within seventy two
(72) hours of Safeway’s request.


6.     Product Updates. Overstock will promptly update the
Products promoted on the Web Site so that at no time will more than [*] of
Products be unavailable to users for immediate delivery.


7.     Security. 
Overstock shall use commercially reasonable efforts to secure the Web
Site, reports, Customer Information, and the physical location where the Web
Site programs, computers and data are stored, against unauthorized intrusions,
modifications, introduction of viruses or damage. All transactions made through
the Web Site shall be received and processed using a secure Server.  The Server shall log all visits to the Web
Site, along with all relevant available information pertaining to the visits.


8.     Bug Fixes. 
Overstock shall use commercially reasonable efforts to correct any bugs
or other problems or irregularities that affect the proper operation of the Web
Site within forty eight (48) hours of discovery thereof.


9.  Abandonment.  Overstock shall use its best efforts to
minimize shopping cart abandonment on the Web Site.


10.   Reports.  Within two (2) Business Days after any outage, Overstock shall
provide Safeway with Web Site outage reports specifying, the time of outage,
response time, time to repair and a root cause analysis.  Within ten (10) days after the end of each
calendar month, Overstock shall provide Safeway with the following monthly
reports specifying (i) the average percentage of Products shown on the Web Site
that are available for immediate delivery, (ii) any virus or other similar
repairs during the preceding month and the time to complete all such
repairs,  (iii) average capacity during
the preceding month, and (iv) the abandonment report.


11.     Remedies
for Failures.  For each failure to
satisfy the standards set forth in Sections 1, 2, 3, 6 , 8, or 10 during the
Term (each, a “Service
Standard Failure”),
Overstock shall provide Safeway with a credit of [*] to be applied on Safeway’s
next order, or if such credit remains at the end of the Term, Overstock shall
pay all credits to Safeway within ten (10) days.  In the event that the combined number of Site Specification
Failures equals or exceeds [*] during any one (1) month period, Safeway, in
addition to any other rights or remedies it may have under the Agreement, shall
have the right to terminate the Agreement.


 


29

















 


EXHIBIT D


CUSTOMER SERVICE REQUIREMENTS


 


Company shall comply with
the following customer service requirements:


 


1.               Receive and respond to e-mails and phone orders within
one (1) Business Day  of receipt via a
computer available to the customer service staff.


2.               Provide the User with an order confirmation within
twenty four (24) hours of receipt. 
Order confirmation should include any information on such order status,
and expected delivery times.


3.               Maintain ability to handle volumes in excess of [*] of
Company’s average daily order volumes.


4.               Receive orders on the Web Site or e-mail and process
orders within forty-eight (48) hours of receipt.


5.               Maintain “best practices” customer service policies, e.g.
“The Customer is always right, even when he/she is not.”


6.               Provide and staff a unique e-mail address for customer
service for the Web Site.


7.               Post the complete and accurate details of Company’s
customer service policies in the Web Site, including: return policies, warranty
information, contact information and any other information as may be required
by law.


8.               Provide Safeway with monthly reports specifying (i)
email and phone order response time, (ii) order confirmation response time,
(iii) average daily order volume, (iii) average daily order capacity, and (iv)
order processing response time.


9.               For each any failure to meet the standards contained
in Sections 1, 2, 3, 4 or 8 (“Service
Metric Failures”)
during the Term, Overstock shall provide Safeway with a credit of [*] to be
applied on Safeway’s next order.  In the
event that the combined number of Service Metric Failures equals or exceeds
[*], Safeway, in addition to any other rights or remedies it may have under the
Agreement, shall have the right to terminate the Agreement.


 


 


30