<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.

                                                                  EXECUTION COPY


                        Global Sports Interactive, Inc.

                            ______________________





                             E-Commerce Agreement

                                    between

                        Global Sports Interactive, Inc.

                                      and

                              Bluelight.com, LLC
<PAGE>

                             E-Commerce Agreement

     This E-Commerce Agreement, dated as of August 10, 2001 (the "Effective
Date"), is made and entered into by and between Global Sports Interactive, Inc.,
a Pennsylvania corporation ("GSI"), Bluelight.com, LLC, a Delaware limited
liability company (the "Company") and Kmart Corporation, a Michigan corporation
(together with its subsidiaries and Affiliates, "Kmart").

                                   Recitals

     WHEREAS, GSI is in the business of developing and operating e-commerce
businesses for specialty retailers, distributors, general merchandisers,
Internet companies and media companies and providing for those companies GSI's
proprietary technology, Web Site design and development capabilities, order
processing capabilities, customer service capabilities, fulfillment
capabilities, centralized inventory management and on-line marketing to enable
those companies to offer e-commerce to their customers;

     WHEREAS, Kmart is in the business of selling a broad assortment of goods
and services to consumers through the Stores (as defined below);

     WHEREAS, the Company is in the business of selling goods and services
through the Internet (as defined below) using certain Kmart Trademarks; and

     WHEREAS, the Company desires to transfer the operation of the Company Site
(as defined below) to GSI to continue to offer for sale Merchandise (as defined
below) through the Internet and to permit the Company and Kmart to engage in
certain Internet marketing and promotions to promote the Stores in accordance
with the terms of this Agreement.

     NOW, THEREFORE, in reliance upon the above recitals (which are made a part
of the Agreement below) and in consideration of the agreements herein, the
Company and GSI (each a "Party" and collectively, the "Parties"), intending to
be legally bound, agree as follows:

Section 1.  Definitions.

Whenever used in this Agreement, the following capitalized terms shall have the
following specified meanings:

     1.1  [*]

     1.2  "Affiliate" means, as to any Person, any other Person that, directly
or indirectly, is controlled by, is under common control with or controls such
Person, but only as long as such control exists. For this purpose, control means
ownership or voting rights over at least 50% of the outstanding voting or equity
securities of the Person in question or the power to direct or cause the
direction of management or policies of such Person, whether through voting
securities, by contract or otherwise. For purpose of this Agreement, Kmart will
be deemed an Affiliate of the Company.

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     1.3   "Aggregate Information" means (i) any information or data derived
from Customer Information, and (ii) all information relating to the financial
performance and/or operations of the Company Site, which in each case is not
specific to a person, does not in either case refer to or identify any specific
Person, and cannot be used, alone or in conjunction with other information, to
identify any specific Person.

     1.4   [*]

     1.5   "Business Day" means any day which is not a Saturday, Sunday or
official federal holiday in the United States.

     1.6   "Company Content" means the following content or information owned or
controlled (e.g., by license or otherwise) by the Company or its Affiliates and
furnished by the Company or its Affiliates to GSI in accordance with the terms
of this Agreement: (a) text, graphics, photographs, video, audio and/or other
data or information, and e-mail addresses furnished by the Company or its
Affiliates, solely for use in connection with the Company Site or the promotion
of the Stores, and (b) Kmart's selected print advertisements for the Stores or
the goods and services offered by Kmart in the 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 by Kmart.

     1.7   "Company Provided Merchandise" means Merchandise which is owned or
controlled by the Company, Kmart or any of their Affiliates and provided to GSI
for the purpose of fulfilling Orders hereunder.  "Company Provided Merchandise"
shall not include samples of Merchandise provided by the Company, Kmart or any
of their Affiliates pursuant to Section 3.2.

     1.8   "Company Site" means the Web Site as operated by GSI pursuant to this
Agreement, the primary Home Page for which is identified by the Designated URL
(and any successor or replacement Web Site).

     1.9   "Company Site Functionality" means, collectively: (a) functionality
and features available on the Company Site that GSI may or is required to make
available from time to time, and (b) any future equivalents, improvements and
enhancements of any of the foregoing.

     1.10  "Stores" means any land-based retail store established and/or
operated by Kmart and devoted to the retail sale of a broad assortment of
merchandise and to the provision of related services.

     1.11  "Confidential Information" means all nonpublic information relating
to a Party or its Affiliates that is designated as confidential or that, given
the nature of the information or the circumstances surrounding its disclosure,
reasonably should be considered as confidential. Confidential Information
includes, without limitation, (a) all nonpublic information relating to a
Party's or its Affiliates' technology, customers, business plans, agreements,
promotional and marketing activities, finances and other business affairs, and
(b) all third party information that a

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Party or its Affiliates is obligated to keep confidential. Confidential
Information may be contained in tangible materials, such as drawings, data,
specifications, reports and computer programs, or may be in the nature of
unwritten knowledge. Confidential Information does not include any information
that (i) has become publicly available without breach of this Agreement, (ii)
can be shown by documentation to have been known to the receiving Party at the
time of its receipt from the disclosing Party or its Affiliates, (iii) is
received from a third party who did not acquire or disclose such information by
a wrongful or tortious act, or (iv) can be shown by documentation to have been
independently developed by the receiving Party without reference to any
Confidential Information.

     1.12  "Customer" means a Person who accesses the Company Site in any
manner, whether or not a purchase is made.

     1.13  "Customer Information" means the name, mailing address, telephone
number, e-mail address, Order and Order processing information (including Order
history) and any other identifying information provided by or obtained from
Customers through the Company Site and/or provided by or obtained from customers
of the Stores; provided, however, Customer Information does not include (i) any
information that either GSI or the Company owns or to which GSI or the Company
has the rights and which is obtained from Customers other than through
transactions contemplated under this Agreement, or (ii) any Aggregate
Information.

     1.14  "Designated URL" means www.bluelight.com and/or www.kmart.com or any
successor or replacement URLs as designated by the Company or Kmart.

     1.15  "Fiscal Year" means GSI's fiscal year, which currently ends on the
Saturday closest to December 31 of a given year.

     1.16  "GAAP" means generally accepted accounting principles, consistently
applied.

     1.17  [*]

     1.18  "GSI Content" means any and all content or information owned or
controlled (e.g., by license or otherwise) by GSI or its Affiliates, including
text, graphics, photographs, video and audio, and furnished by GSI or Affiliates
in connection with the Company Site or otherwise in connection with the
performance of its obligations under this Agreement.

     1.19  "Home Page" means, with respect to a Web Site, the Web page
designated by the operator of the Web Site as the initial and primary end user
interface for the Web Site.

     1.20  "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, trade dress 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 domain names, logos, "rental" rights and rights to
remuneration), whether arising by operation of

                                       3
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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).

     1.21  "Internet" means the system of computer networks interconnected with
routers, worldwide in scope, that facilitates data communication services such
as remote login, file transfer, electronic mail, and the Web, and any successor
to such system.

     1.22  [*]

     1.23  [*]

     1.24  "Launch Date" means the date on which the Company Site, as operated
by GSI hereunder, is first made available to the public on the Web.

     1.25  "Look and Feel" means the appearance, coloring, graphics, fonts,
logos and other look and feel characteristics of a Web Site which are unique to
the Web Site and are consistent from page to page and which indicate a common
identity of the various pages and identify such pages as forming a part of a
single Web Site.

     1.26  "Merchandise" means the products and related services offered for
sale by the Company through the Company Site.

     1.27  [*]

     1.28  "Non-Company Provided Merchandise" means Merchandise which is not
Company Provided Merchandise. Non-Company Merchandise includes Sporting Goods
Merchandise provided by or through GSI.

     1.29  "Non-Shopping Features" means such content and information on the
Company Site, provided by or through the Company, Kmart or their Affiliates that
may contain or make accessible as part of the Company Site or through links from
the Company Site such information as the following: Company and Kmart corporate
information (e.g. historical background, mission statement, officers and
directors), Store locations, community programs, a link to a Web Site (operated
by the Company or a third party) that provides information about and the ability
to apply to participate in the Company's Internet service provider program,
promotions, Company and Kmart employment opportunities, Company and Kmart
contact information and other information which serves to inform Customers about
the Company, Kmart and the Stores.

     1.30  "Order" means an order for Merchandise made by a Customer.

     1.31  "Person" means, whether or not capitalized, any individual,
corporation (including any non-profit corporation), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or governmental body.

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     1.32  "Secondary URLs" means uniform resource locators that (i) are
derivatives of Designated URL, and (ii) such other uniform resource locators
designated by the Company.

     1.33  "Sporting Goods Merchandise" means sports, recreational, athletic
and/or fitness related (i) equipment (e.g. bats, balls, gloves, racquets, clubs,
helmets, skis, fishing and hunting equipment, table games and exercise
equipment), (ii) apparel (e.g. licensed products, hats, jerseys and exercise
clothing), (iii) footwear, and (iv) memorabilia. Sporting Goods Merchandise
shall not include private label sporting goods merchandise and sporting goods
merchandise made exclusively for the Company or Kmart or their Affiliates.

     1.34  "Technology" means any design, specification, content (which includes
product files, catalogs, images and editorial content), data, database,
software, code, template, user interface, technique, algorithm, method, process,
device, procedure, functionality or other technology.

     1.35  "Term" is defined in Section 13.1 of this Agreement.

     1.36  "Trademark" means any trademark, service mark, trade name, URL,
domain name, trade dress, proprietary logo or insignia or other source or
business identifier.

     1.37  "URL" means the uniform resource locator of a Web Site.

     1.38  "Web" means the Internet client-server hypertext distributed
information retrieval system known as the World Wide Web.

     1.39  "Web Site" means any point of presence maintained on the Internet or
on any other public data network. With respect to any Web Site maintained on the
World Wide Web or any successor public data network, such Web Site includes all
HTML pages (or similar unit of information presented in any relevant data
protocol) that either (a) are identified by the same second-level domain (such
as http://www.kmart.com) or by the same equivalent level identifier in any
relevant address scheme, or (b) contain branding, graphics, navigation or other
characteristics such that a user reasonably would conclude that the pages are
part of an integrated information or service offering.

Section 2.  Creation and Operation of the Company Site.

     2.1   Design and Development.  GSI will design and develop the Company Site
in accordance with this Agreement.  The Company Site will contain at a minimum
the functionality and features set forth on Exhibit "A" attached to this
                                            -----------
Agreement and such other functionality and features as may be agreed upon from
time to time by the Parties.  Except for the Company Content and Non-Shopping
Features to be provided by the Company hereunder, GSI will provide all content,
creative, design, programming and related services necessary to the design,
development, operation and updating of the Company Site, including incorporating
the features and functionality provided for herein.  Subject to Section 2.2, the
Company Site will be comprised of a series of templates developed by GSI that
will define the format and layout of a page on the Company Site and establish
the placement and size of content type blocks (e.g. text,

                                       5
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graphics, promotions, advertising, navigation bar and images). Throughout the
Term, GSI will use commercially reasonable efforts to [*]. The Look and Feel
characteristics of the Company Site will be consistent with the Look and Feel of
the Company's current e-commerce Web Site. The Company will provide, and will
cause Kmart and their Affiliates to provide, GSI with the Company Content
necessary for the operation of the Company Site in such format as may be agreed
upon by the Parties. Unless and until GSI provides the Company with the
technology to update the Non-Shopping Features directly, GSI will program,
upload, display and maintain the Non-Shopping Features and will promptly update
the Non-Shopping Features as may be reasonably requested by the Company from
time to time. Upon providing the Company with such technology, the Company will
be responsible for updating the Non-Shopping Features content and GSI will
provide initial training and/or instructions on the use of the technology and
will thereafter provide such assistance that may be reasonably requested by the
Company with respect to the use of such technology.

     2.2  Launch and Modifications.  The Parties will work together in good
faith and use commercially reasonable efforts to [*].  The Company will have the
right to approve the overall design templates and the Look and Feel
characteristics of the Company Site prior to the Launch Date, with such consent
not to be unreasonably withheld or delayed.  After the Launch Date, no material
changes to the templates or Look and Feel of the Company Site will be made
without the approval of the Parties. [*].

     2.3  Hosting, Maintenance and Operation of the Company Site.  GSI will
host, maintain and operate the Company Site in accordance with this Agreement.
GSI will be responsible for hosting, or arranging for the hosting by a reputable
third-party hosting company, the Company Site.  The equipment and software used
by GSI to host and operate the Company Site and the security provided by GSI
with respect to the Company data and Company Site will be [*]. GSI agrees that
during the Term it will [*].  The Company Site will be operated at the
Designated URL and at such other URL as may be agreed upon by the Parties.  The
Company will ensure that, during the Term, the Designated URL and all Secondary
URLs are registered with Network Solutions Inc. (or another reputable registrar)
in such a way that the Designated URL and all Secondary URLs point to the domain
name servers designated by GSI for the Company Site.  The Company will comply
with the requirements of and, prior to the Launch Date, provide the information
set forth on, Exhibit "B" attached to this Agreement with respect to security
              -----------
for and registration of all URLs for the Company Site.

     2.4  Order Processing, Fulfillment and Returns.  GSI will be responsible
for all aspects of Order receipt, processing and fulfillment for the Company
Site, including those functions set forth on Exhibit "C" attached hereto.  The
                                             -----------
Order receipt, processing and fulfillment services provided by GSI with respect
to the Company Site will [*]. GSI has the right only to accept Orders for
shipments to addresses in the United States and APO/FPO addresses and such other
countries or territories to which GSI then generally accepts Orders for
shipment. The returns policy for the Company Site will provide that all returns
of Merchandise will be returned to the Stores or Company's designated returns
processing facility.  [*].

     2.5  Customer Service.  GSI will be responsible for providing customer
service to users of the Company Site, including on-line and through toll-free
telephone support.  Initially

                                       6
<PAGE>

the telephone support shall be provided by GSI, and, at the Company's option,
through a toll-free telephone number established by the Company that will
provide a link to GSI's customer service for the Company Site. The customer
service provided to users of the Company Site will be provided in the name of
the Company Site (unless otherwise required by law or privacy policy or not to
be misleading) and will [*]. GSI will provide customer service in a courteous
and professional manner and provide for Customer feedback through appropriate
features on the Company Site and through the toll-free number for the Company
Site. In the event that GSI receives inquiries or complaints from customers
relating to the Stores, GSI will promptly refer all such customers to a the
email reply service and/or toll-free telephone number for customer service
furnished to GSI by the Company. In the event that the Company receives
inquiries or complaints from customers relating to the Company Site, the Company
will promptly refer all such customers to the email reply service and/or toll-
free telephone number for GSI's customer service for the Company Site. If, in
any quarter during the Term, GSI's customer service for the Company Site
receives telephone inquires concerning matters for which GSI does not have
responsibility hereunder in a number greater than [*], then the Company shall
pay to GSI [*].

     2.6  [*].

     2.7  Web Site Transition Plan.  As soon as practicable after the Effective
Date, the Parties will mutually agree upon a transition plan to address (i) the
transfer of account information from users of the current Company e-commerce Web
Site to GSI for use in connection with the Company Site, (ii) the redemption of
on-line gift cards, gift certificates, coupon and discount codes issued prior to
the Launch Date, (iii) customer service requests received after the Launch Date
which relate to events occurring prior to the Launch Date, and (iv) such other
transition matters as may be necessary to transition the operation of the
Company's current e-commerce Web Site to GSI as contemplated hereunder.

     2.8  Seamless Operations.  The Parties agree that it is important for
Customers to perceive the Company Site as an extension of the Stores and as part
of Kmart's multi-channel distribution plans.  Accordingly, the Parties agree to
work in good faith and use commercially reasonable efforts to perform their
respective obligations hereunder as seamlessly as practicable under the
Company's and/or Kmart's brand.  As a result of the need for Customers to
perceive the Company Site as an extension of the Company and Kmart, the Company
agrees to, and will cause Kmart to, provide GSI with prior notice of any
intended actions if they believe such actions will have a material impact on the
Company Site, the ability of GSI to perform its obligations hereunder, and/or
the volume of Customers or callers accessing the Company Site or customer
service telephone support for the Company Site.  The failure of the Company to
provide any such notice will not be deemed a breach of this Agreement, and GSI
will not be responsible for any failure to perform resulting from such failure
to notify.

     2.9  E-commerce Transactions prior to the Launch Date. The Company
acknowledges and agrees that GSI does not, and will not, have any obligations
(other than as agreed to pursuant to Section 2.7) with respect to the design,
development, operation, or maintenance of the Company's or its Affiliate's
(other than Kmart) e-commerce businesses or Web Sites that existed prior to the
Launch Date.

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Section 3.  Merchandising; Inventory Maintenance.

     3.1  Merchandising; Assortment Plans.  In order to facilitate appropriate
and comprehensive inventory planning (including capacity, staffing, economic and
other related factors) and to maximize merchandise revenues and profit from the
Company Site, the Parties will work together in good faith to prepare mutually
agreed upon merchandising assortment plans (each a "Merchandise Assortment
Plan") for the Company Site at least [*] prior to the beginning of each [*]
(other than the first Merchandise Assortment Plan which will be prepared as soon
as practicable prior to the Launch Date).  Each Merchandise Assortment Plan will
include the following, in reasonable detail, with respect to all Merchandise:
[*].  With respect to Company Provided Merchandise, the Merchandise Assortment
Plan will also include: [*].  The Parties will work together to update the
Merchandise Assortment Plans as may be reasonably necessary or desirable to
maximize merchandise revenues and profit from the Company Site.  [*].

     3.2  Product Images and Descriptions; Samples.  Subject to the Company
providing GSI with all reasonably requested information for the Merchandise to
be included on the Company Site, GSI will be responsible for the creation and
maintenance of the digital images and product descriptions related to such
Merchandise.  The Company agrees to use commercially reasonable efforts to
obtain and/or to assist GSI in obtaining product images and descriptions
directly from vendors, manufacturers and other third parties.  All such product
images and descriptions created by GSI (other than product images and
descriptions relating to Merchandise that is exclusive to the Company or its
Affiliates, which will be deemed Company Content) will be deemed GSI Content for
purposes of this Agreement; [*].  The Company agrees to provide GSI with such
samples of Merchandise reasonably requested by GSI for Merchandise to be
included on the Company Site.  The Company will retain ownership to all such
samples.

     3.3  Company Provided Merchandise Shipments.  The Company will use
commercially reasonable efforts to deliver, or cause Kmart or its Affiliates to
deliver, to GSI the Company Provided Merchandise in such quantities and at such
times as may be required to [*]. The Company will, and will cause Kmart and its
Affiliates to, use commercially reasonable efforts to require merchandise
suppliers to package products in a manner to minimize GSI's receiving costs
based upon specifications provided by GSI.  If the amount or type of Merchandise
actually received by GSI differs from the amount and type of Merchandise
reported by the Company as shipped, GSI will notify the Company of such
discrepancy within [*] days after receipt of such Merchandise, and the Parties
will adjust their records to reflect such verifiable differences.  Additionally,
GSI will notify the Company of any obviously damaged or defective Merchandise
within an average of [*] Business Days of receipt and will notify the Company of
any non-obviously damaged or defective Merchandise promptly after discovering
such damage or defect.  GSI agrees to provide the Company with all reasonably
requested information related to such damaged or defective Merchandise to permit
the Company to file claims for such Merchandise.  The Company may inspect such
delivered Merchandise to verify any discrepancy in quantity and/or damage or
defect.  GSI will provide the Company with [*].  GSI will provide the Company
with receiving documents for Company Provided Merchandise on a timely basis
through a mutually agreed upon process.

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     3.4  Physical Inventory [*].  The Company may, at its expense, upon at
least sixty (60) days prior written notice (but in no event between October 1
and December 31 of any year), conduct a physical inventory of the Company
Provided Merchandise located at GSI owned or controlled facilities; provided
that (i) any such physical inventory is conducted in a manner designed not to
unreasonably interfere with GSI's ordinary business operations; and (ii) such
physical inventory may not occur more frequently then one time every twelve (12)
months.  GSI will reasonably cooperate with the Company in the performance of
such physical inventories.  [*]. The Company will have the right to file UCC-1
statements, which shall be subject to GSI's reasonable approval, to identify the
Company Provided Merchandise in the possession of GSI.  GSI agrees to take, at
the Company's expense, such other actions as may be reasonably requested by the
Company to protect Company's ownership in the Company Provided Merchandise;
provided, however, in no event will GSI be obligated to segregate the Company
Provided Merchandise from other merchandise.

     3.5  Drop Ship Arrangements.  From time to time during the Term, the
Company may enter into appropriate arrangements with drop ship vendors which are
selected by the Company to provide Merchandise to be offered for sale through
the Company Site.  The Company agrees that such drop ship vendors will be
required to agree to comply with the applicable GSI service level standards
relating to drop ship vendors as provided to the Company by GSI.

     3.6  Sporting Goods Merchandise.  Notwithstanding any provision herein to
the contrary, GSI will be the exclusive source of Sporting Goods Merchandise for
sale through the Company Site to the extent GSI chooses to provide such Sporting
Goods Merchandise and shall provide such Merchandise in accordance with the
purchase order terms and conditions set forth on [*], which will be agreed upon
by the Parties prior to the Launch Date.  GSI may provide such Sporting Goods
Merchandise directly or through drop ship vendors chosen by GSI.  The Company
will pay GSI for each unit of Sporting Goods Merchandise sold through the
Company Site an amount equal to [*].

     3.7  Return of Unsold Merchandise. Notwithstanding any provision herein to
the contrary, in the event that GSI retains any Company Provided Merchandise for
more than [*], then GSI will have the right to return such excess Merchandise to
the Company.  GSI will deliver such excess inventory to the Company, "freight
collect," to a single destination as specified by the Company.  Additionally,
upon the expiration or termination of this Agreement, GSI will promptly return
to the Company all Company Provided Merchandise then in GSI's possession and
control, pursuant to the same procedures as apply to the return of excess
inventory in this Section 3.7.

     3.8  Product Recalls.  The Parties agree that in the event that GSI is
obligated to process any product recalls, or in the event that the Company
requests that GSI process any product recalls, for Merchandise sold through the
Company Site, then the Parties will mutually agree upon the procedures to
effectuate such recall and the Company will reimburse GSI for its reasonable
costs associated with such recall, other than costs associated with recalls of
Sporting Goods Merchandise, which, as between the Parties, will be the
responsibility of GSI.

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<PAGE>

Section 4. Treatment of Sales; Pricing; Sales and Use Taxes.

     4.1  Treatment of Sales.  The Company will be the seller of all Merchandise
and related fulfillment services (i.e. shipping, gift wrapping and other value
added services) sold or furnished through the Company Site, and all revenues
from the sale of such Merchandise and such services will be Company revenues.
The Parties agree to execute additional mutually agreed upon documentation
necessary or desirable to reflect such treatment of sales.  GSI agree to use
commercially reasonable efforts to resolve and minimize chargebacks relating to
the Company Site.

     4.2  Pricing of Merchandise and Services.  The Company will be responsible
for establishing the selling price for the Merchandise and related Customer
fulfillment services (i.e. shipping, gift wrapping and other value added
services) which will be charged to the Customer with respect to Orders through
the Company Site; provided, however, the Company agrees that until the first
anniversary of the Effective Date, the shipping charges with respect to Orders
for Merchandise will be [*].  After the first anniversary of the Effective Date,
the Company will have the right to, subject to reasonable technological
constraints, establish revised shipping charges for Orders of Merchandise
through the Company Site.

     4.3  Sales and Use Taxes. As between the Parties, the Company will be
responsible for all sales and use taxes imposed on sales pursuant to Orders
through the Company Site and the Company will be responsible for the timely
notification, remittance, filing and reporting of all such taxes to the proper
tax authorities at the rates required by law.  GSI will provide to the Company
or its Affiliates information necessary for the Company to meet its filing
requirements with respect to such sales and use taxes.  With respect to Orders
though the Company Site, GSI will only be obligated to collect, on behalf of the
Company, sales and use taxes from Customers at the rates and in those
jurisdictions as specified in writing by the Company.  GSI will remit all such
taxes collected by GSI to the Company as provided in Section 7.4 hereof.  The
Parties further agree that all Orders to be fulfilled with Sporting Goods
Merchandise will be treated as purchases for resale by the Company to the end
users.  For accounting, financial reporting, and sales and use tax purposes, the
Parties agree to treat such purchases accordingly. In connection with GSI owned
inventory, the Company will furnish to GSI resale certificates for the
Commonwealths of Pennsylvania and Kentucky and such other jurisdictions as may
be reasonably requested by GSI from time to time.  Upon the reasonable request
of a Party, the other Party will provide the requesting Party with satisfactory
evidence of its compliance with the obligations in this Section 4.3.

     4.4  Kmart Gift Cards.  The Parties will mutually agree upon procedures and
the accounting to permit Customers to pay for Orders through the use of Kmart
gift cards, [*].

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Section 5. Promotion and Advertising.

     5.1  Company Activities and Obligations.  Commencing no later than the
Launch Date and continuing during the Term, the Company will, and will cause
Kmart to, promote and advertise the Company Site and integrate a "shop-on-line"
message and the Designated URL and the other URLs for the Company Site, into its
promotions and advertising, including in the Stores, in accordance with Exhibit
                                                                        -------
"D" to this Agreement.
---

     5.2  GSI Activities and Obligations. GSI [*] and may use the Company's
Trademarks in connection therewith; provided however, GSI will only use such
Trademarks in conformance with the use guidelines of the Company set forth on
Exhibit "E" attached hereto.  [*]
-----------

Section 6. Implementation.

     6.1  Account Managers.  Each Party will assign a dedicated account manager
to oversee the performance of such Party's obligations under this Agreement and
to facilitate coordination of the Parties' performance of their respective
obligations.  Additionally, the Company will assign a dedicated marketing
manager, operations manager and merchandise manager (and appropriate supporting
buying staff) to oversee the applicable Company obligations under this
Agreement.  Each Party's managers will be subject to change from time to time by
the assigning Party upon notice to the other Party. The account managers will
meet at least once every quarter (or with such other frequency as may be
mutually agreed upon) during the Term to review the implementation of this
Agreement and to explore methods for improving performance.

     6.2  Cooperation.  During the Term, the Parties will cooperate in good
faith and use commercially reasonable efforts to (i) provide a positive customer
experience on the Company Site, (ii) maximize customers and revenues from or
through the Company Site and (iii) review opportunities for marketing the
Company Site.

Section 7. Collection of Sales Proceeds; Compensation and Expenses.

     7.1  General.  Except as expressly provided for elsewhere in this
Agreement, each Party will be responsible for all costs and expenses incurred by
such Party in performing its obligations under this Agreement.

     7.2  Collection of Sales Proceeds.  All proceeds from the sale of
Merchandise and related services through the Company Site will be collected and
processed by GSI on behalf of the Company.

     7.3  [*]

     7.4  [*]

                                       11
<PAGE>

     7.5  [*]

     7.6  [*]

     7.7  [*]

     7.8  [*]

     7.9  Records and Audit Rights.  During the Term of this Agreement, and for
a period of [*] after their creation, each Party will keep complete and accurate
books and records sufficient to verify compliance or non-compliance with the
provisions of this Agreement.  Each Party will, upon at least thirty (30) days'
prior written request by the other Party, allow such Party, or a representative
of such Party who is reasonably acceptable to the audited Party, to audit such
books and records at the audited Party's premises to the extent necessary to
verify the performance of the other Party's obligations hereunder; provided that
(a) any such audit is conducted during normal business hours and in a manner
designed to not unreasonably interfere with the audited Party's ordinary
business operations; (b) audits may not occur more frequently than once every
twelve (12) months; and (c) each such audit may only cover periods that were not
previously audited.  The audited Party will cooperate with the auditing Party
and its representatives in the conduct of such audit.  If any audit reveals that
the audited Party has failed properly account for, charge and/or pay any amount
hereunder which results in an overpayment by the auditing Party or an
underpayment by the audited Party, then the audited Party will promptly pay the
auditing Party any such amount, together with interest on the monies owed at an
annual rate of [*] from on the date on which such overpayment was made or such
overdue amount should have been paid to the auditing Party.  If any audit
reveals that the audited Party has failed properly account for, charge and/or
pay any amount hereunder which results in an overpayment by the audited Party or
an underpayment by the audited Party, by [*] or more, then in addition to paying
any such amount due, the audited Party will reimburse the other Party for its
reasonable out-of-pocket expenses incurred in conducting such audit.  Each Party
agrees that any information learned by or disclosed to it or its auditor in
connection with such audit is Confidential Information of the audited Party.

     7.10  [*]

Section 8. Customer Information and Privacy Policies.

     8.1  Customer Information. [*] Each Party will use the Customer Information
in compliance with the privacy policy for the Company Site and applicable law.
Each Party will treat such Customer Information as Confidential Information of
the [*]

     8.2  Privacy Policy. Within thirty (30) days after the date of this
Agreement, but in any event prior to the Launch Date, the Parties will mutually
agree upon the privacy policies for, and that will be posted on, the Company
Site.  Each Party will abide by such privacy policies, as such may be amended
from time to time.  Any amendments to such privacy policies must be agreed upon
by the Parties; provided, however, that if any amendment to the privacy policies
is

                                       12
<PAGE>

required by applicable law, the privacy policies will be amended to comply with
such requirements.

     8.3  Aggregate Information.  [*]

     8.4  E-Mail Promotions.  GSI may send e-mail promotions to those Customers
who have not opted-out for the promotion of the Company Site, [*]

Section 9. Proprietary Rights.

     9.1  Ownership.

          (a)  The Company. As between the Parties, the Company reserves all
right, title and interest in and to the "Company-Furnished Items" (as defined
below), along with all Intellectual Property Rights associated with any of the
foregoing, and no title to or ownership of any of the foregoing is transferred
or, except as expressly set forth in Section 9.2, licensed to GSI or any other
Person. GSI hereby assigns to the Company all right, title and interest that it
may have or acquire in and to such items and all associated Intellectual
Property Rights, and GSI will take, at the Company's expense, any actions
(including execution and delivery of affidavits and other documents) reasonably
requested by the Company to effect, perfect or confirm the Company's or its
designee's right, title and interest therein. As used herein, "Company-Furnished
Item" means any Company Content or any Trademark or Look and Feel of the Company
Site that (a) is owned or controlled (e.g., by license or otherwise) by the
Company or its Affiliates, as the case may be, and (b) is furnished by the
Company for use in connection with the activities contemplated by this
Agreement. As used herein, "Company-Furnished Item" will also include, without
limitation, any adaptation, modification, improvement or derivative work of any
Company-Furnished Item that is developed by either Party or jointly by the
Parties; provided, however, that the Company-Furnished Items do not include any
GSI-Furnished Item (as defined below), any [*] or any adaptation, modification,
improvement or derivative work of the any GSI-Furnished Item or any [*]. At the
termination of the Agreement, GSI will return all Company-Furnished Items to the
Company, and GSI will have no further rights thereto.

          (b)  GSI. As between the Parties, GSI reserves all right, title and
interest in and to the "GSI-Furnished Items" (as defined below) and the "GSI-
Owned Developments" (as defined below), along with all Intellectual Property
Rights associated with any of the foregoing, and no title to or ownership of any
of the foregoing is transferred or licensed to the Company or any other Person.
The Company hereby assigns and agrees to assign to GSI all right, title and
interest to such items and all associated Intellectual Property Rights, and the
Company will take, at GSI's expense, any actions (including execution and
delivery of affidavits and other documents) reasonably requested by GSI to
effect, perfect or confirm GSI's or its designee's right, title and interest
therein. As used herein, "GSI-Furnished Item" means any GSI Content or any
Technology or Trademark of GSI that (a) is owned or controlled (e.g., by license
or otherwise) by GSI or its Affiliates, as the case may be, and (b) is furnished
by GSI for use in connection with the activities contemplated by this Agreement.
"GSI-Owned Development" means any Technology (including any adaptation,
modification, improvement or derivative work of any GSI-Furnished Item) that is
developed solely by GSI or jointly by the Parties for use on

                                       13
<PAGE>

the Company Site in connection with the activities contemplated by this
Agreement or that is developed by GSI for use on the Web Sites that it operates,
which may include the Company Site. Notwithstanding the foregoing, neither the
GSI-Furnished Items nor the GSI-Owned Developments will include any Company-
Furnished Item or any [*], or any adaptation, modification, improvement or
derivative work of the any GSI-Furnished Item or any [*]. The GSI-Owned
Developments will, however, include all adaptations, modifications, improvements
or derivative works of the Company Site Functionality that are developed by GSI
or jointly by the Parties. At the termination of the Agreement, the Company will
return all GSI-Furnished Items to GSI, and the Company will have no further
rights thereto.

           (c)  [*]

     9.2   Company License. The Company, and as applicable Kmart, hereby grants
to GSI, during the Term, a worldwide, non-transferable license to use the
Company-Furnished Items supplied by the Company as may be reasonably necessary
to perform its obligations under this Agreement and to sublicense the Company-
Furnished Items supplied by the Company to third parties in connection with
advertising and promotion agreements and arrangements permitted under this
Agreement; provided, however, that GSI will not use Trademarks of the Company or
its Affiliates, including in any advertising, except in conformance with the use
guidelines of the Company set forth on Exhibit "E" attached to this Agreement
                                       -----------
[*] All goodwill arising out of any use of any of the Company's or its
Affiliate's Trademarks by, through or under GSI will inure solely to the benefit
of the Company or such Affiliate, as the case may be.

     9.3   Non-Disparagement.  Neither GSI nor any of its Affiliates will use
the Trademarks of the Company or its Affiliates in a manner that disparages the
Company or its Affiliates, as the case may be, or its products or services, or
portrays the Company or its Affiliates, as the case may be or its products or
services in a false, competitively adverse or poor light. GSI and its Affiliates
will avoid knowingly taking any action that diminishes the value of such marks.

Section 10. Representations and Indemnification.

     10.1  Representations.  Each Party represents and warrants to the
other that: (a) it has the full right, power and authority to enter into this
Agreement and perform its obligations hereunder; and (b) when executed and
delivered, this Agreement will constitute its legal, valid and binding
obligation enforceable against it in accordance with its terms.

     10.2  Indemnity.

           (a)  GSI will defend, indemnify and hold harmless the Company and its
Affiliates (and their respective employees, officers, directors and
representatives) from and against any and all claims, costs, losses, damages,
judgments and expenses (including reasonable attorneys' fees) arising out of any
third party claim, action, suit or proceeding (a "Claim"), to the extent it is
based on (i) the creation, operation or content of the Company Site (other than
any items or materials supplied by the Company for use on the Company Site or
otherwise pursuant to this Agreement, including the Company Content) and the
fulfillment obligations of GSI

                                       14
<PAGE>

hereunder, (ii) any actual or alleged breach of GSI's representations,
warranties and/or obligations as set forth in this Agreement, (iii) any actual
or alleged infringement of any Intellectual Property Rights by any materials
provided by GSI for use on the Company Site or provided by GSI to the Company
for its use under this Agreement, (iv) any failure or alleged failure of GSI to
comply with any applicable law, rule or regulation concerning the performance of
its obligations hereunder, or (v) Claims based upon product liability, product
labelling, personal injury or death relating to any Sporting Goods Merchandise
supplied by or on behalf of GSI. Subject to Section 10.3, GSI will pay any award
against the Company and its Affiliates (and their respective employees,
officers, directors or representatives) and any costs and attorneys' fees
reasonably incurred by them resulting from any such Claim.

           (b)  The Company will defend, indemnify and hold harmless GSI and its
Affiliates (and their respective employees, officers, directors and
representatives) from and against any and all claims, costs, loses, damages,
judgments and expenses (including reasonable attorneys' fees) arising out of any
third party Claim, to the extent it is based on (i) any actual or alleged breach
of the Company's representations, warranties and/or obligations as set forth in
this Agreement, (ii) any actual or alleged infringement of any Intellectual
Property Rights by any materials provided by the Company to GSI for its use on
the Company Site or otherwise under this Agreement, including the Company
Content, (iii) the offer, marketing or sale of any products or services through
the Company Site (other than marketing provided by GSI), including Claims based
upon product liability, personal injury or death relating to any products (other
than any Sporting Goods Merchandise supplied by or on behalf of GSI) or services
(other than GSI performed services) sold by the Company hereunder, (iv) any act,
omission, event, transaction or matter concerning or related to the operation of
the Company's business prior to the Launch Date  any Web Site operated by or on
behalf of the Company other than the Company Site as operated by GSI, or the
cessation of the operation of any such Web Site, any agreement or arrangement
entered into by the Company prior to the Launch Date, or any current or future
Company Internet service provider programs, or (v) any failure or alleged
failure of the Company to comply with any applicable law, rule or regulation.
Subject to Section 10.3, the Company will pay any award against GSI and its
Affiliates (and their respective employees, officers, directors or
representatives) and any costs and attorneys' fees reasonably incurred by them
resulting from any such Claim.

     10.3  Procedure.  In case any claim, action, suit or proceeding is at
any time brought against a Party or its Affiliates (or any of their respective
employees, officers, directors or representatives) (an "Indemnified Party") and
such Indemnified Party is entitled to indemnification pursuant to Section 10.2,
the party obligated to provide such indemnification (the "Indemnifying Party")
will defend such claim, action, suit or proceeding, at the sole expense of the
Indemnifying Party, using counsel selected by the Indemnifying Party. The
Indemnified Party will give prompt notice of any Claim to the Indemnifying
Party. If the Indemnifying Party fails to take timely action to defend such a
Claim or proceeding after having received written notice from the Indemnified
Party of such failure, the Indemnified Party may defend such a Claim at the
Indemnifying Party's expense. The Indemnifying Party will keep the Indemnified
Party fully advised with respect to such Claims and the progress of any suits,
and the Indemnified Party will have the right to participate, at the Indemnified
Party's expense, in any suit instituted against it and to select attorneys to
defend it, which attorneys will be independent

                                       15
<PAGE>

of any attorneys chosen by the Indemnifying Party relating to such claim or
related claim. The Indemnifying Party may settle, compromise or otherwise enter
into any agreement regarding the disposition of any claim against the
Indemnified Party without the prior written consent and approval of the
Indemnified Party, so long such settlement, compromise or disposition does not
adversely affect the Indemnified Party. The obligations of the Indemnifying
Party pursuant to this Section 10 will survive expiration or earlier termination
of this Agreement.

Section 11. Disclaimers and Limitations.

     11.1  DISCLAIMER OF WARRANTIES.  EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY HEREBY WAIVES AND DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES REGARDING THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OR IMPLIED WARRANTIES
ARISING OUT OF COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING (A) THE AMOUNT OF SALES
REVENUES THAT MAY OCCUR DURING THE TERM, AND (B) ANY ECONOMIC OR OTHER BENEFIT
THAT IT MIGHT OBTAIN THROUGH ITS PARTICIPATION IN THIS AGREEMENT (OTHER THAN THE
SPECIFIC SUMS TO BE PAID PURSUANT TO THIS AGREEMENT).

     11.2  LIMITATION OF DAMAGES. EXCEPT TO THE EXTENT AWARDED TO A THIRD PARTY
IN A JUDGMENT AGAINST WHICH A PARTY IS ENTITLED TO INDEMNIFICATION PURSUANT TO
SECTION 10, OR TO THE EXTENT ARISING OUT OF AN INTENTIONAL BREACH OF THIS
AGREEMENT, NEITHER PARTY WILL BE LIABLE (WHETHER IN CONTRACT, WARRANTY, TORT
(INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE), PRODUCT LIABILITY OR OTHER THEORY),
TO THE OTHER PARTY OR ANY OTHER PERSON OR ENTITY FOR COST OF COVER OR FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES
(INCLUDING DAMAGES FOR LOSS OF PROFIT, BUSINESS OR DATA) ARISING OUT OF THIS
AGREEMENT.

Section 12. Company and its Affiliates E-Commerce Activities.

     12.1  Company Site.  [*]

     12.2  [*]

Section 13. Term and Termination.

     13.1  Term.  Subject to the earlier termination rights of the Parties
set forth herein, the Term of this Agreement will commence on the Effective Date
and, unless extended or earlier terminated as provided elsewhere in this
Agreement, will automatically expire on [*].

                                       16
<PAGE>

     13.2  Termination for Breach.  Without limiting any other rights or
remedies (including, without limitation, any right to seek damages and other
monetary relief and the rights under Sections 13.3 and 13.4) that either Party
may have in law or otherwise, either Party may terminate this Agreement if the
other Party fails to perform any of its obligations hereunder; provided that (a)
the non-breaching Party sends written notice to the breaching Party describing
in reasonable detail the breach and stating its intention to terminate this
Agreement unless such breach is cured, and (b) the breaching Party does not cure
the breach within [*] days following its receipt of such notice; provided,
however, that if the breaching party has diligently attempted to cure the breach
during such [*] day period but has not cured the breach by the end of such [*]
day period, the non-breaching party may not terminate this Agreement so long as
the breaching party continues to diligently attempt to cure the breach and such
breach is cured by the end of the [*] day period following such [*] day period.
Notwithstanding the foregoing, GSI will be deemed to have cured a breach
premised upon failure [*].

     13.3  Company Termination. The Company will be entitled to terminate this
Agreement immediately upon written notice to GSI if GSI becomes insolvent,
admits in writing its inability to pay debts as they mature, institutes or has
instituted against it any bankruptcy, reorganization, debt arrangement,
assignment for the benefit of creditors, or other proceeding under any
bankruptcy or insolvency law or dissolution, receivership, or liquidation
proceeding (and, if such proceeding is instituted against it, such proceeding is
not dismissed within sixty (60) days).

     13.4  GSI Termination.  GSI will be entitled to terminate this Agreement
immediately upon written notice to the Company if the Company becomes insolvent,
admits in writing its inability to pay debts as they mature, institutes or has
instituted against it any bankruptcy, reorganization, debt arrangement,
assignment for the benefit of creditors, or other proceeding under any
bankruptcy or insolvency law or dissolution, receivership, or liquidation
proceeding (and, if such proceeding is instituted against it, such proceeding is
not dismissed within sixty (60) days).

     13.5  Effect of Termination.  Upon termination of this Agreement, each
Party in receipt, possession or control of the other Party's intellectual or
proprietary property, information and materials (including any Confidential
Information) pursuant to this Agreement must return to the other Party (or at
the other Party's written request, destroy) such property, information and
materials. Sections 2.6, 2.9, 3.2 (third sentence), 4.3, 7.9, 8.1, 8.2 (second
sentence), 8.3, 9, 10, 11 and 13 (together with all other provisions that
reasonably may be interpreted as surviving termination or expiration of this
Agreement) will survive the termination or expiration of this Agreement.
Notwithstanding the foregoing, termination of this Agreement will not relieve
either Party from its obligation to pay any monies due to the other Party for
any period prior to the effective date of termination.

                                       17
<PAGE>

     13.6  Post-Termination Process.  Upon expiration or termination of this
Agreement, the Parties will mutually cooperate to effect an orderly termination
of their relationship hereunder and to effectuate the transition of the Company
Site during the one-hundred eighty (180) days following such expiration or
termination. Without limiting the generality of the foregoing, at the Company's
option, GSI agrees to continue to operate the Company Site on the same terms and
conditions hereof, for up to [*] following the date of such expiration or
termination of this Agreement.

     13.7  [*].

Section 14. Miscellaneous.

     14.1  Press Releases.  All voluntary public announcements concerning the
transactions contemplated by this Agreement will be mutually acceptable to both
the Company and GSI. Unless required by law, neither the Company nor GSI (nor
any of their respective Affiliates) will make any public announcement or issue
any press release concerning the transactions contemplated by this Agreement
without the prior consent of the other Party. Notwithstanding the preceding
sentences in this Section 14.1, (a) after the initial public announcement of a
particular matter or transaction contemplated by this Agreement has been
approved by the Parties, either Party may make subsequent reference to the other
Party and describe its relationship with the other Party so long as such
reference or description is consistent with and no broader than the initial
public announcement approved by both Parties and such subsequent reference
remains factually accurate, and (b) each Party may make any public announcement
or issue any press release that it is required by law to issue, provided such
Party gives reasonable prior notice of such announcement or press release to the
other Party.

     14.2  Independent Contractors.  The Parties are entering this Agreement as
independent contractors, and this Agreement will not be construed to create a
partnership, joint venture or employment relationship between them. Neither
Party will represent itself to be an employee or agent of the other or enter
into any agreement or legally binding commitment or statement on the other's
behalf of or in the other's name.

     14.3  Confidentiality.

           (a)  Each Party will protect the Confidential Information of the
other Party from misappropriation and unauthorized use or disclosure, and at a
minimum, will take precautions at least as great as those taken to protect its
own confidential information of a similar nature. Without limiting the
foregoing, the receiving Party will: (i) use such Confidential Information
solely for the purposes for which it has been disclosed; and (ii) disclose such
Confidential Information only to those of its employees, agents, consultants,
and others who have a need to know the same for the purpose of performing this
Agreement and who are informed of and agree to a duty of nondisclosure. The
receiving Party may also disclose Confidential Information of the disclosing
Party to the extent necessary to comply with applicable law or legal process,
provided that the receiving Party uses reasonable efforts to give the disclosing
Party prompt advance notice thereof. Upon request of the other Party, or in any
event upon any termination or expiration of the Term, each Party will return to
the other all

                                       18
<PAGE>

materials, in any medium, which contain, embody, reflect or reference all or any
part of any Confidential Information of the other Party.

           (b)  Neither Party will disclose this Agreement or the transactions
contemplated herein, or make any filing of this Agreement or other agreements
relating to the transactions contemplated herein, without the consent of the
other; provided, however, that if a Party is required by applicable law to
provide public disclosure of this Agreement or the transactions contemplated
herein, such Party will use all reasonable efforts to coordinate the disclosure
with the other Party before making such disclosure, including the submission to
the Securities and Commission (and any other applicable regulatory or judicial
authority) of an application for confidential treatment of certain terms (which
terms will be agreed upon by the Parties) of this Agreement. Each Party will
provide to the other for review a copy of any proposed disclosure of this
Agreement or its terms and any application for confidential treatment prior to
the time any such disclosure or application is made and the parties will work
together to mutually approve such disclosure or application.

     14.4  Force Majeure.  If either Party is unable to perform any of its
obligations under this Agreement due to an event beyond the control of that
Party, including natural disaster, acts of God, actions or decrees of
governmental bodies, act of war, failure or discontinuance of the Internet or
failure of communications lines or networks, that Party will give written notice
to the other Party and will use commercially reasonable efforts to resume
performance of its obligations and, if substitute performance is reasonably
available, the notifying Party will offer the other Party such substitute
performance, which the other Party may accept or reject in its reasonable
discretion, but the notifying Party will have no liability to the other Party
for failure to perform its obligations under this Agreement for so long as it is
unable to do so as a result of such event.

     14.5  Compliance with Laws.  In its performance of this Agreement, each
Party will comply in all material respects with all applicable laws,
regulations, orders and other requirements, now or hereafter in effect, of
governmental authorities having jurisdiction.

     14.6  Insurance.  Each Party will at its own expense obtain and maintain
such policy or policies of insurance as are required by law or as are
commercially reasonable for the transactions and business contemplated by this
Agreement. Upon request from a Party, the other Party will furnish a certificate
of insurance and such other documentation relating to such policies as
reasonably requested.

     14.7  Notices.  Unless otherwise provided, all notices, consents or other
communications required or permitted to be given under this Agreement must be in
writing and will be deemed to have been duly given (a) when delivered
personally, (b) three business days after being mailed by first class mail,
postage prepaid, or (c) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the signature page of this Agreement.
Notices may also be given by electronic mail or facsimile and will be effective
on the date transmitted if confirmed within 24 hours thereafter by a signed
original sent in the manner provided in the preceding sentence.  Notices to GSI
will be sent to its address stated on the signature page of this Agreement to
the

                                       19
<PAGE>

attention of the General Counsel, with a copy sent simultaneously to the same
address to the attention of its Chief Financial Officer. Notices to the Company
and Kmart will be sent to their respective address stated on the signature page
of this Agreement to the attention of General Counsel, with a copy sent
simultaneously to the Chief Financial Officer. Any party may change its address
for notice and the address to which copies must be sent by giving notice of the
new addresses to the other parties in accordance with this Section 14.7, except
that any such change of address notice will not be effective unless and until
received.

     14.8   Assignment.  Neither Party may assign this Agreement or any of its
rights or obligations hereunder, whether voluntarily, involuntarily, by
operation of law or otherwise, without the other Party's prior written consent,
except to (a) a wholly-owned subsidiary of such Party, (b) any corporation or
other entity resulting from any merger, consolidation, or other reorganization
involving such Party, or (c) any Person to which such Party transfers all or
substantially all of its business or assets; provided that such Party will
require, as a condition to such assignment, any assignee or successor to all or
substantially all of its business or assets to assure and agree in writing to
perform this Agreement and to be bound by all the terms and conditions of this
Agreement in the same manner and to the same extent that such Party would be
required to perform or would be bound if no assignment or succession had taken
place.  Subject to the foregoing, this Agreement will be binding on and
enforceable by the Parties and their respective successors and permitted
assigns.

     14.9   Amendment.  This Agreement may be amended, modified or supplemented
by the Parties, provided that any such amendment, modification or supplement
shall be in writing and signed by the Parties.

     14.10  Waiver.  No waiver by a Party with respect to this Agreement will be
effective or enforceable against a Party unless in writing and signed by that
Party.  Except as otherwise expressly provided herein, no failure to exercise,
delay in exercising, or single or partial exercise of any right, power or remedy
by a Party, and no course of dealing between or among any of the Parties, will
constitute a waiver of, or will preclude any other or further exercise of the
same or any other right, power or remedy.

     14.11  Counterparts and Transmitted Copies.  This Agreement may be executed
in any number of counterparts, each of which when executed and delivered will be
deemed an original, but all of which taken together will constitute but one and
the same instrument, and it will not be necessary in making proof of this
Agreement to produce or account for more than one original counterpart hereof.
The Parties acknowledge that Transmitted Copies of this Agreement will be
equivalent to original documents until such time (if any) as original documents
are completely executed and delivered. "Transmitted Copies" means copies which
are reproduced or transmitted via facsimile, or another process of complete and
accurate reproduction and transmission.

     14.12  Cost of Litigation.  The prevailing Party in any legal action or
proceeding arising out of or relating to this Agreement will be entitled to an
award of its reasonable legal expenses in connection therewith.

                                       20
<PAGE>

     14.13  Entire Agreement.  This Agreement, together with the Exhibits to
this Agreement, (a) represents the entire understanding between the Parties with
respect to the subject matter hereof and supersedes all previous oral or written
communications or agreements, and all contemporaneous oral communications and
agreements, between the Parties and their respective Affiliates regarding such
subject matter, including, effective upon the date that the Parties agree upon
the purchase order terms and conditions set forth on Exhibit "H", the Strategic
                                                     -----------
Alliance Agreement, dated February 28, 2000, by and between GSI and
Bluelight.com LLC, and (b) may be amended or modified only by a written
instrument signed by a duly authorized agent of each Party. No breach of this
Agreement by either Party will affect the rights or obligations of either Party
under any other agreement between the Parties.

     14.14  Severability.  If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof will not
be affected thereby and will be enforceable without regard thereto.

     14.15  CHOICE OF LAW.  THIS AGREEMENT WILL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF [*], WITHOUT REFERENCE TO
ITS CHOICE OF LAW RULES.  [*]

     14.16  Headings.  The headings of sections and subsections of this
Agreement are for convenience of reference only and are not intended to
restrict, affect or otherwise influence the interpretation or construction of
any provision of this Agreement.

     14.17  References.  All words used in this Agreement will be construed to
be of such number and gender as the context requires or permits. Unless a
particular context clearly provides otherwise (i) the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection hereof, and (ii) the word "including"
will mean including but not limited to.

     14.18  Construction.  The Parties agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party will
not be applied in the construction or interpretation of this Agreement or any
other agreements or documents delivered in connection with the transactions
contemplated by this Agreement.

     14.19  [*]

                            (********************)
                    SIGNATURES APPEAR ON THE FOLLOWING PAGE

                                       21
<PAGE>

     IN WITNESS WHEREOF, intending to be legally bound, the Parties hereby
execute this Agreement on the date first written above.

Global Sports Interactive, Inc.         Bluelight.com, LLC


By: /s/ Michael G. Rubin                By: /s/ Richard Blunck
    -------------------------------         --------------------------
    Name: Michael G. Rubin                  Name:  Richard Blunck
    Title: President, Chairman              Title CEO
       and Chief Executive Officer

Address:   1075 First Avenue            Address:   c/o Kmart Corporation
           King of Prussia, PA 19406               3100 West Big Beaver Road
                                                   Troy, MI 48084
Telephone: [*]                          Telephone: [*]
Facsimile: [*]                          Facsimile: [*]

Kmart Corporation


By: /s/ Randy L. Allen
    ------------------------
    Name: Randy L. Allen
    Title: EVP

Address:   3100 West Big Beaver Road
           Troy, MI 48084
Telephone: [*]
Facsimile: [*]

                                       22
<PAGE>

                                  EXHIBIT "A"

                          Functionality and Features

 .  Search and Browse
 .  Shopping Cart
 .  Online Checkout with Secure Ordering
 .  E-mail Notifications relating to Orders
 .  Order History and Tracking
 .  User Login/Registration
 .  Affiliate Program Management
 .  Company and Kmart Information and Store Locator
 .  Corporate Information
 .  Employment Opportunities and Press Releases
 .  Frequently Asked Questions
 .  "Contact Us"
<PAGE>

                                  EXHIBIT "B"

                      Site Security and URL Registration

SSL Certificates


These certificates are used for secure e-commerce transactions.  The
certificates certify that the customer is giving their personal information to a
site which indeed is an authorized representative of the store where they are
shopping.  Verisign is the certification body and will need to contact an
officer within the company regarding our request for these SSL certificates as a
third party.

       Main store URLs (domain):                    ______________________
       Internic registrant company name for
       this domain:                                 ______________________
       Company address:

(Corporate contact must be an officer in the company named above who has
sufficient authority to approve the validity of GSI's request to represent the
said company in e-commerce transactions)

       Corporate contact:                           ______________________
       Title:                                       ______________________
       Phone:                                       ______________________
       Fax:                                         ______________________

       Dun and Bradstreet number for above          ______________________
       company:

DNS


DNS is the Internet address system which allows a customer to reach the new
store via the desired URL such as www.store.com.  This needs to be changed at
                                  -------------
least one week prior to the expected store launch so that the changes have been
propagated to all DNS servers on the Internet.  Our policy is to support your
existing store ip address on our servers, so that even after the DNS has been
updated to point to our servers, your existing site will still be reachable
until we have launched the new store.

       DNS Technical contact for main
       URLs listed above:                           ______________________
       Contact phone:                               ______________________
       Contact e-mail address:                      ______________________
<PAGE>

Secondary URLs which will be supported by GSI:

1.  ___________________       Technical contact:    ______________________

2.  ___________________       Technical contact:    ______________________

3.  ___________________       Technical contact:    ______________________


List any additional on back.

E-mail Aliases

These are the e-mail aliases which customers will use associated with the e-
commerce store such as customerssupport@domain.com.  If your company uses this
                       ---------------------------
domain for mail, you need to add forwarding for the listed e-mail aliases below
that will point to the corresponding mailbox on our servers.

E-mail aliases which need to be created on your mail server:

Your mail server               points to      Our mail server
[*]                                           [*]








[*]

     Who to contact for updating company
     e-mail server with new aliases:           ______________________
     Phone:                                    ______________________
     E-mail:                                   ______________________

___________________________________________    ______________________
Your name                      Title           Date
<PAGE>

                                  EXHIBIT "C"

                       Order Processing and Fulfillment

 .  Order Receipt, Confirmation and Processing
 .  Credit Card Authorization and Processing
 .  Inventory, Receipt, Control and Management
 .  Pick, Pack and Ship Orders
 .  Shipping Management and Tracking
<PAGE>

                                  EXHIBIT "D"

       Web Site Integration and Promotional and Advertising Requirements

 .  [*]
<PAGE>

                                  EXHIBIT "E"

                       Company Trademark Use Guidelines

GSI will not, with respect to the Company Trademarks:

 .  alter the overall design, color or shape of any such Trademarks
 .  commingle or combine any such Trademarks with any other mark
 .  use any other mark that is confusingly similar to such Trademarks
 .  substitute designs or objects for letters in any Trademark
 .  use in conjunction with any illegal, immoral, obscene or pornographic
   activities
<PAGE>

                                  EXHIBIT "F"

[*]
<PAGE>

                                  EXHIBIT "G"

                              Company Agreements
<PAGE>

                                  EXHIBIT "H"

                             Purchase Order Terms