Nautilus 2006 Annual Report Download - page 73
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4
6. SPECIAL PURCHASE REBATE PROGRAM
6.1 Purchaser and Seller have entered into a Supply Agreement, dated as of June 30, 2006 (the “Supply Agreement”), providing for the
terms and conditions under which Purchaser will purchase Products (as defined in the Supply Agreement) from Seller. Seller will
provide a rebate to Purchaser on all sales of Products made by Seller to Purchaser in accordance with the provisions of this Article
6. The rebate will be (*) of the total sales volume of Products calculated on an FOB sales price to Purchaser basis excluding sales of
product tooling and sales attributed to rods purchased and packaged at the direction of Purchaser for Bowflex home gyms (the
“
Sales Volume
”
).
6.2
Rebates will be paid quarterly in arrears on each April 15, July 15, October 15 and January 15 in an amount equal to (*) of the Sales
Volume of Products for the preceding calendar quarter; provided , that the rebate for calendar year 2006 (net of prior payments
received by Purchaser in the total amount of (*)), shall be paid on or before February 15, 2007.
6.3 The term of the rebate program hereunder shall commence on January 1, 2006 and, unless extended as provided below, terminate
on June 30, 2007. In the event Purchaser exercises the Option in accordance with Section 3.2 above, the term of the rebate program
will automatically extend until December 31, 2007.
6.4 The parties acknowledge that the rebate amount was formulated based on current costs in U.S. Dollar terms to Seller for steel
components and labor required in the manufacture, assembly and packaging of the Products. Accordingly, the parties agree that
adjustments to the rebate rate will be made in the circumstances and in accordance with the procedures set forth below:
(a) All calculations involving the determination of unit costs shall be made in accordance with U.S. GAAP. In determining the
U.S. Dollar equivalent of a cost or expense incurred in RMB, the exchange rate used shall be the average of the buy and sell
exchange rates (or mid-rate) announced by the People’s Bank of China for U.S. Dollars and RMB for the date on which the
relevant RMB cost or expense was incurred. An average of the daily exchange rates may be used for transactions within one
month (the rate for non
-
business days assumed to be the rate for the most recent previous day published.)
(*) Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested
with respect to the omitted portions.