Heuristic Development Group, Inc.
00000 Xxxxxxx Xxxxx Xxxxxxx
Xxxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
November 27, 1996
Nautilus Group Japan, Ltd.
X.X. Xxx 0000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Dear Sir or Madam:
Reference is made to the Assignment (the "Assignment") dated as of August
22, 1994 between Heuristic Development Group, Inc. (the "HDG") and Nautilus
Group Japan, Ltd. ("Distributor") and the Exclusive Distribution License
Agreement (the "Distribution Agreement") dated as of June __, 1995 between the
HDG and Distributor. HDG and Distributor hereby agree as follows:
(a) The last two sentences of Section 6(b) of the Assignment is hereby
deleted in full.
(b) The first sentence of Section 3.01 of the Distribution Agreement is
hereby deleted in full and a new first two sentences of Section 3.01 are added
to the Distribution Agreement to read in full as follows:
"HDG and Distributor hereby agree that in the event that (i) the Franchise
Agreement (as defined in the Assignment Agreement) is terminated and is not
replaced with another franchise agreement between Distributor and Sumitomo
Fudosan Fitness Co., Ltd. or (ii) Distributor reasonably concludes, based
on an examination of its quarterly financial results, that its annual
revenue from the Franchise Agreement has fallen below one million dollars
($1,000,000) ((i) and (ii) above are collectively referred to as the
"Conditions") then the royalty payments owed by Distributor to HDG for all
Products distributed outside of Sumitomo Nautilus Clubs in Japan will be as
follows:
(a) No royalty will be payable by Distributor to HDG with respect to
the first two million dollars of revenue per year derived from
Distributor's use of the license.
(b) The royalty payable by Distributor to HDG with respect to all
revenue in excess of two million dollars per year derived from
Distributor's use of the license will be determined by Distributor and
HDG prior to distribution of the Products in the Territory.
In the event that neither of the Conditions has been met the royalty
payments owed by Distributor to HDG for all Products distributed
outside of Sumitomo Nautilus Clubs in Japan will be negotiated by
Distributor and HDG."
All other terms of the Assignment and Distribution Agreement will remain in
full force and effect.
Please indicate your acceptance of and agreement with the foregoing by
signing the enclosed counterpart of this letter and returning it to HDG,
whereupon this shall be a binding agreement between the parties.
Very truly yours,
HEURISTIC DEVELOPMENT GROUP, INC.
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx
Chief Operating Officer
Accepted and Agreed:
NAUTILUS GROUP JAPAN, LTD.
/s/ Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx
Chief Operating Officer
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