Nautilus 2006 Annual Report Download

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FORM 10-K
NAUTILUS, INC.
(Annual Report)
Filed 3/16/2007 For Period Ending 12/31/2006
Address 16400 SE NAUTILUS DRIVE
VANCOUVER, Washington 98683
Telephone 360-694-7722
CIK 0001078207
Industry Retail (Catalog & Mail Order)
Sector Services
Fiscal Year 12/31

Table of contents

  • Page 1
    NAUTILUS, INC. FORM 10-K (Annual Report) Filed 3/16/2007 For Period Ending 12/31/2006 Address Telephone CIK Industry Sector Fiscal Year 16400 SE NAUTILUS DRIVE VANCOUVER, Washington 98683 360-694-7722 0001078207 Retail (Catalog & Mail Order) Services 12/31

  • Page 2
    ...non-affiliates computed by reference to the last sales price ($15.71) as reported on the New York Stock Exchange as of the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2006) was $491,439,623. The number of shares outstanding of the registrant's common...

  • Page 3

  • Page 4
    ... Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and...

  • Page 5
    ...of leading brands, product development capabilities, product lines, distribution channels, and the size of our customer base. Our common stock is listed on the New York Stock Exchange and trades under the symbol "NLS." Our principal executive offices are located at 16400 SE Nautilus Drive, Vancouver...

  • Page 6
    ... system by reducing the number of distribution centers. RECENT DEVELOPMENTS Through our investment in product development in 2006, we introduced 17 new high quality products from the Nautilus, Bowflex and Schwinn Fitness brands, including an expansion of our successful Bowflex home gym line...

  • Page 7
    ... and selling of branded fitness equipment sold under the Nautilus, Bowflex, Schwinn Fitness, and StairMaster brand names and is responsible for servicing customers within the Americas, which includes the United States, Mexico, Canada and South America. Sales from our Bowflex home-gym product line...

  • Page 8
    ...Nautilus brand includes four distinct lines of strength equipment, free weights and benches, a complete line of cardio equipment including treadmills, ellipticals, and the unique commercial version of the TreadClimber, along with upright and recumbent exercise bicycles. Our StairMaster brand is best...

  • Page 9
    ... designs, and evaluate the competition. • In the retail channel , we market and sell a comprehensive line of consumer fitness equipment under the Nautilus, Bowflex, Schwinn Fitness, and StairMaster brands through a network of more than 3,200 locations consisting of sporting goods, warehouse clubs...

  • Page 10
    ... for licensing patented technology for new innovations for the years ended December 31, 2006, 2005, and 2004, respectively. SEASONALITY Fitness Equipment Products In general, U.S. and international sales in our direct, commercial, and retail fitness equipment channels are seasonal. We believe...

  • Page 11
    ... lines. We distribute commercial strength fitness equipment from our Virginia warehouse facility directly to customers primarily through our own truck fleet which allows us to effectively control the set up and inspection of equipment at the end-user's facilities. International Equipment Business...

  • Page 12
    ... the key competitive factors affecting this portion of our business include brand relevance, product innovation, quality, durability, diversity of features, price, financing options, customer service, and product service network. Retail Fitness Equipment: Our Nautilus, Schwinn Fitness, StairMaster...

  • Page 13
    ... products by our competitors. Building our intellectual property portfolio is an important factor in maintaining our competitive position in the fitness equipment and apparel industries. We have followed a policy of filing applications for the U.S. and foreign patents on inventions, new designs...

  • Page 14
    ... other information with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended ("Exchange Act"). You can inspect and obtain a copy of our reports, proxy statements and other information filed with the SEC at the offices of the SEC's Public Reference...

  • Page 15
    ... in which our products are produced or sold may adjust or impose new quotas, duties, tariffs or other restrictions. Further, our business depends on our ability to source and distribute products in a timely manner. As a result, we rely on the free flow of goods through open and operational ports...

  • Page 16
    ...currently hold a number of patents and trademarks and have several patent and trademark applications pending. However, our efforts to protect our proprietary rights may be inadequate, and applicable laws provide only limited protection. Intense competition may have a negative impact on our net sales...

  • Page 17
    ...and establishing and protecting intellectual property rights. Increasing sales to department stores and improving the sales productivity of our customers will each depend on various factors including strength of our brand name, competitive conditions, our ability to manage increased sales and future...

  • Page 18
    ... failure to do so may have an adverse impact on our business Our future success depends on our ability to attract and retain key executives, managers, product development engineers, sales personnel, and others. We face intense competition for such individuals worldwide. Not being able to attract or...

  • Page 19
    ... Colorado Oklahoma Oklahoma Canada World headquarters, call center, retail store, and warehouse Warehouse and distribution Warehouse and distribution Commercial equipment manufacturing Engineering, prototyping, customer service, and administrative Showroom Commercial equipment sales and warehouse...

  • Page 20
    ... PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for our Common Stock Our common stock is listed on the New York Stock Exchange (the "NYSE") and trades under the symbol "NLS." As of February 28, 2007, 31,521,611...

  • Page 21
    ... a line graph and table comparing the cumulative total shareholder return of our common stock with the cumulative total return of the NYSE Composite Index, NASDAQ, and the S&P SmallCap 600 Index for the period commencing on May 5, 1999 (the date of our initial public offering ("IPO")) and ending on...

  • Page 22
    ... profitability. For more information, see our discussion of Risk Factors located at Part I, Item IA of this Form 10-K. EXECUTIVE OVERVIEW In 2006, we continued to focus on repositioning our Company for sustainable and profitable long-term growth by following our FIT #1 business principles: Financial...

  • Page 23
    ... equipment business designs, produces, sells and markets fitness products sold under the Nautilus, Bowflex, Schwinn Fitness, and StairMaster brand names. Depending on the brand, our fitness equipment is sold and marketed through the direct, commercial, and retail channels of distribution located...

  • Page 24
    ... international equipment business sells and markets fitness products sold under the Nautilus, Bowflex, Schwinn Fitness, and StairMaster, brand names through the direct, commercial, and retail channels of distribution located outside of the Americas. Net sales for the international business improved...

  • Page 25
    ... were offset by an increase in freight costs and changes in both the sales channel and product sales mix within the product categories. International Equipment Business - Gross profit for our international equipment business was $16.5 million in 2006 compared to $13.8 million in 2005, an increase of...

  • Page 26
    ... the retail channel, specifically SelectTech, TreadClimber and new Bowflex home-gym products. The increase was also due to gaining additional retail customers as well as expanding the number of products offered at existing customer locations. • • International Equipment Business - Net sales...

  • Page 27
    ...the international equipment business was 25.9% in 2005 compared to 33.8% in 2004. The decrease in gross margin was attributed to a combination of drivers that include growth in lower margin retail channel sales, increases in whole goods purchase prices and a new, more expensive logistics provider in...

  • Page 28
    ...to support our innovative product offerings, and computer equipment to maintain and expand current information systems for future growth. In 2006, we also collected $7.1 million from the sales of our former headquarters building located in Vancouver, Washington and the distribution center located in...

  • Page 29
    ...increases to the end-consumer. To the extent these costs continue to increase and we are unable to pass these costs to the customer, our gross margins may continue to be negatively impacted. SEASONALITY In general, based on historic trends, we expect our sales from fitness equipment products both in...

  • Page 30
    ... our basic limited warranty and record a liability in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liability include the number of units sold, along with the historical and anticipated cost to repair, replace or refund the original sale. We...

  • Page 31
    ...of credit risk as bank deposits may exceed federally insured limits. Foreign Exchange Risk We are exposed to foreign exchange risk from currency fluctuations, mainly in Canada and Europe, due to sourcing of our products in the U.S. dollars and selling them primarily in Canadian dollars, Swiss Francs...

  • Page 32
    ... Contents Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2006 and 2005 Consolidated Statements of Income for the years ended December 31, 2006, 2005...

  • Page 33
    ... principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2006, based on...

  • Page 34
    ... 31, 2006 AND 2005 (In Thousands) 2006 2005 ASSETS CURRENT ASSETS: Cash and cash equivalents Trade receivables, net Inventories Prepaid expenses and other current assets Short-term note receivable Assets held for sale Deferred tax assets Total current assets PROPERTY, PLANT AND EQUIPMENT, net...

  • Page 35
    ... NAUTILUS, INC. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (In Thousands, Except Per Share Amounts) 2006 2005 2004 NET SALES COST OF SALES Gross profit OPERATING EXPENSES: Selling and marketing General and administrative Research and development Royalties Total...

  • Page 36
    ...NAUTILUS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2006...190 Total ...change from adoption of accounting policy Share-based compensation Options exercised Tax benefit of exercise of nonqualified options BALANCES at DECEMBER 31, 2006...

  • Page 37
    ...and other current assets Trade payables Accrued liabilities Income taxes payable Customer deposits Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment, and assets held...

  • Page 38
    ...CASH AND CASH EQUIVALENTS, END OF YEAR SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid for income taxes Cash paid for interest SUPPLEMENTAL DISCLOSURE OF OTHER NONCASH INVESTING AND FINANCING ACTIVITY Other receivable issued as part of the sale of land Other long term liability issued in...

  • Page 39
    ... SIGNIFICANT ACCOUNTING POLICIES Organization and Business - Nautilus, Inc. ("Nautilus" or the "Company") is a leading designer, developer, manufacturer and marketer of branded fitness and apparel products sold under such well-known brand names as Nautilus, Bowflex, Schwinn Fitness, StairMaster, and...

  • Page 40
    ... with the customer. Retail store revenues are recorded at the time of sale. Revenue for commercial products is recognized upon final installation of commercial equipment if the Company is responsible for installation. Revenue is recognized net of applicable promotional discounts, rebates, and return...

  • Page 41
    ...00-10, Accounting for Shipping and Handling Fees and Costs . Direct costs associated with shipping goods and inventory planning, receiving and handling costs to customers are recorded as a component of cost of sales. Research and Development - Internal research and development costs, which primarily...

  • Page 42
    ... sources to enable sales of its commercial fitness equipment. While most of these financing arrangements are without recourse, in certain cases the Company provides a guarantee or other recourse provisions to an independent finance company for either all or a portion of the lease payments in order...

  • Page 43
    ...-based payments over the requisite service periods of the individual grants which generally equal the vesting periods. Consistent with prior years, the fair value of each equity award is estimated at the date of grant using the Black-Scholes-Merton option pricing model which requires extensive use...

  • Page 44
    ...Certain prior year amounts have been reclassified to conform to fiscal year 2006 presentation. These changes had no impact on previously reported results of operations, financial position, or cash flows. New Accounting Pronouncements - In February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), The...

  • Page 45
    ... for new products and internally developed software that are not yet in service. Capitalized interest was not material for the years ended December 31, 2006, 2005 and 2004. In 2006, as part of the plan to consolidate its production facilities for the cardiovascular line of equipment, the Company...

  • Page 46
    ...included in cost of sales and general and administrative expense, for the next five full succeeding years, is estimated at $2.3 million, $2.0 million, $1.5 million, $1.1 million, and $1.1 million. During 2006, the Company determined that the life of the Schwinn trademark was indefinite and therefore...

  • Page 47
    Table of Contents at the annual rate equal to the applicable Facility Fee Rate in effect on the payment date. The facility fee is based on the average daily total commitment amount in effect during the quarter and is payable quarterly. At December 31, 2006, the outstanding balance under the facility...

  • Page 48
    ...) 860 $15,662 2006 2005 Assets: Accrued liabilities Allowance for doubtful accounts Inventory valuation Uniform capitalization Share-based compensation expense Net operating loss carryforward Other Liabilities: Prepaid advertising Other prepaids Basis difference on long-lived assets Undistributed...

  • Page 49
    ... for future issuance for exercise of stock options and restricted stock, and payment of awards under share-based compensation plans. During fiscal 2006, the Company paid a quarterly cash dividend on its common stock of $0.40 per share. In March 2005, the Company's Board of Directors authorized the...

  • Page 50
    ... with an exercise price equal to the market price of the Company's stock based on the closing market price of the Company's common stock on the date preceding the grant date, generally vest based on four years of continuous service and, starting with the adoption of the 2005 Plan, have a seven...

  • Page 51
    ... its executive team. The performance unit awards vest if the Company meets earnings targets set by the Compensation Committee of the Board of Directors. The fair value of the performance units is based on the closing market price of the Company's common stock on the date preceding the grant date and...

  • Page 52
    ...limitations. The 401(k) plan provides for Company matching contributions of up to 50% of the first 6% of eligible contributions made by all participants. All participants must have completed one year of service before becoming eligible for the Company matching contributions. Employees vest at a rate...

  • Page 53
    ... Business is responsible for the design, production, marketing and selling of branded fitness equipment sold under the Nautilus, Bowflex, Schwinn Fitness, and StairMaster brand names and is responsible for servicing customers within the Americas, which includes the United States, Mexico, Canada...

  • Page 54
    ... and international properties used for warehousing, distribution, product development, administration, and product sales. The Company also has operating leases for certain equipment mainly consisting of product delivery trucks used in its commercial fitness equipment business, and product service...

  • Page 55
    ...$ 6,023 5,341 4,149 3,963 3,908 7,228 $30,612 As further discussed in Note 1, at times the Company arranges for commercial leases or other financing sources with third parties to enable certain of its commercial customers to purchase the Company's commercial products. As the result, at December 31...

  • Page 56
    ..., Utah in a case filed by ICON Health & Fitness, Inc. ("ICON") claiming false advertising involving the Company's advertising and promotion going back to 1987 for certain elements of its Bowflex home gyms and claiming trademark infringement for the name placed on a treadmill belt sold in 2002. On...

  • Page 57
    ...assets Property, plant and equipment Trade name Customer base Developed technology In process research and development Other assets Goodwill Current liabilities Long-term deferred tax liabilities Long-term debt Total acquisition cost The Company did not consummate any acquisitions in fiscal 2006. 16...

  • Page 58
    ...Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules...

  • Page 59
    ... in Rule 13a-15 (f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company's Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial...

  • Page 60
    ..., as part of our monitoring effort of the Company's internal control environment, we have reported on the progress and status of the above remediation actions to the Audit Committee of the Board of Directors. Based on our testing of these enhanced procedures and increased staffing levels, management...

  • Page 61
    ... internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide...

  • Page 62
    ...also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2006 of the Company and our report dated March 15, 2007 expressed an unqualified opinion on those financial...

  • Page 63
    ... 16(a) Beneficial Ownership Reporting Compliance, Executive Officers and Information Concerning the Board of Directors in the Company's Proxy Statement for its 2007 Annual Meeting of Shareholders and is incorporated herein by reference. Item 11. Executive Compensation The information required by...

  • Page 64
    ... (a)(1) (a)(2) Financial Statements See the Consolidated Financial Statements in Item 8. Financial Statement Schedule There are no financial statement schedules filed as part of this annual report, since the required information is included in the consolidated financial statements, including the...

  • Page 65
    ...Date: March 15, 2007 N AUTILUS , I NC . By: /s/ G REGGORY C. H AMMANN Greggory C. Hammann, Chairman, Chief Executive Officer and President (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed... Meadowcroft Attorney-In-Fact 63

  • Page 66
    ... 10, 2005. First Amendment to the Company 2005 Long-Term Incentive Plan - Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2006, as filed with the Commission on November 9, 2006. Form of Employee Incentive Stock Option...

  • Page 67
    ... 2005. Executive Employment Agreement, dated June 30, 2005, by and between the Company and Juergen Eckmann - Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Commission on March 16, 2006. Annual Base Salary...

  • Page 68
    ...lead agent Incorporated by reference to Exhibit 10.1 the Company's Current Report on Form 8-K, as filed with the Commission on February 20, 2007. Supply Agreement, dated June 30, 2006, with Action Fast Associates Limited, Land America Health and Fitness Co., LTD, and Xiamen World Gear Sporting Goods...

  • Page 69
    ...24 31.1 31.2 32.1 32.2 Consent of Independent Registered Public Accounting Firm. Powers of Attorney. Certification pursuant to Section 302... Act of 2002. * Indicates management contract, compensatory agreement or arrangement, in which the Company's directors or executive officers may participate. 67

  • Page 70
    ... and distribution of certain of Purchaser's proprietary line of health and fitness equipment and selected other fitness equipment (the "Business"); and WHEREAS, Seller desires to provide Purchaser an exclusive, time-limited option to buy the Business and substantially all of the assets of the...

  • Page 71
    ...by applicable U.S. state and federal securities laws, and with a value of $30,000,000, valued at the closing price on the New York Stock Exchange for the trading day immediately preceding the date of delivery of such shares. As set forth in the Purchase Agreement, Nautilus shall be obligated to file...

  • Page 72
    .... Seller agrees that commencing January 1, 2007 and at all times prior to expiration of the Option, or if the Option is exercised, at all times to and including the Closing Date, Seller shall maintain books and records in a manner necessary and appropriate to prepare audited financial statements...

  • Page 73
    ...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"). Rebates...

  • Page 74
    ... consistent with that used in arriving at the Base Case figure or disputes the accuracy of such certification, it will notify Seller in writing of such fact and the parties shall then promptly jointly engage an international accounting firm to examine the Seller's books and records and determine the...

  • Page 75
    ...'s books, records, and all relevant financial and operational information regarding the Assets and Business that Purchaser deems necessary to provide a basis for determining whether it will exercise the Option. CONFIDENTIALITY. The parties acknowledge that Purchaser and Land America Health & Fitness...

  • Page 76
    ..., or on the date of actual delivery, whichever is the earliest, and shall be sent to the parties at the following addresses, or at such other address as the party may hereafter designate by written notice to the other: If to Purchaser: Nautilus, Inc. 16400 SE Nautilus Drive Vancouver, WA 98683 Attn...

  • Page 77
    ... resolution before a single arbitrator in accordance with the Commercial Rules of the American Arbitration Association. The arbitrators shall interpret all controversies or claims arising under or relating to this Agreement in accordance with the laws of the State of Washington, without regard to...

  • Page 78
    IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. PURCHASER: NAUTILUS, INC. By: Signature Print Name: Title: 9 SELLER: TREURIVER INVESTMENTS LTD. By: Signature Print Name: Title:

  • Page 79
    Exhibit A ASSET PURCHASE AGREEMENT BY AND AMONG NAUTILUS, INC., [NAUTILUS ACQUISITION SUBSIDIARY] AND TREURIVER INVESTMENTS LIMITED (*) Dated as of •, 2007 (*) Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with...

  • Page 80
    ...SUBSEQUENT TO THE CLOSING DATE TERMINATION OTHER PROVISIONS LIST OF SCHEDULES AND EXHIBITS Assigned Contracts Certain Fixed Assets Land Use Rights Buildings Leased Premises Tangible Property Owned Tangible Property Leased Inventory Locations Intellectual Property Contracts Additional Required Assets...

  • Page 81
    ... Tab Employee Plans Compliance with the Foreign Corrupt Practices Act and Export Control and Anti-Boycott Laws Sales to Affiliates Services from Affiliates Exhibit A : Exhibit B : Exhibit C : Exhibit D : Form of Seller Non-Competition Agreement Form of Shareholders Non-Competition Agreement Form...

  • Page 82
    ... engaged in the procurement and distribution of certain of Nautilus's proprietary line of health and fitness equipment and other fitness equipment (the "Business"). Nautilus and Seller have entered into a Purchase Option Agreement, dated effective January 29, 2007 (the "Option Agreement"), pursuant...

  • Page 83
    ...in Article 3.12. "Books and Records" shall mean all books, ledgers, files, reports, plans and operating records of, or maintained by, the Business, in both physical and electronic form, as the case may be. "Business" has the meaning given such term in the Preliminary Statements hereof. "Business Day...

  • Page 84
    ... analysis, etc.) or specific, unique-to-the-business usage (e.g., order processing, manufacturing, process control, design, shipping, etc.) and all computer operating, security or programming software, owned or licensed. "Customer Complaint" has the meaning given such term in Article 10.7. "Disposed...

  • Page 85
    ...the Business, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by Seller in the production of finished goods of the Business. "Land" means the land described in Article 3.5.1. "Lien" shall mean any...

  • Page 86
    ..., without limitation, business, income, capital gain, value added, use, transfer, sales, deed and excise or custom tax, and stamp duties and however termed). "Tangible Personal Property" all machinery, equipment, tools, dyes, molds, furniture, fixtures, office equipment, computer hardware, supplies...

  • Page 87
    ... following assets (the "Assets"), free and clear of all Liens: Intellectual Property . All interests of Seller in the Intellectual Property used in or related to the Business, including, without limitation that listed in Schedule 3.5.2. Contracts Related to the Business . All rights and interests of...

  • Page 88
    ... any product warranties; and liabilities or obligations to any supplier of goods, services or utilities or to any customer and; any other liabilities or obligations to any third party, including, without limitation, liabilities to any Government Authority. Purchase Price . The purchase price (the...

  • Page 89
    ...Nautilus, assigning and transferring to Buyer all of Seller's interest in all Intellectual Property used in and related to the Business, including that listed in Schedule 3.5.2, including, without limitation, an assignment of Seller's trade name and trademarks relating to the Business; Duly executed...

  • Page 90
    ... in, all of the Assets, free and clear of all Liens, except as noted in the Schedules hereto. [Intentionally left blank] Intellectual Property . Schedule 3.5.2 sets forth all domestic and foreign Intellectual Property used in or relating to the Business, registered in the name of Seller, or of which...

  • Page 91
    ..., intellectual property rights, agency agreements, technical information, engineering data, design and engineering specifications and similar materials recording or evidencing Seller's proprietary expertise used in or residing with the Business, whether purchased or developed internally, included...

  • Page 92
    ... any such statute, order, rule or regulation. Schedule 3.7 lists all material governmental licenses, permits, product registrations, filings, authorizations and approvals and any pending applications for any thereof relating to the conduct of the Business or the use of properties held by Seller and...

  • Page 93
    ...has failed to file any material report or return with respect to the Business which may be required by any law or regulation of the British Virgin Islands or political subdivision thereof to be filed, and, except as set forth in Schedule 3.13, Seller has duly paid or accrued on it's books of account...

  • Page 94
    ... Buyer true and complete copies of all Employee Plans, including trust agreements and insurance contracts embodying such plans, funds, programs or arrangements. Compliance with the Foreign Corrupt Practices Act and Export Control and Anti-Boycott Laws . Except as identified in Schedule 3.21, neither...

  • Page 95
    ... 164 or 389 of the PRC Criminal Code, Article 8 of the Law Against Unfair Competition or the Interim Rules on Prohibition of Commercial Bribery. Pricing of Sales . Except as set forth in Schedule 3.19, since December 31, 2006, all of the products of the Business have been sold to persons who are not...

  • Page 96
    ... leases, mortgages, deeds of trust, security instruments, permits, trademarks, patents and other Intellectual Property, litigation files, contracts, employee agreements and licenses, and such documents have not been modified and will not be modified prior to the Closing Date without Nautilus's prior...

  • Page 97
    ...ordinary course of business, (iii) exercise best efforts to keep available the services of the present employees of the Business, and (iv) exercise best efforts to preserve the good relations of suppliers, customers and others with whom Seller has business relations relating to the Business. Sale or...

  • Page 98
    ... full access throughout the period prior to the Closing Date, to all of the properties, books, contracts, commitments, customers, suppliers, distributors and records of the Business, and furnish to Nautilus during such period all such information concerning the Business as Nautilus may...

  • Page 99
    ... with the effect of materially affecting the value of, or the ability of Buyer to operate as presently operated, the Business, and there shall have been delivered to Nautilus a certificate to that effect, dated the Closing Date and signed by the legal representative of Seller. Performance by Seller...

  • Page 100
    ... of the insurance set forth in Schedule 3.16. Seller will make arrangements to insure the continued coverage after the Closing Date of Buyer under an insurance policy for any and all liabilities for injury to persons or property arising out of the sale by Seller of the products of the Business prior...

  • Page 101
    ... and hold each of Nautilus and Buyer harmless at all times as set forth below from and after the Closing Date against and in respect of all matters in connection with the following: From and after the Closing Date, all the liabilities of Seller arising out of or in connection with the Business...

  • Page 102
    ... Indemnity Cut-Off Date, Seller and the Shareholders may delay payment for such claims until after the (*)month anniversary of the Closing Date and the initial release of funds to the Representative pursuant to the Land America Escrow Agreement. 8.2.1 Subject to the limitations set forth in Article...

  • Page 103
    ... Party within the limits of this Chapter 8. So long as the Indemnifying Party is reasonably contesting any such claim in good faith, the Indemnified Party shall not pay Article 8.4 Article 8.5 (*) Certain information on this page has been omitted and filed separately with the Commission...

  • Page 104
    ... Article 9.1 Staff and Employees . Seller has delivered to Nautilus and Buyer a list, dated within ten days of the Closing Date, naming by location all of the staff and employees of Seller actively employed in the Business, including each such staff and employee's current compensation rate and date...

  • Page 105
    ... to prepare financial statements or tax returns or deal with tax audits. After the Closing Date, Seller shall provide Buyer and its representatives reasonable access to records that are Excluded Assets, during normal business hours and on at least three days' prior written notice, for any reasonable...

  • Page 106
    ... and for a period of five (5) years after the Closing Date, Seller and each Shareholder agrees that it shall not divulge to any Person any trade secret, or secret process, method or means, or any other confidential information concerning the Business, Nautilus or Buyer that comes to the knowledge of...

  • Page 107
    ... as long as such claim is being prosecuted in good faith. [Intentionally left blank] Responsibility for Taxes . Each Party shall pay its own transaction-related Taxes arising out of the transactions contemplated by this Agreement. 11.1.4 11.1.5 Article 12.2 Article 12.3 (*) Certain information on...

  • Page 108
    ... a confirmation report specifying the facsimile number of the recipient, the number of pages sent and the date of the transmission) and, (d) if given or made by electronic mail, on the following Business Day after the electronic mail is sent (as long as the sender has confirmation records confirming...

  • Page 109
    Notices and communications shall be delivered as follows: To Nautilus and Buyer at: Nautilus, Inc 16400 SE Nautilus Drive Vancouver, Washington 98683 U.S.A. Attn: Wayne M. Bolio, Chief Administrative Officer and Senior Vice President, Law & Human Resources Facsimile: 1 (360) 859-5915 E-mail: wbolio@...

  • Page 110
    ...but in the event of a conflict between the two versions the English version shall prevail. All Schedules attached to this Agreement are an integral part hereof and are incorporated herein by reference as though set forth in full. The headings used in this Agreement are for convenience only and shall...

  • Page 111
    ...in the absolute discretion of the Selling Parties Representative, but only with respect to the following provisions of this Agreement, with the power to: (A) designate the accounts for payment of the Purchase Price pursuant to Article 2.3; (B) act pursuant to Article 2.4 with respect to any Purchase...

  • Page 112
    ...: Title: BUYER [NAUTILUS ACQUISITION SUBSIDIARY] By: Signature Print Name: Title: SELLER LAND AMERICA HEALTH & FITNESS CO., LTD By: Signature Print Name: Title: (*) (a Shareholder) By: (*) (*) (a Shareholder) By: (*) (*) Certain information on this page has been omitted and filed separately with the...

  • Page 113
    ... designated in Article 12.15 of the foregoing Asset Purchase Agreement, agrees to serve as the Selling Parties Representative and to be bound by the terms of such Asset Purchase Agreement pertaining thereto. Dated: , 2007 (*) (*) Certain information on this page has been omitted and filed...

  • Page 114
    EXHIBIT A (Seller's Non-Competition Agreement) Exhibit B

  • Page 115
    EXHIBIT B (Shareholders Non-Competition Agreement) Exhibit C

  • Page 116
    EXHIBIT C (Form of Opinion of The Universal Legal Corp., PRC, Counsel to Seller and Shareholders)

  • Page 117
    EXHIBIT D (Form of Opinion of Counsel to Seller and Shareholders) 2 ,

  • Page 118
    ...Shares executed by • in blank. If (a) Nautilus elects to deposit Shares with the Escrow Agent as described in clause (i) above, and (b) the market value of the Shares on deposit hereunder on the third day prior to the Closing Date (the "Determination Date") determined using the Average Share Price...

  • Page 119
    ... stock powers executed in blank by • so that Nautilus may deposit such in escrow hereunder. "Average Share Price" means the average closing price of Nautilus common stock on the New York Stock Exchange for the 10 trading day period ending on the Determination Date. (b) Escrow Property . All Shares...

  • Page 120
    ... Closing Release Instructions signed by Nautilus and the Representative by 4:30 p.m., Pacific Standard Time, on December 31, 2007, and if the Closing has neither occurred or is scheduled to occur, the Escrow Agent shall pay and deliver to Nautilus all Escrow Property held by it hereunder; provided...

  • Page 121
    ...thereof. Any payments of income from the Escrow Property shall be subject to withholding regulations then in force with respect to United States taxes. The parties hereto will provide the Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax identification number certification, or...

  • Page 122
    ...act on such court order and legal opinion without further question. Nautilus and the Selling Parties shall pay the Escrow Agent compensation (as payment in full) for the services to be rendered by the Escrow Agent hereunder in the amount of dollars ($ ) at the time of execution of this Agreement and...

  • Page 123
    ... (by name or title) designated below (or to such other address, facsimile number or person as a party may designate by notice to the other parties): To Nautilus at: Nautilus, Inc. 16400 SE Nautilus Drive Vancouver, Washington 98683 U.S.A. Attn: Wayne M. Bolio, Chief Administrative Officer, Senior...

  • Page 124
    ...(*) at: Attn: (*) Facsimile: E-mail: Attn: Facsimile: E-mail: To Escrow Agent at: Attn: Facsimile: E-mail: with a mandatory copy to: Attn: Facsimile: E-mail: (*) Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with...

  • Page 125
    ... in any other court. Process in any proceeding referred to in the preceding sentence may be served on any party anywhere in the world. Execution of Agreement. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all...

  • Page 126
    ... in connection with this Agreement, including, without limitation, with the power to: (A) execute and deliver the Closing Release Instructions pursuant to Section 3(a) and other release instructions pursuant to Section 3(d), (B) designate the accounts for payment of the amounts released from...

  • Page 127
    ... as of the date first written above. NAUTILUS, INC. By: Print Name: Title: TREURIVER INVESTMENTS LIMITED By: Print Name: Title: [BUYER] By: Print Name: Title: (*), individually and as Representative (*) (*) Certain information on this page has been omitted and filed separately with the Commission...

  • Page 128
    ... should be included if Nautilus has deposited shares of Nautilus common stock with the Escrow Agent as the Option Exercise Deposit. The total number of shares released in accordance with this paragraph should have a value of $30,000,000 calculated using the Average Share Price as determined in...

  • Page 129
    ... the time of exercise of the Option, in the design, manufacture, production or delivery of Purchaser's products and other fitness equipment, including, without limitation, all tangible and intangible assets, machines, devices, instruments and components and related intellectual properties, including...

  • Page 130
    ... If Purchaser exercises the Option, the Option Fee shall be retained by Seller and credited to the payment of the Purchase Price. 3. TERM AND EXERCISE . 3.1 Option Term. The term of the Option shall begin on the date of delivery of the Option Fee and expire at 6:00 p.m. Pacific Daylight Time on June...

  • Page 131
    ... the assets of any other business engaged in the manufacture of fitness equipment in China that has assets with a value exceeding (*). DUE DILIGENCE AND ACCESS TO RECORDS. Commencing on the date of this Agreement and until the earlier of the mutual execution of the Purchase Agreement or termination...

  • Page 132
    ... proprietary and that the unauthorized use or disclosure of this information for any purpose other than as set forth in this Agreement could cause substantial monetary damages to the Seller. (*) PUBLIC STATEMENTS OR RELEASES . Neither of the parties shall make any public announcement with respect to...

  • Page 133
    ... resolution before a single arbitrator in accordance with the Commercial Rules of the American Arbitration Association. The arbitrators shall interpret all controversies or claims arising under or relating to this Agreement in accordance with the laws of the State of Washington, without regard to...

  • Page 134
    IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. PURCHASER: NAUTILUS, INC. By: Signature Print Name: Title: 6 SELLER: LAND AMERICA HEALTH & FITNESS CO., LTD By: Signature Print Name: Title:

  • Page 135
    Exhibit A ASSET PURCHASE AGREEMENT BY AND AMONG NAUTILUS, INC., [NAUTILUS WOFE] AND LAND AMERICA HEALTH & FITNESS CO., LTD. (*) Dated as of •, 2007 (*) Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect...

  • Page 136
    ...SUBSEQUENT TO THE CLOSING DATE TERMINATION OTHER PROVISIONS LIST OF SCHEDULES AND EXHIBITS Assigned Contracts Certain Fixed Assets Land Use Rights Buildings Leased Premises Tangible Property Owned Tangible Property Leased Inventory Locations Intellectual Property Contracts Additional Required Assets...

  • Page 137
    ... Labor Contracts Employee Plans Compliance with the Foreign Corrupt Practices Act and Export Control and Anti-Boycott Laws Sales to Affiliates Services from Affiliates Exhibit A : Exhibit B : Exhibit C : Exhibit D : Exhibit E : (*) Form of Escrow Agreement Form of Seller Non-Competition Agreement...

  • Page 138
    ... corporation ( "Nautilus") ; [ NAUTILUS WOFE ], a wholly foreign-owned limited liability company duly organized and existing under the laws of the PRC ( "Buyer" ); LAND AMERICA HEALTH & FITNESS CO., LTD. , a wholly foreign-owned limited liability company duly organized and existing under the laws of...

  • Page 139
    ...Software" means all computer applications software, owned or licensed, whether for general business usage (e.g., accounting, word processing, graphics, spreadsheet analysis, etc.) or specific, unique-to-the-business usage (e.g., order processing, manufacturing, process control, design, shipping, etc...

  • Page 140
    ... land described in Article 3.5.1. "Indemnity Cut-Off Date" has the meaning given such term in Article 8.2 hereof. "Intellectual Property" shall mean trademarks, service marks, brand names, certification marks, trade dress, trade names and other indications of origin, the goodwill associated with the...

  • Page 141
    ...the Business, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by Seller in the production of finished goods of the Business. "Land" means the land described in Article 3.5.1. "Lien" shall mean any...

  • Page 142
    ..., without limitation, business, income, capital gain, value added, use, transfer, sales, deed and excise or custom tax, and stamp duties and however termed). "Tangible Personal Property" all machinery, equipment, tools, dyes, molds, furniture, fixtures, office equipment, computer hardware, supplies...

  • Page 143
    ... limitations and obligations of the leases, agreements, charges and instruments listed in Schedule 3.5.3. Machinery and Equipment Owned by Seller . Good and marketable title to all the Tangible Personal Property used in or related to the Business owned by Seller, including those listed in Schedule...

  • Page 144
    ... any product warranties; and liabilities or obligations to any supplier of goods, services or utilities or to any customer and; any other liabilities or obligations to any third party, including, without limitation, liabilities to any Government Authority. Purchase Price . The purchase price (the...

  • Page 145
    ... be paid by Seller; provided , that Buyer will reimburse Seller for the incremental audit fees as compared to the fees associated with Seller's previous statutory audit. Promptly after completion of such audit Deloitte shall supply Seller with copies of the Audited Closing Financial Statements and...

  • Page 146
    ..., binding and conclusive on the Parties; provided , that , Buyer may dispute any amount reflected on the Audited Closing Financial Statements if Buyer shall notify Seller in writing of the amount of and describe each disputed item within twenty (20) calendar days of Seller's receipt of the Audited...

  • Page 147
    ... have been paid in full; A building ownership certificate for each building or portion of a building described in Schedule 3.5.2 naming Buyer as the owner, together with evidence satisfactory to Nautilus that all applicable fees and taxes (including, without limitation, deed taxes) in respect of the...

  • Page 148
    ...Nautilus, assigning and transferring to Buyer all of Seller's interest in all Intellectual Property used in and related to the Business, including that listed in Schedule 3.5.7, including, without limitation, an assignment of Seller's trade name and trademarks relating to the Business; Duly executed...

  • Page 149
    .... Seller has good and marketable title to, or, in the case of leases, valid and effective leasehold interests in, all of the Assets, free and clear of all Liens, except as noted in the Schedules hereto. Land Use Rights . Schedule 3.5.1 sets forth all of the land used in the Business for which Seller...

  • Page 150
    ... name of Seller, or of which Seller is a licensor or licensee, used in, or which have been used in, or which are under development or have been conceived in, or which have or potentially have application to, the Business. Seller owns all of the Intellectual Property to be transferred hereunder free...

  • Page 151
    agency agreements, technical information, engineering data, design and engineering specifications and similar materials recording or evidencing Seller's proprietary expertise used in or residing with the Business, whether purchased or developed internally, included in the Assets are transferable to ...

  • Page 152
    .... No item of Tangible Personal Property is in need of repair or replacement other than as part of routine maintenance in the ordinary course of business. Except as disclosed in Schedule 3.7(b), all Tangible Personal Property used in the Business is in the possession of Seller. Compliance with Laws...

  • Page 153
    ... to Nautilus: (a) a pro forma unaudited balance sheet of the Business as at December 31, 2006 (including the notes thereto, the "2006 Balance Sheet"), and the related pro forma unaudited statements of income, changes in shareholders' equity and cash flows for the fiscal year then ended, including...

  • Page 154
    ... in such amounts duly in force through the Closing Date. Suppliers . Listed on Schedule 3.17 are the names and addresses of each of the suppliers of services materials, components, and supplies used in the Business and involving in the aggregate payments exceeding U.S.$100,000 or the equivalent in...

  • Page 155
    ... to Nautilus the environmental report of MWH Environmental Engineering (Shanghai) Co., Ltd. ("MWH"), dated December 8, 2006, relating to the Facilities. All matters identified in that report have been remediated by Seller. Article 3.19 Employees . Schedule 3.19 lists the name, current annual salary...

  • Page 156
    ... records are based is complete and accurate in all respects. Seller maintains a system of internal accounting controls adequate to insure that Seller maintains no off-the-books accounts and that Seller's assets are used only in accordance with Seller's management directives. Seller has at all times...

  • Page 157
    ... 164 or 389 of the PRC Criminal Code, Article 8 of the Law Against Unfair Competition or the Interim Rules on Prohibition of Commercial Bribery. Pricing of Sales . Except as set forth in Schedule 3.23, since December 31, 2006, all of the products of the Business have been sold to persons who are not...

  • Page 158
    ... and to review such information as Nautilus has requested for the purpose of completing such investigation. Periodic Reports. The periodic reports on Form 10-K, Form 10-Q and Form 8-K filed by Nautilus with the U.S. Securities and Exchange Commission ("SEC") since June 30, 2006 (i) complied as to...

  • Page 159
    ...ordinary course of business, (iii) exercise best efforts to keep available the services of the present employees of the Business, and (iv) exercise best efforts to preserve the good relations of suppliers, customers and others with whom Seller has business relations relating to the Business. Sale or...

  • Page 160
    ... full access throughout the period prior to the Closing Date, to all of the properties, books, contracts, commitments, customers, suppliers, distributors and records of the Business, and furnish to Nautilus during such period all such information concerning the Business as Nautilus may...

  • Page 161
    ... and deliver to Nautilus and Buyer prior to Closing an updated environmental report (the "Closing Environmental Report"), dated within twenty (20) days of the Closing date, prepared by MWH. Such updated report shall be of similar scope to the report of such firm dated December 8, 2006 (as referenced...

  • Page 162
    ... Date, there shall not have occurred or been discovered: any material adverse change in the business, financial condition, prospects or results of operations of the Business, other than a material adverse change resulting from a material reduction in the volume of purchases by Nautilus; any new law...

  • Page 163
    ... of the insurance set forth in Schedule 3.16. Seller will make arrangements to insure the continued coverage after the Closing Date of Buyer under an insurance policy for any and all liabilities for injury to persons or property arising out of the sale by Seller of the products of the Business prior...

  • Page 164
    ...Nautilus and Buyer. Legal Prohibition . On the Closing Date there shall exist no injunction or final judgment, law or regulation prohibiting the consummation of the transactions contemplated by this Agreement. Article 7.2 Article 7.3 (*) Certain information on this page has been omitted and filed...

  • Page 165
    ... Cut-Off date for an indefinite period, and other than claims under Article 3.18, which shall survive until the (*)-month anniversary of the Closing Date); (c) claims based on the failure of any item of Tangible Personal Property to satisfy the representations and warranties set forth in Article...

  • Page 166
    ... and hold harmless Seller and the Shareholders at all times from and after the Closing Date against and in respect of all matters in connection with the following: From and after the Closing Date, all the liabilities of Nautilus and Buyer arising out of or in connection with the Business (including...

  • Page 167
    ... of officers and employees of Seller or the Shareholders after the Closing Date in defense thereof. Notwithstanding the foregoing, the maximum aggregate liability of Nautilus and Buyer for all claims made by Seller or the Shareholders under Article 8.3.2 shall not exceed (*). Article 8.4 Payments to...

  • Page 168
    ... will use their best efforts to cause such employees to become employees of Buyer as of the Closing Date. Article 9.2 Salaries and Benefits . Seller shall be responsible for (i) the payment of all wages and other remuneration due to staff and employees of the Business with respect to their services...

  • Page 169
    ... to prepare financial statements or tax returns or deal with tax audits. After the Closing Date, Seller shall provide Buyer and its representatives reasonable access to records that are Excluded Assets, during normal business hours and on at least three days' prior written notice, for any reasonable...

  • Page 170
    ... such information. [Intentionally left blank] Land America Name . Seller agrees that following the Closing Date it will not, and each Shareholder agrees that it will cause Seller not to, (i) use the name "Land America" in connection with the manufacture, distribution or sale of fitness equipment, or...

  • Page 171
    ... long as such claim is being prosecuted in good faith. [intentionally left blank] Responsibility for Taxes . Each Party shall pay its own transaction-related Taxes arising out of the transactions contemplated by this Agreement. Seller shall also pay any filing or recording fees payable in connection...

  • Page 172
    ... a confirmation report specifying the facsimile number of the recipient, the number of pages sent and the date of the transmission) and, (d) if given or made by electronic mail, on the following Business Day after the electronic mail is sent (as long as the sender has confirmation records confirming...

  • Page 173
    ... America Health & Fitness Co., Ltd. 25 North 2nd Road, Xiamen, Xinglin Jimei District Xiamen, China 361022 Attn: (*) Facsimile Address] Facsimile: E-mail (*) [Address] Attn: Facsimile: E-mail: Public Announcements . No Party shall issue any press release or public announcement in connection with...

  • Page 174
    ...but in the event of a conflict between the two versions the English version shall prevail. All Schedules attached to this Agreement are an integral part hereof and are incorporated herein by reference as though set forth in full. The headings used in this Agreement are for convenience only and shall...

  • Page 175
    ... Seller to take or not take such action, as the case may be. Without limiting the generality of the foregoing, Seller and each Shareholder shall be jointly and severally liable for the indemnities set forth in Article 8. Article 12.15 (a) Representative of Seller and the Shareholders . Seller and...

  • Page 176
    ... Signature Print Name: Title: BUYER [NAUTILUS WOFE] By: Signature Print Name: Title: SELLER LAND AMERICA HEALTH & FITNESS CO., LTD By: Signature Print Name: Title: (*) (a Shareholder) By: (*) (*) ( a Shareholder) By: (*) (*) Certain information on this page has been omitted and filed separately with...

  • Page 177
    ...REPRESENTATIVE The undersigned, being the Selling Parties Representative designated in Article 12.15 of the foregoing Asset Purchase Agreement, agrees to serve as the Selling Parties Representative and to be bound by the terms of such Asset Purchase Agreement pertaining thereto. Dated: , 2007 (*) 40

  • Page 178
    ... account of the Selling Parties. Release of Escrow Property. (a) Indemnification Claim Releases . (1) From time to time on before the dates specified in Article 8.2 of the Purchase Agreement, Nautilus may give a notice (a "Notice") to the Representative and the Escrow Agent specifying in reasonable...

  • Page 179
    ... . Nautilus and the Representative may from time to time jointly instruct the Escrow Agent in writing to release any or all of the Escrow Property to a person or persons designated by them. Release of Escrow Property. Following the (*)-month anniversary of the Closing Date, the Escrow Agent shall...

  • Page 180
    ... deposit account with the Escrow Agent until release by the Escrow Agent of the entire Escrow Property. The Escrow Agent is authorized to liquidate in accordance with its customary procedures any portion of the Escrow Property consisting of investments to provide for payments required to be made...

  • Page 181
    ...thereof. Any payments of income from the Escrow Property shall be subject to withholding regulations then in force with respect to United States taxes. The parties hereto will provide the Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax identification number certification, or...

  • Page 182
    ..., to use the services of any United States central securities depository it reasonably deems appropriate, including, without limitation, the Depository Trust Company and the Federal Reserve Book Entry System. (j) (k) (l) 7. Limited Responsibility. This Agreement expressly sets forth all...

  • Page 183
    ... (by name or title) designated below (or to such other address, facsimile number or person as a party may designate by notice to the other parties): To Nautilus at: Nautilus, Inc. 16400 SE Nautilus Drive Vancouver, Washington 98683 U.S.A. Attn: Wayne M. Bolio, Chief Administrative Officer, Senior...

  • Page 184
    ...forum, agrees that all claims in respect of the ...Process in any proceeding referred to in the preceding sentence may be served on any party anywhere in the world. Execution of Agreement. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy...

  • Page 185
    ... in connection with this Agreement, including, without limitation, with the power to: (A) execute and deliver the Closing Release Instructions pursuant to Section 3(a) and other release instructions pursuant to Section 3(d), (B) designate the accounts for payment of the amounts released from...

  • Page 186
    ... as of the date first written above. NAUTILUS, INC. By: Print Name: Title: LAND AMERICA HEALTH & FITNESS CO., LTD. By: Print Name: Title: [BUYER] By: Print Name: Title: (*), individually and as Representative (*) (*) Certain information on this page has been omitted and filed separately with the...

  • Page 187
    EXHIBIT A (Form of Escrow Agreement) Exhibit A

  • Page 188
    EXHIBIT B (Seller's Non-Competition Agreement) Exhibit B

  • Page 189
    EXHIBIT C (Shareholders Non-Competition Agreement) Exhibit C

  • Page 190
    EXHIBIT D (Form of Opinion of The Universal Legal Corp., PRC, Counsel to Seller and Shareholders) Exhibit D

  • Page 191
    EXHIBIT E (Form of Opinion of Counsel to Seller and Share Exhibit E ,

  • Page 192
    ... OF NAUTILUS, INC. Nautilus, Inc., a Washington corporation Nautilus International Holdings, S.A., a Swiss corporation Nautilus International, S.A., a Swiss corporation Nautilus Switzerland, S.A., a Swiss corporation Nautilus Fitness Deutschland GmbH, a German corporation Nautilus Fitness UK Ltd...

  • Page 193
    ... reports dated March 15, 2007, relating to the consolidated financial statements of Nautilus, Inc. and management's report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Nautilus, Inc. for the year ended December 31, 2006. DELOITTE...

  • Page 194
    ..., his true and lawful attorney-in-fact and agent, for him and his name, place and stead, in any and all capacities, to sign the Form 10-K of Nautilus, Inc., a Washington corporation, for the fiscal year ended December 31, 2006, and any amendments or supplements thereto, and to file this Power of...

  • Page 195
    ..., his true and lawful attorney-in-fact and agent, for him and his name, place and stead, in any and all capacities, to sign the Form 10-K of Nautilus, Inc., a Washington corporation, for the fiscal year ended December 31, 2006, and any amendments or supplements thereto, and to file this Power of...

  • Page 196
    ..., his true and lawful attorney-in-fact and agent, for him and his name, place and stead, in any and all capacities, to sign the Form 10-K of Nautilus, Inc., a Washington corporation, for the fiscal year ended December 31, 2006, and any amendments or supplements thereto, and to file this Power of...

  • Page 197
    ..., his true and lawful attorney-in-fact and agent, for him and his name, place and stead, in any and all capacities, to sign the Form 10-K of Nautilus, Inc., a Washington corporation, for the fiscal year ended December 31, 2006, and any amendments or supplements thereto, and to file this Power of...

  • Page 198
    ...All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material...

  • Page 199
    ...All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material...

  • Page 200
    ... of Title 18, United States Code), the undersigned officer of Nautilus, Inc., a Washington corporation (the "Company"), does hereby certify that: To my knowledge, the Annual Report on Form 10-K for the year ended December 31, 2006 (the "Form 10-K") of the Company fully complies with the requirements...

  • Page 201
    ... of Title 18, United States Code), the undersigned officer of Nautilus, Inc., a Washington corporation (the "Company"), does hereby certify that: To my knowledge, the Annual Report on Form 10-K for the year ended December 31, 2006 (the "Form 10-K") of the Company fully complies with the requirements...