Nautilus 2006 Annual Report Download - page 71

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3. TERM AND EXERCISE
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3.1 Option Term. The term of the Option shall begin on the effective date hereof and expire at 6:00 p.m. Pacific Daylight Time on
June 30, 2007. In the event Purchaser fails to exercise the Option on or before such time of expiration, Purchaser shall return to
Seller or destroy all confidential and proprietary information of Seller obtained by Purchaser during the due diligence process.
3.2 Exercise of Option. On or before expiration of the Option as provided in Section 3.1 above, and subject to the provisions of
Section 3.3 below, Purchaser may elect to exercise the Option by giving written notice to Seller in accordance with Section 10.2
below and depositing an Option Exercise Deposit that shall be held in accordance with the terms of an Escrow Agreement in the
form of Exhibit A attached hereto (the “Escrow Agreement”). The Option Exercise Deposit shall, at Purchaser’
s sole option, consist
of either (a) Thirty Million United States Dollars ($30,000,000) or (b) shares of Nautilus, Inc. unregistered common stock, bearing a
restrictive legend as required 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 a registration statement covering such shares with the U.S.
Securities and Exchange Commission within 30 days following Closing (as defined in the Purchase Agreement). The Option
Exercise Deposit shall be held and disbursed in accordance with the terms of the Escrow Agreement and the Purchase Agreement.
3.3 Purchase Agreement and Escrow Agreement . Within sixty (60) days after delivery of written notice of exercise as specified in
Section 3.2 above, but no earlier than June 30, 2007, Purchaser and Seller shall execute and deliver a definitive Asset Purchase and
Sale Agreement (“Purchase Agreement”) in the form attached hereto as Exhibit B. The purchase and sale of the Assets shall be
completed on December 31, 2007 (the “Closing Date”)
in accordance with the terms of the Purchase Agreement. Seller shall deliver
draft schedules and exhibits to the Purchase Agreement on or before April 30, 2007 and shall promptly provide updated schedules
and exhibits to supplement or correct any information presented in such draft schedules.
3.4 Land America Option Agreement. It is the intention of the parties that exercise of the Option shall occur only in conjunction with
exercise of the Land America Option. Therefore, exercise (or expiration, if applicable) of the Option as provided in Section 3.2
above shall constitute exercise (or expiration, if applicable) of the Land America Option, and exercise (or expiration, if applicable)
of the Land America Option in accordance with the terms of the Land America Option Agreement shall constitute exercise (or
expiration, if applicable) of the Option granted herein.