Exhibit 10.31

SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of March 8, 2010, is by and between NAUTILUS,
INC., a Washington corporation (the “Debtor”), and BANK OF THE WEST (“the
Secured Party”).

WHEREAS, the Debtor has entered into a credit agreement dated as of the date
hereof (as amended and in effect from time to time, the “Credit Agreement”),
with the Secured Party, pursuant to which the Secured Party, subject to the
terms and conditions contained therein, is to make loans or otherwise to extend
credit to the Debtor; and

WHEREAS, it is a condition precedent to the Secured Party’s making any loans or
otherwise extending credit to the Debtor under the Credit Agreement that the
Debtor execute and deliver to the Secured Party a security agreement in
substantially the form hereof; and

WHEREAS, the Debtor wishes to grant a security interest in favor of the Secured
Party as herein provided;

NOW, THEREFORE, in consideration of the promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1. Definitions. All capitalized terms used herein without definitions shall have
the respective meanings provided therefor in the Credit Agreement. The term
“State,” as used herein, means the State of Washington. All terms defined in the
Uniform Commercial Code of the State and used herein shall have the same
definitions herein as specified therein. However, if a term is defined in
Article 9 of the Uniform Commercial Code of the State differently than in
another Article of the Uniform Commercial Code of the State, the term has the
meaning specified in Article 9.

2. Grant of Security Interest. The Debtor hereby grants to the Secured Party, to
secure the payment and performance in full of all of the Obligations, a security
interest to the Secured Party in the following properties, assets and rights of
the Debtor, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof (all of the same being
hereinafter called the “Collateral”): all personal and fixture property of every
kind and nature including without limitation all goods (including inventory,
equipment and any accessions thereto), instruments (including promissory notes),
documents, accounts (including health-care-insurance receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, supporting obligations,
any other contract rights or rights to the payment of money, insurance claims
and proceeds, and all general intangibles (including all payment intangibles).
The Secured Party acknowledges that the attachment of its security interest in
any additional commercial tort claim as original collateral is subject to the
Debtor’s compliance with Section 4.6. Notwithstanding anything in this Section
to the contrary, the following shall not constitute “Collateral” hereunder:
(a) equipment acquired after the Closing Date pursuant to Capital Leases in
compliance with the Credit Agreement to the extent that the agreements with
respect thereto prohibit the inclusion of

 

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such equipment as Collateral; and (b) any intent-to-use trademark application to
the extent and for so long as creation by the Debtor of a security interest
therein would result in the abandonment, invalidation, or unenforceability
thereof. Notwithstanding anything in this Section to the contrary, the
Collateral constituting stock in foreign Subsidiaries shall be limited as set
forth in the Pledge Agreement.

3. Authorization to File Financing Statements. The Debtor hereby irrevocably
(until termination of this Agreement) authorizes the Secured Party at any time
and from time to time to file in any filing office in any Uniform Commercial
Code jurisdiction any initial financing statements and amendments thereto that
(a) indicate the Collateral (i) as all assets of the Debtor or words of similar
effect, regardless of whether any particular asset comprised in the Collateral
falls within the scope of Article 9 of the Uniform Commercial Code of the State
or such jurisdiction, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) provide any other information required by part 5 of
Article 9 of the Uniform Commercial Code of the State, or such other
jurisdiction, for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether the Debtor is an organization, the
type of organization and any organizational identification number issued to the
Debtor and, (ii) in the case of a financing statement filed as a fixture filing
or indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates. The
Debtor agrees to furnish any such information to the Secured Party promptly upon
the Secured Party’s request. The Debtor also ratifies its authorization for the
Secured Party to have filed in any Uniform Commercial Code jurisdiction any like
initial financing statements or amendments thereto if filed prior to the date
hereof.

4. Other Actions. To further the attachment, perfection and first priority of,
and the ability of the Secured Party to enforce, the Secured Party’s security
interest in the Collateral, and without limitation on the Debtor’s other
obligations in this Agreement, the Debtor agrees, in each case at the Debtor’s
expense, to take the following actions with respect to the following Collateral:

4.1 Promissory Notes and Tangible Chattel Paper. If the Debtor shall at any time
hold or acquire any promissory notes or tangible chattel paper, in each case to
the extent that the aggregate amount of such promissory notes or tangible
chattel paper (along with all other Collateral of any type described above)
exceeds $250,000, the Debtor shall forthwith endorse, assign and deliver the
same to the Secured Party, accompanied by such instruments of transfer or
assignment duly executed in blank as the Secured Party may from time to time
specify.

4.2 Deposit Accounts. For each deposit account that the Debtor at any time opens
or maintains, the Debtor shall, at the Secured Party’s request and option,
pursuant to an agreement in form and substance satisfactory to the Secured Party
in its Permitted Discretion, either (a) cause the depositary bank to comply at
any time with instructions from the Secured Party to such depositary bank
directing the disposition of funds from time to time credited to such deposit
account, without further consent of the Debtor, or (b) arrange for the Secured
Party to become the customer of the depositary bank with respect to the deposit
account, with the Debtor being permitted, only with the consent of the Secured
Party, to exercise rights to withdraw funds from such deposit account. The

 

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Secured Party agrees with the Debtor that the Secured Party shall not give any
such instructions or withhold any withdrawal rights from the Debtor, unless an
Event of Default has occurred and is continuing, or would occur, if effect were
given to any withdrawal not otherwise permitted by the Loan Documents. The
provisions of this paragraph shall not apply to (i) any deposit account for
which the Debtor, the depositary bank and the Secured Party have entered into a
cash collateral agreement specially negotiated among the Debtor, the depositary
bank and the Secured Party for the specific purpose set forth therein, (ii) a
deposit account for which the Secured Party is the depositary bank and is in
automatic control, and (iii) deposit accounts specially and exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of the Debtor’s salaried employees, and (iv) deposit accounts that
contain no more than $50,000 in any such deposit account at any time and no more
than $250,000 in the aggregate in all such deposit accounts under this
clause (iv).

4.3 Investment Property. If the Debtor shall at any time hold or acquire any
certificated securities, to the extent that the aggregate amount of such
certificated securities exceeds $250,000, the Debtor shall forthwith endorse,
assign and deliver the same to the Secured Party, accompanied by such
instruments of transfer or assignment duly executed in blank as the Secured
Party may from time to time specify. If any securities in the aggregate amount
exceeding $250,000 now or hereafter acquired by the Debtor are uncertificated
and are issued to the Debtor or its nominee directly by the issuer thereof, the
Debtor shall immediately notify the Secured Party thereof and, at the Secured
Party’s request and option, pursuant to an agreement in form and substance
satisfactory to the Secured Party in its Permitted Discretion, either (a) cause
the issuer to agree to comply with instructions from the Secured Party as to
such securities, without further consent of the Debtor or such nominee, or
(b) arrange for the Secured Party to become the registered owner of the
securities. If any securities, whether certificated or uncertificated, or other
investment property now or hereafter acquired by the Debtor, to the extent that
the aggregate amount of such securities or investment property exceeds $250,000,
are held by the Debtor or its nominee through a securities intermediary or
commodity intermediary, the Debtor shall immediately notify the Secured Party
thereof and, at the Secured Party’s request and option, pursuant to an agreement
in form and substance satisfactory to the Secured Party in its Permitted
Discretion, either (i) cause such securities intermediary or (as the case may
be) commodity intermediary to agree to comply with entitlement orders or other
instructions from the Secured Party to such securities intermediary as to such
securities or other investment property, or (as the case may be) to apply any
value distributed on account of any commodity contract as directed by the
Secured Party to such commodity intermediary, in each case without further
consent of the Debtor or such nominee, or (ii) in the case of financial assets
or other investment property held through a securities intermediary, arrange for
the Secured Party to become the entitlement holder with respect to such
investment property, with the Debtor being permitted, only with the consent of
the Secured Party, to exercise rights to withdraw or otherwise deal with such
investment property. The Secured Party agrees with the Debtor that the Secured
Party shall not give any such entitlement orders or instructions or directions
to any such issuer, securities intermediary or commodity intermediary, and shall
not withhold its consent to the exercise of any withdrawal or

 

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dealing rights by the Debtor, unless an Event of Default has occurred and is
continuing, or, after giving effect to any such investment and withdrawal rights
not otherwise permitted by the Loan Documents, would occur. The provisions of
this paragraph shall not apply to any financial assets credited to a securities
account for which the Secured Party is the securities intermediary.

4.4 Collateral in the Possession of a Bailee. If any Collateral is at any time
in the possession of a bailee, the Debtor shall promptly notify the Secured
Party thereof and, at the Secured Party’s request and option, shall promptly
obtain an acknowledgement from the bailee, in form and substance satisfactory to
the Secured Party in its Permitted Discretion, that the bailee holds such
Collateral for the benefit of the Secured Party, and that such bailee agrees to
comply, without further consent of the Debtor, with instructions from the
Secured Party as to such Collateral, provided that if no Default or Event of
Default has occurred and is continuing, the Debtor does not need to comply with
the provisions of this Section so long as the Collateral is not in possession of
any such bailee for a period longer than 30 days and no more than $250,000 of
Collateral is in possession of any such bailee (or $1,000,000 in possession of
all bailees) at any time. The Secured Party agrees with the Debtor that the
Secured Party shall not give any such instructions unless an Event of Default
has occurred and is continuing or would occur after taking into account any
action by the Debtor with respect to the bailee.

4.5 Letter-of-Credit Rights. If the Debtor is at any time a beneficiary under a
letter of credit, to the extent that the aggregate amount of any such letters of
credit exceeds $250,000, the Debtor shall promptly notify the Secured Party
thereof and, at the request and option of the Secured Party, the Debtor shall,
pursuant to an agreement in form and substance satisfactory to the Secured Party
in its Permitted Discretion, either (a) arrange for the issuer and any confirmer
or other nominated person of such letter of credit to consent to an assignment
to the Secured Party of the proceeds of the letter of credit, or (b) arrange for
the Secured Party to become the transferee beneficiary of the letter of credit.

4.6 Commercial Tort Claims. If the Debtor shall at any time hold or acquire a
commercial tort claim, to the extent that the aggregate amount of any such
commercial tort claims exceeds $250,000, the Debtor shall immediately notify the
Secured Party in a writing signed by the Debtor of the particulars thereof and
grant to the Secured Party in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance satisfactory to the Secured Party.

4.7 Other Actions as to Any and All Collateral. The Debtor further agrees, at
the request and option of the Secured Party, to take any and all other
commercially reasonable actions the Secured Party may determine in its Permitted
Discretion to be necessary or useful for the attachment, perfection and first
priority of, and the ability of the Secured Party to enforce, the Secured
Party’s security interest in any and all of the Collateral, including, without
limitation, (a) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the Uniform Commercial Code, to
the extent, if any, that the Debtor’s signature thereon is required

 

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therefor, (b) causing the Secured Party’s name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Secured Party to
enforce, the Secured Party’s security interest in such Collateral, (c) complying
with any provision of any statute, regulation or treaty of the United States as
to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Secured Party to
enforce, the Secured Party’s security interest in such Collateral, (d) obtaining
governmental and other third party waivers, consents and approvals in form and
substance satisfactory to Secured Party in its Permitted Discretion, including,
without limitation, any consent of any licensor, lessor or other person
obligated on Collateral, (e) obtaining waivers from mortgagees and landlords in
form and substance satisfactory to the Secured Party in its Permitted Discretion
and (f) taking all actions under any earlier versions of the Uniform Commercial
Code or under any other law, as reasonably determined by the Secured Party to be
applicable in any relevant Uniform Commercial Code or other jurisdiction,
including any foreign jurisdiction.

5. Relation to Other Security Documents. The provisions of this Agreement
supplement the provisions of any real estate mortgage or deed of trust granted
by the Debtor to the Secured Party which secures the payment or performance of
any of the Obligations. Nothing contained in any such real estate mortgage or
deed of trust shall derogate from any of the rights or remedies of the Secured
Party hereunder. In addition to the provisions of this Agreement being so read
and construed with any such mortgage or deed of trust, the provisions of this
Agreement shall be read and construed with the other Security Documents referred
to below in the manner so indicated.

5.1 IP Security Agreements. Concurrently herewith the Debtor is also executing
and delivering to the Secured Party the IP Security Agreements pursuant to which
the Debtor is granting to the Secured Party security interests in certain
Collateral consisting of patents and patent rights, trademarks, service marks
and trademark and service mark rights, together with the goodwill appurtenant
thereto. The provisions of the IP Security Agreements are supplemental to the
provisions of this Agreement, and nothing contained in the IP Security
Agreements shall derogate from any of the rights or remedies of the Secured
Party hereunder. Neither the delivery of, nor anything contained in, the IP
Security Agreements shall be deemed to prevent or postpone the time of
attachment or perfection of any security interest in such Collateral created
hereby.

6. Representations and Warranties Concerning Debtor’s Legal Status. The Debtor
has previously delivered to the Secured Party a certificate signed by the Debtor
and entitled “Perfection Certificate” (the “Perfection Certificate”). The Debtor
represents and warrants to the Secured Party as follows: (a) the Debtor’s exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof, (b) the Debtor is an organization of the type, and is organized in
the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Debtor’s organizational identification
number or accurately states that the Debtor has none, (d) the Perfection
Certificate accurately sets forth the Debtor’s place of business or, if more
than one, its chief executive office, as well as the Debtor’s mailing address,
if different, (e) all other information set forth on the Perfection Certificate
pertaining to the Debtor is accurate and complete in all material respects, and
(f) that there has been no change in any information provided in the Perfection
Certificate since the date on which it was executed by the Debtor.

 

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7. Covenants Concerning Debtor’s Legal Status. The Debtor covenants with the
Secured Party as follows: (a) without providing at least 15 days’ prior written
notice to the Secured Party, the Debtor will not change its name, its place of
business or, if more than one, chief executive office, or its mailing address or
organizational identification number if it has one, (b) if the Debtor does not
have an organizational identification number and later obtains one, the Debtor
shall forthwith notify the Secured Party of such organizational identification
number, and (c) the Debtor will not change its type of organization,
jurisdiction of organization or other legal structure except as permitted in the
Credit Agreement.

8. Representations and Warranties Concerning Collateral, etc. The Debtor further
represents and warrants to the Secured Party as follows: (a) the Debtor is the
owner of the Collateral, free from any right or claim of any person or any
adverse lien, security interest or other encumbrance, except for the security
interest created by this Agreement and Permitted Liens, (b) none of the
Collateral constitutes, or is the proceeds of, “farm products” as defined in
Section 9-102(a)(34) of the Uniform Commercial Code of the State, (c) none of
the account debtors or other persons obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral, (d) the
Debtor holds no commercial tort claim except as indicated on the Perfection
Certificate, and (e) the Debtor has at all times operated its business in
material compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state
and local statutes and ordinances dealing with the control, shipment, storage or
disposal of hazardous materials or substances, (f) all other information set
forth on the Perfection Certificate pertaining to the Collateral is accurate and
complete in all material respects, and (g) that there has been no change in any
information provided in the Perfection Certificate since the date on which it
was executed by the Debtor.

9. Covenants Concerning Collateral, etc. The Debtor further covenants with the
Secured Party as follows: (a) the Collateral, to the extent not delivered to the
Secured Party pursuant to Section 4, will be kept at those locations listed on
the Perfection Certificate and the Debtor will not remove the Collateral from
such locations, without providing at least 15 days prior written notice to the
Secured Party, (b) except for the security interest herein granted and the
Permitted Liens, the Debtor shall be the owner of the Collateral free from any
right or claim of any other person, lien, security interest or other
encumbrance, and the Debtor shall defend the same against all claims and demands
of all persons at any time claiming the same or any interests therein adverse to
the Secured Party (except for the Permitted Liens), (c) the Debtor shall not
pledge, mortgage or create, or suffer to exist any right of any person in or
claim by any person to the Collateral, or any security interest, lien or
encumbrance in the Collateral in favor of any person, other than the Secured
Party (and other than the Permitted Liens), (d) the Debtor will keep the
Collateral in good order and repair (ordinary wear and tear excepted) and will
not use the same in violation of any material law or any policy of insurance
thereon, (e) the Debtor will permit the Secured Party, or its designee, to
inspect the Collateral, subject to reasonable advance notice, at any reasonable
time during normal business hours, wherever located, (f) the Debtor will pay
promptly when due all taxes, assessments, governmental charges and levies upon
the Collateral or incurred in connection with the use or operation of such
Collateral or incurred in

 

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connection with this Agreement (unless such taxes, assessments, governmental
charges, and levies are being properly contested), (g) the Debtor will continue
to operate, its business in compliance with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances, and (h) the
Debtor will not sell or otherwise dispose, or offer to sell or otherwise
dispose, of the Collateral or any interest therein except for (i) sales of
inventory in the ordinary course of business (ii) so long as no Event of Default
has occurred and is continuing, sales or other dispositions of obsolescent items
of equipment consistent with past practices and (iii) as otherwise permitted in
the Credit Agreement.

10. Insurance.

10.1 Maintenance of Insurance. The Debtor will maintain with financially sound
and reputable insurers insurance with respect to its properties and business
against such casualties and contingencies as shall be in accordance with general
practices of businesses engaged in similar activities in similar geographic
areas. Such insurance shall be in such minimum amounts that the Debtor will not
be deemed a co-insurer under applicable insurance laws, regulations and policies
and otherwise shall be in such amounts, contain such terms, be in such forms and
be for such periods as may be reasonably satisfactory to the Secured Party. In
addition, all such insurance (other than workers’ compensation and D&O
insurance) shall be payable to the Secured Party as loss payee. Without limiting
the foregoing, the Debtor will (a) keep all of its physical property insured
with casualty or physical hazard insurance on an “all risks” basis, (b) maintain
all such workers’ compensation or similar insurance as may be required by law,
and (c) maintain, in amounts and with deductibles equal to those generally
maintained by businesses engaged in similar activities in similar geographic
areas, general public liability insurance against claims of bodily injury, death
or property damage occurring, on, in or about the properties of the Debtor;
business interruption insurance; and product liability insurance.

10.2 Insurance Proceeds. The proceeds of any casualty insurance in respect of
any casualty loss of any of the Collateral shall, subject to the rights, if any,
of other parties with an interest having priority in the property covered
thereby, (a) so long as no Default or Event of Default has occurred and is
continuing and to the extent that the amount of such proceeds is less than
$10,000, be disbursed to the Debtor for direct application by the Debtor solely
to the repair or replacement of the Debtor’s property so damaged or destroyed,
and (b) in all other circumstances, be held by the Secured Party as cash
collateral for the Obligations. The Secured Party may, at its sole option,
disburse from time to time all or any part of such proceeds so held as cash
collateral, upon such terms and conditions as the Secured Party may reasonably
prescribe, for direct application by the Debtor solely to the repair or
replacement of the Debtor’s property so damaged or destroyed, or the Secured
Party may apply all or any part of such proceeds to the Obligations.

 

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10.3 Continuation of Insurance. All policies of insurance shall provide for at
least 30 days prior written cancellation notice to the Secured Party. In the
event of failure by the Debtor to provide and maintain insurance as herein
provided, the Secured Party may, at its option, provide such insurance and
charge the amount thereof to the Debtor. The Debtor shall furnish the Secured
Party with certificates of insurance and policies evidencing compliance with the
foregoing insurance provision.

11. Collateral Protection Expenses; Preservation of Collateral.

11.1 Expenses Incurred by Secured Party. In the Secured Party’s discretion, if
the Debtor fails to do so, upon giving the Debtor prior written notice thereof,
the Secured Party may discharge taxes and other encumbrances at any time levied
or placed on any of the Collateral, maintain any of the Collateral, make repairs
thereto and pay any necessary filing fees or insurance premiums. The Debtor
agrees to reimburse the Secured Party promptly on demand for all expenditures so
made. The Secured Party shall have no obligation to the Debtor to make any such
expenditures, nor shall the making thereof be construed as the waiver or cure of
any Default or Event of Default.

11.2 Secured Party’s Obligations and Duties. Anything herein to the contrary
notwithstanding, the Debtor shall remain obligated and liable under each
contract or agreement comprised in the Collateral to be observed or performed by
the Debtor thereunder. The Secured Party shall not have any obligation or
liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Secured Party of any payment relating to
any of the Collateral, nor shall the Secured Party be obligated in any manner to
perform any of the obligations of the Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times. The Secured Party’s sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the Uniform Commercial Code of the State or otherwise,
shall be to deal with such Collateral in the same manner as the Secured Party
deals with similar property for its own account.

12. Securities and Deposits. The Secured Party may at any time following and
during the continuance of a Default and Event of Default, at its option,
transfer to itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional Collateral or
apply it to the Obligations. Whether or not any Obligations are due, the Secured
Party may, following and during the continuance of a Default and Event of
Default, demand, sue for, collect, or make any settlement or compromise which it
deems desirable with respect to the Collateral. Regardless of the adequacy of
Collateral or any other security for the Obligations, any deposits or other sums
at any time credited by or due from the Secured Party to the Debtor may at any
time be applied to or set off against any of the Obligations.

 

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13. Notification to Account Debtors and Other Persons Obligated on Collateral.
If a Default or an Event of Default shall have occurred and be continuing, the
Debtor shall, at the request and option of the Secured Party, notify account
debtors and other persons obligated on any of the Collateral of the security
interest of the Secured Party in any account, chattel paper, general intangible,
instrument or other Collateral and that payment thereof is to be made directly
to the Secured Party or to any financial institution designated by the Secured
Party as the Secured Party’s agent therefor, and the Secured Party may itself,
if a Default or an Event of Default shall have occurred and be continuing, upon
notice to the Debtor, so notify account debtors and other persons obligated on
Collateral. After the making of such a request or the giving of any such
notification, the Debtor shall hold any proceeds of collection of accounts,
chattel paper, general intangibles, instruments and other Collateral received by
the Debtor as trustee for the Secured Party without commingling the same with
other funds of the Debtor and shall turn the same over to the Secured Party,
together with any necessary endorsements or assignments. The Secured Party shall
apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Secured Party to
the Obligations, such proceeds to be immediately credited after final payment in
cash or other immediately available funds of the items giving rise to them.

14. Power of Attorney.

14.1 Appointment and Powers of Secured Party. The Debtor hereby irrevocably
(until termination of this Agreement) constitutes and appoints the Secured Party
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorneys-in-fact with full irrevocable power and authority in the
place and stead of the Debtor or in the Secured Party’s own name, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments that may
be necessary or useful to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, hereby gives said attorneys the power
and right, on behalf of the Debtor, without notice to or assent by the Debtor,
to do the following:

(a) upon the occurrence and during the continuance of an Event of Default,
generally to sell, transfer, pledge, make any agreement with respect to or
otherwise dispose of or deal with any of the Collateral in such manner as is
consistent with the Uniform Commercial Code of the State and as fully and
completely as though the Secured Party were the absolute owner thereof for all
purposes, and to do, at the Debtor’s expense, at any time, or from time to time,
all acts and things which the Secured Party deems necessary or useful to
protect, preserve or realize upon the Collateral and the Secured Party’s
security interest therein, in order to effect the intent of this Agreement, all
at least as fully and effectively as the Debtor might do, including, without
limitation, (i) the filing and prosecuting of registration and transfer
applications with the appropriate federal, state, local or other agencies or
authorities with respect to trademarks, copyrights and patentable inventions and
processes, (ii) upon written notice to the Debtor, the exercise of voting rights
with respect to voting securities, which rights may be exercised, if the Secured
Party so elects, with a view to causing the liquidation of assets of the issuer
of any such securities, and (iii) the execution, delivery and recording, in
connection with any sale or other disposition of any Collateral, of the
endorsements, assignments or other instruments of conveyance or transfer with
respect to such Collateral; and

 

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(b) to the extent that the Debtor’s authorization given in Section 3 is not
sufficient, to file such financing statements with respect hereto, with or
without the Debtor’s signature, or a photocopy of this Agreement in substitution
for a financing statement, as the Secured Party may deem appropriate and to
execute in the Debtor’s name such financing statements and amendments thereto
and continuation statements which may require the Debtor’s signature.

14.2 Ratification by Debtor. To the extent permitted by law, the Debtor hereby
ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof. This power of attorney is a power coupled with an interest and is
irrevocable.

14.3 No Duty on Secured Party. The powers conferred on the Secured Party
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Secured Party shall be
accountable only for the amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Debtor for any act or failure to
act, except for the Secured Party’s own bad faith, gross negligence or willful
misconduct.

15. Rights and Remedies. If an Event of Default shall have occurred and be
continuing, the Secured Party, without any other notice to or demand upon the
Debtor have in any jurisdiction in which enforcement hereof is sought, in
addition to all other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code of the State and any additional rights
and remedies which may be provided to a secured party in any jurisdiction in
which Collateral is located, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Secured Party may, so far
as the Debtor can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Secured Party may
in its discretion require the Debtor to assemble all or any part of the
Collateral at such location or locations within the jurisdiction(s) of the
Debtor’s principal office(s) or at such other locations as the Secured Party may
reasonably designate. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Secured Party shall give to the Debtor at least five Business Days
prior written notice of the time and place of any public sale of Collateral or
of the time after which any private sale or any other intended disposition is to
be made. The Debtor hereby acknowledges that five Business Days prior written
notice of such sale or sales shall be reasonable notice. In addition, the Debtor
waives any and all rights that it may have to a judicial hearing in advance of
the enforcement of any of the Secured Party’s rights and remedies hereunder,
including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights and remedies
with respect thereto.

16. Standards for Exercising Rights and Remedies. To the extent that applicable
law imposes duties on the Secured Party to exercise remedies in a commercially
reasonable manner, the Debtor acknowledges and agrees that it is not
commercially unreasonable

 

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for the Secured Party (a) to fail to incur expenses reasonably deemed
significant by the Secured Party to prepare Collateral for disposition or
otherwise to fail to complete raw material or work in process into finished
goods or other finished products for disposition, (b) to fail to obtain third
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against account debtors
or other persons obligated on Collateral or to fail to remove liens or
encumbrances on or any adverse claims against Collateral, (d) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (e) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (f) to contact other persons, whether or not in the
same business as the Debtor, for expressions of interest in acquiring all or any
portion of the Collateral, (g) to hire one or more professional auctioneers to
assist in the disposition of Collateral, whether or not the collateral is of a
specialized nature, (h) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, (k) to purchase insurance or
credit enhancements to insure the Secured Party against risks of loss,
collection or disposition of Collateral or to provide to the Secured Party a
guaranteed return from the collection or disposition of Collateral, or (l) to
the extent deemed appropriate by the Secured Party, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Secured Party in the collection or disposition of any of the Collateral. The
Debtor acknowledges that the purpose of this Section 16 is to provide
non-exhaustive indications of what actions or omissions by the Secured Party
would fulfill the Secured Party’s duties under the Uniform Commercial Code or
other law of the State or any other relevant jurisdiction in the Secured Party’s
exercise of remedies against the Collateral and that other actions or omissions
by the Secured Party shall not be deemed to fail to fulfill such duties solely
on account of not being indicated in this Section 16. Without limitation upon
the foregoing, nothing contained in this Section 16 shall be construed to grant
any rights to the Debtor or to impose any duties on the Secured Party that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section 16.

17. No Waiver by Secured Party, etc. The Secured Party shall not be deemed to
have waived any of its rights or remedies in respect of the Obligations or the
Collateral unless such waiver shall be in writing and signed by the Secured
Party. No delay or omission on the part of the Secured Party in exercising any
right or remedy shall operate as a waiver of such right or remedy or any other
right or remedy. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right or remedy on any future occasion. All rights and remedies
of the Secured Party with respect to the Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or concurrently at such
time or at such times as the Secured Party deems expedient.

18. Suretyship Waivers by Debtor. The Debtor waives demand, notice, protest,
notice of acceptance of this Agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and
all other demands and notices

 

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of any description except any demands and notices expressly provided for in this
Agreement or the Credit Agreement. With respect to both the Obligations and the
Collateral, the Debtor assents to any extension or postponement of the time of
payment or any other indulgence, to any substitution, exchange or release of or
failure to perfect any security interest in any Collateral, to the addition or
release of any party or person primarily or secondarily liable, to the
acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Secured Party may deem advisable. The Secured Party shall have no duty as to the
collection or protection of the Collateral or any income therefrom, the
preservation of rights against prior parties, or the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in Section 11.2.
The Debtor further waives any and all other suretyship defenses.

19. Marshalling. The Secured Party shall not be required to marshal any present
or future collateral security (including but not limited to the Collateral) for,
or other assurances of payment of, the Obligations or any of them or to resort
to such collateral security or other assurances of payment in any particular
order, and all of its rights and remedies hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights and remedies, however existing or arising. To the
extent that it lawfully may, the Debtor hereby agrees that it will not invoke
any law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Secured Party’s rights and remedies under this
Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, the Debtor hereby irrevocably waives the
benefits of all such laws.

20. Proceeds of Dispositions; Expenses. The Debtor shall pay to the Secured
Party on demand any and all out-of-pocket expenses, including reasonable
attorneys’ fees and disbursements, incurred or paid by the Secured Party in
protecting, preserving or enforcing the Secured Party’s rights and remedies
under or in respect of any of the Obligations or any of the Collateral. After
deducting all of said expenses, the residue of any proceeds of collection or
sale or other disposition of the Collateral shall, to the extent actually
received in cash, be applied to the payment of the Obligations in such order or
preference as the Secured Party may determine, but in accordance with the terms
of the Credit Agreement, proper allowance and provision being made for any
Obligations not then due. Upon the final payment and satisfaction in full of all
of the Obligations and after making any payments required by
Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the
State, any excess shall be returned to the Debtor. In the absence of final
payment and satisfaction in full of all of the Obligations, the Debtor shall
remain liable for any deficiency.

21. Overdue Amounts. Until paid, all amounts due and payable by the Debtor
hereunder shall be a debt secured by the Collateral and shall bear, whether
before or after judgment, interest at the rate of interest for overdue principal
set forth in the Credit Agreement.

22. Termination; Release of Collateral. Upon termination of the Credit
Agreement, this Agreement shall automatically terminate and Secured Party (at
Borrower’s expense) shall promptly execute and deliver to Borrower such
documents and instruments reasonably requested by Borrower as shall be necessary
to evidence termination of all security

 

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interests given by Borrower to Secured Party hereunder. Upon any dispositions of
Collateral permitted by the Credit Agreement, Secured Party’s security interest
in such Collateral shall automatically terminate and Secured Party (at
Borrower’s expense) shall promptly execute and deliver to Borrower such
documents and instruments reasonably requested by Borrower as shall be necessary
to evidence termination of all security interests given by Borrower to Secured
Party in such Collateral.

23. Governing Law; Consent to Jurisdiction. THIS AGREEMENT IS INTENDED TO TAKE
EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF WASHINGTON. The parties hereto agree
that any action or claim arising out of, or any dispute in connection with, this
Agreement, any rights, remedies, obligations, or duties hereunder, or the
performance or enforcement hereof or thereof, may be brought in the courts of
the State or any federal court sitting therein and consents to the exclusive
jurisdiction of such court and to service of process in any such suit being made
upon such party by mail at the address specified in Section 11.4 of the Credit
Agreement. Each party hereto hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient court.

24. Waiver of Jury Trial. THE PARTIES HERETO WAIVE THEIR RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS, REMEDIES, OBLIGATIONS, OR DUTIES HEREUNDER, OR
THE PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF. Except as prohibited by law,
the parties hereto waive any right which they may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. Each party hereto (a) certifies that neither party hereto nor
any representative, agent or attorney of any party hereto has represented,
expressly or otherwise, that the Secured Party would not, in the event of
litigation, seek to enforce the foregoing waivers or other waivers contained in
this Agreement, and (b) acknowledges that, in entering into the Credit Agreement
and the other Loan Documents, the parties hereto are relying upon, among other
things, the waivers and certifications contained in this Section 24.

25. Miscellaneous. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Debtor and its respective successors and assigns, and shall inure to the benefit
of the Secured Party and its successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Agreement
shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Debtor acknowledges receipt
of a copy of this Agreement.

 

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IN WITNESS WHEREOF, intending to be legally bound, the Debtor has caused this
Agreement to be duly executed as of the date first above written.

 

NAUTILUS, INC. By:   /s/ Kenneth Fish   Kenneth Fish, Chief Financial Officer
BANK OF THE WEST By:   /s/ Sean Edwards   Sean Edwards, Vice President

 

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