Exhibit 10.2

 

LOGO [g832988g15d04.jpg]   Continuing Security Agreement

 

Name of Debtor:    Nautilus, Inc. Debtor’s Address:    17750 SE 6th Way,
Vancouver, WA 98683

Dated as of December 5, 2014

Grant of Security Interest. Nautilus, Inc. (the “Debtor”) grants to JPMorgan
Chase Bank, N.A., whose address is 888 SW 5th Ave., Portland, OR 97204 (together
with its successors and assigns, the “Bank”) a continuing security interest in,
pledges and assigns to the Bank all of the “Collateral” (as hereinafter defined)
owned by the Debtor, all of the collateral in which the Debtor has rights or
power to transfer rights and all Collateral in which the Debtor later acquires
ownership, other rights or rights or power to transfer rights to secure the
payment and performance of the Liabilities.

Credit Agreement. Capitalized terms used but not defined herein shall have the
meaning attributed to them in that certain Credit Agreement by and between the
Debtor and the Bank, dated December 5, 2014 (the “Credit Agreement”) as amended,
restated or replaced from time to time.

Liabilities. “Liabilities” means all obligations, indebtedness and liabilities
of the Debtor whether individual, joint and several, absolute or contingent,
direct or indirect, liquidated or unliquidated, now or hereafter existing in
favor of the Bank, including without limitation, all liabilities, all interest,
costs and fees arising under or from any note, open account, overdraft, letter
of credit application, endorsement, surety agreement, guaranty, credit card,
lease, Rate Management Transaction, acceptance, foreign exchange contract or
depository service contract, whether payable to the Bank or to a third party and
subsequently acquired by the Bank, any monetary obligations (including interest)
incurred or accrued during the pendency of any bankruptcy, insolvency,
receivership or other similar proceedings, regardless of whether allowed or
allowable in such proceeding, and all renewals, extensions, modifications,
consolidations, rearrangements, restatements, replacements or substitutions of
any of the foregoing. “Rate Management Transaction” means any transaction
(including an agreement with respect thereto) that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option, derivative transaction or any other similar
transaction (including any option with respect to any of these transactions) or
any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures. The
Debtor and the Bank specifically contemplate that Liabilities include
indebtedness hereafter incurred by the Debtor to the Bank.

Collateral. Accounts; Chattel Paper; Deposit Accounts and other payment
obligations of a financial institution (including the Bank); Documents;
Equipment; General Intangibles; Instruments; Inventory; Investment Property;
Pledged Equity; and Letter of Credit Rights; provided, however, that the
Collateral shall not include the Excluded Equity.

Description of Collateral. As used in this agreement, the term “Collateral”
means all of the Debtor’s property whether owned individually or jointly with
others of the types indicated above and defined below, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located, including but not limited to any items listed on any schedule or list
attached hereto. In addition, the term “Collateral” includes all “proceeds,”
“products” and “supporting obligations” (as such terms are defined in the “UCC,”
meaning the Uniform Commercial Code of Washington, as in effect from time to
time) of the Collateral indicated above, including but not limited to all stock
rights, subscription rights, dividends, stock dividends, stock splits, or
liquidating dividends, and all cash, accounts, chattel paper, “instruments,”
“investment property,” “financial assets,” and “general intangibles” (as such
terms are defined in the UCC) arising from the sale, rent, lease, casualty loss
or other disposition of the Collateral, and any Collateral returned to,
repossessed by or stopped in transit by the Debtor, and all insurance claims
relating to any of the Collateral (defined above). The term “Collateral” further
includes all of the Debtor’s right, title and interest in and to all books,
records and data relating to the Collateral identified above, regardless of the
form of media containing such information or data, and all software necessary or
desirable to use any of the Collateral identified above or to access, retrieve,
or process any of such information or data. Where the Collateral is in the
possession of the Bank or the Bank’s agent, the Debtor agrees to deliver to the
Bank any property that represents an increase in the Collateral or profits or
proceeds of the Collateral.

 

1. “Accounts” means all of the Debtor’s “accounts” as defined in Article 9 of
the UCC.

 

2. “Chattel Paper” means all of the Debtor’s “chattel paper” as defined in
Article 9 of the UCC.

 

3. “Deposit Accounts” means all of the Debtor’s “deposit accounts” as defined in
Article 9 of the UCC and other payment obligations of a financial institution
(including the Bank) to the Debtor.

 

4. “Documents” means all of the Debtor’s “documents” as defined in Article 9 of
the UCC.

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5. “Domestic Subsidiary” means any subsidiary of the Debtor that is organized
under the laws of any political subdivision of the United States.

 

6. “Equipment” means all of the Debtor’s “equipment” as defined in Article 9 of
the UCC. In addition, “Equipment” includes any “documents” (as defined in
Article 9 of the UCC) issued with respect to any of the Debtor’s “equipment” (as
defined in Article 9 of the UCC) and certificates of title relating to the
foregoing. Without limiting the security interest granted, the Debtor represents
and warrants that the Debtor’s Equipment is presently located at the address set
forth in this agreement or in a separate Collateral Location Schedule delivered
to the Bank.

 

7. “Equity Interests” means (i) in the case of a corporation, capital stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a trust, beneficial interests therein,
(iv) in the case of a partnership, partnership interests (whether general or
limited), (v) in the case of a limited liability company, membership interests
and (vi) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person, and any warrants, options or other rights entitling the
holder thereof to purchase or acquire any such equity interest.

 

8. “Excluded Equity” means the Equity Interests of any Foreign Subsidiary to the
extent such Equity Interests do not constitute Pledged Equity.

 

9. “Foreign Subsidiary” means any subsidiary of the Debtor that is not a
Domestic Subsidiary.

 

10. “General Intangibles” means all of the Debtor’s “general intangibles” as
defined in Article 9 of the UCC. In addition, “General Intangibles” further
includes any right to a refund of taxes paid at any time to any governmental
entity.

 

11. “Instruments” means all of the Debtor’s “instruments” as defined in Article
9 of the UCC.

 

12. “Inventory” means all of the Debtor’s “inventory” as defined in Article 9 of
the UCC. In addition, “Inventory” includes any “documents” and certificates of
title issued with respect to any of the Debtor’s “inventory” (as defined in
Article 9 of the UCC). Without limiting the security interest granted, the
Debtor represents and warrants that the Debtor’s Inventory is presently located
at the address set forth in this agreement or in a separate Collateral Location
Schedule delivered to the Bank.

 

13. “Investment Property” means all of the Debtor’s “investment property” as
defined in Article 9 of the UCC and all of the Debtor’s “financial assets,” as
defined in Article 8 of the UCC.

 

14. “Letter of Credit Rights” means all of the Debtor’s “letter of credit
rights” as defined in Article 9 of the UCC.

 

15. “Pledged Equity” means (i) 100% of the issued and outstanding Equity
Interests of each Domestic Subsidiary of the Debtor that is directly owned by
the Debtor and (ii) 65% (or such greater percentage that, due to a change in an
applicable law after the date hereof, (A) could not reasonably be expected to
cause the undistributed earnings of such Foreign Subsidiary as determined for
United States federal income tax purposes to be treated as a deemed dividend to
such Foreign Subsidiary’s United States parent and (B) could not reasonably be
expected to cause any material adverse tax consequences) of the issued and
outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg.
Section 1.956 2(c)(2)) and 100% of the issued and outstanding Equity Interests
not entitled to vote (within the meaning of Treas. Reg. Section 1.956 2(c)(2))
in each Foreign Subsidiary of the Debtor that is directly owned by the Debtor,
including the Equity Interests of the subsidiaries owned by the Debtor as set
forth on any schedule or list attached hereto, in each case together with the
certificates (or other agreements or instruments), if any, representing such
shares, and all options and other rights, contractual or otherwise, with respect
thereto.

Collateral Location Schedule. “Collateral Location Schedule” means a schedule in
the form attached to this agreement. The Debtor agrees to complete, execute and
deliver a Collateral Location Schedule to the Bank with respect to any
Collateral for which the Debtor has identified a location in this agreement:
(i) concurrently with the execution of this agreement, if the initial location
of the Collateral is other than the address of the Debtor set forth above; and
(ii) within ten (10) days prior to the relocation of any Collateral to any place
other than the address of the Debtor set forth above or the location identified
in any previously submitted Collateral Location Schedule.

Pledged Equity Schedule. “Pledged Equity Schedule” means a schedule in the form
attached to this agreement. The Debtor agrees to complete, execute and deliver a
Pledged Equity Schedule to the Bank: (i) concurrently with the execution of this
agreement; and (ii) within thirty (30) days following the acquisition of any
Pledged Equity Interests.

Representations, Warranties and Covenants. The Debtor represents and warrants
to, and covenants and agrees with the Bank that each of the following is true
and will remain true until termination of this agreement and full and final
payment of all Liabilities:

 

1. Its principal residence or chief executive office is at the address shown
above;

 

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2. The Debtor’s name as it appears in this agreement is its exact name as it
appears in the Debtor’s organizational documents, as amended, including any
trust documents;

 

3. It is or will become the owner of the Collateral free from any liens,
encumbrances or security interests, except for Permitted Liens, and it will
defend the Collateral against all claims and demands of all persons at any time
claiming any interest in the Collateral;

 

4. It will keep the Collateral free of liens, encumbrances and other security
interests, except for Permitted Liens, maintain the Collateral in good repair,
not use it illegally and exhibit the Collateral to the Bank on demand;

 

5. At its own expense, the Debtor will maintain comprehensive casualty insurance
on the tangible Collateral against such risks, in such amounts, with such
deductibles and with such companies as may be satisfactory to the Bank. Each
insurance policy shall contain a lender’s loss payable endorsement in form and
substance satisfactory to the Bank and a prohibition against cancellation or
amendment of the policy or removal of the Bank as loss payee without at least
thirty (30) days’ prior written notice to the Bank. In all events, the amounts
of such insurance coverages shall conform to prudent business practices and
shall be in such minimum amounts that the Debtor will not be deemed a
co-insurer. The policies and certificates evidencing them, shall, if the Bank so
requests, be deposited with the Bank. The Debtor authorizes the Bank to endorse
on the Debtor’s behalf and to negotiate drafts reflecting proceeds of insurance
of the Collateral, provided that the Bank shall remit to the Debtor such
surplus, if any, as remains after the proceeds have been applied, at the Bank’s
option, to the satisfaction of all of the Liabilities (in such order of
application as the Bank may elect) or to the establishment of a cash collateral
account for the Liabilities;

 

6. It will not sell, lease, license or offer to sell, lease, license or
otherwise transfer the Collateral or any rights in or to the Collateral, without
the written consent of the Bank, except sales of inventory to buyers in the
ordinary course of Debtor’s business, sales of damaged, obsolete, surplus, or
worn-out property, or as otherwise permitted herein or in the Credit Agreement;

 

7. It will not change the location of the Collateral (other than goods in
transit, goods that are temporarily in the possession of repairmen, product
testing services, or potential buyers or vendors as samples, or goods in
temporary storage in the ordinary course of business) from Debtor’s premises,
from the locations of the Collateral described in this agreement and any
separate Collateral Location Schedule provided to the Bank, without providing at
least ten (10) days’ prior written notice to the Bank by means of submitting a
Collateral Location Schedule, except (A) for deliveries to buyers in the
ordinary course of Debtor’s business, and deliveries of damaged, obsolete,
surplus or worn-out property, and (B) Collateral which consists of mobile goods
(as such term is used in the 1972 Uniform Commercial Code), in which case Debtor
agrees not to remove or permit the removal of such Collateral from its state of
domicile for a period in excess of thirty (30) calendar days from Debtor’s
premises except in the ordinary course of Debtor’s business;

 

8. It will pay promptly when due all taxes and assessments upon the Collateral,
or for the use or operation of the Collateral;

 

9. No financing statement covering all or any part of the Collateral or any
proceeds is on file in any public office, unless the Bank has approved that
filing. From time to time at the Bank’s request, the Debtor will execute one or
more financing statements or similar record and a control agreement with respect
to the proceeds in form satisfactory to the Bank and will pay the cost of filing
them in all public offices where filing is deemed by the Bank to be reasonably
necessary or desirable. In addition, the Debtor shall execute and deliver, or
cause to be executed and delivered, such other documents as the Bank may from
time to time reasonably request to perfect or to further evidence the security
interest created in the Collateral by this agreement including, without
limitation: (a) any certificate or certificates of title to the Collateral with
the security interest of the Bank noted thereon or executed applications for
such certificates of title in form satisfactory to the Bank; (b) any assignments
of claims under government contracts which are included as part of the
Collateral, together with any notices and related documents as the Bank may from
time to time request; (c) any assignment of any specific account receivable as
the Bank may from time to time request; (d) a notice of and acknowledgment of
the Bank’s security interest and a control agreement with respect to any
Collateral, all in form and substance satisfactory to the Bank; (e) a notice to
and acknowledgment from any person holding or in possession of any Collateral
that such persons holds the Collateral as a bailee for the Bank’s benefit, all
in form and substance reasonably satisfactory to the Bank; and (f) any consent
to the assignment of proceeds of any letter of credit, all in form and substance
reasonably satisfactory to the Bank;

 

10. It will not, without the Bank’s prior written consent, change the Debtor’s
name, the Debtor’s business organization, the jurisdiction under which the
Debtor’s business organization is formed or organized, or the Debtor’s chief
executive office, or of any additional places of the Debtor’s business;

 

11. It will provide any information that the Bank may reasonably request and
will permit the Bank or the Bank’s agents to inspect and copy its books,
records, data and the Collateral at any time during normal business hours;

 

12. The Bank shall have the right now, and at any time in the future in its sole
and absolute discretion, without notice to the Debtor, to (a) prepare, file and
sign the Debtor’s name on any proof of claim in bankruptcy or similar document
against any owner of the Collateral and (b) prepare, file and sign the Debtor’s
name on any financing statement, notice of lien, assignment or satisfaction of
lien or similar document in connection with the Collateral. The Debtor hereby
authorizes the Bank to file financing statements covering Collateral or such
lesser amount of assets as the Bank may determine, or the Bank may, at its
option, file financing statements or similar records containing any collateral
description which reasonably describes the Collateral in which a security
interest is granted under this agreement;

 

13. Immediately upon the Debtor’s receipt of any Collateral evidenced by an
agreement, “instrument,” “chattel paper,” certificated “security” or “document”
(as such terms are defined in the UCC) (collectively, “Special Collateral”), the
Debtor shall mark the Special Collateral to show that it is subject to the
Bank’s security interest and shall deliver the original to the Bank together
with appropriate endorsements and other specific evidence of assignment or
transfer in form and substance satisfactory to the Bank;

 

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14. The Debtor shall keep all tangible Collateral in good order and repair and
shall not waste or destroy any of the Collateral, nor use any of the Collateral
in violation of any applicable law or any policy of insurance thereon;

 

15. Except as may be otherwise disclosed in writing by the Debtor to the Bank,
none of the Collateral is attached to real estate so as to constitute a
“fixture” (as defined in the UCC) and none of the Collateral shall at any time
hereafter be attached to real estate so as to constitute a fixture. If any of
the Collateral is now or at any time hereafter becomes so attached to real
estate so as to constitute a fixture, the Debtor shall, at any time upon the
Bank’s request, furnish the Bank with a disclaimer of interest in the Collateral
executed by each person or entity having an interest in such real estate.

Accounts; Chattel Paper; General Intangibles and Instruments. If the Collateral
includes the Debtor’s “Accounts, Chattel Paper, General Intangibles and
Instruments” and until the Bank gives notice to the Debtor to the contrary, the
Debtor will, in the usual course of its business and at its own expense, on the
Bank’s behalf but not as the Bank’s agent, demand and receive and use its best
efforts to collect all moneys due or to become due with respect to the
Collateral. So long as no default has occurred in any provision of this
agreement, the Notes or any other Related Documents and is continuing beyond the
applicable cure period set forth therein, Debtor may use the funds collected in
its business. Upon the occurrence of a default in any provision of this
agreement, the Notes or any other Related Documents beyond the applicable cure
period set forth therein, and notice thereof from the Bank, the Debtor agrees
that (1) all sums of money it receives on account of or in payment or settlement
of the Accounts, Chattel Paper, General Intangibles and Instruments shall be
held by it as trustee for the Bank without commingling with any of the Debtor’s
other funds, and shall immediately be delivered to the Bank with endorsement to
the Bank’s order of any check or similar instrument and (2) the Bank shall be
entitled, in its own name or in the name of the Debtor or otherwise, but at the
expense and cost of the Debtor, to collect, demand, receive, sue for or
compromise any and all Accounts, Chattel Paper, General Intangibles, and
Instruments, and to give good and sufficient releases, to endorse any checks,
drafts or other orders for the payment of money payable to the Debtor and, in
the Bank’s discretion, to file any claims or take any action or proceeding which
the Bank may deem necessary or advisable. It is expressly understood and agreed,
however, that the Bank shall not be required or obligated in any manner to make
any demand or to make any inquiry as to the nature or sufficiency of any payment
received by it or to present or file any claim or take any other action to
collect or enforce the payment of any amounts which may have been assigned to
the Bank or to which the Bank may be entitled at any time or times. All notices
required in this paragraph will be immediately effective when sent. Such notices
need not be given prior to the Bank’s taking action. The Debtor appoints the
Bank or the Bank’s designee as the Debtor’s attorney-in-fact, effective when an
Event of Default exists, to do all things with reference to the Collateral as
provided for in this section including without limitation (1) to notify the post
office authorities to change the Debtor’s mailing address to one designated by
the Bank, (2) to receive, open and dispose of mail addressed to the Debtor,
(3) to sign the Debtor’s name on any invoice or bill of lading relating to any
Collateral, on assignments and verifications of account and on notices to the
Debtor’s customers, and (4) to do all things necessary to carry out this
agreement or to perform any of the obligations of the Debtor under this
agreement. The Debtor ratifies and approves all acts of the Bank as
attorney-in-fact. The Bank shall not be liable for any act or omission, nor any
error of judgment or mistake of fact or law, but only for its gross negligence
or willful misconduct. This power being coupled with an interest is irrevocable
until all of the Liabilities have been fully satisfied and shall survive the
death or disability of the Debtor.

Pledge. If the Debtor is not liable for all or any part of the Liabilities, then
the Debtor agrees that:

 

1. If any moneys become available from any source other than the Collateral that
the Bank can apply to the Liabilities, the Bank may apply them in any manner it
chooses, including but not limited to applying them against obligations,
indebtedness or liabilities which are not secured by this agreement.

 

2. The Bank may take any action against the Debtor, the Collateral or any other
collateral for the Liabilities, or any other person or entity liable for any of
the Liabilities.

 

3. The Bank may release the Debtor or anyone else from the Liabilities, either
in whole or in part, or release the Collateral in whole or in part or any other
collateral for the Liabilities, and need not perfect a security interest in the
Collateral or any other collateral for the Liabilities.

 

4. The Bank does not have to exercise any rights that it has against the Debtor
or anyone else, or make any effort to realize on the Collateral or any other
collateral for the Liabilities, or exercise any right of setoff.

 

5. Without notice or demand and without affecting the Debtor’s obligations
hereunder, from time to time, the Bank is authorized to: (a) renew, modify,
compromise, rearrange, restate, consolidate, extend, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the Liabilities
or any part thereof, including increasing or decreasing the rate of interest
thereon; (b) release, substitute or add any one or more sureties, endorsers, or
guarantors; (c) take and hold other collateral for the payment of the
Liabilities, and enforce, exchange, substitute, subordinate, impair, waive or
release any such collateral; (d) proceed against the Collateral or any other
collateral for the Liabilities and direct the order or manner of sale as the
Bank in its discretion may determine; and (e) apply any and all payments
received by the Bank in connection with the Liabilities, or recoveries from the
Collateral or any other collateral for the Liabilities, in such order or manner
as the Bank in its discretion may determine.

 

6. The Debtor’s obligations hereunder shall not be released, diminished or
affected by (a) any act or omission of the Bank, (b) the voluntary or
involuntary liquidation, sale or other disposition of all or substantially all
of the assets of the Debtor, or any receivership, insolvency, bankruptcy,
reorganization, or other similar proceedings affecting the Debtor or any of its
assets or any other obligor on the Liabilities or that obligor’s assets, (c) any
change in the composition or structure of the Debtor or any other obligor on the
Liabilities, including a merger or consolidation with any other person or
entity, or (d) any payments made upon the Liabilities.

 

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7. The Debtor expressly consents to any impairment of any other collateral for
the Liabilities, including, but not limited to, failure to perfect a security
interest and release of any other collateral for the Liabilities and any such
impairment or release shall not affect the Debtor’s obligations hereunder.

 

8. The Debtor waives and agrees not to enforce any rights of subrogation,
contribution or indemnification that it may have against the Debtor, any person
or entity liable on the Liabilities, or the Collateral, until the Debtor and the
Debtor have fully performed all their obligations to the Bank, even if those
obligations are not covered by this agreement.

 

9. The Debtor waives (a) to the extent not prohibited by applicable law, all
rights and benefits under any laws or statutes regarding sureties, as may be
amended, (b) any right the Debtor may have to receive notice of the following
matters before the Bank enforces any of its rights: (i) the Bank’s acceptance of
this agreement, (ii) incurrence or acquisition of any Liabilities, any credit
that the Bank extends to the Debtor, (iii) the Debtor’s default, (iv) any
demand, diligence, presentment, dishonor and protest, or (v) any action that the
Bank takes regarding the Debtor, anyone else, any other collateral for the
Liabilities, or any of the Liabilities, which it might be entitled to by law or
under any other agreement, (c) any right it may have to require the Bank to
proceed against the Debtor, any guarantor or other obligor on the Liabilities,
the Collateral or any other collateral for the Liabilities, or pursue any remedy
in the Bank’s power to pursue, (d) any defense based on any claim that the
Debtor’s obligations exceed or are more burdensome than those of the Debtor,
(e) the benefit of any statute of limitations affecting the Debtor’s obligations
hereunder or the enforcement hereof, (f) any defense arising by reason of any
disability or other defense of the Debtor or by reason of the cessation from any
cause whatsoever (other than payment in full) of the obligation of the Debtor
for the Liabilities, and (g) any defense based on or arising out of any defense
that the Debtor may have to the payment or performance of the Liabilities or any
portion thereof. The Bank may waive or delay enforcing any of its rights without
losing them. Any waiver affects only the specific terms and time period stated
in the waiver.

 

10. The Debtor agrees that to the extent any payment or transfer is received by
the Bank in connection with the Liabilities, and all or any part of such payment
or transfer is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be transferred or repaid by the Bank or
paid over to a trustee, receiver or any other person or entity, whether under
any bankruptcy act or otherwise (any of those payments or transfers is
hereinafter referred to as a “Preferential Payment”), then this agreement shall
continue to be effective or shall be reinstated, as the case may be, even if all
Liabilities have been paid in full, and whether or not the Bank is in possession
of this agreement or whether this agreement has been marked paid, cancelled,
released or returned to the Debtor, and, to the extent of the payment or
repayment or other transfer by the Bank, the Liabilities or part intended to be
satisfied by the Preferential Payment shall be revived and continued in full
force and effect as if the Preferential Payment had not been made. If this
agreement must be reinstated, the Debtor agrees to execute and deliver to the
Bank any new security agreements and financing statements, if necessary or if
requested by the Bank, in form and substance acceptable to the Bank, covering
the Collateral.

 

11. The Debtor agrees to fully cooperate with the Bank and not to delay, impede
or otherwise interfere with the efforts of the Bank to secure payment from the
assets which secure the Liabilities including actions, proceedings, motions,
orders, agreements or other matters relating to relief from automatic stay,
abandonment of property, use of cash collateral and sale of the Bank’s
collateral free and clear of all liens.

 

12. The Debtor has (a) without reliance on the Bank or any information received
from the Bank and based upon the records and information the Debtor deems
appropriate, made an independent investigation of the Debtor, the Debtor’s
business, assets, operations, prospects and condition, financial or otherwise,
and any circumstances that may bear upon those transactions, the Debtor or the
obligations, liabilities and risks undertaken pursuant to this agreement;
(b) adequate means to obtain from the Debtor on a continuing basis information
concerning the Debtor and the Bank has no duty to provide any information
concerning the Debtor or other obligor on the Liabilities to the Debtor;
(c) full and complete access to the Debtor and any and all records relating to
any Liabilities now or in the future owing by the Debtor; (d) not relied and
will not rely upon any representations or warranties of the Debtor not embodied
in this agreement or any acts taken by the Debtor prior to or after the
execution or other authentication and delivery of this agreement (including but
not limited to any review by the Debtor of the business, assets, operations,
prospects and condition, financial or otherwise, of the Debtor); and
(e) determined that the Debtor will receive benefit, directly or indirectly, and
has or will receive fair and reasonably equivalent value, for the execution and
delivery of this agreement and the rights provided to the Bank. By entering into
this agreement, the Debtor does not intend: (i) to incur or believe that the
Debtor will incur debts that would be beyond the Debtor’s ability to pay as
those debts mature; or (ii) to hinder, delay or defraud any creditor of the
Debtor. The Debtor is neither engaged in nor about to engage in any business or
transaction for which the remaining assets of the Debtor are unreasonably small
in relation to the business or transaction, and any property remaining with the
Debtor after the execution or other authentication of this agreement is not
unreasonably small capital.

Default; Remedies. If any of the Liabilities are not paid at maturity, whether
by acceleration or otherwise, or if a default by anyone occurs under the terms
of any agreement related to any of the Liabilities and such default is not cured
within the applicable cure period set forth therein, then the Bank shall have
the rights and remedies provided by law or this agreement, including but not
limited to the right to require the Debtor to assemble the Collateral and make
it available to the Bank at a place to be designated by the Bank which is
reasonably convenient to both parties, the right to take possession of the
Collateral with or without demand and with or without process of law, and the
right to sell and dispose of it and distribute the proceeds according to law.
Should a default occur, the Debtor will pay to the Bank all costs reasonably
incurred by the Bank for the purpose of enforcing its rights hereunder, to the
extent not prohibited by law, including, without limitation: costs of
foreclosure; costs of obtaining money damages; and a reasonable fee for the
services of internal and outside attorneys employed or engaged by the Bank or
its affiliates for any purpose related to this agreement, including, without
limitation, consultation, drafting documents, sending notices or instituting,
prosecuting or defending litigation or

 

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any proceeding. The Debtor agrees that upon taking possession of the Collateral
as provided herein, the Bank may dispose of any of the Collateral in its then
present condition, that the Bank has no duty to repair or clean the Collateral
prior to sale, and that the disposal of the Collateral in its present condition
or without repair or clean-up shall not affect the commercial reasonableness of
such sale or disposition. The Bank’s compliance with any applicable state or
federal law requirements in connection with the disposition of the Collateral
will not adversely affect the commercial reasonableness of any sale of the
Collateral. The Bank may disclaim warranties of title, possession, quiet
enjoyment, and the like, and the Debtor agrees that any such action shall not
affect the commercial reasonableness of the sale. In connection with the right
of the Bank to take possession of the Collateral, the Bank may take possession
of any other items of property in or on the Collateral at the time of taking
possession, and hold them for the Debtor without liability on the part of the
Bank. The Debtor expressly agrees that the Bank may enter upon the premises
where the Collateral is believed to be located without any obligation of payment
to the Debtor, and that the Bank may, without cost, use any and all of the
Debtor’s “equipment” (as defined in the UCC) in the manufacturing or processing
of any “inventory” (as defined in the UCC) or in growing, raising, cultivating,
caring for, harvesting, loading and transporting of any of the Collateral that
constitutes “farm products” (as defined in the UCC). If there is any statutory
requirement for notice, that requirement shall be met if the Bank sends notice
to the Debtor at least ten (10) days prior to the date of sale, disposition or
other event giving rise to the required notice, and such notice shall be deemed
commercially reasonable. The Debtor is liable for any deficiency remaining after
disposition of the Collateral.

Miscellaneous.

 

1. Where the Collateral is located at, used in or attached to a facility leased
by the Debtor, the Debtor will obtain from the lessor a consent to the granting
of this security interest and a release or subordination of the lessor’s
interest in any of the Collateral, in form and substance reasonably satisfactory
to the Bank.

 

2. At its option the Bank may, but shall be under no duty or obligation to,
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral, pay for insurance on the Collateral, and pay
for the maintenance and preservation of the Collateral, and the Debtor agrees to
reimburse the Bank on demand for any payment made or expense incurred by the
Bank, with interest at the highest rate at which interest may accrue under any
of the instruments or documents evidencing the Liabilities.

 

3. No delay on the part of the Bank in the exercise of any right or remedy
waives that right or remedy, no single or partial exercise by the Bank of any
right or remedy precludes any other exercise of it or the exercise of any other
right or remedy, and no waiver or indulgence by the Bank of any default is
effective unless it is in writing and signed by the Bank, nor does a waiver on
one occasion waive that right on any future occasion.

 

4. If any provision of this agreement is invalid, it shall be ineffective only
to the extent of its invalidity, and the remaining provisions shall be valid and
effective.

 

5. Except as provided in the Accounts; Chattel Paper; General Intangibles; and
Instruments paragraph above, any notices and demands under or related to this
document shall be in writing and delivered to the intended party at its address
stated herein, and if to the Bank, at its main office if no other address of the
Bank is specified herein, by one of the following means: (a) by hand, (b) by a
nationally recognized overnight courier service, or (c) by certified mail,
postage prepaid, with return receipt requested. Notice shall be deemed given:
(a) upon receipt if delivered by hand, (b) on the Delivery Day after the day of
deposit with a nationally recognized courier service, or (c) on the third
Delivery Day after the notice is deposited in the mail. “Delivery Day” means a
day other than a Saturday, a Sunday, or any other day on which national banking
associations are authorized to be closed. Any party may change its address for
purposes of the receipt of notices and demands by giving notice of such change
in the manner provided in this provision.

 

6. All rights of the Bank benefit the Bank’s successors and assigns; and all
obligations of the Debtor bind the Debtor’s heirs, executors, administrators,
successors and assigns.

 

7. A carbon, photographic or other reproduction of this agreement is sufficient
as, and can be filed as, a financing statement. The Bank is irrevocably
appointed the Debtor’s attorney-in-fact to execute any financing statement on
the Debtor’s behalf covering the Collateral. The Debtor authorizes the Bank to
file one or more financing statements or similar records related to the security
interests created by this agreement, and further authorizes the Bank, as secured
party herein, instead of the Debtor, to sign such financing statements and other
similar records.

 

8. Time is of the essence under this agreement and in the performance of every
term, covenant and obligation contained herein.

Indemnification. The Debtor agrees to indemnify, defend and hold the Bank, its
parent companies, subsidiaries, affiliates, their respective successors and
assigns and each of their respective shareholders, directors, officers,
employees and agents (collectively the “Indemnified Persons”) harmless from and
against any and all loss, liability, obligation, damage, penalty, judgment,
claim, deficiency, expense, interest, penalties, attorneys’ fees (including the
fees and expenses of attorneys engaged by the Indemnified Person at the
Indemnified Person’s reasonable discretion) and amounts paid in settlement
(“Claims”) to which any Indemnified Person may become subject arising out of or
relating to this agreement or the Collateral, except to the limited extent that
the Claims are proximately caused by the Indemnified Person’s gross negligence
or willful misconduct. The indemnification provided for in this paragraph shall
survive the termination of this agreement and shall not be affected by the
presence, absence or amount of or the payment or nonpayment of any claim under,
any insurance.

Governing Law and Venue. This agreement shall be governed by and construed in
accordance with the laws of the State of Washington (without giving effect to
its laws of conflicts), and to the extent applicable, federal law, except to the
extent that the laws regarding the perfection and priority of security interests
of the state(s) in which either the Debtor or any property securing the

 

6

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Liabilities is located, are applicable. The Debtor agrees that any legal action
or proceeding with respect to any of its obligations under this agreement may be
brought by the Bank in any state or federal court located in the State of
Washington, as the Bank in its sole discretion may elect. By the execution and
delivery of this agreement, the Debtor submits to and accepts, for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of those courts. The Debtor waives any claim that the State of
Washington is not a convenient forum or the proper venue for any such suit,
action or proceeding.

Additional Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants to the Bank that each of the following is true and will
remain true until termination of this agreement and payment in full of all
Liabilities: (a) the execution and delivery of this agreement and the
performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, and do not require the consent
or approval of any governmental authority or any third party; (b) this agreement
is a valid and binding agreement, enforceable according to its terms; and
(c) all balance sheets, profit and loss statements, and other financial
statements furnished to the Bank in connection with the Liabilities are accurate
and fairly reflect the financial condition of the organizations and persons to
which they apply on their effective dates, including contingent liabilities of
every type, which financial condition has not changed materially and adversely
since those dates. The Debtor, other than a natural person, further represents
that: (a) it is duly organized, validly existing and in good standing under the
laws of the state where it is organized and in good standing in each state where
it is doing business; and (b) the execution and delivery of this agreement and
the performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii) do
not contravene the terms of its articles of incorporation or organization, its
by-laws, or any agreement or document governing its affairs.

WAIVER OF SPECIAL DAMAGES. THE DEBTOR WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

JURY WAIVER. THE DEBTOR AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN OR AMONG THE DEBTOR AND THE BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
PROVIDE THE FINANCING DESCRIBED HEREIN.

 

Debtor: Nautilus, Inc. By:  

/s/ Sid Nayar

  Sid Nayar, Chief Financial Officer

Date Signed: December 5, 2014

 

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Collateral Location Schedule

 

Date:                     December 5, 2014                                      
Debtor: Nautilus, Inc. Check one:  
x  Designation of initial location of Collateral  
Date of Continuing Security Agreement: December 5, 2014    
¨  Notice of intent to relocate Collateral    

Instructions: This schedule should be completed by the Debtor (the owner of the
Collateral) described in the Continuing Security Agreement to which this form is
attached, if the Collateral is located at or will be relocated to, any place
other than the Debtor’s address set forth in the Continuing Security Agreement.
The Debtor is required to notify the Bank in writing at least ten (10) days’
prior to changing the location of any Collateral. The Debtor represents and
warrants that the Collateral is located or stored at the location(s) described
below and if any location(s) is leased or used for storage and not owned by the
Debtor, the name, address and the phone number of the Landlord or owner of the
warehouse (“Warehouseman”) and contact name is set forth below with respect to
the leased or storage premises.    

Please PRINT or TYPE the following information.     Collateral Location      
Landlord/Warehouseman Information Address:  

        18225 NE Riverside Parkway, Bldg G

    ¨  Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.         x  Landlord
        ¨  Warehouseman City, State:  

        Portland, Oregon

    Name:  

   PLDAB LLC

        Address:  

   26277 SW 95th Avenue

Zip Code:  

        97230

    Suite Number:  

   Suite 405

        City, State:  

   Wilsonville, Oregon

Collateral:  

        Inventory

    Zip Code:  

   97070

        Contact Name:  

 

       

Phone Number:

 

 

   (    )

 

Collateral Location       Landlord/Warehouseman Information Address:  

        5415 Centerpoint Parkway

    ¨  Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.         x  Landlord
        ¨  Warehouseman City, State:  

        Obetz, Ohio

    Name:  

   CP V, LLC

        Address:  

   c/o Exxcel Project Management, Inc.

Zip Code:  

        43125

    Suite Number:  

   328 Civic Center Drive

        City, State:  

   Columbus, Ohio

Collateral:  

        Inventory

    Zip Code:  

   43215

        Contact Name:  

 

       

Phone Number:

 

 

   (    )

 

Collateral Location       Landlord/Warehouseman Information Address:  

 

    ¨  Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.         ¨  Landlord
        ¨  Warehouseman City, State:  

 

    Name:  

 

        Address:  

 

Zip Code:  

 

    Suite Number:  

 

        City, State:  

 

Collateral:  

 

    Zip Code:  

 

        Contact Name:  

 

       

Phone Number:

 

 

 

 

Collateral Location       Landlord/Warehouseman Information Address:  

 

    ¨  Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.         ¨  Landlord
        ¨  Warehouseman City, State:  

 

    Name:  

 

        Address:  

 

Zip Code:  

 

    Suite Number:  

 

        City, State:  

 

Collateral:  

 

    Zip Code:  

 

        Contact Name:  

 

           

Phone Number:

 

 

 

 

DEBTOR: Nautilus, Inc.             By:  

 

        Name:  

 

       

Title:

 

 

 

 

           

 

8

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Pledged Equity Schedule

 

Date:                     December 5, 2014                           

Debtor: Nautilus, Inc.

Date of Continuing Security Agreement: December 5, 2014

Instructions: This schedule should be completed by the Debtor (the owner of the
Pledged Equity) described in the Continuing Security Agreement to which this
form is attached. The Debtor represents and warrants that set forth on this
Schedule is (i) a complete and accurate list of all subsidiaries, joint ventures
and partnerships and other equity investments of the Debtor as of the date of
this Schedule, (ii) the number of shares of each class of Equity Interests in
each subsidiary outstanding, (iii) the number and percentage of outstanding
shares of each class of Equity Interests owned by the Debtor and (iv) the class
or nature of such Equity Interests (i.e. voting, non-voting, preferred, etc.).
    

Please PRINT or TYPE the following information. Issuer  

Owner

  Total Number    
of Shares    
Outstanding       Number of    
Shares Owned    
by Debtor       Certificate    
Number(s)       Percentage of
Shares Owned
by Debtor     Class/Nature
(Voting, Non-
Voting, Preferred,
Etc.)

Nautilis Fitness Canada, Inc.

  Debtor   100   100   R3     100 %    Common

Pacific Direct LLC

  Debtor                 50 %                                                   
                                                                               
                                                     

DEBTOR: Nautilus, Inc.                   By:   

 

              Name:   

 

              Title:   

 

                                               

 

9