SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2010

Commission file
number 0-4538

Cybex International, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                          
|-------------------------------------------------------------- |  | -----------------------------------------
|New York                                                       |  | 11-1731581                               
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)     
|                                                               | 
|10 Trotter Drive, Medway, Massachusetts                        |  | 02053                                    
|(Address of principal executive office)                        |  | (Zip Code)                               
|                                                               | 
|Registrants telephone number, including area code             |  | (508) 533-4300                           
|                                                              
|Securities registered pursuant to Section 12(b) of the Act:   
|Title of Each Class                                            |  | Name of each exchange
on which registered
|Common Stock, $.10 Par Value                                   |  | NASDAQ Global Market                     

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes  [    ]  No [X]

Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  [    ]  No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  [X]  No [    ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).
Yes  [    ]   No  [    ]

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
[    ]    Accelerated filer [    ]    Non-accelerated filer [    ]    Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes  [    ]  No [X]





The aggregate
market value of the common stock held by non-affiliates of the registrant as of June 26, 2010 was $12,687,353.





The number of
shares outstanding of the registrants class of common stock, as of March 31, 2011

Common Stock, $.10 Par
Value  17,120,383 shares





DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference from the registrants definitive proxy statement for its Annual Meeting of Stockholders, to be filed
with the Commission pursuant to Regulation 14A, or if such proxy statement is not filed with the Commission on or before 120 days after the end of the fiscal year covered by this Report, such information will be included in an amendment to this
Report filed no later than the end of such 120-day period.









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PART I



|ITEM 1. | BUSINESS
|------- | --------

General

Cybex International, Inc. (the Company or Cybex), a New York corporation, is a manufacturer of
exercise equipment and develops, manufactures and markets strength and cardiovascular fitness equipment products for the commercial and, to a lesser extent, consumer markets. The Company operates in one business segment.

Products

The Company
develops, manufactures and markets high performance, professional quality exercise equipment products for the commercial market and, to a lesser extent, the premium segment of the consumer market. These products can generally be grouped into two
major categories: cardiovascular products and strength systems.

The Companys products are of professional quality and
are believed to be among the best in the category in which they compete, featuring high performance and durability suitable for utilization in health clubs or by professional athletes. Accordingly, the majority of the Companys products are
premium priced.

The contribution to net sales of the Companys product lines over the past three years is as follows
(dollars in millions):



|                            |  |           |       |  |         |  |     |           |  |   |         |  |  |           |     |   |         |   |       |  |  |  |     |  
|--------------------------- |  | --------- | ----- |  | ------- |  | --- | --------- |  | - | ------- |  |  | --------- | --- | - | ------- | - | ----- |  |  |  | --- | -
|                            |  | 2010      |       |  | 2009    |  |     | 2008      | 
|                            |  | Net Sales |       |  | Percent |  |     | Net Sales |  |   | Percent |  |  | Net Sales |     |   | Percent |  
|Cardiovascular products     |  | $         | 69.4  |  |         |  | 56  | %         |  | $ | 66.7    |  |  |           | 55  | % |         | $ | 76.8  |  |  |  | 52  | %
|Strength systems            |  |           | 41.0  |  |         |  | 33  |           |  |   | 42.0    |  |  |           | 35  |   |         |   | 58.2  |  |  |  | 39  |  
|Parts                       |  |           | 5.7   |  |         |  | 5   |           |  |   | 5.3     |  |  |           | 4   |   |         |   | 4.8   |  |  |  | 3   |  
|Freight and other sales (1) |  |           | 6.9   |  |         |  | 6   |           |  |   | 6.5     |  |  |           | 6   |   |         |   | 8.1   |  |  |  | 6   |  
|                            |  |           |       |  |         |  |     |           |  |   |         |  |  |           |     |   |         |   |       |  |  |  |     |  
|                            |  | $         | 123.0 |  |         |  | 100 | %         |  | $ | 120.5   |  |  |           | 100 | % |         | $ | 147.9 |  |  |  | 100 | %
|                            |  |           |       |  |         |  |     |           |  |   |         |  |  |           |     |   |         |   |       |  |  |  |     |  



|(1) | Reflects shipping and handling fees and costs included on customer invoices.
|--- | ----------------------------------------------------------------------------

Cybex, Eagle, VR3 and Arc Trainer are registered trademarks of Cybex,
and Big Iron, Bravo, Cyclone-S, CX-445T, FT-360, FT-450, Home Arc, Jungle Gym, LCX-425T, MG525, Pro3, Safety Sentry, and VR1 are trademarks
of Cybex.

Cardiovascular Products. The Companys cardiovascular equipment is designed to provide aerobic
conditioning by elevating the heart rate, increasing lung capacity, endurance and circulation, and burning body fat. The Companys cardiovascular products include cross trainers, treadmills, bikes and steppers. All of the Companys
cardiovascular products incorporate computerized electronics which control the unit and provide feedback to the user. All of the cardiovascular products, except the Home Arc, can be equipped with optional TV monitors that feature controls integrated
into the control console, with an incremental list price of approximately $1,600.

Cross
Trainers. Cybex Arc Trainer is a product designed to provide the user with more and varied training potential. It provides motions that vary from gliding to climbing. Its brake design provides resistance up to 900 Watts in the
commercial version to meet the demands ranging from the casual user to the athlete. The 750AT and 750A Arc Trainers use a control console that is based on the 750T treadmill console, facilitating cross-use of these products. The 750AT Total Body Arc
Trainer retains all of the functionality of the original Arc Trainer and adds upper body motion to provide for total body training. The Company also produces the 425A Arc Trainer for the light commercial and high-end consumer markets and the 360A
Arc Trainer for the consumer market. The Arc Trainers list prices range from $3,495 to $7,995.



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Treadmills. The Company has four treadmill models, the 750T,
Pro3, CX-445T, and LCX-425T. The LCX-425T is a high-end
consumer and light commercial product while the other models are for the commercial market. Each treadmill model is motorized and incorporates computerized electronics controlling speed, incline, display functions and preset exercise programs. The
electronics also provide displays to indicate speed, elevation, distance, time, pace and a variety of other data. All of the treadmills include a complete diagnostic suite that can be accessed through the display, which is useful in the maintenance
of the product. The CX-445T, Pro3and 750T also include an
innovative safety feature known as Safety Sentry which causes the treadmill to stop once it detects inactivity with the user. All treadmills are equipped with contact heart rate monitoring and deck suspension system and include wireless heart rate
monitoring capabilities. The CX-445T and Pro3are
scheduled for phase out in early 2011. The Company anticipates introducing two new treadmills in early 2011, the 625T and 770T. The Companys treadmills have list prices ranging from $4,795 to $7,895.

Bikes. The Company has two bikes, the 750C Upright Cycle and 750R Recumbent Cycle. These bikes feature improved ergonomics
including a walk-through design on the recumbent model as well as improved ease of use and an exceptionally broad resistance range with multiple resistance modes. These products are designed to allow any users to receive the maximum benefit in
minimum time. The console design is based on that of the 750T, 750A and 750AT to provide a common method of operation. The list price of the upright bike is $3,495 and the recumbent bike is $3,695.

Steppers. The Company has one model of stepper targeting the commercial marketplace. The Cyclone-S
Stepper features the family display common to the Pro3as
well as an advanced ergonomic handrail design, contact and Polar heart rate monitoring and patented drive system. The list price of the Cyclone-S is $3,395.

Strength Training Products. Strength training equipment provides a physical workout by exercising the musculo-skeletal system. The Companys strength training equipment uses weights for
resistance. This product line includes selectorized single station equipment, jungle gyms, modular multi-station units, the MG525 multi-gym, functional trainers, plate-loaded equipment and free-weight equipment.

Selectorized Equipment. Selectorized single station equipment incorporates stacked weights, permitting the user to select
different weight levels for a given exercise by inserting a pin at the appropriate weight level. Each selectorized product is designed for a specific muscle group with each product line utilizing a different technology targeted to facility and user
type.

The Companys selectorized equipment is sold under the trademarks VR1, VR3 and
Eagle. The VR1 line represents a value-engineered line suitable for smaller general-purpose facilities and as an entry line in larger facilities. This 20 piece line was introduced in 2007 as a replacement for the VR line. Eight new dual
function machines intended for use in smaller facilities were added in 2008 and 2009. The VR3 line is a 23 piece line designed for exceptional ease of use in fitness facilities. Eagle represents the Companys premier line and features a
complete scope of use; it features ease-of-use as well as patented and patent pending technologies to meet the needs of performance oriented individuals and facilities. The Company currently sells 74 selectorized equipment products under the above
lines with list prices between $2,725 and $7,295.

Modular Units. The Jungle Gym provides facilities with a
multi-station, configurable design for essential movements. The pricing of the Jungle Gym depends on configuration. The list price of a typical Jungle Gym is $12,135.

Multi-gym. The Company introduced the MG525 in early 2010, replacing an earlier model. The multi-gym uses considerably less space than multiple selectorized single station
equipment. It contains three weight stacks to meet the needs of the vertical commercial market, especially hotels, corporate fitness centers and other small-scale locations. This product has a list price of $5,995.



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Functional Trainers. The FT-360 was phased out in late 2010. The
Bravo (originally the FT-450) was introduced in late 2008 as a successor to the FT-360. The Bravo extends the capabilities of functional training through the ability to vary the width of the cables and to add stabilization in a progressive manner.
The Company has added four additional configurations targeted to rehabilitation and sports performance markets. These products have a list price ranging from $6,195 to $7,395.

Plate Loaded Equipment. The Company manufactures and distributes a wide range of strength equipment which mimics many of the
movements found on its selectorized machines but are manually loaded with weights. These are simple products which allow varying levels of weight to be manually loaded. In 2009, the Company introduced eight updated models while phasing out earlier
products. The Company currently offers 18 plate-loaded products, ranging in price from $1,425 to $4,065.

Free-Weight Equipment. The Company also sells free-weight benches and racks and complements them with OEM
supplied dumbbells, barbells and plates. In 2010, the Company added the Big Iron line of free-weight products targeted at collegiate and professional athletic performance training. The Company offers 31 items of free-weight equipment with list
prices ranging from $425 to $5,895.

Customers and Distribution

The Company markets its products to commercial customers and to individuals interested in purchasing premium quality equipment for use in
the home. A commercial customer is defined as any purchaser who does not intend the product for home use. Management estimates that consumer sales represent less than 10% of 2010 net sales. Typical commercial customers are health clubs, hotels,
resorts, spas, educational institutions, sports teams, sports medicine clinics, military installations, golf clubs, corporate fitness and community centers. Sales to Cutler-Owens International Ltd., an independent authorized dealer, represented
13.0%, 13.6% and 12.3% of the Companys net sales for 2010, 2009 and 2008, respectively. Sales to Planet Fitness Equipment, LLC represented 12.4%, 10.6%, and 10.2% of the Companys net sales for 2010, 2009, and 2008, respectively. Sales to
Snap Fitness, Inc. or its franchisees represented 4.1%, 7.4% and 12.9% of the Companys net sales for 2010, 2009 and 2008, respectively. No other customer accounted for more than 10% of the Companys net sales for 2010, 2009 or 2008.

The Company distributes its products through independent authorized dealers, its own sales force, international distributors
and its e-commerce web site (www.cybexinternational.com). The Company services its products through independent authorized dealers, international distributors, a network of independent service providers and its own service personnel.

Independent authorized dealers operate independent stores specializing in fitness-related products and promote home and commercial sales
of the Companys products. The operations of the independent dealers are primarily local or regional in nature. In North America, the Company publishes dealer performance standards which are designed to assure that the Company brand is properly
positioned in the marketplace. In order to qualify as an authorized dealer, the dealer must, among other things, market and sell Cybex products in a defined territory, achieve sales objectives, have qualified sales personnel, and receive on-going
product and sales training. As of March 1, 2011, the Company has approximately 63 active dealers with 116 locations in North America. The Companys domestic sales force services this dealer network and sells direct in regions not covered
by a dealer and in specialty markets, such as the military/government, fire departments, golf clubs or universities. The domestic sales team is comprised of 39 positions including territory managers or reps, regional or national account managers,
Assistant Vice Presidents, and a Senior Vice President.

The national account team focuses on major market segments such as
health clubs and gyms, hotels, resorts, the U.S. government and organizations such as YMCAs, as well as third party consultants which purchase on behalf of such national accounts. The Company has approximately 25 national accounts.



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Sales outside of North America accounted for approximately 31%, 29% and 28% of the
Companys net sales for 2010, 2009 and 2008, respectively. The international sales force consists of 14 positions including a Senior Vice President, a Vice President of Europe Business Development, regional sales managers, country sales
managers, a director of International Training, a Director of Communications, an operations coordinator and a European Group Sales Administrator. The Company, through its wholly-owned subsidiary, Cybex UK, directly markets and sells Cybex products
in the United Kingdom. Cybex UK has 14 employees. The Company utilizes independent distributors for the balance of its international sales. There are approximately 67 independent distributors in 74 countries currently representing Cybex. The Company
enters into international distributor agreements with these distributors which define territories, performance standards and volume requirements.

Additional information concerning the Companys international sales and assets located in foreign countries is located in Note 2 to the Companys consolidated financial statements.

The Company markets certain products by advertising in publications which appeal to individuals within its targeted demographic profiles.
In addition, the Company advertises in trade publications and participates in industry trade shows. The Company has retained Greg Norman to engage in marketing of the Companys products, specifically to the golf club market.

The Company offers leasing and other financing options for its commercial customers. The Company arranges financing for its dealers and
direct sale customers through various third party lenders for which it may receive a fee. Management believes that these activities produce incremental sales of the Companys products.

Warranties

All products are warranted for one year of labor and up to ten
years for structural frames. Warranty periods for parts range from one to ten years depending on the part and type of equipment. The Company also provides extended warranties on its cardiovascular products. Warranty expense for the years ended
December 31, 2010, 2009 and 2008 was $3,547,000, $4,940,000 and $4,361,000, respectively.

Competition

The market in which the Company operates is highly competitive. Numerous companies manufacture, sell or distribute exercise equipment. The
Company currently competes primarily in the premium-performance, professional quality equipment segment of the market. The Companys competitors vary according to product line and include companies with greater name recognition and more
extensive financial and other resources than the Company.

Important competitive factors include price, product quality and
performance, diversity of features, warranties and customer service. The Company follows a policy of premium quality and differentiated features which results in products having suggested retail prices at or above those of its competitors in most
cases. The Company currently focuses on the segment of the market which values quality and is willing to pay a premium for products with performance advantages over the competition. Management believes that its reputation for producing products of
high quality and dependability with differentiated features constitutes a competitive advantage.

Product Development

Research and development expense for the years ended December 31, 2010, 2009 and 2008 was $5,569,000, $4,545,000 and $6,603,000,
respectively. At December 31, 2010, the Company had the equivalent of 38 employees engaged in ongoing research and development programs. The Companys development efforts focus on improving existing products and developing new products,
with the goal of producing user-friendly, ergonomically and biomechanically correct, durable exercise equipment with competitive features. Product development is a cross functional effort of sales, marketing, product management, engineering and
manufacturing, led by the Companys Senior Vice President of Research and Development.



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Manufacturing and Supply

The Company maintains two vertically integrated manufacturing facilities equipped to perform fabrication, machining, welding, grinding, assembly and finishing of its products.

The Company manufactures treadmill and bike cardiovascular products in its facility located in Medway, Massachusetts and manufactures the
cross trainers and strength equipment in its facility located in Owatonna, Minnesota. Raw materials and purchased components are comprised primarily of steel, aluminum, wooden decks, electric motors, molded or extruded plastics, milled products,
circuit boards for computerized controls, video monitors and upholstery. These materials are assembled, fabricated, machined, welded, powder coated and upholstered to create finished products.

The Companys stepper, multi-gym, and Home Arc products are manufactured for the Company in Taiwan.

The Company single sources its stepper, multi-gym and Home Arc products and certain raw materials and component parts, including drive
motors, belts, running decks, molded plastic components, electronics and video monitors, where it believes that sole sourcing is beneficial for reasons such as quality control and reliability of the vendor or cost. The Company attempts to reduce the
risk of sole source suppliers by maintaining varying levels of inventory. However, the loss of a significant supplier, or delays or disruptions in the delivery of components or materials, or increases in material costs, could have a material adverse
effect on the Companys operations.

The Company manufacturers most of its strength training equipment on a
build-to-order basis which responds to specific sales orders. The Company manufactures its other products based upon projected sales in addition to a build to order basis.

Backlog

Backlog
historically has not been a significant factor in the Companys business.

Patents and Trademarks

The Company owns, licenses or has applied for various patents with respect to its products and has also registered or applied for a number
of trademarks. While these patents and trademarks are of value, management does not believe that it is dependent, to any material extent, upon patent or trademark protection.

Insurance

The Companys product liability insurance currently
provides an aggregate of $10,000,000 of annual coverage on a claims made basis ($5,000,000 annual coverage for claims made prior to December 1, 2008). These policies include a deductible of $250,000 on claims made after December 1, 2008
with an annual aggregate deductible of $1,000,000 (for claims made prior to December 1, 2008, a $100,000 deductible with an annual aggregate deductible of $750,000). Reserves for self insured retention, including claims incurred but not yet
reported, are included in accrued liabilities on the consolidated balance sheet.

Governmental Regulation

The Companys products are not subject to material governmental regulation.

The Companys operations are subject to federal, state and local laws and regulations relating to the environment. The Company
regularly monitors and reviews its operations and practices for compliance with these laws and regulations, and management believes that it is in material compliance with such environmental



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laws and regulations. Despite these compliance efforts, some risk of liability is inherent in the operation of the business of the Company, as it is with other companies engaged in similar
businesses, and there can be no assurance that the Company will not incur material costs in the future for environmental compliance.

Employees

On
March 1, 2011, the Company employed 552 persons on a full-time basis. None of the Companys employees are represented by a union. The Company considers its relations with its employees to be good.

Available Information

The Company files reports electronically with the Securities and Exchange Commission. Forms 8-K, 10-Q, 10-K, Proxy Statements and other
information can be viewed at http://www.sec.gov. This information can also be viewed without charge at the Companys own website at http://www.cybexinternational.com. The internet website address for Cybex is included in this report for
identification purposes. The information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

The risk factors identified in the cautionary statements below could cause our actual results to differ materially from those suggested in the forward-looking statements appearing elsewhere in this Annual
Report on Form 10-K. However, these risk factors are not exhaustive and new risks may also emerge from time to time. It is not possible for management to predict all risk factors or to assess the impact of all risk factors on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual
results.

We are subject to a product liability jury verdict substantially in excess of our insurance coverage and beyond
our capacity to pay.On December 7, 2010, the jury in the Barnhard v Cybex International, Inc. product liability suit returned a $66 million verdict, apportioned 75% to Cybex, 20% to a non-affiliated co-defendant and 5% to the
plaintiff. Under New York law, Cybex would be responsible for payment of 95% of any judgment entered on this verdict and may then seek to collect 20% of such judgment from the co-defendant.Our available insurance coverage for this matter as
of December 31, 2010 was approximately $2,900,000. See Item 3, Part 1 below and Note 14 of the Notes to the Consolidated Financial Statements included herein for a more detailed description of this matter. We intend to vigorously pursue
all available options to seek a reversal or reduction of the verdict and any judgment that is ultimately entered on the verdict. However, any appeals we make in this matter may be denied. In addition, we may be required to post a bond in a
significant amount, up to the full amount of the judgment, in order to obtain a stay of enforcement of the judgment during the pendency of our appeals, and there is no assurance that we will have the financial ability to obtain such a bond. We do
not have the resources to a satisfy our obligations if the plaintiff is ultimately able, either due to our inability to post a bond or the failure of our appeals, to enforce a judgment in this matter unless the judgment is substantially reduced from
the jury verdict. Even if we have the financial ability to obtain a bond or to pay a reduced judgment, such events could have a material adverse effect on our business prospects, liquidity, financial condition and cash flows. The uncertainties of
this matter may also negatively affect the willingness of others, including our customers, vendors and lenders, to do business with us. The above factors have caused our independent registered public accountants to include an explanatory paragraph
in their opinion on our consolidated financial statements included herein stating that this matter raises substantial doubt about our ability to continue as a going concern.

Failure to comply with our credit facilities could have a material adverse effect upon us.We failed to meet certain financial covenants contained in our credit facilities at March 28 and
June 27, 2009. We obtained waivers from each lender for the quarters then ended, and we also renegotiated our financial covenants with our lenders.



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In March, 2011, our financial covenants were further amended and we are currently in compliance with our credit facilities. A failure to remain in compliance with our credit facilities could
result in a number of consequences, such as our lenders requiring all indebtedness to be paid or our revolving lender refusing to extend further revolving loans, which could have a material adverse effect on our business, prospects or financial
condition.

Our revolving credit facility matures on July 1, 2011. Our revolving credit facility matures on
July 1, 2011, prior to which time we anticipate it will be extended or refinanced. However, there is no assurance that such extension or refinancing will be available or, if available, that it will be on favorable terms. If we are unable to
extend or refinance the revolving credit facility, we would not have available to us working capital loans. While we have not utilized the revolving credit facility for working capital financing since 2009, the failure to have revolving credit
availability could result in insufficient sources of liquidity to meet our obligations.

We have incurred losses. We
incurred net losses in the last three fiscal years. In 2008 we recorded a goodwill impairment charge of $11,247,000, resulting in a net loss for the year. An approximate 19% decline in our 2009 net sales compared to the prior year was a substantial
contributor to our 2009 net loss. In 2010, we incurred $45,991,000 in pre-tax litigation charges, related to the product liability jury award discussed above, and a $12,665,000 incremental tax provision, primarily due to the valuation allowance
recorded against deferred tax assets as a result of the uncertainty of realization caused by the litigation charge, resulting in a net loss of $58,237,000 for the year. If we are unable to maintain our profitability and we incur losses in the
future, such losses could have a material adverse effect on our business prospects, liquidity, financial condition and cash flows.

General economic conditions affect our results. Demand for our products is affected by economic conditions and consumer confidence. In times of economic uncertainty, our customers, particularly
commercial customers such as fitness clubs, may become cautious in making expansion and other investments and may reduce their capital expenditures for items such as the fitness equipment offered by us. In addition, economic conditions could make it
more difficult for us to collect amounts as they become due to us. While our net sales in 2010 were 2% above prior year results, net sales for 2009 and 2010 were approximately 19% and 17%, respectively, below 2008 net sales. We believe that this
sales decline largely reflected our customers caution in making capital investment decisions due to economic conditions, both generally and in the fitness industry. If these economic conditions persist or further deteriorate, our ability to
generate future revenues and earnings and our business prospects, liquidity and financial condition could be materially adversely affected.

We depend upon our ability to successfully develop, market and sell new or improved products. Our continued growth and ability to remain competitive will substantially depend upon our development
of new or improved products. A failure to develop new or improved products on a timely basis, or which are accepted in the marketplace, or which produce appropriate sales or profit margins, could adversely affect our ability to generate future
revenues and earnings and have a negative impact on our business prospects, liquidity and financial condition.

Increases
in raw material costs, or the unavailability of raw materials or components, could adversely affect us.Increases in our cost of raw materials could have a material effect on our profitability. We currently source our Home Arc, multi-gym and
stepper and certain raw materials and component parts (e.g., drive motors, belts, running decks, molded plastic components and electronics) from single suppliers. Current economic conditions may make it more likely that our suppliers are unable to
deliver supplies which we require on a timely basis or at all. The loss of a significant supplier, or delays or disruptions in the delivery of raw materials or components, could adversely affect our ability to generate future revenues and earnings
and have a material adverse effect on our business and financial results.

We are subject to product liability claims that
may exceed our insurance coverage.As a manufacturer of fitness products, we are inherently subject to the hazards and uncertainties of product liability litigation. We have maintained, and expect to continue to maintain, product liability
insurance, and we include reserves for self



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insured retention in accrued liabilities in our consolidated balance sheets. While we believe that our current insurance coverage is adequate, we may be subject to product liability claims which
assert damages materially in excess of the limits of our insurance coverage. In December 2010, a significant jury verdict was rendered in a product liability suit, discussed above, which substantially exceeds our available insurance coverage. It is
possible that the Company could be subject to other product liability judgments or settlements which materially exceed the available insurance coverage and related reserves.

We have been involved in a number of other litigation matters and expect legal claims in the future.In recent years we have been involved in a number of other litigation matters, including with
respect to intellectual property rights and contractual disputes. We expect that we will continue to be involved in litigation in the ordinary course of business. While we maintain reserves for estimated litigation costs and losses, one or more
adverse determinations or excessive costs in litigation affecting us could have a material adverse effect on our business prospects, liquidity, financial condition and cash flows.

Our failure or inability to protect our intellectual property from misappropriation or competition could adversely affect our business
prospects.Our intellectual property aids us in competing in the exercise equipment industry. Despite our efforts to protect our intellectual property rights, such as through patent, trade secret and trademark protection, unauthorized parties
may try to copy our products, or obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries may not protect our rights to as great an extent as U.S. law. Furthermore, the patents and trademarks which we
have obtained or may seek in the future may not be of a sufficient scope or strength to provide meaningful economic or competitive value. Our rights and the additional steps we have taken to protect our intellectual property may not be adequate to
deter misappropriation, and we also remain subject to the risk that our competitors or others will independently develop non-infringing products substantially equivalent or superior to our products. We also may not be able to prevent others from
claiming that our products violate their proprietary rights. If we are unable to protect our intellectual property, or if we are sued for infringing another partys intellectual property, our business, financial condition, results of operation
or cash flows could be materially adversely affected.

We principally use two facilities to produce our products and a
material business disruption at either facility could significantly impact our business. Most of our products are manufactured or assembled in two vertically integrated facilities located in Massachusetts and Minnesota. These facilities house
all our manufacturing operations and our executive offices. We take precautions to safeguard our facilities, including obtaining insurance, maintaining safety protocols and using off-site storage of computer data. However, a natural disaster, such
as an earthquake, fire or flood, or an act of terrorism or vandalism, could cause substantial disruption to our operations, damage or destroy our manufacturing equipment, information systems or inventory and cause us to incur substantial additional
expenses. The insurance we maintain against disasters may not cover or otherwise be adequate to meet our losses in any particular case. Any disaster which prevents operations in either of our facilities for any extended period may result in
decreased revenues and increased costs and could significantly harm our operating results, financial condition, cash flows and prospects.

The loss of a major customer could adversely affect us. In 2010 sales to one independent authorized dealer represented 13.0% of our net sales and sales to an end user customer represented 12.4% of
net sales. These customers represented 9.5% and 6.7%, respectively, of our accounts receivable as of December 31, 2010. The concentration of customers may increase our overall exposure to credit risk. The loss or significant reduction in the
business of a major customer, or a major customer experiencing financial difficulty, could significantly harm our operating results, financial condition, cash flows and prospects.

We rely on third party dealers and distributors to sell and service a significant portion of our products. In 2010, more than half
of our total net sales were to our independent authorized dealers in North America and to independent distributors internationally. These third party dealers and distributors may terminate their relationships with us, or fail to commit the necessary
resources to sell or service our products to the level of our



9



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expectations. If current or future third party dealers or distributors do not perform adequately, or if we fail to maintain our existing relationships with them or fail to recruit and retain
dealers or distributors in particular markets or geographic areas, our revenues may be adversely affected and our operating results could suffer.

Our major stockholders may exercise effective control over us.John Aglialoro, Joan Carter and UM Holdings Ltd., who are related parties, collectively own approximately 49.5% of our outstanding
common stock. Such stockholders may have the ability to significantly influence (i) the election of our Board of Directors, and thus our future direction and (ii) the outcome of all other matters submitted to our stockholders, including
mergers, consolidations and the sale of all or substantially all of our assets.

We face strong competition.The
fitness equipment industry is highly competitive. Numerous companies manufacture, sell or distribute exercise equipment. Our competitors include companies with strong name recognition and more extensive financial and other resources than us.

We carry debt.We carry long-term debt. This leverage may have several important consequences, including the need to
meet debt service requirements and vulnerability to changes in interest rates. This leverage may also limit our ability to raise additional capital, withstand adverse economic or business conditions and competitive pressures, and take advantage of
significant business opportunities that may arise.

Warranty claims may exceed the related reserves.We warrant our
products for varying periods of up to ten years. While we maintain reserves for warranty claims, it could have a material adverse effect on our business prospects, liquidity, financial condition and cash flows if warranty claims were to materially
exceed anticipated levels.

We may have a liability related to the arrangement of third party financing.We offer to
our customers leasing and other financing of products by third party providers, for which we may receive a fee. While most of these financings are without recourse, in certain cases we may offer a guaranty or other recourse provisions. At
December 31, 2010, our maximum contingent liability under all recourse provisions was approximately $5,691,000. While we maintain a reserve for estimated losses under these recourse provisions, it could have a material adverse effect on our
business prospects, liquidity, financial condition and cash flows if actual losses were to materially exceed the related reserve.

We are currently not in compliance with, and may be unable to regain or maintain compliance with, NASDAQs continued listing requirements. On January 21, 2011, we received notification
from the NASDAQ Stock Market (NASDAQ) that we no longer meet the NASDAQs continued listing requirement because our common stock traded below $1.00 per share for 30 consecutive business days. The notification of non-compliance has
no immediate effect on the listing or trading of our securities on the NASDAQ Global Market. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for at least 10 consecutive business days prior to
July 20, 2011.In addition to NASDAQs $1.00 minimum bid price rule, there are a number of other continued listing requirements that we must satisfy in order to maintain our listing on NASDAQ, and there is no assurance we will
regain and maintain compliance with the NASDAQ continued listing standards. The delisting of our common stock from trading on NASDAQ could have a significant negative effect on the market for, and liquidity and value of, our common stock.

Unfavorable international political or economic changes and/or currency fluctuations could negatively impact us.Approximately 31% and 29% of our sales in 2010 and 2009, respectively, were derived from outside North America. Political or economic changes and/or currency fluctuations in countries in which we do business could negatively impact our business
and financial results, including decreases in our revenues and profitability.

We may not be able to attract and retain key
employees and the loss of any member of our senior management could negatively affect our business.We compete for the services of qualified personnel. Our future success will depend upon, to a significant degree, the performance and
contribution of the members of senior



10



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management and upon our ability to attract, motivate and retain other highly qualified employees with technical, management, marketing, sales, product development, creative and other skills.
Although we do have employment agreements with our executive officers, there can be no assurance that such officers will continue to perform under those contracts. Our business, financial condition and results of operations could be materially and
adversely affected if we lost the services of members of our senior management team or key technical or creative employees or if we failed to attract additional highly qualified employees.

Future issuances of preferred stock may adversely affect the holders of our common stock.Our Board has the ability to issue,
without approval by the common stockholders, shares of one or more series of preferred stock, with the new series having such rights and preferences as the Board may determine in its sole discretion. Any series of preferred stock may have rights,
including cumulative dividend, liquidation and conversion rights, senior to our common stock, which could adversely affect the holders of the common stock, as well as the economic value of the common stock.

A variety of factors may discourage potential take-over attempts.John Aglialoro, Joan Carter and UM Holdings Ltd., who are
related parties, collectively own approximately 49.5% of our outstanding common stock. In addition, our Certificate of Incorporation requires an affirmative super-majority stockholder vote before we can enter into certain defined business
combinations, except for combinations that meet certain specified conditions; provides for staggered three-year terms for members of the Board of Directors; and authorizes the Board of Directors to issue preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of such preferred stock without any further vote or action by our stockholders. Each of these factors could have the effect of discouraging potential take-over attempts and may make attempts
by stockholders to change our management more difficult.

In the event we are unable to satisfy regulatory
requirements relating to internal control over financial reporting, or if these internal controls are not effective, our business and financial results may suffer.Effective internal controls are necessary for us to provide reasonable
assurance with respect to our financial reports and to effectively prevent fraud. If we cannot provide reasonable assurance with respect to our financial reports and effectively prevent fraud, our business and operating results could be harmed.
Pursuant to the Sarbanes-Oxley Act of 2002, we are required to furnish a report by management on internal control over financial reporting, including managements assessment of the effectiveness of such control. Internal control over financial
reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only
reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the
risk that the control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal controls, including any failure to
implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could also be a material adverse
effect on our stock price.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 2. | PROPERTIES
|------- | ----------

The Company occupies approximately 120,000 square feet of space in Medway, Massachusetts and approximately 340,000 square feet of space in Owatonna, Minnesota for administrative offices, manufacturing,
assembly and warehousing. Both facilities are owned by the Company. The Company also utilizes outside warehousing.



11



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Cybex UK, the Companys wholly-owned United Kingdom subsidiary, leases approximately
728 square feet of space in Measham, England. This space is utilized for the subsidiarys direct sales and service efforts in the United Kingdom, which serves Cybexs operations throughout Europe.

The Companys manufacturing facilities are equipped to perform fabrication, machining, welding, grinding, assembly and powder
coating of its products. These facilities are well maintained and kept in good repair. Management believes that the Companys facilities are adequate for its operations for the foreseeable future.

Additional information concerning the financing of the Companys facilities are described in Notes 7 and 14 to the Companys
consolidated financial statements.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

Product Liability

As a manufacturer of fitness products, the Company is inherently subject to the hazards and uncertainties of product liability litigation.
The Company has maintained, and expects to continue to maintain, product liability insurance, and it includes reserves for self insured retention in accrued liabilities in the consolidated balance sheets. While the Company believes that its
insurance coverage is adequate in light of the risks of product liability claims and awards, the Company may be subject to product liability claims which assert damages materially in excess of the limits of its insurance coverage. In December 2010,
a jury verdict in the Barnhard v Cybex International, Inc. product liability suit, discussed below, apportioned a significant amount of liability to the Company, which substantially exceeds the Companys available insurance coverage. It
is possible that the Company could be subject to other product liability judgments or settlements which materially exceed the available insurance coverage and related reserves.

Litigation and Contingencies

Barnhard v. Cybex International, Inc., et al.

This product liability litigation was commenced in 2005 in the Supreme Court, Eighth District, State of New York. The
plaintiff, who was rendered a quadriplegic after she pulled a Cybex weight machine over onto herself, asserted that Cybex was at fault for the accident due to the design of the machine and a failure to warn. On December 7, 2010, the jury
returned a $66 million verdict, apportioned 75% to Cybex, 20% to co-defendant Amherst Orthopedic Physical Therapy, P.C. and 5% to the plaintiff. Under New York law, Cybex would be responsible for payment of 95% of any judgment entered on this
verdict and may then seek to collect 20% of such judgment from the co-defendant.

In January 2011 the Company filed post-trial
motions, seeking, alternatively, judgment in its favor as a matter of law, a new trial and a reduction of the verdict. In February 2011, the trial court denied these motions, and the Company thereafter filed an appeal from this post-trial order with
the Appellate Division, Fourth Judicial Department. At the date of this Report, no judgment has been entered on the verdict. Interest does not begin to accrue on this judgment until after it has been entered. The Company intends to vigorously pursue
all available options to seek a reversal or reduction of the verdict and any judgment that is ultimately entered.

United Leasing, Inc. v.
Cybex International, Inc., et al.

The Company on February 25, 2009 was served with an Amended Complaint which added
the Company and its wholly owned subsidiary, Cybex Capital Corp. (collectively with the Company referred to herein as Cybex), as additional defendants in this action originally venued in the Circuit Court for Williamson County, State of Tennessee.
The plaintiff, United Leasing, Inc., provided a series of lease financings for the sale of Cybex equipment to a purchaser/lessee which has since entered bankruptcy, many of which sales were made by an independent dealer, also a defendant in the
action. The plaintiff alleged that it was induced to finance in excess of



12



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the purchase price for certain of the equipment based primarily upon alleged rebates to the purchaser/lessee made by the independent dealer. Cybex Capital assisted in the lease financing and the
plaintiff asserted that Cybex participated in the alleged scheme and was liable for any resulting damages.

During March 2009,
this action was removed to the United States District Court for the Middle District of Tennessee, and Cybex filed an Answer denying all material allegations of the Amended Complaint, other than admitting limited guarantees of certain of the leases
at issue had been provided.

In January 2011, the parties entered into a settlement agreement. Pursuant to this settlement,
Cybex paid to the plaintiff the sum of $937,500, the parties provided cross-releases of all claims and the litigation has been dismissed with prejudice.

The Company is involved in certain other legal actions, contingencies and claims arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these other matters
will not have a material adverse effect on the Companys financial position, results of operations or cash flows. Legal fees related to those matters are charged to expense as incurred.



|ITEM 4. | RESERVED
|------- | --------

SPECIAL
ITEM.EXECUTIVE OFFICERS OF REGISTRANT

Officers are elected by the Board of Directors and serve
at the pleasure of the Board. The executive officers of the Company as of March 15, 2011 were as follows:



|                     |  |     |    |  |          |                                                               
|-------------------- |  | --- | -- |  | -------- | --------------------------------------------------------------
|Name                 |  | Age |    |  | Position
|John Aglialoro       |  |     | 67 |  |          | Chairman and Chief Executive Officer                          
|Arthur W. Hicks, Jr. |  |     | 52 |  |          | President, Chief Operating Officer and Chief Financial Officer
|Edward Kurzontkowski |  |     | 47 |  |          | Senior Vice President of Manufacturing                        
|Raymond Giannelli    |  |     | 57 |  |          | Senior Vice President of Research and Development             
|Edward J. Pryts      |  |     | 50 |  |          | Senior Vice President of SalesNorth America                  
|John P. Young        |  |     | 48 |  |          | Senior Vice President of SalesInternational                  

Mr. Aglialoro has served as Cybexs Chief Executive Officer since 2000. Mr. Aglialoro is also the Chairman of UM Holdings Ltd., which he co-founded in 1973. UM Holdings Ltd. is the
Companys principal stockholder. He served as a Director and Chairman of Trotter Inc. (Trotter) from 1983 until Trotters merger with Cybex in 1997, from which time he has served as the Chairman of the Companys Board of
Directors.

Mr. Hicks is the Companys President, Chief Operating Officer and Chief Financial Officer.
Mr. Hicks has served the Company as President since 2008, as Chief Operating Officer since 2006 and as Chief Financial Officer since 2002. He also held the title Executive Vice President from 2006 until his appointment as President. Prior to
2006, he served Cybex through a service agreement between the Company and UM Holdings Ltd., where he was employed as Chief Financial Officer since 1988. He was a director of Trotter from 1994 to 1997 and has served as a director of Cybex since 1997.

Mr. Kurzontkowski has served as the Companys Senior Vice President of Manufacturing since 2008. He joined Trotter
in 1981 and has served the Company in a variety of capacities, including Executive Vice President of Operations from 2002 to 2003 and Senior Vice President of Manufacturing and Engineering from 2003 to 2008.

Mr. Giannelli has served as the Companys Senior Vice President of Research and Development since 2003. He first joined Cybex
in 1975 and served in various positions including Vice President of Research and Development. In 1991, Mr. Giannelli left Cybex and joined Trotter as the Vice President of Research and



13



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Development and continued to maintain that position after the merger of Trotter with Cybex. Mr. Giannelli left Cybex in 1999 and returned in 2001 to assist in Cybexs research and
development effort as the Chairman of the Cybex Institute.

Mr. Pryts has served as the Companys Senior Vice
President of SalesNorth America since 2007. Mr. Pryts first joined Trotter in 1993 and has served the Company in a variety of capacities, including Vice President of SalesNorth America from 2002 to 2006 and Vice President of
Domestic Sales from 2000 to 2002.

Mr. Young has served as the Companys Senior Vice President of
SalesInternational since January 2007. He first joined Cybex in 1999 and has served in several capacities, including Vice President of International Sales from 2001 to 2006.



14



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PART II



|ITEM 5. | MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ----------------------------------------------------------------------------------------------------------------

The Companys common shares are traded on the NASDAQ Global Market under the symbol CYBI.

The following table shows the high and low market prices as reported by NASDAQ:



|               |  |      |      |  |      |   |      |      |  |   |      |  |  |   |      | 
|-------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|               |  | 2010 |      |  | 2009 |  
|Calendar       |  | High |      |  | Low  |   |      | High |  |   | Low  | 
|First Quarter  |  | $    | 1.62 |  |      | $ | 1.17 |      |  | $ | 1.93 |  |  | $ | 0.81 | 
|Second Quarter |  |      | 1.72 |  |      |   | 1.17 |      |  |   | 1.49 |  |  |   | 0.95 | 
|Third Quarter  |  |      | 1.80 |  |      |   | 1.34 |      |  |   | 2.55 |  |  |   | 0.86 | 
|Fourth Quarter |  |      | 1.65 |  |      |   | 0.57 |      |  |   | 1.89 |  |  |   | 1.15 | 

As of March 15,
2011, there were approximately 436 common stockholders of record. This figure does not include stockholders with shares held under beneficial ownership in nominee name.

Under the Companys credit agreements, the Company currently does not have the ability to pay dividends. The present policy of the Company is to retain any future earnings to provide funds for the
operation and expansion of its business.

The following table summarizes securities authorized for issuance under equity
compensation plans at December 31, 2010:

Equity Compensation Plan Information



|                                                          |  |                                                                                        |         |  |                                                                          |   |      |                                                                                          |  |  |         |    
|--------------------------------------------------------- |  | -------------------------------------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------ | - | ---- | ---------------------------------------------------------------------------------------- |  |  | ------- | ---
|Plan category                                             |  | Number ofsecurities to beissued upon exerciseof outstandingoptions,
warrantsand rights |         |  | Weighted-averageexercise price ofoutstanding options,warrants and
rights |   |      | Number ofsecurities remainingavailable for
futureissuance under equitycompensation plans | 
|Equity compensation plans approved bysecurity holders     |  |                                                                                        | 791,125 |  |                                                                          | $ | 2.17 |                                                                                          |  |  | 565,000 | (1)
|Equity compensation plans not approved bysecurity holders |  |                                                                                        |        |  |                                                                          |   |     |                                                                                          |  |  |        |    
|                                                          |  |                                                                                        |         |  |                                                                          |   |      |                                                                                          |  |  |         |    
|Total                                                     |  |                                                                                        | 791,125 |  |                                                                          | $ | 2.17 |                                                                                          |  |  | 565,000 |    
|                                                          |  |                                                                                        |         |  |                                                                          |   |      |                                                                                          |  |  |         |    



|(1) | Consists of 565,000 shares available for issuance under the Companys 2005 Omnibus Incentive Plan. See Note 10 to the Companys consolidated financial
statements for a description of this plan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15



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Performance Graph

The following graph compares the five-year cumulative total return (change in stock price plus reinvested dividends) on the Companys common stock with the total returns of the NASDAQ Market Value
Index, a broad market index covering stocks listed on the NASDAQ, and the companies in the Sporting and Athletic Goods Industry (SIC Code 3949), a group encompassing 17 companies (the SIC Code Index). The performance graph is deemed
furnished and not filed with the Securities and Exchange Commission.

LOGO

Comparison of 5-Year Cumulative Total Return Among

Cybex International, Inc., NASDAQ Market Index,

and SIC Code Index (1)



|                                          |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |      |   |        |  |  |   |        | 
|----------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ----- |  | ---- | - | ------ |  |  | - | ------ | 
|                                          |  | 2005 |        |  | 2006 |   |        | 2007 |  |   | 2008   |  |  | 2009 |       |  | 2010 |  
|Cybex International, Inc.                 |  | $    | 100.00 |  |      | $ | 162.16 |      |  | $ | 123.24 |  |  | $    | 49.73 |  |      | $ | 31.62  |  |  | $ | 17.84  | 
|NASDAQ Market Index                       |  |      | 100.00 |  |      |   | 111.74 |      |  |   | 124.67 |  |  |      | 73.77 |  |      |   | 107.12 |  |  |   | 125.93 | 
|SIC CODE 3949-Sporting and Athletic Goods |  |      | 100.00 |  |      |   | 96.77  |      |  |   | 94.36  |  |  |      | 43.38 |  |      |   | 37.35  |  |  |   | 42.06  | 



|(1) | Assumes $100 invested on December 31, 2005 and dividends are reinvested. Source: Research Data Group, Inc.
|--- | ----------------------------------------------------------------------------------------------------------



16



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|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following information has been extracted from the Companys consolidated financial statements for the five years ended December 31, 2010. This selected consolidated financial data should be
read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and the Companys consolidated financial statements and notes thereto included elsewhere in this report.



|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|-------------------------------------------- |  | ------------------------------------- | ------- | --- | ---- | - | ------- | ---- |  | - | ------- | --- |  | ---- | ------- | ---- |  | - | ------- | ----
|                                             |  | Year Ended December 31                |        
|                                             |  | 2010                                  |         |     | 2009 |   |         | 2008 |  |   | 2007    |     |  | 2006 |        
|                                             |  | (in thousands, except per share data) |        
|Statement of Operations Data:                |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|Net sales                                    |  | $                                     | 122,961 |     |      | $ | 120,474 |      |  | $ | 147,929 |     |  | $    | 146,503 |      |  | $ | 126,924 |     
|Cost of sales                                |  |                                       | 78,114  |     |      |   | 84,466  |      |  |   | 99,940  |     |  |      | 95,683  |      |  |   | 80,241  |     
|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|Gross profit                                 |  |                                       | 44,847  |     |      |   | 36,008  |      |  |   | 47,989  |     |  |      | 50,820  |      |  |   | 46,683  |     
|Selling, general and administrative expenses |  |                                       | 42,072  |     |      |   | 37,680  |      |  |   | 42,321  |     |  |      | 42,224  |      |  |   | 36,757  |     
|Litigation charge                            |  |                                       | 45,991  | (a) |      |   |        |      |  |   |        |     |  |      |        |      |  |   |        |     
|Goodwill impairment charge                   |  |                                       |        |     |      |   |        |      |  |   | 11,247  | (c) |  |      |        |      |  |   |        |     
|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|Operating income (loss)                      |  |                                       | (43,216 | )   |      |   | (1,672  | )    |  |   | (5,579  | )   |  |      | 8,596   |      |  |   | 9,926   |     
|Interest expense, net                        |  |                                       | (1,260  | )   |      |   | (1,274  | )    |  |   | (1,176  | )   |  |      | (963    | )    |  |   | (1,839  | )   
|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|Income (loss) before income taxes            |  |                                       | (44,476 | )   |      |   | (2,946  | )    |  |   | (6,755  | )   |  |      | 7,633   |      |  |   | 8,087   |     
|Income tax expense (benefit)                 |  |                                       | 13,761  | (b) |      |   | (509    | )    |  |   | 2,333   |     |  |      | (2,121  | )(d) |  |   | (11,967 | )(e)
|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|Net income (loss)                            |  | $                                     | (58,237 | )   |      | $ | (2,437  | )    |  | $ | (9,088  | )   |  | $    | 9,754   |      |  | $ | 20,054  |     
|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|Basic earnings (loss) per share              |  | $                                     | (3.40   | )   |      | $ | (0.14   | )    |  | $ | (0.52   | )   |  | $    | .56     |      |  | $ | 1.22    |     
|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     
|Diluted earnings (loss) per share            |  | $                                     | (3.40   | )   |      | $ | (0.14   | )    |  | $ | (0.52   | )   |  | $    | .55     |      |  | $ | 1.18    |     
|                                             |  |                                       |         |     |      |   |         |      |  |   |         |     |  |      |         |      |  |   |         |     



|(a) | Consists of a $45,991 charge relating to the unfavorable jury verdict in the Barnhard product liability suit.
|--- | -------------------------------------------------------------------------------------------------------------

|(b) | Includes an increase in the valuation allowance of $30,656 to fully offset deferred tax assets, primarily due to the uncertainty of realization of the Companys
deferred tax assets resulting from the product liability suit. The net incremental tax provision recorded as a result of the litigation charge was $12,665.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Consists of a non-cash non-tax deductible goodwill impairment charge of $11,247 triggered by declines in the Companys stock price in the period.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Includes a benefit of $5,377 resulting from a reduction in the valuation allowance for deferred income taxes.
|--- | -------------------------------------------------------------------------------------------------------------

|(e) | Includes a benefit of $15,361 resulting from a reduction in the valuation allowance for deferred income taxes.
|--- | --------------------------------------------------------------------------------------------------------------



|                                           |  |                |         |   |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|------------------------------------------ |  | -------------- | ------- | - | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|                                           |  | December 31    |        
|                                           |  | 2010           |         |   | 2009 |   |        | 2008 |  |   | 2007   |  |  | 2006 |       
|                                           |  | (in thousands) |        
|Balance Sheet Data:                        |  |                |         |   |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|Working capital                            |  | $              | (26,611 | ) |      | $ | 21,107 |      |  | $ | 20,929 |  |  | $    | 18,186 |  |  | $ | 14,061 | 
|Total assets                               |  |                | 85,414  |   |      |   | 88,635 |      |  |   | 91,301 |  |  |      | 98,129 |  |  |   | 73,377 | 
|Long-term debt (including current portion) |  |                | 15,809  |   |      |   | 17,606 |      |  |   | 18,488 |  |  |      | 18,950 |  |  |   | 3,762  | 
|Total stockholders equity (deficit)       |  |                | (15,010 | ) |      |   | 43,109 |      |  |   | 45,451 |  |  |      | 55,042 |  |  |   | 45,667 | 



17



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS
|------- | ------------------------------------------------------------------------------------

CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION

Statements included in this Managements Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements. There are a number of risks and uncertainties
that could cause actual results to differ materially from those anticipated by the statements made below. These include, but are not limited to, the resolution of litigation involving us, our ability to comply with the terms of our credit
facilities, competitive factors, technological and product developments, market demand, and economic conditions. Further information on these and other factors which could affect our financial results can be found in our filings with the Securities
and Exchange Commission, including Part I of this Annual Report on Form 10-K.

OVERVIEW AND OUTLOOK

We are a New York corporation that develops, manufacturers and markets high performance, professional quality exercise equipment products
for the commercial market and, to a lesser extent, the premium segment of the consumer market.

We estimate that commercial
sales represent more than 90% of our total net sales. Our financial performance can be affected when, in times of economic uncertainty, our commercial customers, particularly fitness clubs, become cautious in making expansion and other capital
investments and reduce their expenditures for items such as the fitness equipment offered by us.

Our net sales began to
decline commencing with the fourth quarter of 2008, with net sales in 2009 and 2010 approximately 19% and 17%, respectively, below 2008 net sales. We believe that this sales decline largely reflects our commercial customers, particularly fitness
clubs, being cautious in making capital investments due to economic conditions, both generally and in the fitness industry.

Our sales began to recover in 2010, with 2010 net sales approximately 2% above 2009 net sales. This improvement in sales accelerated
throughout the year, with sales in the second and third quarters of 2010 essentially flat compared to net sales for the corresponding 2009 periods and fourth quarter 2010 net sales almost 15% above fourth quarter 2009 results. While we believe that
this trend may reflect improving economic and industry conditions as well as our marketing and new product initiatives, there is no assurance that the improved sales trend will continue. We also cannot be certain the extent that other factors, such
as the product liability verdict discussed below or changes in economic conditions, will affect our financial performance.

We
took various steps to reduce expenses in response to the decline in our sales. These steps included a first quarter 2009 work force reduction of about 5% and a wage reduction of 3% or 5% for all employees in effect from the second quarter 2009 to
December 31, 2009. In addition, at the request of our outside Board members, a 5% reduction in director fees was in effect during the period of the employee wage reduction. We intend to monitor general economic conditions and our sales
performance and, if warranted, may implement further cost saving measures.

On December 7, 2010, the jury in the
Barnhard product liability suit returned a $66 million verdict, apportioned 75% to Cybex, 20% to a non-affiliated co-defendant, and 5% to the plaintiff. Under New York law, Cybex would be responsible for payment of 95% of any judgment entered
on this verdict and may then seek to collect 20% of such judgment from the co-defendant. Our available insurance coverage for this matter as of December 31, 2010 was approximately $2,900,000. See Item 3, Part 1 of this Report and Note 14
of the Notes to the Consolidated Financial Statements included herein for a more detailed description of this matter. We intend to vigorously pursue all available options to seek a reversal or reduction of the verdict and any judgment that is
ultimately entered on the verdict, and we will seek a stay of enforcement of any judgment during the appellate process. Such a stay may require the posting of a bond in a substantial amount, up to the full amount of the



18



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judgment. While we will ask the Court to issue such a stay with a limited or no bonding requirement, there is no assurance we will be successful in this regard or that we will have the
financial ability to secure a bond at a level required by the Court. The requirement to post a bond in a significant amount, even if at a level within our capacity to secure, could have a material adverse effect on our liquidity, financial condition
and business prospects. If we are unable to obtain a required bond, the plaintiff would be able to immediately enforce the judgment before we are able to fully pursue our appeal. We do not have the capital resources or liquidity to satisfy our
obligations if the plaintiff is ultimately able, either due to our inability to post a bond or the failure of our appeal, to enforce a judgment in this matter that has not been substantially reduced from the jury verdict.

The report of our independent registered public accountants on our consolidated financial statements contained in this Report on Form
10-K includes an explanatory paragraph stating that the Barnhard jury verdict raises substantial doubt about our ability to continue as a going concern. The consolidated financial statements that are included herein do not include any
adjustments that might result from the outcome of this uncertainty.

We believe that we were not at fault in the
accident that is the basis of the plaintiffs claims and accordingly that this case was wrongly decided as to liability. In addition, we believe that the amount of damages awarded by the jury is grossly overstated. Our strategy to resolve the
doubt about our ability to continue as a going concern is to vigorously contest the outcome of the Barnhard jury verdict through post trial proceedings and appeal, in order to obtain a reversal or substantial reduction of the award.

The foregoing statements are based on current expectations. These statements are forward-looking and actual results may
differ materially. In particular, the uncertainties created by the jury verdict discussed above, and the continued uncertainties in U.S. and global economic conditions and in the fitness industry, make it particularly difficult to predict future
events and may preclude us from achieving expected results.

RESULTS OF OPERATIONS

The following table sets forth selected items from the Consolidated Statements of Operations as a percentage of net sales:



|                                             |  |                        |     |    |      |  |     |      |  |  |     |   
|-------------------------------------------- |  | ---------------------- | --- | -- | ---- |  | --- | ---- |  |  | --- | --
|                                             |  | Year Ended December 31 |    
|                                             |  | 2010                   |     |    | 2009 |  |     | 2008 | 
|Net sales                                    |  |                        | 100 | %  |      |  | 100 | %    |  |  | 100 | % 
|Cost of sales                                |  |                        | 64  |    |      |  | 70  |      |  |  | 68  |   
|                                             |  |                        |     |    |      |  |     |      |  |  |     |   
|Gross profit                                 |  |                        | 36  |    |      |  | 30  |      |  |  | 32  |   
|Selling, general and administrative expenses |  |                        | 34  |    |      |  | 31  |      |  |  | 28  |   
|Litigation charge                            |  |                        | 37  |    |      |  |    |      |  |  |    |   
|Goodwill impairment charge                   |  |                        |    |    |      |  |    |      |  |  | 8   |   
|                                             |  |                        |     |    |      |  |     |      |  |  |     |   
|Operating loss                               |  |                        | (35 | )  |      |  | (1  | )    |  |  | (4  | ) 
|Interest expense, net                        |  |                        | 1   |    |      |  | 1   |      |  |  | 1   |   
|                                             |  |                        |     |    |      |  |     |      |  |  |     |   
|Loss before income taxes                     |  |                        | (36 | )  |      |  | (2  | )    |  |  | (5  | ) 
|Income tax expense (benefit)                 |  |                        | 11  |    |      |  |    |      |  |  | 1   |   
|                                             |  |                        |     |    |      |  |     |      |  |  |     |   
|Net loss                                     |  |                        | (47 | )% |      |  | (2  | )%   |  |  | (6  | )%
|                                             |  |                        |     |    |      |  |     |      |  |  |     |   

NET SALES

Our net sales increased $2,487,000, or 2%, to $122,961,000 in 2010 compared with a $27,455,000, or 19%, decrease in 2009 compared to 2008.



19



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The increase in 2010 was attributable to increases in sales of cardiovascular products of
$2,658,000, or 4% to $69,362,000 and increased freight, parts and other sales of $801,000, or 7% to $12,579,000, offset by decreases in sales of strength products of $972,000, or 2% to $41,020,000. We believe that the overall increase in sales is
reflective of improving economic conditions as well as our marketing and new product initiatives.

The decrease in 2009 was
attributable to decreases in sales of cardiovascular products of $10,074,000, or 13% to $66,704,000, strength training products of $16,181,000, or 28% to $41,992,000 and freight, parts and other sales of $1,200,000, or 9% to $11,778,000. The sales
decline was generally throughout our product offerings and we believe was reflective of economic conditions, generally and in the fitness industry.

Sales outside of North America represented 31%, 29% and 28% of consolidated net sales in 2010, 2009 and 2008, respectively.

GROSS MARGIN

Gross margin was 36.5% in 2010, compared with 29.9% in 2009
and 32.4% in 2008. Margins increased in 2010 due to higher selling prices (2.3%), favorable product mix (1.2%), lower warranty costs (1.2%), lower component costs (.9%), lower obsolescence expense (.9%) and lower manufacturing costs (.1%).

Margins decreased in 2009 due to higher material costs (2.3%) as a percentage of sales due primarily to higher steel
costs and product and customer mix, higher warranty costs (1.2%), and higher overhead as a percentage of sales mainly due to lower volumes (.8%). These decreases in margin were partially offset by lower labor costs as a percentage of sales
(1.1%) and improvements in freight billings compared to freight costs (.7%).

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses, including bad debt expense, increased by $4,392,000, or 12% in 2010 to
$42,072,000 compared to a decrease of $4,641,000, or 11%, in 2009. As a percentage of net sales, these expenses were 34%, 31% and 28% in 2010, 2009 and 2008, respectively.

The 2010 increase in selling, general and administrative expenses was predominantly due to higher sales and marketing costs ($3,551,000) including initiatives directed to new markets, higher sales
compensation and advertising costs.

The 2009 decrease in selling, general and administrative expenses was predominantly due
to a decrease in domestic and international selling expenses ($2,879,000) and a decrease in product development costs ($2,058,000) and was the result of various cost reductions we effectuated during 2009 in response to economic conditions.

LITIGATION CHARGE

The litigation charge for the year ended December 31, 2010 relates to an unfavorable jury verdict in the Barnhard product liability suit. See Note 14 to the Companys consolidated
financial statements.

GOODWILL IMPAIRMENT CHARGE

At December 31, 2008, we tested our goodwill for impairment and performed the initial step of our impairment evaluation by comparing the fair market value of our single reporting unit, as determined
using market capitalization, as adjusted for a control premium, to its carrying value. As the carrying amount exceeded the fair value, the second step of the impairment evaluation was performed to calculate impairment, and as a result a goodwill
impairment charge of $11,247,000, the entire amount of the goodwill carrying value, was recorded effective December 31, 2008, with no corresponding tax benefit. The primary reason for the impairment charge was the reduction in our market
capitalization resulting from the sustained decline of our stock price during the second half of 2008.



20



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INTEREST EXPENSE, NET

Net interest expense decreased by $14,000, or 1%, in 2010 to $1,260,000 compared to an increase of $98,000, or 8%, in 2009. During 2010, interest expense decreased due to lower interest rates on the new
equipment facility offset by higher interest earned in 2009 from a financing program. During 2009, interest expense increased due to a higher applicable interest rate resulting from debt modifications, offset by lower average borrowings.

INCOME TAXES

We
recorded, as of December 31, 2010, an increase in the valuation allowance for deferred tax assets of $30,656,000 to fully offset our deferred tax assets of $32,158,000. A valuation allowance for deferred tax assets is recorded to the extent it
cannot be determined that the realization of these assets is more likely than not. Due to the uncertainty created by an unfavorable product liability jury verdict (see Note 14 to the Companys consolidated financial statements), we determined
that a valuation allowance against the entire amount of our deferred tax assets as of December 31, 2010 is necessary. We recorded an income tax expense (benefit) of $13,761,000 (including the increase in the valuation allowance), ($509,000) and
$2,333,000 for the years ended December 31, 2010, 2009, and 2008, respectively. The effective tax (benefit) rate was 72.3% in 2010 excluding the litigation charge and related tax expense, (17.3%) in 2009 and 51.9% in 2008 before the
non-deductible goodwill impairment charge. The tax (benefit) rates in each year are affected by non-deductible foreign losses, and the percentage that these losses represent of our results for the year causes large fluctuations in our tax (benefit)
rates. Actual cash outlays for taxes continue to be reduced by the available operating loss carryforwards and credits.

As of
December 31, 2010, U.S. federal operating loss carryforwards of approximately $15,462,000 were available to us to offset future taxable income and, as of such date, we also had foreign net operating loss carryforwards of $5,871,000, federal
alternative minimum tax credit carryforwards of $700,000 and federal research and development tax credit carryforwards of $352,000.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2010, we had negative working capital of $26,611,000 compared to positive working capital of $21,107,000 at December 31, 2009. The net decrease in working capital is primarily
due to the net liability accrued for the non-cash Barnhard litigation charge of $46,792,000, as well as the use of cash for capital expenditures and the reduction of long-term debt, partially offset by the net cash provided by operating activities
in 2010.

For the year ended December 31, 2010, we generated $4,192,000 of cash from operating activities compared to
$7,219,000 for the year ended December 31, 2009. The decrease in cash provided by operating activities in 2010 compared to 2009 is primarily due to increases in accounts receivable and inventories in 2010 compared to decreases in 2009,
partially offset by net income excluding the litigation charge and related tax expense generated in 2010 compared to a net loss in 2009.

Cash used in investing activities of $2,240,000 in 2010 consisted of purchases of manufacturing tooling and equipment of $1,443,000, primarily for the manufacture of new products, and computer hardware
and infrastructure of $797,000. Cash used in investing activities of $613,000 during 2009 consisted of purchases of manufacturing tooling and equipment of $312,000, primarily for the manufacture of new products, and computer hardware and
infrastructure of $301,000. While 2011 capital expenditures are expected to be approximately $3,500,000, the timing and amount of these expenditures will depend on economic conditions, the results of our operations and our other cash needs.



21



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For the year ended December 31, 2010, cash used in financing activities of $1,801,000
consisted primarily of $5,863,000 in repayment of the Wells Fargo Bank, NA (Wells Fargo) term loans and $933,000 of principal payments on the Citizens real estate loan, offset by $4,999,000 advanced under the Citizens equipment facility.
For the year ended December 31, 2009, cash used in financing activities of $1,355,000 consisted primarily of net term loan payments of $882,000 and $451,000 for the purchase of treasury stock through a repurchase program.

We have credit facilities with RBS Citizens, National Association and RBS Asset Finance, Inc. (collectively, Citizens). Our
Citizens Credit Agreement provides a revolving line of credit of up to the lesser of a ceiling or an amount determined by reference to a borrowing base. Our Citizens Loan Agreement provided for a $13,000,000 real estate loan which was advanced in
2007 to finance the acquisition of our Owatonna facility. Our Citizens equipment facility has provided $4,999,000 of equipment lease financing, the proceeds of which were used in June 2010 to retire equipment term loans and related obligations to
Wells Fargo. The Citizens real estate loan and revolving line of credit are secured by substantially all of our assets. The Citizens equipment facility is secured by our equipment, is cross-collateralized by our accounts receivable and inventory and
matures on July 1, 2015. The Citizens real estate loan matures on July 2, 2014. The Citizens revolving line of credit matures July 1, 2011. While there can be no assurance, we anticipate that the line will either be extended or
replaced prior to that date.

At December 31, 2010, there were no outstanding revolving credit loans, a $11,223,000 real
estate loan and $4,586,000 outstanding under the Citizens equipment facility. Availability under the revolving loan fluctuates daily. At the date of this Report, the availability under the revolving line of credit is $2,000,000.

Our credit facilities include financial covenants. These financial covenants were amended in March 2011, permitting us to remain in
compliance with them as of December 31, 2010. We believe that we will remain in compliance with our financing agreements throughout 2011, provided that there is a stay of execution of any judgment issued on the Barnhard verdict which
continues throughout the period. While there can be no assurance, we do not believe it is probable that the judgment will be enforced without a stay of execution pending our appeals, or that we will be required to post a bond in excess of an amount
acceptable to the bank, which would constitute events of default, during at least calendar 2011.

We rely upon cash flows from
our operations and borrowings under our credit facilities to fund our working capital and capital expenditure requirements. As discussed above under the caption Overview and Outlook, the Barnhard jury verdict creates uncertainties
as to whether our sources of liquidity will be sufficient to meet our obligations. In addition to these uncertainties, a decline in sales or margins or a failure to remain in compliance with the terms of our credit facilities or to extend the
maturity date of our revolving line of credit could result in having insufficient funds for our working capital and capital expenditure needs. However, we believe that our cash flows and the availability under our credit facilities are sufficient to
fund our general working capital and capital expenditure needs for at least the next 12 months, provided that there is a stay of enforcement of any judgment issued on the Barnhard verdict which continues throughout the period.

As of December 31, 2010, we had approximately $21,333,000 in U.S. Federal and non-U.S. net operating loss carry forwards,
substantially all of which will be available to offset future taxable income. These losses do not include the charge relating to the unfavorable jury verdict in the Barnhard matter, as it is not currently deductible for income taxes.



22



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RECONCILIATION OF GAAP TO NON-GAAP RESULTS

The following tables set forth certain financial information as of and for the year ended December 31, 2010 excluding the 2010
litigation charge and the related tax impact. This presentation is not in accordance with generally accepted accounting principles (GAAP), and the tables include a reconciliation of GAAP and non-GAAP results. We believe that the non-GAAP
statement of operations data is a beneficial supplemental disclosure in analyzing and assessing our operating performance, exclusive of the effects of the litigation charge and related increase in valuation allowance, and to provide a basis for
reviewing our operating performance on a consistent basis for the periods presented. We also believe that the non-GAAP balance sheet data is beneficial supplemental disclosure in analyzing and assessing changes in our financial condition, exclusive
of the effects of the litigation charge and related tax impact. In addition, management utilizes this information in analyzing our performance and for planning purposes.



|                                                                          |  |                                      |         |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------- |  | ------------------------------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                          |  | Year Ended December 31               |        
|                                                                          |  | 2010                                 |         |   | 2009 |   |        | 2008 | 
|                                                                          |  | (in thousands, exceptper share data) |        
|GAAP net loss                                                             |  | $                                    | (58,237 | ) |      | $ | (2,437 | )    |  | $ | (9,088 | )
|Adjustments                                                               |  |                                      |         |   |      |   |        |      |  |   |        |  
|Eliminate litigation charge                                               |  |                                      | 45,991  |   |      |   |       |      |  |   |       |  
|Adjustment to income tax provision to exclude impact of litigation charge |  |                                      | 12,665  |   |      |   |       |      |  |   |       |  
|                                                                          |  |                                      |         |   |      |   |        |      |  |   |        |  
|Non-GAAP net income (loss)                                                |  | $                                    | 419     |   |      | $ | (2,437 | )    |  | $ | (9,088 | )
|                                                                          |  |                                      |         |   |      |   |        |      |  |   |        |  
|Basic and diluted net income (loss) per share                             |  | $                                    | (3.40   | ) |      | $ | (0.14  | )    |  | $ | (0.52  | )
|Adjustments                                                               |  |                                      | 3.43    |   |      |   |       |      |  |   |       |  
|                                                                          |  |                                      |         |   |      |   |        |      |  |   |        |  
|Non-GAAP basic and diluted net income (loss) per share                    |  | $                                    | 0.03    |   |      | $ | (0.14  | )    |  | $ | (0.52  | )
|                                                                          |  |                                      |         |   |      |   |        |      |  |   |        |  
|                                                                          |  |                                     
|                                                                          |  | December 31                          |         |   |      |  
|                                                                          |  | 2010                                 |         |   | 2009 |   |        |      | 
|                                                                          |  | (in thousands)                       |         |   |      |  
|GAAP stockholders equity (deficit)                                       |  | $                                    | (15,010 | ) |      | $ | 43,109 |      |  |   |        |  
|Adjustments                                                               |  |                                      |         |   |      |   |        |      |  |   |        |  
|Eliminate net impact of litigation charge                                 |  |                                      | 58,656  |   |      |   |       |      |  |   |        |  
|                                                                          |  |                                      |         |   |      |   |        |      |  |   |        |  
|Non-GAAP stockholders equity                                             |  | $                                    | 43,646  |   |      | $ | 43,109 |      |  |   |        |  
|                                                                          |  |                                      |         |   |      |   |        |      |  |   |        |  



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CONTRACTUAL OBLIGATIONS

The following is an aggregated summary of the Companys obligations and commitments to make future payments under various agreements:



|                                                        |  |       |            |  |                   |   |            |                   |  |   |                   |  |  |                 |            |  |  |   |   | 
|------------------------------------------------------- |  | ----- | ---------- |  | ----------------- | - | ---------- | ----------------- |  | - | ----------------- |  |  | --------------- | ---------- |  |  | - | - | 
|                                                        |  | TOTAL |            |  | Less ThanOne Year |   |            | One to ThreeYears |  |   | Four to FiveYears |  |  | After FiveYears |           
|Contractual obligations:                                |  |       |            |  |                   |   |            |                   |  |   |                   |  |  |                 |            |  |  |   |   | 
|Debt                                                    |  | $     | 15,809,000 |  |                   | $ | 1,520,000  |                   |  | $ | 3,040,000         |  |  | $               | 11,249,000 |  |  | $ |  | 
|Interest due including impact of interest rate swap (a) |  |       | 3,585,000  |  |                   |   | 1,102,000  |                   |  |   | 1,971,000         |  |  |                 | 512,000    |  |  |   |  | 
|Capital lease obligations (b)                           |  |       | 28,000     |  |                   |   | 12,000     |                   |  |   | 16,000            |  |  |                 |           |  |  |   |  | 
|Operating lease commitments                             |  |       | 1,278,000  |  |                   |   | 460,000    |                   |  |   | 553,000           |  |  |                 | 265,000    |  |  |   |  | 
|Purchase obligations                                    |  |       | 21,757,000 |  |                   |   | 15,844,000 |                   |  |   | 5,313,000         |  |  |                 | 600,000    |  |  |   |  | 
|                                                        |  |       |            |  |                   |   |            |                   |  |   |                   |  |  |                 |            |  |  |   |   | 
|                                                        |  | $     | 42,457,000 |  |                   | $ | 18,938,000 |                   |  | $ | 10,893,000        |  |  | $               | 12,626,000 |  |  | $ |  | 
|                                                        |  |       |            |  |                   |   |            |                   |  |   |                   |  |  |                 |            |  |  |   |   | 



|(a) | This includes a fixed rate of 8.75% per the interest rate swap agreement.
|--- | -------------------------------------------------------------------------

|(b) | Includes future interest obligation.
|--- | ------------------------------------

This table does not include any amounts that may be payable related to the Barnhard v. Cybex International, Inc. matter described in Item 3, Legal Proceedings. At the date of this Report, no
judgment has been entered on the verdict. The Company intends to vigorously pursue all available options to seek a reversal or reduction of the verdict and any judgment that is ultimately entered.

We have agreements with our named executive officers that provide for severance payments to the officer in the event the employee is
terminated without cause or, in certain situations, the officer resigns after a change in control. As further described in Note 14, Employment Agreements, to the Companys consolidated financial statements, the maximum cash exposure under these
agreements is $2,495,000 as of December 31, 2010. The actual amounts to be paid can only be determined at the time of the executive officers separation from the Company.

OFF-BALANCE SHEET ARRANGEMENTS

We have a lease financing program, whereby
we arrange equipment leases and other financing for certain commercial customers for selected products. These leases are sales-type leases and are generally for terms of three to five years, at which time title transfers to the lessee. While most of
these financings are without recourse, in certain cases we may offer a guaranty or other recourse provisions. At December 31, 2010, the maximum contingent liability under all recourse provisions was approximately $5,691,000. A reserve for
estimated losses under recourse provisions of $818,000 has been recorded based upon historical experience, and is included in accrued liabilities at December 31, 2010.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 2009, the Financial Accounting
Standards Board (FASB) issued amended guidance addressing revenue arrangements with multiple deliverables. This new guidance establishes a new hierarchy for allocating revenues among multiple deliverables in a multi-element arrangement. In order of
preference, revenues will be allocated based on vendor specific objective evidence (VSOE), third-party evidence, or estimated selling price. Additional disclosures are required to describe the effects of adoption, including changes in how
arrangement consideration is allocated or in the pattern and timing of revenue recognition. This guidance is effective for fiscal years beginning on or after June 15, 2010, and the Company elected to early adopt for new or materially modified
arrangements entered into on or after January 1, 2009. The adoption did not materially impact the Companys consolidated financial condition, results of operations or cash flows.



24



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In January 2010, the FASB issued guidance to require new disclosures regarding
(1) transfers in and out of Levels 1 and 2 fair value measurements and (2) activity in Level 3 fair value measurements. Additionally, this guidance clarifies existing fair value disclosures about the level of disaggregation and about
inputs and valuation techniques used to measure fair value. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the
roll forward activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company adopted this guidance on January 1, 2010 and
included the appropriate disclosures in Note 9 to the consolidated financial statements. The adoption of this guidance did not have any impact on the Companys consolidated financial condition, results of operations or cash flows.

CRITICAL ACCOUNTING POLICIES

The Companys significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. The preparation of financial
statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to the allowance for doubtful
accounts, realizability of inventory, reserves for warranty obligations, reserves for legal matters and product liability, and valuation of deferred tax assets. Management bases its estimates and judgments on historical experience and on various
other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions, which could materially impact the Companys results of operations and financial position. These critical accounting policies and estimates have been discussed with the
Companys audit committee.

Allowance for doubtful accounts. Management performs ongoing credit evaluations of
customers and adjusts credit limits based upon payment history and the customers current credit worthiness, as determined by a review of their current credit information. Management continuously monitors collections and payments from customers
and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. If the financial condition of a specific customer or the Companys general customer
base were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Realizability of inventory. The Company values inventory at the lower of cost or market. Management regularly reviews inventory
quantities on-hand and records a provision for excess and obsolete inventory based primarily on estimated forecasts of product demand and historical usage, after considering the impact of new products. If actual market conditions and product demand
are less favorable than projected, additional inventory write-downs may be required.

Warranty reserve. All products
are warranted for one year of labor and up to ten years for structural frames. Warranty periods for parts range from one to ten years depending on the part and the type of equipment. A warranty liability is recorded at the time of product sale based
on estimates that are developed from historical information and certain assumptions about future events. Future warranty obligations are affected by product failure rates, usage and service costs incurred in addressing warranty claims. These factors
are impacted by the level of new product introductions and the mix of equipment sold to the commercial and consumer markets. If actual warranty costs differ from managements estimates, adjustments to the warranty liability would be required.



25



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Legal matters. The Company will record a reserve related to certain legal matters for
which it is probable that a loss has been incurred and the range of such loss can be determined. With respect to other matters, management has concluded that a loss is only possible or remote and, therefore, no loss is recorded. As additional
information becomes available, the Company will continue to assess whether losses from legal matters are probable, possible, or remote, and the adequacy of accruals for probable loss contingencies.

Product liability reserve.Due to the nature of its products, the Company is involved in certain pending product liability
claims and lawsuits. The Company maintains product liability insurance coverage subject to deductibles. Reserves for self-insured retention, including claims incurred but not yet reported, are included in accrued liabilities in the accompanying
consolidated balance sheets, based on managements review of outstanding claims and claims history and consultation with its third-party claims administrators. The Company records a reserve for the self insured retention portion of product
liability matters for which it is probable that a loss has been incurred and the range of the loss can be determined. The Company records a reserve and a corresponding insurance receivable if the amount of the product liability exposure is
recoverable from the Companys insurance carrier. If actual results vary from managements estimates, adjustments to the reserve would be required. See Notes 5 and 14 to the Companys consolidated financial statements for further
discussion on product liability.

The Company, as of December 31, 2010, recorded a $62,696,000 litigation reserve as a
current liability pertaining to the Barnhard jury verdict and a corresponding litigation related receivable of $15,904,000 representing the amount recoverable from the co-defendant in the matter and the estimated amount recoverable under the
Companys insurance policies. The Company also accrued $947,000 and $3,054,000, as of December 31, 2010 and 2009, respectively, for product liability claims and a corresponding receivable for the liability claims estimated to be
recoverable under the Companys insurance policies. This product liability claims accrual is included as a component of other liabilities and the insurance recoverable is included as a component of other assets at December 31, 2010 and
December 31, 2009. On a quarterly basis, the Company reviews and adjusts each product liability claim and corresponding receivable. The change in accrual for product liability claims and the corresponding receivable from December 31, 2009
to December 31, 2010 primarily relates to the insured settlement of a product liability claim during the first quarter of 2010.

Valuation of deferred tax assets.The Company records a valuation allowance to reduce the carrying amount of deferred tax assets if it is more-likely-than-not that such assets will not be realized.
At December 31, 2010, there is a valuation allowance of $32,158,000, which reduces our net deferred tax assets to zero. Approximately $82,500,000 of future taxable income is needed to fully recognize the Companys deferred tax assets. If
the estimates and related assumptions relating to the likely utilization of the deferred tax asset change in the future, the valuation allowance may change accordingly.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|-------- | ---------------------------------------------------------

Interest Rate Risk

The Company uses interest rate swaps to hedge its
exposure to interest rate changes and also to reduce volatility of its financing costs. Under these swaps the Company agrees with a counterparty to exchange the difference between fixed-rate and floating-rate interest amounts based on agreed
notational principal amounts. These agreements are considered highly effective as cash flow hedges for a portion of the Companys variable debt, and hedge accounting is used to account for these instruments.

The Company has an interest rate swap which effectively converts the Citizens real estate loan in the amount of $11,223,000 at
December 31, 2010 from a floating rate to a fixed rate of 8.25% to 8.75% based on a performance grid throughout the duration of the loan. See Notes 8 and 9 to the Companys consolidated financial statements for further discussion of these
instruments. A change in interest rates would not materially impact the Companys interest expense because the interest rate swap effectively converts the majority of the Companys outstanding debt to fixed rate debt.



26



---

Foreign Currency Rates

The Company at times uses foreign currency forward contracts to hedge its foreign currency exposure on sales made in the UK in British Sterling. There were no foreign currency forward contracts
outstanding at December 31, 2010.   Foreign currency fluctuations do not have a significant impact on the business because most purchases and sales are denominated in US dollars.



27



---

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE



|                                                                                                                                       |  |  |     | 
|-------------------------------------------------------------------------------------------------------------------------------------- |  |  | --- | 
|Report of Independent Registered Public Accounting Firm                                                                                |  |  | F-1 | 
|                                                                                                                                       | 
|Consolidated Financial Statements:                                                                                                     |  |  |     | 
|                                                                                                                                       | 
|Consolidated Balance Sheets as of December 31, 2010 and 2009                                                                           |  |  | F-2 | 
|                                                                                                                                       | 
|Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and
2008                                             |  |  | F-3 | 
|                                                                                                                                       | 
|Consolidated Statements of Stockholders Equity (Deficit) and Comprehensive Loss for the years ended December 31,
 2010, 2009 and 2008 |  |  | F-4 | 
|                                                                                                                                       | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and
2008                                             |  |  | F-5 | 
|                                                                                                                                       | 
|Notes to Consolidated Financial Statements                                                                                             |  |  | F-6 | 
|                                                                                                                                       | 
|Financial Statement Schedule:                                                                                                          |  |  |     | 
|                                                                                                                                       | 
|II. Valuation and Qualifying Accounts for the years ended December 31, 2010, 2009 and
2008                                             |  |  | S-1 | 

All schedules for
which provision is made in the applicable accounting regulations of the Securities and Exchange Commission that are not required under the related instructions or are inapplicable, have been omitted.



28



---

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Cybex International, Inc.:

We have audited the accompanying consolidated balance
sheets of Cybex International, Inc. and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders equity (deficit) and comprehensive loss, and cash flows
for each of the years in the three-year period ended December 31, 2010. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based
on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Cybex International, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 and Note 14 to the consolidated financial statements, a December 2010 jury verdict in a product liability suit
apportions a significant amount of liability to the Company. The Company does not have the resources to satisfy a judgment in this matter that has not been substantially reduced from the jury verdict, which raises substantial doubt about the
Companys ability to continue as a going concern. Managements plans in regard to this matter are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ KPMG LLP

Pittsburgh, Pennsylvania

March 31, 2011



F-1



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)



|                                                                                 |  |              |         |   |      |   |         |  
|-------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                                                 |  | December 31, |        
|                                                                                 |  | 2010         |         |   | 2009 |  
|ASSETS                                                                           |  |              |         |   |      |   |         |  
|Current Assets:                                                                  |  |              |         |   |      |   |         |  
|Cash and cash equivalents                                                        |  | $            | 7,030   |   |      | $ | 6,879   |  
|Accounts receivable, net of allowance of $1,046 and $1,362                       |  |              | 18,806  |   |      |   | 16,815  |  
|Inventories                                                                      |  |              | 11,060  |   |      |   | 10,054  |  
|Prepaid expenses and other                                                       |  |              | 1,574   |   |      |   | 1,216   |  
|Barnhard litigation related receivable                                           |  |              | 15,904  |   |      |   |        |  
|Deferred income taxes                                                            |  |              |        |   |      |   | 5,040   |  
|                                                                                 |  |              |         |   |      |   |         |  
|Total current assets                                                             |  |              | 54,374  |   |      |   | 40,004  |  
|Property, plant and equipment, net                                               |  |              | 29,693  |   |      |   | 31,835  |  
|Deferred income taxes                                                            |  |              |        |   |      |   | 8,815   |  
|Barnhard litigation related receivable                                           |  |              |        |   |      |   | 4,573   |  
|Other assets                                                                     |  |              | 1,347   |   |      |   | 3,408   |  
|                                                                                 |  |              |         |   |      |   |         |  
|                                                                                 |  | $            | 85,414  |   |      | $ | 88,635  |  
|                                                                                 |  |              |         |   |      |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                   |  |              |         |   |      |   |         |  
|Current Liabilities:                                                             |  |              |         |   |      |   |         |  
|Current portion of long-term debt                                                |  | $            | 1,520   |   |      | $ | 2,415   |  
|Accounts payable                                                                 |  |              | 3,913   |   |      |   | 4,436   |  
|Accrued liabilities                                                              |  |              | 12,856  |   |      |   | 12,046  |  
|Barnhard litigation reserve                                                      |  |              | 62,696  |   |      |   |        |  
|                                                                                 |  |              |         |   |      |   |         |  
|Total current liabilities                                                        |  |              | 80,985  |   |      |   | 18,897  |  
|Long-term debt                                                                   |  |              | 14,289  |   |      |   | 15,191  |  
|Long-term portion of accrued warranty obligation                                 |  |              | 1,135   |   |      |   | 1,346   |  
|Barnhard litigation reserve                                                      |  |              |        |   |      |   | 4,573   |  
|Other liabilities                                                                |  |              | 4,015   |   |      |   | 5,519   |  
|                                                                                 |  |              |         |   |      |   |         |  
|Total liabilities                                                                |  |              | 100,424 |   |      |   | 45,526  |  
|                                                                                 |  |              |         |   |      |   |         |  
|Commitments and contingencies (Notes 13 and 14)                                  |  |              |         |   |      |   |         |  
|Stockholders Equity (Deficit):                                                  |  |              |         |   |      |   |         |  
|Common stock, $.10 par value, 30,000 shares authorized, and 17,860 shares issued |  |              | 1,786   |   |      |   | 1,786   |  
|Additional paid-in capital                                                       |  |              | 68,880  |   |      |   | 68,661  |  
|Treasury stock, at cost (740 shares)                                             |  |              | (2,955  | ) |      |   | (2,955  | )
|Accumulated deficit                                                              |  |              | (80,484 | ) |      |   | (22,247 | )
|Accumulated other comprehensive loss                                             |  |              | (2,237  | ) |      |   | (2,136  | )
|                                                                                 |  |              |         |   |      |   |         |  
|Total stockholders equity (deficit)                                             |  |              | (15,010 | ) |      |   | 43,109  |  
|                                                                                 |  |              |         |   |      |   |         |  
|                                                                                 |  | $            | 85,414  |   |      | $ | 88,635  |  
|                                                                                 |  |              |         |   |      |   |         |  

The accompanying notes are an integral part of these statements.



F-2



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                             |  | Year Ended December 31, |        
|                                             |  | 2010                    |         |   | 2009 |   |         | 2008 | 
|Net sales                                    |  | $                       | 122,961 |   |      | $ | 120,474 |      |  | $ | 147,929 |  
|Cost of sales                                |  |                         | 78,114  |   |      |   | 84,466  |      |  |   | 99,940  |  
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Gross profit                                 |  |                         | 44,847  |   |      |   | 36,008  |      |  |   | 47,989  |  
|Selling, general and administrative expenses |  |                         | 42,072  |   |      |   | 37,680  |      |  |   | 42,321  |  
|Litigation charge                            |  |                         | 45,991  |   |      |   |        |      |  |   |        |  
|Goodwill impairment charge                   |  |                         |        |   |      |   |        |      |  |   | 11,247  |  
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Total operating expenses                     |  |                         | 88,063  |   |      |   | 37,680  |      |  |   | 53,568  |  
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating loss                               |  |                         | (43,216 | ) |      |   | (1,672  | )    |  |   | (5,579  | )
|Interest expense, net                        |  |                         | (1,260  | ) |      |   | (1,274  | )    |  |   | (1,176  | )
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Loss before income taxes                     |  |                         | (44,476 | ) |      |   | (2,946  | )    |  |   | (6,755  | )
|Income tax expense (benefit)                 |  |                         | 13,761  |   |      |   | (509    | )    |  |   | 2,333   |  
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Net loss                                     |  | $                       | (58,237 | ) |      | $ | (2,437  | )    |  | $ | (9,088  | )
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Basic net loss per share                     |  | $                       | (3.40   | ) |      | $ | (0.14   | )    |  | $ | (0.52   | )
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Diluted net loss per share                   |  | $                       | (3.40   | ) |      | $ | (0.14   | )    |  | $ | (0.52   | )
|                                             |  |                         |         |   |      |   |         |      |  |   |         |  

The accompanying notes are an integral part of these statements.



F-3



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE LOSS

(in thousands)



|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------- |  | ------------ | ------ |  | ------------------------ | - | ----- | ------------- |  | - | ------------------ |  |  | --------------------------------- | ------ | - | ---------------------------------- | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                                          |  | Common Stock |        |  | AdditionalPaid-inCapital |   |       | TreasuryStock |  |   | AccumulatedDeficit |  |  | AccumulatedOtherComprehensiveLoss |        |   | TotalStockholdersEquity
(Deficit) |  
|                                                                          |  | Shares       |        |  | Amount                   |   |       |               |  |   |                   
|Balance, January 1, 2008                                                  |  |              | 17,553 |  |                          | $ | 1,755 |               |  | $ | 68,049             |  |  | $                                 | (2,251 | ) |                                    | $ | (10,722 | ) |  | $ | (1,789 | ) |  | $ | 55,042  |  
|Common stock issued to Directors                                          |  |              | 16     |  |                          |   | 2     |               |  |   | 88                 |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   | 90      |  
|Exercise of warrants/options                                              |  |              | 244    |  |                          |   | 24    |               |  |   | 67                 |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   | 91      |  
|Repurchases of common stock                                               |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   | (252   | ) |                                    |   |         |   |  |   |        |   |  |   | (252    | )
|Employee stock compensation                                               |  |              |       |  |                          |   |      |               |  |   | 176                |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   | 176     |  
|Income tax benefit from exercise of stock options                         |  |              |       |  |                          |   |      |               |  |   | 46                 |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   | 46      |  
|Comprehensive loss:                                                       |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Cumulative translation adjustment                                         |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   |        |   |  |   | 106    |   |  |   | 106     |  
|Change in fair value of hedge, net of deferred income tax benefit of $501 |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   |        |   |  |   | (760   | ) |  |   | (760    | )
|Net loss                                                                  |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   | (9,088  | ) |  |   |       |   |  |   | (9,088  | )
|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Comprehensive loss                                                        |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   | (9,742  | )
|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Balance, December 31, 2008                                                |  |              | 17,813 |  |                          |   | 1,781 |               |  |   | 68,426             |  |  |                                   | (2,503 | ) |                                    |   | (19,810 | ) |  |   | (2,443 | ) |  |   | 45,451  |  
|Common stock issued to Directors                                          |  |              | 42     |  |                          |   | 5     |               |  |   | 55                 |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   | 60      |  
|Exercise of warrants/options                                              |  |              | 5      |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   |        |  
|Repurchases of common stock                                               |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   | (452   | ) |                                    |   |         |   |  |   |        |   |  |   | (452    | )
|Employee stock compensation                                               |  |              |       |  |                          |   |      |               |  |   | 180                |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   | 180     |  
|Comprehensive loss:                                                       |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Cumulative translation adjustment                                         |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   |        |   |  |   | (146   | ) |  |   | (146    | )
|Change in fair value of hedge, net of deferred income tax benefit of $315 |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   |        |   |  |   | 453    |   |  |   | 453     |  
|Net loss                                                                  |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   | (2,437  | ) |  |   |       |   |  |   | (2,437  | )
|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Comprehensive loss                                                        |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   | (2,130  | )
|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Balance, December 31, 2009                                                |  |              | 17,860 |  |                          |   | 1,786 |               |  |   | 68,661             |  |  |                                   | (2,955 | ) |                                    |   | (22,247 | ) |  |   | (2,136 | ) |  |   | 43,109  |  
|Employee stock compensation                                               |  |              |       |  |                          |   |      |               |  |   | 219                |  |  |                                   |       |   |                                    |   |        |   |  |   |       |   |  |   | 219     |  
|Comprehensive loss:                                                       |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Cumulative translation adjustment                                         |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   |        |   |  |   | (48    | ) |  |   | (48     | )
|Change in fair value of hedge, net of deferred income tax benefit of ($0) |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   |        |   |  |   | (53    | ) |  |   | (53     | )
|Net loss                                                                  |  |              |       |  |                          |   |      |               |  |   |                   |  |  |                                   |       |   |                                    |   | (58,237 | ) |  |   |       |   |  |   | (58,237 | )
|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Comprehensive loss                                                        |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   | (58,338 | )
|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  
|Balance, December 31, 2010                                                |  |              | 17,860 |  |                          | $ | 1,786 |               |  | $ | 68,880             |  |  | $                                 | (2,955 | ) |                                    | $ | (80,484 | ) |  | $ | (2,237 | ) |  | $ | (15,010 | )
|                                                                          |  |              |        |  |                          |   |       |               |  |   |                    |  |  |                                   |        |   |                                    |   |         |   |  |   |        |   |  |   |         |  

The accompanying notes are an integral part of these statements.



F-4



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                |  | Year Ended December 31, |        
|                                                                                |  | 2010                    |         |   | 2009 |   |         | 2008 | 
|OPERATING ACTIVITIES:                                                           |  |                         |         |   |      |   |         |      |  |   |         |  
|Net loss                                                                        |  | $                       | (58,237 | ) |      | $ | (2,437  | )    |  | $ | (9,088  | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                         |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                   |  |                         | 4,656   |   |      |   | 5,391   |      |  |   | 5,054   |  
|Amortization of deferred financing costs                                        |  |                         | 47      |   |      |   | 41      |      |  |   | 38      |  
|Litigation charge                                                               |  |                         | 45,991  |   |      |   |        |      |  |   |        |  
|Goodwill impairment charge                                                      |  |                         |        |   |      |   |        |      |  |   | 11,247  |  
|Deferred income taxes                                                           |  |                         | 13,855  |   |      |   | (678    | )    |  |   | 2,161   |  
|Stock-based compensation                                                        |  |                         | 219     |   |      |   | 180     |      |  |   | 235     |  
|Provisions for doubtful accounts                                                |  |                         | (75     | ) |      |   | 328     |      |  |   | 506     |  
|Amortization of interest rate swap                                              |  |                         | (31     | ) |      |   | (31     | )    |  |   | (31     | )
|Change in fair value of foreign currency contract                               |  |                         |        |   |      |   | 462     |      |  |   | (309    | )
|Changes in operating assets and liabilities:                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Accounts receivable                                                             |  |                         | (1,901  | ) |      |   | 1,579   |      |  |   | 1,746   |  
|Inventories                                                                     |  |                         | (1,005  | ) |      |   | 3,398   |      |  |   | 308     |  
|Prepaid expenses and other                                                      |  |                         | (451    | ) |      |   | 493     |      |  |   | 129     |  
|Accounts payable, accrued liabilities and other liabilities                     |  |                         | 1,124   |   |      |   | (1,507  | )    |  |   | (2,904  | )
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                       |  |                         | 4,192   |   |      |   | 7,219   |      |  |   | 9,092   |  
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|INVESTING ACTIVITIES:                                                           |  |                         |         |   |      |   |         |      |  |   |         |  
|Purchases of property, plant and equipment                                      |  |                         | (2,240  | ) |      |   | (613    | )    |  |   | (7,436  | )
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|NET CASH USED IN INVESTING ACTIVITIES                                           |  |                         | (2,240  | ) |      |   | (613    | )    |  |   | (7,436  | )
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|FINANCING ACTIVITIES:                                                           |  |                         |         |   |      |   |         |      |  |   |         |  
|Repayments of term loans                                                        |  |                         | (6,796  | ) |      |   | (1,882  | )    |  |   | (1,270  | )
|Repayments under revolving loans                                                |  |                         |        |   |      |   | (3,425  | )    |  |   | (79,384 | )
|Borrowings under revolving loans                                                |  |                         |        |   |      |   | 3,425   |      |  |   | 77,992  |  
|Borrowings under term loans                                                     |  |                         | 4,999   |   |      |   | 1,000   |      |  |   | 2,200   |  
|Purchase of treasury stock through repurchase program                           |  |                         |        |   |      |   | (451    | )    |  |   | (252    | )
|Proceeds from exercise of stock options                                         |  |                         |        |   |      |   |        |      |  |   | 91      |  
|Tax benefit from employee stock options                                         |  |                         |        |   |      |   |        |      |  |   | 46      |  
|Other financing activities payments                                             |  |                         | (4      | ) |      |   | (22     | )    |  |   | (60     | )
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|NET CASH USED IN FINANCING ACTIVITIES                                           |  |                         | (1,801) |   |      |   | (1,355) |      |  |   | (637)   |  
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                       |  |                         | 151     |   |      |   | 5,251   |      |  |   | 1,019   |  
|CASH AND CASH EQUIVALENTS, beginning of year                                    |  |                         | 6,879   |   |      |   | 1,628   |      |  |   | 609     |  
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|CASH AND CASH EQUIVALENTS, end of year                                          |  |                         | $7,030  |   |      |   | $6,879  |      |  |   | $1,628  |  
|                                                                                |  |                         |         |   |      |   |         |      |  |   |         |  
|SUPPLEMENTAL CASH FLOW DISCLOSURE:                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash paid for interest                                                          |  | $                       | 1,323   |   |      | $ | 1,327   |      |  | $ | 1,247   |  
|Cash paid for income taxes, net                                                 |  |                         | 32      |   |      |   | 40      |      |  |   | 239     |  
|Common stock issued to directors earned in previous period                      |  |                         |        |   |      |   | 60      |      |  |   | 90      |  
|Settlement of interest rate swap                                                |  |                         | 71      |   |      |   |        |      |  |   |        |  

The accompanying notes are an integral part of these statements.



F-5



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1BACKGROUND AND GOING CONCERN

Cybex International, Inc. (the
Company or Cybex), a New York corporation, is a manufacturer of exercise equipment and develops, manufactures and markets strength and cardiovascular fitness equipment products for the commercial and, to a lesser extent,
consumer markets. Most of the Companys products are sold under the brand name Cybex. The Company operates in one business segment.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. On December 7, 2010, a jury verdict in a product liability suit
apportioned a significant amount of liability to the Company (see Note 14). The Company does not have the resources to satisfy its obligations if the plaintiff is ultimately able to enforce a judgment in this matter that has not been substantially
reduced from the jury verdict, which raises substantial doubt regarding the Companys ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome
of this uncertainty.

The Company believes that it was not at fault in the accident that is the basis of the plaintiffs
claims in this product liability litigation and accordingly that this case was wrongly decided as to liability. In addition, the Company believes that the amount of damages awarded by the jury was overstated. The Companys strategy to resolve
the doubt about its ability to continue as a going concern is to vigorously contest the outcome of this jury verdict through post trial proceedings and appeal, in order to obtain a reversal or substantial reduction of the award.

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. The allowance for doubtful accounts, inventory valuation, warranty reserve, reserves for legal and product liability matters, recoverability of long-lived assets and valuation of deferred tax assets are the items that are most
susceptible to changes in estimates.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. As of
December 31, 2010 and 2009, the Companys cash equivalents consisted of a money market account. The carrying value of cash equivalents approximates fair value.

Trade Accounts Receivable

Trade accounts receivable are recorded at the
invoiced amount and do not bear interest. The allowance for doubtful accounts is managements best estimate of the amount of probable credit losses in the Companys



F-6



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



existing accounts receivable. Management determines the allowance based on historical write-off experience and a specific review of past due balances over a specified amount. Management reviews
the Companys allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes materials, labor and manufacturing overhead.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Betterments and improvements are capitalized while repairs and maintenance costs are charged to expense as incurred. Depreciation is recorded using the
straight-line method based on estimated useful lives for financial reporting purposes. The estimated useful lives for financial reporting purposes are 25 years for buildings and improvements and 3 to 10 years for furniture and equipment.

Impairment of Long-Lived Assets

The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying value of the assets to the undiscounted cash flows estimated to be generated by those assets. If a write down were necessary, an impairment charge would be recognized equal to the
amount by which the carrying amount of the assets exceeds their fair value, as determined based upon quoted market prices or discounted cash flows. Management believes that no long-lived assets were impaired as of December 31, 2010 and 2009.

Goodwill

At December 31, 2008, the Company performed the initial step of its impairment evaluation by comparing the fair market value of its single reporting unit to its carrying value. As the carrying amount
exceeded the fair value, the second step of the impairment evaluation was performed to calculate impairment, and as a result a goodwill impairment charge of $11,247,000, the entire amount of the goodwill carrying value, was recorded during 2008,
with no corresponding tax benefit. The primary reason for the impairment charge was the reduction in the Companys market capitalization resulting from the sustained decline of the Companys stock price during the second half of 2008.

Accrued Warranty Obligations

All products are warranted for one year of labor and for parts ranging from one to ten years depending on the part and the type of equipment. Warranty expense was $3,547,000, $4,940,000 and $4,361,000 for
the years ended December 31, 2010, 2009 and 2008, respectively. The accrued warranty obligation is provided at the time of product sale based on management estimates, which are developed from historical information and certain assumptions about
future events and are subject to change. The amount expected to be paid in the following year is classified in accrued liabilities.



F-7



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



The following table sets forth the changes in the liability for product warranties for
the years ended December 31, 2010 and 2009:



|                                      |  |                         |            |   |      |   |            |  
|------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | -
|                                      |  | Year Ended December 31, |           
|                                      |  | 2010                    |            |   | 2009 |  
|Balance as of January 1               |  | $                       | 3,988,000  |   |      | $ | 4,054,000  |  
|Payments made under warranty          |  |                         | (4,143,000 | ) |      |   | (5,006,000 | )
|Accrual for product warranties issued |  |                         | 3,547,000  |   |      |   | 4,940,000  |  
|                                      |  |                         |            |   |      |   |            |  
|Balance as of December 31             |  | $                       | 3,392,000  |   |      | $ | 3,988,000  |  
|                                      |  |                         |            |   |      |   |            |  

Derivatives

At December 31, 2010, derivative instruments include one interest rate swap that hedges variable rate interest payments.

See Notes 7, 8 and 9 for further discussion of this financial instrument.

Translation of Foreign Currencies

Assets and liabilities of the Companys foreign subsidiary, whose functional currency is its local currency, is translated at year-end exchange rates. Income and expense items are translated at the
average rates of exchange prevailing during the year. The adjustment resulting from translating the financial statements of such foreign subsidiary is reflected in accumulated other comprehensive loss within stockholders equity.

Fair Value of Financial Instruments

The Companys financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, long-term debt and derivative instruments. The carrying values of cash
equivalents, accounts receivable and accounts payable are considered to be representative of their respective fair values because of the short maturity of these instruments. Based on the terms of the Companys debt instruments that are
outstanding as of December 31, 2010, the carrying values are considered to approximate their respective fair values.

Revenue Recognition

Revenue is recorded when products are shipped and the Company has no significant remaining obligations, persuasive evidence of an arrangement exists, the price to the buyer is fixed or determinable, and
collection of the relevant receivable is probable. The Company does not offer its customers a right of return, price protection or inventory rotation programs. The Company classifies amounts billed to customers for shipping and handling as sales.
Direct shipping and handling costs are classified as cost of sales. Internal salaries and overhead related to shipping and handling are classified as selling, general and administrative expense. Sales tax collected from customers and remitted to
governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of operations.

Concentration of Risk, Geographic Segment Data and Enterprise-Wide Disclosures

More than half of the Companys net sales are through specialty fitness dealers and distributors. Financial instruments that potentially subject the Company to concentrations of credit risk consist
primarily of trade



F-8



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



accounts receivable. Sales to one customer in 2010, 2009 and 2008 were 13.0%, 13.6% and 12.3% of net sales, respectively. Accounts receivable from that customer was $1,779,000 and $1,025,000 at
December 31, 2010 and 2009, respectively. Sales to another customer in 2010, 2009, and 2008 were 12.4%, 10.6%, and 10.2% of net sales, respectively. Accounts receivable from that customer was $1,265,000 and $2,364,000 at December 31, 2010
and 2009, respectively. Sales to a third customer or its franchisees in 2010, 2009 and 2008 were 4.1%, 7.4% and 12.9% of net sales, respectively. Accounts receivable from that customer and its franchisees were less than $200,000 at December 31,
2010 and 2009. No other single customer accounted for more than 10% of the Companys net sales in any of those years.

There is no single geographic area of significant concentration other than the U.S. Sales outside of North America accounted for
approximately 31%, 29% and 28% of total net sales for the years ended December 31, 2010, 2009 and 2008, respectively. Long-lived assets located in foreign countries totaled $20,000 and $36,000 at December 31, 2010 and 2009, respectively.

The Company single sources its stepper, Home Arc and multi-gym products and certain raw materials and component parts,
including drive motors, belts, running decks, molded plastic components, video monitors and electronics, where management believes that sole sourcing is beneficial for reasons such as quality control and reliability of the vendor or cost. The
Company attempts to reduce the risk of sole source suppliers by maintaining varying levels of inventory. However, the loss of a significant supplier, or delays or disruptions in the delivery of components or materials, or increases in material
costs, could have a material adverse effect on the Companys operations.

The following table summarizes net sales over
the past three years (in millions):



|                          |  |                         |       |  |      |   |       |      |  |   |       | 
|------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                          |  | Year Ended December 31, |      
|                          |  | 2010                    |       |  | 2009 |   |       | 2008 | 
|Cardiovascular products   |  | $                       | 69.4  |  |      | $ | 66.7  |      |  | $ | 76.8  | 
|Strength systems          |  |                         | 41.0  |  |      |   | 42.0  |      |  |   | 58.2  | 
|Parts                     |  |                         | 5.7   |  |      |   | 5.3   |      |  |   | 4.8   | 
|Freight and other revenue |  |                         | 6.9   |  |      |   | 6.5   |      |  |   | 8.1   | 
|                          |  |                         |       |  |      |   |       |      |  |   |       | 
|                          |  | $                       | 123.0 |  |      | $ | 120.5 |      |  | $ | 147.9 | 
|                          |  |                         |       |  |      |   |       |      |  |   |       | 

Advertising Costs

The Company charges advertising costs to expense as incurred. For the years ended December 31, 2010, 2009 and 2008, advertising expense was $3,660,000, $1,763,000 and $1,864,000, respectively, and is
included in selling, general and administrative expenses.

Research and Development Costs

Research and development costs are charged to expense as incurred. Such costs were $5,569,000, $4,545,000, and $6,603,000 for the years
ended December 31, 2010, 2009 and 2008, respectively, and are included in selling, general and administrative expenses.



F-9



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Income Taxes

The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are
recognized for operating loss and tax credit carryforwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more-likely-than-not
that such assets will not be realized.

Net Loss per Common Share

The table below sets forth the reconciliation of the basic and diluted net loss per share computations:



|                                                    |  |                         |             |   |      |   |            |      |  |   |            |  
|--------------------------------------------------- |  | ----------------------- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                    |  | Year Ended December 31, |            
|                                                    |  | 2010                    |             |   | 2009 |   |            | 2008 | 
|Net loss attributable to common stockholders        |  | $                       | (58,237,000 | ) |      | $ | (2,437,000 | )    |  | $ | (9,088,000 | )
|                                                    |  |                         |             |   |      |   |            |      |  |   |            |  
|Shares used in computing basic loss per share       |  |                         | 17,120,000  |   |      |   | 17,175,000 |      |  |   | 17,465,000 |  
|Dilutive effect of options and warrants             |  |                         |            |   |      |   |           |      |  |   |           |  
|                                                    |  |                         |             |   |      |   |            |      |  |   |            |  
|Shares used in computing diluted net loss per share |  |                         | 17,120,000  |   |      |   | 17,175,000 |      |  |   | 17,465,000 |  
|                                                    |  |                         |             |   |      |   |            |      |  |   |            |  

For the years ended December 31, 2010, 2009 and 2008, options to purchase 791,125, 577,375 and 674,000
shares of common stock at exercise prices ranging from $1.17 to $7.37, $1.20 to $7.37 and $1.22 to $7.37 per share, respectively, were outstanding but were not included in the computation of diluted net loss per share as the result would be
anti-dilutive.

Stock-Based Compensation

The Company records stock-based compensation to recognize the cost of employee services received in exchange for an award of equity instruments, with such cost recognized over the period that the employee
is required to perform services in exchange for the award. The Company measures the cost of employee services received in exchange for an award based on the grant date fair value of the award. For 2010, the Company recorded stock-based compensation
expense of $219,000, consisting of expenses related to stock options ($205,000) and stock issued to directors ($14,000). For 2009, the Company recorded stock-based compensation expense of $180,000, consisting of expenses related to stock options
($170,000) and stock to be issued to directors ($10,000). For 2008, the Company recorded stock-based compensation expense of $235,000, consisting of expenses related to stock options ($166,000) and stock to be issued to directors ($69,000).



F-10



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



The weighted average fair value of each stock option granted during the years ended
December 31, 2010, 2009, and 2008 was $0.77, $0.98 and $3.24, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



|                                     |  |                        |               |  |      |  |               |      |  |  |            | 
|------------------------------------ |  | ---------------------- | ------------- |  | ---- |  | ------------- | ---- |  |  | ---------- | 
|                                     |  | Year Ended December 31 |              
|                                     |  | 2010                   |               |  | 2009 |  |               | 2008 | 
|Risk free interest rate              |  |                        | 2.87% - 3.04% |  |      |  | 2.27% - 3.05% |      |  |  | 3.70%      | 
|Expected dividend yield              |  |                        |              |  |      |  |              |      |  |  |           | 
|Expected life                        |  |                        | 6.25 years    |  |      |  | 6.25 years    |      |  |  | 6.25 years | 
|Expected volatility                  |  |                        | 70%           |  |      |  | 68% -  70%    |      |  |  | 79%        | 
|Expected volatilityweighted average |  |                        | 70%           |  |      |  | 69%           |      |  |  | 79%        | 

Expected volatilities
are calculated based on the historical volatility of the Companys stock over the expected term of the option. Management monitors share option exercise and employee termination patterns to estimate forfeiture rates within the valuation model.
The expected term of the option is derived from the Companys historical stock option exercise experience as it is a relevant indicator of future exercise patterns. The risk free interest rate is based on the implied yield available on the U.S,
Treasury yield curve with a term approximating the expected life of the option.

Recent Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued amended guidance addressing revenue arrangements
with multiple deliverables. This new guidance establishes a new hierarchy for allocating revenues among multiple deliverables in a multi-element arrangement. In order of preference, revenues will be allocated based on vendor specific objective
evidence (VSOE), third-party evidence, or estimated selling price. Additional disclosures are required to describe the effects of adoption, including changes in how arrangement consideration is allocated or in the pattern and timing of revenue
recognition. This guidance is effective for fiscal years beginning on or after June 15, 2010, and the Company elected to early adopt for new or materially modified arrangements entered into on or after January 1, 2009. The adoption did not
materially impact the Companys consolidated financial condition, results of operations or cash flows.

In January 2010,
the FASB issued guidance to require new disclosures regarding (1) transfers in and out of Levels 1 and 2 fair value measurements and (2) activity in Level 3 fair value measurements. Additionally, this guidance clarifies existing fair value
disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for disclosures
about purchases, sales, issuances, and settlements in the roll forward activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The
Company adopted this guidance on January 1, 2010 and included the appropriate disclosures in Note 9. The adoption of this guidance did not have any impact on the Companys consolidated financial condition, results of operations or cash
flows.

Reclassifications

Certain reclassifications to prior period amounts have been made to conform to the current presentation.



F-11



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 3INVENTORIES

Inventories consist of the following:



|                |  |              |            |  |      |   |            | 
|--------------- |  | ------------ | ---------- |  | ---- | - | ---------- | 
|                |  | December 31, |           
|                |  | 2010         |            |  | 2009 |  
|Raw materials   |  | $            | 5,354,000  |  |      | $ | 5,180,000  | 
|Work in process |  |              | 3,529,000  |  |      |   | 2,837,000  | 
|Finished goods  |  |              | 2,177,000  |  |      |   | 2,037,000  | 
|                |  |              |            |  |      |   |            | 
|                |  | $            | 11,060,000 |  |      | $ | 10,054,000 | 
|                |  |              |            |  |      |   |            | 

NOTE 4PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:



|                                             |  |              |             |   |      |   |             |  
|-------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                             |  | December 31, |            
|                                             |  | 2010         |             |   | 2009 |  
|Land                                         |  | $            | 3,129,000   |   |      | $ | 3,129,000   |  
|Building and improvements                    |  |              | 20,130,000  |   |      |   | 19,881,000  |  
|Equipment, computers, software and furniture |  |              | 26,304,000  |   |      |   | 24,475,000  |  
|                                             |  |              |             |   |      |   |             |  
|                                             |  |              | 49,563,000  |   |      |   | 47,485,000  |  
|Less-accumulated depreciation                |  |              | (19,870,000 | ) |      |   | (15,650,000 | )
|                                             |  |              |             |   |      |   |             |  
|                                             |  | $            | 29,693,000  |   |      | $ | 31,835,000  |  
|                                             |  |              |             |   |      |   |             |  

Depreciation expense was $4,653,000, $5,388,000 and $5,049,000 for the years ended December 31, 2010,
2009 and 2008, respectively.

NOTE 5OTHER ASSETS

Other assets consist of the following:



|                                   |  |              |           |  |      |   |           | 
|---------------------------------- |  | ------------ | --------- |  | ---- | - | --------- | 
|                                   |  | December 31, |          
|                                   |  | 2010         |           |  | 2009 |  
|Deferred financing costs, net      |  | $            | 130,000   |  |      | $ | 177,000   | 
|Other amortizable intangibles, net |  |              | 8,000     |  |      |   | 11,000    | 
|Recoverable insurance claims       |  |              | 947,000   |  |      |   | 3,054,000 | 
|Other assets                       |  |              | 262,000   |  |      |   | 166,000   | 
|                                   |  |              |           |  |      |   |           | 
|                                   |  | $            | 1,347,000 |  |      | $ | 3,408,000 | 
|                                   |  |              |           |  |      |   |           | 

Amortization expense of other intangibles was $3,000, $3,000 and $5,000 for the years ended
December 31, 2010, 2009 and 2008, respectively. The remaining balance of other amortizable intangibles of $8,000 at December 31, 2010 will be amortized through 2014.

In connection with the financings described in Note 7, the Company incurred debt issuance costs consisting of brokerage fees and legal fees, which are included within other assets at December 31,
2010 and December 31, 2009, net of accumulated amortization. The Company is amortizing these costs on a straight-line basis, which



F-12



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 5OTHER ASSETS (continued)



approximates the effective interest rate method, over the term of the related debt. Interest expense related to deferred financing costs was $47,000, $41,000 and $38,000 for the years ended
December 31, 2010, 2009 and 2008, respectively.

As of December 31, 2010 and 2009, the Company accrued $947,000 and
$3,054,000, respectively, in other liabilities for product liability claims and a corresponding receivable for the liability claims estimated to be recoverable under the Companys insurance policies (see Note 14). On a quarterly basis, the
Company reviews and adjusts each product liability claim and corresponding receivable.

NOTE 6ACCRUED LIABILITIES

Accrued liabilities consist of the following:



|                                         |  |              |            |  |      |   |            | 
|---------------------------------------- |  | ------------ | ---------- |  | ---- | - | ---------- | 
|                                         |  | December 31, |           
|                                         |  | 2010         |            |  | 2009 |  
|Current portion of warranty reserves     |  | $            | 2,257,000  |  |      | $ | 2,642,000  | 
|Self insurance reserves                  |  |              | 2,076,000  |  |      |   | 2,773,000  | 
|Litigation reserve and professional fees |  |              | 932,000    |  |      |   | 707,000    | 
|Customer deposits                        |  |              | 1,977,000  |  |      |   | 1,870,000  | 
|Payroll related                          |  |              | 2,530,000  |  |      |   | 1,524,000  | 
|Lease contingency reserve                |  |              | 865,000    |  |      |   | 794,000    | 
|Other                                    |  |              | 2,219,000  |  |      |   | 1,736,000  | 
|                                         |  |              |            |  |      |   |            | 
|                                         |  | $            | 12,856,000 |  |      | $ | 12,046,000 | 
|                                         |  |              |            |  |      |   |            | 

NOTE 7LONG-TERM DEBT

Long-term debt consists of the following:



|                               |  |              |            |   |      |   |            |  
|------------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                               |  | December 31, |           
|                               |  | 2010         |            |   | 2009 |  
|Citizens revolving credit loan |  | $            |           |   |      | $ |           |  
|Citizens real estate loan      |  |              | 11,223,000 |   |      |   | 11,743,000 |  
|Citizens equipment facility    |  |              | 4,586,000  |   |      |   |           |  
|Wells Fargo term loans         |  |              |           |   |      |   | 5,863,000  |  
|                               |  |              |            |   |      |   |            |  
|                               |  |              | 15,809,000 |   |      |   | 17,606,000 |  
|Lesscurrent portion           |  |              | (1,520,000 | ) |      |   | (2,415,000 | )
|                               |  |              |            |   |      |   |            |  
|                               |  | $            | 14,289,000 |   |      | $ | 15,191,000 |  
|                               |  |              |            |   |      |   |            |  

In June 2007, a $13,000,000 mortgage loan was advanced to the Company pursuant to the loan agreement (the
Citizens Loan Agreement) with RBS Citizens, National Association (Citizens). The proceeds of this loan were used to finance a portion of the acquisition of an approximate 340,000 square foot manufacturing, office and
warehouse facility located in Owatonna, Minnesota. The principal of the mortgage loan is to be retired by eighty three equal monthly payments of $43,000 along with a balloon payment of $9,403,000 at July 2, 2014. This loan and the revolving
loans described below are secured by substantially all of the Companys assets.



F-13



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 7LONG-TERM DEBT (continued)



In July 2007, the Company entered into a Loan Agreement (the Wells Fargo Loan
Agreement) with Wells Fargo Bank, NA, formerly named Wachovia Bank, NA (Wells Fargo), which was supplemented and modified in March 2008, March 2009 and December 2009. The Wells Fargo Loan Agreement as supplemented and modified
provided for three term loans, the proceeds of which financed the acquisition of machinery and equipment. $5,000,000 was advanced pursuant to the initial term loan, $1,975,000 was advanced pursuant to the second term loan and $1,000,000 was advanced
pursuant to the third term loan. The Wells Fargo term loans were prepaid in full in June 2010 with the proceeds of the Citizens Equipment Facility. The Wells Fargo term loans were secured by the Companys equipment.

In July 2008, the Company entered into a credit agreement (the Citizens Credit Agreement) with Citizens, providing for a
revolving line of credit of up to the lesser of a ceiling or an amount determined by reference to a borrowing base composed of designated percentages of the Companys eligible accounts receivable and eligible inventory. Availability under the
revolving loan fluctuates daily based on the borrowing base. At the date of this Report, the availability under the revolving line of credit is $2,000,000. The Citizens revolving line of credit is available to July 1, 2011 and, while there can
be no assurance, the Company anticipates that the line will either be extended or replaced prior to that date.

In June 2010,
the Company entered into a Master Lease Agreement (the Citizens Equipment Facility) with an affiliate of Citizens, RBS Asset Finance, Inc. (referred to herein as Citizens), pursuant to which $4,999,000 of equipment lease
financing was advanced. Proceeds of the advance were used to retire in full the Wells Fargo equipment term loans and related obligations. The Citizens Equipment Facility will be retired by 60 equal monthly payments of fixed rent plus interest. While
the documentation for this transaction is structured as a lease, the advances under the facility are treated for all purposes as a loan secured by designated equipment owned by the Company. Amounts outstanding under the Citizens Equipment Facility
are cross-collateralized by the Companys accounts receivable and inventory.

The Citizens revolving line of credit prior
to April 1, 2009 bore interest at a floating rate equal to LIBOR plus 1.25% or the prime rate minus 1%, from April 1, 2009 to June 30, 2009 bore interest at LIBOR plus 2.25%, and after such date bears interest at LIBOR plus 2.5% to
3.0% based on a performance grid. The Citizens real estate loan prior to April 1, 2009 bore interest at a floating rate equal to LIBOR plus 1.2% per annum, from April 1, 2009 to June 30, 2009 bore interest at LIBOR plus 2.25%,
and after such date bears interest at LIBOR plus 2.5% to 3.0% based on a performance grid. The Wells Fargo initial and second term loans prior to April 1, 2009 bore interest at LIBOR plus 1.2% to 1.45% based on a performance grid and from
April 1, 2009 to June 30, 2009 these loans bore interest at LIBOR plus 2.25%. The third Wells Fargo term loan prior to June 30, 2009 bore interest at LIBOR plus 2.25%. After June 30, 2009, each Wells Fargo term loan bore interest
at LIBOR plus 3.5%. The Citizens Equipment Facility bears interest at a floating rate equal to LIBOR plus 3%. LIBOR was .26% at December 31, 2010.

There were no revolving loans outstanding during 2010. The average outstanding revolving loan balance during 2009 and 2008 was $859,000 and $468,000, respectively, and the weighted average interest rate
was 1.77% and 4.20%, respectively. Interest expense on the revolving line of credit, including an unused availability fee on the revolving loans, was $25,000, $50,000 and $83,000 for the years ended December 31, 2010, 2009, and 2008,
respectively. Interest expense on the Wells Fargo term loans, which were retired at the end of the second quarter 2010, was $219,000, $332,000 and $267,000 for the years ended December 31, 2010, 2009 and 2008, respectively. Interest expense on
the Citizens real estate loan, including interest rate swap payments, was $973,000, $963,000, and $883,000 for the years ended December 31, 2010, 2009, and 2008, respectively. Interest expense on the Citizens Equipment Facility, which was
advanced at the end of the second quarter 2010, was $87,000 for the year ended December 31, 2010.



F-14



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 7LONG-TERM DEBT (continued)



The Companys credit facilities require the Company to maintain various financial
covenants. The Company failed to meet certain of these covenants at the end of the first and second quarters of 2009, which failures were waived by the lenders. In connection with these waivers, the Company entered into amendments to its credit
facilities. The Wells Fargo amendments increased the interest rate on the term loans, modified the financial covenants, and increased the collateral for the term loans to include all of the Companys equipment. The Citizens amendments increased
the interest rate on the credit facilities, cross-collateralized the Citizens credit facilities, reduced the ceiling and modified the borrowing base calculation for the revolving line of credit, and amended the financial and certain other covenants
contained in the credit facilities. In June 2010, the Company, coincident with entering into the Citizens Equipment Facility, entered into a further amendment with Citizens, modifying a financial covenant in the Citizens Loan Agreement and Credit
Agreement. In March 2011, the parties entered into further amendments to the Citizens credit facilities which further modified the financial covenants, thereby permitting the Company to remain in compliance with them as of December 31, 2010, and
reduced availability under the revolving line of credit to $2,000,000. As a requirement of this amendment, the Company provided increased security for the credit facilities by granting a mortgage on the Companys Medway, Massachusetts plant.
The Company believes that it will remain in compliance with its financing agreements throughout 2011, provided that there is a stay of execution of any judgment issued on the Barnhard verdict which continues throughout the period. While there
can be no assurance, the Company does not believe it is probable that the judgment will be enforced without a stay of execution pending its appeals, or that the Company will be required to post a bond in excess of an amount acceptable to the bank,
which would constitute events of default, during at least calendar 2011 and, accordingly, the debt is classified pursuant to its contractual maturity dates.

The Companys credit agreements contain cross default provisions to each other.

At December 31, 2010 long-term debt maturities are as follows:



|     |  |   |            | 
|---- |  | - | ---------- | 
|2011 |  | $ | 1,520,000  | 
|2012 |  |   | 1,520,000  | 
|2013 |  |   | 1,520,000  | 
|2014 |  |   | 10,663,000 | 
|2015 |  |   | 586,000    | 
|     |  |   |            | 
|     |  | $ | 15,809,000 | 
|     |  |   |            | 

NOTE 8DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company uses certain financial derivatives to mitigate its exposure to volatility in foreign currency exchange rates and interest
rates. The Company uses these derivative instruments to hedge exposures in the ordinary course of business and does not invest in derivative instruments for speculative purposes.

Foreign currency forward contracts are utilized at times to hedge the foreign currency exposure on sales made in the UK in British
Sterling. The Companys UK sales are denominated in British Sterling, while its purchases of inventory from the Company are paid in US dollars. These contracts are not designated as hedging instruments and accordingly changes in their fair
value are recognized in selling, general and administrative expense in the consolidated statement of operations. Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. These agreements are
currently designated as cash flow hedges, therefore, the effective portion of unrealized gains and losses are recorded in accumulated other comprehensive loss.

In March 2007, the Company entered into a series of 13 monthly forward contracts that began on April 30, 2007, whereby the Company paid a bank 150,000 British Sterling and the bank paid the Company
$290,000 each



F-15



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CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 8DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued)



month. In November, 2007, the Company entered into a series of 13 monthly forward contracts that began on May 30, 2008, whereby the Company paid a bank 150,000 British Sterling and the bank
paid the Company $309,000 each month. This agreement was extended in February 2009 whereby the Company entered into a series of 10 monthly forward contracts that began on March 31, 2009, whereby the Company paid a bank 130,000 British Sterling
and the bank paid the Company $214,000 each month. This series of contracts ended on December 31, 2009. No foreign exchange forward contracts were outstanding during 2010.

In June 2006, the Company entered into a forward starting interest rate swap agreement with Citizens which commenced on June 29,
2007 to hedge the LIBOR-based Citizens real estate loan. The notional amount of the swap amortizes based on the same amortization schedule as the Citizens Loan Agreement and the hedged item (one-month LIBOR) is the same as the basis for the interest
rate on the loan. The swap effectively converts the rate from a floating rate based on LIBOR to a fixed rate which prior to April 1, 2009 equaled 6.95%, from April 1, 2009 to June 30, 2009 equaled 8.00% and after June 30, 2009
throughout the duration of the loan equals 8.25% or 8.75% based on a performance grid. The swap and interest payments on the debt settle monthly. The real estate loan and the swap both mature on July 2, 2014. There was no initial cost of the
interest rate swap. The Company designates the interest rate swap as a hedging instrument and, accordingly, the effective portion of changes in the fair value of this swap are recorded as a component of accumulated other comprehensive loss.

In November 2007, the Company entered into a forward starting interest rate swap agreement with Wells Fargo, which commenced
on March 3, 2008, intended to hedge the initial LIBOR-based Wells Fargo term loan. The notional amount of the swap amortized based on the same amortization schedule as the initial Wells Fargo term loan and the hedged item (one-month LIBOR) was
the same as the basis for the interest rate on the loan. The swap effectively converted the rate from a floating rate based on LIBOR to a fixed rate which prior to April 1, 2009 equaled 5.76% or 6.01% based on a performance grid, from
April 1, 2009 to June 30, 2009 equaled 6.81% and after June 30, 2009 equaled 8.06%. The Company determined the interest rate swap qualified as a derivative hedging instrument and, accordingly, changes in the fair value of this swap
were recorded as a component of accumulated other comprehensive loss. The interest rate swap was terminated in June 2010 in connection with the prepayment of the Wells Fargo term loans. There was no initial cost of the interest rate swap, and upon
termination the Company paid $71,000 in settlement of the interest rate swap.

The following table presents the fair values of
derivatives included within the consolidated balance sheets:



|                                              |  |                   |   |  |                       |   |   |                      |  |  |                  |  |  |                  |           |  |                      |   |           |  |  |                 
|--------------------------------------------- |  | ----------------- | - |  | --------------------- | - | - | -------------------- |  |  | ---------------- |  |  | ---------------- | --------- |  | -------------------- | - | --------- |  |  | ----------------
|                                              |  | Asset Derivatives |   |  | Liability Derivatives
|                                              |  | Fair Value        |   |  |                       |   |   | Fair Value           |  |  |                 
|                                              |  | December 31,2010  |   |  | December 31,2009      |   |   | BalanceSheetLocation |  |  | December 31,2010 |  |  | December 31,2009 |           |  | BalanceSheetLocation
|Derivatives
designated as
hedging instruments |  |                   |   |  |                       |   |   |                      |  |  |                  |  |  |                  |           |  |                      |   |           |  |  |                 
|Interest rate swapagreements                  |  | $                 |  |  |                       | $ |  |                      |  |  |                 |  |  | $                | 1,527,000 |  |                      | $ | 1,505,000 |  |  | OtherLiabilities



F-16



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 8DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued)



The following table presents the amounts affecting the consolidated statements of
operations and accumulated other comprehensive loss for the years ended December 31, 2010, 2009, and 2008, respectively.



|                                              |      |                                                                                                               |         |      |  |   |          |   |  |   |          |  
|--------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------- | ------- | ---- |  | - | -------- | - |  | - | -------- | -
|Derivatives in
Cash Flow Hedging
Relationship |      | Amount of Gain (Loss) Recognized inOther ComprehensiveLoss, 
net of taxYear Ended December 31                 |        
|                                              | 2010 |                                                                                                               |         | 2009 |  |   | 2008     |  
|Interest rate swap agreements                 |      | $                                                                                                             | (53,000 | )    |  | $ | 453,000  |   |  | $ | (760,000 | )
|                                              |     
|Derivatives in
Cash Flow Hedging Relationship |      | Amount of Gain (Loss) Reclassified fromAccumulated Other 
ComprehensiveLoss Into IncomeYear Ended December 31 |        
|                                              | 2010 |                                                                                                               |         | 2009 |  |   | 2008     |  
|Interest rate swap agreements                 |      | $                                                                                                             | 760,000 |      |  | $ | (811,000 | ) |  | $ | (428,000 | )



|                                                  |      |                                                                                 |   |      |                                                             |   |          |   |  |   |         |  |  |                                            
|------------------------------------------------- | ---- | ------------------------------------------------------------------------------- | - | ---- | ----------------------------------------------------------- | - | -------- | - |  | - | ------- |  |  | -------------------------------------------
|Derivatives Not Designated as
Hedging Instruments |      | Amount of Gain (Loss) Recognized inIncome on 
DerivativesYear Ended December 31 |   |      | Location of Gain (Loss) Recognized in Income on
Derivatives
|                                                  | 2010 |                                                                                 |   | 2009 |                                                             |   | 2008     |   | 
|Foreign currency forward contracts                |      | $                                                                               |  |      |                                                             | $ | (462,000 | ) |  | $ | 309,000 |  |  | Selling, general and administrativeexpenses

See Note 9Fair Value of Financial Instruments for a description of how the above financial instruments are valued.

The Company is exposed to credit related losses in the event of non-performance by counterparties to these financial instruments. The counterparties to all derivative transactions are major financial
institutions with investment grade credit ratings, and although no assurances can be given, the Company does not expect any of the counterparties to fail to meet its obligations. The credit exposure related to these financial instruments is
represented by the fair value of contracts with a positive fair value at the reporting date. Therefore the Company had no exposure to its counterparties as of December 31, 2010.

For the cash flow hedges referred to above, the amounts in accumulated other comprehensive loss are reclassified into earnings as the
underlying hedged item affects earnings. The amount expected to be reclassified into pre-tax earnings in the next 12 months is $255,000. The timing of actual amounts reclassified into earnings is dependent on future movement in interest rates.

NOTE 9FAIR VALUE OF FINANCIAL INSTRUMENTS

The Companys financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, long-term debt and derivative instruments (discussed below). The carrying
values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of their respective fair values because of the short maturity of these instruments. Based on the terms of the Companys debt
instruments that are outstanding as of December 31, 2010 and December 31, 2009, respectively, the carrying values are considered to approximate their respective fair values. See Note 7 for the terms and carrying values of the
Companys various debt instruments.



F-17



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 9FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)



The following table presents the Companys financial assets and liabilities that
are measured at fair value on a recurring basis as of December 31, 2010 and 2009, and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

|                             |  |                            |           |  |                                                             |  |   |                                             |  |   |                                         |  |  |  |   | 
|---------------------------- |  | -------------------------- | --------- |  | ----------------------------------------------------------- |  | - | ------------------------------------------- |  | - | --------------------------------------- |  |  |  | - | 
|                             |  | Balance atDecember 31,2010 |           |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |  |   | Significant OtherObservable Inputs(Level 2) |  |   | SignificantUnobservableInputs(Level
 3) | 
|Interest rate swap liability |  | $                          | 1,527,000 |  |                                                             |  |  |                                             |  | $ | 1,527,000                               |  |  |  |  | 



|                               |  |                            |           |  |                                                             |  |   |                                             |  |   |                                         |  |  |  |   | 
|------------------------------ |  | -------------------------- | --------- |  | ----------------------------------------------------------- |  | - | ------------------------------------------- |  | - | --------------------------------------- |  |  |  | - | 
|                               |  | Balance atDecember 31,2009 |           |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |  |   | Significant OtherObservable Inputs(Level 2) |  |   | SignificantUnobservableInputs(Level
 3) | 
|Interest rate swap liabilities |  | $                          | 1,505,000 |  |                                                             |  |  |                                             |  | $ | 1,505,000                               |  |  |  |  | 

The valuation of the
interest rate swap agreements are based on a quoted price from the counterparty that values these instruments using proprietary models and market information at the date presented, as well as consideration of the impact of the risk of
non-performance of the counterparty and the Company.

There were no non-financial assets or liabilities subject to measurement
at fair value on a non-recurring basis at December 31, 2010.

NOTE 10STOCKHOLDERS EQUITY (DEFICIT)

Preferred Stock

The Companys Board has the ability to issue, without approval by the common shareholders, up to 500,000 shares of $1 par value
preferred stock having rights and preferences as the Board may determine in its sole discretion.

Common Stock

On November 3, 2008, the Companys Board of Directors authorized the repurchase of up to 1 million shares of its common
stock, in open market transactions or through privately negotiated transactions, subject to market conditions and other factors. Pursuant to its credit facilities, the Company had been restricted in making further purchases of its shares and the
Board of Directors terminated the stock repurchase program in February 2011. A total of 531,200 shares was repurchased under this program in 2008 and 2009 with an aggregate cost of $703,000. This stock repurchase is recorded in treasury stock on the
consolidated balance sheet.

At December 31, 2010, there are 1,356,125 shares of common stock reserved for future
issuance pursuant to the exercise or issuance of stock options.

Warrants

In July 2009, five warrant holders exercised in full their respective warrants to purchase an aggregate of 5,750 shares of common stock of
the Company. Pursuant to the net exercise provisions of these warrants, the Company issued 5,196 shares of its common stock to the warrant holders. These warrants were issued in connection with the Companys 2004 private placement.



F-18



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 10STOCKHOLDERS EQUITY (DEFICIT) (continued)



On July 16, 2008, a warrant holder exercised in full its warrant to purchase
189,640 shares of common stock of the Company, for an aggregate exercise price of $18,964. This warrant was issued in connection with a 2003 financing.

Comprehensive Income (Loss)

Comprehensive income (loss) is the
change in equity of a business enterprise from transactions and other events and circumstances from non-owner sources. Excluding net income (loss), the components of comprehensive income (loss) are from foreign currency translation adjustments and
changes in the fair value of hedging instruments.

The following summarizes the components of accumulated other comprehensive
loss at December 31, 2010 and 2009 (in thousands):



|                                                             |  |              |        |   |      |   |        |  
|------------------------------------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                             |  | December 31, |       
|                                                             |  | 2010         |        |   | 2009 |  
|Cumulative translation adjustment                            |  | $            | (1,345 | ) |      | $ | (1,297 | )
|Change in fair value of interest rate hedge
(net of tax) (1) |  |              | (892   | ) |      |   | (839   | )
|                                                             |  |              |        |   |      |   |        |  
|Total                                                        |  | $            | (2,237 | ) |      | $ | (2,136 | )
|                                                             |  |              |        |   |      |   |        |  



|(1) | Net of deferred income tax asset of $0 and $526,000 at December 31, 2010 and 2009, respectively.
|--- | ------------------------------------------------------------------------------------------------

Stock Options

2005 Omnibus Incentive Plan

Cybexs 2005 Omnibus Incentive Plan (the Omnibus Plan) is designed to provide incentives that will attract and retain individuals key to the success of the Company through direct or
indirect ownership of the Companys common stock. The Omnibus Plan provides for the granting of stock options, stock appreciation rights, stock awards, performance awards and bonus stock purchase awards. The Company reserved 1,000,000 shares of
common stock for issuance pursuant to the Omnibus Plan. A registration statement has been filed for the Omnibus Plan and the Company provides newly-issued shares of registered common stock upon the exercise of options and upon stock grants under the
Omnibus Plan.

The terms and conditions of each award are determined by a committee of the Board of Directors of the Company.
Under the Omnibus Plan, the committee may grant either qualified or nonqualified stock options with a term not to exceed ten years from the grant date and at an exercise price per share that the committee may determine (which in the case of
incentive stock options may not be less than the fair market value of a share of the Companys common stock on the date of grant). The options generally vest over a three to five year period (with some cliff vesting).

1995 Omnibus Incentive Plan

The terms and conditions of grants of stock options under the 1995 Omnibus Incentive Plan were determined by a committee of the Board of Directors. Options outstanding under this plan were granted at
exercise prices which were not less than the fair market value of a share of the Companys common stock on the date of grant and were exercisable over a period not to exceed ten years from the original date of grant. No future grants may be
made under this plan.



F-19



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 10STOCKHOLDERS EQUITY (DEFICIT) (continued)



A summary of the status of the Companys stock option plans as of December 31,
2010 is presented below:



|                                                         |  |                |         |   |                              |   |      |                                 |  |  |                |  |  |   |   | 
|-------------------------------------------------------- |  | -------------- | ------- | - | ---------------------------- | - | ---- | ------------------------------- |  |  | -------------- |  |  | - | - | 
|                                                         |  | NumberofShares |         |   | WeightedAverageExercisePrice |   |      | RemainingContractualTerm(years) |  |  | IntrinsicValue | 
|Outstanding at January 1, 2010                           |  |                | 577,375 |   |                              | $ | 2.57 |                                 |  |  |                |  |  |   |   | 
|Granted                                                  |  |                | 228,000 |   |                              |   | 1.17 |                                 |  |  |                |  |  |   |   | 
|Exercised                                                |  |                |        |   |                              |   |     |                                 |  |  |                |  |  |   |   | 
|Cancelled/Forfeited                                      |  |                | (14,250 | ) |                              |   | 2.40 |                                 |  |  |                |  |  |   |   | 
|                                                         |  |                |         |   |                              |   |      |                                 |  |  |                |  |  |   |   | 
|Outstanding at December 31, 2010                         |  |                | 791,125 |   |                              | $ | 2.17 |                                 |  |  | 5.53           |  |  | $ |  | 
|                                                         |  |                |         |   |                              |   |      |                                 |  |  |                |  |  |   |   | 
|Options exercisable at December 31, 2010                 |  |                | 504,000 |   |                              | $ | 2.47 |                                 |  |  | 3.72           |  |  | $ |  | 
|                                                         |  |                |         |   |                              |   |      |                                 |  |  |                |  |  |   |   | 
|Options vested and expected to vest at December 31, 2010 |  |                | 768,595 |   |                              | $ | 2.19 |                                 |  |  | 5.43           |  |  | $ |  | 
|                                                         |  |                |         |   |                              |   |      |                                 |  |  |                |  |  |   |   | 

The intrinsic value of options exercised during the years ended December 31, 2010, 2009, and 2008 was
$0, $0, and $138,000, respectively.

As of December 31, 2010, there was $286,000 of total unrecognized compensation cost
related to nonvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 2.06 years.

At December 31, 2010, there are 565,000 shares available for future issuance pursuant to the 2005 Omnibus Incentive Plan.

Information with respect to options outstanding under the Companys plans as of December 31, 2010 is as follows:



|                         |  |             |         |  |                              |   |      |                                                 |  |  |        |  |  |                              |         |  |  |   |      | 
|------------------------ |  | ----------- | ------- |  | ---------------------------- | - | ---- | ----------------------------------------------- |  |  | ------ |  |  | ---------------------------- | ------- |  |  | - | ---- | 
|                         |  | Outstanding |         |  | Exercisable                  |  
|Range of exercise prices |  | Shares      |         |  | Weightedaverageexerciseprice |   |      | Weightedaverageremainingcontractuallife (years) |  |  | Shares |  |  | Weightedaverageexerciseprice |        
|$1.17$1.51              |  |             | 515,125 |  |                              | $ | 1.22 |                                                 |  |  | 5.75   |  |  |                              | 276,125 |  |  | $ | 1.26 | 
|1.701.90                |  |             | 90,000  |  |                              |   | 1.76 |                                                 |  |  | 2.02   |  |  |                              | 78,750  |  |  |   | 1.76 | 
|3.70                     |  |             | 10,000  |  |                              |   | 3.70 |                                                 |  |  | 3.49   |  |  |                              | 10,000  |  |  |   | 3.70 | 
|4.56                     |  |             | 143,500 |  |                              |   | 4.56 |                                                 |  |  | 7.01   |  |  |                              | 107,250 |  |  |   | 4.56 | 
|5.867.37                |  |             | 32,500  |  |                              |   | 7.25 |                                                 |  |  | 5.90   |  |  |                              | 31,875  |  |  |   | 7.28 | 
|                         |  |             |         |  |                              |   |      |                                                 |  |  |        |  |  |                              |         |  |  |   |      | 
|                         |  |             | 791,125 |  |                              | $ | 2.17 |                                                 |  |  | 5.53   |  |  |                              | 504,000 |  |  | $ | 2.47 | 
|                         |  |             |         |  |                              |   |      |                                                 |  |  |        |  |  |                              |         |  |  |   |      | 

Stock Retainer Plan for Nonemployee Directors

The Companys 2002 Stock Retainer Plan for Nonemployee Directors (2002 Plan) provided that each nonemployee director
received 50% of his annual retainer in shares of common stock of the Company. Up to 150,000 shares of common stock could be issued under the 2002 Plan. The January 2009 issuance of shares



F-20



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 10STOCKHOLDERS EQUITY (DEFICIT) (continued)



under the 2002 Plan which related to services performed in 2008, exhausted the authorized shares under the Plan, and the Board of Directors in February 2009 suspended its operation. The issuance
of shares as partial payment of annual retainers resulted in expense being recognized based on the fair market value of such shares. At December 31, 2010, there are no shares available for future issuance pursuant to the 2002 Plan. The Company
recorded stock-based compensation expense of $0, $0 and $60,000 for the years ended December 31, 2010, 2009 and 2008, respectively, related to the 2002 Plan. In January 2009, the Company issued 18,270 shares of common stock to the directors,
which had a fair value of $60,000, related to directors fees earned in 2008, which were included in accrued liabilities at December 31, 2008. In January 2008, the Company issued 16,157 shares of common stock to the directors, which had a fair
value of $90,000, related to directors fees earned in 2007, which were included in accrued liabilities at December 31, 2007.

NOTE
11INCOME TAXES

Loss before income taxes consists of the following:



|         |  |                         |             |   |      |   |            |      |  |   |            |  
|-------- |  | ----------------------- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|         |  | Year Ended December 31, |            
|         |  | 2010                    |             |   | 2009 |   |            | 2008 | 
|Domestic |  | $                       | (43,716,000 | ) |      | $ | (2,261,000 | )    |  | $ | (5,137,000 | )
|Foreign  |  |                         | (760,000    | ) |      |   | (685,000   | )    |  |   | (1,618,000 | )
|         |  |                         |             |   |      |   |            |      |  |   |            |  
|         |  | $                       | (44,476,000 | ) |      | $ | (2,946,000 | )    |  | $ | (6,755,000 | )
|         |  |                         |             |   |      |   |            |      |  |   |            |  

The income tax (benefit) provision consists of the following:



|          |  |                         |            |  |      |   |          |      |  |   |           | 
|--------- |  | ----------------------- | ---------- |  | ---- | - | -------- | ---- |  | - | --------- | 
|          |  | Year Ended December 31, |           
|          |  | 2010                    |            |  | 2009 |   |          | 2008 | 
|Current:  |  |                         |            |  |      |   |          |      |  |   |           | 
|Federal   |  | $                       | 33,000     |  |      | $ |         |      |  | $ | 65,000    | 
|State     |  |                         | 76,000     |  |      |   | 50,000   |      |  |   | 66,000    | 
|          |  |                         |            |  |      |   |          |      |  |   |           | 
|          |  |                         | 109,000    |  |      |   | 50,000   |      |  |   | 131,000   | 
|          |  |                         |            |  |      |   |          |      |  |   |           | 
|Deferred: |  |                         |            |  |      |   |          |      |  |   |           | 
|Federal   |  |                         | 12,373,000 |  |      |   | (855,000 | )    |  |   | 2,013,000 | 
|State     |  |                         | 1,279,000  |  |      |   | 296,000  |      |  |   | 189,000   | 
|          |  |                         |            |  |      |   |          |      |  |   |           | 
|          |  |                         | 13,652,000 |  |      |   | (559,000 | )    |  |   | 2,202,000 | 
|          |  |                         |            |  |      |   |          |      |  |   |           | 
|          |  | $                       | 13,761,000 |  |      | $ | (509,000 | )    |  | $ | 2,333,000 | 
|          |  |                         |            |  |      |   |          |      |  |   |           | 



F-21



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 11INCOME TAXES (continued)



The reconciliation between income taxes at the federal statutory rate and the amount
recorded in the accompanying consolidated financial statements is as follows:



|                                                                                        |  |                         |             |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------------------- |  | ----------------------- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                        |  | Year Ended December 31, |            
|                                                                                        |  | 2010                    |             |   | 2009 |   |            | 2008 | 
|Tax (benefit) at statutory rate                                                         |  | $                       | (15,122,000 | ) |      | $ | (1,001,000 | )    |  | $ | (2,297,000 | )
|Impact of foreign taxes                                                                 |  |                         | 46,000      |   |      |   | 41,000     |      |  |   | 97,000     |  
|State income taxes, net                                                                 |  |                         | (1,779,000  | ) |      |   | 220,000    |      |  |   | 169,000    |  
|Federal research and development tax credit                                             |  |                         | (74,000     | ) |      |   | (121,000   | )    |  |   | (126,000   | )
|Change in unrecognized tax benefits                                                     |  |                         | (60,000     | ) |      |   | 156,000    |      |  |   | 109,000    |  
|Non-deductible goodwill impairment charge                                               |  |                         |            |   |      |   |           |      |  |   | 3,824,000  |  
|Other permanent differences, primarily meals and entertainment and stock option expense |  |                         | 94,000      |   |      |   | 173,000    |      |  |   | 19,000     |  
|Change in valuation allowance                                                           |  |                         | 30,656,000  |   |      |   | 23,000     |      |  |   | 538,000    |  
|                                                                                        |  |                         |             |   |      |   |            |      |  |   |            |  
|                                                                                        |  | $                       | 13,761,000  |   |      | $ | (509,000   | )    |  | $ | 2,333,000  |  
|                                                                                        |  |                         |             |   |      |   |            |      |  |   |            |  

The significant components of the Companys net deferred tax assets (liabilities) are as follows:



|                                            |  |              |             |   |      |   |            |  
|------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ---------- | -
|                                            |  | December 31, |            
|                                            |  | 2010         |             |   | 2009 |  
|Deferred tax assets (liabilities):          |  |              |             |   |      |   |            |  
|Barnhard litigation reserve                 |  | $            | 17,883,000  |   |      | $ |           |  
|Net operating loss and credit carryforwards |  |              | 8,569,000   |   |      |   | 9,036,000  |  
|Warranty reserves                           |  |              | 1,644,000   |   |      |   | 1,545,000  |  
|Other accruals and reserves                 |  |              | 2,735,000   |   |      |   | 2,603,000  |  
|Bad debt and lease loss reserves            |  |              | 930,000     |   |      |   | 892,000    |  
|Intangibles                                 |  |              | 1,444,000   |   |      |   | 1,963,000  |  
|Other, net                                  |  |              | 542,000     |   |      |   | 674,000    |  
|                                            |  |              |             |   |      |   |            |  
|Total deferred tax assets                   |  |              | 33,747,000  |   |      |   | 16,713,000 |  
|Depreciation                                |  |              | (1,589,000  | ) |      |   | (1,372,000 | )
|Valuation allowance                         |  |              | (32,158,000 | ) |      |   | (1,486,000 | )
|                                            |  |              |             |   |      |   |            |  
|                                            |  | $            |            |   |      | $ | 13,855,000 |  
|                                            |  |              |             |   |      |   |            |  

At December 31, 2010, the Company had U.S. federal net operating loss carryforwards, which are
scheduled to expire as follows:



|                    |  |   |            | 
|------------------- |  | - | ---------- | 
|2020                |  | $ | 2,514,000  | 
|2021                |  |   | 5,528,000  | 
|2022                |  |   | 4,354,000  | 
|2023 and thereafter |  |   | 3,066,000  | 
|                    |  |   |            | 
|                    |  | $ | 15,462,000 | 
|                    |  |   |            | 

In addition, the Company has foreign net operating loss carryforwards of $5,871,000, which have an unlimited
life, federal alternative minimum tax credit carryforwards of $700,000, which do not expire, federal research and development tax credit carryforwards of $352,000, which begin to expire in 2021 and various net operating loss and credit carryforwards
for state tax purposes.



F-22



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 11INCOME TAXES (continued)



The Company recorded an increase in the valuation allowance of $30,656,000 in 2010 to
fully offset net deferred tax assets of $32,158,000 as of December 31, 2010. A valuation allowance for deferred tax assets is recorded to the extent it cannot be determined that the realization of these assets is more likely than not. Due to
the uncertainty created by the unfavorable jury verdict in a product liability suit (see Note 14), it was determined that a valuation allowance against the entire amount of deferred tax assets as of December 31, 2010 is necessary. As of
December 31, 2010, approximately $82,500,000 of future taxable income is needed to fully realize the Companys deferred tax assets. The difference between this figure and the net operating loss carryforwards and credits is primarily
cumulative book versus tax differences related to various expenses.

The Company files income tax returns in the U.S. federal
jurisdiction, the United Kingdom and various state jurisdictions. The Company is no longer subject to U.S. federal, United Kingdom and state income tax examinations by tax authorities for years before 2005.

The Company has evaluated any uncertain tax positions in its federal income tax return, United Kingdom return and the state tax returns
it is currently filing. The Company has also made an evaluation of the potential impact of additional state taxes being assessed by jurisdictions in which the Company does not currently consider itself liable. Based on this analysis, the Company has
recorded an unrecognized tax liability.

A reconciliation of the beginning and ending balance of the unrecognized tax
liability is as follows:



|                                                        |  |                        |          |   |      |   |         |      |  |   |         |  
|------------------------------------------------------- |  | ---------------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                        |  | Year Ended December 31 |         
|                                                        |  | 2010                   |          |   | 2009 |   |         | 2008 | 
|Balance as of January 1                                 |  | $                      | 290,000  |   |      | $ | 249,000 |      |  | $ | 174,000 |  
|Increases for tax positions related to the current year |  |                        | 69,000   |   |      |   | 86,000  |      |  |   | 78,000  |  
|Decreases for tax positions related to the prior year   |  |                        | (26,000  | ) |      |   | (45,000 | )    |  |   | (3,000  | )
|Decreases for settlements with taxing authorities       |  |                        | (103,000 | ) |      |   |        |      |  |   |        |  
|                                                        |  |                        |          |   |      |   |         |      |  |   |         |  
|Balance as of December 31                               |  | $                      | 230,000  |   |      | $ | 290,000 |      |  | $ | 249,000 |  
|                                                        |  |                        |          |   |      |   |         |      |  |   |         |  

As of December 31, 2010, the unrecognized tax liability of $230,000 is comprised of $101,000 included
in accrued liabilities, and $129,000 included in the valuation allowance for deferred taxes, since the items comprising this amount are included in deferred tax assets. Therefore, $101,000 of the unrecognized tax liability would impact the effective
tax rate if recognized. The entire amount of the unrecognized tax liability as of December 31, 2009 and 2008 would impact the effective tax rate if recognized. Consistent with its current policy, the Company will include any interest and
penalties related to uncertain tax positions as a component of selling, general and administrative expense. There are no amounts accrued for interest or penalties through December 31, 2010.

NOTE 12RELATED PARTY TRANSACTIONS

For the years ended December 31, 2010, 2009 and 2008, the Company paid $647,000, $402,000 and $335,000, respectively, to a law firm of which one of the directors of the Company is a member.

John Aglialoro, Joan Carter, and UM Holdings Ltd. (UM) are related parties which collectively own approximately
49.5% of the Companys common shares.



F-23



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 12RELATED PARTY TRANSACTIONS (continued)



Mr. Aglialoro has served as Chief Executive Officer of the Company since November
2000, and is expected to serve in this capacity for an indefinite period of time. He received salaries of $535,000, $518,000 and $536,000 for 2010, 2009 and 2008, respectively.

UM provides certain office support services for which the Company reimbursed UM at the rate of $145,000 during 2010, 2009, and 2008,
respectively. At December 31, 2010 and 2009, the Company owed UM $13,000 and $15,000 for services, respectively.

NOTE
13GUARANTEES

The Company arranges equipment leases and other financings for its customers. While most of these financings are
without recourse, in certain cases the Company may offer a guarantee or other recourse provisions. In such situations, the Company ensures that the transaction between the independent leasing company and the end user customer represents a sales-type
lease. The Company monitors the payment status of the lessee under these arrangements and provides a contingency reserve in situations when collection of the lease payments is not probable. At December 31, 2010, the maximum contingent liability
under all recourse and guarantee provisions was $5,691,000. A reserve for estimated losses under recourse provisions of $818,000 and $710,000 has been recorded based on historical experience and is included in accrued liabilities at
December 31, 2010 and 2009, respectively.

The Company as guarantor will recognize, at the inception of certain
guarantees, a liability for the fair value of the obligation undertaken in issuing such guarantees. The Company has recorded a net liability of $47,000 and $84,000 at December 31, 2010 and 2009, respectively, for the estimated fair value of the
Companys guarantees. The fair value of the guarantees is determined based on the estimated cost for a customer to obtain a letter of credit from a bank or similar institution. This liability is reduced on a straight-line basis over the term of
each respective guarantee. In most cases, if the Company is required to fulfill its obligations under the guarantee, it has the right to repossess the equipment from the customer. It is not practicable to estimate the approximate amount of proceeds
that would be generated from the sale of these assets in such situations.

NOTE 14COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company has lease commitments expiring at various dates through 2015 for equipment and property under noncancelable operating leases. Future minimum payments under these leases at December 31,
2010 are as follows:



|                                   |  |           |           |  |         |   |        |  
|---------------------------------- |  | --------- | --------- |  | ------- | - | ------ | -
|                                   |  | Operating |           |  | Capital |  
|2011                               |  | $         | 460,000   |  |         | $ | 12,000 |  
|2012                               |  |           | 355,000   |  |         |   | 12,000 |  
|2013                               |  |           | 198,000   |  |         |   | 4,000  |  
|2014                               |  |           | 151,000   |  |         |   |        |  
|2015                               |  |           | 114,000   |  |         |   |        |  
|                                   |  |           |           |  |         |   |        |  
|                                   |  |           | 1,278,000 |  |         |   | 28,000 |  
|Less: amount representing interest |  |           |          |  |         |   | (5,000 | )
|                                   |  |           |           |  |         |   |        |  
|                                   |  | $         | 1,278,000 |  |         |   | 23,000 |  
|                                   |  |           |           |  |         |   |        |  
|Less: current portion              |  |           |           |  |         |   | (8,000 | )
|                                   |  |           |           |  |         |   |        |  
|                                   |  |           |           |  |         | $ | 15,000 |  
|                                   |  |           |           |  |         |   |        |  



F-24



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 14COMMITMENTS AND CONTINGENCIES (continued)



Rent expense under all operating leases for the years ended December 31, 2010, 2009
and 2008 was $630,000, $582,000 and $579,000, respectively. Interest expense related to capital leases was $3,000, $0 and $0 for the years ended December 31, 2010, 2009, and 2008, respectively. Assets subject to capital leases had a cost of
$27,000 and accumulated depreciation of $4,000 at December 31, 2010.

Purchase Obligations

The Company is required to make purchases of goods and services, principally for purchase order obligations, an endorsement agreement and
capital expenditures, that are legally binding of $16,000,000 in 2011, $4,000,000 in 2012, $1,000,000 in 2013 and $1,000,000 in 2014.

Product Liability

As a manufacturer of fitness products, the Company is
inherently subject to the hazards and uncertainties of product liability litigation. The Company has maintained, and expects to continue to maintain, product liability insurance, and it includes reserves for self insured retention in accrued
liabilities in the consolidated balance sheets. The Companys product liability insurance, which is on a claims made basis, provides an aggregate of $10,000,000 of annual coverage for claims made on or after December 1, 2008 and $5,000,000
of annual coverage for claims made prior to December 1, 2008. The amount of coverage for a claim is reduced as payments are made under the policy for that policy year. These policies include a deductible of a $250,000 per claim with an annual
aggregate deductible of $1,000,000 on claims made on or after December 1, 2008 and $100,000 per claim with an annual aggregate deductible of $750,000 on claims made prior to December 1, 2008.

While the Company believes that its insurance coverage is adequate in light of the risks of product liability claims and awards, the
Company may be subject to product liability claims which assert damages materially in excess of the limits of its insurance coverage. In December 2010, a jury verdict in the Barnhard v Cybex International, Inc. product liability suit,
discussed below, apportioned a significant amount of liability to the Company, which substantially exceeds the Companys available insurance coverage. It is possible that the Company could be subject to other product liability judgments or
settlements which materially exceed the available insurance coverage and related reserves.

The Company records a reserve for
the self insured retention portion of product liability matters for which it is probable that a loss has been incurred and the range of the loss can be determined. In addition, as of December 31, 2010, the Company recorded a $62,696,000
litigation reserve as a current liability pertaining to the Barnhard jury verdict and a corresponding litigation related receivable for $15,904,000, representing the amount recoverable from the co-defendant in the matter and the estimated
amount recoverable under the Companys insurance policies. The Company records a reserve and a corresponding insurance receivable if the amount of the product liability exposure is recoverable from the Companys insurance carrier for other
product liability claims. The Company also accrued $947,000 and $3,054,000, as of December 31, 2010 and December 31, 2009, respectively, for these product liability claims and a corresponding receivable for such liability claims estimated
to be recoverable under the Companys insurance policies. Excluding the Barnhardmatter, the product liability claims accrual is included as a component of accrued liabilities ($1,869,000 and $2,451,000 at December 31, 2010 and
2009, respectively) and other long-term liabilities ($947,000 and $3,054,000 at December 31, 2010 and 2009, respectively) and the insurance recoverable is included as a component of other assets ($947,000 and $3,054,000 at December 31,
2010 and 2009, respectively). On a quarterly basis, the Company reviews and adjusts each product liability claim and corresponding receivable. The change in the accrual for product liability claims and the corresponding receivable from
December 31, 2009 to December 31, 2010 primarily relates to the insured settlement of a product liability claim during the first quarter of 2010.



F-25



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 14COMMITMENTS AND CONTINGENCIES (continued)



Litigation

Barnhard v. Cybex International, Inc., et al.

This product liability litigation was commenced in 2005 in the Supreme Court, Eighth District, State of New York. The plaintiff, who was rendered a quadriplegic after she pulled a Cybex weight machine
over onto herself, asserted that Cybex was at fault for the accident due to the design of the machine and a failure to warn. On December 7, 2010, the jury returned a $66 million verdict, apportioned 75% to Cybex, 20% to co-defendant Amherst
Orthopedic Physical Therapy, P.C. and 5% to the plaintiff. Under New York law, Cybex would be responsible for payment of 95% of any judgment entered on this verdict but may collect 20% of such judgment from Amherst Orthopedic Physical Therapy, P.C.

In January 2011 the Company filed post-trial motions, seeking, alternatively, judgment in its favor as a matter of law, a new
trial and a reduction of the verdict. In February 2011, the trial court denied these motions, and the Company thereafter filed an appeal from this post-trial order with the Appellate Division, Fourth Judicial Department. At the date of this Report,
no judgment has been entered on the verdict. Interest does not begin to accrue on this judgment until after it has been entered. The Company intends to vigorously pursue all available options to seek a reversal or reduction of the verdict and any
judgment that is ultimately entered.

United Leasing, Inc. v. Cybex International, Inc., et al.

The Company on February 25, 2009 was served with an Amended Complaint which added the Company and its wholly owned subsidiary, Cybex
Capital Corp. (collectively with the Company referred to herein as Cybex), as additional defendants in this action originally venued in the Circuit Court for Williamson County, State of Tennessee. The plaintiff, United Leasing, Inc., provided a
series of lease financings for the sale of Cybex equipment to a purchaser/lessee which has since entered bankruptcy, many of which sales were made by an independent dealer, also a defendant in the action. The plaintiff alleges that it was induced to
finance in excess of the purchase price for certain of the equipment based primarily upon alleged rebates to the purchaser/lessee made by the independent dealer. Cybex Capital assisted in the lease financing and the plaintiff asserted that Cybex
participated in the alleged scheme and was liable for any resulting damages.

During March 2009, this action was removed to
the United States District Court for the Middle District of Tennessee, and Cybex filed an Answer denying all material allegations of the Amended Complaint, other than admitting limited guarantees of certain of the leases at issue had been provided.

In January 2011, the parties entered into a settlement agreement. Pursuant to this settlement, Cybex paid to the plaintiff
the sum of $937,500, the parties provided cross-releases of all claims and the litigation has been dismissed with prejudice.

The Company is involved in certain other legal actions, contingencies and claims arising in the ordinary course of business. In the
opinion of management, the ultimate disposition of these other matters will not have a material adverse effect on the Companys financial position, results of operations or cash flows. Legal fees related to those matters are charged to expense
as incurred.

Employment Agreements

The Company has entered into employment agreements with its named executive officers. Under these agreements, the employment may be terminated with or without cause at any time. In the event that the
Company



F-26



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

NOTE 14COMMITMENTS AND CONTINGENCIES (continued)



terminates the officers employment other than for cause the Company is obligated to continue normal salary payments for periods generally varying from six months to two years.
The employment agreements generally provide that upon a change of control, as defined, the officer may in certain events resign and receive the severance which would have been payable upon a non-cause termination. The maximum aggregate exposure
under these agreements is $2,495,000 as of December 31, 2010.

NOTE 15BENEFIT PLANS

The Company has a 401(k) defined contribution retirement plan. The Company during 2008 and a portion of 2009 matched 50% of the first 4%
of the employees eligible compensation contributions. Matching contributions by the Company to the plan were $0, $57,000, and $362,000 for the years ended December 31, 2010, 2009, and 2008, respectively. Effective March 1, 2009, the
Company elected to suspend the Company match. Additionally, the Company may make discretionary contributions to the plan. No discretionary contributions were made for the years ended December 31, 2010, 2009 or 2008.

NOTE 16QUARTERLY DATA (unaudited)

The following table presents unaudited quarterly financial information for the years ended December 31, 2010 and 2009:



|                           |  |                    |            |   |         |   |            |              |  |   |             |   |  |   |             |     
|-------------------------- |  | ------------------ | ---------- | - | ------- | - | ---------- | ------------ |  | - | ----------- | - |  | - | ----------- | ----
|                           |  | 2010 Quarter Ended |           
|                           |  | March 27           |            |   | June 26 |   |            | September 25 |  |   | December 31 |  
|Sales                      |  | $                  | 26,116,000 |   |         | $ | 27,672,000 |              |  | $ | 29,235,000  |   |  | $ | 39,938,000  |     
|Gross profit               |  |                    | 9,466,000  |   |         |   | 9,505,000  |              |  |   | 10,493,000  |   |  |   | 15,383,000  |     
|Net loss                   |  |                    | (753,000   | ) |         |   | (356,000   | )            |  |   | (15,000     | ) |  |   | (57,113,000 | )(a)
|Basic loss per share       |  |                    | (0.04      | ) |         |   | (0.02      | )            |  |   | 0.00        |   |  |   | (3.34       | )(a)
|Diluted net loss per share |  |                    | (0.04      | ) |         |   | (0.02      | )            |  |   | 0.00        |   |  |   | (3.34       | )(a)



|(a) | Includes a $46.0 million or $2.69 per diluted share pre-tax charge to reserve for the unfavorable jury verdict in the product liability suit, Barnhard v. Cybex
International, Inc.,and a $12.7 million or $.74 per diluted share, incremental tax provision, primarily due to the valuation allowance recorded against deferred tax assets as a result of the uncertainty of realization caused by the litigation
charge.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                    |  |                    |            |   |         |   |            |              |  |   |             |  |  |   |            | 
|----------------------------------- |  | ------------------ | ---------- | - | ------- | - | ---------- | ------------ |  | - | ----------- |  |  | - | ---------- | 
|                                    |  | 2009 Quarter Ended |           
|                                    |  | March 28           |            |   | June 27 |   |            | September 26 |  |   | December 31 | 
|Sales                               |  | $                  | 28,922,000 |   |         | $ | 27,755,000 |              |  | $ | 28,985,000  |  |  | $ | 34,812,000 | 
|Gross profit                        |  |                    | 7,899,000  |   |         |   | 7,145,000  |              |  |   | 9,157,000   |  |  |   | 11,807,000 | 
|Net income (loss)                   |  |                    | (1,407,000 | ) |         |   | (2,104,000 | )            |  |   | 81,000      |  |  |   | 993,000    | 
|Basic net income (loss) per share   |  |                    | (0.08      | ) |         |   | (0.12      | )            |  |   | 0.00        |  |  |   | .06        | 
|Diluted net income (loss) per share |  |                    | (0.08      | ) |         |   | (0.12      | )            |  |   | 0.00        |  |  |   | .06        | 



F-27



---

CYBEX INTERNATIONAL, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II



|                                     |  |                              |           |  |                      |   |         |            |  |   |                         |  |  |   |           | 
|------------------------------------ |  | ---------------------------- | --------- |  | -------------------- | - | ------- | ---------- |  | - | ----------------------- |  |  | - | --------- | 
|Description                          |  | Balance atBeginning ofPeriod |           |  | Additions/Recoveries |   |         | Write-offs |  |   | Balance
atEnd of Period | 
|For the year ended December 31, 2010 |  |                              |           |  |                      |   |         |            |  |   |                         |  |  |   |           | 
|Allowance for doubtful accounts      |  | $                            | 1,362,000 |  |                      | $ | (75,000 | )          |  | $ | 241,000                 |  |  | $ | 1,046,000 | 
|                                     |  |                              |           |  |                      |   |         |            |  |   |                         |  |  |   |           | 
|For the year ended December 31, 2009 |  |                              |           |  |                      |   |         |            |  |   |                         |  |  |   |           | 
|Allowance for doubtful accounts      |  | $                            | 1,215,000 |  |                      | $ | 328,000 |            |  | $ | 181,000                 |  |  | $ | 1,362,000 | 
|                                     |  |                              |           |  |                      |   |         |            |  |   |                         |  |  |   |           | 
|For the year ended December 31, 2008 |  |                              |           |  |                      |   |         |            |  |   |                         |  |  |   |           | 
|Allowance for doubtful accounts      |  | $                            | 953,000   |  |                      | $ | 506,000 |            |  | $ | 244,000                 |  |  | $ | 1,215,000 | 
|                                     |  |                              |           |  |                      |   |         |            |  |   |                         |  |  |   |           | 



S-1



---

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the Companys controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based upon
that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company (including its
consolidated subsidiaries) in its periodic filings with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms.

Managements Report on Internal Control Over Financial Reporting

Management of Cybex International, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Internal control over financial reporting is a
process designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the
United States of America. A companys internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of
America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management evaluated the internal control over financial reporting of the Company as of December 31, 2010. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal ControlIntegrated Framework (COSO). As a result of this assessment and based on the criteria in the
COSO framework, management has concluded that, as of December 31, 2010, the Companys internal control over financial reporting was effective.

This annual report does not include an attestation report of the Companys independent registered public accounting firm regarding internal control over financial reporting. Managements report
was not subject to attestation by the Companys independent registered public accounting firm.



|                                     |  |  |  |                                                               
|------------------------------------ |  |  |  | --------------------------------------------------------------
|                                     |  | 
|/s/    JOHN
AGLIALORO                |  |  |  | /s/    ARTHUR W. HICKS,
JR.                                   
|Chairman and Chief Executive Officer |  |  |  | President, Chief Operating Officer and Chief Financial Officer

March 31, 2011



II-1



---

Changes in Internal Control Over Financial Reporting

There has been no change in the Companys internal control over financial reporting during the last fiscal quarter in the period
covered by this report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

On February 16, 2011, the Board of Directors of Cybex approved a bonus at the threshold level under the 2010 Management Incentive Compensation Bonus Program, payable to all participants, including
the Cybex Named Executive Officers. These bonuses were paid in cash.

On February 16, 2011, the Board of Directors
approved the 2011 Management Incentive Compensation Bonus Program, adopted pursuant to the Cybex 2005 Omnibus Incentive Plan. Executive officers can earn bonuses in this program at varying levels from 10% to 75% of base salary, depending upon office
and whether Cybex meets specified levels of operating income in 2011. Bonuses earned by executive officers in this Program are to be paid 75% in cash and 25% in restricted stock.

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information set forth under the sections captioned Election of Directors, Corporate Governance and
Security Ownership of Certain Beneficial Owners and ManagementSection 16(a) Beneficial Ownership Reporting Compliance in the Companys definitive Proxy Statement for its 2011 Annual Meeting of Shareholders (the Proxy
Statement) is incorporated herein by reference. For information concerning the executive officers of the Company, see Executive Officers of the Registrant in Part I of this report.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information set forth under the caption Executive Compensation in the Proxy Statement is incorporated herein by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The information set forth under the sections captioned Security Ownership of Certain Beneficial Owners and Management and
Executive CompensationEquity Compensation Plan Information in the Proxy Statement is incorporated by reference herein.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information set forth under the caption Corporate Governance in the Proxy Statement is incorporated herein by reference.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The information set forth under the caption Audit Committee MattersAudit Fees in the Proxy Statement is incorporated herein by reference.



II-2



---

PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

The following documents are filed or incorporated by reference as a part of this report:



|    |  |                     |  |                                                                                                                                                                                                                                           
|--- |  | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | FinancialStatements |  |                                                                                                                                                                                                                                           
|    |  |                    
|(a) |  |                     |  | Consolidated Financial Statements and Financial Statement Schedule of the Company are set forth on Page F-1, Part II, Item 8 hereof and are incorporated by reference
herein.                                                             
|    |  | Exhibits            |  |                                                                                                                                                                                                                                           
|    |  |                    
|    |  | 3(a)(1)             |  | Restated Certificate of Incorporation of the Company, dated May 20, 1988, incorporated by reference to Exhibit 3(a)(1) to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 (the June 1996 10-Q).                   
|    |  |                    
|    |  | 3(a)(2)             |  | Certificate of Amendment of the Certificate of Incorporation of the Company, dated May 30, 1988, incorporated by reference to Exhibit 3(a)(2) to the June 1996
10-Q.                                                                      
|    |  |                    
|    |  | 3(a)(3)             |  | Certificate of Amendment of the Certificate of Incorporation of the Company, dated August 7, 1996, incorporated by reference to Exhibit 3(a)(3) to the June 1996
10-Q.                                                                    
|    |  |                    
|    |  | 3(a)(4)             |  | Certificate of Amendment of the Certificate of Incorporation of the Company, dated May 27, 1997, incorporated by reference to Exhibit 3.1 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997.                       
|    |  |                    
|    |  | 3(a)(5)             |  | Certificate of Amendment to the Certificate of Incorporation of the Company, filed July 8, 2003, incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for
the quarter ended June 28, 2003 (the June 2003 10-Q).
|    |  |                    
|    |  | 3(a)(6)             |  | Certificate of Amendment to the Certificate of Incorporation of the Company, dated May 4, 2005, incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for
the quarter ended June 25, 2005.                       
|    |  |                    
|    |  | 3(b)(1)             |  | By-Laws of the Company, as amended (the By-Laws), incorporated by reference to Exhibit 3(b) to the Annual Report on Form 10-K for the year ended December 31,
1987.                                                                     
|    |  |                    
|    |  | 3(b)(2)             |  | Amendment to the By-Laws, adopted November 7, 2007, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed November 7, 2007.                                                                                    
|    |  |                    
|    |  | 10(a)               |  | 1995 Omnibus Incentive Plan, as amended, incorporated by reference to Exhibit 10(f) to the Annual Report on Form 10-K for the year ended December 31, 2001 (the 2001 Form
10-K).*                                                       
|    |  |                    
|    |  | 10(b)(1)            |  | 2005 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 6, 2005 (the May 6, 2005 Form
8-K).*                                                                              
|    |  |                    
|    |  | 10(b)(2)            |  | Amendment No. 1 to the 2005 Omnibus Incentive Plan, incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed May 11, 2007 (the May 11, 2007 Form
8-K).*                                                        
|    |  |                    
|    |  | 10(c)(1)            |  | 2002 Stock Retainer Plan for Non-employee Directors, incorporated by reference to Exhibit 10(k) to the 2001 Form 10-K.*                                                                                                                   
|    |  |                    
|    |  | 10(c)(2)            |  | Amendment to 2002 Stock Retainer Plan for Non-employee Directors, incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed February 18,
2005.*                                                                   



II-3



---

| |  |       |  |                                                                                                                                                                                                                                                                   
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |      
| |  | 10(d) |  | Employment Agreement dated April 8, 2003, between the Company and John Aglialoro, incorporated by reference to Exhibit 10.4 to the June 2003 10-Q.*                                                                                                               
| |  |      
| |  | 10(e) |  | Amended and Restated Management Employment Agreement, dated as of January 1, 2006, between the Company and Ray Giannelli, incorporated by reference to Exhibit 10.4 to the Current
Report on Form 8-K filed February 22, 2006 (the February 22, 2006 Form 8-K).*
| |  |      
| |  | 10(f) |  | Management Employment Agreement dated February 22, 2006, between the Company and Arthur W. Hicks, Jr., incorporated by reference to Exhibit 10.3 to the February 22,
2006 Form 8-K.*                                                                              
| |  |      
| |  | 10(g) |  | Management Employment Agreement between the Company and Edward Kurzontkowski, incorporated by reference to Exhibit 10(bb) to the Annual Report on Form 10-K for the year ended
December 31, 2006 (the 2006 Form 10-K).*                                         
| |  |      
| |  | 10(h) |  | Management Employment Agreement between the Company and Galen S. Lemar, incorporated by reference to Exhibit 10(x) to the Annual Report on Form 10-K for the year ended December
31, 2008 (2008 Form 10-K).*                                                    
| |  |      
| |  | 10(i) |  | Management Employment Agreement between the Company and Ed Pryts, incorporated by reference to Exhibit 10(cc) to the 2006 Form 10-K.*                                                                                                                             
| |  |      
| |  | 10(j) |  | Management Employment Agreement between the Company and John Young, incorporated by reference to Exhibit 10(dd) to the 2006 Form 10-K.*                                                                                                                           
| |  |      
| |  | 10(k) |  | Form of Incentive Stock Option Agreement issued pursuant to the 1995 Omnibus Incentive Plan as Amended, incorporated by reference to Exhibit 10.4 to the September 2004
10-Q.*                                                                                    
| |  |      
| |  | 10(l) |  | Form of Non-Qualified Stock Option Agreement issued pursuant to the 1995 Omnibus Incentive Plan as Amended, incorporated by reference to Exhibit 10.5 to the September 2004
10-Q.*                                                                                
| |  |      
| |  | 10(m) |  | Form of Non-Assignable Incentive Stock Option Agreement pursuant to the 2005 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.2 to the May 6, 2005 Form
8-K.                                                                                       
| |  |      
| |  | 10(n) |  | Form of Non-Assignable Non-Qualified Stock Option Agreement pursuant to the 2005 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.3 to the May 6, 2005 Form
8-K.                                                                                   
| |  |      
| |  | 10(o) |  | Form of Restricted Stock Award Agreement for Newly-Elected Non-Employee Director, incorporated by reference to Exhibit 99.2 to the Current Report on the May 11, 2007 Form
8-K.*                                                                                  
| |  |      
| |  | 10(p) |  | Form of Notification of Participation - 2010 Management Incentive Compensation Bonus Program (CEO Level), incorporated by reference to Exhibit 10.1 to the Current Report on Form
8-K filed February 18, 2010 (the February 18, 2010 Form 8-K).*                
| |  |      
| |  | 10(q) |  | Form of Notification of Participation - 2010 Management Incentive Compensation Bonus Program (President Level), incorporated by reference to Exhibit 10.2 to the February 18, 2010
Form 8-K.*                                                                     
| |  |      
| |  | 10(r) |  | Form of Notification of Participation - 2010 Management Incentive Compensation Bonus Program (Senior Vice-President Level), incorporated by reference to Exhibit 10.3 to the
February 18, 2010 Form 8-K.*                                                         



II-4



---

| |  |          |  |                                                                                                                                                                                                                                                                                                      
| |  | -------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |         
| |  | 10(s)    |  | Tri-Party Agreement, dated August 22, 2006, among the Company, First Industrial Development Services, Inc. and the City of Owatonna, Minnesota, incorporated by reference to
Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (the  September 2006 10-Q).
| |  |         
| |  | 10(t)    |  | Business Subsidy Agreement, dated August 22, 2006, between the Company and the City of Owatonna, Minnesota, incorporated by reference to Exhibit 10.4 to the September 2006
10-Q.                                                                                                                    
| |  |         
| |  | 10(u)(1) |  | Loan Agreement, dated as of October 17, 2006, between the Company and Citizens Bank of Massachusetts, incorporated by reference to Exhibit 10.5 to the September 2006
10-Q.                                                                                                                          
| |  |         
| |  | 10(u)(2) |  | Credit Agreement, dated July 2, 2008, by and between RBS Citizens, National Association and the Company, incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form
10-Q for the quarter ended June 28, 2008.                                                                         
| |  |         
| |  | 10(u)(3) |  | Amendment No. 1 to Credit Agreement, dated August 31, 2008, by and between the Company and RBS Citizens, National Association, incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the quarter ended September 27, 2008 (the September 2008 10-Q).                  
| |  |         
| |  | 10(u)(4) |  | Modification Agreement, dated May 4, 2009 between the Company and RBS Citizens, National Association, incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the
Quarterly Report on Form 10-Q for the quarter ended March 28, 2009.                                                        
| |  |         
| |  | 10(u)(5) |  | Modification Agreement, dated August 13, 2009, between the Company and RBS Citizens, National Association, incorporated by reference to Exhibit 10.1 to the Quarterly Report
on Form 10-Q for the quarter ended September 26, 2009 (the September 2009 10-Q).                                      
| |  |         
| |  | 10(u)(6) |  | Modification Agreement, dated June 24, 2010, between the Company and RBS Citizens, National Association, incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form
10-Q for the quarter ended June 26, 2010 (the June 2010 10-Q).                                                  
| |  |         
| |  | 10(v)(1) |  | Loan Agreement, dated July 30, 2007, with Wachovia Bank, NA, incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended June 30,
2007.                                                                                                                     
| |  |         
| |  | 10(v)(2) |  | Loan Modification Agreement dated April 23, 2009, between Wachovia Bank, National Association and Cybex International, Inc., incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the quarter ended March 28, 2009.                                                    
| |  |         
| |  | 10(v)(3) |  | Loan Modification Agreement dated July 28, 2009, between Wachovia Bank, National Association and Cybex International, Inc., incorporated by reference to Exhibit 10.2 to the
September 2009 10-Q.                                                                                                    
| |  |         
| |  | 10(v)(4) |  | Loan Modification Agreement dated September 24, 2009, between Wachovia Bank, National Association and Cybex International, Inc., incorporated by reference to Exhibit 10.3 to the
September 2009 10-Q.                                                                                               
| |  |         
| |  | 10(v)(5) |  | Loan Modification Agreement dated December 24, 2009, between the Company and Wachovia Bank, N.A., incorporated by reference to Exhibit 10(v)(5) to the Annual report on Form 10-K
for the year ended December 31, 2009.                                                                              



II-5



---

| |  |             |  |                                                                                                                                                                                                                                                                       
| |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |            
| |  | 10(w)       |  | Promissory Note dated March 25, 2008, in a principal amount of up to $3,000,000, from the Company to Wachovia Bank, N.A., incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the quarter ended March 29, 2008 (the March 2008 10-Q).
| |  |            
| |  | 10(x)       |  | Promissory Note dated March 2, 2009, in a principal amount of up to $1,000,000, from the Company to Wachovia Bank, N.A., incorporated by reference to Exhibit 10(u) to the 2008
Form 10-K.                                                                            
| |  |            
| |  | 10(y)       |  | Office Services Agreement, dated as of January 1, 2006, between the Company and UM Holdings Ltd., incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K
filed January 4, 2006.                                                                  
| |  |            
| |  | 10(z)(1)    |  | Master Lease Agreement, dated June 24, 2010, between RBS Asset Finance, Inc. and the Company, incorporated by reference to Exhibit 10.1 to the June 2010 10-Q.                                                                                                        
| |  |            
| |  | 10(z)(2)    |  | Lease Schedule No. 001, dated June 24, 2010, between the Company and RBS Asset Finance, Inc., incorporated by reference to Exhibit 10.2 to the June 2010 10-Q.                                                                                                        
| |  |            
| |  | 10(a)(a)(1) |  | Form of Notification of Participation - 2011 Management Incentive Compensation Bonus Program (CEO) (Filed herewith)*                                                                                                                                                  
| |  |            
| |  | 10(a)(a)(2) |  | Form of Notification of Participation - 2011 Management Incentive Compensation Bonus Program (President) (Filed herewith)*                                                                                                                                            
| |  |            
| |  | 10(a)(a)(3) |  | Form of Notification of Participation - 2011 Management Incentive Compensation Bonus Program (Sr. Vice President Level) (Filed herewith)*                                                                                                                             
| |  |            
| |  | 21          |  | Subsidiaries of the Registrant (Filed herewith).                                                                                                                                                                                                                      
| |  |            
| |  | 23          |  | Consent of Independent Registered Public Accounting FirmKPMG LLP (Filed herewith).                                                                                                                                                                                   
| |  |            
| |  | 31(a)       |  | Certification of Chief Executive Officer (Filed herewith).                                                                                                                                                                                                            
| |  |            
| |  | 31(b)       |  | Certification of President, Chief Operating and Chief Financial Officer (Filed herewith).                                                                                                                                                                             
| |  |            
| |  | 32(a)       |  | Certification of Chief Executive Officer pursuant to Section 1350 (Filed herewith).                                                                                                                                                                                   
| |  |            
| |  | 32(b)       |  | Certification of President, Chief Operating and Chief Financial Officer pursuant to Section 1350 (Filed herewith).                                                                                                                                                    



|* | Executive compensation plans and arrangements
|- | ---------------------------------------------



II-6



---

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



CYBEX INTERNATIONAL, INC.
(Registrant)By:

/S/    JOHN
AGLIALOROJohn AglialoroChairman


March 31, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                                 |  |                                                                                                        |  |               
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------ |  | --------------
|Signature                                        |  | Title                                                                                                  |  | Date          
|                                                 |  |                                                                                                       
|/S/    JOHN
AGLIALORO John Aglialoro             |  | Chairman and Chief Executive Officer (principal executive officer)                                     |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    ARTHUR W. HICKS,
JR. Arthur W. Hicks, Jr. |  | Director, President, Chief Operating Officer and Chief Financial Officer (principal financial officer) |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    JAMES M.
AHEARN James M. Ahearn           |  | Treasurer (principal accounting officer)                                                               |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    JAMES H.
CARLL James H. Carll             |  | Director                                                                                               |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    JOAN
CARTER Joan Carter                   |  | Director                                                                                               |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    JERRY
LEE Jerry Lee                       |  | Director                                                                                               |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    JOHN
MCCARTHY John McCarthy               |  | Director                                                                                               |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    HARVEY
MORGAN Harvey Morgan               |  | Director                                                                                               |  | March 31, 2011
|                                                 |  |                                                                                                       
|/S/    ROBERT E.
SMYTH Robert E. Smyth           |  | Director                                                                                               |  | March 31, 2011



II-7