**Exhibit 10.31**

**SECURITY AGREEMENT**

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

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

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

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

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

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

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

 

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

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

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

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

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

 

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

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

 

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

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

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

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

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

 

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

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

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

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

 

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

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

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

 

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

10. Insurance. 

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

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

 

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

11. Collateral Protection Expenses; Preservation of Collateral. 

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

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

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

 

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

14. Power of Attorney. 

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

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

 

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

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

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

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

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

 

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

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

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

 

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

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

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

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

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

 

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

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

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

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

 

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

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

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