Form of Performance Unit Agreement



 Exhibit 10.3 
 PERFORMANCE UNIT AGREEMENT 
 Nautilus, Inc. (the “Company”), through its Board of Directors
or a Committee thereof (the “Plan Administrator”), has granted to                      (the “Executive”) Performance Unit
awards pursuant to the Nautilus, Inc. 2005 Long Term Incentive Plan (the “Plan”), which is incorporated herein by reference. Capitalized terms not otherwise defined in this Agreement shall be defined as set forth in the Plan. 

 

	1.	Performance Units and Performance Goals. Subject to the terms of the Plan and achievement of the Performance Goals as set forth below, the Company hereby grants to Executive
the following Performance Unit awards: 

  

	 	(a)	2006 Award. The first Performance Unit award (the “2006 Award”) shall entitle the Executive to receive
                     (            ) shares of the Company’s common
stock if (i) Executive is employed by the Company on the last day of such fiscal year, and (ii) the Company achieves the following Performance Goal: the Company’s Earnings Per Share (as defined below) for such fiscal year equal or
exceed                      ($            ). 

  

	 	(b)	2007 Award. The second Performance Unit award (the “2007 Award”) shall entitle the Executive to receive
                     (            ) shares of the Company’s common
stock if (i) Executive is employed by the Company on the last day of such fiscal year, and (ii) the Company achieves the following Performance Goal: the Company’s Earnings Per Share (as defined below) for such fiscal year equal or
exceed                      ($            ). 

  

	 	(c)	2008 Award. The third Performance Unit award (the “2008 Award”) shall entitle the Executive to receive
                     (            ) shares of the Company’s common
stock if (i) Executive is employed by the Company on the last day of such fiscal year, and (ii) the Company achieves the following Performance Goal: the Company’s Earnings Per Share (as defined below) for such fiscal year equal or
exceed                      ($            ). 

  

	 	(d)	Carry forward of 2006 and 2007 Awards. In the event the Performance Goal for the 2006 Award is not achieved, such Award shall be paid to Executive if Executive receives
either the 2007 Award or the 2008 Award. In the event the Performance Goal for the 2007 Award is not achieved, such Award shall be paid to Executive if Executive receives the 2008 Award. 

 As used in this Agreement, “Earnings Per Share” shall mean the Company’s earnings per share for a completed fiscal year as reported in the Company’s
consolidated statement of income as set forth in the report of the Company’s independent auditors. 
  

	2.	Price Paid by Executive. If earned in accordance with Section 1, the Performance Unit Awards shall be paid to Executive in shares of common stock of the Company within
60 days after the last day of the fiscal year in which such award is earned. The Executive shall not be required to make any payment for such shares. 









	3.	Termination of Employment. In the event Executive’s employment with the Company shall terminate for any reason prior to the date on which the Company publicly announces
results of operations for fiscal 2006, 2007 or 2008, the Award for such year(s) shall be cancelled and of no further force or effect. 

  

	4.	No Rights of Shareholder. Until the Company has issued shares to Executive in accordance with the terms of the Plan, the Performance Units granted herein shall not entitle
the Executive to any rights of a shareholder, including without limitation the right to receive dividends or to vote the shares underlying such Performance Units. 

  

	5.	Non-Transferability of Awards. These Performance Unit awards may not be transferred in any manner otherwise than by will or by the laws of descent or distribution.


  

	6.	Adjustments upon Recapitalization or Reorganization. In the event of a material alteration in the capital structure of the Company on account of a recapitalization, stock
split, reverse stock split, stock dividend or otherwise, these Performance Unit awards shall be subject to adjustment by the Plan Administrator in accordance with the Plan. 

  

	7.	Taxation upon Payment of Awards. Executive understands that he may recognize income for federal income tax purposes in an amount equal to the fair market value of shares
received under these Performance Unit awards. The Company will be required to withhold tax from Executive’s current compensation with respect to such income; to the extent that Executive’s current compensation is insufficient to satisfy
the withholding tax liability, the Company may require the Executive to make a cash payment to cover such liability as a condition of issuing such shares; provided, at Executive’s election, withholding tax may be paid by withholding from the
earned award such number of shares as have an aggregate Fair Market Value on the date of withholding as equals the amount of withholding tax so payable. 

  

	8.	Governing Law. This agreement shall be interpreted and construed in accordance with the laws of the State of Washington. 

  

	9.	Section 409A. Anything herein to the contrary notwithstanding, any earned amount payable to Executive hereunder shall be paid on or deferred until the earliest date as
may be required to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended. 

 [Remainder of this page intentionally left blank.] 







 IN WITNESS WHEREOF, this Agreement has been executed effective
                        . 
  

									
	EXECUTIVE	 		 		 	NAUTILUS, INC.
				
	  	 		 	 By:
	 	  
	 [name of Executive]
	 		 		 	 Signature

					
		 		 		 		 	  
		 		 		 		 	 Print Name

		 		 		 		 	 Its: _____________________________________________