United States

Securities and Exchange Commission

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant To Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  x    Filed by a Party other than the Registrant  ¨

Check the appropriate box:

NAUTILUS, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

NAUTILUS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of Nautilus, Inc.:

The annual meeting of stockholders of Nautilus, Inc. (the “Company”) will be held on Tuesday,Thursday, May 25, 2010,19, 2011, at the Company’s World Headquarters, 16400 SE Nautilus Drive, Vancouver, Washington 98683, beginning at 11:00 a.m. Pacific Daylight Time, for the following purposes:

1. To elect a Board of Directors, consisting of six (6) members, to serve until the next annual meeting of stockholders or until their successors are duly elected and qualified;

2. To ratify the Audit Committee’s appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2010;2011; and

3. To consider and act upon any other matter which may properly come before the annual meeting or any adjournment thereof.

Only stockholders who held their shares at the close of business on April 9, 2010,March 24, 2011, the record date, are entitled to notice of and to vote at the annual meeting or any adjournment or postponement thereof.

All stockholders are cordially invited to attend the annual meeting.Whether or not you plan to attend the annual meeting, please sign and promptly return the enclosed proxy card, which you may revoke at any time prior to its use. A prepaid, self-addressed envelope is enclosed for your convenience. Your shares will be voted at the annual meeting in accordance with your proxy.

Vancouver, Washington

April 12, 201011, 2011

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held On May 25, 2010:19, 2011:

Pursuant to rules promulgated by the Securities and Exchange Commission or the SEC,(the “SEC”), we have elected to provide access to our proxy materials both by sending you this full set of proxy materials, including a notice of annual meeting, and 20092010 Annual Report to Stockholders, and by notifying you of the availability of our proxy materials on the Internet. The notice of annual meeting, proxy statement, and 20092010 Annual Report to Stockholders are available at http://www.nautilus.com/proxy. In accordance with the SEC rules, the materials on the sitewebsite are searchable, readable and printable, and the sitewebsite does not have “cookies” or other tracking devices which identify visitors. Directions to the Company’s World Headquarters are available at http://www.nautilus.com.

20102011 ANNUAL MEETING OF STOCKHOLDERS

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

TABLE OF CONTENTS

NAUTILUS, INC.

16400 SE Nautilus Drive

Vancouver, Washington 98683

PROXY STATEMENT

General Information

Our Board of Directors is furnishing this proxy statement and the accompanying Annual Report to Stockholders, notice of annual meeting and proxy card in connection with its solicitation of proxies for use at our 20102011 annual meeting of stockholders or any adjournment thereof. The annual meeting will be held on Tuesday,Thursday, May 25, 2010,19, 2011, beginning at 11:00 a.m., Pacific Daylight Time at the following location:

Nautilus World Headquarters

16400 SE Nautilus Drive

Vancouver, Washington 98683

Our Board of Directors has designated the two persons named on the enclosed proxy card, Edward J. Bramson and Wayne M. Bolio, to serve as proxies in connection with the annual meeting. These proxy materials and the accompanying Annual Report to Stockholders are being mailed on or about April 23, 201018, 2011 to our stockholders of record as of April 9, 2010.March 24, 2011.

Our principal executive offices are located at 16400 SE Nautilus Drive, Vancouver, Washington 98683. As used in this proxy statement, the terms “we,” “our,” “us,” “Nautilus,” and “Company” refer to Nautilus, Inc. and its subsidiaries.

Revocability of Proxies

You may revoke any proxy you execute at any time prior to its use at the annual meeting by:

Record Date

Our Board of Directors has fixed the close of business on April 9, 2010March 24, 2011 as the record date for determining which of our stockholders are entitled to notice of and to vote at the annual meeting. At the close of business on the record date, 30,744,336 shares of our common stock were outstanding.

Voting; Quorum

Each share of common stock outstanding on the record date is entitled to one vote per share at the annual meeting. Stockholders are not entitled to cumulate their votes. The presence, in person or by proxy, of the holders of a majority of our outstanding shares of common stock is necessary to constitute a quorum at the annual meeting.

Votes Required to Approve each Proposal

If a quorum is present at the annual meeting:

(i) the six nominees for the election of directors who receive the greatest number of votes cast for the election of Directors by the shares present and voting in person or by proxy will be elected as Directors;directors; and

(ii) the ratification of Deloitte & Touche LLP as our independent registered public accounting firm will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against it.

Effect of Abstentions

If you abstain from voting, your shares will be deemed present at the annual meeting for purposes of determining whether a quorum is present. Directors are elected by a plurality of the votes cast, and only votes cast in favor of a nominee will have an effect on the outcome. Therefore, abstention from voting will not affect the outcome of the election of Directors.directors. Abstentions will also not affect the outcome of the proposal to ratify Deloitte & Touche LLP as our independent registered public accounting firm.

Effect of Broker Non-Votes

If you hold your shares in “street name” through a broker or other nominee, your broker or nominee maywill not be permitted to exercise voting discretion with respect to the proposalsproposal for election of directors but will be permitted to be voted upon atexercise voting discretion with respect to the annual meetingproposal for ratification of stockholders.Deloitte & Touche, LLP as our registered independent public accounting firm. Thus, if you do not give your broker or nominee specific voting instructions, your shares will not be voted on these matters.the proposal for election of directors. Such “broker non-votes” will be counted for determining whether there is a quorum, but will not be counted as votes “for” or “against.” Thus broker non-votes will not have any effect on the proposal for election of directors or ratification of Deloitte & Touche LLP as our registered independent public accounting firm.directors.

Proxy Procedure

When a proxy card is properly dated, executed and returned, the shares it represents will be voted at the annual meeting in accordance with the instructions specified in the proxy. If no specific instructions are given, the shares will be voted FOR the election of the Directordirector nominees described below, and FOR the ratification of Deloitte & Touche LLP as our registered independent public accounting firm. If other matters come before the annual meeting, the persons named in the accompanying proxy will vote in accordance with their best judgment with respect to such matters.

Cost of Proxy Solicitation

The Company doesWe do not plan to hire a proxy solicitor in connection with the annual meeting, but to the extent the Company chooseswe choose to use proxy solicitor services, the CompanyNautilus will pay the related fees and expenses.

Procedures for Stockholder Proposals and Nominations

Under Nautilus’ Bylaws,our amended and restated bylaws (“Bylaws”), nominations for Directors at an annual meeting may be made only by (1) the Board of Directors or a committee of the Board, or (2) a stockholder entitled to vote who has delivered notice to the Company within 90 to 120 days before the first anniversary of the date of the mailing of the notice for the preceding year’s annual meeting.

Our Bylaws also provide that business may not be brought before an annual meeting unless it is (1) specified in the notice of meeting (which includes stockholder proposals that the Company iswe are required to include in itsour proxy statement under SEC Rule 14a-8), (2) brought before the meeting by or at the direction of the Board, or (3) brought by a stockholder entitled to vote who has delivered notice to the Company (containing certain information specified in the Bylaws) within 90 to 120 days before the first anniversary of the date of the mailing of the notice for the preceding year’s annual meeting. In addition, you must comply with SEC Rule 14a-8 to have your proposal included in the Company’sour proxy statement.

A copy of the full text of the Company’sour Bylaws may be obtained upon written request to the CorporateCompany Secretary at the address provided on page 1 of this proxy statement.

Where You Can Find More Information

We file our proxy statements and other information with the Securities and Exchange Commission (the “SEC”)SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”). You can inspect and obtain a copy of our proxy statement and other information filed with the SEC at the offices of the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC maintains an Internet site at http://www.sec.gov/ where you can obtain most of our SEC filings. We also make available, free of charge, on our website at www.nautilus.com, our proxy statements filed with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they are filed electronically with the SEC.

PROPOSAL 1:

ELECTION OF DIRECTORS

In accordance withAccording to our amended and restated bylaws,Bylaws, our Board of Directors (“Board”) shall be comprised of seven (7) Directors,directors, provided, however that the number may be decreased by resolution of our Board. One of our directors, Michael A. Stein, has elected to retire from our Board effective upon the convening of Directors. At the time of this proxy statement,our 2011 annual meeting and will not stand for re-election. Accordingly, the Board has passed a resolution reducing the authorized number of our directors to six (6) Directors. The Board feels that six (6) directors currentlyeffective at the time our annual meeting is sufficient to govern the activities of the Company.convened.

At theour annual meeting, our stockholders will elect a Boardboard consisting of six (6) Directorsdirectors to serve until the 2011our 2012 annual meeting or until their respective successors are elected and qualified. Our Board of Directors has nominated the individuals listed below to serve on our Board. All of the nominees currently are members of our Board of Directors.Board. If any nominee is unable or unwilling to serve as a Directordirector at the time of the annual meeting, our Board of Directors may provide for a lesser number of Directorsdirectors or designate a substitute. If our Board of Directors designates a substitute, the proxy holders will have the discretionary authority to vote for the substitute. Proxies may not be voted for more than six nominees.

TheOur Board unanimously recommends that you vote FOR each of the following nominees for election as Director:director:

Edward J. Bramson, 59,60, Chairman, was elected to our Board of Directors, in December 2007 and became our Chief Executive Officer (“CEO”) onin March 26, 2008. In addition to his duties as our Chairman and CEO, since May of 2006, Mr. Bramson serveshas served as the managing member of Sherborne Investors GP, LLC (“Sherborne Investors GP”) and Sherborne Investors Management GP, LLC (“Sherborne Management GP”(collectively, “Sherborne Investors”) and, as such, manages the investment activities of certain funds controlled by Sherborne Investors GP and Sherborne Management GP.Investors. Since February 2011 Mr. Bramson has held these positions since Mayserved as chairman of 2006.F&C Asset Management plc, an asset management firm listed on the London Stock Exchange (“LSE”). From December 2006 to September 2008,March 2010, Mr. Bramson served as Executive Chairmanchairman of Spirent Communications plc, (“Spirent”), a global communications technology company listed on the London Stock Exchange (the “LSE”). From September 2008 until March 2010,LSE, during which time he served as non-executiveexecutive chairman of Spirent, and is currently a non-executive director of the company. Investment vehicles managed by affiliates of Mr. Bramson owned approximately 20% of the outstanding ordinary shares of Spirent until 2009.from March 2007 to November 2008. Previously, Mr. Bramson served as Chairmanchairman and a Directordirector of (i) Elementis plc, a global specialty chemicals company listed on the LSE, from June 2005 to April 2007; (ii) Ampex Corporation, (“Ampex”), a manufacturer of specialized data recording devices and a licensor of proprietary digital video technologies listed on the NASDAQ Stock Market from 1992 until February 2007. Ampex Corporation2007, which filed for Chapter 11 bankruptcy protection in May 2008 and from which it emerged in September 2008; (ii) Elementis plc, a global specialty chemicals company listed on the LSE, from June 2005 to September 20062008, and (iii) 4imprint Group PLC,plc, a U.K. promotional products company listed on the LSE, from October 2003 to July 2004. Investment vehicles managed by affiliates of Mr. Bramson effected operational turnarounds with respect to, and invested in, Elementis and 4imprint. TheApril 2005. Our Board of Directors determined that Mr. Bramson has the requisite experience and expertise to be a director of Nautilus Inc. He hasbased on his extensive experience as an executive and thus providesthe ability to provide valuable insight to theour Board of Directors on theregarding day-to-day operations of the company.Company. As a representative of Sherborne Investors, our largest stockholder, Mr. Bramson is positioned to inform theour Board on governance questionsissues from a stockholder perspective.

Ronald P. Badie,67, 68, joined our Board of Directors in August 2005. Mr. Badie is a member of the Compensation Committee and the Nominating and Governance Committee. Mr. Badie spent over 35 years with Deutsche Bank

and its predecessor, Bankers Trust Company, retiring in 2002 as Vice Chairmanvice chairman of Deutsche Bank Alex Brown (now Deutsche Bank Securities), the firm’s investment banking subsidiary. Mr. Badie currently serves as a Directordirector and audit committee member of Obagi Medical Products, Inc., and Amphenol Corporation, and Merisel, Inc.Corporation. In addition, Mr. Badie is the chairman of the compensation committee for Obagi Medical Products. Mr. Badie is a graduate of Bucknell University and received an MBA from New York University’s Stern School of Business. TheOur Board of Directors determined that Mr. Badie has the requisite experience and expertise to be a director of Nautilus Inc. Mr. Badie has hadbased on his broad experience while serving as a director of several publicly-traded and privately-held companies. In addition, Mr. Badie spent many years as an investment banker and has extensive experience in structured finance and capital markets transactions.

Richard A. Horn,, 62, 63, was elected to our Board of Directors in December 2007. Mr. Horn is Chairman of the Nominating and Governance Committee and is also a member of the Audit Committee and the Compensation Committee. Mr. Horn has been a private investor since February 2002. Mr. Horn was General Managergeneral manager of the PetsHotel Division of PETsMART, Inc., a publicly-traded company, from April 2001 through February 2002. From January 1999 through March 2001, he was Senior Vice-Presidentsenior vice-president and General Merchandise Managergeneral merchandise manager of PETsMART.com, Inc. and from July 1994 until December 1998, he was Vice-Presidentvice-president and General Merchandise Managergeneral merchandise manager of PETsMART, Inc. From 1992 to 1994, Mr. Horn was Chief Financial Officerchief financial officer of Weisheimer Companies, Inc. Mr. Horn was as partner at Coopers & Lybrand (now PricewaterhouseCoopers) from 1980 to 1992. Mr. Horn currently serves on the Boardboard of Directorsdirectors of Lucky Litter L.L.C., a privately-financed manufacturer and marketer of pet products, and as the Chairmanchairman of the Boardboard of Trusteestrustees of The Saint Joseph’s Hospital Foundation and as a Trusteetrustee and Treasurertreasurer of Scottsdale Artists’ School. TheOur Board of Directors determined that Mr. Horn has the requisite experience and expertise to be a director of Nautilus, Inc.Nautilus. As a former retail merchandising and direct-marketing manager, former chief financial officer and a former partner at Coopers &Lybrand,& Lybrand, Mr. Horn brings particular expertise to theour Board of Directors in the areas of direct marketing sales, merchandising, consumer productsproduct merchandising, and service industries, investor relations, financial reporting, accounting and auditing for complex multinational operations.

M. Carl Johnson, III, 62, was elected to our Board on July 1, 2010. Mr. Johnson is a member of the Compensation Committee. From 2001 until his retirement on April 1, 2011, Mr. Johnson served as senior vice president and chief strategy officer of the Campbell Soup Company, where he had direct responsibility for corporate strategy, research & development, quality, corporate marketing services, licensing, and e-business. Mr. Johnson joined Campbell from Kraft Foods, where he ran three successively larger business divisions. He joined Kraft in 1992 as vice president, Strategy, for Kraft Foods, USA. In 1993, he became executive vice president, Kraft USA and general manager of Kraft’s Specialty Products Division. In 1995, he was made executive vice president of Kraft Foods, N.A. and general manager of the Meals Division. In 1997, Mr. Johnson was named president of the $2.5 billion New Meals Division when the former Meals and Enhancers Divisions were consolidated and a member of the Kraft Foods N.A. operating committee. Mr. Johnson earned his B.A. degree in government and economics from Wesleyan University, and his M.B.A. degree from the University of Chicago. Mr. Johnson serves as an advisory board member of the Agricultural Sustainability Institute, University of California, Davis. He also serves as a member of the board of directors of Avedro, Inc., a privately held pioneer in vision correction technology. Mr. Johnson is a trustee of the Adelphic Educational Fund, Wesleyan University, which grants scholarships and supports educational, literary and artistic programs. He is also a member of the steering committee of the Kilts Center for Marketing at the University of Chicago Graduate School of Business, which provides scholarships to top marketing students and helps the school steer its marketing curriculum. He also serves on the dean’s advisory board of the LeBow College of Business at Drexel University. Our Board has determined that Mr. Johnson has the requisite experience and expertise to be a director of Nautilus based on his consumer marketing expertise and strong background in corporate expansion strategy.

Craig L. McKibben, 60, was appointed to our Board of Directors on December 18, 2009, effective December 31, 2009. Mr. McKibben has, since 2002,1989, been a Managing Director, Partnermanaging director, partner and the Chief Financial Officerchief financial officer of Sherborne Investors LP, Sherborne Investors Management LP and certain of their affiliates (“Sherborne”). Mr. McKibben served as Chief Financial Officerchief financial officer of Ampex Corporation from 1992 until September 2008. Mr. McKibben also

served on the Boardboard of Directorsdirectors of Ampex from 1992 until September 2008. Ampex formerly was a publicly-traded company. Ampex filed for Chapter 11 bankruptcy protection in May 2008, from which it emerged in September 2008, at which time Mr. McKibben resigned from his positions with the company. TheOur Board of Directors determined that Mr. McKibben has the requisite experience and expertise to be a director of Nautilus, Inc.Nautilus. As acting managing director, partner and chief financial officer of Sherborne and a former chief financial officer of a publicly-traded company, Mr. McKibben brings particular expertise to theour Board of Directors in the areas of corporate finance and investor relations and is able to provide a stockholder perspective as a representative of Sherborne.

Marvin G. Siegert,, 61, 62, joined our Board of Directors in August 2005. Mr. Siegert is Chairman of the Audit Committee. Currently a private investor, Mr. Siegert was Presidentpresident and Chief Operating Officerchief operating officer of The Pyle Group LLC, a private equity investment group, from 1996 until July 2007. Prior to The Pyle Group, Mr. Siegert spent 26 years with Rayovac Corporation, a manufacturer of batteries and lighting products, where he held various positions, with his most recent position as Senior Vice Presidentsenior vice president and Chief Financial Officer.chief financial officer. Currently, Mr. Siegert serves as Audit Committee Chairmanaudit committee chairman on the Boardboard of Directorsdirectors of Great Lakes Educational Loan Services, Inc., a privately-held student loan servicing company, and is a member of the Boardboard of Directorsdirectors of Hy Cite Corporation, a privately-held direct sales marketing company. Mr. Siegert graduated from the University of Wisconsin, Whitewater with a degree in Accountingaccounting and holds a master’s degree in Managementmanagement from the University of Wisconsin, Madison. TheOur Board of Directors determined that Mr. Siegert has the requisite experience and expertise to be a director of Nautilus, Inc.Nautilus. As a former president and chief operating officer of a

private equity investment group and former chief financial officer of a publicly-tradedprivately-held global consumer products company, Mr. Siegert brings a particular expertise to theour Board of Directors in the areas of consumer products, investor relations and financial strategies.

Michael A. Stein, 60, was elected to our Board in December 2007. Mr. Stein is Chairman of the Compensation Committee and is also a member of the Audit Committee and the Nominating and Governance Committee. From 2001 until its acquisition by Eli Lilly in 2007, Mr. Stein served as Chief Financial Officer of ICOS Corporation, a biotechnology company based in Bothell, Washington. From 1998 to 2000, Mr. Stein was Chief Financial Officer of Nordstrom, Inc. From 1989 to 1998, Mr. Stein served in various capacities with Marriott International, Inc., including Chief Financial Officer from 1993 to 1998. Mr. Stein serves on the Board of Directors of Apartment Investment and Management Company, a publicly-held company, and the Board of Directors of Providence Health & Services, a not-for-profit health system operating hospitals and other health care facilities across Alaska, Washington, Montana, Oregon and California. He is a Certified Public Accountant (inactive) and received his B.S. in business administration from the University of Maryland at College Park. The Board of Directors determined that Mr. Stein has the requisite experience and expertise to be a director of Nautilus, Inc. As the former chief financial officer of three companies, including two NYSE-listed companies, and a former partner at Arthur Andersen, Mr. Stein brings particular expertise to the Board of Directors in the areas of corporate finance, the consumer products and services industries, and investor relations, reporting, accounting and auditing for complex, multinational operations.

No family relationship exists among any of the Directorsdirectors or executive officers. No arrangement or understanding exists between any Directordirector or executive officer and any other person pursuant to which any Directordirector was selected as a Directordirector or executive officer of the Company.Nautilus.

INFORMATION CONCERNING THE BOARD OF DIRECTORS

TheOur Board of Directors oversees theour overall performance on behalf of the Company on your behalf.our stockholders. Members of theour Board stay informed of the Company’sour business through discussions with theour Chief Executive Officer and other members of theour executive team, of the Company, by reviewing materials provided to them, and by participating in regularly scheduled Board and committee meetings.

Corporate Governance

The NautilusOur Board of Directors is elected by theour stockholders to govern theour business and affairs of the Company. Theaffairs. Our Board selects theour senior management team, which is charged with conducting the Company’sour business. Having selected theour senior management team, theour Board acts as an advisor to senior management and monitors their performance. TheOur Board reviews the Company’sour strategies, financial objectives and operating plans. It also plans for management succession of theour Chief Executive Officer, as well as other senior management positions, and oversees the Company’sour compliance efforts.

TheOur Board of Directors has determined that each of Ronald P. Badie, Richard A. Horn, M. Carl Johnson, III, Marvin G. Siegert and Michael A. Stein qualify as an “independent director” for purposes of the Company’sunder our Corporate Governance Guidelines (available on the Company’sour website at www.nautilusinc.com), Section 303A.02 of the Listed Company Manual of the New York Stock Exchange, and applicable rules of the SEC, and that each such person is free of any relationship that would interfere with the individual exercise of independent judgment. TheOur Board of Directors has further determined that each member of the three committees of theour Board of Directors meets the independence requirements applicable to those committees prescribed by the Listed Company Manual and the SEC, including Rule 10A-3(b)(1) under the Securities Exchange Act related to audit committee member independence. Our Board considered Mr. Siegert’s independence in light of his position as an independent member of the board of directors of Hy Cite Corporation,

and concluded that his qualification as an independent director of Nautilus is not compromised by such position. Hy Cite provides third-party consumer credit financing to certain Nautilus customers whose credit applications have been declined our primary third-party consumer credit financing provider.

TheOur Board of Directors met nineeight times in 2009,2010 and all of theour directors attended at least 75% of the meetings of theour Board and of the meetings held by the committee(s) on which they served.

Transactions with Related Persons

The Company’sOur Board of Directors recognizes that related person transactions“transactions” with a “related person” (as such terms are defined in Item 404 of Regulation S-K) present a heightened risk of conflict of interest and/or improper valuation (or the perception thereof) and, therefore, has adopted a policy which shall be followed in connection with all related person transactions. Specifically, this policy addresses our procedures for the review, approval and ratification of all related person transactions.

TheOur Board of Directors has determined that theits Audit Committee of the Board is best suited to review and approve related person transactions. Accordingly, any related person transactions recommended by management shall be presented to the Audit Committee for approval at a regularly scheduled meeting of the Audit Committee. Any “transaction” with a “related person” (as such terms are defined in Item 404 of Regulation S-K)related person transaction shall be consummated or shall continue only if the Audit Committee approves the transaction, the disinterested members of theour Board of Directors approve the transaction, or the transaction involves compensation approved by the Company’s Compensation Committee.Committee of the Board.

The Company’sOur largest stockholder, Sherborne Investors LP (“Sherborne”and certain of its affiliates (collectively, “Sherborne”) undertook a successful action to replace four of the Company’s Directorsour Board members with Sherborne nominees in a December 2007 special meeting of stockholders. In May 2008 stockholders approved the reimbursement of up to $0.6 million of expenses incurred by Sherborne in connection with the stockholder action. Payment requires the approval of the disinterested members of the Company’sour Board and is not anticipated until some time after the Company returnswe return to profitability. Sherborne is controlled by Edward J. Bramson, our Chairman and Chief Executive Officer, and Craig L. McKibben, a member of our Board.

In February 2009 the disinterested members of the Company’sour Board of Directors approved a separate agreement with Sherborne Investors Management (“Sherborne Investors”) under which the Company iswe are obligated to reimburse Sherborne Investors $20,000 per month for the use of Sherborne’s New York office space and administrative, information technology and communications services to support the Company’sour Chief Executive Officer.

On September 3, 2010, the disinterested members of our Board approved a Note Purchase Agreement (the “Purchase Agreement”) by and among the Company and certain entities affiliated with Sherborne (the “Purchasers”).

Pursuant to the Purchase Agreement, Nautilus issued to the Purchasers $6,096,996.21 in aggregate principal amount at maturity of its Increasing Rate Senior Discount Notes Due December 31, 2012 (the “Notes”). The Notes have an original principal amount totaling $5,000,000 and mature on December 31, 2012. The then outstanding principal amount of the Notes accretes value at rates equal to (i) 2.5% per annum from September 3, 2010 through February 28, 2011; (ii) 6.0% per annum from March 1, 2011 through August 31, 2011; (iii) 9.5% per annum from September 1, 2011 through February 29, 2012; (iv) 13.0% per annum from March 1, 2012 through August 31, 2012; and (v) 14.5% per annum thereafter. Nautilus received gross proceeds from the sale of the Notes of $5,000,000. The proceeds will be used for working capital and general corporate purposes. If all the Notes are paid at maturity, the effective rate of interest is 8.7% per annum. At a meeting of the Company’s Board held on September 2, 2010, we granted a waiver of a provision of our Code of Business Conduct and Ethics to the extent that Mr. Bramson’s control of and interest in the Purchasers of the Notes may constitute a “conflict of interest” within the meaning of our Code of Business Conduct and Ethics.

Committees of the Board

The NautilusOur Board of Directors currently has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each committee is governed by a written charter that may be amended by theour Board at any time. The full text of each committee charter and our Corporate Governance Guidelines are available on the Company’sour website located at www.nautilusinc.com or in print to allany interested partiesparty who requestrequests it. Requests should be sent to the CorporateCompany Secretary at the address provided on page 1 of this Proxy Statement.proxy statement.

The Audit Committee

The Audit Committee is established in accordance with section 3(a)(58)(A) of the Exchange Act and represents and assists theour Board in fulfilling its oversight responsibility relating to (i) the integrity of the Company’sour financial statements and other financial information furnished by the Company,Nautilus, (ii) the Company’sour compliance with legal and regulatory requirements, (iii) the Company’s systemsour system of internal accounting and financial controls, (iv) theour registered independent public accounting firm’s qualifications, performance, compensation and independence, (v) the performance of the Company’sour internal audit function, and (vi) compliance with the Company’sour code of business conduct and ethics.

In fulfilling the duties outlined in its charter, the Audit Committee, among other things, shall:

and quarterly financial statements, including disclosures contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and matters required to be reviewed under applicable legal, regulatory or New York Stock Exchange requirements;

TheAs of the date of this proxy statement, the Audit Committee consists of three independent Directors,directors, Marvin G. Siegert (Chairman), Richard A. Horn and Michael A. Stein. Mr. Siegert has served as Chairman of the committee since May 2007. Mr. Horn and Mr. Stein were appointed to the Committee in December 2007. Mr. Stein has elected to retire from our Board effective upon the convening of our 2011 annual meeting and will not stand for re-election.

Each current member of the Audit Committee meets the independence, financial literacy and experience requirements contained in the corporate governance listing standards of the New York Stock Exchange (NYSE) relating to audit committees. TheOur Board of Directors has determined that all the members of its Audit Committee members qualify as “audit committee financial experts” under the regulations of the SEC. Although all members of ourthe Audit

Committee meet the current NYSE regulatory requirements for accounting or related financial management expertise, and theour Board of Directors has determined that each of them qualifies as an “audit committee financial expert,” members of ourthe Audit Committee are not professionally engaged in the practice of auditing or accounting and are not technical experts in auditing or accounting. The Audit Committee met elevensix times during 2009.2010.

A copy of the full text of the Company’s Audit Committee Charter can be found on our website at www.nautilusinc.com.

The Compensation Committee

The Compensation Committee is responsible for overseeing the Company’s compensation of employees, including equity-based plans, and employee benefit plans and practices, including the compensation and benefits of the Company’sour executive officers. The Compensation Committee also administers the Company’sour 2005 Long TermLong-Term Incentive Plan.

In fulfilling the duties outlined in its charter, the Compensation Committee, among other things, shall:

The Compensation Committee may not delegate any power or authority required by any law, regulation or listing standard to be exercised by the Compensation Committee. In 2009, thecommittee. The Compensation Committee met nine times.six times during 2010.

A copy of the full text of the Company’s Compensation Committee Charter can be found on our website at www.nautilusinc.com.

Compensation Committee Interlocks and Insider Participation

TheAs of the date of this proxy statement, the Compensation Committee is comprised of threefour independent Directors,directors, Michael A. Stein (Chairman), Ronald P. Badie, and Richard A. Horn and M. Carl Johnson, III, each of whom served on the committee during 2009.2010. Messrs. Stein, Horn and Badie were appointed to the committee on December 31, 2007 and Mr. Stein was named the committee’s Chairman on that date. Mr. Stein has elected to retire from our Board effective upon the convening of our 2011 annual meeting and will not stand for re-election.

Mr. Johnson was appointed to the Compensation Committee on July 1, 2010. None of the members of the committee have a relationship with Nautilus, Inc. other than as Directorsdirectors and security holders.stockholders. No member of the Compensation Committee is or was formerly an officer or an employee of the Company.Nautilus. None of Nautilus’our executive officers served, during the year ended December 31, 2009,2010, as a member of the compensation committee or board of directors of any entity that has an executive officer serving as a member of the Compensation Committee or Board of Directors of Nautilus, Inc. The Compensation Committee met nine times during 2009.Nautilus.

The Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for considering and making recommendations concerning the membership and function of the Board, and the development and review of corporate governance guidelines.

In fulfilling the duties outlined in its charter, the Nominating and Corporate Governance Committee, among other things, shall:

The Nominating and Corporate Governance Committee will consider recommendations for directorships submitted by stockholders. Stockholders who wish the Nominating and Corporate Governance Committee to consider their recommendations for nominees for the position of Directordirector should submit their recommendations in writing to the Nominating and Corporate Governance Committee, Attention: Chairman, Nautilus, Inc., 16400 SE Nautilus Drive, Vancouver, WA 98683. Recommendations by stockholders that are made in accordance with these procedures will receive the same consideration given to nominations made by the Nominating and Corporate Governance Committee.committee.

Nominees may be suggested by Directors,directors, members of management, stockholders or, in some cases, by a third party firm. In identifying and considering candidates for nomination to the Board of Directors, the Nominating and Corporate Governance Committee considers a candidate’s quality of experience, the needs of the

Company and the range of talent and experience represented on theits Board. In evaluating particular candidates, the Committeecommittee will review the nominee’s personal and professional integrity, judgment, experience, and ability to serve the long-term interest of the stockholders. The Committeecommittee will also take into account the ability of a Directordirector to devote the time and effort necessary to fulfill his or her responsibilities. The Committeecommittee also considers matters of diversity, including gender, race and national origin, education, professional experience and differences in viewpoints and skills. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, both the Board and the Committeecommittee believe that it is essential that Board members represent a diverse range of experience, expertise and viewpoints.

TheAs of the date of this proxy statement, the Nominating and Corporate Governance Committee is comprised of three independent Directors,directors, Richard A. Horn (Chairman), Ronald P. Badie and Michael A. Stein. Messrs. Horn and Stein were appointed to the committee and Mr. Horn was named the committee’s Chairman on December 31, 2007. In 2009,Mr. Stein has elected to retire from our Board effective upon the convening of our 2011 annual meeting and will not stand for re-election. The Nominating and Corporate Governance Committee met three times.times during 2010.

A full copy of the Company’s Nominating and Corporate Governance Committee Charter can be found on our website at www.nautilusinc.com.

Communications with Directors

All interested parties may send correspondence to our Board of Directors or to any individual Directordirector at the following address: Nautilus, Inc., 16400 SE Nautilus Drive, Vancouver, Washington 98683.

Your communications should indicate that you are a stockholder of Nautilus. Depending on the subject matter, we will either forward the communication to the Directordirector or Directorsdirectors to whom it is addressed, attempt to handle the inquiry directly, or not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. Correspondence marked confidential will not be opened prior to forwarding to the Board or any individual Director.director.

Code of Business Conduct and Ethics

We have adopted the Nautilus, Inc. Code of Business Conduct and Ethics (the “Code of Ethics”), which applies to all of our Directors,directors, officers and employees. You can view the Code of Ethics on our website at www.nautilusinc.com. A copy of the Code of Ethics will be provided in print without charge to all interested parties who submit a request in writing to Corporate Communications, Nautilus, Inc., 16400 SE Nautilus Drive, Vancouver, Washington 98683.

Board Leadership Structure

At this time, theour Board believes that combining the Chairman and CEO role is most effective for the Company’s leadership and governance. Having one person as our Chairman and CEO provides unified leadership and direction to the Company and strengthens the ability of theour CEO to develop and implement strategic initiatives and respond efficiently in various situations. TheOur Board also believes the combination of the Chairman and CEO positionpositions is appropriate in light of the independent oversight provided by the Board.that our Board provides. Nautilus has a Lead Independent Director, currently Mr. Badie, who: presides over executive sessions of independent directors; serves as a liaison between the chairmanChairman and independent directors; consults with the Chairman and CEO regarding information sent to directors; reviews meeting agendas and schedules; may call meetings of independent directors; and, if asked by major stockholders, would be available for direct communication if appropriate. In addition to the Lead Independent Director, theour Board has a majority of independent directors. Four out of the six director nominees are independent. The Audit, Compensation, and Nominating and Corporate Governance Committees each are each composed solely of independent directors.

Board Role in Risk Oversight

While risk management is primarily the responsibility of the Company’sour management team, theour Board of Directors is responsible for overall supervision of the company’s risk management efforts as they relate to the key business risks facing the organization.we face. Management identifies, assesses, and manages the risks most critical to the Company’sour operations and routinely advises theour Board onregarding those matters. Those areasAreas of material risk canmay include

operational, financial, legal and regulatory, human capital, informationalinformation technology and security, and strategic and reputational risks. The BoardOur Board’s role in risk oversight of the Company is consistent with the Company’sour leadership structure, with senior management having responsibility for assessing and managing the Company’s risk exposure, and theour Board and its Committees providing oversight as necessary in connection with those efforts.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act requires our Directorsdirectors and executive officers, as well as persons who own more than 10% of our outstanding common stock, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of shares of our common stock. Based solely on a review of copies of such forms furnished to us and written representations from our executive officers, Directorsdirectors and 10% stockholders, we believe that all Section 16(a) filing requirements applicable to Nautilus Inc. were timely made with respect to the year ended December 31, 2009,2010, with the exception of one late filing by Vice President, Marketing Caroline J. Howe, one late filing by Senior Vice President, Consumer Business William B. McMahon, one late filing byRyan A. Neal, Vice President, General Manager Ryan A. Neal, and one late filing by former Vice President, Finance Corporate Controller William R. Peacock, eachRetail, with respect to one transaction.

STOCK OWNERSHIP

BENEFICIAL OWNERS OF NAUTILUS STOCK

The following table summarizes certain information regarding the beneficial ownership of our outstanding common stock, as of March 31, 2010,February 28, 2011, by: 1) each director and director nominee; 2) each of the named executive officers included in the Summary Compensation Table; 3) all persons that we know are beneficial owners of more than 5% of our common stock; and 4) all Directorsdirectors and executive officers as a group. Except as otherwise indicated, and subject to applicable community property laws, each owner has sole voting and sole investment powers with respect to all shares beneficially owned.

		Total Shares Beneficially Owned				Shares Covered by Options(2)				Percentage Beneficially Owned(1)
Name and Address of Beneficial Owner
Sherborne Investors GP, LLC 135 East 57th Street New York, NY 10022			9,981,449	(3)			—				32.43
Dimensional Fund Advisors, LP Palisades West, Building One 6300 Bee Cave Road Austin, Texas 78746			1,539,550	(4)			—				5.01
Current Non-Employee Directors
Ronald P. Badie, Director			37,500				30,000				*
Richard A. Horn, Director			15,000				15,000				*
M. Carl Johnson, III, Director			5,000				—				*
Craig L. McKibben, Director			—				—				*
Marvin G. Siegert, Director			33,000	(5)			30,000				*
Michael A. Stein, Director(6)			15,000				15,000				*
Current Employee Director
Edward J. Bramson, Chairman of the Board of Directors and Chief Executive Officer			9,981,449	(7)			—				32.43
Current Named Executive Officers
Kenneth L. Fish, Chief Financial Officer			212,467				74,252				*
Wayne M. Bolio, Senior Vice President, Law and General Counsel			127,384				111,584				*
William B. McMahon, Senior Vice President, Consumer Business			27,806				25,546				*
Ryan A. Neal, Vice President, General Manager Retail			12,584				5,584				*
Current Directors and Executive Officers as a Group (12 persons)			10,526,458				360,384				34.24

EXECUTIVE OFFICERS

The following table identifies our current executive officers as of the date of this proxy statement, the positions they hold and the year in which they began serving as officers of the Company. TheNautilus. Our Board of Directors elects all of our executive officers, who hold office until their respective successors are elected and qualified.

For information on Edward J. Bramson’s business background, see “Nominees” under “Election of Directors” above.

Kenneth L. Fish was appointed Chief Financial Officer in November 2008, having previously served as Chief Administrative Officer and Vice President/General Manager Commercial Business since April 2008. Mr. Fish joined Nautilus in 2005, initially serving as Vice President, Financial Analysis; then Vice President and Corporate Controller; Vice President, Global Finance; and, in December 2007, was promoted to the position of Senior Vice President/General Manager Strength Business. He brings more than 25 years of senior level finance and operations experience, including Vice President, Finance for Vestas Wind Systems from 2003 to 2005, a manufacturer of equipment for the production of wind generated electricity, and various financial positions including Asia-Pacific Finance Director for NACCO Materials Handling Group from 1977 to 2002. Mr. Fish has a business administration degree from Oregon State University, and was certified as a management accountant.

Wayne M. Bolio was promoted to Senior Vice President, Law in January of 2006 and was named General Counsel in April 2008. Mr. Bolio joined Nautilus in June 2003 as Vice President, Human Resources. He was appointed Senior Vice President, Human Resources in March 2004 and Senior Vice President, Law and General Counsel in May 2004. From 1997 to 2002 he served as the chief human resources officer for Consolidated Freightways, a major transportation company, and most recently held the position of Vice President of Human Resources and Assistant General Counsel. Prior to that, he was employed by Southern Pacific Transportation Company as Assistant General Counsel with responsibility for labor relations, human resources, and employment law matters. Mr. Bolio received a B.A. from the University of California at Berkeley and a J.D. from UCLA.

Caroline J. Howewas appointed as Vice President, Marketing in January 2009, where she is responsible for marketing activities for the consumer business including both direct and retail channels. Ms. Howe joined Nautilus in December 2007 as General Manager, Senior Vice President Cardio. Ms. Howe brings more than 20 years of brand and business management experience. From 2006 to 2007, Ms. Howe worked for American Sporting Goods Corporation where she led the reinvention of Ryka, a twenty year old women’s footwear and apparel brand. From 2004 to 2006, she was Global Brand Director of Sports Drinks for the Coca Cola Company. Prior to that, Ms. Howe served as General Manager of Memories for Hallmark Cards, Inc., and served over 10 years at Nike, Inc. including as Global Brand Director for Women’s Fitness. She has an economics degree from Pomona College in Claremont, California.

Deborah H. Marshjoined Nautilus in March 2007 as Senior Vice President, Human Resources, where she is responsible for personnel management, human resources systems, compensation and benefits. Ms. Marsh has 20 years of human resources experience from high tech, forest products, manufacturing and the public sector. Previously, she was the senior Human Resources Executive for TriQuint Semiconductor, from 2002 to 2007, and

senior consultant for Arthur Andersen Human Capital Services and KPMG Compensation and Benefits practice from 1998 to 2002. She serves as faculty for WorldatWork. Ms. Marsh is a Certified Employee Benefits Specialist, Certified Compensation Professional and Certified Benefits Professional. She has a masters degree in Community/Clinical Psychology, from Pepperdine University, and a bachelor of arts degree from California State University Los Angeles.

William B. McMahon was appointed to Senior Vice President, Consumer Business in November 2009. In this role he is responsible for leading the marketing, sales, and operations teams for the consumer business. He joined Nautilus in October 2005 and has held a number of leadership roles, most recently Vice President and General Manager for our Direct Business. Before joining Nautilus, Mr. McMahon held several executive positions with the Readers Digest Association from 1989 through 1995, including Chief Operating Officer ofgifts.com,an e-commerce portal; Director of Information Technology; Vice President, Operations ofGood Catalog, a luxury home products and electronics catalog; and Director of US Operations for QSP Inc., the largest school fundraising program in North America. He previously spent over a decade with the United States Navy nuclear submarine force, where he oversaw reactor plant operations. Mr. McMahon is a graduate of the US Naval Nuclear Engineering program.

Ryan A. Nealjoined Nautilus in May 2009 as Vice President, General Manager Retail, where he is responsible for leading the retail salesbusiness team. Mr. Neal has over 20 years of leadership experience in the sporting goods/home leisure industries, most recently as the Senior Vice President, Sales for Aero Products International in Chicago, Illinois from 2007 to 2009. From 19931998 to 2007, he held various executive and senior leadership positions with the W.C. Bradley Company; including serving as Vice President of Business Development for Zebco division, and Vice President, Business Unit Manager for the Char-Broil Parts and Accessories division. Mr. Neal hasearned his undergraduate degree from Indiana University in Indianapolis, Indiana.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

April 8, 20106, 2011

The Compensation Committee of the Board of Directors (“Committee”(the “Committee”) oversees the Company’s compensation programs on behalf of the Board of Directors.

The Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based on the review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement,proxy statement, in connection with the Company’s 20102011 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission.

Respectfully submitted,

Michael A. Stein, Chairman

Ronald P. Badie

Richard A. Horn

M. Carl Johnson, III

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION and ANALYSIS

In this section of the proxy statement we identify the material elements of our compensation programs for all of our executive officers, including an overview of our executive compensation philosophy and the processes and methodology we use in making executive pay decisions. We also provide detailed information regarding compensation paid to each Named Executive Officer (“NEO”). NEOs are the Chief Executive Officer, Chief Financial Officer and three most highly compensated executive officers of the Company,Nautilus, including salary, bonus, stock awards, option awards and all other compensation. Our NEOs are as follows:

Executive Summary

Overview

In early 2008 we implemented considerable revisions to our executive compensation programs with the goal of improving our financial performance and supporting our financial turnaround strategy. These changes included an increase in the targeted ratio of variable compensation to total compensation and revisions to the short-term incentive program. These programs remained in effect during 2009 and 2010 as turnaround activities continued.

The Committee has established a desired competitive position for target total cash compensation levels in the 50^th to 75^th percentile range of the peer group. Individual levels within this range are based on experience, performance and potential.

The executive compensation program is comprised of three primary elements in support of these objectives:

Our Chief Executive Officer has elected not to receive any salary, benefits or incentives directly from Nautilus. Our executive officers are eligible to participate in our employee benefits programs on the same terms as our eligible non-executive employees. Nautilus does not provide any executive perquisites. Unexercised stock options held by our executive officers expire 90 days following termination, which same terms apply to our non-executive employees.

Nautilus has employment contracts with Messrs. Bolio, Fish, McMahon and Neal that provide for the payment of six months of base salary upon termination of employment under certain circumstances. Nautilus completed a post-employment agreement with Mr. McMahon, his first such agreement with the Company, on March 30, 2011.

2010 Compensation Decisions

In 2010 the Committee approved the following with respect to the compensation for our NEOs:

Overall, the Committee believes that the executive compensation program and specific actions taken in 2010 are consistent with and reflect our pay-for-performance orientation, executive retention objectives and company performance in what continues to be a challenging business environment.

Governance of the Company’s Executive Compensation Program

The Compensation Committee of the Board of Directors (“Committee”) has overall responsibility for the evaluation, approval and oversight of the Company’sour compensation plans, policies and programs and the total direct compensation of the Company’sour executive officers.

The Committee has sole responsibility for determining theour Chief Executive Officer’s compensation and for reviewing it with the Board of Directors. Theour Board. Our Chief Executive Officer provides recommendations to the Committee on compensation matters for theour other executive officers. The Committee seeks input from an independent consultant who advises the Committee regarding executive compensation matters.

The Committee has engaged Compensia to serve as its independent compensation consultant. Compensia assists the Committee in reviewing the Company’sour compensation practices and provides advice to the Committee regarding compensation of the Company’sour executive officers. Neither Compensia nor any of its employees earns fees from the Company or any of its executive officers or directors, other than for providing executive compensation consulting services to the Committee, and neither Compensia nor any of its employees own any shares of Nautilus stock. Compensia was chosen solely by the Committee, all of their fees are for services provided to and at the request of Committee, and the Committee has complete and sole discretion as to their hiring, continued service or termination.

Compensia reports directly to the Committee and supports the Committee by:

Compensation Philosophy

The Company’sOur executive compensation program is designed with two primary objectives in mind:

Consistent with these objectives, the Company offerswe offer our executive officers a mix of base salary, short-term incentive compensation, long-term equity based incentives, health and welfare benefits and employment contracts. While we do not target a specific percentage allocation for base salary, short-term incentive compensation or long-term incentives (as a percent of total direct compensation), we operate under the general philosophy of targeting a total direct compensation opportunity that is competitive within our market for executive talent. Relative to our peer group, we believe that we generally target a greater percentage of the executives’ total direct compensation opportunity as variable compensation. TheWe do not believe the elements of our compensation program are not structured so as to encourage excessive risk taking by any executive,of our executives, but are part of an overall compensation and management philosophy designed to increase stockholder value over time.

Peer group data is used to compare the Company’sour compensation program for top executivesexecutive officers with that of executives in comparable roles at peer group companies. ADue to the divestiture of our commercial business and resultant reduction in annual revenue, Compensia identified a group of smaller consumer products industry peer group has been established, withcompanies than we used in 2009 for benchmarking purposes.

Although a comprehensive compensation review was not conducted in 2010, Compensia conducted a benchmark equity compensation analysis for the Company trending toward the middlepurpose of the range, based on total annual revenues. Secondarily, the Committee also considereddetermining equity market capitalization. In the Committee’s judgment total annual revenues and product/market similarity were deemed most important. grants.

Based upon the selection criteria, which targeted high-end consumer products companies with annual revenues similar to Nautilus, the following companies were chosen for theour peer group:

The compensation comparisons generally include base salaries, and short-term and long-term incentive targets. Peer group data for aforementioned companies is supplemented by data from published relevant compensation surveys, providing additional market-based analytical data for corporate executive pay at companies similar in industry, annual revenues or other relevant metrics.

The Committee has established a desired competitive position for target total cash compensation levels in the 50^th to 75^th percentile range of theour peer group. Individual levels within this range wouldare also be affected by the executive’s experience, performance and potential.potential, as assessed by our Chief Executive Officer and the Committee.

Chief Executive Officer Compensation

Mr. Bramson, our Chief Executive Officer and Chairman of the Board, has elected not to take any salary, benefits or incentives from the Company. As a partner of Sherborne Investors Management LP, a significant stockholder of Nautilus, Inc., Mr. Bramson hopes to realize substantial economic benefit in the form of appreciation in the value of Nautilus Inc. stock which is owned by Sherborne Investors.Investors Management LP.

The Company reimbursesNautilus pays $20,000 per month to Sherborne Investors Management LP $20,000 per month, for the use of New York office space and administrative, information technology and communications services to support Mr. Bramson in his role as the Company’sour Chief Executive Officer. The CompanyWe also reimbursesreimburse Mr. Bramson for customary travel and other business expenses incurred while conducting Companycompany business.

Base Salaries of Executives Other Than the Chief Executive Officer

Base salaries for theof our executive officers, other than Mr. Bramson, are intended to attract and retain executives (as part of the total compensation package) by providing a competitive base level of compensation. Base salaries are typically considered by the Committee on an annual basis, as well as in connection with the hiring of a new executive from outside the company, a promotion or other changes in an incumbent executive’s job responsibilities. Base salaries for executivesof executive officers are determined by evaluating the responsibilities of the position, the experience and performance of the individual, and by reference to the competitive marketplace median for corporate executives in comparable positions (similarity in scope, duties and responsibilities).

In February 2009,Although a comprehensive compensation review was not conducted in 2010, in March 2010 Compensia conducted a benchmark equity compensation analysis for the purpose of determining equity grants. At this time, Compensia presented an executive compensation analysis, summarizing the current position of our executive officers, noting base salaries generally below the marketour peer group’s 50^th percentile and target total cash compensation averaging near the marketour peer group’s 65^th percentile. In view of business and market conditions at that time, the Committee decided not to make any changes to then currentexecutive officer base salaries and target total cash compensation levels.

Short-Term Incentive Program for Executives Other Than the Chief Executive Officer

The Company’sOur short-term incentive program for executivesexecutive officers, other than the Chief Executive OfficerMr. Bramson, is designed to reward accomplishment of strategic, financial and individual goals. Achievement relative to measurable, pre-determined Companycompany goals provides the basis of the program. Individual goals are also established, the achievement of which further impacts the amount of potential short-term incentive.

The program focuses on specific short-term objectives to improve the Company’sour financial performance and accelerate needed turnaround efforts, with quarterly measurements and payments. Individual bonus targets reflect the Company’sour emphasis on leveraging variable pay upon achievement of ambitious performance objectives.

The calculation for determining an individual’s quarterly incentive amount earned is a product of: 1) the individual’s quarterly eligible wages; 2) the individual’s target bonus percentage; 3) the weighting of each Companycompany performance factor; and 4) the degree to which each Companycompany performance factor is actually achieved. The calculation is performed for each Companycompany performance factor. The Companycompany performance amounts are then totaled and multiplied by the individual’s goal achievement percentage. The Company and individual performance objectives are tied directly to the quarterly business plan. While achievability was reasonably uncertain at the time the performance criteria were established, in all quarters the performance targets were generally set such that the business plan results must be surpassed in order to achieve a payout at or above the target level.

Individual Bonus Targets for our NEOs ranged from 50% to 100% of quarterly eligible wages, as follows:

Company Performance Criteriaare determined on a calendar quarter basis. Each Companycompany performance factor has anis assigned a weighting.

The 20092010 quarterly performance criteria and specific weightings applicable to Messrs. Fish, Bolio and Joyce and Ms. Marsh’s bonuses were:

The 2009 quarterly performance criteria and specific weightings applicable to Mr. Goulet’s bonus were:

The 2009 quarterly performance criteria and specific weightings applicable to Mr. Neal’s bonus were:

Thresholds, Targets and MaximumsThe payout Payout under the plan in 2010 could rangehave ranged from 0% to 150% of target, based on achievement of the Companycompany performance criteria, subject to a specified minimum performance threshold required to earn any incentive under the plan.plan, as follows:

		Potential Achievement Ranges
First Quarter 2009		Consolidated Operating Income/(Loss)			Consolidated Net Debt
Threshold		20	%		25	%
Target		100	%		100	%
Maximum		100	%		150	%
		Potential Achievement Ranges
Second Quarter 2009		Consolidated Operating Income/(Loss)			Consolidated Inventory and Accounts Receivable
Threshold		10	%		25	%
Target		100	%		100	%
Maximum		100	%		150	%

Individual Performance Criteria In addition to Companycompany performance criteria, individual performance objectives arewere established for each executive in the form of formal written goals. The specific, measurableSpecific actions for example, included, but were not limited to, revenue targets, expense reduction targets, accounts receivable and inventory reductions,reduction amounts, new borrowing arrangements and terms, and arrangements, on-timecash position, specific product delivery,development milestones and divestiture of the Commercial business, and specific product milestones.commercial business.

Based on achievement relative to individual performance objectives, an individual performance multiplier would be applied to the result based on Companycompany performance, as follows:

Holdback ProvisionA “holdback” provision for executive officers requires that 20% of each quarterly incentive earned be withheld, with payment to be made after year-endour annual audited financial statements are completed. To the extent that audit or other adjustments made to the annual financial results are available.statements would, if known at the time, have resulted in a recalculated bonus less than the amount originally calculated, the executive officer may be paid some of this 20% withheld to the extent that the difference between the original bonus amount and the recalculated amount is less than the remaining 20% holdback.

20092010 Short-Term Incentive PaymentsOur In 2010 our NEOs earned quarterly incentives based on achievement of Companycompany and individual performance metrics as follows:

Equity Compensation

Long-term incentives are intended to focus executive behavior on making decisions that meaningfully contribute to theour long-term success of the Company, as reflected in the Company’sour stock price. Under the 2005 Long-Term Incentive Plan (the Plan), the Committee may grant equity awards (stock options, stock appreciation rights, restricted stock, performance units or stock units) to executive officers and other employees. Stock options are priced at fair market value as defined by the Plan. In granting these awards, the Committee may establish conditions or restrictions it deems appropriate.

ExecutiveOur executive officers generally are provided an equity grant upon commencement of employment with the Company.their employment. The Committee reviews the equity position of executive officers on a periodic basis. Additionally, an executive’sexecutive officer’s overall equity position is reviewed at the time of promotion and an additional grant may be considered.

A grantIn March 2010 Compensia conducted a benchmark equity compensation analysis to assist the Committee in determining equity grants. The analysis indicated that target total direct compensation (includes base salary, short-term incentives and equity award grants) of options for 10,000 shares of Company common stockour executive officers was provided to Mr. Neal upon commencement of his employmentbelow our peer group average. Based on this information, our Chief Executive Officer, in consultation with the Company. TheCommittee, determined that a modest equity grant vestswas warranted. A mix of stock option and performance share unit awards were granted which, in four equal annual installments on the anniversary date of Mr. Neal’s employment.general, resulted in target total direct compensation (includes base salary, short term incentives and equity grants) below, but closer to, our peer group’s 50^th percentile.

There were no other equity grantsEquity awards granted to our NEOs in 2009.

Early 2010 Compensation Decisions

The Committee met in early 2010 to review and establish compensation levels for 2010 under the Company’s short-term incentive program. The Committee determined that base salary levels will remain the same, and approved short-term incentive plan performance criteria and potential achievement ranges for the first quarter of 2010, recommended by the Chief Executive Officer,were as follows:

Company Performance Criteria⁽¹⁾:

Achievement Ranges (Thresholds, Targets and Maximums):

The Committee also approved equity grants for our NEOs, as follows:

Early 2011 Compensation Decisions

The Committee met in early 2011 to review and establish compensation levels for 2011 under our short-term incentive program. The Committee approved short-term incentive plan performance criteria and potential achievement ranges for the first quarter of 2011, recommended by our Chief Executive Officer, as follows:

Company Performance Criteria:

Achievement Ranges (Thresholds, Targets and Maximums):

Perquisites and Other Benefits

ExecutiveOur executive officers are eligible to participate in the Company’sour medical, dental, vision, flexible spending, life, disability, and 401(k) programs on substantially the same terms as eligible non-executive employees, subject to legal limits on the amounts that may be contributed or paid to executive officers under these plans. We suspended company matching contributions underNo perquisites are provided to our 401(k) program in mid-2009.

Post-Employment Obligations

The Company believesWe believe that modest post-employment benefits are an important factor in maintaining the stability of theour executive management team, especially at a time when there is significant uncertainty about market conditions for the Company’sour products and the economy in general.

The Company A post-employment agreement with Mr. McMahon, his first such agreement with Nautilus, was completed on March 30, 2011. In addition to Mr. McMahon, Nautilus has a separate severance arrangementarrangements with each NEOMessrs. Bolio, Fish and Neal under his or hertheir respective employment agreement or employment offer. These documents outline the terms and conditions of the post employment benefits. The agreements generally provide that the CompanyNautilus will pay severance ranging fromof six months to twelve months of the employee’s base salary in the event of an involuntary termination of employment for reasons other than cause. In general, the definition of “cause” includes: indictment or conviction of the employee for a crime that, in the Company’s judgment, makes the employee unfit or unable to perform his or her duties, or adversely affects the Company’s reputation; employee dishonesty related to his or her employment; violation of key Companycompany policies; insubordination; serious conflicts of interest or self-dealing; intentional or grossly negligent conduct by the employee that is significantly injurious to the Company; certain serious performance failures by the employee; and, death or disability of the employee.

Severance payments are made in accordance with the Company’sour normal payroll cycle over the severance period. The agreements for Messrs. Bolio, Fish and McMahon also generally provide for continuation, during the severance period, of health benefits under COBRA for the employee and covered dependents, at active employee premium rates. Refer to the table entitled Other Potential Post-Employment Payments and related notes, elsewhere herein, for information regarding severance and post-employment benefits that may be payable to our NEOs upon their termination.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code limits to $1 million the amount the Companywe can deduct for compensation paid to itsour Chief Executive Officer and three other most highly-compensated executive officers (excluding the Chief Financial Officer) in any year. The limit on deductibility does not apply to performance-based compensation meeting certain requirements.

Our general philosophy is to structure executive compensation to maximize deductibility under Section 162(m). In 2009,2010, 100% of our executive compensation was deductible by the Company.tax deductible. Base salary is not performance-based under Section 162(m), and our short-term incentive awards do not meet the performance-based compensation requirements of Section 162(m) because these awards are not granted under a stockholder-approved plan. However, we were able to deduct all of this compensation because no executive officerofficer’s compensation exceeded the $1 million limit. Should an executive officerofficer’s compensation approach $1 million in the future, our Compensationthe Committee will consider deductibility of compensation under Section 162(m) as one (but not the sole) factor in setting executive compensation.

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation earned by, awarded to or paid to or earned by each of our NEOs forin the years ended December 31, 2010, 2009 2008 and 2007.2008.

(7)	The table below sets forth the components of All Other Compensation for 2009.

GRANTS OF PLAN-BASED AWARDS

The following table sets forth certain information regarding non-equity incentive plan awards and stock options grants awarded to our NEOs during 2009. No restricted stock or performance unit awards were granted to executive officers during 2009.2010.

The following table sets forth certain information regarding stock option grants and performance share unit grants awarded to our NEOs during 2010.