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Exhibit
10.3
THIRD AMENDMENT TO LOAN
AND SECURITY AGREEMENT AND CONSENT
THIS THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT AND CONSENT (this “
Amendment ”), dated as of May 5, 2008, is entered
into by and among the financial institutions signatory hereto (each
a “ Lender ” and collectively the “
Lenders ”), BANK OF AMERICA, N.A. , as
administrative agent for the Lenders (in such capacity, “
Agent ”), NAUTILUS, INC. , a Washington
corporation (“ US Borrower ”), NAUTILUS
INTERNATIONAL S.A. , a Swiss private share company
(“ Swiss Borrower ”, and together with US
Borrower, collectively, “ Borrowers
”).
RECITALS
A. Borrowers, Agent and the
Lenders have previously entered into that certain Loan and Security
Agreement dated as of January 16, 2008 (as amended,
supplemented, restated and modified from time to time, the “
Loan Agreement ”), pursuant to which the Lenders have
made certain loans and financial accommodations available to
Borrowers. Terms used herein without definition shall have the
meanings ascribed to them in the Loan Agreement.
B. US Borrower has informed
Agent and the Lenders that it intends to repurchase up to
$10,000,000 of US Borrower’s outstanding capital stock as
recently approved by the Board of Directors of US Borrower (the
“ Stock Repurchase ”).
C. Borrowers, Agent and the
Lenders now wish to amend the Loan Agreement and consent to the
Stock Repurchase (as defined below) on the terms and conditions set
forth herein.
AGREEMENT
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Amendments to Loan
Agreement .
(a) The definition of
“Availability Block” in Section 1.1 of the Loan
Agreement is hereby amended and restated in its entirety to read as
follows:
“ Availability
Block : a block in an amount equal to the Real Estate Formula
Amount.”
(b) The definition of
“EBITDA” in Section 1.1 of the Loan Agreement is
hereby amended and restated in its entirety to read as
follows:
“ EBITDA :
determined on a consolidated basis for Borrowers and Subsidiaries,
net income, calculated before (in each case, to the extent included
in determining net income and to the extent incurred or
attributable during the applicable measurement period)
(i) interest expense, (ii) provision for income taxes,
(iii) depreciation and amortization expense, (iv) gains
or losses arising from the sale of capital assets, (v) gains
arising from the write-up of assets, and (vi) any
extraordinary gains, (vii) fees incurred by Borrowers in
connection with entering into this Agreement and the Loan Documents
in an aggregate amount not to exceed $700,000, (viii) legal
fees and expenses incurred by US Borrower during the fourth Fiscal
Quarter of 2007 or the first Fiscal Quarter of 2008 in
connection
with the proxy dispute
between US Borrower, its directors and Sherborne Investors, L.P. in
an aggregate amount not to exceed $2,700,000, (ix) a
write-down of Intellectual Property and associated goodwill taken
on or before the last day of the first Fiscal Quarter of 2008 in
connection with the Disclosed Sale in an amount not to exceed
$15,500,000, (x) a non-cash inventory write-down taken on or
before the last day of the fourth Fiscal Quarter of 2007 in an
amount not to exceed $400,000, (xi) up to $600,000 in expenses
(no more than $150,000 of which expenses shall be cash expenses)
incurred during the first Fiscal Quarter of 2008 in connection with
closure of Borrowers’ Australia direct operations,
(xii) up to $1,000,000 in expenses incurred during the first
or second Fiscal Quarter of 2008 in connection with closure of
Borrowers’ Italy operations, (xiii) up to $1,000,000 in
expenses (no more than $400,000 of which expenses shall be cash
expenses) incurred during the first and second Fiscal Quarters of
2008 in connection with closure of Borrowers’ Bolingbrook,
Illinois distribution center, (xiv) a non-cash write-off of up
to $1,200,000 taken during the fourth Fiscal Quarter of 2007 in
connection with the abandonment of the License with Lance
Armstrong, (xv) a non-cash charge of up to $1,890,000 taken
during the fourth Fiscal Quarter of 2007 in connection with the
elimination of Borrowers’ EV9.16 product line, (xvi) a
non-cash charge of up to $300,000 taken during the fourth Fiscal
Quarter of 2007 in connection with the elimination of
Borrowers’ fitness advisor product, (xvii) up to
$3,000,000 in expenses actually incurred during the first and
second Fiscal Quarters of 2008 in connection with Borrowers’
future employee reductions, (xviii) a non-cash charge of up to
$1,100,000 taken during the fourth Fiscal Quarter of 2007 in
connection with the elimination of Borrowers’ TC9.16 product
line, (xix) a non-cash warranty accrual taken during the
fourth Fiscal Quarter of 2007 relating to discontinued items in an
amount up to $1,000,000, (xx) a non-cash write-off of up to
$3,000,000 taken during the fourth Fiscal Quarter of 2007 in
connection with the abandonment or non-use of certain ICON patents;
(xxi) an accrual taken in the first Fiscal Quarter of 2008 in
connection with future warranty costs resulting from outsourcing of
warranty processing in an amount up to $3,000,000; (xxii) a
non-cash write-off in an amount not to exceed $19,400,000 taken
during the fourth Fiscal Quarter of 2007 relating to costs and
payments incurred in connection with the LandAmerica Acquisition;
(xxiii) a warranty accrual taken during the fourth Fiscal
Quarter of 2007 relating to the discontinued Treadclimber 9.16 line
in an amount up to $12,000,000; and (xxiv) a payment in the
amount of up to $8,000,000 made during the first or second Fiscal
Quarter of 2008 as final settlement of the unconsummated
LandAmerica Acquisition.”
(c) The definition of
“Required Lenders” in Sect
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