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Item 5.02
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Departure of Directors or Certain officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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On July 8, 2019, Nautilus, Inc. (the “Company”), announced
the appointment of James Barr as the Company’s Chief Executive Officer and as a member of its Board of Directors, effective
as of July 29, 2019 (the “Effective Date”). In connection with Mr. Barr’s appointment, the service of M. Carl
Johnson, III, as the Company’s Interim Chief Executive Officer will terminate immediately prior to the Effective Date. Mr.
Johnson will continue to serve as a member of the Company’s Board of Directors.
Mr. Barr, 57, served as the
Group President of Ritchie Bros. Auctioneers, an auctioneering company for construction, agriculture, transportation and energy
equipment, from November 2014 to February 2018. From November 2011 to January 2014, Mr. Barr served as the Executive Vice President,
Chief Digital Officer/Chief Information Officer, of OfficeMax Inc., and then Office Depot, Inc., both office supply retailers,
following their merger. From January 2008 to January 2010, Mr. Barr served as President, Online for Sears Holdings Corporation,
a consumer products retailer. Mr. Barr held various positions with Microsoft Corporation, a multinational technology company,
from 1996 to 2008, where he focused on product planning, business development and commerce services. Mr. Barr has also served
on the board of directors of private companies, a trade association and Miami University, from which he graduated with a B.S.
in Accountancy. Mr. Barr received an M.B.A. from the University of Chicago Booth School of Business. The Board has concluded that
Mr. Barr should serve as a director based on his extensive executive leadership and digital transformation experience.
The Company
entered into an Executive Employment Agreement with Mr. Barr, effective as of July 29, 2019 (the “Agreement”). Mr.
Barr’s initial annual base salary under the Agreement is $550,000, and he will be eligible for an annual bonus with a target
amount of up to 100% of his annual base salary, payable based on achievement of corporate and/or personal performance goals at
the discretion of the Company’s Board of Directors (the “Short-Term Incentive”). The Agreement also provides
that Mr. Barr will receive in 2020 an award of 50% restricted stock units and 50% performance stock units, collectively having
a value of $880,000, under the Company’s 2015 Long Term Incentive Plan. The restricted stock units will vest annually over
three years from the date of grant and the performance stock units will vest on the third anniversary of the grant date based
on achievement of financial performance goals, each subject to Mr. Barr’s continued service on the vesting date.
The Agreement also entitles Mr. Barr
to receive (i) a sign-on bonus of $275,000, payable in either cash or equity at Mr. Barr’s election, upon commencement of
his employment, (ii) equity awards having a total value of $1,760,000, 66% of which will be restricted stock units vesting annually
over three years and 33% of which will be stock options to purchase shares of the Company’s common stock vesting annually
over three years; and (iii) $275,000 payable upon the completion of fiscal year 2020 (the “Second Cash Bonus”). The
Second Cash Bonus shall not be paid in the event that the Short-Term Incentive payment for fiscal year 2020 is at least 50% of
Mr. Barr’s annual base salary. Mr. Barr is also eligible for certain relocation benefits, including reimbursement of
moving and travel expenses associated with Mr. Barr and his family’s relocation to the Vancouver, Washington area.
Either party
may terminate the Agreement at any time for any reason, provided, however, if the Company terminates Mr. Barr’s employment
without “cause” or Mr. Barr resigns for “good reason” (each as defined in the Agreement), then Mr. Barr
will be entitled to receive certain severance benefits, including cash severance equal to 12 months of his then-current annual
base salary, continuation of the company-paid portion of medical and dental coverages during such twelve-month period, payment
of a prorated Short-Term Incentive bonus and 100% accelerated vesting of all outstanding equity awards and exercisability of all
stock options for the remainder of their term.
The foregoing summary of the material terms of the Agreement does not purport to be complete and is qualified in its
entirety by reference to the full text of the Agreement, which will be filed with the Company’s Quarterly Report on Form
10-Q for the period ended June 30, 2019.