Edgar Filing: NAUTILUS GROUP INC

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United States Securities and Exchange Commission
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

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:

[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under Rule 14a-12

THE NAUTILUS GROUP, INC.
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(Name of Registrant as Specified in Its Charter)

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

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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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the Form or Schedule and the date of its filing.
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THE NAUTILUS GROUP, INC.

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

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To the Stockholders of The Nautilus Group, Inc.:

Our annual meeting of stockholders will be held on Monday, June 9,
2003, at the Phoenix Inn Suites, 12712 SE 2nd Circle, Vancouver, Washington
98684, beginning at 10:00 a.m. Pacific Daylight Time, for the following
purposes:

1. To elect a board of eight directors, each for a one year term; and
2. 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 11, 2003, 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 at
which management will present a review of our operations for the year ended
December 31, 2002. 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.

By Order of the Board of Directors

/s/ ROD W. RICE
ROD W. RICE
Chief Financial Officer, Treasurer and Secretary
Vancouver, Washington
April 18, 2003

THE NAUTILUS GROUP, INC.
1400 NE 136TH AVENUE
VANCOUVER, WASHINGTON 98684

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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 2003

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GENERAL

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 2003 Annual
Meeting of Stockholders or any adjournment thereof. The annual meeting will be
held on Monday, June 9, 2003, beginning at 10:00 a.m., Pacific Daylight Time at
the following location:

Phoenix Inn Suites
12712 SE 2nd Circle
Vancouver, Washington 98684

We are bearing all expenses associated with this solicitation. Our
officers or regular employees, without additional remuneration, may follow this
written proxy solicitation with personal solicitation of stockholders in person
or by telephone or facsimile transmission. In addition, we may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners. We
reserve the right to retain an outside proxy solicitation firm, the expense of
which we estimate will not exceed $10,000.

Our Board of Directors has designated the two persons named on the
enclosed proxy card, Brian R. Cook and Rod W. Rice, 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 25, 2003 to our
stockholders of record on April 11, 2003.

Our principal executive offices are located at 1400 NE 136th Avenue,
Vancouver, Washington 98684.

REVOCABILITY OF PROXIES

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

o delivering written notice of revocation to our Secretary;
o delivering an executed proxy bearing a later date to our
Secretary; or
o attending the annual meeting and voting in person.

RECORD DATE

Our Board of Directors has fixed the close of business on April 11,
2003, 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, 32,552,163 shares of our common stock were outstanding and there
were 85 stockholders of record.

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.

VOTE REQUIRED TO APPROVE THE PROPOSALS

If a quorum is present at the annual meeting, the eight nominees 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.

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.

EFFECT OF BROKER NON-VOTES

If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to the election of directors. Thus, if you do not give
your broker or nominee specific voting instructions, your shares may not be
voted on these matters. If your shares are not voted, they will not be counted
as votes "for" or "against" in the election of directors. Accordingly, shares
represented by such "broker non-votes" will have no effect on the election of
directors. Shares represented by broker non-votes will, however, be counted for
determining whether there is a quorum.

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 director nominees described below.
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.

ELECTION OF DIRECTORS
(PROPOSAL 1)

In accordance with our amended and restated bylaws, our Board of
Directors shall be comprised of no less than five and no more than fifteen
directors, with the specific number to be determined by our Board of Directors.
By resolution adopted on February 24, 2003, our Board of Directors set the
number of directors at eight.

NOMINEES

At the annual meeting, our stockholders will elect a board of eight
directors to serve until the 2004 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. If any nominee is unable or
unwilling to serve as a director at the time of the annual meeting, our Board of
Directors may provide for a lesser number of directors 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 eight nominees.

NAME AGE HAS BEEN A DIRECTOR SINCE
---- --- -------------------------
Brian R. Cook 53 1986
Kirkland C. Aly 46 1996
C. Rowland Hanson 51 1999
Paul F. Little 59 1999
Frederick T. Hull 65 2001
James M. Weber 43 2001
Peter A. Allen 42 2002
Robert S. Falcone 56 2003

BRIAN R. COOK has served on the Board of Directors and as Chief
Executive Officer of The Nautilus Group, Inc. since 1986. Mr. Cook also serves
as Chairman of the Board. Mr. Cook has more than 25 years of business management
and corporate experience. Prior to joining The Nautilus Group, Inc., he held
various financial and managerial positions at Sea Galley Stores, Inc., a large,
publicly owned restaurant company. Mr. Cook also acted as the Chief Financial
Officer for a manufacturer of industrial fasteners. Previously, he was a
certified public accountant with Peat, Marwick, Mitchell & Company. Mr. Cook
received his B.A. in Business Administration with a major in Accounting from
Western Washington University.

KIRKLAND C. ALY has served on our Board of Directors since 1996. In
2002, Mr. Aly became an Executive Vice President of Advanced Interactive
Systems, Inc. Prior to that, Mr. Aly served as an Executive Vice President of
Convergent Technology Group, Inc. beginning in 2000, and continued as a venture
partner with Zilkha Capital Partners, LP, a private equity investment company,
which he joined in 1999. Mr. Aly served as Senior Vice President of Webforia,
Inc. in 1998 and 1999. Commencing in 1996, Mr. Aly was Executive Vice President

of Softbank Content Services, Inc., and subsequently served as Vice President of
Worldwide Sales & Marketing at Software Logistix Corporation following its
acquisition of Softbank in 1998. From 1994 to 1996, Mr. Aly was the Chief
Executive Officer of Atrieva Corporation. Mr. Aly received a B.A. in
Communications from Washington State University.

C. ROWLAND HANSON has served on our Board of Directors since October
1999. Mr. Hanson is founder of C.R.H. & Associates, which provides consulting
services in strategic planning. Prior to consulting, Mr. Hanson served as Vice
President of Worldwide Marketing at Neutrogena Corporation and Vice President of
Corporate Communications at Microsoft. Currently, Mr. Hanson serves as a board
member of Alpha Shield, Inc., and on the advisory board of several companies.
Mr. Hanson holds a M.B.A. from the Wharton School of Business, University of
Pennsylvania and a B.A. from Loyola University.

PAUL F. LITTLE has served on our Board of Directors since 1999. Mr.
Little is President of Westover Investments Inc., an investment company. He also
consults to companies and investment managers in the area of development
capital. From 1986 to 1999 he was a principal of Toronto-based merchant bank,
Gornitzki, Thompson & Little and President of GTL Securities Inc., a related
securities dealer. Mr. Little currently serves on five other public company
boards including Denison Energy, Inc., Medisystem Technologies, Inc., Barcode
Holdings, Inc., Pason Systems, Inc., and World Point Terminals, Inc. He is
Chairman of Echelon General Insurance Company and recently joined the Board of
Visitors of the Graziadio School of Business at Pepperdine University. Mr.
Little is a Chartered Accountant. He holds a M.B.A. from the University of
British Columbia and a B.A. in Economics from the University of Toronto.

FREDERICK T. HULL has served on our Board of Directors since 2001. Mr.
Hull, a veteran of 35 years with the Nestle/Carnation Company, is the past
President of Nestle Brands Foodservice Company, the foodservice division of
Nestle USA. Currently, Mr. Hull serves on the advisory board of the Hotel and
Restaurant School of California State Polytechnic University, Pomona, the
advisory board of the School of Business at the University of Colorado, and is a
board advisor to Anawah, Inc. Mr. Hull received a B.S. in Business
Administration from the University of Colorado.

JAMES M. WEBER has served on our Board of Directors since 2001. Mr.
Weber became the President and Chief Executive Officer of Brooks Sports, Inc. in
April 2001. Brooks Sports, Inc. designs and markets athletic footwear, apparel
and accessories. Prior to that, Mr. Weber served as Managing Director of U.S.
Bancorp Piper Jaffray in its Seattle Investment Banking office from May 1999 to
April 2001. Commencing in 1996, Mr. Weber was Chairman and Chief Executive
Officer of Sims Sports, Inc., a leading action sports company. From 1990 to
1996, Mr. Weber was active in a variety of executive positions for The Coleman
Company, Inc., including Vice President of Corporate Development, and President
of O'Brien International, Inc. Mr. Weber received a M.B.A. from the Tuck School
at Dartmouth College and a B.S. from the University of Minnesota.

PETER A. ALLEN has served on our Board of Directors since 2002. Mr.
Allen is a Managing Partner at Technology Partners International, a consulting
services firm. Mr. Allen has maintained this position since July 2001. From
December 1998 to June 2001, Mr. Allen served as Chairman, President and Chief

Executive Officer of Data Dimensions, Inc., an IT consulting firm. Prior to
that, Mr. Allen served as Vice President with Computer Sciences Corporation from
1990 to 1998. Mr. Allen received a B.S. in Computer Science from the University
of Maryland.

ROBERT S. FALCONE joined our Board of Directors in 2003. Mr. Falcone,
who has over 33 years of management and board experience, is Executive Vice
President and Chief Financial Officer of BearingPoint, Inc., one of the world's
largest business consulting firms. Mr. Falcone is the former Senior Vice
President and Chief Financial Officer of 800.com, an Internet retailer of
consumer electronics, and was the Chief Financial Officer of Nike, Inc. from
1992 to 1998. He also spent over 21 years with Price Waterhouse LLP, the last 8
years as a partner. Mr. Falcone is a board member of RadioShack Corporation and
International Microcomputer Software, Inc. and received his B.S. in Business
Administration, Accounting from Villanova University.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During 2002, our Board of Directors held eleven (11) meetings. No
director while in office attended fewer than 75% of the Board meetings.

Our Board of Directors had two committees in 2002: an Audit Committee,
and a Compensation Committee. The Audit Committee had authority to: (1) make
recommendations to the Board of Directors regarding the selection of independent
auditors; (2) review the results and scope of audits and other services provided
by our independent auditors; and (3) review and evaluate our audit and control
functions. In 2002, the Audit Committee met six (6) times. Directors Paul F.
Little, Kirkland C. Aly and James M. Weber served on the Audit Committee. All
members attended at least 75% of the Audit Committee meetings.

The Compensation Committee is responsible for evaluating the
performance and establishing the compensation of our executive officers. No
officer or employee who is a director participated in Board deliberations
regarding their own compensation. Our non-employee directors who served on the
Compensation Committee included Kirkland C. Aly, C. Rowland Hanson, Frederick T.
Hull, Paul F. Little, and James M. Weber. In 2002, the Compensation Committee
met one (1) time and all members attended the meeting. Subsequent to the 2002
Compensation Committee meeting, the Board designated Peter A. Allen, C. Rowland
Hanson, and Frederick T. Hull to serve as the Compensation Committee beginning
in June 2002.

Our Board of Directors did not have a Nominating Committee in 2002.
Instead, the full Board of Directors considered and determined nomination
issues.

DIRECTOR COMPENSATION

Directors who are not officers of the Company receive annual
compensation of $25,000, payable in quarterly installments of $6,250 plus $500
per day plus travel expenses for each Board meeting they attend in person, and
$150 per day for each Board meeting they attend telephonically. On June 10,
2002, our Board of Directors granted to each non-employee director an option to

purchase 2,500 shares of our common stock at an exercise price equal to the
market price of our common stock at close of trading on the New York Stock
Exchange on the date prior to the grant date ($34.05 per share). The options
vest fully after one year. Directors who are Company employees receive no
additional or special remuneration for serving as directors.

BOARD RECOMMENDATION

Our Board of Directors unanimously recommends a vote FOR each of the
nominees named in this proxy statement.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table summarizes certain information regarding the
beneficial ownership of our outstanding common stock as of April 7, 2003 by: (1)
each director and director nominee; (2) each executive officer whose name
appears 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 directors and
executive officers as a group. Except as otherwise indicated below and subject
to applicable community property laws, each owner has sole voting and sole
investment powers with respect to the common stock listed.

SHARES
BENEFICIALLY OWNED
-----------------------------
DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENTAGE (1)
------------------------------------------------- ------------- --------------
Sprott Asset Management, Inc. 3,977,801 (2) 12.2%
Suite 3450, South Tower
Royal Bank Plaza
Toronto, Ontario M5J 2J2
Canada
Brian R. Cook 1,758,887 (3) 5.4%
1400 NE 136th Avenue
Vancouver, WA 98684
Kevin T. Lamar 109,804 (4) *
Randal R. Potter 226,312 (5) *
Rod W. Rice 309,197 (6) *
Kirkland C. Aly 3,030 (7) *
C. Rowland Hanson 115,555 (8) *
Paul F. Little 1,508,415 (9) 4.6%
Frederick T. Hull 6,180 (10) *
James M. Weber 4,080 (11) *
Peter A. Allen 300 *
Robert S. Falcone -- --
All directors and executive
officers as a group (11 persons) 4,041,760 12.4%

* Less than 1%.
(1) All percentages have been calculated assuming that 32,552,163 shares of our
common stock are issued and outstanding. Shares which the person or group
has the right to acquire within 60 days after April 7, 2003 are deemed to
be outstanding in calculating the percentage ownership of the person or
group but are not deemed to be outstanding as to any other person or group.
(2) Based on the Schedule 13G filed on November 8, 2002, Sprott Asset
Management, Inc. has the sole voting power and sole dispositive power with
respect to 3,871,327 shares, and shared voting power and shared dispositive
power with respect to 106,474 shares.
(3) Includes 200,000 shares held in a partnership of which Mr. Cook has shared
voting power.
(4) Includes 75,000 shares issuable upon the exercise of options.
(5) Includes 33,282 shares issuable upon the exercise of options.
(6) Includes 40,625 shares issuable upon exercise of options.
(7) Includes 3,030 shares issuable upon exercise of options.
(8) Includes 3,780 shares issuable upon exercise of options.
(9) Includes 20,790 shares issuable upon the exercise of options, and 557,009
shares held by Westover Investments, Inc., of which Mr. Little is the sole
stockholder and director.
(10) Includes 3,780 shares issuable upon exercise of options.
(11) Includes 3,780 shares issuable upon exercise of options.

EXECUTIVE OFFICERS

The following table identifies our current executive officers, the
positions they hold and the year in which they began serving in their respective
capacities. The Board of Directors elects all officers, who hold office until
their respective successors are elected and qualified.

Position
Name Age Position(s) with The Nautilus Group Held Since
---------------- --- ----------------------------------- ----------

Brian R. Cook 53 Chief Executive Officer, Chairman of the Board 1986
Kevin T. Lamar 41 President 2001
Randal R. Potter 36 Chief Operating Officer, President of Nautilus Direct, Inc. 2000
Rod W. Rice 39 Chief Financial Officer, Treasurer and Secretary 1995

For information on Brian R. Cook's business background, see "Nominees"
under "Election of Directors" above.

KEVIN T. LAMAR joined The Nautilus Group, Inc. in 2001 as President.
From 1989 to 2000, Mr. Lamar served in a variety of senior management roles for
Schwinn/GT Corp., a global leader in bicycles and fitness equipment with annual
sales in excess of $350 million. He was instrumental in growing Schwinn/GT's
fitness business from $20 million in annual sales to over $100 million in annual
sales, and he became President of Schwinn/GT in 1999. From 1987 to 1989, he was
Director of Marketing for Bowflex of America, Inc. (which later became The
Nautilus Group, Inc.). From 1985 to 1987, he played professional football for
the Buffalo Bills and San Francisco 49ers in the National Football League. Mr.
Lamar received a B.A. in Economics from Stanford University in 1985.

RANDAL R. POTTER is Chief Operating Officer of The Nautilus Group, Inc.
and President of Nautilus Direct, Inc. Prior to becoming Chief Operating Officer
in September 2000, Mr. Potter was Vice President of Marketing since December
1995. Mr. Potter joined The Nautilus Group, Inc. in 1991 as Creative Director
and Marketing Manager. Mr. Potter, who received his B.S. in Social Science from
Washington State University, has been involved in the direct marketing industry
since 1986.

ROD W. RICE has been with The Nautilus Group, Inc. since 1994, serving
first as the Company's Controller. In 1995, he assumed his current role of Chief
Financial Officer. Mr. Rice also serves as Treasurer and Secretary of the
Company. Formerly, Mr. Rice worked as an accountant with Deloitte & Touche. Mr.
Rice received his B.S. in Business Administration with a major in Accounting
from Portland State University.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the
compensation we paid to our Chief Executive Officer and other executive officers
whose salary and bonus together exceeded $100,000 in fiscal years 2002, 2001 and
2000. These individuals are referred to collectively in this proxy statement as
the "Named Executive Officers."

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- --------------------- ALL OTHER
NAME AND PRINCIPAL SECURITIES UNDERLYING COMPENSATION
POSITION YEAR SALARY ($)(1) BONUS ($)(2) OPTIONS (#)(3) ($)(4)
------------------------------------------------------------------------------------------------------

Brian R. Cook, Chief 2002 450,000 250,000 -- 5,500
Executive Officer and 2001 375,000 375,000 -- 4,838
Chairman of the Board 2000 295,000 295,000 -- 4,437

Kevin T. Lamar, 2002 375,000 225,000 20,000 4,125
President (5) 2001 230,745 189,584 150,000 --

Randal R. Potter, 2002 360,000 360,000 20,000 5,500
Chief Operating 2001 310,000 310,000 37,500 4,838
Officer, President of 2000 195,000 195,000 33,750 4,437
Nautilus Direct, Inc.

Rod W. Rice, Chief 2002 260,000 200,000 12,000 5,500
Financial Officer, 2001 210,000 210,000 37,500 4,838
Treasurer and 2000 160,000 160,000 22,500 4,437
Secretary

(1) In January 2003, the Compensation Committee decided to retain executive
salaries at 2002 levels.
(2) The Board of Directors has sole discretion in establishing bonus awards.
All bonuses awarded in 2002, 2001 and 2000 were in accordance with the
performance-based criteria established by the Board of Directors in January
2002, January 2001, and February 2000, respectively.
(3) Options in this schedule reflect the 3 for 2 stock splits paid in August
2000, January 2001 and August 2001.
(4) Represents matching contributions by the Company under a 401(k) plan.
(5) Mr. Lamar was hired in 2001.

OPTION GRANTS

The following table sets forth information concerning stock option
grants to the Named Executive Officers during 2002.

OPTION GRANTS IN LAST FISCAL YEAR(1)

INDIVIDUAL GRANTS GRANT DATE VALUE
---------------------------------------------------------- ----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE PRICE PRESENT VALUE
NAME GRANTED (#) IN 2002(2) ($/SHARE) (3) EXPIRATION DATE ($)(4)
---------------- ---------- ---------- -------------- --------------- ----------------

Brian R. Cook -- -- N/A N/A N/A
Kevin T. Lamar 20,000 7.3 34.05 6/10/07 410,800
Randal R. Potter 20,000 7.3 34.05 6/10/07 410,800
Rod W. Rice 12,000 4.4 34.05 6/10/07 246,480

(1) The options were granted on June 10, 2002. The options granted to executive
officers in 2002 vest in one-fourth increments on each of the first four
anniversaries of the grant date.
(2) During 2002, the Board of Directors granted options to purchase a total of
275,075 shares of The Nautilus Group common stock.
(3) The exercise price per share equaled the closing price of the shares on the
day before the grant date. The exercise price may be adjusted only upon the
occurrence of specific events that would dilute our share capital.
(4) The fair value of each option grant was estimated on the grant date using
the Black-Scholes option-pricing model with the following weighted-average
assumptions: (a) all options granted will vest as scheduled; (b) no
dividend yield; (c) a risk-free interest rate of 4.1%; and (d) an expected
volatility of 67%.

The following table summarizes the number and value of options
exercised by the Named Executive Officers during 2002 and the value of options
held by such persons as of December 31, 2002.

AGGREGATED OPTION EXERCISES IN 2002 AND
YEAR END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT YEAR END (#) AT YEAR END ($)(3)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#)(1) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------- ----------- -------- ----------- ------------- ----------- -------------

Brian R. Cook -- -- 101,250 -- 1,213,987 --
Kevin T. Lamar -- -- 37,500 132,500 -- --
Randal R. Potter 9,375 209,250 25,907 71,438 82,012 --
Rod W. Rice 45,000 1,383,137 31,250 57,000 82,012 --

(1) All option amounts above reflect the 3 for 2 stock splits paid in
August 2000, January 2001, and August 2001.
(2) The value realized is calculated based on the closing price of the
Company's common stock as reported by the New York Stock Exchange on
the date of exercise minus the exercise price of the option, and does
not necessarily indicate that the optionee sold such stock.
(3) The market value of underlying securities is based on the difference
between the closing price of the Company's common stock on December 31,
2002 (as reported by the New York Stock Exchange) and the exercise
price.

EQUITY COMPENSATION PLANS

The following table provides information about the Company's equity
compensation plan as of December 31, 2002.

EQUITY COMPENSATION PLAN INFORMATION

NUMBER OF SECURITIES NUMBER OF
TO BE ISSUED UPON WEIGHTED AVERAGE SECURITIES
EXERCISE OF EXERCISE PRICE OF REMAINING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, AVAILABLE FOR
PLAN CATEGORY WARRANTS AND RIGHTS (#) WARRANTS AND RIGHTS ($) FUTURE ISSUANCE (#)
----------------------------- ----------------------- ----------------------- -------------------

Equity compensation plans
approved by security holders 1,599,987 17.26 2,142,121
Equity compensation plans not
approved by security holders -- -- --
----------------------- ---------------------- -------------------
Total 1,599,987 17.26 2,142,121
======================= ====================== ===================

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

Each of our Named Executive Officers has entered into an employment
agreement with the Company. The salary under each of these agreements is set
each year by the Board of Directors. The executives are entitled to
reimbursement for reasonable out-of-pocket expenses. Each of the employment
agreements had an initial term of one year, with automatic renewals for
subsequent one-year terms. The Company may terminate any of the employment
agreements by providing the executive with at least six months' notice of such
termination. Upon the receipt of such notice, all unpaid salary that would have
been paid to the executive during the remaining term of his employment would
become immediately due and payable.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors is composed of
Messrs. Allen, Hanson, and Hull. All members of the Compensation Committee are
non-employee, outside directors. Although Mr. Cook, the Company's Chief
Executive Officer, served on the Company's Board of Directors in 2002 and
participated in compensation discussions, he did not participate in any
deliberations or decisions regarding his own compensation.

REPORT ON EXECUTIVE COMPENSATION *

Our Board of Directors and Compensation Committee administer our
executive compensation program. As part of its mandate, the Board is responsible
for: (1) determining the most effective overall executive compensation strategy
based upon our needs and consistent with stockholder interests; (2)
administering our executive compensation program and policies; (3) monitoring
our performance and its relationship to executive compensation; and (4)
reviewing and making appropriate changes to executive compensation as warranted.
The Compensation Committee is responsible for evaluating the performance and
establishing the compensation of our executive officers.

COMPENSATION PHILOSOPHY

The Board's executive compensation program is designed to encourage,
compensate and reward employees on the basis of individual and corporate
performance, both in the short and long term. Each executive compensation
package is comprised of a base salary and an annual incentive bonus tied to
corporate and individual performance, and, except for the Chief Executive
Officer, is supplemented by long-term incentives in the form of stock options.
The Board of Directors believes that this compensation program increases the
mutuality of interest between our executive officers and stockholders. In 2002,
the Board retained one independent compensation consulting firm to supply the
Board and the Compensation Committee with competitive compensation information
to facilitate the establishment of executive compensation levels for 2003.

BASE SALARY. The Board of Directors sets base salaries for its
executive officers at levels it believes are competitive with the base salaries
paid by leading, comparably sized public corporations in the healthy lifestyle
products and retail industry. The Board of Directors approves base salary ranges
for our executive officers based on reviews of market data from peer group,
industry and national surveys. Within each range, the Board of Directors
establishes a base salary for each executive officer based on individual
performance, the executive officer's level of responsibility and the importance
of the position to us. In 2002, an independent compensation consulting firm was
retained to advise the Board concerning wages for the executive officers.

ANNUAL BONUS. In the first quarter of each year, the Board of Directors
establishes target corporate performance goals based on actual earnings per
share and other significant factors, such as cash management, strategic business
development and personnel management. At the end of each year, the Board of
Directors evaluates corporate performance in light of these goals. If we meet or
surpass the pre-established performance goals, the Board of Directors generally
will award a bonus to each executive officer equal to 100% of his base salary.
However, the Board of Directors has absolute discretion in awarding annual
bonuses and may award greater or lesser annual bonuses to one or more executive
officers, whether or not we achieve our performance goals.

STOCK OPTIONS. Our Board of Directors views stock options as the key
long-term element in its performance-based executive compensation program. Our
Board of Directors grants stock options to our executive officers based on the
Board's estimation of each executive officer's contribution to our long-term
growth and profitability. Generally, each stock option granted to an executive
officer has an exercise price equal to the market price on the day before the
grant date and vests in one-fourth increments over a four-year period. Since
1999, stock options have not been granted to the Chief Executive Officer as he
has a substantial ownership interest in The Nautilus Group, Inc. giving him
long-term performance incentive. See "Option Grants in Last Fiscal Year" for a
summary of options granted to our executive officers during 2002.

OTHER BENEFITS. Executive officers participate in various broad-based
employee benefit plans on substantially the same terms as eligible,
non-executive employees, subject to any legal limits on the amounts that may be
contributed or paid to executive officers under these plans. We offer a 401(k)
plan which allows employees to invest in an array of funds on a pre-tax basis
and which provides for employer matching contributions of up to three percent of
eligible compensation. We also maintain insurance and other benefits for our
employees.

DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal Revenue
Code of 1986 limits to $1,000,000 per person the amount that we can deduct for
compensation paid to any of our most highly paid officers in any year. We
generally do not expect any of our employee's salary and bonus levels to exceed
that limit. However, depending on individual and corporate performance, total
compensation for certain executives may be greater than $1,000,000. The limit on
deductibility, however, does not apply to performance-based compensation that
meets certain requirements. Our current policy is generally to grant stock
options that meet those requirements so that we may properly deduct option
compensation recognized by an optionee.

2002 COMPENSATION OF CHIEF EXECUTIVE OFFICER

Except as otherwise described herein, the Compensation Committee
generally follows the compensation philosophy adopted by the Board of Directors.
The Compensation Committee established Brian R. Cook's 2002 base salary of
$450,000 in the same manner as described in "Base Salary" above with respect to
all executive officers. Mr. Cook earned a $250,000 annual bonus based on
corporate and individual performance as described in "Annual Bonus" above, and
as evaluated by the Compensation Committee. No stock options were granted to Mr.
Cook during 2002 for the reasons explained in "Stock Options" above.

The Company incurred royalty expense related to sales of Bowflex
products under an agreement with a stockholder of the Company of $9,089,312 in
2002. The stockholder separately negotiated an agreement in 1992, when the
Company was privately held, among the stockholder, Brian R. Cook, Chief
Executive Officer and Chairman of the Board and a former director of the
Company. That separate agreement stipulates that annual royalties above $90,000
would be paid 60% to the stockholder, 20% to Mr. Cook and 20% to the former
director. Mr. Cook earned $1,799,862 in 2002 under this agreement.

SUBMITTED BY

THE BOARD OF DIRECTORS: THE COMPENSATION COMMITTEE:

Peter A. Allen Peter A. Allen
Kirkland C. Aly C. Rowland Hanson
Brian R. Cook Frederick T. Hull
Robert S. Falcone
C. Rowland Hanson
Frederick T. Hull
Paul F. Little
James M. Weber

* The Report of our Board of Directors and Compensation Committee
describes the compensation policies and rationale with respect to our executive
officers during 2002. The information contained in the report shall not be
deemed "soliciting material" or "filed with the SEC," and such information shall
not be incorporated by reference into any future filing under the Securities Act
of 1933, as amended, or the Exchange Act except to the extent that we
specifically incorporate such information by reference.

REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS*

The Audit Committee of the Board of Directors of the Company (the
"Audit Committee") is comprised of three non-employee, independent directors:
Kirkland C. Aly, Paul F. Little, and James M. Weber. Management has the primary
responsibility for the financial statements and the reporting process, including
the system of internal controls. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and issuing a report thereon. The Committee is
responsible for the oversight of the Company's internal accounting and financial
reporting process and the review of the audited financial statements of the
Company, together with a discussion of pertinent matters with management and the
Company's independent auditors.

The Audit Committee acts under a written charter adopted and approved
by our Board of Directors. The members of the Audit Committee are "independent,"
as such term is defined under applicable New York Stock Exchange listing
standards. The Audit Committee has reviewed and discussed the audited financial
statements for the year ended December 31, 2002 with management and Deloitte &
Touche LLP, the Company's independent auditors. In addition the Audit Committee
has discussed and reviewed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, and, with and without
management present, discussed and reviewed the results of the independent
auditor's audit of the financial statements. Additionally, the Audit Committee
has received the written disclosures and a letter from Deloitte & Touche LLP
required by Independence Standards Board Standard No. 1, "Independence
Discussion with Audit Committees," and has discussed with Deloitte & Touche LLP
the auditor's independence.

Based on the foregoing reviews and discussions, the Audit Committee has
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2002 for filing with the Securities and Exchange Commission.

Respectfully Submitted,

Kirkland C. Aly
Paul F. Little
James M. Weber

* The Report of the Audit Committee shall not be deemed to be
"soliciting material" or to be incorporated by reference by any general
statement incorporating this Proxy Statement into any filings under either the
Securities Act of 1933, as amended, or the Exchange Act of 1934 (together the
"Acts"), except to the extent the Company specifically incorporates such report
by reference, and further, such Report shall not otherwise be deemed filed under
the Acts.

2002 PERFORMANCE GRAPH

Set forth below is a line graph and table comparing the cumulative
total stockholder return of our common stock with the cumulative total return of
the NYSE Composite Index and the S&P SmallCap 600 Index for the period
commencing on May 5, 1999 (the date of our initial U.S. public offering) and
ending on December 31, 2002. The S&P 600 Small Cap Index was chosen because we
do not believe we can reasonably identify an industry index or specific peer
issuer that would offer a meaningful comparison. The S&P SmallCap 600 Index
represents a broad-based index of companies with similar market capitalizations.
In 2001, we compared cumulative total returns between our common stock and the
NASDAQ Composite Index and the Russell 2000 Index of small cap stocks. The
change to the NYSE Composite Index from the NASDAQ Composite Index is due to the
transfer of our listing from the NASDAQ National Market to the New York Stock
Exchange on May 21, 2002. The change to the S&P SmallCap 600 Index from the
Russell 2000 Index is due to the addition of our common stock to this Index on
March 19, 2003.

The graph assumes that $100 was invested in our common stock at the
initial United States public offering price and each index on May 5, 1999. The
comparisons in this table are set forth in response to Securities and Exchange
Commission disclosure requirements, and therefore are not intended to forecast
or be indicative of future performance of the common stock.

[PERFORMANCE GRAPH]

MAY-99 DEC-99 DEC-00 DEC-01 DEC-02
------ ------ ------ ------ ------
NLS $100.0 $135.4 $245.6 $513.7 $220.0
NYSE Composite $100.0 $101.5 $102.5 $ 92.1 $ 73.8
S&P SmallCap 600 $100.0 $114.1 $126.7 $134.0 $113.4
NASDAQ $100.0 $163.7 $ 99.4 $ 78.5 $ 53.7
Russell 2000 $100.0 $116.7 $111.8 $112.9 $ 88.6

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, as well as persons who own more than 10% of
our outstanding common stock, to file with the Securities and Exchange
Commission 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 executive
officers, directors and 10% shareholders that no other reports were required, to
our knowledge, our officers, directors and 10% shareholders complied with all
applicable Section 16(a) filing requirements.

STOCKHOLDER PROPOSALS

To be considered for inclusion in our 2004 proxy statement, we must
receive all stockholder proposals intended to be presented at our 2004 annual
meeting of stockholders at our principal executive office no later than December
16, 2003. Our amended and restated bylaws require stockholders to deliver
proposals they intend to present at our 2003 annual meeting to our principal
executive office no later than sixty calendar days (April 10, 2004), and no
earlier than ninety calendar days (March 11, 2004), prior to the first
anniversary of our 2003 annual meeting.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We employed Deloitte Touche Tohmatsu ("Deloitte & Touche") as our
independent accountants during 2002, and have selected Deloitte & Touche as our
independent accountants for 2003. There have been no disagreements with Deloitte
& Touche on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of Deloitte & Touche, would have caused Deloitte & Touche to
make reference to the matter in their report. Representatives of Deloitte &
Touche are expected to be present at the annual meeting. Each representative
will be given the opportunity to make a statement on behalf of their firm if
such representative so desires, and each representative will be available to
respond to appropriate stockholder questions.

In addition to retaining Deloitte & Touche to audit our consolidated
financial statements for 2002, we retained Deloitte & Touche, as well as other
accounting and consulting firms to provide advisory, auditing, and consulting
services in 2002. We understand the need for Deloitte & Touche to maintain
objectivity and independence in its audit of our financial statements. To

minimize relationships that could appear to impair the objectivity of Deloitte &
Touche, our audit committee has restricted the non-audit services that Deloitte
& Touche may provide. These determinations are among the key practices adopted
by the Audit Committee in its "Policies and Procedures for the Approval of Audit
and Non-audit Services Provided by the Independent Auditor," effective April
2003.

The April 2003 policies adopted by the Audit Committee also address
policies and procedures for pre-approving all non-audit work performed by
Deloitte & Touche. With Audit Committee pre-approval, the Company may use
Deloitte & Touche for the following categories of non-audit services: merger and
acquisition due diligence and audit services; tax services; internal control
reviews; employee benefit plan audits; and reviews and procedures that the
Company requests Deloitte & Touche to undertake to provide assurances on matters
not required by laws or regulations.

In accordance with new SEC definitions and rules which we elected to
adopt for this year's proxy statement, "audit fees" are fees we paid Deloitte &
Touche for professional services for the audit of our consolidated financial
statements included in Form 10-K and review of financial statements included in
Form 10-Qs, or for services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements; "audit-related
fees" are fees billed by Deloitte & Touche for assurance and related services
that are reasonably related to the performance of the audit or review of our
financial statements; "tax fees" are fees for tax compliance, tax advice, and
tax planning; and "all other fees" are fees billed by Deloitte & Touche to us
for any services not included in the first three categories.

The aggregate fees billed for professional services by Deloitte &
Touche in 2002 and 2001 for these various services were approximately:

Type of Fees 2002 2001
---------------------- ------------ ------------
Audit Fees $ 293,000 $ 158,000
Audit-Related Fees 123,000 160,000
Tax Fees 63,000 61,000
All Other Fees 4,112,000 681,000
------------ ------------
Total $ 4,591,000 $ 1,060,000
============ ============

The aggregate fees billed by Deloitte & Touche for other professional
services predominantly consist of services rendered in connection with the
design and implementation of our new information systems. Deloitte & Touche fees
associated with these new information systems for 2002 and 2001 totalled
approximately $4,046,000 and $628,000, respectively. The Audit Committee
acknowledges that the regulations adopted by the SEC include certain
transitional provisions that would permit Deloitte & Touche to continue to
provide prohibited services until May 6, 2004, so long as the services are
provided pursuant to a contract entered into prior to May 6, 2003. The Audit
Committee has been notified that certain services continue

to be provided by Deloitte & Touche, and subject to these transitional
provisions, those services have been approved.

The Audit Committee believes that the foregoing expenditures are
compatible with maintaining the independence of the Company's principal
accountant.

TRANSACTION OF OTHER BUSINESS

As of the date of this proxy statement, the Board of Directors is not
aware of any other matters that may come before the annual meeting. The persons
named in the enclosed proxy card intend to vote the proxy in accordance with
their best judgment if any other matters properly come before the annual
meeting.

Please return the enclosed proxy card as soon as possible. Unless a
quorum consisting of a majority of the outstanding shares entitled to vote is
represented at the annual meeting, no business can be transacted. Therefore,
please be sure to date and sign your proxy card exactly as your name appears on
your stock certificate and return it in the enclosed postage prepaid return
envelope. Please act promptly to insure that you will be represented at this
important meeting.

By Order of the Board of Directors

/s/ Rod W. Rice
----------------------------------
Rod W. Rice
Chief Financial Officer, Treasurer
and Secretary

Vancouver, Washington
April 18, 2003

THE NAUTILUS GROUP, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 9, 2003
----------------------------------------------------------------

The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement, each dated April 18, 2003, and names,
constitutes and appoints Brian R. Cook and Rod W. Rice, or either of them acting
in absence of the other, with full power of substitution, my true and lawful
attorneys and proxies for me and in my place and stead to attend the Annual
Meeting of the Stockholders of The Nautilus Group, Inc., to be held at 10:00
a.m. PDT on June 9, 2003, and at any adjournment thereof, and to vote all the
shares of common stock held of record in the name of the undersigned on April
11, 2003, with all the powers that the undersigned would possess if personally
present.

1. PROPOSAL 1: Election of Directors

[_] FOR all nominees named below (except as marked otherwise below)
[_] WITHHOLD AUTHORITY for all nominees named below

(Instructions: To withhold authority to vote for any individual nominee,
strike a line through nominee's name)

Peter A. Allen Robert S. Falcone Paul F. Little
Kirkland C. Aly C. Rowland Hanson James M. Weber
Brian R. Cook Frederick T. Hull

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES NAMED ABOVE.

2. Upon such other matters as may properly come before, or incident to the
conduct of the annual meeting, the proxy holders shall vote in such manner
as they determine to be in our best interests of The Nautilus Group, Inc.
Management is not presently aware of any such matters to be presented for
action at the annual meeting.

Our Board of Directors is soliciting this proxy. If no specific direction
is given as to the above item, this proxy will be voted FOR the nominees named
in Proposal 1.

Please sign below exactly as your name appears on this proxy card. If
shares are registered in more than one name, the signatures of all such persons
are required. A corporation should sign in its full corporate name by a duly
authorized officer, stating his/her title. Trustees, guardians, executors and
administrators should sign in their official capacity, giving their full title
as such. If a partnership, please sign in the partnership name by authorized
person(s). If you receive more than one proxy card, please sign and return all
such cards in the accompanying envelope.

Dated
-------------------------------------

-------------------------------------------
Stockholder (PRINT NAME)

-------------------------------------------
Stockholder (SIGN NAME)

-------------------------------------------
Address

-------------------------------------------
City, State, Zip or Postal Code

I DO [_] DO NOT [_] PLAN TO ATTEND THE
MEETING.

The stockholder signed above
reserves the right to revoke this
proxy at any time prior to its
exercise by written notice delivered
to our Secretary at our corporate
offices at 1400 NE 136TH AVENUE,
VANCOUVER, WASHINGTON 98684, prior
to the annual meeting. The power of
the proxy holders shall also be
suspended if the stockholder signed
above appears at the annual meeting
and elects in writing to vote in
person.