Filed
by
the Registrant ¨
Filed
by
a Party other than the Registrant ý
Check
the
appropriate box:
£ Preliminary
Proxy Statement
£ Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
£ Definitive
Proxy Statement
T Definitive
Additional Materials
£ Soliciting
Material Pursuant to §240.14a-12
(Name
of
Registrant as Specified In Its Charter)
SHERBORNE
INVESTORS LP, SHERBORNE INVESTORS GP, LLC, SHERBORNE
INVESTORS MANAGEMENT
LP, SHERBORNE INVESTORS MANAGEMENT GP, LLC,
SHERBORNE STRATEGIC FUND A, LLC,
SHERBORNE STRATEGIC FUND B, LLC,
NOTTINGHAM INVESTORS LLC AND EDWARD J.
BRAMSON
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
T
No fee required.
£
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
|
(4) Proposed
maximum aggregate value of transaction:
(5) Total
fee paid:
£
Fee paid previously with preliminary materials.
|
£
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
|
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
SHERBORNE
INVESTORS MAILS LETTER TO NAUTILUS, INC. SHAREHOLDERS
Company’s
Largest Shareholder Encourages Investors to Elect All of Sherborne
Investors’
Director
Nominees at the Upcoming Special Shareholders Meeting
NEW
YORK,
NY, December 10, 2007 – Sherborne Investors LP mailed a letter to Nautilus, Inc.
(NYSE: NLS) shareholders today, encouraging them to hold the Company’s Board of
Directors accountable for its recent actions and the Company’s multi-year stock
price decline. Sherborne Investors encouraged shareholders to vote
“FOR
ALL” of
its nominees at Nautilus’ upcoming special shareholder meeting on
December 18.
The
text
of the letter follows below:
December
7, 2007
Dear
Fellow Shareholder:
Nautilus’
special shareholder meeting will be held in just over one week’s time. As you
consider your position in this important matter, we wanted to take the
opportunity to address several key points raised by the Company’s Board in their
most recent letter. The current Board’s propensity to omit key facts and distort
Sherborne Investors’ record is telling. Particularly troubling is the
mischaracterization of an incentive compensation arrangement that was offered
in
lieu of stock options to one of our principals, who was serving as CEO of
Ampex
Corporation, one of our previous investments.
Nautilus
goes on to point out in its letter that we declined the Company’s offer to
appoint two Sherborne Investors representatives to its Board of Directors.
However, the letter fails to fully explain that, had we accepted the offer,
we
would have been locked into an ineffective position with only two directors
out
of 10 and would have been subject to an onerous Company-drafted “standstill”
agreement, which could have effectively precluded us from taking any matters
directly to shareholders and from voting our shares in what we believe to
be the
best way. In fact, the agreement could have tied our hands for up to 15 months
with related notice periods, ensuring that the Board was free to continue
to
make decisions that we believe are not in the best interests of all
shareholders. We have presented a very clear path to returning Nautilus to
profitability and sustained growth, and the offer presented by the Company could
have severely restricted our ability to deliver on that plan.
A
greater
concern to us than the exact form of Board representation is the need for
increased operational oversight. We feel strongly that there should be a
division of responsibility between the chairman and CEO. This would ensure
closer operational supervision, which we believe could only benefit the Company.
Unfortunately, the CEO has declined to accept such an arrangement and his
employment contract, approved recently by the current Board, specifically
provides that if the roles of chairman and CEO are separated, he is entitled
to
severance of $1.15 million and immediate vesting of 400,000 options. For
this
reason, we believe this employment contract is onerous to
shareholders.
In
the
past two years, when most members of the current Board were in office, including
the current CEO, Nautilus shares declined by 62%. Since the appointment of
the
current CEO only four months ago, the shares have declined by 24%. The recent
public unveiling of the Company’s strategy has not caused the shares to recover
and, in our opinion, the reaction to it is likely to continue to be
disappointing. One must question the decision of the Board to hire a CEO
who was
a director over the past four years while the share price has dramatically
declined. We feel the Company would have been better served by a search process
that yielded outside candidates with more appropriate experience and the
ability
to provide a fresh look at Nautilus’ operations.
Sherborne
Investors, on the other hand, has made money for shareholders in every
investment it has made in the past five years except, up to this point,
Nautilus. We are confident, and have demonstrated this confidence with a
25%
shareholding, that our approach and experience will make a significant, positive
difference to the value of your shares and ours and that the improvements
will
be seen relatively quickly. The Board’s approach, which is largely to continue
as before, offers the prospect of mediocre returns, even if it ultimately
succeeds. Meanwhile, the Company is expected to record, on a recurring basis,
a
$35 million loss in 2007. The Board’s approach will take a number
of
years
to
prove itself and the Company may not have the financial resources to wait
that
long. We feel strongly that more immediate action is required.
Nautilus’
current Board has not represented its shareholders well and should be held
accountable.
Importantly,
two leading proxy governance firms recently recognized the need for change
on
the Nautilus Board. Both Institutional Shareholder Services and Glass Lewis
LLC
have recommended shareholders elect two of Sherborne Investors’ nominees to the
Board, which would provide incremental additional governance and management
oversight. As Glass Lewis noted in its analysis of the actions recently taken
by
the Company: “It appears that most of the Company’s actions were taken only
after [Sherborne Investors] threatened a proxy contest and following many
months
of disappointing results. This gives us little faith that the Board has been
proactively seeking to remedy the Company’s poor performance.” This further
underscores the need for a serious change in approach at the Board level.
We
believe that to take a truly fresh perspective on Nautilus’ strategy and restore
financial stability and profitable growth in the near-term, you should vote
“FOR” all four of our nominees on the GREEN proxy card.
We
believe that the issues to be considered at the special meeting reflect a
fundamental difference of business judgment in how best to create value for
shareholders. On its current course, we believe the Company is facing a
prolonged period of underperformance and a material risk of failure. There
is a
better way to unlock the value hidden in Nautilus, and we ask for your support
to enable us to implement a fresh approach that can create value for all
shareholders. For the reasons stated above and more fully discussed in our
proxy
statement dated November 5, 2007, which is available along with the full
details
of our strategic plan for the Company on our website at
http://www.dfking.com/sherborne, Sherborne Investors urges you to vote “FOR”
Proposals 1, 2, 3 and 5 and “FOR ALL” of our nominees in Proposal 4 on the
enclosed GREEN proxy card.
Yours
sincerely,
Sherborne
Investors LP
135
East
57th Street
New
York,
New York 10022
A
proxy
statement regarding this proxy solicitation was filed with the Securities
and
Exchange Commission on November 5, 2007. You should read the proxy statement,
as
it contains important information. Copies of this proxy statement are available
free of charge at www.sec.gov and www.dfking.com/sherborne or by calling
D.F.
King & Co., Inc. at the numbers listed below. The GREEN proxy card is being
furnished to shareholders in connection with the solicitation of proxies
by
Sherborne Investors LP and not on behalf of the incumbent board of directors
of
the company.
The
upcoming special meeting of shareholders will take place at 10:00 a.m. local
time on December 18, 2007. It will be held at Nautilus’ World Headquarters,
16400 SE Nautilus Drive, Vancouver, Washington. We urge you to vote the GREEN
proxy card today.
Please
vote the GREEN proxy card today! Do NOT send back management’s white proxy card
even as a sign of protest. Remember, your latest dated proxy card will revoke
all previous cards submitted, so if you have already voted the white card
please
vote the GREEN proxy card today.
If
any of
your shares are held in the name of a broker, bank or other nominee, only
it can
vote such shares and only upon receipt of your specific instructions.
Accordingly, please contact the person responsible for your account and instruct
that person to execute the GREEN proxy card representing your shares. We
urge
you to confirm to D.F. King & Co., Inc. in writing at the address provided
below the instructions you give to your broker, bank or other nominee so
that we
will be aware of all instructions given and can attempt to ensure that such
instructions are followed.
If
you
have any questions, require assistance in voting your shares, or need additional
copies of our proxy materials, please call D.F. King & Co., Inc. at the
phone numbers listed below.
D.F.
King
& Co., Inc.
48
Wall
Street
22nd
Floor
New
York,
NY 10005
Banks
and
Brokers Call Collect: (212) 269-5550
All
others call toll free: (800) 628-8532
Institutional
Investors Call: (212) 493-6990
Email:
sherborne@dfking.com
Forward-Looking
Statements
Certain
statements contained herein are forward-looking statements, including statements
concerning Sherborne Investors’ ability to conduct a successful turnaround of
Nautilus, Inc. (“Nautilus”). Factors that could cause Nautilus’ actual results
to differ materially from these forward-looking statements include Sherborne
Investors’ ability to effectively implement its turnaround strategy, the
availability of media time and fluctuating advertising rates, a decline in
consumer spending due to unfavorable economic conditions, Nautilus’ ability to
effectively develop, market, and sell future products, Nautilus’ ability to get
foreign sourced product through customs in a timely manner, Nautilus’ ability to
effectively identify, negotiate and integrate any future strategic acquisitions,
Nautilus’ ability to protect its intellectual property, the introduction of
lower-priced competing products, unpredictable events and circumstances relating
to international operations including Nautilus’ use of foreign manufacturers,
government regulatory action, and general economic conditions. We also caution
you not to place undue reliance on forward-looking statements, which speak
only
as of the date they are made. We undertake no obligation to update publicly
any
forward-looking statements to reflect new information, events or circumstances
after the date they were made or to reflect the occurrence of unanticipated
events.
Media
Contacts:
Adam
Miller/Tom Johnson
Abernathy
MacGregor Group
(212)
371-5999
Institutional
Investor Contact:
Jordan
Kovler
D.F.
King
& Co., Inc.
(212)
493-6990