This excerpt taken from the NLS DEFA14A filed Dec 5, 2007.
Your Company needs your support to enable it to execute its strategy. Now is not the time to allow Bramson and the other Sherborne nominees to seize control of your Board.
You may have received a recent letter from Sherborne, in which it questions your Boards commitment to executing our turnaround plan and touts its own experience. Let no one question your Boards resolve. We have been proactive in implementing change and taking steps to create shareholder value. At the same time, as we told you in our letter of November 8, 2007, we welcome whatever experience Sherborne has to offer. That was why, months ago, we offered Sherborne representation on our Board in proportion to its share ownership. In addition, we offered Sherborne seats on a new Executive Committee whose purpose would be to oversee the Companys financial affairs and strategic direction with a supervisory role over the Companys business plans, capital structure and financing activities and financial budget.
Sherborne rejected our offer, choosing instead to continue its efforts to seize control of your Board. Sherborne tries to explain its decision not to accept Board and oversight representation by claiming this was because we asked it to execute a standstill agreement. What Sherborne fails to tell you is that it never asked what your Board would require. If it had asked, we would have explained that the only requirement for us to put its nominees on the Board is that Sherborne refrain from running a competing slate of directors for twelve months, so that the company, with Sherbornes participation, can focus on its turnaround plan and bring it to fruition. Our offer to Sherborne remains open, and we have offered representation to Sun Capital Securities, LLC, our second largest shareholder, in the event our nominees are elected.
Despite the fact that Sherborne appears to be stuck in fight mode, your Board and company has continued to move forward with our turnaround plan, implementing the cost reductions and evaluating the potential divestitures of non-core assets that we discuss above. We agree with Sherborne that a fresh, realistic and straightforward attitude on the board could make a major difference to the shareholder value of Nautilus we already have that attitude and we have already taken actions to realize shareholder value.
We also agree with Sherborne that it is not the best choice to manage Nautilus over the long term. But while Sherborne wants to begin yet another search for new management, Bob Falcone has hit the ground running. It is important to know that Bob Falcones appointment was the result of an extensive search of more than 100 candidates brought to the independent directors through a highlyregarded recruiting firm. Sherborne inaccurately refers to his severance agreement as onerous. In fact, Mr. Falcones agreement, unlike many customary agreements provided to public company CEOs, does not trigger a severance payment upon a change of control, and no payment would be due to Bob under the agreement solely as a result of the proxy contest. Bob was the best candidate and the committee wanted to have a permanent CEO so the turnaround could start immediately, not three to six months down the road after the proxy contest came to an end and a new CEO had the opportunity to get up to speed the Company could not afford to sit idly by at the time and we cannot afford to put our turnaround plan on hold now and start over from the beginning.
We are committed to delivering value for ALL shareholders. We have already written to you about the losses suffered by Ampexs shareholders while it was under Mr. Bramsons watch. Those facts speak for themselves. But on this issue, we also need to inform you of another troubling fact arising out of past actions at Ampex that we believe calls into question Mr. Bramsons assertion that his interests are fully aligned with the interests of all shareholders. While at Ampex, Bramson and entities he controlled purchased shares of Ampex stock directly from Ampex with money borrowed from Ampex. While in control of Ampex, and as the value of the Ampex stock dropped, Mr. Bramson and his affiliates defaulted on the loans owed to Ampex, had a portion of their loan repayment obligations forgiven and had the terms of some loans modified so that Ampex would only be able to take back the Ampex stock (which had declined in value below the loan amounts) if Mr. Bramson and his affiliates defaulted on the loans. In all, of approximately $5.2 million in loans, approximately $4.98 million was forgiven or not repaid and Ampex was forced to foreclose on Ampex stock worth only $0.44 million.
Although these loans were permitted at the time, in the years following the collapses of Enron and WorldCom (which also made loans to Messrs. Skilling and Ebbers, among others), such types of loans have been made illegal, as they are now deemed to be symptomatic of bad corporate governance. Ask yourself whether Bramson and the other Sherborne nomineeswho by their own admission are not the best choice for Nautilus in the long termdeserve control of your company.
We believe that the moves already made by Bob Falcone, the management team and the Board have been significant changes that will have a large, positive influence on Nautilus and its turnaround changes that will benefit all shareholders. This work is underway and additional changes are in progress; we are confident in our market opportunity, our brands and products, our distribution strategy and the ability of our quality management team to execute on Bobs strategy.
Your Board and management team are confident that we are on the right path to a stronger future for Nautilus and increased value for all shareholders. With your supportand your vote on the enclosed WHITE proxy cardwe can send Bramson and Sherborne a strong message by soundly rejecting their proposals. Please use the enclosed WHITE proxy card to vote AGAINST the removal of your directors TODAYby telephone, by Internet, or by signing, dating and returning the WHITE proxy card.
Thank you for your support.
THE BOARD OF DIRECTORS