nautilius13da-092007.htm

0001116679-07-002535.txt : 20070921 0001116679-07-002535.hdr.sgml : 20070921 20070920185945 ACCESSION NUMBER: 0001116679-07-002535 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20070921 DATE AS OF CHANGE: 20070920 GROUP MEMBERS: EDWARD J. BRAMSON GROUP MEMBERS: NOTTINGHAM INVESTORS LLC GROUP MEMBERS: SHERBORNE INVESTORS GP, LLC GROUP MEMBERS: SHERBORNE INVESTORS LP GROUP MEMBERS: SHERBORNE INVESTORS MANAGEMENT GP, LLC GROUP MEMBERS: SHERBORNE INVESTORS MANAGEMENT LP GROUP MEMBERS: SHERBORNE STRATEGIC FUND A, LLC GROUP MEMBERS: SHERBORNE STRATEGIC FUND B, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NAUTILUS, INC. CENTRAL INDEX KEY: 0001078207 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 943002667 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-57867 FILM NUMBER: 071127904 BUSINESS ADDRESS: STREET 1: 16400 SE NAUTILUS DRIVE CITY: VANCOUVER STATE: WA ZIP: 98683 BUSINESS PHONE: 3606947722 MAIL ADDRESS: STREET 1: 16400 SE NAUTILUS DRIVE CITY: VANCOUVER STATE: WA ZIP: 98683 FORMER COMPANY: FORMER CONFORMED NAME: NAUTILUS GROUP INC DATE OF NAME CHANGE: 20020523 FORMER COMPANY: FORMER CONFORMED NAME: DIRECT FOCUS INC DATE OF NAME CHANGE: 19990202 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Sherborne Investors GP, LLC CENTRAL INDEX KEY: 0001373507 IRS NUMBER: 204960973 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 135 EAST 57TH STREET CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: (212) 735-1000 MAIL ADDRESS: STREET 1: 135 EAST 57TH STREET CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 nautilius13da-092007.htm SUBJECT: NAUTILUS, INC. nautilius13da-092007.htm

As filed with the Securities and Exchange Commission on September 21, 2007

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 5)

Nautilus, Inc.

(Name of Issuer)

Common Stock, No Par Value

(Title of Class of Securities)

63910B102

(CUSIP Number)

Michael L. Zuppone, Esq.

Paul, Hastings, Janofsky & Walker LLP

75 East 55th Street

New York, New York 10022

(212) 318-6906

(Name, Address and Telephone Number of Person Authorized

to Receive Notices and Communications)

September 20, 2007

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Sherborne Investors LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 7,405,455
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 7,405,455
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,405,455
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5%
14	TYPE OF REPORTING PERSON PN

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Sherborne Investors GP, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 7,405,455
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 7,405,455
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,405,455
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5%
14	TYPE OF REPORTING PERSON OO

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Sherborne Investors Management LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 7,405,455
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 7,405,455
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,405,455
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5%
14	TYPE OF REPORTING PERSON PN

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Sherborne Investors Management GP, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 7,405,455
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 7,405,455
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,405,455
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5%
14	TYPE OF REPORTING PERSON OO

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Sherborne Strategic Fund A, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 632,944.239
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 632,944.239
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 632,944.239
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.0%
14	TYPE OF REPORTING PERSON OO

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Sherborne Strategic Fund B, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 949,416.358
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 949,416.358
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 949,416.358
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.0%
14	TYPE OF REPORTING PERSON OO

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Nottingham Investors LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 5,823,094.400
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 5,823,094.400
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,823,094.400
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 18.5%
14	TYPE OF REPORTING PERSON OO

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1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Edward J. Bramson
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)o (b)o
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United Kingdom
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 7,405,455
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 7,405,455
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,405,455
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5%
14	TYPE OF REPORTING PERSON IN

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Explanatory Note: This Amendment No. 5 (this “Amendment”) to Schedule 13D is filed by the Reporting Persons (as defined below in this Explanatory Note) pursuant to Rule 13d-2(a) under the Securities Exchange Act of 1934, as amended. This Amendment amends and supplements the Schedule 13D filed with the U.S. Securities and Exchange Commission (the “Commission”) on July 25, 2007 (the “Initial 13D”) as amended and supplemented by Amendment 1 to the Initial 13D filed with the Commission on July 31, 2007, Amendment 2 to the Initial 13D filed with the Commission on August 24, 2007, Amendment 3 to the Initial 13D filed with the Commission on September 4, 2007 and Amendment 4 to the Initial 13D filed with the Commission on September 14, 2007 and relates to the common stock, no par value (“Shares”) of Nautilus, Inc., a Washington corporation (the “Issuer”).

The Reporting Persons are:

(i)	Sherborne Investors LP, a Delaware limited partnership and managing member of each of the Funds (as defined below) (“Managing Member” or “Sherborne Investors”);

(ii)	Sherborne Investors GP, LLC, a Delaware limited liability company and general partner of the Managing Member (“Sherborne Investors GP”);

(iii)

Sherborne Investors Management LP, a Delaware limited partnership and investment manager to the Funds (“Sherborne Management”);

(iv)	Sherborne Investors Management GP, LLC, a Delaware limited liability company and general partner of Sherborne Management (“Sherborne Management GP”);

(v)	Sherborne Strategic Fund A, LLC, a Delaware limited liability company (“Strategic Fund A”);

(vi)	Sherborne Strategic Fund B, LLC, a Delaware limited liability company (“Strategic Fund B”);

(vii)

Nottingham Investors LLC, a Delaware limited liability company (“Nottingham” and, together with Strategic Fund A and Strategic Fund B, the “Funds”); and

(viii)

Edward J. Bramson (“Bramson”), a citizen of the United Kingdom and the managing member of Sherborne Investors GP and Sherborne Management GP.

The Covered Persons, for whom information is required to be provided pursuant to Instruction C to Schedule 13D, are Bramson, Mr. Craig L. McKibben and Mr. Gerard L. Eastman (collectively, the “Covered Persons”). Messrs. McKibben and Eastman are managing directors of Sherborne Investors GP and Sherborne Management GP.

Item 3. Source and Amount of Funds or Other Consideration.

Item 3 is hereby amended and restated in its entirety as follows:

The aggregate purchase price of the 7,405,455 Shares owned by the Funds is $74,680,933.52,

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including brokerage commissions. The Shares owned by the Funds were acquired with such Funds’ available funds.

Item 4. Purpose of Transaction

Item 4 is amended and restated in its entirety as follows:

On September 13, 2007, Edward Bramson and Gerard Eastman, principals of Sherborne Investors, met with Ronald Badie, the lead director of the Issuer, and the nominating committee of the Issuer’s board of directors. At the meeting, the parties discussed the operating turnaround experience of Messrs. Bramson and Eastman in other companies in which the Reporting Persons or their affiliates have invested and areas of focus for a potential turnaround plan for the Issuer. Messrs. Bramson and Eastman expressed their desire to join the board of directors of the Issuer and to actively assist the Issuer in an operating capacity. The parties also discussed a possible separation of the roles of chairman and chief executive with a representative of the Reporting Persons to be appointed as chairman. While no understandings or agreements were reached at this meeting, the representatives of the Issuer agreed to review with the full board the actions discussed by the parties and subsequently indicated their intention to respond during the week of September 17th.

On September 19, 2007, Mr. Bramson received an email from Donald Keeble, Chairman of the Issuer’s Nominating Committee, stating that the board would not be responding to these matters until the week of September 24th. The Reporting Persons believe that in the event an acceptable agreement between the parties is not reached, it would be appropriate to refer these issues to the shareholders of the Issuer for a vote. In order to preserve the option of holding such a meeting prior to year end, the Reporting Persons, on September 20, 2007, sent a demand for a special meeting of shareholders to the Issuer (the “Demand”). The Demand and a letter, dated September 20, 2007, from Mr. Bramson to Mr. Keeble informing Mr. Keeble that Sherborne Investors was sending the Demand to the Issuer are attached hereto as Exhibits 2 and 3, respectively, and are incorporated herein by reference.

In summary, the Demand sets forth proposals (the “Proposals”) for (i) the removal of four incumbent directors from the Issuer’s board of directors (namely, Peter A. Allen, Evelyn Follit, Donald W. Keeble, and Diane L. Neal), (ii) the election of four nominees proposed by the Reporting Persons (namely Edward Bramson and Gerard L. Eastman, as representatives of Sherborne Investors, and Michael A. Stein and Richard A. Horn, as independent directors, (collectively, the “Nominees”)), and (iii) certain technical proposals, including bylaw amendments, related to the implementation of the foregoing proposals. The Demand does not propose the removal of Robert S. Falcone (Interim Chief Executive Officer), Ronald P. Badie (the Lead Independent Director), and Marvin G. Siegert (Chairman of the Audit Committee). In conjunction with the Demand, the Reporting Persons currently intend to file a proxy statement with the Commission so that they may solicit proxies from other holders of Shares that support the Proposals. Further information regarding the background and experience of the Nominees will be contained in such proxy statement.

If elected, the Nominees would constitute a majority of the Issuer’s board of directors. The Reporting Persons anticipate that the Nominees, if elected, would give consideration to the

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separation of the offices of Chairman and Chief Executive and to the appointment of Edward Bramson as Chairman. If elected to the board, the Nominees intend to work actively with other members of the board and management to effectuate a successful operational turnaround of the Issuer with the objective of enhancing shareholder value.

Under Section 23B.07.020 of the Washington Business Corporation Act and Section 1.2 of the bylaws of the Issuer, due to the delivery of the Demand to the Issuer, the Issuer is required to call a special meeting of its shareholders to consider and vote upon the Proposals.

The September 13, 2007 meeting discussed above was preceded by a meeting on August 22, 2007 between Edward Bramson and Gerard Eastman, and Robert Falcone, interim chairman and chief executive of the Issuer, Mr. Badie and other members of the management of the Issuer. At that meeting, the parties discussed a number of issues, including the status of the Issuer’s current operations and operational turnaround plans. In addition, the parties discussed the current search for a permanent chief executive officer, and also the possibility of adding representatives of the Reporting Persons to the Issuer’s board of directors. Although no understandings or agreements were reached at the August 22, 2007 meeting, the Reporting Persons expected to have further discussions with representatives of the Issuer regarding these matters.

The Reporting Persons and the Covered Persons purchased the Shares based on their belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. Depending upon various factors, including overall market conditions, other investment opportunities available to the Reporting Persons and the Covered Persons, and the availability of Shares at prices that would make the purchase of additional Shares desirable, the Reporting Persons and the Covered Persons may or may not increase their position in the Issuer through, among other things, the purchase of additional Shares or derivative securities, on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Persons and the Covered Persons may deem advisable.

The Reporting Persons and the Covered Persons intend to review their investments in the Issuer on a continuing basis and depending on various factors the Reporting Persons and the Covered Persons may deem relevant to their investment decision, including, without limitation, the Issuer’s financial position and strategic direction, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions, the Reporting Persons and the Covered Persons may decide to sell some or all of their Shares, or to continue to hold their existing position in the Shares for investment. The Reporting Persons and the Covered Persons, if they so elect, may from time to time engage in transactions for the purpose of hedging some or all of their positions in the Shares.

In addition, depending upon the factors mentioned above and other factors the Reporting Persons and the Covered Persons may deem relevant, the Reporting Persons and the Covered Persons may in the future take such other actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, engaging in further discussions with management and/or the board of the Issuer concerning opportunities that the Reporting Persons and the Covered Persons believe may exist to improve the business, operations, financial condition and strategic direction of the Issuer, communicating with other shareholders of the

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Issuer, continuing to seek representation on the Issuer’s board, or changing their intention with respect to any and all matters referred to in this Item 4.

Except as set forth herein or such as would occur upon completion of any of the actions discussed above, no Reporting Person or Covered Person has any present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a)-(j) of Item 4 of Schedule 13D.

Item 7. Materials to be Filed as Exhibits

Exhibit No.	Description
1	Joint Filing Agreement, dated July 25, 2007(1)
2	Demand for Special Meeting of Shareholders, dated September 20, 2007, pursuant to Section 23B.07.020 of the Washington Business Corporation Act and Section 1.2 of the Bylaws of Nautilus, Inc.
3	Letter, dated September 20, 2007, from Edward Bramson to Donald Keeble, director of the Issuer and Chairman of the Issuer’s Nominating Committee

___________________

(1) Previously filed with the Initial 13D on July 25, 2007.

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SIGNATURE

After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: September 20, 2007

	SHERBORNE INVESTORS LP

	By: SHERBORNE INVESTORS GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

SHERBORNE INVESTORS GP, LLC

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

	SHERBORNE INVESTORS MANAGEMENT LP

	By: SHERBORNE INVESTORS MANAGEMENT GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

SHERBORNE INVESTORS MANAGEMENT GP, LLC

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

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	SHERBORNE STRATEGIC FUND A, LLC

	By: SHERBORNE INVESTORS LP, its managing member

By:

SHERBORNE INVESTORS GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

	SHERBORNE STRATEGIC FUND B, LLC

	By: SHERBORNE INVESTORS LP, its managing member

By:

SHERBORNE INVESTORS GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

	NOTTINGHAM INVESTORS LLC

	By: SHERBORNE INVESTORS LP, its managing member

By:

SHERBORNE INVESTORS GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

EDWARD BRAMSON

	/s/ Edward Bramson
	Edward Bramson

EX-2 2 ex-2.htm DEMAND FOR SPECIAL MEETING ex-2.htm

Exhibit 2

SHERBORNE STRATEGIC FUND A, LLC

SHERBORNE STRATEGIC FUND B, LLC

NOTTINGHAM INVESTORS LLC

135 East 57th Street

New York, NY 10022

September 20, 2007

Via Facsimile and Registered Mail,

Return Receipt Requested

Mr. Robert Falcone

Interim Chairman and Chief

Executive Officer

Mr. William D. Meadowcroft

Chief Financial Officer, Secretary

and Treasurer

Nautilus, Inc.

16400 S.E. Nautilus Drive

Vancouver, Washington 98683

Re:	Demand for Special Meeting of Shareholders Pursuant to Section 23B.07.020 of theWashington Business Corporation Act and Section 1.2 of the Bylaws of Nautilus, Inc.

Gentlemen:

Pursuant to Section 23B.07.020 of the Washington Business Corporation Act and Section 1.2 of the Amended and Restated Bylaws (the “Bylaws”) of Nautilus, Inc. (the “Company”), Sherborne Strategic Fund A, LLC, a Delaware limited liability company (“Strategic Fund A”), Sherborne Strategic Fund B, LLC, a Delaware limited liability company (“Strategic Fund B”), and Nottingham Investors LLC, a Delaware limited liability company (“Nottingham” and, together with Strategic Fund A and Strategic Fund B, the “Funds”), hereby demand a special meeting of shareholders of the Company (the “Special Meeting”) as the beneficial and/or record owners on the date hereof of 7,405,455 shares of common stock, no par value, of the Company (the “Shares”) in the aggregate for the purpose of voting on the following proposals:

·	Proposal 1 - To remove each of the following four incumbent members of the Company’s board of directors (the “Board”) and any other person elected or appointed to the Board by the members of the Board since April 4, 2007 to fill any vacancy on the Board or any newly-created directorships:

o	Peter A. Allen;

o	Evelyn Follit;

o	Donald W. Keeble; and

o	Diane L. Neal.

Proposal 2– To amend Section 2.4 of Article II of the Bylaws, as set forth on Schedule I to this demand, to provide that any vacancies on the Board resulting from the removal of directors by the shareholders of the Company may not be filled by the Board and shall only be filled by the shareholders of the Company.

·	Proposal 3- To amend Section 2.2 of Article II of the Bylaws, as set forth on Schedule I to this demand, to fix the number of directors serving on the Board at seven; provided, however, that such number may be decreased (but not increased) pursuant to resolution of the Board.

·	Proposal 4 - To the extent shareholders vote to remove incumbent directors pursuant to Proposal 1 above, to elect the following four nominees to the Board:

o	Edward J. Bramson;

o	Gerard L. Eastman;

o	Michael A. Stein; and

o	Richard A. Horn;

provided, however, to the extent shareholders approve the removal of some, but fewer than all, of the incumbent directors listed in Proposal 1, the nominees above are proposed to be elected to the Board in the following order until all of the vacancies created by the removal of incumbent directors pursuant to Proposal 1 are filled: nominee Bramson, nominee Eastman, nominee Stein and nominee Horn.

·	Proposal 5– To adjourn the Special Meeting, if necessary, for the purposes of soliciting additional proxies to vote in favor of Proposals 1 through 4.

Proposals 1, 2, 3, 4 and 5 are collectively referred to herein as the “Proposals.”

Address of Shareholders Making Demand

The address for each of the Funds is 135 East 57th Street, New York, NY 10022.

Class and Number of Shares of Capital Stock

The Funds own an aggregate 7,405,455 Shares, consisting of 6,624,478 Shares held of record by the Funds and 780,977 Shares beneficially owned by the Funds but held in “street name.” For your information, we attach hereto as Exhibit A copies of the stock certificates evidencing the 6,624,478 Shares held of record by the Funds.

Arrangements or Understandings with Other Persons

Other than as set forth below, no arrangements or understandings exist between the Funds and any other person in connection with the Proposals and no other person has a material interest in the Proposals, other than the indirect interests of investors in the Funds. The following describes the individual ownership of Shares by each of the Funds and the relationships between the Funds and the persons that control the Funds:

·	Strategic Fund A owns of record and/or beneficially approximately 632,944.239 Shares;

·	Strategic Fund B owns of record and/or beneficially approximately 949,416.358 Shares;

·	Nottingham owns of record and/or beneficially approximately 5,823,094.400 Shares;

·	Sherborne Investors LP (the “Managing Member”), a Delaware limited partnership, is the managing member of each of the Funds;

·	Sherborne Investors GP, LLC (“Sherborne Investors GP”), a Delaware limited liability company, is the general partner of the Managing Member;

·	Sherborne Investors Management LP (“Sherborne Management”), a Delaware limited partnership, is the investment manager to the Funds;

·	Sherborne Investors Management GP, LLC (“Sherborne Management GP”), a Delaware limited liability company, is the general partner of Sherborne Management;

·	Edward J. Bramson (“Bramson”), is the managing member of Sherborne Investors GP and Sherborne Management GP; and

·	Mr. Craig L. McKibben and Mr. Gerard L. Eastman are managing directors of Sherborne Investors GP and Sherborne Management GP.

The Funds, the Managing Member, Sherborne Investors GP, Sherborne Management, Sherborne Management GP, Bramson, Craig L. McKibben and Gerard L. Eastman are collectively referred to herein as “Sherborne.” As described in the Schedule 13D filed by the Funds, the Managing Member, Sherborne Investors GP, Sherborne Management, Sherborne Management GP and Bramson with the U.S. Securities and Exchange Commission on July 26, 2007 and amended on July 31, 2007, August 24, 2007, September 4, 2007 and September 14, 2007 (the “Schedule 13D”), Sherborne seeks to improve the business, operations, financial condition and strategic direction of the Company.

Appearance at the Special Meeting

Each of the Funds intends to appear in person or by proxy at the Special Meeting to bring the Proposals before the Special Meeting.

Persons to Contact with Respect to the Proposals

Should you have any questions with respect to the foregoing, please do not hesitate to contact Michael L. Zuppone (212-318-6906) or Keith D. Pisani (212-318-6053) of Paul, Hastings, Janofsky & Walker LLP, outside counsel to Sherborne.

SHERBORNE STRATEGIC FUND A, LLC

	By:	SHERBORNE INVESTORS LP, its managing member


	By:	SHERBORNE INVESTORS GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

SHERBORNE STRATEGIC FUND B, LLC

	By:	SHERBORNE INVESTORS LP, its managing member


	By:	SHERBORNE INVESTORS GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

NOTTINGHAM INVESTORS LLC

	By:	SHERBORNE INVESTORS LP, its managing member


	By:	SHERBORNE INVESTORS GP, LLC, its general partner

	By:	/s/ Craig L. McKibben
		Name: Craig L. McKibben
		Title: Managing Director

SCHEDULE I

PROPOSED AMENDMENTS

TO THE AMENDED AND RESTATED BYLAWS OF NAUTILUS, INC.

Proposed Amendment to Bylaws to Allow Only the Shareholders to Fill any Vacancies on the Nautilus, Inc. Board Resulting From the Removal of Directors by the Shareholders

Section 2.4 of Article II of the Amended and Restated Bylaws of Nautilus, Inc. is amended and restated in its entirety as follows (proposed new language appears in italics; deleted characters appear as struck through):

"2.4. Vacancies. Except as otherwise provided in this Section 2.4, Aany vacancy occurring in the Board of Directors (whether caused by resignation, death, an increase in the number of directors, or otherwise) may be filled by the shareholders or the Board of Directors. If the directors in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of all the directors in office. Notwithstanding the foregoing, any vacancies occurring in the Board of Directors resulting from removal of members of the Board of Directors by the shareholders may not be filled by the Board of Directors and shall only be filled by the affirmative vote of the shareholders of the corporation entitled to vote generally in the election of directors, voting together as a single class. A director elected to fill any vacancy shall hold office until the next shareholders meeting at which directors are elected.”

Proposed Amendment to Bylaws to Fix Number of Directors Serving on the Nautilus, Inc. Board At Seven (7).

Section 2.2 of Article II of the Amended and Restated Bylaws of Nautilus, Inc. is amended and restated in its entirety as follows (proposed new language appears in italics; deleted characters appear as struck through):

"2.2 Number of Directors, Qualification. The authorized number of directors of the Corporation shall be fixed at seven (7); provided, however, that such number may be decreased (but not increased) pursuant to resolution of the Board of Directors.~~The number of directors of the corporation shall be not less than five (5) nor more than fifteen (15), the specific number to be set by resolution of the Board of Directors.~~ No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires. No director need be a shareholder of the corporation or a resident of the State of Washington."

EXHIBIT A

See attached.

[Stock certificate No. 116 of Nautilus, Inc. representing 566,194 shares of common stock with no par value registered in the name of Sherborne Strategic Fund A, LLC]

[Stock certificate No. 117 of Nautilus, Inc. representing 5,208,993 shares of common stock with no par value registered in the name of Nottingham Investors LLC]

[Stock certificate No. 118 of Nautilus, Inc. representing 849,291 shares of common stock with no par value registered in the name of Sherborne Strategic Fund B, LLC]

EX-3 3 ex-3.htm LETTER, DATED SEPTEMBER 20, 2007 ex-3.htm

Exhibit 3

September 20, 2007

Mr. Donald W. Keeble

Director

Nautilus, Inc.

16400 SE Nautilus Drive

Vancouver, WA 98683

Dear Don,

Thank you for your email. I am disappointed to hear that the board will be unable to respond to us this week as you had previously indicated. We of course hope that the board’s decision will be favorable.

As we discussed with you last week, if we are unable to reach a satisfactory agreement on board representation, we think the appropriate course of action would be to consult shareholders directly regarding the future composition of the board.

There are a number of uncertainties and major decisions facing Nautilus at the moment, including the debt position, the Land America transaction, and the appointment of a permanent chief executive with the appropriate qualifications and strategic outlook. I am sure you would agree that prolonged uncertainty is not good for the company or any of its stakeholders.

The time required to complete a shareholder vote is, regrettably, quite lengthy and if such a vote were required, it would not be in anyone’s interest to delay it beyond year end. To stay on this timetable essentially requires that a meeting of shareholders be initiated now. Accordingly, we are today sending to the company a demand for a special meeting of shareholders to remove the existing directors other than the Interim Chief Executive Officer, the Lead Independent Director, and the Chairman of the Audit Committee. The resolutions would also seek to appoint four new directors, two of whom would be affiliates of Sherborne Investors and two who would be new independent directors.

We have appreciated the opportunity to meet with the members of the Nominating Committee and hope that we answered all of your questions concerning our previous experience in successful operational turnaround situations of the kind that Nautilus currently faces. We continue to be enthusiastic about working actively with Nautilus to develop and execute a turnaround plan that will fully realize the company’s potential.

We recognize that the board has a process that it follows in considering the appointment of new directors and understand that it may take more time for you to complete it. In the meantime, the process of calling a special meeting of shareholders will continue.

We look forward to hearing from you in due course.

Yours sincerely,

/s/ Edward Bramson

Edward J. Bramson