defa14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Soliciting Material Under Section 240.14a-12 |
INFOUSA INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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5711 S 86TH CIRCLE • PO BOX 27347 • Omaha NE 68127-0347
Executive Office: (402) 596-8900 • Fax (402) 596-8902
Internet: www.infoUSA.com
FOR IMMEDIATE RELEASE
April 26, 2006
CONTACT:
Laura Smith / Andrew Siegel
Joele Frank, Wilkinson Brimmer Katcher
Phone: (212) 355-4449
infoUSA SENDS LETTER TO SHAREHOLDERS
Urges Shareholders to Vote FOR infoUSA Directors
and AGAINST Shareholder Proposal Number 2
OMAHA, Neb. — April 26, 2006 — infoUSA (Nasdaq:IUSA) today sent the following letter, along with an
informational insert, to all infoUSA stockholders recommending that they vote FOR the Board’s
director nominees and AGAINST shareholder proposal number 2:
IMPORTANT: PROTECT YOUR INVESTMENT BY VOTING
THE ENCLOSED WHITE PROXY CARD TODAY!
April 26, 2006
Dear Fellow infoUSA Shareholder,
With infoUSA’s Annual Meeting of stockholders approaching, we urge you to vote FOR your
Board’s nominees – Vinod Gupta, Dr. George Haddix and Dr. Vasant Raval – by signing, dating
and returning the WHITE proxy card TODAY.
PRESERVE AND ENHANCE THE VALUE OF YOUR infoUSA INVESTMENT
VOTE FOR YOUR BOARD’S NOMINEES AND AGAINST PROPOSAL NUMBER 2 ON THE
WHITE PROXY CARD
Dolphin Limited
Partnership I, L.P. (“Dolphin”) is a hedge fund and dissident
shareholder with a history of activism. As you may know, despite the fact that Dolphin has
been an investor in infoUSA for less than a year, it has initiated a disruptive proxy
contest in opposition to your Board of Directors. Your Board is unanimously opposed to their nominees and believes that their
election would not be in the best interest of
shareholders. We urge you to disregard their materials and the blue proxy card and to
preserve and enhance the value of your infoUSA investment by supporting the incumbent
nominees.
We want you to know
more about Dolphin and its principal, Mr. Donald T. Netter. Mr.
Netter served as an officer and Director of a corporation guilty of Medicare fraud.
Enclosed is information about the man and the firm. We encourage you to read it carefully.
When you do, we believe that you will conclude that voting the WHITE card FOR the incumbent
Directors is in your best interests.
Dolphin is also seeking
your support of a proposed bylaw amendment that would limit the
ability of infoUSA’s Board of Directors to fill vacancies on the Board. The Company has
received the written opinion of its legal advisor that Dolphin’s proposed bylaw amendment
would be invalid under Delaware law. Your Board believes this proposal is not in the best
interests of the Company and its stockholders and urges you to vote AGAINST shareholder
proposal number 2.
TABLE OF CONTENTS
infoUSA’s BOARD AND MANAGEMENT TEAM ARE EFFECTIVELY
IMPLEMENTING A STRATEGIC BUSINESS PLAN THAT IS WORKING
Your Board has overseen the effective implementation of
infoUSA’s strategic plan and we believe that your
Board’s nominees (Vinod Gupta — the
Company’s founder, CEO and largest shareholder;
Dr. George Haddix — Chair of the Board’s
Nominating and Corporate Governance Committee; and
Dr. Vasant Raval — Chair of the Board’s
Audit Committee) are critical to its continued successful
execution. We believe that the election of the dissident
nominees would be disruptive and could impair the implementation
of the Company’s strategic plan. Critical elements of the
Company’s strategic plan include:
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Increasing infoUSA’s subscription customer base —
which now exceeds 35,000 — for its exciting
subscription services such as SalesGenie.com, SalesLeadsUSA.com,
Credit.net and others. |
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Adding new subscribers builds infoUSA’s recurring revenue
base, and during the first quarter infoUSA added 6,000 plus
subscribers. That’s an increase of more than 18% in just
three months! |
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Continuing to invest in advertising and branding to further
expand the customer base and increase future revenue. As
subscriptions build up and advertising expense stays consistent,
infoUSA expects revenue growth to exceed advertising expense,
improving the Company’s overall margins and creating a
strong business-to-business brand. |
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Developing the Company’s international sales force and
increasing infoUSA’s presence in international markets.
Among other international growth opportunities, the Company,
under the oversight of your Board and with the direct
involvement of your CEO, is developing a small business database
in the UK. |
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Expanding infoUSA’s presence in political, non-profit,
charitable and governmental markets, where there is a tremendous
opportunity to leverage the Company’s existing databases.
The Company has blue-chip customers in this marketplace. |
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Acquiring small direct marketing companies and market research
companies from current owners, many of whom do not have any exit
strategy. Your Board supports the successful strategy of
pursuing opportunities to further consolidate this industry and
increase shareholder value. infoUSA has completed 26
acquisitions and has been very successful in increasing
shareholder value. |
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Reducing corporate expenses to improve margins and enhance
shareholder value. For example, in 2005 infoUSA migrated its
data center from an outsourced mainframe to an in-house data
center, which is making the Company more productive while
reducing costs. |
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Improving the performance of the Company’s Donnelley Group.
Already most of the divisions in the Donnelly Group have shown
growth. During the first quarter Donnelly delivered growth in
booked revenue and increased infoUSA’s GAAP revenue. |
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infoUSA also has an excellent track record of developing and
investing in strategic partnerships, including successful
investments in such companies as MetroMail, infoSpace and Hogan
Information Systems. In addition, infoUSA has deep license
relationships with Google, AOL, Yahoo!, infoSpace, Microsoft,
salesforce.com and other leading companies. infoUSA’s
successful investment strategy and valuable license
relationships help the company to enhance shareholder value.
infoUSA shareholders are already reaping the rewards of this
successful business plan as evidenced by the Company’s
record results in the first quarter of 2006. infoUSA’s
revenue increased from $95 million in the first quarter of
2005 to $103 million this year, an increase of 8%. infoUSA
delivered 4.3% organic revenue growth in the first quarter, with
the balance of the increase from acquisitions. The
Company’s strategic plan is working. We believe that
electing the dissident nominees could disrupt this success and
threaten the Board’s effort to create long-term value for
all infoUSA stockholders.
Your Board and management have been steadfast in their
commitment to pursuing opportunities that are in the best
interests of all our stockholders. Through their extensive
market knowledge and industry experience, infoUSA’s Board
and management team have made infoUSA an industry leader with
customers and operations worldwide.
infoUSA HAS BUILT
STRONG AND LASTING CUSTOMER RELATIONSHIPS
Your Company has close relationships with its customers and we
have worked hard to develop leading products and services that
meet their needs. The feedback we’ve received from our
customers speaks for itself:
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“I would highly recommend your product to anyone who
wishes to save on their bottom line.”*
Ross Hawkins, San Francisco Chronicle |
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“The names were like gold to me . . . We got a huge
response rate early on — like 20%.”*
Robert Daniels, Copperfield Chimney Supply, Inc. |
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“The quality and precision of the data is
superb.”*
Lippincott & Margulies |
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“Salesgenie.com allows me more flexibility in a changing
market. . . . This is one of the best moves my company has
made!”*
Deborah James, Farmers Insurance Group |
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“It is certainly affordable and makes the best use of
our sales department’s time. The support given by your
organization has been the best.”*
Randy Sundby, Culligan Water |
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“ReferenceUSA offers superb depth, breadth, and currency
in a very well-designed web interface. Recommended for all
libraries serving business needs.”*
Ed Tallent, Boston College |
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“The Sacramento Bee uses Credit.net to base credit
decisions on and increase existing credit lines. The service is
truly a cost savings and promotes quick turn around of credit
decisions based on sound data.”*
Dennis Godfrey, Sacramento Bee Newspaper |
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Permission to use quotations neither sought nor obtained |
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In addition, infoUSA is recognized by Selling Power
magazine, a highly respected industry trade publication, as
among the best companies for prospective salespeople. Selling
Power’s ranking positions infoUSA as one of the Top 25
Best Service Companies and one of the Top 50 Best Sales
Organizations for salespeople who are considering their choices
of potential employers.
ELECT THE INCUMBENT DIRECTORS
WE BELIEVE THEIR KNOWLEDGE AND EXPERIENCE IS CRITICAL
TO infoUSA’S FUTURE
infoUSA’s Board and management have repeatedly demonstrated
their ability to succeed, even in a challenging financial
environment. Given infoUSA’s success in creating
shareholder value through the successful execution of the
Company’s strategic business plan, we are steadfast in our
belief that shareholders of infoUSA are best served by the
continued leadership of this experienced team.
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Vinod Gupta founded the Company in February 1972
and has been Chairman of the Board since its incorporation.
Mr. Gupta served as Chief Executive Officer of the Company
from the time of its incorporation in 1972 until September 1997
and since August 1998. Mr. Gupta founded the company with
$100 and it is his vision and vast industry knowledge that have
driven the Company’s business. Today infoUSA has a market
capitalization of more than $650 million. |
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Dr. George F. Haddix has served as a director
of the Company since March 1995. Dr. Haddix is Chairman and
Chief Executive Officer of PKW Holdings, Inc. and PKWARE, INC.,
computer software companies headquartered in Milwaukee,
Wisconsin. From November 1994 to December 1997, Dr. Haddix
served as President of CSG Holdings, Inc. and CSG Systems
International, Inc., companies providing software and
information services to the communications industry. His
operational experience at CSG, a company that provides
outsourced services including printing and mailing, is highly
relevant and makes him an invaluable resource to infoUSA as we
continue to build our subscription business. |
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Dr. Vasant H. Raval has served as a director
of the Company since October 2002. Dr. Raval has been
Professor and Chair of the Department of Accounting at Creighton
University since July 2001. He joined the Creighton University
faculty in 1981 and has served as Professor of Accounting and
Associate Dean and Director of Graduate Programs at the College
of Business Administration. Dr. Raval is a director of
Syntel Inc., an electronic business solutions provider based in
Troy, Michigan. As Chair of the Audit Committee, he has overseen
the Company’s successful efforts to meet the requirements
of Sarbanes-Oxley. |
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YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR THESE QUALIFIED PROFESSIONALS TO HELP THE
COMPANY CONTINUE ITS GROWTH AND SUCCESS
With a Board that is comprised of a majority of independent
directors (eight out of nine) and a management team that has
successfully led infoUSA through one of the industry’s most
difficult periods, we are confident in our ability to continue
our momentum of progress as we lead the Company into the future.
Following the slowdown in the industry after September 11,
2001, your Board quickly adjusted to the changing market
dynamics by building an email and online marketing business to
continue profitably growing the Company.
We urge you to act now to protect the value of your investment
in infoUSA. Your vote is extremely important — no
matter how many or how few shares you own. To vote your
shares, please sign, date and return the WHITE proxy card and
mail it promptly in the envelope provided. Your Board also urges
you to vote AGAINST shareholder proposal number 2.
Remember, even if you have previously returned a blue proxy
card, you have every legal right to change your vote —
only your latest-dated proxy counts.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES OR NEED
ADDITIONAL ASSISTANCE, PLEASE CONTACT MACKENZIE PARTNERS,
THE FIRM ASSISTING US IN THE SOLICITATION OF PROXIES,
TOLL FREE AT (800) 322-2885
We thank you for your continued confidence and support.
Sincerely,
Vinod Gupta
Chairman & Chief Executive Officer
infoUSA Inc.
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PLEASE VOTE TODAY
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If you have any questions or need assistance in voting your
WHITE proxy card, please call: |
105 Madison Avenue
New York, New York 10016
proxy@mackenziepartners.com
Call Collect: (212) 929-5500
or
Toll-Free (800) 322-2885
WHO IS DOLPHIN?
WHO IS DONALD T. NETTER?
NETTER SERVED AS AN OFFICER AND
DIRECTOR OF
A CORPORATION GUILTY OF MEDICARE
FRAUD.
Dolphin Limited Partnership I, L.P.
(“Dolphin”) and its principal, Donald T. Netter,
are asking to act as your proxy in order to change the
composition and direction of infoUSA’s Board of Directors.
You may not know much about Dolphin because, unlike public
companies such as infoUSA, hedge funds operate with little
regulatory oversight and have limited disclosure obligations. In
making your decision, you should consider the following facts:
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Dolphin was established in 1994 under the
umbrella of Independence Holding Corp.
(“IHC”).i
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IHC is a publicly-traded insurance holding
company that was and continues to be controlled by Edward
Netter, Donald Netter’s father, and Geneve Corporation, a
privately held company controlled by the Netter
family.ii
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At the time that Dolphin was formed,
Donald Netter served concurrently as Senior Vice President of
Investments at the
publicly-held but
Netter family-controlled IHC and as Vice President of
Investments at the
privately-held Geneve.
Donald Netter also served on the Board of Directors of
IHC.iii |
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Dolphin’s General Partner and its
management company were both
wholly-owned indirect
subsidiaries of the
privately-held Netter
family business,
Geneve.iv |
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Publicly-traded IHC was one of the initial
Limited Partners in Dolphin and by December 1995, IHC had
invested more than $4 million in Dolphin — almost
half of the partnership’s
capital.v
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IHC continued to increase its investment
in Dolphin. Dolphin’s own financial statements in 1997
noted that, “As of December 31, 1997, a majority of
the Limited Partners are ultimately controlled by an individual
who is related to the General
Partner.”vi
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As of December 31, 2005, IHC
continues to have a
multi-million dollar
investment in
Dolphin.vii |
In short, Mr. Netter’s hedge
fund and the management fees received by its General Partner and
management company have been financed in part by the minority
shareholders of the
publicly-traded
entities dominated by his family.
EXAMINE DOLPHIN’S TRACK RECORD:
DOLPHIN AND NETTER LOST A
PROXY CONTEST TO DAVE &
BUSTER’S INCUMBENT DIRECTORS
In 2003 Mr. Netter launched a proxy
fight against Dave & Buster’s. As is the case with his
investment in infoUSA, Mr. Netter acquired his position in
Dave & Buster’s in the midst of a proposed
management buyout. In that instance, the public records
demonstrate that Mr. Netter led a proxy fight in an effort
to force the sale of the company. Notably, the shareholders of
Dave & Buster’s voted down Mr. Netter and
Dolphin and reelected the incumbent nominees.
Shareholders are urged to compare the
tactics used by Dolphin in the Dave & Buster’s
proxy contest with the chronology of their actions set forth in
their own proxy statement filed in connection with infoUSA:
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Dolphin did not make its first investment
in infoUSA until June 20, 2005, after the announcement that
Vin Gupta made an offer to acquire all of the shares of the
Company that he did not already own.
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On August 31, 2005, approximately two
months after its initial investment and one week after the
announcement that Mr. Gupta had withdrawn his proposal, Dolphin
sent a letter to the Board declaring its impatience with the
Board.
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Dolphin continued to increase its stake in
infoUSA. In fact, after expressing its impatience, Dolphin
increased its investment in the Company tenfold.
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On March 14, 2006, Dolphin sent a
letter to the Company recommending that Karl L. Meyer, one
of its current nominees, be nominated to fill a recent vacancy
on the Board for a term expiring in 2008.
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On March 15, 2006 Dolphin issued a
press release making its letter public.
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On March 17, 2006, a mere three days
later and even before the Board had a chance to consider the
first letter, Dolphin sent another letter to the Board enclosing
notice of intention to nominate Mr. Meyer and two others
for terms on the Board ending in 2009. Dolphin chose not to
publicly announce its change of direction until March 28,
2006.
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Do you believe that these are the
actions of an investor wanting to participate in the long-term
growth of the Company?
NETTER SERVED AS AN OFFICER AND
DIRECTOR OF A CORPORATION
GUILTY OF MEDICARE FRAUD THAT PAID
MASSIVE
CRIMINAL AND CIVIL FINES OF $119
MILLION
We think that before you vote your proxy
you should know some important facts about
Mr. Netter’s experience with
publicly-traded
companies not already controlled by his family.
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The only time that Mr. Netter has
held any leadership position at a
publicly-held company
not affiliated with his family was when he served as a director
and officer of Damon
Corp.viii |
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Mr. Netter and other parties
initiated a hostile takeover of Damon Corp. and assumed control
of the company in
1989.ix
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During the period Mr. Netter served
as a member of the Board of Directors and held
high-level executive
positions at Damon Corp., including
treasurer,x
Damon Corp. engaged in a massive Medicare
fraud.xi |
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As a result of a Department of Justice
investigation of Medicare fraud, Damon Corp. paid
$119 million in criminal fines and civil
settlements.xii
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At the time, the $119 million was the
largest fine ever for a healthcare fraud
case.xiii
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According to newspaper reports, the
federal prosecutor involved in the case described the fraud as
“corporate greed run
amok.”xiv
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Mr. Netter and the other Damon
directors failed to disclose to investigators and shareholders
evidence of Medicare billing irregularities they discovered
during an internal
investigation.xv
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Soon after Mr. Netter left the Damon
Board of Director’s in 1993, Dolphin Partners was formed.
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We believe the sequence of events and
these actions speak for themselves. Now that you know more about
Dolphin and Mr. Netter, would you trust Mr. Netter to
pick your Board of Directors?
WE BELIEVE THAT ELECTING THE DISSIDENT
SLATE WOULD BE
DISRUPTIVE TO THE IMPLEMENTATION OF OUR
STRATEGIC PLAN AND
COULD IMPAIR SHAREHOLDER
VALUE
We urge you to act now to protect the
value of your investment in infoUSA. Your vote is extremely
important — no matter how many or how few shares you
own. To vote your shares, please sign, date and return the
enclosed WHITE proxy card and mail it promptly in the envelope
provided. Your Board also urges you to vote AGAINST shareholder
proposal number 2. Remember, even if you have previously
returned a blue proxy card, you have every legal right to change
your vote — only your latest-dated proxy counts.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING
YOUR SHARES OR
NEED ADDITIONAL ASSISTANCE, PLEASE
CONTACT MACKENZIE
PARTNERS, THE FIRM ASSISTING US IN THE
SOLICITATION OF PROXIES,
TOLL FREE AT
(800) 322-2885
i Source:
Dolphin Limited Partnership, Financial Statements
(Exhibit 99 to IHC’s Annual Report on
Form 10-K405 for
the fiscal year ended December 31, 1996).
ii Source:
IHC’s Schedule 14A, filed April 27, 1995;
IHC’s Schedule 14A, filed April 29, 2005.
iii Source:
IHC’s Schedule 14A, filed April 27, 1995.
iv Source:
Dolphin Limited Partnership, Financial Statements
(Exhibit 99 to IHC’s Annual Report on
Form 10-K405 for
the fiscal year ended December 31, 1996).
v Source:
Dolphin Limited Partnership, Financial Statements
(Exhibit 99 to IHC’s Annual Report on
Form 10-K405 for
the fiscal year ended December 31, 1996).
vi Source:
Dolphin Limited Partnership, Financial Statements
(Exhibit 99 to IHC’s Annual Report on
10-K405 for the fiscal
year ended December 31, 1997).
vii Source:
IHC’s Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005.
viii To
infoUSA’s knowledge, Mr. Netter is or has been a
director of three public companies: Damon Corp., The Aristotle
Corporation and Independence Holding Company. Source:
Dolphin’s Schedule 14A, filed May 19, 2003. The
Netter family’s affiliations with IHC are described above.
Geneve Corporation, a privately held company controlled by the
Netter family, beneficially owns over 90% of The Aristotle
Corporation’s common stock. Source: The Aristotle
Corporation’s Schedule 14A, filed July 27, 2005.
ix Source:
“Damon OKs
$223-Million Bid From
Investor Group,” Los Angeles Times, January 17,
1989.
x Source:
Damon Corp. Proxy Statement filed May 13, 1992.
xi Source:
“Needham Lab Fined $119m for Fraud,” The Boston Globe,
October 10, 1996.
xii Source:
“Needham Lab Fined $119m for Fraud,” The Boston Globe,
October 10, 1996.
xiii Source:
“Romney Says Board Didn’t Alert Probers, Declares Firm
Took Corrective Action,” The Boston Globe, October 11,
2002.
xiv Source:
“Needham Lab Fined $119m for Fraud,” The Boston Globe,
October 10, 1996 (quoting US Attorney Donald Stern).
xv Source:
“Romney Says Board Didn’t Alert Probers, Declares Firm
Took Corrective Action,” The Boston Globe, October 11,
2002; “Romney Confirms Findings Not Turned Over to the
Feds,” Deseret News, October 11, 2002.
