26.04.2006 16:27:00
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infoUSA Sends Letter to Shareholders; Urges Shareholders to Vote FOR infoUSA Directors and AGAINST Shareholder Proposal Number 2
IMPORTANT: PROTECT YOUR INVESTMENT BY VOTING THE ENCLOSED WHITEPROXY CARD TODAY!
April 26, 2006
Dear Fellow infoUSA Shareholder,
With infoUSA's Annual Meeting of stockholders approaching, we urgeyou to vote FOR your Board's nominees - Vinod Gupta, Dr. George Haddixand Dr. Vasant Raval - by signing, dating and returning the WHITEproxy card TODAY.
PRESERVE AND ENHANCE THE VALUE OF YOUR infoUSA INVESTMENT VOTE FORYOUR BOARD'S NOMINEES AND AGAINST PROPOSAL NUMBER 2 ON THE WHITE PROXYCARD
Dolphin Limited Partnership I, L.P. ("Dolphin") is a hedge fundand dissident shareholder with a history of activism. As you may know,despite the fact that Dolphin has been an investor in infoUSA for lessthan a year, it has initiated a disruptive proxy contest in oppositionto your Board of Directors. Your Board is unanimously opposed to theirnominees and believes that their election would not be in the bestinterest of shareholders. We urge you to disregard their materials andthe blue proxy card and to preserve and enhance the value of yourinfoUSA 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 acorporation guilty of Medicare fraud. Enclosed is information aboutthe man and the firm. We encourage you to read it carefully. When youdo, we believe that you will conclude that voting the WHITE card FORthe incumbent Directors is in your best interests.
Dolphin is also seeking your support of a proposed bylaw amendmentthat would limit the ability of infoUSA's Board of Directors to fillvacancies on the Board. The Company has received the written opinionof its legal advisor that Dolphin's proposed bylaw amendment would beinvalid under Delaware law. Your Board believes this proposal is notin the best interests of the Company and its stockholders and urgesyou to vote AGAINST shareholder proposal number 2.
infoUSA's BOARD AND MANAGEMENT TEAM ARE EFFECTIVELY IMPLEMENTING ASTRATEGIC BUSINESS PLAN THAT IS WORKING
Your Board has overseen the effective implementation of infoUSA'sstrategic plan and we believe that your Board's nominees (Vinod Gupta- the Company's founder, CEO and largest shareholder; Dr. GeorgeHaddix - Chair of the Board's Nominating and Corporate GovernanceCommittee; and Dr. Vasant Raval - Chair of the Board's AuditCommittee) are critical to its continued successful execution. Webelieve that the election of the dissident nominees would bedisruptive and could impair the implementation of the Company'sstrategic plan. Critical elements of the Company's strategic planinclude:
-- 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.
-- 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!
-- 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.
-- 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.
-- 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.
-- 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.
-- 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.
-- 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.
infoUSA also has an excellent track record of developing andinvesting in strategic partnerships, including successful investmentsin such companies as MetroMail, infoSpace and Hogan InformationSystems. In addition, infoUSA has deep license relationships withGoogle, AOL, Yahoo!, infoSpace, Microsoft, salesforce.com and otherleading companies. infoUSA's successful investment strategy andvaluable license relationships help the company to enhance shareholdervalue.
infoUSA shareholders are already reaping the rewards of thissuccessful business plan as evidenced by the Company's record resultsin the first quarter of 2006. infoUSA's revenue increased from $95million in the first quarter of 2005 to $103 million this year, anincrease of 8%. infoUSA delivered 4.3% organic revenue growth in thefirst quarter, with the balance of the increase from acquisitions. TheCompany's strategic plan is working. We believe that electing thedissident nominees could disrupt this success and threaten the Board'seffort to create long-term value for all infoUSA stockholders.
Your Board and management have been steadfast in their commitmentto pursuing opportunities that are in the best interests of all ourstockholders. Through their extensive market knowledge and industryexperience, infoUSA's Board and management team have made infoUSA anindustry leader with customers and operations worldwide.
infoUSA HAS BUILT STRONG AND LASTING CUSTOMER RELATIONSHIPS
Your Company has close relationships with its customers and wehave worked hard to develop leading products and services that meettheir needs. The feedback we've received from our customers speaks foritself:
"I would highly recommend your product to anyone who wishes tosave on their bottom line."* Ross Hawkins, San Francisco Chronicle
"The names were like Gold to me . . . We got a huge response rateearly on - like 20%."* Robert Daniels, Copperfield Chimney Supply,Inc.
"The quality and precision of the data is superb."* Lippincott &Margulies
"Salesgenie.com allows me more flexibility in a changing market. .. . This is one of the best moves my company has made!"* DeborahJames, Farmers Insurance Group
"It is certainly affordable and makes the best use of our salesdepartment's time. The support given by your organization has been thebest."* Randy Sundby, Culligan Water
"ReferenceUSA offers superb depth, breadth, and currency in a verywell-designed web interface. Recommended for all libraries servingbusiness needs."* Ed Tallent, Boston College
"The Sacramento Bee uses Credit.net to base credit decisions onand increase existing credit lines. The service is truly a costsavings and promotes quick turn around of credit decisions based onsound data."* Dennis Godfrey, Sacramento Bee Newspaper
In addition, infoUSA is recognized by Selling Power magazine, ahighly respected industry trade publication, as among the bestcompanies for prospective salespeople. Selling Power's rankingpositions infoUSA as one of the Top 25 Best Service Companies and oneof the Top 50 Best Sales Organizations for salespeople who areconsidering their choices of potential employers.
ELECT THE INCUMBENT DIRECTORS WE BELIEVE THEIR KNOWLEDGE ANDEXPERIENCE IS CRITICAL TO infoUSA'S FUTURE
infoUSA's Board and management have repeatedly demonstrated theirability to succeed, even in a challenging financial environment. GiveninfoUSA's success in creating shareholder value through the successfulexecution of the Company's strategic business plan, we are steadfastin our belief that shareholders of infoUSA are best served by thecontinued leadership of this experienced team.
-- 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.
-- 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.
-- 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.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FORTHESE QUALIFIED PROFESSIONALS TO HELP THE COMPANY CONTINUE ITS GROWTHAND SUCCESS
With a Board that is comprised of a majority of independentdirectors (eight out of nine) and a management team that hassuccessfully led infoUSA through one of the industry's most difficultperiods, we are confident in our ability to continue our momentum ofprogress as we lead the Company into the future. Following theslowdown in the industry after September 11, 2001, your Board quicklyadjusted to the changing market dynamics by building an email andonline marketing business to continue profitably growing the Company.
We urge you to act now to protect the value of your investment ininfoUSA. Your vote is extremely important--no matter how many or howfew shares you own. To vote your shares, please sign, date and returnthe WHITE proxy card and mail it promptly in the envelope provided.Your Board also urges you to vote AGAINST shareholder proposal number2. Remember, even if you have previously returned a blue proxy card,you have every legal right to change your vote--only your latest-datedproxy counts.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES OR NEEDADDITIONAL ASSISTANCE, PLEASE CONTACT MACKENZIE PARTNERS, THE FIRMASSISTING 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.
* Permission to use quotations neither sought nor obtained
WHO IS DOLPHIN?
WHO IS DONALD T. NETTER?
NETTER SERVED AS AN OFFICER AND DIRECTOR OF A CORPORATION GUILTYOF 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 changethe composition and direction of infoUSA's Board of Directors. You maynot know much about Dolphin because, unlike public companies such asinfoUSA, hedge funds operate with little regulatory oversight and havelimited disclosure obligations. In making your decision, you shouldconsider the following facts:
-- Dolphin was established in 1994 under the umbrella of Independence Holding Corp. ("IHC").(1)
-- 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.(2)
-- 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.(3)
-- Dolphin's General Partner and its management company were both wholly-owned indirect subsidiaries of the privately-held Netter family business, Geneve.(4)
-- 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.(5)
-- 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."(6)
-- As of December 31, 2005, IHC continues to have a multi-million Dollar investment in Dolphin.(7)
In short, Mr. Netter's hedge fund and the management fees receivedby its General Partner and management company have been financed inpart by the minority shareholders of the publicly-traded entitiesdominated by his family.
EXAMINE DOLPHIN'S TRACK RECORD: DOLPHIN AND NETTER LOST PROXYCONTEST 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 hisposition in Dave & Buster's in the midst of a proposed managementbuyout. In that instance, the public records demonstrate that Mr.Netter led a proxy fight in an effort to force the sale of thecompany. 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 inthe Dave & Buster's proxy contest with the chronology of their actionsset forth in their own proxy statement filed in connection withinfoUSA:
-- 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.
-- 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.
-- Dolphin continued to increase its stake in infoUSA. In fact, after expressing its impatience, Dolphin increased its investment in the Company tenfold.
-- 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.
-- On March 15, 2006 Dolphin issued a press release making its letter public.
-- 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.
Do you believe that these are the actions of an investor wantingto participate in the long-term growth of the Company?
NETTER SERVED AS AN OFFICER AND DIRECTOR OF A CORPORATION GUILTYOF MEDICARE FRAUD THAT PAID MASSIVE CRIMINAL AND CIVIL FINES OF $119MILLION
We think that before you vote your proxy you should know someimportant facts about Mr. Netter's experience with publicly-tradedcompanies not already controlled by his family.
-- 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.(8)
-- Mr. Netter and other parties initiated a hostile takeover of Damon Corp. and assumed control of the company in 1989.(9)
-- 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,(10) Damon Corp. engaged in a massive Medicare fraud.(11)
-- As a result of a Department of Justice investigation of Medicare fraud, Damon Corp. paid $119 million in criminal fines and civil settlements.(12)
-- At the time, the $119 million was the largest fine ever for a healthcare fraud case.(13)
-- According to newspaper reports, the federal prosecutor involved in the case described the fraud as "corporate greed run amok."(14)
-- 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.(15)
-- Soon after Mr. Netter left the Damon Board of Director's in 1993, Dolphin Partners was formed.
We believe the sequence of events and these actions speak forthemselves. Now that you know more about Dolphin and Mr. Netter, wouldyou trust Mr. Netter to pick your Board of Directors?
WE BELIEVE THAT ELECTING THE DISSIDENT SLATE WOULD BE DISRUPTIVETO THE IMPLEMENTATION OF OUR STRATEGIC PLAN AND COULD IMPAIRSHAREHOLDER VALUE
We urge you to act now to protect the value of your investment ininfoUSA. Your vote is extremely important--no matter how many or howfew shares you own. To vote your shares, please sign, date and returnthe WHITE proxy card and mail it promptly in the envelope provided.Your Board also urges you to vote AGAINST shareholder proposal number2. Remember, even if you have previously returned a blue proxy card,you have every legal right to change your vote--only your latest-datedproxy counts.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES OR NEEDADDITIONAL ASSISTANCE, PLEASE CONTACT MACKENZIE PARTNERS, THE FIRMASSISTING US IN THE SOLICITATION OF PROXIES, TOLL FREE AT (800)322-2885
(1)Source: Dolphin Limited Partnership, Financial Statements(Exhibit 99 to IHC's Annual Report on Form 10-K405 for the fiscal yearended December 31, 1996).
(2)Source: IHC's Schedule 14A, filed April 27, 1995; IHC'sSchedule 14A, filed April 29, 2005.
(3)Source: IHC's Schedule 14A, filed April 27, 1995.
(4)Source: Dolphin Limited Partnership, Financial Statements(Exhibit 99 to IHC's Annual Report on Form 10-K405 for the fiscal yearended December 31, 1996).
(5)Source: Dolphin Limited Partnership, Financial Statements(Exhibit 99 to IHC's Annual Report on Form 10-K405 for the fiscal yearended December 31, 1996).
(6)Source: Dolphin Limited Partnership, Financial Statements(Exhibit 99 to IHC's Annual Report on 10-K405 for the fiscal yearended December 31, 1997).
(7)Source: IHC's Annual Report on Form 10-K for the fiscal yearended December 31, 2005.
(8)To infoUSA's knowledge, Mr. Netter is or has been a director ofthree public companies: Damon Corp., The Aristotle Corporation andIndependence Holding Company. Source: Dolphin's Schedule 14A, filedMay 19, 2003. The Netter family's affiliations with IHC are describedabove. Geneve Corporation, a privately held company controlled by theNetter family, beneficially owns over 90% of The AristotleCorporation's common stock. Source: The Aristotle Corporation'sSchedule 14A, filed July 27, 2005.
(9)Source: "Damon OKs $223-Million Bid From Investor Group," LosAngeles Times, January 17, 1989.
(10)Source: Damon Corp. Proxy Statement filed May 13, 1992.
(11)Source: "Needham Lab Fined $119m for Fraud," The Boston Globe,October 10, 1996.
(12)Source: "Needham Lab Fined $119m for Fraud," The Boston Globe,October 10, 1996.
(13)Source: "Romney Says Board Didn't Alert Probers, Declares FirmTook Corrective Action," The Boston Globe, October 11, 2002.
(14)Source: "Needham Lab Fined $119m for Fraud," The Boston Globe,October 10, 1996 (quoting US Attorney Donald Stern).
(15)Source: "Romney Says Board Didn't Alert Probers, Declares FirmTook Corrective Action," The Boston Globe, October 11, 2002; "RomneyConfirms Findings Not Turned Over to the Feds," Deseret News, October11, 2002.
About infoUSA
infoUSA (www.infoUSA.com), founded in 1972, is the leadingprovider of business and consumer information products, databasemarketing services, data processing services and sales and marketingsolutions. Content is the essential ingredient in every marketingprogram, and infoUSA has the most comprehensive data in the industry,and is the only company to own a proprietary database of 250 millionconsumers and 14 million businesses under one roof. The infoUSAdatabase powers the directory services of the top Internettraffic-generating sites. Nearly 3 million customers use infoUSA'sproducts and services to find new customers, grow their sales, and forother direct marketing, telemarketing, customer analysis and creditreference purposes. infoUSA headquarters are located at 5711 S. 86thCircle, Omaha, NE 68127 and can be contacted at (402) 593-4500. Toknow more about Sales Leads, click www.infousa.com. To get a 7-dayfree trial and 100 free sales leads, click www.salesgenie.com.
Statements in this announcement other than historical data andinformation constitute forward looking statements that involve risksand uncertainties that could cause actual results to differ materiallyfrom those stated or implied by such forward-looking statements. Thepotential risks and uncertainties include, but are not limited to,recent changes in senior management, the successful integration ofrecent and future acquisitions, fluctuations in operating results,failure to successfully carry out our Internet strategy or to grow ourInternet revenue, effects of leverage, changes in technology andincreased competition. More information about potential factors thatcould affect the company's business and financial results is includedin the company's filings with the Securities and Exchange Commission.
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