Vinod Gupta has resigned as InfoGroup’s CEO although he remains on the company’s board of directors. Bill L. Fairfield, the lead independent director on InfoGroup’s board, has been named InfoGroup’s CEO.
In a statement, Gupta gave the following explanation for what he described as his decision. “After long deliberation I have decided that this change is in the best interest of the company. I look forward to continuing my service as a director of the company and to pursuing new business opportunities.”
But SEC documents give a much clearer reason why Gupta served his last day as CEO on Wednesday: He stepped down as part of a litigation settlement.
The documents offer an overview of how shareholder lawsuits brought by Cardinal Value Equity Partners L.P., Dolphin Limited Partnership I, L.P. and Robert Bartow were resolved. (For background on the legal challenges, click here: http://directmag.com/news/gupta-072408/index.html).
According to the documents, “On August 20, 2008, the company’s board of directors entered into a settlement agreement with Mr. Gupta and the other parties to the derivative litigation. In connection with this settlement agreement, Mr. Gupta has resigned as the company’s chief executive officer effective August 20, 2008, and has entered into a severance agreement with the company.”
While Gupta remains on the company’s board, two other board members — George F. Haddix and Vasant H. Raval — have agreed to tender their resignations within five days. A third, Elliot S. Kaplan, has agreed to voluntarily step down from the board at the time of the 2009 annual meeting of stockholders or on June 30, 2009, whichever occurs earlier
According to the filings, Gupta will receive $5 million within 60 days of the execution of the severance agreement, and an additional $5 million one day after the company’s 2009 shareholder meeting.
An agreement inked in July, when Gupta stepped down as chairman of the board, requires him to pay the company $9 million over a course of five years.
Gupta still owns a significant chunk of InfoGroup stock – 19 million shares, or more than one-third of the outstanding total, either directly or indirectly as of August 5.
Gupta’s resignation cleared the way for Fairfield to assume the role of InfoGroup’s CEO. In addition to his new responsibilities, Fairfield is the chairman of DreamField Partners Inc., a management services and venture capital firm. He also serves on the board of directors and Audit Committee of The Buckle Inc., an apparel and footwear firm.
Bernard W. Reznicek, a current director, has taken over the role of chairman of the board. Fairfield had served as chairman since July, when a board committee separated the roles of chairman and CEO.
Fairfield has his work cut out for him. InfoGroup’s second quarter net income dropped from $6.3 million a year ago to $4.3 million in the quarter just ended. This slip in income came as net sales, costs and expenses rose: InfoGroup’s second-quarter sales amounted to $187.2 million, up from $160.1 million in second-quarter 2007. But the costs of goods and services rose at an even faster clip, from $64.9 million to $80.9 million, as did its selling, general and administrative expenses, which jumped from $70 million to $85.2 million.
On Thursday, after the news about Gupta’s resignation came out, the company’s stock jumped by 98 cents per share to $6.15.
During the most recent quarter, InfoGroup recorded restructuring charges of $2.1 million. Approximately $1.6 million of this was related to the elimination of several management positions within its Guideline Inc. operations. During the quarter the company reduced headcount by 67 employees.
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